The Western Europe petfood market
A mature market banks on humanization for continued growth
The last decade showed a steady increase in the diffusion of commercial petfood across Western European, although with different timing and speeds in different countries. Recent years have seen a general slowdown partially because of global economic difficulties and also because the market as a whole is getting closer to its maturity.
Euromonitor figures show total Western European cat and dog food sales at US$14.47 billion in 2007, up from US$10.16 billion in 2002. Growth is projected to continue at 7.6% between now and 2012, to a total of US$15.57 billion then.
Today the overall estimated population of dogs and cats is basically stable or slightly increasing all across Western Europe, so it can no longer be considered a key market driver. More interesting is how the composition of the pet population is changing; a common trend is the number of cats increasing while the number of dogs stays flat or is declining, especially among larger breeds.
This trend appears to be directly connected to relatively recent and ongoing sociodemographic shifts such as:
- Increasingly urban lifestyles—currently 73% of Western Europeans live in urban areas, a figure projected to reach nearly 80% by 2030, according to the Department of Economic and Social Affairs of the United Nations Secretariat—meaning less free time and room for pets;
- More single households with higher purchasing power but possibly smaller living spaces; and
- More elderly people with time available, often experiencing the so-called empty-nest syndrome and willing to pamper pets as children.
Humanization rules
Pets’ changing role toward family member status makes the humanization phenomenon one of the strongest trends affecting the Western European petfood market and one that is increasingly pushed by the strategic policies of industry players. This leads to key trends:
- Providing good to best quality food—premiumization;
- Providing specific nutrition—segmentation by lifestage, lifestyle, size and breed;
- Providing functional nutrition—segmentation by solution to a problem/pathology;
- Safety and health concerns—natural/organic ingredients, fortification with supplements like in human food;
- Variety and “gastronomic experience”—humanlike recipes and ingredients; and
- Offering gifts or reward/enforcing human-pet relationship—snack and treats.
Market specifics
All these trends are present in individual Western European countries, though at different degrees depending on respective level of market maturity. Generally speaking, northern and central Europe comprise an area that can be considered a more sophisticated and saturated petfood market, similar to the US and Canada. To maintain profitability, manufacturers have to display a higher degree of innovation.
Southern Europe (Italy, Spain, Portugal, Greece) is a little behind and therefore still experiences faster growth than the rest of Western Europe. Next to multinationals and players with scale and leading brands, even small dynamic manufacturers can play a role in niche segments.
Neither dog nor cat food volumes have grown significantly in the past few years, despite an average fair growth rate in value; but while in the Northern area the expenditure per shopper has increased and driven market growth (Figure 2), in the Southern area it has been the penetration rate in households. A progressively larger use of dry petfood has taken place throughout Western Europe, expanding its share compared to the wet segment.
Another significant factor in the Western European petfood market is private label production. This includes a clear petfood premiumization trend; however, there is a significant segment of consumers who need access to petfood products at affordable prices.
This increasing polarization stems mainly from the unfavorable economic situation of the last years, which forces consumers losing purchasing power to limit expenditures on pets. On the other hand, when a fair or high disposable income is available, consumers are more and more able and willing to pay for quality and added value, resulting in a gradual squeezing of the mid-price segment.
Success of private label petfoods differs from country to country depending on cultural differences, modernity of society and the presence of discounters, big international retailers and strong specialty chains. In general private label growth can be seen in major Western European countries like Germany, UK, France, Spain and Italy.
Grocery and pet channels
In terms of distribution, increasingly heavy price competition has reduced the value growth in the grocery channel, but it has compensated and still performs well thanks to the escalating entrance of premium petfood products and snacks, previously found only in the pet specialty shops.
In the latter channel, premium dry dog food continues to drive sales, but the last year has also seen a revival in wet petfood sales (value added products) and a decline in snacks, possibly offset by an increase of the category at lower prices in the grocery channel. However, the pet specialty channel is still growing share, gaining shoppers and seeing an increase in expenditure per shopper in countries like France, Germany and Italy.
According to Euromonitor, in 2007 premium dog and cat foods recorded an overall 2% value growth in the grocery and pet specialty channels across Western Europe.
Spotlight on France
The pet population in France is increasing, with cats slightly outnumbering dogs—9.9 million vs. 9.4 million, Euromonitor says. Also increasing is the awareness of pet health and well-being, which has grown demand for natural and healthy products. French consumers are becoming more aware of the nutritional needs of their pets, spurring manufacturers to expand their lines and offer specific products for specific needs (breed, age, health issues).
French pet owners are seeking the best for their pets, which has led to growth in premium and superpremium products in the last few years, especially in cat food. The premiumization trend is accompanied by successes such as single-serve cat pouches (they grew 11% in 2005 to 295 millions units, according to Euromonitor), which offer convenience, freshness and eco-friendly packaging. Premiumization also means more elaborate recipes and increasingly humanlike products. The key words are health, quality and “real” ingredients.
One of the most evident trends in the French petfood market is the shift from wet to dry food, especially for dogs, as dry dog food is seen as cheaper, more convenient and more nutritious than wet dog food. In 2007, wet cat food accounted for 58% of overall French cat food sales, while wet dog food represented just 26% of total dog food sales, Euromonitor says. The market is also characterized by a strong polarization: the economy segment (with a growing presence of private labels) vs. premium and superpremium products.
In 2006 the dog and cat food market in France reached €2.17 billion (US$3.4 billion). By 2011, Euromonitor projects the French market for petfood and pet care products will reach €3.6 billion (US$5.62 billion), a 1.7% annual growth rate. In volume terms, dog and cat food retail sales will increase by 1% a year thanks to products marketed with health claims.
Supermarkets and hypermarkets are the main petfood distribution channel in France, with a market share of 58% in 2007. But the decrease in wet petfood sales means this share is declining. Discount stores also pose a significant threat to supermarkets and hypermarkets, offering private label petfood as an alternative to more expensive branded products.
Garden centers are the second most important distribution channel (19%) in France and supply an increased range of premium products. Veterinary clinics are a very dynamic channel, accounting for 11% of the market. Pet specialty retail’s market share is 7% and also quite dynamic, thanks to the increasing growth of superstore chains. The increasing demand for dry petfood has especially benefited this channel.
Spotlight on Germany
More than one-third of all German households have a pet. The number of cats in German homes is increasing (to 7.9 million in 2007), while the dog population has remained stable (5.3 million).
Pet ownership reflects demographic developments in Germany: An increasing number of single and older people own pets. Germans consider pets part of their families and transfer their own expectations for food onto their pets, so the humanization trend is as strong in Germany as in other developed petfood markets.
The German petfood market is fairly mature but still growing. It is characterized by remarkably high polarization:
Growth of economy priced products is due to the very tight budget of many German households, who are compelled to buy the cheapest products (especially for dry cat food) and from private label sources. As a consequence of this polarization, mid-priced products are stagnant. German consumers are also increasingly shifting from wet to dry petfood (for convenience and for reasons linked to the pet health; dry food is often considered to be more nutritionally complete than wet food).
Still, Euromonitor projects the entire German pet supplies market (including petfood and pet care products) to grow 3% by 2012, to a total of €3.2 billion (US$4.99 billion).
According to IVH (the German association of pet product manufacturers), the country’s petfood market reached €2.4 billion (US$3.76 billion) in 2007, a 0.4% increase over 2006. Growth is being fueled mainly by sales increases in cat food, though that growth slowed in 2007 to only 0.8%. This included a 0.4% increase in wet cat food sales, to a total of €844 million (US$1.32 billion) , a 1.4% increase in dry cat food sales, to a total of €252 million (US$395 million), and a 2.1% increase in treats and cat milk products, to a total of €136 million (US$213 million).
With dog food, IVH says treat sales increased 1.1% from 2006 to 2007, to a total of €285 million, (US$446 million). But sales of wet dog food decreased 0.4%, down to €342 million (US$536 million); dry dog food decreased by the same amount, 0.4%, down to €374 million (US$586 million). The net result: the combined dog food category grew 0.1% from 2006 to 2007, with overall sales of €1 billion (US$1.57 billion).
Supermarket chains (including drugstore and discount stores) continue to be the main sales channel for petfood in Germany, with a share of 68% and sales of €1.5 billion (US$2.34 billion), IVH says.
Spotlight on the UK
Dog and cat populations in the UK have remained fairly stable over the last few years, but changes in lifestyle and growing urbanization have led to pet cats now outnumbering dogs—9.6 million to 6.8 million respectively, according to the Pet Food Manufacturers Association (PFMA) in the UK.
According to Euromonitor, the number of married consumers in the UK declined 0.3% between 2005 and 2006, while more British women have postponed starting famiies. These demographic factors affect the attitudes of UK pet owners: Pets become substitutes for children and their owners tend to spend more on their pets. Thus, humanization is quite evident in the UK market.
With pet obesity rates reaching record levels in the UK, health has become one of the biggest concerns of pet owners. This explains the increasing success of new health-focused, multi-functional foods featuring ingredients such as omega 3 and 6 fatty acids and marketing claims such as gluten-free, hypoallergenic and organic.
In fact, the UK is the largest market for pet healthcare and dietary supplements in Europe, Euromonitor says, with retail value sales approaching €220 million ($US343.26 million) in 2007 (a 14% increase over 2006). As pet owners are becoming increasingly aware of their pets’ nutritional needs, the market is also seeing in influx of lifestage and lifestyle petfood products.
Another key trend in the British market is the predominance of premium and superpremium products, with a total growth rate of 10% in 2007. Consumers are buying fewer but pricier petfood products, with premium cat food particularly increasing in sales.
Overall cat food has been growing about 2% a year, according to PFMA. In 2006 cat food sales totaled £708 million (US$1.41 billion), with wet cat food making up £536 million (US$1.07 billion) of that and dry, £172 million (US$343 milion). Those figures represent a 2% increase for wet cat food over the previous, with dry cat food sales remaining the same.
Dog food sales have increased about 3%, PFMA says. In 2006 total sales were £714 million (US$1.42 billion), with wet dog food at £287 million (US$572 million), a 2% increase over the previous year, dry dog food at £388 million (US$774 million), a 4% gain, and mixers at £29 million (US$58 million), a 2% decrease.
With distribution, major grocery and pet superstore chains have taken over a greater proportion of the UK pet market in recent years. Pet superstores especially have grown due to the humanization trend and the increasing demand for superpremium offerings and more specialized products. These large chains have lured consumers away from small, independent pet stores, which cannot stock wide ranges of products. Garden centers have also become important outlets for pet products; in the last five years the number of pet departments within UK and Irish garden centers has increased by 77%.
But the petfood market is still dominated by the grocery chains, which increased their share of sales from 66% to 68% between 2004 and 2006. The share of sales through the pet specialty trade (both superstores and small pet shops) fell during the same period, while the share of the other channels (including the Internet) rose from 9% to 11%, according to Key Note, a UK market research firm.