Amazon, Chewy private label pet foods threaten profits

Private label pet foods from Amazon and Chewy threaten established brands by leveraging their online sales platform to boost visibility.

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(Hadrian |
(Hadrian |

Private label pet foods from Amazon and Chewy threaten established brands by leveraging their online sales platform to boost visibility, wrote Gartner L2 analysts in the report “Digital IQ Index: Pet Care U.S. 2018.”  As more pet owners look to purchase pet food over the internet, online retailers increasingly have opportunities to boost exposure of their own brands by featuring those dog and cat foods in sponsored advertisements, on homepage displays and through other means. The ability of online retailers to undercut premium pet foods with their own brands threatens the profitability of pet food premiumization, which currently drives pet food sales value growth while volume growth stagnates.

Amazon boosts own pet foods in two ways

Amazon now has a range of private label pet foods at price points from value to superpremium. The first of these pet foods to be introduced, premium dog food Wag, still fails to appear in many search results, according to Gartner analysts. Only four percent of unbranded terms for dog food return Wag on the first page of search results.

However, Amazon compensates for lack of search engine visibility in two way. First, Wag appears in curated product selections offered by Amazon, including its pet food guide. This helps place Wag on equal footing with established brands in the minds of consumers. Second, Amazon promotes Wag in sponsored product results that appear after unbranded searches for dog food. This helps compensate for the relatively low performance of the dog food in search results.

Chewy uses page placement for private label pet foods

Chewy’s private label pet food, American Journey, tends to do better than Amazon’s Wag in unbranded search results. A pet food buyer will find American Journey along with established rivals Wellness and Hill’s Pet Nutrition while searching Chewy’s website. American Journey products appear on the first page of search results for 31 percent of unbranded pet food terms on Chewy, wrote Gartner analysts.

Chewy has more tricks up it’s sleeve than search results though. American Journey often features prominently on the Chewy homepage. In American Journey’s product description, Chewy highlights deals and discounts.

Price threats to premium pet food

Amazon and Chewy’s ability to offer premium pet foods at lower prices may be the more serious threat to other brands, since it undercuts premiumization.

For North America, particularly the U.S., humanization and premiumization are maintaining growth when other factors have seemingly lost their effectiveness, wrote Petfood Industry’s Lindsay Beaton. Pet owners are already buying as much pet food as they need, so volume sales can no longer be relied on for significant growth. Instead, growth is coming from the drive pet owners have to give their pets the best.

In the US, more than perhaps any other country in the world, humans are treating their pets like members of the family, and are willing to spend with that idea in mind. Premium pet food sales continue to grow when other segments, particularly economy sales, are seeing drops in growth. In fact, according to Euromonitor International data, in 2017 premium dog and cat food sales made up more of total value sales than economy and mid-priced sales combined.

“However, as private label brands develop premium offerings, their low-cost value proposition will only add to pricing pressures, further threatening the profitability of pet food products,” wrote Gartner analysts."

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