Trade agreements between the European Union (EU) and Mercosur (the Southern Common Market, comprising Argentina, Bolivia, Brazil, Paraguay and Uruguay), as well as the EU and India, could help pet food manufacturers reduce sourcing costs, diversify ingredient supplies and tap into fast-growing consumer markets. On the downside, the deals can bear certain animal welfare risks for Europe.
The two agreements rank among the EU’s most significant trade initiatives in recent years. The EU-Mercosur agreement alone would create one of the world’s largest free-trade areas, linking a market of more than 700 million consumers and accounting for around a quarter of global GDP. The EU-India free trade agreement would create a market of around 2 billion people — roughly a quarter of the world’s population — and account for about one-quarter of global GDP.
Pet food industry reception strong, with some concerns
The proposed agreements have been welcomed by much of the pet food industry but have also prompted concerns from EU animal welfare organizations. In particular, they argue that some provisions of the EU-Mercosur agreement could undermine efforts to improve animal welfare standards.
For example, animal welfare provisions in the EU-Mercosur deal are limited in scope, said Daniel Pérez Vega, farm animals senior project officer at Eurogroup for Animals. “Major traded animal products like beef and poultry, which are also widely used as inputs in pet food, are not subject to EU-equivalent animal welfare requirements. This means that pet ingredients derived from animals raised under lower welfare standards may enter the EU market.”
Like most free-trade agreements, the proposed deals focus on reducing tariffs and other trade barriers while requiring compliance with the EU’s sanitary and phytosanitary standards. Animal welfare standards, however, are not included among the trade conditions.
According to Vega, trade agreements such as EU-Mercosur or EU-Thailand could further encourage intensive livestock production and lower animal welfare standards abroad while affecting EU consumers’ expectations for higher-welfare products. By contrast, the EU-India free trade agreement is expected to exclude liberalization for most animal products — apart from fisheries — thereby reducing the risk of imports produced under lower welfare standards.
“From a policy perspective, this also raises questions about consistency,” Vega said. “The EU is in the process of revising its animal welfare acquis with import requirements at its core. But EU trade deals like EU-Mercosur undermine these efforts.”
Europe to gain access to cheaper pet food ingredients
Despite these concerns, analysts expect the agreements to deliver significant benefits for Europe’s pet food industry by improving access to competitively priced ingredients and expanding opportunities in fast-growing export markets.
“For European manufacturers, improved access to Mercosur countries could strengthen supplies of poultry meal, beef by-products, cereals, soy derivatives, vegetable proteins and other feed ingredients where South America has strong production advantages,” said Nandini Roy Choudhury, senior analyst at Future Market Insights.
According to Choudhury, lower import costs could improve manufacturing margins, particularly in premium and functional pet food formulations, where ingredient costs account for a significant share of production expenses.
The agreement with India offers a different set of strategic advantages. India is emerging as an important supplier of rice, plant proteins, botanicals, functional ingredients, natural additives and specialty nutritional components increasingly used in premium pet nutrition, Choudhury said.
“Greater market access could diversify sourcing beyond traditional suppliers while reducing dependence on more concentrated supply chains,” she added.
Future Market Insights also expects the agreements to encourage European manufacturers to increase exports of premium pet food to India as pet ownership rises and consumers increasingly seek scientifically formulated nutrition. At the same time, Mercosur manufacturers could become more competitive in supplying ingredients and finished products to Europe, intensifying global competition.
A win-win situation?
The agreements are also expected to benefit pet food industries in the EU’s trading partners. India’s domestic pet food manufacturing sector has expanded rapidly since the Covid-19 pandemic and is increasingly well positioned to compete with European producers, said Binoy Sahee, sales and marketing director of the India International Pet Trade Fair.
“With the reduction in import duties on pet food from Europe, high-quality products will be available in India at lower prices. Secondly, there will be opportunities for collaboration with Indian pet food manufacturers,” Sahee said.
Ultimately, the agreements should lead to healthy competition, provide pet owners with more choices and improve overall market sentiment, he added. They are also expected to strengthen business ties between India and the EU.
It remains unclear whether the agreement will create significant new export opportunities for Indian pet food producers. “India has been exporting natural pet treats for a long time. Indian treat exporters have consistently introduced new product ranges, including Agro Food Industries and Allanasons, to name a few,” Sahee said. “However, until the agreement is implemented, it is difficult to say whether Indian pet treats will gain a stronger foothold in the European market.”
Beyond pet food exports
The broader impact of the agreements is likely to extend well beyond trade volumes, Choudhury said.
Lower input costs could partially ease inflationary pressure on pet food prices, although premiumization is expected to remain the industry’s dominant long-term trend. Rather than competing solely on price, manufacturers are likely to reinvest cost savings into innovation, functional nutrition, sustainability initiatives and premium ingredients.
The agreements could also reshape competitive dynamics across the global pet food industry. “Large multinational manufacturers with diversified procurement networks are likely to benefit most because they can rapidly optimize sourcing across Europe, South America and Asia,” Choudhury said. “Smaller regional manufacturers may face greater competitive pressure if larger companies achieve lower ingredient costs and stronger purchasing leverage.”
The agreements could also accelerate investment in local manufacturing facilities, ingredient processing, quality certification and regulatory harmonization, particularly in India, where the pet food market continues to expand rapidly.
“As ingredient trade grows, greater emphasis will be placed on traceability, food safety standards, sustainability certification and supply chain transparency to meet increasingly stringent customer and regulatory expectations,” Choudhury said.
