The Top 10
Why these companies lead the global petfood industry in sales, growth and innovation
That the 10 companies profiled here led the petfood industry in 2005 is no surprise to anyone. After all, the members of this top group don't change much from year to year; typically only mergers and acquisitions affect who the players are and their position in the rankings.
But what about the stories behind the rankings and numbers? How have these companies achieved their elite status?
Dominating the market-again
In 2005, the most recent year for which complete data were available at press time, global dog and cat food sales amounted to US$42.1 billion, according to Euromonitor International. As in past years, Mars Inc. and NestlÃ© SA dominated that market, grabbing 25.2% and 23.7% shares, respectively.
Both figures reflect slight declines, even with the Mars percentage including the share for S&M NuTec LLC, the maker of Greenies treats acquired by Mars in 2006. But in terms of value (retail sales), both major players showed growth, driven by an increasing commitment to the premium segment, says Euromonitor in its November 2006 report, the World Market for Pet Food and Pet Care Products.
"The two leading players â€¦ have established a truly global presence," the report reads. "Broad brand portfolios, with a strong focus on mid-priced and economy brands distributed through mainstream grocery channels, have enabled the companies to build a strong consumer base in both developed and emerging markets. Indeed, the two companies have been instrumental in driving the development of dog and cat food sales in emerging regions through their extensive distribution networks and aggressive marketing activity."
Premiums, superpremiums rule
After Mars and NestlÃ©, market share and retail sales dropped significantly to number three Procter & Gamble Co. with its Iams and Eukanuba brands. It was followed closely by Colgate-Palmolive, parent company of Hill's Pet Nutrition.
Both companies have also achieved a global presence, Euromonitor says, but their focus on superpremium petfoods means their sales and growth lie mainly in developed markets more likely to have consumers with purchasing power. Fortunately for Iams and Hill's, such consumers have continued to trade up to more expensive foods for their pets.
At number seven, Nutro Products Inc. also increased sales due to its superpremium products, mainly in its US base. In between, Del Monte Foods Co. came in at number five and Agrolimen SA at number six. Agrolimen enjoyed the largest sales increase from 2004 of the top 10 manufacturers, riding geographic ex-pansion in its native region, Western Europe.
Rounding out the top 10 were three Japanese companies: Unicharm Corp., Nisshin Seifun Group Inc. through its Nisshin Petfood division and Nippon Flour Mills Co. Ltd. through its Nippon Pet Foods. As the world's second largest market for pet products (behind the US), Japan saw significant growth thanks to pet owners' increasing interest in the nutritional value of petfoods, functional foods and human-style products, according to Euromonitor. However, the three companies profiled here had flat or declining shares of the global market.
A growing and innovative industry
Table 1 includes 2004 and 2005 market shares and retail sales for the top 10 companies. The 2005 retail figure is repeated in the profile of each company in this article, but we've also included 2006 data where available.
Table 2 lists petfood company leaders in growth, while Table 3 (p. 20) lists innovation leaders as measured by new product development. Obviously, these two areas go hand in hand.
Most experts predict the petfood industry will continue to grow worldwide through at least 2010. Though growth is expected to be more sluggish in developed regions, it will continue because of ongoing trends affecting product development-more people treating their pets like human family members, higher disposable incomes and a desire for convenience, including with packaging.
In emerging markets, such as Eastern Europe, Latin America and China, growth is exploding and should continue at a rapid pace. As consumers in these markets increase their purchasing power, they are more likely to place value on pet nutrition, thus transitioning from table scraps and homemade meals to prepared petfoods. Simultaneously, petfood companies are expanding distribution into these areas, as are pet-related retail outlets.
All this promises a positive future for the entire industry, including the 10 leaders. Read on to find out what they're doing to shape that future for themselves.
1. Mars Inc. (Mars Petcare)
World headquarters: McLean, Virginia, USA Approx. 2005 global retail sales: US$10.26 billionOfficers: Doug Cahill, president, Mars Petcare USTop brands: Pedigree, Whiskas, Waltham, Cesar, Sheba, KitekatNew products: Pedigree Super Chew, GreeniesWebsites: www.mars.com; www.waltham.com; www.pedigree.com
Mars operates three core businesses (snack food, pet care and main meal food) in most parts of the world. Acquisitions was the name of the game in 2006, as Mars acquired S&M NuTec, maker of popular pet treats sold under the Greenies brand, and Doane Pet Care Enterprises Inc., previously known as the world's largest supplier of private label petfoods. Doug Cahill, president and CEO of Doane, was chosen to run Mars' North American pet care business in Nashville, Tennessee, USA, where Doane was headquartered. In late March 2006, Doane reported sales of US$991.6 million for fiscal year 2005, down 5.7% from a year earlier. Doane's European business was sold to another party.
In the past year, a new easy-to-digest version of Greenies was released for adult dogs to help clean teeth and freshen breath. According to Mars, the formula is based on patent-pending science rooted in dog biology.
2. NestlÃ© SA (NestlÃ© Purina PetCare)
World headquarters: Vevey, SwitzerlandApprox. 2005 global retail sales: US$9.65 billionOfficers: W. Patrick McGinnis, CEO, NestlÃ© Purina PetCare; Terence Block, president, PetCare NA; Rock Foster, CFOTop brands: Purina, Friskies, Alpo, Beneful, Fancy Feast, Mighty Dog, Pro Plan, Beggin' Strips, Busy Bone, Bakers, Felix, Winalot, Go Cat, Gourmet Gold, Vital Balance, VitalifeNew products: Beneful Prepared Meals, Fancy Feast Elegant Medleys, Purina ONE Natural Blends, Naturals by Purina Cat Chow brandWebsites: www.nestle.com; www.purina.comEmployees: 7,000
During the first nine months of 2006, net sales for NestlÃ© amounted to US$5.69 billion (CHF72.2 billion), an increase of 9.1% over the same period in 2005. The PetCare segment achieved 6.9% organic growth. PetCare category sales were US$4.36 billion (CHF5.53 billion). Growth in North America continues to accelerate.
According to Keith Schopp, vice president of public relations, the company's keys to growth include innovation based on humanization and a focus on the consumer. Growth was also strong in Europe, with strategic brands such as Bakers, Purina ONE, Gourmet and Beneful doing particularly well.
Many successful new products were launched by NestlÃ© Purina in 2006. One of the most innovative was Beneful Prepared Meals, a new family-style food for dogs with such eye appeal that it warranted innovative packaging to clearly show the product on the store shelf.
NestlÃ© Purina also released natural products, plus Fancy Feast Elegant Medleys wet cat food in a shelf-ready tray pack. This packaging eliminates the need for single-can stocking and improves the shopping experience, according to NestlÃ©.
3. Procter & Gamble Inc. (P&G Pet Care)
World headquarters: Cincinnati, Ohio, USA (P&G Pet Care: Dayton, Ohio, USA)Approx. 2005 global retail sales: US$2.82 billionTop brands: Eukanuba, IamsNew products: Iams Smart Puppy, Iams Small and Toy formulas, Slow-Cooked can recipesWebsites: www.pg.com; www.iams.com; www.eukanuba.com
As a company, Procter & Gamble (P&G) had net sales of US$68.2 billion in the year ending June 30, 2006. This value was an increase of 20% versus the same period last year. The major brands produced are Iams and Eukanuba. Both brands include superpremium dog and cat foods and treats, with Iams sold worldwide in most channels (including grocery and mass merchandisers), while Eukanuba is sold exclusively in pet specialty stores and veterinary clinics in North America.
Net sales for the global business unit that includes the Pet Health, Snacks and Coffee segments were US$4.38 billion for the year ending June 30, 2006. This is 6% of P&G's company sales, which was up 2% from the same period last year. Sales in Pet Health were down slightly due to strong competitive activity in North America and Western Europe, according to the company's annual report.
4. Colgate-Palmolive Co. (Hill's Pet Nutrition)
World headquarters: New York, New York, USAApprox. 2005 global retail sales: US$2.54 billionOfficers: Robert C. Wheeler, CEO, Hill's Pet Nutrition; Neil Thompson, president, Hill's International; P. Justin Skala, president, Hill's North AmericaTop brands: Hill's Science Diet, Hill's Prescription DietWebsites: www.colgate.com, www.hillspet.comMain plants/facilities: five facilities, plus more than a dozen offices worldwideNumber of employees: 2,500, more than 170 veterinarians
Founded in 1939 by a veterinarian, Hill's Pet Nutrition has been part of the global consumer goods powerhouse Colgate-Palmolive since 1976.
According to Colgate's 2005 annual report, Hill's increased unit volume by 4% that year and sales and operating profit by 6%. It did this via product innovation, including large breed and small bites extensions of its Science Diet Lamb & Rice Recipe line and Prescription Diet Canine j/d, based on the science of nutrigenomics. Data from Datamonitor show Colgate/Hill's ranking 14th globally in new product launches from 2003 to 2006 (Table 3).
Through the third quarter of 2006, Colgate reported all five of its operating divisions-pet nutrition, plus four geographic divisions of its oral, personal and home care products-experienced sales and profit increases. This was supported by record advertising spending, according to the Colgate's World Fact Sheet on the company website.
Robert Wheeler, CEO of Hill's, expects growth and new product development to continue not only for his company but also the petfood industry in general. "We will see the pace of product innovation continue," he told Petfood Industry last year. "As we learn more about the benefits of good nutrition, we will see an increase in products designed to keep pets healthy."
5. Del Monte Foods
World headquarters: San Francisco, California, USAApprox. 2005 global retail sales: US$1.43 billionOfficers: Jeffrey M. Watters, senior VP, pet productsTop brands: 9Lives, Cycle, Gravy Train, Kibbles 'n Bits, Nature's Recipe, Reward, Skippy, Meow Mix, Alley Cat, Milk-Bone, Jerky Treats, Meaty Bone, Pounce, Pup-Peroni, SnausagesNew products: Meaty Bone Denta Delicious, Snausages Roverolis, Canine Carryouts Pizza flavor, Kibbles 'n Bits Brushing BitesPlant locations: Bloomsburg, Pennsylvania, USA; Lawrence, Kansas, USA; Decatur, Alabama, USA; Buffalo, New York, USAEmployees: 7,500
As a result of recent acquisitions, Del Monte has added the Meow Mix, Alley Cat and Milk-Bone brands to its pet products portfolio. Del Monte also produces private label petfood products. The company has market shares of 8.8% in the dry dog food category, 7.3% in wet dog, 4.5% in dry cat food, 19.6% in wet cat food, 38.8% in the chewy dog snack category, 11.8% in the biscuit/crunchy dog snack and 20% in the cat treats category. During fiscal 2006, Wal-Mart was Del Monte's top customer, representing approximately 30% of the company's gross sales and an even higher percentage of sales for the pet products business.
Pet products are primarily manufactured at four of Del Monte's production facilities, located in the US and American Samoa. The company also uses a limited number of third-party co-packers and re-packers located in the US and Thailand to supplement production capacity. The company operates a R&D facility in Terminal Island, California, USA, where it develops product lines and researches products for the petfood business.
6. Agrolimen SA (Affinity Petcare SA)
World headquarters: Barcelona, SpainApprox. 2005 global retail sales: US$562 million Officers: Carlos ArgentÃ©, CEO/VP marketing; Franc Andreu, operations managing director; Francesc Blanch, VP R&D ; Patricia Larumbe, VP business developmentTop brands: Affinity, Ultima (UK), Rubadub (snacks/treats), Brekkies, Brekkies Excel (cat), Advance, Advance Veterinary DietsNew products: Ultima, Advance Special Puppy Care, Advance Sterilized (12 new dog foods, 10 new cat foods, three new snack/treats)Websites: www.affinity-petcare.comPlant locations: one plant in Spain, two in FranceEmployees: 720
Affinity offers a wide range of products, from special veterinary diets to superpremium foods. Despite its size, the company distributes its products within a limited area geographically, mainly the European Union (EU). Affinity operates in the EU as if it was a single country. This facilitates a limited cost structure and greater visibility to its customers, competitors and consumers.
Affinity is focused on organic growth in the EU. It is looking to expand selectively in markets with good potential. The company sees future growth opportunities through increased distribution. In the countries where Affinity is not a leader, increased advertising support is helping brands launched during the last three years to gain awareness and recognition with consumers.
In 2006, Affinity introduced 12 new dog foods, one new treat/snack product for dogs, 10 new cat foods and two new cat treats/snacks. A new brand, Ultima, was introduced to the UK market as Affinity's superpremium brand in the grocery channel. It is currently the third best-selling dry dog product in the grocery channel and is closing the gap as the second best-selling dry cat product in this channel.
According to Carlos ArgentÃ©, CEO/VP of marketing, "We strive to be known for taking care of the well-being of dogs and cats. In relation to our trade partners, we strive to be known for innovations and value creators. Where we are not leaders, we would like to be perceived as the challengers in the category."
7. Nutro Products Inc.
World headquarters: City of Industry, California, USAApprox. 2005 global retail sales: US$536 millionOfficers: David Kravis, CEO; Mike Satterwhite, executive vice president; Ladd Hardy, senior vice president, marketingTop brands: Max Dog, Ultra Dog, Max Cat Gourmet Classics, Natural Choice CompleteNew products: Ultra Large Breed dog food, Ultra Small Breed dog food, Natural Choice Whole Brown Rice & Lamb Senior dog food, Natural Choice Healthy Desserts dog treats, Natural Choice Small Bites Lite and Senior dog food, Max Cat Gourmet Classics PouchesWebsites: www.nutroproducts.com, www.ultraholistic.comMain plants/facilities: Victorville, California, USA, and Lebanon, Tennessee, USA
Celebrating its 80th anniversary in 2006, privately owned Nutro Products Inc. has staked its success and continued growth on a commitment to the pet specialty channel. "Nutro creates a true partnership with pet specialty, working hard to provide retailers with the tools necessary to compete in a crowded marketplace with the best combination of people, products and marketing programs," says Margaret Goodall, director of marketing. "We work hard to help bring consumers into pet specialty stores, we educate store employees to speak knowledgeably about our foods, and finally, we make foods that perform, so consumers will continue to come back for more."
Other keys to growth cited by Goodall include using all-natural ingredients, making foods that pets enjoy and thrive on and staying abreast of research. New products from the company reflect all these elements, she says. For example, new small bites formulas are for dogs and cats that prefer a smaller kibble size, and large-breed dog foods provide for the different nutritional needs of specific breeds of dogs. Nutro also introduced what Goodall calls a unique system with omega-3 and omega-6 fatty acids.
With its focus on one channel, the company always finds it a challenge to help bring consumers into pet stores, Goodall says. "Consumers are often swayed by the convenience of buying their pet foods at grocery stores. It is our job to educate them that pet specialty retailers continue to carry foods that use better ingredients and provide better performance," she explains.
Despite that challenge, Goodall says the company continues to outperform the average industry growth rate each year and expects continued strong growth for 2007, especially in its cat and holistic brands. "We believe cat owners are turning more and more to superpremium foods that provide their cats with superior nutritional value and performance," she says. "We have also seen a growing trend toward holistic foods for pets. We introduced our Ultra brand in 2004 to begin to meet the needs of this market. In 2006, Ultra began to really take off, and our expectations for 2007 are for us to continue to build our holistic business."
8. Unicharm Corp. (Unicharm PetCare Corp.)
World headquarters: Tokyo, JapanApprox. 2005 global retail sales: US$317 millionOfficers: Toshio Takahara, chairman; Gumpei Futagami, president/CEOTop brands: Aiken Genki Gin no Sara; Neko-Genki Silver SpoonNew products: Ginno Sara for dogs 7 years and older, Fukkura Dry dog food, Ginno Spoon Umino Gourmet cat food, Ginno Spoon Can cat foodWebsite: www.uc-petcare.co.jpMain plants/facilities: Itami Hyogo (petfoods) and Mie (pet care products)Number of employees: 180
On a new product tear since 2003, Unicharm PetCare Corp. is a division of Tokyo-based Unicharm Corp., maker of baby, personal and hygiene products. In 2005 and 2006, the pet division continued its product development blitz with at least four new products, including extensions of lines that have captured 33% market share for gourmet dog and cat foods.
To what does the company attribute this rapid growth? "We believe the key for growth is product development meeting needs in line with trends," says Gumpei Futagami, president/CEO of Unicharm. He explains that this focus also helps the company add value to existing products.
Unicharm differentiates itself from its competition by adhering to a firm strategy of researching consumer needs, conducting in-depth analysis to convert those needs into products, increasing the awareness of the products via marketing and advertising, and expanding sales. "We have accumulated and analyzed consumer data for the past 20 years and have been carrying out consumer tests," Futagami says. "For food we have an independent R&D team inside our factory, and we emphasize speed in converting needs into products. In terms of technology, recent palatability enhancing technology applied to our gourmet petfoods is unique."
Futagami says Unicharm has grown 13-14% annually since he became president in 2001, and he expects continued growth.
9. Nisshin Seifun Group Inc. (Nisshin Petfood Inc.)
World headquarters: Tokyo, JapanApprox. 2005 global retail sales: US$217 millionOfficers: Osamu Shoda, chairman of the board; Hiroshi Hasegawa, presidentTop brands: Run, Carat, LovelyNew products: JPStyle dog foodWebsites: www.nisshin.com, www.nisshin.com/english/english36.htmlPlants/facilities: 21 in Japan, Canada, US, Belgium, Germany, Netherlands, Singapore, Thailand, Indonesia, China
Under the Nisshin Seifun Group umbrella, Nisshin Petfood Inc. markets to predominantly Japanese pet owners. The parent holding company, which traces its roots in Tokyo to 1901, oversees other businesses as diverse as flour milling, foods, animal feed, pharmaceuticals and engineering.
In developing its petfood products, the company cites Japanese cultural trends such as an aging population and increasing single-person households. "For many, their pet is now an important member of the family and a life partner with which they have an emotional bond," according to the Nisshin website. The company keeps this "new level of emotional attachment in mind" with its product lineup, which includes Run dog foods, Carat cat foods and Lovely foods for small pets.
To capitalize further on the cultural changes, Nisshin launched a premium dog food, JPStyle, in February 2006, via mail order. The new product has contributed to increased dog food sales and is the centerpiece of a new company focus on premiums. Sales have also risen significantly for cat food, particularly dried and pouch products and foods for older cats, according to Nisshin financial statements.
In addition to products, Nisshin Petfood provides a pet advice and consultation service to its customers, which also allows the company to gather up-to-the-minute feedback on pet owners' needs.
10. Nippon Flour Mills Co. Ltd. (Nippon Pet Foods Co. Ltd.)
World headquarters: Tokyo, JapanApprox. 2005 global retail sales: US$183 millionOfficers: Hiroshi Sawada, chairman and CEO; Masataka Horikawa, director and vice chairman; Wataru Aosaki, president and COOTop brands: Nippn, Vita-OneWebsites: http://e-nippn.comPlants/facilities: 12 plants plus seven offices in Japan, one mill in China, two mills plus one office in Thailand, three facilities in US
Also headquartered in Tokyo, the 110-year-old Nippon Flour Mills Co. Ltd., which claims to be the first industrial flour milling company in Japan to introduce western-style machinery, manufactures dry dog and cat foods under Nippon Pet Foods Co. Ltd. (NPF Japan). Besides petfoods and flour milling, Nippon manufactures and sells food ingredients; processed, frozen and health foods; and cosmetics. Most fall under the corporate Nippn brand.
Key to the company's success and competitive edge is its research and development. "NPF Japan has its own R&D center where 100 dogs and cats are bred," states the company's website. "Appetite, discharges and physical conditions are being monitored to collect effective data in developing safe and quality dog and cat foods."
The company also takes pride in its advanced manufacturing methods, claiming to have become, in 2001, the first petfood manufacturer to be certified to ISO 9001 (the international quality management standard). Though Nippon operates globally, its petfoods are marketed mainly in Japan. Company financial statements say sales of petfood products have increased greatly, though Euromonitor numbers show a sales decline in 2005. The company credits the rising number of pet lovers in Japan for growth. "Keeping pets has a positive effect on people, and the market for pet products is expanding," reads the financial statement.