No minor feat in a mature market worth upwards of $27 billion, U.S. retail sales of dog and cat food held steady and grew in 2017 and 2018, and the upward momentum has persisted into 2019, according to market research firm Packaged Facts in the report Pet Food in the U.S., 14th Edition.
"For pet food, retail, marketing, and new product initiatives are hopping," says David Sprinkle, research director for Packaged Facts. "And from a merger and acquisition perspective, the past couple of years have been nothing short of dynamic."
This positive state of affairs belies, however, that the market is facing enormous headwinds. As in almost every consumer product category, e-commerce continues to upend traditional retail as more pet owners opt to buy their pet food online instead of, or in addition to, from brick-and-mortar sellers.
For pet food, a side effect has been to speed up the dissolution of the pet specialty/mass channel divide that has long helped to justify the "superpremium" prices of brands sold only by pet specialty retailers, which have for years bolstered dollar sales absent volume growth by converting pet owners to higher-priced fare. At the core of this premiumization trend have been natural products including grain-free formulas, which have driven pet food sales growth for over a decade.
Now, however, virtually all pet food brands are available online, accelerating the "mass premiumization" trend whereby pet-specialty-type products are now widely available in the grocery and mass channels. As online sellers including Amazon, Chewy, and Walmart battle it out, including via private labels, the upshot is downward pricing pressure market-wide even as the costs of producing pet food continue to rise. Since the dog and cat population is not growing enough to provide much of a volume lift, pet food marketers and retailers will have to come up with new and compelling premiumization drivers in order to maintain dollar sales gains.