The pet industry in the Baltics

The increased focus of Baltic pet owners on quality and health is driving market growth. However, consumer behavior, spending patterns and even product choices are affected by the overall economic situation.

PETS International asked industry insiders to share their insights into product trends, e-commerce, manufacturing challenges and future growth opportunities.

Pet ownership in the Baltics: facts and figures

• The European pet food association FEDIAF estimates the number of pets in the 2 main categories in the Baltics (as of 2022) at 2.4 million: 1.3 million cats and 1.1 million dogs
• While dog ownership is more common in Estonia and Lithuania, in Latvia cat ownership is more prevalent among households having a pet
• In all 3 countries (which have a total of around 6 million inhabitants), pets are most often found in families of 3 or more people
• Data shows that regardless of whether they care for a cat, dog or other pet, owners are increasingly viewing their pets as family members and pampering them

A valued part of the family

Wild animals such as bears, lynxes and wolves thrive in the forests, bogs and coastal ecosystems of Estonia, Latvia and Lithuania, which are among Europe’s least densely populated nations.

But pets can also enjoy a good life in these Baltic countries, where they have become cherished members of the household.

The pet products market in the Baltics has experienced significant growth in recent years and pet owners are sparing no expense when it comes to providing for their beloved companions, even though the overall economic situation and pet food market have been negatively affected by the war in Ukraine.

Rising interest in pet well-being

Trends in Estonia, Latvia and Lithuania are generally similar to most other European nations, with owners showing increasing interest in their pets’ general health and well-being, and becoming more conscious of the need for good nutrition.

Additionally, demand is growing for veterinary care and other pet services.

“People’s care habits for pets have changed, which is also evidenced by the growing demand for toys and various food products for their four-legged friends. Pet menus are planned as complete meals, combining dry food with wet food. Also, when the owners feast on a treat, the pet gets a treat too,” says Linda Teležnikova from PetCity, a full-service pet center operator with multiple locations across the Baltics.

Supermarkets vs specialized channels

As a result, more and more accessories, care products, snacks and treats for pets have found their way onto retail shelves.

Pet food items that cater to certain dietary requirements or are aimed at addressing specific health issues, such as allergies and digestive problems, are also in greater demand.

Major pet food retail and distribution channels in the Baltics include supermarkets that offer a wide range of dog and cat food from both multinational pet food manufacturers and cheaper private label brands.

Meanwhile, premium products and expensive accessories are more the domain of specialized pet shops and veterinary clinics.

Factors influencing the purchasing method include price, quality, shopping convenience and the availability of professional advice about products, according to industry insiders. The final choice ultimately depends on the personal preferences, beliefs and priorities of pet owners.

Money-saving strategies

Differences in income levels and the availability of veterinary services across Estonia, Lithuania and Latvia influence how much pet owners spend on their pets.

High inflation and rising prices, which have affected people’s everyday lives in recent years, have made consumers more price sensitive.

To cut costs and save money, many of them opt to buy larger quantities of essential pet supplies when there are significant discounts. Nevertheless, they still show a strong commitment to pet welfare and a preference for high-quality products.

“Estonia is struggling with high inflation and unprecedented high prices, so dog owners are feeling it in their wallets. But the livelihoods of dog people no longer differ by orders of magnitude from those in Western Europe or the US. Estonian dog owners are spending more and more resources on ensuring their dog’s well-being,” explains Aivar Roop, CEO and founder of the Estonian dog accessories brand Nufnuf.

His company produces and sells its premium pet products to more than 30 countries around the world. In addition, it offers dog daycare and hotel services in Tallinn and operates Estonia’s first indoor pool for dogs.

Online shopping on the rise

Following the COVID-19 pandemic boost to e-commerce, consumers are purchasing a growing percentage of pet-related goods online.

Local players believe that this will continue to increase in the coming years, as it is making high-quality and specialized pet products more accessible to Baltic pet owners.

In Latvia, home delivery means that people are now more often buying canned food and dry food for cats and dogs.

Meanwhile, in Estonia and Lithuania, frozen food is also gaining popularity in addition to classic pet meals, according to the technology company Wolt, which is active in all 3 Baltic countries. This homedelivery company joined forces some years ago with PetCity to offer an online platform for consumers, merchants and couriers.

This allows pet owners to order food, toys and care products online and get them delivered to their door.

Sky-high raw materials costs

The growing consumer interest in buying pet products online has also prompted other food retailers and pet industry players to intensify their digital activities.

The pandemic already highlighted the importance of digitalized processes and diversification, not least because of the disruption in the global supply chains that created major production and logistics challenges. These have since been exacerbated by Russia’s war in Ukraine and have primarily driven up the costs of raw materials.

“Prices for cereals, meat and other raw materials jumped sky high and the surge had a huge impact on product cost and pricing structures,” says Paulius Ausmanas, Head of Export Development at KIKA Group, the largest manufacturer and retailer of pet care products in the Baltics. “We couldn’t pass everything on to our customers and had to absorb a lot of the cost increases by decreasing our margins.”

Focus on differentiation

Due to the conflict in Ukraine, Baltic pet companies are no longer able to export to the neighboring markets of Russia and Belarus. Given the small size of their domestic markets, pet care product producers from Estonia, Latvia and Lithuania have turned their attention abroad to mitigate the loss of that sizable portion of their business.

Many of them are now increasingly looking to international markets for growth, with significant potential seen in Asia, the US and Scandinavia.

“Competition is tough; the pet industry has become one of the ‘most wanted’ industries nowadays. So, if you want to be in the game you have to be the best – you can’t be average,” Ausmanas states. He adds that the competitive nature of the pet industry necessitates a focus on quality and differentiation.

For Baltic pet care product producers to succeed globally, unique selling propositions (USPs) and high-end products are essential. “We have to be unique and go the extra mile in everything we do,” he adds.

In search of new markets

KIKA Group, which is based in Lithuania’s second biggest city, Kaunas, exports to 65 countries worldwide.

It increased its export sales by more than a third in the 12 months up to February 2024. The company is currently preparing for the construction of a new factory to produce wet food in small pouch packages, and also invests in research and development activities.

Over the next 3 years, the branded and private label supplier will invest up to €5 million ($5.58M) in collaboration projects with Lithuanian and European scientists to develop and validate new formulas and products.

Finding new export markets has also been a huge challenge for the Ukrainian producer of wet and dry food for cats and dogs, Kormotech. It adapted to the war in its home country by relocating some of its activities to Lithuania, where it had been operating an annual 20,000-tonne-capacity plant specializing in wet pet food production in the city of Kėdainiai since 2020.

Amid the ongoing war, the company has managed to strengthen its presence in the Baltics, as many supermarket chains have been eager to replace Russian-made goods with Ukrainian ones.

At the end of last year, Kormotech announced plans to expand its manufacturing facility by investing more than €60 million ($67M). “We consider Lithuania our second home market. While we plan to build new production facilities in Ukraine once the war is over, Lithuania currently serves as our gateway to the world,” states Kormotech CEO and co-owner Rostyslav Vovk.

The company expects the first new production line in Kėdainiai to become operational in 2025, with another 3 added over the course of the project by 2028.

A note of optimism

Looking to the future, industry representatives are cautiously optimistic.

Despite the pressure of various economic and geopolitical factors, dog and cat owners in the Baltics still seem to be willing to spend on their pets, and they show a rising awareness of proper pet care.

This will create new business opportunities in the relatively small markets for both local and global players. However, in view of narrowed profit margins, there is a need for differentiation and ongoing innovation to stay ahead of the competition.