"On solid ground." That's how Packaged Facts describes the US pet industry in its new report, US Pet Market Outlook 2010-2011: Tapping into Post-Recession Pet Parent Spending. It shows the pet care market grew last year despite the awful economy, and most signs point to continued growth for the next year and beyond. However, our industry will need to monitor a few potentially dark clouds.
The report says US sales of veterinary services rose almost 8% in 2009 (to US$18.4 billion), followed by petfood at 5% (US$17.8 billion), non-medical pet services at 4% (US$5.8 billion) and non-food supplies at 3% (US$10.7 billion). In share of the overall US pet care market, veterinary services leads at 35%, with petfood close behind at 34%.
But over the next four years, Packaged Facts predicts the veterinary services share to increase to 40.7%, with petfood's falling to 30%. Why? "As the population of senior pets continues to rise and market participants continue to adapt human-style technologies and medications and develop new pet-specific ones, the veterinary category will see its growth rate steadily increase through 2014," the report states.
Meanwhile, retail price-cutting for petfood (seen this year in PetSmart and Petco ) could slow dollar growth, Packaged Facts says, also surmising that "2009 saw considerable migration of premium petfood purchasers across channels and brands." Walmart posted strong pet category growth, while the pet specialty and natural supermarket channels lagged.
Pet owner confidence is another factor, and the picture is mixed. Packaged Facts cites its own study of approximately 700 US pet owners in February, which showed 19% of respondents strongly disagreeing that they are spending less on pet products because of the economy. However, 21% somewhat agreed they're spending less. The report also mentions a February study by Catalyst Direct showing 73% of pet owners (among 400 Americans surveyed) worried about finances, 64% more anxious and 59% less confident.
The March issue of Pet Business magazine reported on a survey of nearly 500 consumers in five US metropolitan areas showing 71% of respondents now consider price the top priority when buying pet care products. Further, 31% said they're spending 25-50% less on pet supplies compared to a year ago; 24% said they're spending 50-75% less. When shopping for petfood, 60% said they buy from mass merchandisers (including grocery stores), with 21% shopping at Petco or PetSmart and 16% at independent pet stores.
There is good news. The Pet Business survey revealed petfood is not suffering as much as other pet categories; consumers said they're still willing to spend more to ensure their pets' nutritional needs are met. The Catalyst Direct study showed 83% of pet owners citing their pets' emotional support helping them survive the rough economy and 86% valuing the sense of stability their pets provide.
Packaged Facts predicts the retail playing field will level out by the end of this year, with premium-oriented pet owners who may have defected to mass merchandisers returning to the pet specialty channel. It still projects US petfood sales to increase 4.5% this year and again in 2011.
And if you use new product introductions as a barometer of the industry's health and momentum, as Packaged Facts does, we're in good stead. The report touts a 14% increase in pet product launches last year (according to Datamonitor's Product Launch Analytics), following a 38% rise in 2008. Many were for petfood products.