Diving into the world of private labels

Today’s reality is that pet parents are increasingly looking for high-quality products at a competitive price. This is having a positive impact on the private label segment, which has shown steady and consistent growth recently. As a result, more manufacturing companies are joining the private label business.

Advantages of store brands
For retailers and manufacturers, the so-called ‘store brand’ products combine the advantage of speed to market with control over formulation and production. “Meanwhile, consumers can select from a wide variety of products when comparison shopping or experimenting with new pet treats and foods,” points out Amy McCarthy, Vice President for Pet Solutions at ADM Animal Nutrition. In 2021 the company, which is headquartered in Chicago, US, acquired a group of private label companies – PetDine, Pedigree Ovens, The Pound Bakery and NutraDine – providing retailers with access to a “vast portfolio, extensive technical expertise and formulation know how”.

Problem-solver products
Hofman Animal Care, a distributor of animal supplies in Europe, offers retail companies in the industry support in launching their own private label concepts, from the creation of the product to the quality control and the text that appears on the packaging. The Dutch-based company has so far produced 200 products under private label, mainly supplements, care products and a small percentage of food. The firm has seen a rise in interest for non-food private label products as retailers in the pet industry want to create so-called ‘problem- solver’ products with the aim of increasing customer loyalty and brand awareness.

Taking control of the whole product strategy
One of the main reasons that stores, retail chains and wholesalers decide to start their own brand is because of the popularization of these products in the online channel. “Own brands enable them to control the market price and create their own strategy,” says a spokesperson from Hofman Animal Care. French multinational Imerys, which owns mineral resources and production facilities in Europe, has a portfolio of more than 15 different cat litter products, including mineral-based clumping and non-clumping grades as well as a wide range of organic solutions. As a result of the company’s strategic decision to focus on private labels, annual sales growth has stood at around 4% for the last 3 years and more than 60% of its cat litter sales now come from this segment, according to the company.

Imerys is also extending its operational footprint to accommodate the needs of customers in new countries. “This strategic step will allow us to strengthen our presence in the private-label cat litter market,” states Thierry Casteran, Filtration & Life Sciences Market Vice-President at Imerys.

The challenges ahead
The global issues impacting the logistics and supply chain, especially since the beginning of the COVID-19 pandemic, are definitely affecting private labels in nearly all industries. But in addition to these common problems, the pet segment is also facing some specific challenges. One of them is related to consumer packaging and the task of presenting a product that has an on-shelf impact and appeals to the buyer. “Retailers can be quite demanding and manufacturers can’t always meet those demands, or they might need to invest to do so,” continues Casteran. He admits that this is the reason why branded products tend to have more sophisticated packaging. On the other hand, private labels also face strong competition from dominant and highly differentiated major brands. “Private labels need innovation and marketing support, and only a strong private label manufacturer can offer this,” he adds.

Visibility and space
The visibility of private labels is an added challenge for manufacturers. Insiders agree that the fact that larger retailers offer a wide range of private label products for extra visibility and space versus other brands creates operational and supply chain complexity. Hofman Animal Care states: “People need to realize this is the moment to invest in their company instead of building and subsequently losing business.”

Whether for themselves, for their families or for their pets, consumers are interested in products that deliver the options they seek at a reasonable price point –and this is precisely where private labels can play a critical role.

However, the decision to move into private label production is not always easy for manufacturers, plus the transition usually takes some time because they need to invest time, money and effort in designing a product that is going to be a success.

Moreover, national regulations covering a wide range of issues – from ingredients to packaging – can represent an extra burden for some companies. Quality departments play an important part in checking the current laws and making sure that the end products comply with all the applicable standards.

The future is bright
The store-brand category seems popular among pet parents. Euromonitor forecasts that the market share for private-label dog and cat foods and treats already stands at 9.5% in the US. “As pet humanization is expected to increase, private labels can cash in on the trend to offer more innovative and premium products that match international brands,” comments Casteran.

In addition, the increase of the e-commerce retailing channel is making it easier to develop private label products for sale online. Hofman Animal Care sees a bright future and expects to double its number of references in the next 1-2 years. The same applies to ADM, which based on its own research concludes that functional treats for dogs are expected to grow at annual rates of 12% or higher by 2026.

“We see opportunities for continued growth in the private label space for innovative pet foods and treats that meet evolving consumer demands, such as more natural and sustainable ingredients, and functional solutions for proactive health and wellness,” concludes McCarthy.