Many pet food producers around the world, and particularly in the Latin America region, are concerned with the economic impacts of COVID-19 on their businesses. The massive loss of employment and the rather weak economic stimulus in some countries raise questions as to whether the pet food industry can recover from the pandemic, and when.
Fortunately, two elements protect the pet food industry versus other consumer industries during economic recessions.
First, pet food products have no substitutes other than homemade preparations or people’s table scraps. Moreover, commercial pet food is more affordable, more convenient and nutritionally superior to any homemade food.
The actual substitutes for pet food products are likely other pet foods. When incomes tighten, consumers may simply opt to buy inexpensive brands and will avoid reducing the volume fed. Therefore, the impact of economic recessions on pet food consumption is less.
Second, most countries in Latin America are well supplied with pet food production facilities. In other words, the recession will not wipe out the current production capacity in Latin America, except of course for those few companies that may have to shut down due to financial difficulties.
As employment and personal incomes recover, the resurge of pet food consumption will be more rapid than that for other consumer markets, where production capacity has been lost. Thus, there is no waiting period to resume higher production levels, as the pet food infrastructure capacity remains intact. Such a circumstance represents a big difference in the speed of the recovery.
Instead of production plants running at medium capacity, a quick recovery signifies returning to close-to-full capacity levels.
Given the arguments above, the recovery of pet food markets in the Latin American region will likely take a “V” shape. This means a rapid and decisive rebound after a sharp drop in consumption.
This type of recovery is the most desired, given the deep drop in economic activity and the difficulties other markets will face to come back from the current recession.
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Iván Franco is the founder of Triplethree International and has collaborated on hundreds of research projects for several consumer goods industries. He was granted the Global Consultant of the Year award by Euromonitor International and authored the book 17 Market Strategies for Growth (in Spanish).
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