New opportunities for private label

Private label pet food sales trends in the US market have been negative. In the mass market, according to IRI multi-outlet sales tracking data for 2014, private label sales were down for the major pet food and treat classifications, including wet dog food (-12.5%), dry dog food (-10.4%), dry cat food (-10.3%), wet cat food (-5.6%), dog biscuits/treats (-4.6%), and rawhide dog chews (-3.0%).

Store brand presence

It is not for lack of store brand presence. Big box store brand pet food entries include Walmart’s Ol’ Roy, Sam’s Club’s Simply Right Complete Nutrition, Costco’s popular Kirkland Signature brand, and Target’s Boots & Barkley.

Mainstream supermarket chains universally offer their own private label pet foods. In the natural supermarket channel, approximately 15% of Whole Foods’ pet food department is store brand (in the wake of the Whole Paws launch in 2013), as is about 80% of Trader Joe’s pet product mix, in keeping with this popular and trendy retailer’s overall private label focus.

Trader Joe’s corporate sibling Aldi, which in turn has enjoyed rising popularity in the US with its own value-priced private label emphasis, competes with its Shep brand, as do dollar stores with offerings such as Dollar General’s EverPet.

Drugstore chains are also in on the act, including Walgreens with its Pet Shoppe line and CVS with Pet Central line. The specialty pet channel, like the mass market overall, still relies mainly on national brands, but PetSmart and Petco have been investing in private label, as have been many independent pet stores, with private label shares of specialty pet store sales falling in the 10%-15% range.

Trends in private label

Nonetheless, Simmons National Consumer Survey data from Experian Marketing Services, which cover retail purchasing overall (including mass market as well as pet specialty), confirm that private label shares are flat or falling for pet food and treats. The private label brand draw among purchasers for dry dog food, at 7%-8% for 2004 through 2010, edged up temporarily in 2011 and 2012 before retreating back to its former level.

In the case of dry cat food, private label’s draw fell from 10%-12% of category purchasers for 2004-2007 to 8-9% since 2008. The private label draw among purchasers of wet dog food and wet cat food likewise dropped over the last decade, falling to under 7% as of 2014. The private label brand draw for dog biscuits/treats, similarly, is down from 18% in 2004-2005 to 12% as of 2013-2014. Category of purchases most often buying private label pet food or pet treat brands % of US households, 2004-2014 20 15 10 5 0 % 2006 2010 2014 Dry dog food Dry cat food Wet dog food Wet cat food Dog biscuits/ trainers Cat treats 50 www.petsinfo.net Source: Compiled by Packaged Facts based on Experian Marketing Services. Simmons NCD Adult study 12-month. 7.0% 10.5% 9.6% 11.6% 17.4% 8.2% 8.2% 8.0% 6.3% 12.6% 3.4% 7.9% 7.8% 6.7% 6.9% 11.9% 3.4% June 2015 Marketing PETS International private label David Sprinkle dsprinkle@marketresearch.com www.packagedfacts.com

Pet product premiumization

Partially accounting for the recent weak performance by store brand pet food and treats is the pet product premiumization trend.

Upmarket and progressive pet nutrition products of all stripes – including gourmet, natural/organic, functional, grain-free, and exotic protein formulations, along with newfangled formats such as frozen, refrigerated, freeze-dried, dehydrated, and raw – remaining a core market driver, fueled by the ‘pet parents’ among middle- and higher-income demographics.

Even so, as reported in Packaged Facts’ U.S. Pet Market Outlook 2015-2016 (April 2015), more moderately priced offerings with premium or even superpremium formulation attributes are redefining the market, as exemplified by Wegmans’ Simply from Nature brand. This counter trend gives pet owners at all income levels more price point Agreement with ‘I look out for lower prices, special o ers and sales on pet products’ % of US pet product shoppers, 2013-2015 options, and simultaneously expands the range of possibilities for store brands.

Thus, store brands competing for the pet parent dollar should strike ‘holistic’ notes and emphasize pet wellness themes in product positioning and marketing, especially with natural formulations that feature whole ingredients like meat, vegetables, and fruit on ingredient lists and product packaging visuals.

In fact, as indicated by Walmart’s private label Ol’ Roy (the top-selling dog kibble in the US by volume) along with its newer Pure Balance line of natural pet food, leading retailers can leverage economies of scale in ingredient sourcing and product manufacturing, along with in-store marketing and promotion campaigns, to compete in ways smaller superpremium marketers cannot.

Competitive pricing

This opportunity is strengthened because competitive pricing remains a top priority among pet product shoppers, even as they seek out higher quality and innovative products.

Data from Packaged Facts’ Pet Owners Surveys over the last few years show that pet product shoppers have consistently been searching for good deals: as of January 2015, 34% of pet product buyers strongly agreed and 37% somewhat agreed that they are looking out for lower prices, special offers, and sales on pet products.

In keeping with this deal seeking, pet owners are cross-shopping across various retail channels (increasingly including the internet) and stores for products, straddling the mass market and pet specialty divide. Packaged Facts survey data reveal that half of pet owners shop around at a variety of stores for pet products, a behaviour that hasn’t diminished since the height of the recession.

This shows that loyalty to a single chain store or a retail channel is relatively weak. Private label pet nutrition can make its case across a spectrum of retail channels and to a broad range of consumers, such that more intensive pushes by premiumized private labels from chains in both the mass-market and pet specialty channels can help reclaim sales momentum.