The anticipated economic recovery will likely support growth in the dog and cat population. Overall, pet care is set to move towards stabilization.
Retail volume growth
According to Euromonitor, pet care witnessed a relatively strong development over the 2012-2017 review period despite the economic downturn, as Russian pet owners refused to cut down on expenses on their pets. However, several years of economic recession took its toll on the development of pet care. Retail volume growth remained low in 2016, and a similar dynamic is expected in 2017. The declining purchasing power of Russian consumers prevents them from increasing consumption of pet care and adopting new pets, which restrains growth. Further upward pressure on unit prices is likely due to a VAT increase on pet food from 10% to 18%, following the adoption of a new product classification system in Russia.
Dog and cat food categories appear to be well developed in Russia, and the breakdown in the pet population and pet food between dogs and cats remained stable throughout the review period. Cat and dog food are expected to witness similar trends with a movement towards mid-priced categories.
Consumers sacrifice purchases of more expensive brands in the premium non-therapeutic category, while economy products often do not satisfy their quality requirements. In addition, the mid-priced categories offer well-known brands of leading manufacturers, with strong distribution through modern retailers. Growth is expected to be observed in the mid-priced wet and dry dog and cat food categories.
The two leading companies
Pet care is strongly led by two international giants, Mars and Nestlé Russia. Both manufacturers are predominantly present in dog and cat food, with their brands distributed across all price segments. Mars and Nestlé Russia operate domestically located production facilities and have achieved unmatched brand recognition through constant advertising campaigns during the long years of their presence in Russia.
Domestic manufacturers could not increase pressure on the two leaders, despite the continuing growth of domestic brands’ quality level and widening assortment. A lack of access to the largest grocery retailing chains and insufficient marketing budgets will not allow domestic manufacturers to pose a threat to Mars and Nestlé Russia in the near future.
Modern grocery retailers
The share of modern grocery retailers surpassed the compound share of sales value generated by pet shops and pet superstores during the review period. In 2017, the increasing share of modern grocery retailers is set to continue. The trend is strongly influenced by the volume growth of mid-priced products in pet food, which is largely represented by Mars and Nestlé Russia brands, which have good access to modern retail channels.
Another trend in pet care distribution is the continuing development of internet retailing. The channel is especially popular for purchases of heavy items, such as large packs of dog food, as consumers benefit from delivery options, while prices are often comparable to those found in pet stores and grocery retailers.
A positive development
Over the course of the 2017-2021 forecast period, pet care is set to record positive retail volume growth. The anticipated economic recovery will likely support growth in the dog and cat population and disposable incomes of Russian consumers. Slightly stronger volume growth is expected in dog food, due to its lower volume base compared to the level of cat food.
The weak retail volume sales of other pet products and premium dog and cat food, witnessed in the review period, will likely recover together with the expected GDP growth. Overall, pet care is set to move towards greater maturity and stabilization.
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