General Mills’ first quarter fiscal year 2020 (Q1 FY20) financial results, including for its Blue Buffalo pet food division, yielded few, if any, surprises. The company’s pet food sales continue to grow – by 7% overall compared to the same period last year – fueled by robust growth in the e-commerce and food, drug and mass (FDM) channels. At the same time, Blue Buffalo’s pet food sales in the pet specialty channel, where the company once dominated, decreased by double digits, the company reported.
This is all by design, a strategy telegraphed two years ago when Blue Buffalo (pre-acquisition by General Mills) started selling some lines of its pet food in four large FDM retailers. That move was probably made to position the company for sale to a large human food company with a strong presence in FDM.
Then in January of 2019, General Mills announced its plan to double its pet food distribution and product assortment in the FDM channel, as it continued to accelerate activity and sales in e-commerce, too.
Gains in pet food e-commerce, FDM for entire market
Execution of that plan is well under say, it seems. For Q1 FY20, General Mills’ pet food sales climbed 50% year-over-year in the FDM retailers that have carried its products for more than 12 months: Target, Kroger, Albertsons, Meijer, H-E-B, Giant Eagle and Hy-Vee. At the same time, its e-commerce sales increased 20%. The company also gained market share in both channels, it reported.
These pet food sales results gibe with (and perhaps are contributing to) the overall U.S. pet food market. In 2018, e-commerce pet food sales overall rose 45%, according to a report by Nielsen for Pet Business, while sales in “mainstream retail” (which apparently includes FDM) grew 2.7%. Though that seems modest, particularly compared to the large e-commerce gain, it’s still more than the barely registering increase of 0.6% in pet specialty.
Retreating from pet specialty is part of the plan
When General Mills announced its continued pet food expansion into FDM during another earnings call earlier this year, Mark Kalaygian, publishing director and editor in chief of Pet Business, commented that company executives “barely mentioned” pet specialty – where Blue Buffalo used to be a favorite and even claimed to be the number one brand in the channel, Kalaygian added.
He also said a growing number of independent pet retailers had decided to phase out the brand after its move into FDM, while acknowledging that a focus on FDM and e-commerce had been reflected in the priorities detailed by General Mills previously.
Indeed, it seems the large drop in sales and market share in pet specialty for Blue Buffalo is not at all a concern to General Mills. In fact, turning away from the channel seems to be part of the company’s master plan. As Kalaygian asked earlier this year, “Regardless, the real question is does Blue Buffalo even care that its position within pet specialty is eroding?” The answer seems ever more obvious now.