Higher production costs, higher retail prices?

Inflation creating tension about prices across all categories of fast-moving consumer goods is nothing new. And pet supplies are no exception. While manufacturers are dealing with increased costs along the production process, retailers are seeing how this is affecting the price pet parents have to pay.

Impact on retailers

Various retailers have expressed their disagreement with increases to the prices of pet supplies in the context of inflation. In some cases, this has become a public dispute between big manufacturers and retail players.

Recently, online retailer zooplus refused to comply with Royal Canin’s price increase. It notified shoppers on its platform about the “excessive” price hike adopted by the Mars subsidiary, saying that it didn’t want to pass on the high costs to pet parents.

In July 2022, Tesco outrightly rejected an “unjustifiable” price increase by Mars Petcare. The British supermarket chain stated that the brand had increased the prices of its products at a time of high inflation.

Volatile price changes

There are also price pressures on the other side of the Atlantic. Cyndi Cardenas, Senior Director Divisional Merchandise Manager at Florida-based Pet Supermarket, says that the local retailing industry is experiencing “volatile price changes” in comparison to prior years. “We expect to see costs stabilize, as supply chain challenges and disruptions level off. However, we do not have an indication of when that would be.”

Some retailers, such as UK pet store chain Jollyes, are using the price war to push their own private label portfolio. “We’re deliberately holding back prices on private labels and customers are reacting very positively to that,” admits CEO Joe Wykes.

Absorbing the costs

Raw materials, which account for around 80% of the operating costs of pet food, are one of the headaches that the industry has been facing since the start of the Ukraine invasion.

Royal Canin states that the production of its formulas requires raw materials that are “greatly affected by rising costs” as well as by inflation in packaging, transport and energy. The pet food producer says it is “absorbing these rising costs as much as possible”, as it prioritizes providing cats and dogs with “high-quality, precision-engineered food” without compromising at all on the quality of its solutions.

The good news is that the price of wheat, commonly used by manufacturers in pet food formulation, has been on a downward trend for a while. Since the implementation of the Black Sea grain deal, it is believed that the price of this cereal has decreased by 37%.

Are price increases really necessary?

At Mars, they point out that price adjustment is usually “necessary” in a volatile marketplace marked by wide-ranging inflationary pressures. However, they claim they will “continue to absorb these rising costs as much as possible”.

The pet food maker says that they are “constantly reviewing” a whole range of factors that impact the business, including raw materials, transport and the supply chain.

Nestlé says it is doing everything possible to keep costs down, such as managing external inflationary pressures and finding internal savings, while increasing prices responsibly. Some of the extra costs are being absorbed with efficiency gains and reductions. This includes cutting marketing expenses and investing in energy consumption improvements in the production process.

The multinational’s goal is to keep products affordable and accessible for consumers while still “paying fair prices to our suppliers, including farmers for their sustainably produced raw materials”.