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THE STATE OF THE GLOBAL PET CARE INDUSTRY
CHALLENGES AND OPPORTUNITIES
WIEBKE SCHOON
GLOBAL PETS FORUM JANUARY 2017 – WARSAW
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Euromonitor International – strategic global market intelligenceABOUT EUROMONITOR INTERNATIONAL
© Euromonitor International
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USD104 bn 2.6% 2.4%
Global value sales 2016 2011-2016 CAGR 2016-2021 CAGR
Pet care globallyTHE STATE OF THE PET CARE INDUSTRY – CHALLENGES AND OPPORTUNITIES
Values in USD, constant 2016 prices, fixed 2016 exchange rate. Values for 2016 are estimated
KEY DRIVERS
RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
Pet specialistsGrocery retailingInternet retailing
OUTLOOK AND KEY TAKEAWAYS
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Largest markets continue to perform wellKEY DRIVERS
05,000
10,00015,00020,00025,00030,00035,00040,00045,00050,000
0
1
2
3
4
5
6
2016 Pet Care Value Sales by Region and CAGR 2011-2016
% C
AGR
2011
-201
6
Constant 2016 prices, fixed 2016 exchange rate
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Economy Mid-Priced Premium 0
5000
10000
15000
20000
25000
30000
35000
40000
0
0.5
1
1.5
2
2.5
3
3.5
Dog and Cat Food by Price Platform 2016/2021 and CAGR 2016-2021
2016 value sales 2021 value sales 2016-21 CAGR %
% C
AGR
2016
-202
1
Premium dog and cat food set to see the strongest growthKEY DRIVERS
Constant 2016 prices, fixed 2016 exchange rate
© Euromonitor International
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Humanisation as a key premiumisation strategyKEY DRIVERS
• Pet humanisation leads to a convergence of trends
between human food and pet food
• The “natural” trend is spilling over from health and
wellness human food
• Free-from, Paleo, superfoods and freshness are all human
food trends trends being mirrored in pet food
KEY DRIVERS
RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
Pet specialistsGrocery retailingInternet retailing
OUTLOOK AND KEY TAKEAWAYS
© Euromonitor International
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Grocery retailers lead globally, ahead of specialistsRETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
Grocery retailers40%
Pet superstores17%
Pet shops15%
Internet retailing6%
Veterinary clinics7%
Others16%
Global Pet Care Value Sales by Channel 2016
USD104 bnTotal value sales 2016fixed exchange rate
© Euromonitor International
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Internet retailing and pet superstores experience the strongest growthRETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
Grocery
retailers
Pet superst
ores
Pet shops
Veterinary
clinics
Internet retailin
g
Others0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
Pet Care Sales by Channel 2011/2016
20112016
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Different distribution structures across regions set different challengesRETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
Middle East and Africa
Australasia
Eastern Europe
Asia Pacific
Latin America
Western Europe
North America
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Importance of Distribution Channels by Region, 2016
Grocery RetailersPet superstoresPet shopsInternet RetailingVeterinary clinicsOthers
KEY DRIVERS
RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
Pet specialistsGrocery retailingInternet retailing
OUTLOOK AND KEY TAKEAWAYS
© Euromonitor International
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USA Germany Brazil Russia Poland Mexico Thailand0
2000
4000
6000
8000
10000
12000
14000
16000
Pet Care Value Sales of Pet Shops and Superstores in Selected Countries, 2011/2016
20112016
+16%+67%
+61% +17%+79%
+83%
US registers the strongest actual value growth for pet specialistsRETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
+28%
Current values, fixed 2016 exchange rate
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US – pet shops are finding their nichesRETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
• First opened in Chicago in 2006
• 42 outlets in 2016
• Focus on natural “Kriser's Approved” products
• Sets out to offer exceptional customer service by very knowledgeable customer service assistants
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Maskota – a Mexican success story… in danger?RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
2012 2013 2014 2015 20160
100
200
300
400 Number of Outlets
2012 2013 2014 2015 201638404244464850
Value Share within Pet Shops and Superstores in Mexico
% sh
are
• Store concept adapted to include smaller formats
• Focus on exclusive premium pet food brands key to its success
• Services key for differentiation: home delivery, home beauty salon services, veterinary service
• Toka+Kota (Touch Pets) Service: allows children to interact with dogs, rabbits, snakes, parrots, etc
• Animal cruelty scandal caused consumer backlash
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Thailand – a fragmented pet specialists retail environment flying highRETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
33% of pet care sales generated by pet shops in 2016: USD250 mn
4.4% CAGR 2016-2021 for pet shops and superstores (constant, fixed exchange rate)
Fragmented market: Manoon Pet Shop leads with 7% of value sales
“Pet Idols” – Social media
Grooming servicesConveniently located for local neighbourhoods
In-store vet services
Availability of (exclusive) brands
Professional advice
Manoon Pet Shop in Ao Tor Kor market
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Focused on large cities
Several types of private label products offered alongside mainstream brands
Around 40 outlets, 11% value share in pet shops and superstores
Offers a price-match with competitors’ prices
Complements its stores with an online shop
Poland: Kakadu competes on choice and priceRETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
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No strong economisation on pet food
40% of pet care value sales through pet shops
Pet shops overtaken by modern grocery retail for the first time in 2016
Bethowen holds a 12% value share in the fragmented pet shops and superstores channel
Russia – pet shops robust despite a difficult economic situationRETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
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Germany – Fressnapf continues to assert its positionRETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
Fressnapf store in Berlin2011 2012 2013 2014 2015 20160
200400600800
1,0001,2001,400
Fressnapf Value Sales Germany, 2011-2016
Fressnapf Tiernahrungs GmbH store-based value sales, rsp incl sales tax
USD
mn
Fixed exchange rate, current values
KEY DRIVERS
RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
Pet specialistsGrocery retailingInternet retailing
OUTLOOK AND KEY TAKEAWAYS
© Euromonitor International
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Grocery retailing – hypermarkets and supermarkets very important in pet care sales
RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
Super-markets
Hyper-markets
Discounters
Inde-pendent
Small Gro-cers
Other Grocery Re-tailers
Convenience Stores Forecourt Retailers
Breakdown of Pet Care Sales Through Grocery Retailing in 2016
USD41 bn in 2016
Grocery retailing generated 40% of all pet care value sales globally
Sainsbury’s, Leicester, UK
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Australasia
Middle East and Afric
a
Western
Europe
Eastern Euro
peWorld
North Americ
a
Latin America
Asia Pacifi
c0
10203040506070
Share of Pet Care Sales Through Supermarkets and Hypermarkets
by Region
% s
hare
Woolworths (supermarket in Australia) is positioned as a one-stop-shop and specialist for pet care products: food for puppies, kittens, adult and senior cats and dogs is available
Product portfolio ranging from economy private label to premium, branded products, including chilled pet food
Phantom brands make private label difficult to spot: Smitten and Apollo
Supermarkets trying to shed their “too generalist” imageRETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
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Western Europe is the most successful battleground for discountersRETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
Austria Spain Germany Switzerland Western Europe
0
2
4
6
8
10
12
14
16
18
20
Discounters' Share of Pet Care Value Sales in Selected Countries, 2016
% sh
are
Aldi, Germany
KEY DRIVERS
RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
Pet specialistsGrocery retailingInternet retailing
OUTLOOK AND KEY TAKEAWAYS
© Euromonitor International
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Internet retailing set for strong growth in all regionsRETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
0
500
1000
1500
2000
2500
0
2
4
6
8
10
12
14
16Pet Care Internet Retailing Sales 2016 and CAGR 2016-2021
2016 value sales 2016-2021 CAGR %
% C
AGR
Constant 2016 values, fixed exchange rate
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Apparel and Footwear Food and Drink Pet Care0
50000100000150000200000250000
024681012
Global Internet Retailing Sizes by Category 2011/2016 and CAGR 2016-2021
2011 value size 2016 value size 2016-2021 CAGR
% C
AGR
Pet care internet retailing to see healthy growth, but remains small RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
Internet sales in pet care are still small compared with other channelsApparel and footwear is successful thanks to free returns policies in many countries, and often low delivery charges
Food and drink faced bigger challenges, but has seen strong growth in a few markets Pet retailing has good arguments on its side for internet retailing – the challenge is to provide a service tailored to consumers’ needs
Constant values, fixed 2016 exchange rate
© Euromonitor International
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Amazon Dash Button – contradicting pet parents’ sentiments?RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
ConvenienceShopping for
pets as a chore
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• Strongly developed internet environment meets highly pet-centric society
South Korea
• Largest pet care market relatively underdeveloped in internet retailing
• Recurring orders interesting for US consumersUS
• Click-and-collect has potential for growth• Supermarkets and specialists are expanding their
product rangesUK
• Zooplus key in driving pet care internet retailing• Fressnapf has shifted its focus to multi-channel Germany
South Korea the ideal environment for pet care internet retailingRETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
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Distribution can be one of the main challenges in emerging markets
Bricks-and-mortar retail infrastructure still lacking in smaller places Chained grocery retail presence often limited Internet retailing can provide a means of leapfrogging this hurdle in
order to reach the “long tail” of consumers in these small but numerous markets Local online retailer Alibaba is expanding aggressively in rural China, building service centres
where villagers can both make and pick-up orders
Alibaba chases the “long tail” in ChinaRETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
2011 2012 2013 2014 2015 201605
101520253035
3 %
30 %
Share of Internet Retailing in Pet Care Value Sales in China 2011-2016
% sh
are
KEY DRIVERS
RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
Pet specialistsGrocery retailingInternet retailing
OUTLOOK AND KEY TAKEAWAYS
© Euromonitor International
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Pet care set to register healthy growth over the next five yearsOUTLOOK AND KEY TAKEAWAYS
2016 2017 2018 2019 2020 20210
10000
20000
30000
40000
50000
60000
Pet Care Value Sales by Region, 2016-2021
North AmericaWestern EuropeLatin AmericaAsia PacificEastern EuropeAustralasiaMiddle East and Africa
+11%
+7%
+26%
+22%+18%-1%+37%
Constant values, fixed exchange rate
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Leverage the fact (and marketing message) that smaller players can cater to consumers in
certain niches more appropriately than big competitors
Creative approaches to products or distribution
Manufacturers and pet shops can benefit from a virtuous circle if they support each other
How can small players tackle the challenge of competing with big competitors?
OUTLOOK AND KEY TAKEAWAYS
© Euromonitor International
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Strengths• Strong global standing of pet
specialists•Capitalising on human food
concerns• Innovative retail strategies
Weaknesses• Ethical or animal welfare • Limited distribution network
in emerging countries
Opportunities•Pet parents willing to spend
money•Mirroring human food concerns• Internet retailing – reaching
consumers
Threats•Private label competition and
downwards influence on pricing• Internet retailing – being left
behind
Pet care sees good opportunities if threats are kept at bayOUTLOOK AND KEY TAKEAWAYS
THANK YOU FOR LISTENINGWiebke SchoonSenior Research Analyst Food & Nutrition – Western [email protected]+44 (0) 207 251 8024 EXT 1190