In the middle of the economic recovery, the scarcity of raw materials worldwide and increasing costs are hindering the production of pet food in Mexico. Several manufacturers are currently having a hard time finding inputs such as oils, packaging and corn. As inflation is rising everywhere in the developed world and in emerging markets, one logical expectation for the pet food industry is that prices would eventually go up proportionally.
However, consumer inflation of pet food products hasn’t soared in Mexico. In the first eight months of 2021, pet food consumer inflation averaged just 4.2% on an annualized monthly basis, according to the National Statistics Institute (INEGI). Moreover, that figure is lower than for the same period in 2020, when it reached 4.7%.
In Mexico, high pet food inflation occurred in June 2017 when prices climbed 13% in annual terms. Yet, six months later, pet food inflation dropped to 4.8%. Since then, inflation has not reached 6% or more. A relevant question might be, why is pet food not experiencing high inflation when the economy is?
Is official pet food inflation data reliable?
To estimate the pet food inflation index, INEGI collects hundreds of price points for 44 dog and cat food brands nationwide, including a few product varieties of the leading brands such as Dog and Cat Chow (Purina), Pedigree and Whiskas (Mars).
However, according to Triplethree estimates, the brands in the official pet food inflation index represent only about 60% of the overall local pet food market. The remaining 40% of brands are not covered in the index.
Likely, those excluded brands are increasing in price faster than the market leaders, as their negotiating power across the supply chain is less than that of the leaders. The excluded brands are mainly regional, emerging and smaller players.
Pet food rising inflation may happen in due time
Regardless of the relatively low official inflation in the first eight months of 2021, the supply price shocks will probably continue impacting the pet food industry until the end of the year and during 2022.
Thus, eventually, official pet food inflation figures might better reflect the increasing pressure on pet food prices, as the market leaders and other brands represented in the index may have to raise their prices faster.
