Global growth trends
Sales in the premium segments are outpacing the mid-priced and economy segments
The humanization of cats and dogs has driven growth in products that cater toward specific ailments, breeds and age segments. This differentiation in products has allowed prices to vary widely and is most evident in the global US$42 billion dollar a year dog and cat food industry. Dog food represents 61.5% of value sales.
The growing value-added segment is due to petfood manufacturers spending recent years introducing a variety of premium and superpremium products. The accelerated premium trend can be attributed to the success of the Iams brand introduction in 2002 into the hypermarket and supermarket retail channels. In the premium dog food segment, 80% of sales are in the dry category. In the premium cat food segment, 40% of sales are in dry products.
Owners have had no problem purchasing products with a premium price, resulting in an increased number of value-added products introduced into the market. This consumer demand has also convinced supermarkets, hypermarkets and mass merchandisers to include the new products in their petfood range, increasing distribution and growth. Euromonitor International expects the upward trend in pricing to continue as owners increasingly provide products to dogs and cats that address individual pets' needs.
Value-added products, more expensive than economy or mid-priced brands, are doing booming business in maturing and mature markets alike. In Western Europe, premium cat food's average price is US$5.20 per kg compared to US$2.20 for mid-priced cat food and US$1.40 for economy. Consumer's preference for these more expensive products has taken a toll on economy and mid-priced brands. In the mature market of the UK, standard premium wet dog food experienced a nearly 12% compound annual growth rate (CAGR) between 1998 and 2005 compared to a 13% drop for economy wet dog food. High-quality petfood is becoming increasingly important to UK owners and is considered key to the care of a dog's health. Premium products with high prices are well suited to achieve this for the consumer.
In comparison, emerging markets such as Latin America and Eastern Europe have seen phenomenal movement in petfood over recent years among all price points. Economy wet dog food in Romania, for example, had a 41% CAGR during the review period, leading the globe in increases. Premium cat food in Brazil experienced a gain of 28.4% CAGR. In contrast, it is important to note that growth in premium products is primarily limited to brands. Private label sales continue to be strong in the mid-priced and economy dog food segments.
The Asian petfood market is also on the increase and, adding pet care products, is expected to reach US$10 billion by 2010. Japan still dominates the market with a 75% share, but China has been coming on strong. In general, changing lifestyles, new products and communication programs will foster good petfood sales growth in Asia.
France's pedigreed pooches
With 80% of French dogs considered to be pedigree status, owners in the country are willing to go the extra mile and spend more to please their purebred pooches with products that contain additional benefits. Superpremium dog food in France had a 7% CAGR in the review period with sales of US$106 million in 1998 and US$170 million in 2005. Value-added products that clean teeth, shine coats and are marketed toward specific age groups have replicated their global success in France. Consumers are also leaning toward superpremium products not only for their added benefits, but also because of luxury packaging. With easy-to-open pouches that maintain freshness, French owners make sure their pets are actually enjoying the fresh taste of their food.
Product development focus
Pet owners will continue to seek high-priced functional food products that treat their pets that have ailments they might be suffering themselves. Greater availability, increased functionality and the growing variety of food for different life stages have positively impacted growth in dog and cat food as well as raised the amounts owners are willing to spend. Additionally, the development of value-added food has helped de-emphasize price competition in branded products and bring new focus on product development, raising quality overall. Euromonitor expects product development to slowly have an effect on mid-priced and economy segments where these brands will have to reinvent themselves to stay competitive through 2010.