Australia's red meat industry is looking at raising its game to capture the wet dog food market it lost to multinational pet food manufacturers. The opportunity is certainly there as the number of pets eclipses the number of people, creating an AU$13 billion (roughly US$8.97 billion; 30% of which was pet food) market in 2019 for pet products and services.
A 2019 survey of pets and people commissioned by Animal Medicines Australia (AMA, an organization representing leaders of the animal health industry in Australia) found 28.5 million pets co-existing with 25.5 million people in Australia. The survey also established that 5.9 million, or two-thirds, of Australian households (61%) have a pet. That would be three in five households, which is more than the pet-per-household rate in the United States (57%) and in the United Kingdom (40%), according to Newgate Research, which did the report for AMA.
Feeding all these pets — led by 5.1 million dogs and 3.8 million cats — cost Australians over AU$3.9 billion (roughly US$2.69 billion) in 2019, the survey showed. Dog food accounts for 57% of all pet food spend, valued at an estimated AU$2.3 billion (roughly US$1.59 billion). Cats' pet food spending share is 32%, at AU$1.3 billion (roughly US$897 million).
Australians' other pets include millions of fish, birds, small mammals, reptiles and farm animals like horses, goats and even alpacas.
Meaty pet food opportunities
The hefty pet food bill has convinced Australian red meat producers that there's a high-value business opportunity waiting for them in the pet industry. At stake is Australia's domestic pet food market, expected to grow at 4.6% annually to US$2.8 billion through 2023. To get into the pet food market more profitably and compete with commercial pet food manufacturers, members of the industry organization Meat and Livestock Australia (MLA) said they must play on their core strength, which is meat — fresh and raw.
“Pet food isn’t a new category of use for red meat, but it’s underrated and undervalued,” said Michael Lee, MLA group manager of science and innovation. “We wanted to search for high-value opportunities for red meat within the pet food market segment.”
In scoping the field, the MLA funded a 2019 study to see how its members can best get into the pet food market using real ingredients that are free of preservatives and synthetics. Initial findings based on consumer trends show an opportunity to move from standard by-products with low margins to value-added products that fetch better prices. They also found strong demand for raw and fresh pet food products.
MLA tapped a business growth adviser firm to look at high-value opportunity spaces in pet food that red meat producers can fill in. It came back with a report informing MLA that the best opportunity “is in the wet dog food market, given the high global consumer interest in raw and fresh pet food worldwide.”
The report also noted a trend that follows the “wild” diet of pets based on single-protein sources and raw meat as key ingredients, especially for dog food. But the study found little opportunity for Australian beef and lamb in cat food, which is usually made from chicken or fish. And while there are low-value meat by-products that can be turned into pet treats, the report rated treats as a non-viable opportunity for red meat producers due to an oversaturated market.
“Now’s the time to reimagine pet food to benefit Australian producers,” said Lee. “Products that don’t qualify as food-grade products for human consumption can be used to make pet food products at increased value and in premium formats that the pet owner relates to.”
Demand for premium raw and fresh pet food is currently coming from only 1–3% of Australia's pet food market, but MLA can potentially help bring it to 10% if they can fine-tune red meat designed for pets, the report said.
“This means understanding the changing consumer and seeing opportunities where we can win with Australian red meat ... There’s untapped potential in pet food categories within Australia and internationally — we need to now look at product and business model innovations to succeed,” said Lee.
Instead of losing profit margin by selling by-products to pet food manufacturers, abattoirs can value-add themselves by working directly with Australian start-up companies like Lyka that are trailblazing the premium raw and fresh pet food subscription model. In theory, the study suggested that abattoirs can also increase the Australian premium dog food market size by 5% and increase their own profit margins by producing and selling value-added raw and fresh beef and lamb dog food products.
For maximum profitability no part of an animal should be wasted, so butchers could upcycle low-value meat and bone parts and turn them into healthy and tasty protein dog treats. Lee said animal hides that were previously wasted are now ingredients for high-protein supplements for older dogs with arthritis.
“Finding and capitalizing on opportunities such as this is a step toward bringing increased market share to Australian red meat producers,” said Lee. “It is also a step towards new value chains to grow red meat demand.”
It is worth noting, though, that in Australia pet food is essentially self-regulated with voluntary standards developed by the Australian Veterinary Association, the Royal Society for the Prevention of Cruelty to Animals (RSPCA), the Pet Food Industry Association of Australia and the Standards Australia.
Meanwhile, the MLA also has its sights on the international pet food market which they said is projected to be worth US$128.4 billion by 2024. The organization hopes the premium Australian red meat brand could also be leveraged for export markets and help them bring home the bacon.
Pet market trends
Australia's pet population may explode even further in the next year as nearly 3 million households (31% of all households in the country) are considering getting a new or additional pets.
Sixty one percent of Australian households currently have a pet and 686,000 of them are thinking of acquiring another one or more within the year, the AMA survey showed. Meanwhile, if housing or other lifestyle factors were not an issue, an estimated 2.3 million pet-free households would also get a pet.
Despite the abundance of pet food choices already available, the AMA survey said that a quarter of dog owners and one in 10 cat owners feed their pets leftover table food. Also, a small group of dog owners (16%) and cat owners (4%) in the survey, usually women from lower-income households, said they make food for their pets at home. Only one in five dog owners surveyed visit the butcher shop for pet food.