Top 3 pet food companies thriving in a complex industry

We highlight the companies that made up a significant portion of pet food industry revenue in 2015.

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The Top 3 global pet food companies continue to find success in an increasingly competitive marketplace. | tatomm, Fotolia.com
The Top 3 global pet food companies continue to find success in an increasingly competitive marketplace. | tatomm, Fotolia.com

In the May 2016 edition of Petfood Industry magazine, we highlighted the top 40 global pet food companies based on available 2015 data. Now, we’ll focus on the top three pet food companies—Mars Petcare Inc., Nestlé Purina Petcare and Big Heart Pet Brands—and how they’re finding success in an increasingly complex industry.

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The top three global pet food companies, all based in the US, contributed a combined US$31.421 billion to the 2015 pet market.

1. Mars Petcare Inc.

In 2014 and 2015, Mars solidified its place as the world’s leading pet food company after it purchased 90% of Proctor & Gamble’s pet food business (in North America, Latin America, Australia and New Zealand, as well as parts of the company’s business in the Asia Pacific, Middle East and Africa). The US$2.9 billion deal was initiated in April 2014 with North America, Latin America and other countries; it was substantially completed by the end of June 2015 with the purchase of several additional operations.

Beyond that, 2015 was the year of sustainability, education and community service for Mars Petcare. The company committed to sourcing all its fish from sustainable sources by 2020 and began approaching that goal in earnest. Mars introduced Marine Stewardship Council-certified fish for its Sheba and Whiskas cat food in Europe, and began following sourcing recommendations set by the Monterey Bay Aquarium Seafood Watch program for three varieties of Sheba cat food in the US. The company runs several education programs focusing on responsible pet ownership through its various brands, such as the Pedigree A Dog’s Story app, which aims to teach kids and parents about dog safety. And in 2015, 6,225 Mars Petcare associates spent almost 23,952 hours volunteering to benefit 55,040 pets around the world.

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Pedigree has teamed up with leading dog behavior experts and Auckland Council’s Animal Management team (New Zealand) to launch A Dog’s Story, an interactive adventure for children and parents to learn dog safety together. | Courtesy Mars Petcare Inc.

So far in 2016, Mars has focused on, among other things, positioning its acquired brands and expanding its pet care product options. At Global Pet Expo in March 2016, Mars Petcare announced that two of the superpremium brands it acquired from P&G, California Natural and Evo, would be exclusively sold through independent pet specialty retailers in the US. According to the company, the move—essentially a brand relaunch—aims to build and support the strength of the independent pet channel. In April 2016, Mars purchased Whistle, a startup that makes smart dog collars that track a pet’s location and fitness, for roughly US$117 million. The company said the investment will bring them a new area of pet care technology.

2. Nestlé Purina Petcare

The top two global pet food companies make up a significant portion of the industry as a whole. Among the 11 top-growing large brands of dry dog food in the US mass market channel in 2015, seven belonged to Mars or Nestlé, according to Packaged Facts. In the US pet specialty channel, brands under Mars and Nestlé (through its Merrick and Zuke’s divisions) have spearheaded new product introductions in the fast-growing freeze-dried pet food category, according to GfK.

Nestlé Purina’s success has been compounded in the last couple of years via strategic acquisitions. In January 2014, the company finalized its acquisition of Zuke’s Performance Pet Nutrition (natural pet treats), and in September 2015, Nestlé acquired Merrick Pet Care (natural and organic pet food). These two acquisitions play into the current growth trends found in the specialty pet nutrition categories, where the majority of natural and organic pet food products find their niche. In fact, Nestlé was rewarded for its specialty focus in 2016. In February 2016, the company’s Beyond Purées, which are natural pet food mix-ins made with human-grade ingredients, won recognition in the pet food category of Product of the Year USA’s annual consumer-voted award for product innovation. 

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Beyond Purées are natural mix-ins made with human-grade ingredients plus vitamins and minerals. They recently won accolades in Product of the Year USA’s pet food category. | Courtesy Nestlé Purina PetCare, via Product of the Year USA

Like Mars, Nestlé has tagged sustainability and community service as two of its primary focuses. On the environmental side, the company said it aims to use natural resources efficiently and responsibly to preserve the environment and create positive effects on society. In April 2016, the company reported that five of its North American facilities, spanning dog food, cat food and litter, achieved zero waste to landfill status—supporting Nestlé’s goal to be landfill free by 2020. In terms of service, in 2015 Nestlé Purina donated US$31.5 million worth of pet food, pet supplies and monetary contributions to charity. The company launched Project Opportunity, a career acceleration initiative to help people of all ages gain work experience and strengthen their professional development skills, and continues to support hundreds of pet shelters in the Americas.

3. Big Heart Pet Brands

The first company to shift upwards on the 2015 Top Companies list, Big Heart Pet Brands also benefited from business deals in 2014 and 2015. At the beginning of 2014, the former Del Monte Pet Products business relaunched as Big Heart Pet Brands following the sale of its consumer products division to Del Monte Pacific, and in February 2015, The J.M. Smucker Company completed its acquisition of Big Heart Pet Brands in a cash and stock transaction valued at roughly US$6 billion. The move included Smucker’s gaining Big Heart’s complete portfolio of products, and the business, which was already gaining solid ground, has continued its upward trajectory since the Smucker’s acquisition.

In 2015, Big Heart was the other pet food company to win an award from Product of the Year USA. Alongside Nestlé, Big Heart’s Milk-Bone Good Morning Daily Vitamin Treats won consumer-voted accolades. The specially formulated treats provide nutrients that help promote dogs’ well-being and longevity, and come in three formulas: Total Wellness, Healthy Joints and Healthy Aging.

Poy Milk Bone 1604 Pe Tconsumer

Big Heart Pet Brands was the other company to win a pet food-related award from Product of the Year USA, for its Milk-Bone Good Morning treats. The treats focus on pet nutrition and health, a leading industry trend. | Courtesy Big Heart Pet Brands, via Product of the Year USA

At the beginning of June 2016, Smucker’s released its fourth-quarter 2015 results, announcing a 25% increase in net sales that it partially attributed to the incremental contribution from Big Heart. The company’s net pet food sales for the fourth quarter of 2015 reached US$562.9 million, reflecting a segment profit margin of 20.7%. According to the report, the sales represented an approximate 3% increase compared to the fourth quarter of 2014, including Big Heart's sales occurring prior to the completion of the acquisition. The net sales increase was primarily driven by growth in the Natural Balance brand and pet snacks, partially offset by declines in mainstream dog food.

 

Driving the success of the top 3

Specialty pet food: http://goo.gl/Mq9yiI

Sustainability: http://goo.gl/hC4Umd

Mergers and acquisitions: http://goo.gl/2Hn3mI

 

Petfood Industry’s Top Pet Food Companies database

www.petfoodindustry.com/directories/211

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