In the post-recession pet food world, acquisitions and capital investments promise to reshape the U.S. pet food market. During 2010, Procter & Gamble/Iams acquired holistic pet food maker Natura, Nestlé Purina bought fast-growth treats maker Waggin’ Train, and Del Monte was snapped up by a group of investors including KKR for the tidy sum of $5.3 billion. As the early 2011 acquisition of Petmate by private equity firm Wind Point Partners makes clear, this keen interest in all things pet is industry-wide, with smaller companies also receiving capital infusions. Breathing additional dynamism into the market are health-related marketing and product development initiatives including a wave of grain-free pet foods, new weight-loss foods and programs from major market forces including Hill’s and Purina, and a flood of additional special diet and condition-specific functional foods and treats that takes the notion of pet pampering to a new level.
At the same time, the market continues to face challenges related to consumer cutbacks and retail price wars. Toward the end of the historical 2006-2010 period examined here, the $70K-plus households who have been largely driving the product premiumization trend took a step back, as did some of the consumers buying natural products. As signs of the times, Mars discontinued its Goodlife Recipe line of “natural light” pet foods, and Nestlé Purina quietly withdrew its Pet Promise “stealth brand” from the natural supermarket channel. In addition, during 2010, the number of new products tagged Upscale halved as marketers and retailers continued to focus on value-related appeals, while the number of private-label entries rose. Looking ahead into 2011, this sort of temperance will remain a smart strategy, since in Packaged Facts’ most recent survey of pet owners, conducted in February 2011, almost three-quarters of pet owners agree with the statement “I think many pet products are becoming too expensive.”
Bringing to bear more than 20 years of experience in analyzing this market and drawing on Packaged Facts’ broad cross-category expertise, Pet Food in the U.S., 9th Edition pinpoints strategic directions for current and prospective marketers, with a forward-looking focus on high-growth product segments and market drivers. Covering products for all type of companion animals, the report devotes separate chapters to Dog Food, Cat Food, and Other Pet Food (birds, small animal, fish, and reptiles), while also providing a comprehensive Market Overview covering cross-market trends and opportunities through 2015. Among these: impact of recession and economic recovery; recent and expected mergers and acquisitions; private-label inroads; advertising and promotional trends including social media and cause marketing; green initiatives; the multifaceted trend of natural and organic foods (which despite a slowdown continue to outpace the market as a whole); grain-free/non-allergenic foods; “meat first” products; weight maintenance and senior foods; customized and preportioned foods; “whole” and human-grade ingredients including fruits, vegetables, whole grains, etc.; and novel ingredients such as glucosamine, omega fatty acids, antioxidants and probiotics.
Pegging 2010 U.S. retail sales at $18.4 billion and projecting steady growth through 2015, the report provides market size estimates for the overall retail universe, while quantifying mass-market sales to the marketer/brand share level using data from SymphonyIRI. It also charts market size and marketer share figures for the natural supermarket channel, using SPINSscan sales tracking data. In sum, Pet Food in the U.S., 9th Edition thoroughly documents competitive, new product and retail trends, as well as trends in pet food purchaser demographics, brand preferences, cross-channel shopping, and cross-product purchasing. Consumer profiling is based on customized cross tabulations of Experian Simmons consumer survey data; exclusive data from Packaged Facts’ own quarterly pet owners; and data shared with Packaged Facts by the American Pet Products Association (APPA). Dozens of images of pet food and treat products and consumer and trade ads are included.
Market Insights: A Selection From The Report
Natural and Organic Pet Food Sales
In our July 2010 report, Natural, Organic and Eco-Friendly Pet Products in the U.S., 3rd Edition, Packaged Facts places sales of natural pet food through all channels at $1.5 billion in 2009, up from $689 million in 2005. Natural pet food, with its superpremium pricing, has
felt the impact of the recession, with sales in SymphonyIRI-tracked channels falling 2.4% during the 52 weeks ending April 18, 2010, to $223 million, compared with overall dog and cat food growth of 4.5% during the same period. Looking ahead, however, the sales growth
of natural pet food is still expected to well outpace that of pet food overall during the next five years, at 11% vs. 4% in terms of compound annual growth. [Table 2-8]
Company Profile: Petco Animal Supplies, Inc.
With sales of $3 billion in 2010 and over 1,000 stores in operation, Petco offers an enormous array of pet-related products—over 10,000 in all. The company maintained a healthy rate of double-digit sales growth almost every year between 2000 and 2008, but like PetSmart, Petco saw its sales growth cut in half in 2009 and 2010, according to Packaged Facts estimates.
Also like PetSmart, Petco views pet care services as a growth area, with grooming and dog obedience training available in most stores, and limited veterinary services including routine vaccinations in some stores. Since 2000, pet services have tripled as a share of Petco's overall sales, rising from 2% ($24 million) to 7% ($203 million) in 2010, reflecting a compound annual growth rate (CAGR) of 24% for the ten-year period compared with a 10% CAGR for company sales overall. [Table 2-52]
As discussed in Packaged Facts' February 2011 report, Pet Supplements and Nutraceutical Treats in the U.S., 3rd Edition, functional treats are big business as well as a growing part of the pet supplements trade. New to the market in 2010 are Breeder's Choice Active Care Healthy Joint Treat Soft Heart Shaped Cat Treats, which contain chondroitin and glucosamine; Vetri-Science's UT Strength Everyday Chicken Flavor Soft Chews for Cats, which are touted as "Veterinarian-approved urinary tract support formula with probiotics," and which also contain cranberry extract; Hartz Mountain's Hartz Crunch 'n Clean Cat Treats with the patented ingredient DentaShield, which according to labeling removes three times more tartar than competitive products; Mars' Skin & Coat extension to the Temptations Essentials line, which also includes dental care and hairball control varieties; and Natura's EVO Wild Cravings grain-free treats, whose varieties are Herring & Salmon Formula, Turkey & Chicken Formula, and Weight Management Formula. [Illustration 4-9]In the News
Acquisitions, Investments Reshape Post-Recession U.S. Pet Food Market
New York, March 9, 2011 — In the post-recession world, acquisitions and capital investments are reshaping the pet food market, according to Pet Food in the U.S., 9th Edition by market research publisher Packaged Facts.
Fueling marketer, retailer, and capital investment interest is the relatively stability of the market vis-á-vis other consumer product industries. According to the report, retail sales of pet food reached $18.4 billion in 2010, up 2.8% over 2009 levels. While this rate represented a slowing of category growth (the first time since the turn of the century that sales didn't grow by 3% or more annually), it also signaled the pet food market's relative strength in the face of economic hard times.
During 2010, Procter & Gamble/Iams acquired holistic pet food maker Natura, Nestlé Purina bought fast-growth treats maker Waggin' Train, and Del Monte was snapped up for the tidy sum of $5.3 billion by a group of investors including KKR. As indicated by Wind Point Partners' early 2011 acquisition of Petmate, which has expanded from pet carriers to a wide-ranging line of pet accessories, this keen interest in all things pet spans product categories. Breathing additional dynamism into the market are health-related marketing and product development initiatives including new weight-loss foods and programs from major market forces including Hill's and Purina and a flood of special-diet and condition-specific functional foods and treats that take pet pampering to yet another new level.
"Given that Procter & Gamble now has Natura and Mars Nutro, Packaged Facts suspects that Nestlé Purina may be shopping for a "true" natural pet food brand (i.e., one born in the pet specialty channel) to acquire, and it will be interesting to see which of these three top-ranked pet food companies is first to make the pet-specialty-to-mass leap with such a brand," says David Lummis, senior pet market analyst for Packaged Facts. "Such an event is only a matter of time."
Packaged Facts expects to see additional acquisitions of natural pet companies by mainstream market leaders during 2011 and 2012. It would not be surprising, for example, to see PetSmart or Petco snap up a leading producer of natural/holistic pet food, in order to fast-track their own expansion into natural via an exclusive brand, which could in effect become the chain's private label.In this vein, five companies stand out as possible acquisitions targets:
WellPet LLC, which is currently in the hands of investment management company Berwind Corp.
Natural Balance, a top marketer of natural pet food in the pet specialty channel and a top seller for Petco.
Halo Purely for Pets, majority owned by private equity fund Pegasus Capital Advisors.
Nature's Variety, which produces natural raw and traditional pet food; its parent corporation, M.I. Industries, is backed by investment firm Catterton Partners.
Castor & Pollux, a top organic pet food brand in the pet specialty and natural supermarket channels.
Pet Food in the U.S., 9th Edition, provides market size estimates for the overall retail universe, while quantifying mass-market sales to the marketer/brand share level using data from SymphonyIRI. It also charts market size and marketer share figures for the natural supermarket channel, using SPINSscan sales tracking data. The report thoroughly documents shifts in the competitive landscape, new product and retail developments, and trends in pet food purchaser demographics, brand preferences, cross-channel shopping, and cross-product purchasing. Consumer profiling is based on exclusive data from Packaged Facts' own quarterly surveys of pet owners; customized cross tabulations of Experian Simmons consumer survey data; and data shared with Packaged Facts by the American Pet Products Association (APPA). Dozens of images of pet food and treat products and consumer and trade ads are included to illustrate the state of the market.
About Packaged Facts — Packaged Facts, a division of MarketResearch.com, publishes market intelligence on a wide range of consumer market topics, including consumer goods and retailing, foods and beverages, demographics, pet products and services, and financial products. Packaged Facts also offers a full range of custom research services.
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