Mars regains global lead in pet food

Author: Christiana Benkouider

Date published: 10 Sep 2003

Mars had been leading in the world pet food market comfortably until Nestlé gained ownership of US firm Ralston Purina, which added over US$3 billion to its sales. Whereas Mars accounted for over 23% of global sales in 2000, Nestlé emerged as the new global leader in 2001, generating nearly US$1 billion more in dog and cat food retail sales than Mars.

The leadership position was nevertheless short-lived, as a combination of acquisition and strong brand management has resulted in Mars regaining the global number one spot in 2002.

Royal Canin boosts Mars

The most significant factor was the Royal Canin takeover which enabled Mars to add some US$500 million to its total pet food sales in 2002. While both Ralston Purina and Royal Canin acquisitions were announced in 2001, the Royal Canin takeover was only finalised in 2002.

Enforced divestments hit Nestlé harder than Mars

As a consequence of the companies’ acquisitions, both were obliged to divest some brands during 2002 to satisfy regulators. Nestlé sold Meow Mix and Alley Cat in the US, as well as Ralston Purina’s 50% stake in Spanish joint venture Gallina Blanca Purina. Mars had to divest the Advance and Brekkies brands and some smaller Royal Canin brands in Europe.

The divestments reduced Nestlé’s and Mars’s sales by about US$400 million and US$100 million respectively; thus affecting Nestlé’s turnover more strongly than that of Mars.

Mars achieves stronger organic growth

While Nestlé’s priority during 2002 was the integration of Ralston Purina into its own pet food operations, Mars continued to treat Royal Canin as an independent entity and was thus able to focus more strongly on product innovation. As a result, organic growth achieved by Mars in 2002 was considerably more positive than Nestlé’s.

Mars fully embraced the single-serve concept, which proved to be a successful method of reviving sales in an otherwise declining wet pet food market. The company also focused on product reformulations and life-stage specific brand extensions, thus moving its brands towards the more dynamic premium end of the market. These measures, backed by high-profile advertising campaigns, led to a strong performance from Mars’s key pet food brands.

Mars’s Whiskas cat food brand achieved growth of over 11% during 2002, which represents an increase in actual retail sales of over US$180 million. Pedigree, the world’s number one dog food brand, also recorded positive growth of over US$100 million in the same year. In contrast, Nestlé’s Friskies brand that encompasses both dog as well as cat food, achieved total growth of just over US$100 million.

Nestlé focus to return to key brands in 2003

In response Nestlé is expected to focus more strongly on supporting its brands now that the integration of Ralston Purina can be considered complete. The company has already stated that its newly acquired brands such as Purina ONE have performed particularly well in Europe.

Indeed growth for the new brands is more likely to be achieved outside their main US market, where key Purina brands Dog and Cat Chow have been struggling to keep pace with both the fast-growing super-premium brands such as Iams as well as with Wal-Mart’s private label products, shares of which have been increasing steadily over the last three years.

Competition to remain intense

Significantly, with no more major acquisitions likely to happen due to probable antitrust issues, growth for both firms will now entirely depend on product innovation and marketing capabilities, areas in which the two fmcg multinationals have equally high expertise.

With the pet food market continuing to show strong growth both companies can co-exist, but competition between the two, in particular in the more mature markets of North America and Western Europe, will remain intense.