The global pet care market cracked the US$100 billion sales ceiling in 2016, thanks to a healthy 4.7 percent increase over the year before. Euromonitor International projects that growth to continue, with sales for all pet products and services globally reaching US$117 billion by 2021, a compound annual growth rate of 2.4 percent at constant prices. Pet food will maintain its significant contributions; it accounted for US$75.25 billion of the 2016 sales (at 4.8 percent growth), or nearly 73 percent of all pet care.
Increasingly, both pet care and pet food sales growth is driven by ecommerce as that channel rises in popularity among pet owners, particularly younger ones. The share of pet care sales from the online channel varies from 8 percent in Western Europe to a high of 17 percent in Asia. In Eastern Asia markets like China and Korea, nearly one-third of cat and dog food is bought online, according to Euromonitor.
In the US market, 9 percent of pet care sales occurred online in 2016, according to Packaged Facts’ latest report, “US Pet Market Outlook, 2017-2018.” Specific to pet food, ecommerce accounted for 7 percent of 2016 sales. Packaged Facts went so far as to describe the internet as the “new pet parent, as a dramatic force reshaping the market landscape.”
What ecommerce strength and growth mean for pet food players
To state the obvious, this means pet food companies fail to have an internet retailing strategy at their own peril. Yet developing and executing that strategy is not necessarily easy or straightforward, particularly for players and brands that distinguish themselves by selling only to the pet specialty channel. Companies must now consider whether to extend policies such as minimum advertised price (MAP) or minimum retail price (MRP) to ecommerce. Some experts and retailers believe that MAP and MRP have helped “level the playing field” for independent pet shops, who often can’t afford to sell pet foods at prices as low as chains such as PetSmart and Petco can.
Another key concern for pet food companies as ecommerce gains strength is how to negotiate the ever-changing internet landscape. That includes factors such as how to deal with giants like Amazon – do you sell to Amazon or on Amazon? – as well as mergers and acquisitions among retailers.
For example, PetSmart’s April 2017 announcement that it is acquiring Chewy.com has roiled the waters and heightened consternation among independent pet retailers. In response, one manufacturer, Tuffy’s Pet Food, which sells only to independents and family-owned businesses, quickly made news with its own announcement that it would pull its products from Chewy now that it would be owned by the largest US pet store chain. So far, Tuffy’s executives report a very positive response; yet not every pet food company can afford such a move, or might have other business reasons to stick with some of the larger ecommerce sites.
It’s a situation that calls for constant monitoring and the flexibility and willingness to change strategy, if necessary, to compete online – because today and increasingly in the future, if you’re not competing online, you’re probably not really in the competition.