Positive outlook for pet care

Global value growth

The pet care industry has been in the news recently due to a major takeover that took place earlier this year when yet another well-known FMCG player entered the market. General Mills’ acquisition of Blue Buffalo for a whopping $8 billion (€6.5 billion) hit the headlines and took many by surprise. But it is the industry’s growth that has also been attracting much attention and funnelling major investment into the industry. With an expected 4% global value growth (in constant terms) for 2018, the pet care industry is the place to be.

Year of the cat

Some recent developments in the industry have been in response to the growing popularity of cats, which have largely overtaken dogs in many markets. Felines have captured the limelight due to their playful and typically more independent nature, making them

the perfect companions for fast-paced, urbanised young owners. This is also reflected not only in sales of cat treats but also of cat food in general. In fact, the category has been experiencing high levels of premiumisation with more nutrient-rich, alternative protein and functional diets hitting the shelves.

Global premium cat food sales are expected to increase by 4% in 2018, with absolute growth sales expected to reach $2 billion (€1.6 billion) between 2018 and 2023. While premium pet food has attracted much of the attention, however, not all consumers are so affluent and mid-price cat food is also expected to generate value growth.

East is the new West

According to Euromonitor’s newly released data, China will remain the fastest-growing market in 2018. With its burgeoning middle class and its digital-savvy consumers, China continues to experience a boom

as more pet owners turn to commercially prepared food and pampering their pets. In fact, pet care

value sales are expected to grow by 22% over 2018 and achieve a 20% compound annual growth rate (CAGR) over the next five years at constant 2018 prices. Attesting the market’s dynamism, new brands are entering the fray while competition from local players is intensifying. Other fast-growing markets include Taiwan, South Korea and Thailand – albeit from a different, much lower, base.

Competition intensifies in developed markets

In the US, besides the acquisition of Blue Buffalo, other smaller power shifts have also been taking place and the industry is becoming ever-more competitive. The pace of innovation remains relentless and newcomers are eating into the share of more established players.

Reflecting the global trend, premium pet food is still the best-performing category with a special mention for cat treats and premium wet cat food. As premium, natural grain-free and raw diets continue to enjoy the limelight, wet food has experienced stronger value growth than the traditional, more established dry food.

In contrast, growth is expected to remain sluggish and fairly flat in Western Europe. Amongst the best-performing markets are Portugal and Spain as slightly better economic conditions boost consumer confidence, while growth is slower in the largest markets such as Germany and France.

No stop to pampering

With expected global constant value growth of 5%, the cat treats segment is expected to be the best-performing category for this year as owners look to indulge or reward their pets or even address health conditions with such products. By contrast the dog treats category, which is more mature

than cat treats, is expected to experience slower growth. Nevertheless, 4% value growth is still quite impressive for a more developed category, and the rate of innovation has been unstoppable.

Global outlook

Pet products face less impressive growth globally, but there are pockets of growth that reflect owners’ concerns with their pets’ health and wellbeing. Raw diets and better education about specific ailments and needs have helped to boost sales of pet dietary supplements. Global pet care is expected to continue to benefit from the strong humanisation trend which, together with sociodemographic factors, will continue to drive the industry. A global 4% value CAGR for the next five years is predicted, generating gains in excess of $24 billion (€19.4 billion) over the same period.