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“Healthy future for the US market” A steady stream of super-premium products is fuelling the US

dog food market, stresses pet market expert David Lummis from the market survey company Packaged Facts.

2009 recession and its aftermath of economic uncertainty, pet food has continued to perform well, since many pet owners consider pet food to be at the forefront of their pet’s preventive health reg-imen.

During 2011, US pet food retail sales rose by 4.5 per cent to $19.2 billion, with only the considerably smaller non-medical pet services category doing better (5 per cent). At the centre of the US pet food market are products for dogs, which account for about two-thirds of the market total – to the tune of over $ 12 billion in 2011.

Underscoring the shift to pre-mium products in effect for several years now, sales of pet food in US pet speciality channels have been increasing at a much faster clip than the market overall. According to GfK Retail & Technology, which collects sales information from a sample of pet shops, farm & feed stores, and veterinary clinics across the US, US pet speciality retail sales of pet food rose 7 per cent in 2011, following 8.5 per cent growth in 2010 and 12 per

In the United States, pet food is a 34 per cent slice of a $ 57 billion pie that also comprises non-edible pet products and pet services, including veterinary products. Although the US pet market slowed during the 2008-

cent growth in 2009. Excepting the 1 per cent decline in 2010, unit sales have also been good, up 5 per cent in 2009 and 6 per cent in 2011, while volume (pound) sales have progressed by 1-2 per cent annually. GfK segments pet speciality sales according to channel, with the 2011 figure breaking out into pet shops/pet retail at 68 per cent of sales, vet-erinary clinics at 16 per cent, and farm & feed stores at 16 per cent, and for the past two years, pet shops/pet retail have posted con-siderably faster rates of dollar growth than the other two chan-nels.

Pet food premiumisationAs noted, one of the strongest

growth drivers in the US pet food market is premiumisation, with more and more pet owners opting for higher-priced products. Ac-cordingly, most of the US pet market growth has been coming from higher-ticket sales as op-posed to volume gains. Fuelling this trend is a steady stream of super-premium products, with natural and organic products es-pecially important in the pet food aisle. In Packaged Facts’ March 2012 Pet Owner Survey, 40 per cent of pet product buyers felt that

A host of pet food manufacturers showcased grain-free pet food products at the previous Global Pet Expo trade show, among them Midwestern Pet Foods.

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natural/organic pet products are often better than standard na-tional brand products, up from 30 per cent in the September 2011 survey.

In this same vein, the trend toward human-style pet foods continues. The idea is to appeal to pet owners with products that look like – and contain the same or similar ingredients as – prod-ucts they would eat themselves. The apex of human-style is human-grade, a claim that continues to advance in the dog food aisle. Companies offering pet food made with human-grade ingredi-ents include Newman’s Own Or-ganics (one of the first), Halo Purely for Pets, Evanger’s, Nature’s Variety, and Weruva, to name only a few, with more companies going live with human-grade foods on a regular basis.

Grain-free foodsWithin a relatively short period

of time, grain-free dog food has

become a fact of life in the US pet food market and almost a must for makers of super-premium foods. A number of pet food in-gredient trends combine in grain-free, including natural, no wheat, gluten-free, hypoallergenic, and meat-first. Several new grain-free dog foods debuted at the Amer-ican Pet Products Association’s 2012 Global Pet Expo (GPE) in Orlando, with the trend continuing to attract big names. Among these are “Hill’s Science Diet Ideal Balance Grain Free”, part of Sci-ence Diet’s new “Ideal Balance” natural line; Blue Buffalo’s “Freedom Grain-Free” line, billed as “grain-free at its finest!”; Pre-cise Pet Products’ grain-free “Pre-cise Holistic Complete”, which contains botanicals, herbals, and supplements “to help promote a healthy, well-balanced diet for pets”; Midwestern Pet Foods’ “Earthborn Holistic Meadow Feast” with lamb meal; and Ains-worth’s “Back to Basics”, touted as “the next evolution in grain-free nutrition.”

Another big bright spot in the US pet food market is premium-priced refrigerated pet food. During 2011, SymphonyIRI’s “frozen/re-frigerated dog food” category

made a 19 per cent jump to $ 19.2 mio. And unlike most of the dollar sales gains elsewhere in the pet food market, these dollar gains are coming from increased unit and volume sales. During 2011, unit sales of frozen/refrigerated dog food rose 11 per cent and pound (volume) sales were up 15 per cent, improving on frozen/refrigerated dog food’s 10 per cent gain in 2010. A large majority

of the success with frozen/re-

Sales of pet food in US pet speciality channels have been increasing at a much faster clip than the market overall.

Source: Packaged Facts

Share of US pet market retail sales by category in 2011

35 %

34 % 20 %

11 %

Non-medical pet Services Veterinary

services

Pet food

Pet supplies

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frigerated pet food is attributable to the efforts of Freshpet. During 2011, the company’s Sympho-nyIRI-tracked dog food sales jumped 38 per cent, or $ 7 mio,

accounting for 81 per cent of the growth in the frozen/refrigerated dog food category. Freshpet’s re-frigerated pet food lines include “Freshpet Select”, “Deli Fresh”, “Dog Joy”, and “Dognation” treats. Impressively, one of Freshpet’s key channels is Walmart, whose

David Lummis is Senior Pet Market Analyst at the US market survey company Packaged Facts.

Tel.: +1 (504) 9 31 63 22E-mail dlummis@packagedfacts.com

pet aisles feature Freshpet in its own refrigerator cases, and the company recently added a new grain-free line for the pet speciality channel called Vital.

Specialised dietsSpecialised and “functional”

pet foods – weight-related, age-related, breed-specific, condition-specific, etc. – keep on growing at an above-average clip. Numerous new specialised diets debuted at the 2012 Global Pet Expo, one of the biggest pushes being for Royal Canin’s new diets for extra small dogs. Although small dog foods have been available for many years, the segment is now addi-tionally segmenting into products formulated for extra small dogs. This makes sense in that US pet owners are increasingly favouring smaller dogs, whose share of dog-owning households rose from 41 per cent in 2000 to 47 per cent in 2010, according to the Amer-ican Pet Products Association.

Senior pet foods are similarly sub-dividing. While senior (or “ma-ture”) pet foods are nothing new, most of the products have been aimed at the age 7+ segment. Now marketers including Iams, Hill’s, and Nestlé Purina are intro-ducing products for dogs and cats aged 11+. Making one of the big-gest commitments is Iams, whose

new “Senior Plus” classification spans dogs and cats across both of Iams’ major lines, “Premium Protection”, and “ProActive Health”. As of March 2012, 44 per cent of dog owners have a dog aged 7 or older, while 48 per cent of cat owners have a cat in that oldest age bracket, according to Pack-aged Facts’ latest Pet Owner Survey.

Despite any money-saving tradeoffs pet owners may be making due to the still iffy economy, pre-mium products remain a fact of life in the US pet food market. Ac-cording to Packaged Facts’ March 2011 report, Pet Food in the US, 9th Edition, 10 per cent of the pet food sold in the United States is “super-premium” (defined as priced 20 per cent or more above the category average), while another 30 per cent is “mass premium” (priced 10 per cent-20 per cent above the category average). It ’s no wonder pet product makers are drawn to the super-premium edge of the business. Margins on super-premium foods can reach 40 per cent, compared with 30 per cent for premium brands and 20 per cent or less for standard brands. In the pet food market, “premium” – and especially “super-premium” – increasingly mean natural. And while pure-play pet pampering has not gone away, virtually all of the major players in the US pet food market are fo-cusing more intensively on pet health as a legitimate means of justifying the higher prices of pre-mium products. Taken together, these and the other trends discussed above suggest a healthy future for the US dog food market. n

Premium products remain a fact of life in the US pet food market, in the picture: signage in a Petco store explaining the advantages of premium food.

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