It is remarkable how new pet food companies continue entering the pet food market in Mexico amid the economic setback.
Germán Fernández-Capuz, responsible for marketing and sales at Proteínas, Energéticos y Óleos (Proteo), a Mexican animal feed and pet food manufacturer, believes opportunities in the local market are not yet exhausted. According to his analysis, the caloric penetration rate of pet food in Mexico allows current and new companies to continue growing in the marketplace.
Along with that opportunity, Proteo found a perfect vehicle to expand its operations and sell pet food products in an alternative channel, thus avoiding the well-known market leaders.
Proteo, like other pet food companies in Mexico, operates in the agricultural wholesale channel, an emerging market segment that combines affordability and high sales volumes. Such wholesale channels specialize in the distribution of seeds, eggs and other livestock products.
It is worth noting that pet food caloric penetration is likely lower in semi-rural areas than in big cities. Thus, Fernández's understanding of the pet food market is consistent with current regional demand trends. In such remote places, the pets likely eat less commercial food, making it an attractive segment.
Rising inflation is already modifying the short-term growth prospects of pet food producers in Mexico. Fernández believes the initial growth projections for 2021 will no longer hold, as prices for several raw materials, such as corn and packaging, are increasing notably.
Corn increased 150% from December 2020 to date, while pet food packaging costs rose 30%, due to a shortage of resins. With this scenario, Fernandez says volume growth in 2021 will likely be half that initially forecasted.
Amid the higher pet food prices resulting from rising costs, an alternative way for pet food manufacturers to grow and compete is by offering more affordable brands. Proteo is currently operating in the economy, standard and premium dog food segments. As many other local manufacturers do, the company’s strategy is to set its prices below that of the market leaders.
Fernandez explained that Proteo prices its standard brand, Güesos, between 50% and 60% below the market leader. Likewise, its premium brand, Pro Dog, costs around 30% less than Purina Pro Plan.
Despite some adverse circumstances, such as the pandemic lockdown, economic recession and current inflation in pet food prices, the Mexican market is poised for growth. That suggests a significant resilience on the part of both consumers and manufacturers. Perhaps more importantly, it signals that pet food producers are seizing the opportunities that the market continually presents.
Iván Franco is the founder of Triplethree International and has collaborated on hundreds of research projects for several consumer goods industries. He was granted the Global Consultant of the Year award by Euromonitor International and authored the book 17 Market Strategies for Growth (in Spanish).
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