Not only is the global pet food market steadily growing, it is also considered one of the fastest growing food industry segments. Paul Moers sees eight major trends that will become increasingly significant.
Prepared pet food dates back to the end of the 19th century, but in recent years it has become a truly booming business. Families are getting smaller and birth rates are falling, while spendable income levels are rising, as is population ageing.
As a result, there are more pets than ever before. In some countries, like Japan, the number of pets exceeds that of children under the age of fifteen. For 2017, pet food sales are expected to total around $81 billion (€75.8 billion), compared to $59.3 billion (€55.5 billion) in 2010.
The pet food industry is a very special type of business. According to Dutch market researcher GFK, nine out of ten pet owners perceive and treat their pets as family members. More than half of cat and dog owners buy Christmas presents for their pets and 35% celebrate their birthdays. To most of us, in short, our furry friends are not just animals, they are more like little human beings. We feed them, cuddle them and care for them.
This is reflected in the pet industry, which has become “humanized” as well, with emotional values equaling, if not surpassing the importance of practical aspects. And because of the strong emotional bonds between pets and their owners, people are more and more sensitive to the quality of pet products, paying closer attention to the ingredients of pet foods as well.
North America and Europe remain the largest pet product markets. In the U.S., there are 178 million cats and dogs – roughly 50% of the human population of 354 million. Europe has 180 million cats and dogs for a human population of 754 million. South America and Asia currently have around 70 million cats and dogs, and the numbers in these parts of the world are expected to grow rapidly as income levels rise. Dog foods account for the majority of pet food sales (around 80%). Dry foods are still the most popular food type, but that might change in the near future. Frozen and fresh foods create new opportunities for the industry. Supermarkets will continue to lead in marketing and sales, and for them, pet food is a terrific traffic generator.
Eight major trends
The trends I see emerging and gaining more momentum in the future, are the following:
1. The gap between human food and pet food will narrow
Trends in human food are rapidly becoming trends in pet food as well. The human food industry focuses more and more on the natural trend, banning e-numbers, etc. The food we give our pets has to live up to the standards we apply to the food we eat ourselves. Ingredients have to be clearly specified on the products, so buyers can see what is actually in them and inform themselves on what it is their animals are eating. They want what is best for their pets, and food is one of their major concerns.
2. Online business will grow fast
The Internet is an increasingly important source of information on how we care for our pets. This benefits not only the big names in the pet food industry, it is also good news for small, new entry players, who can distinguish themselves with innovative specialty products. The Internet will help to create a more level playing field with regards to big brands like Mars and Nestlé. Online sales will continue to grow, review sites will become more and more influential and consumers will shape their own empowerment.
3. Pet specialist chains will gain market share worldwide
It’s all about purchasing power, and pet food is no exception. Purchasing power is an essential condition for survival in a converging world. Pet specialists can provide additional information and services, but they can also offer their clients a unique experience, focused on their pets. Which is one thing supermarkets can not do. Pet food chains, as a result, will continue to develop, merge and grow.
4. Private labels are becoming private brands
Chains are discovering the extraordinary strength of their brand names. So, they are now putting their own labels on their products. With the purchasing power and scale they possess, they even have the option of innovation, building on the trust consumers have in their products. So, private label products will continue to grow worldwide, offering retailers better margins and consumers a better deal.
5. Tracking the supply chain
Consumers are better informed than ever before. As a result, they are becoming increasingly critical of products and suppliers. Consumer organizations and the Internet offer truckloads of information. Supermarket chains also want to know exactly what is happening in the supply chain, in order to better inform their customers. They want specifications and factsheets. The same is true for retail chains. Product recalls are bad for their image and so they are getting more careful as well.
People value the quality of food they buy for themselves. On the same terms and for the same reasons, they want quality products for their pets. Special products. Good is no longer good enough. This is creating all sorts of opportunities for upgrading products and, at the same time, improving margins. GMO-free, added vitamins, luxury packaging, organic food products, authenticity, limited ingredient diets (LID), grain-free, etc. They all create added value and provide great opportunities, especially in well-developed countries, where spendable incomes are high enough to pay for premium products. Now that the worldwide economic crisis is over, consumers are willing to start spending again. The important thing is for pet food suppliers to organize their innovation skills and create new opportunities in the marketplace. Product life cycles are getting shorter than ever, requiring suppliers to increase the pace of innovation and speed up time-to-market.
7. Social media will play an even more important role
Traditional media are struggling to reach customers. Social media are cheaper, often have larger audiences and provide completely new platforms for information and entertainment, with instruction movies and buying options. Pet food suppliers can no longer afford to ignore these new venues. They offer unique opportunities to establish a strong bond with pet owners.
8. Emerging markets
Western European markets will face stagnating increase in volume, but at the same time offer new opportunities in terms of added value. In Central and Eastern Europe, markets will continue to grow, with Russia depending on its relations with the West. If existing sanctions are lifted, the economy might pick up again. The real growth opportunities will be in China and the Pacific Rim, except for the already mature market in Japan. The largest pet food market by far is North America, but it is as yet unsure what effects the Trump administration will have on economic development. Rigorous action in dealing with the issue of illegal citizens may impact market conditions in unexpected ways, not only in terms of the availability – or unavailability – of cheap labor, but also in terms of spending power. A policy of deportation, in other words, might very well backfire on the economy.
Research and marketing talent
The pet food industry is a fascinating and dynamic business, offering a solid basis of income for suppliers and retailers alike. However, like any other business, it needs the impulse of constant innovation, which in turn requires highly qualified personnel. In many parts of the world the struggle for talent has already started. Pet food producers need top quality researchers and marketers. Branding will become crucial in maintaining market position and price levels. Brands offer trust and added value. Approaching each geographic market individually is of vital importance, as market dynamics and sales channels are often very different from one another. In a world with over 475 million cats and dogs, there is plenty of room for many additional players. Until now, the supplier market has been fragmented, but further concentration is to be expected soon: There is plenty of potential and sufficient profitability. There is a proven track record of crisis immunity. Consumers will keep feeding their pets, no matter what. In other words, risks are limited, which is exactly what suppliers and retailers want.
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