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on May 16, 2007

Shoppers' habits are changing

In the US, dollar stores, supercenters, pet stores and warehouse clubs are gaining

The petfood category is healthy and continues to generate solid growth in the US.

ACNielsen measures consumer purchasing of petfood products via its Homescan consumer panel service and its Strategic Planner, a syndicated database. Homescan solutions provide longitudinal consumer purchase behavior, demographic profiles, integrated attitudes and usage information.

Households participating in the panel record their UPC-coded purchases across all outlets to help identify key consumer and shopper insights. Strategic Planner covers the sales of fast-moving consumer goods through information collected from grocery, drug and mass merchant store check-out scanners.

Channel trends

The average number of pet care purchasing trips as measured by ACNielsen's Household Panel reflects changing shopper dynamics. Trips to grocery stores have been replaced by trips to supercenters and pet specialty stores.

The dollar store channel has also come on strong, making significant inroads, up an average of 1.4 trips per year since 2001 (see Figure 1). Opportunities to purchase within the dollar channel have increased dramatically. Almost 10,000 new dollar stores have been opened since 1996.

While the drug channel reflects a modest decline in trips, the channel remains healthy. CVS and Walgreens are continuing to invest in rapid store growth. In reviewing dollars spent per trip by channel, dollar stores and warehouse clubs reported the greatest percent increase since 2001 (see Figure 2). Warehouse clubs and pet specialty stores continue to command the largest amounts spent per trip, almost twice as large as the other measured outlets.

Petfood category dollar trending

The petfood category is healthy and continues to generate solid growth in the US. Household Panel data projects 2005 petfood category sales across all channels of US$10.7 billionup 2.4% vs. 2004. Within food, drug and mass merchandiser channels (excluding Wal-Mart), petfood trending for the latest 52-week period ending October 7, 2006, reports dollar growth of 1.2%.

Growth was fueled by dry dog food (+2.7%), wet dog food (+2.0%), dry cat food (+1.3%) and dog/cat treats (2.7%). Moist dog food (-5.5%), moist cat food (-30.0%) and wet cat food (-0.9%) all experienced declines (see Table 1).

Petfood segment growth by channel

Grocery grew 0.8% in dollars during the latest 52-week period. Growth for the channel was driven by dry dog (+2.3%) and wet dog food (+1.6%), dog/cat treats (+1.6%) and dry cat food (+0.8%). Wet cat, moist cat and moist dog all declined.

Petfood within the drug channel experienced strong sales growth. While drug accounts for only 2.2% of total supermarket, drug and mass (excluding Wal-Mart) sales, it grew by 4.9%generating US$5.5 million growth dollars. Dry dog (+12.4%), wet dog (+2.6%) and dry cat (+10.9%) all fueled drug channel growth.

Shopper demographics and future trends

In terms of shopper demographics, younger (age 35-44) females are driving sales within the mass merchandisers, supercenters and grocery, while older females (age 55-65+) dominate the drug channel. Warehouse clubs excel among households with discretionary income to spend, followed by the grocery channel.

Cat food purchasing has increased among those shoppers 65 years and over, as cats may be easier for seniors to care for and feed. ACNielsen notes that the aging population provides opportunities that are long term. This demographic will likely impact store sizes and formats, growth of functional foods, package technology and size, and advertising copy and spending. There exists an opportunity for "generation" marketing.

In the short and long term, growth can be accomplished with a consumer focus that targets the health and wellness opportunities. Organics, functional foods, whole grains and elimination of trans fats are all major trends to be considered. Awareness of the impact of these trends, food product formulation and brand message will be important as well.

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