Pet dog population on the rise as pet cat population stagnates
Following the 2011 population and the 2012 continuing political upheavals and a significant portion of the expatriate population fleeing the country, there has been a significant rise in the number of pet cats and dogs left on the streets of Egypt. Although both pet cats and dogs have been left to fend for themselves, as no replacement homes have been found for them, many Egyptian national consumers have continued to buy guard dogs to implement some security measures in their homes and businesses. In some instances, consumers have bought more than one guard dog. This phenomenon has resulted in the pet dog population’s continued rise while expatriate ownership of cats has dropped, thus causing stagnation in the total pet cat population.
Domestic security concerns fuel demand in 2012 and 2013
Following the ousting of the elected president, Mohammed Morsi, in 2013 his supporters have continued to fill the streets of major cities to protest. The result has been a weakening of national and domestic security and greater concern amongst high-earning Egyptians for their families’ and businesses’ welfare. This has resulted in security precautions being taken, such as buying guard dogs. In turn, demand for dog food and pet products maintained high value and volume growth in 2012, which is expected to be the case for 2013 but this will decline during the remainder of the forecast period.
New entrants drastically raise value sales of pet care
New entrants, such as MVP K9 and Before in pet products in 2012, as well as Trixie in pet dietary supplements in 2010, have drastically shifted the competitive landscape due to their significantly high value and the presence of a consumer base. These brands offer products, which Egyptian consumers were previously obtaining either online or by importing from abroad, in answer to the consumer surplus. As these products have a significantly high price label, they have had a drastic impact with high value sales that have resulted in changes in company and brand ranks. Pet care’s relatively small size makes it easy for new entrants to overtake each other and it is expected that drastic shifts in ranks will continue to be seen in the forecast period. This is especially the case for high value products, such as the leather collars by Before which outstripped Nestlé Purina’s value share of pet products, overtaking it to reach the number one spot in 2012.
Pet shops continue to be the dominant channel
As demand continues to contract amongst high-income consumers and deteriorating disposable incomes have restricted middle-income consumers in affording pet care products, the process of premiumisation is likely to continue. Pet shops are the source of product premiumisation, mostly because they are willing to stock a variety of products in small volumes and they are fragmented geographically so that they can cover high-income earning areas. Brands, such as Royal Canin, have come to dominate the pet shops channel and attain value shares via this channel as high-income consumers seek premium brands.
Economy sized premium dry dog food is expected to provide the highest volume performance
Consumers seek value for money and convenience for their dog food, so pet shops sell economy sized premium dry dog food. Although most consumers visiting pet shops are high-income earners, their demand for economy sized products derives from ease of storage and less regular visits to retailers in order to top up their pets’ food supply. As a result, premium dry dog food is expected to see a decline in the unit price in the forecast period and a high increase in volume consumption.
Ongoing political uncertainty has minimal impact on dog food and pet products
Regardless of the country’s considerable unrest in 2012 and the resultant widespread violence between the Egyptian army and the pro-Morsi protestors, the Muslim Brotherhood, which has worked for power for more than 80 years, is still determined to seize its chance to reshape Egypt. President Morsi, the public face of the Muslim Brotherhood's top political leadership, is perceived to lack competence and the people’s discontent with him has stretched domestic security forces to police the protests and curfews.
This has resulted in security concerns for Egyptian nationals and fleeing of expatriates, and, thus, a decline in the pet-owning population and demand for pet care products. However, this has not been the case for pet dog products as high-income Egyptian nationals have supported value growth with their purchases of premium dog food and pet products.
The situation resulted in continued demand for personal security in 2012, with many opting for guard dogs. The increased sale of medium- to large-sized dogs, likely to raise the medium and large dog populations by a combined 3% in 2013, whilst the small dog population is expected to decline by 3%, has built up demand for complementary pet products and economy pet foods. This resulted in pet food’s volume growth of 26% in 2012, which is expected to be 14% in 2013.
While security concerns persist, pet care is expected to continue to see healthy growth rates in the forecast period, especially for dog food with an anticipated constant value CAGR of 4% and pet dietary supplements with 9%. However, forecast growth rates will not be as high as in the review period mostly due to the low base growth rates that these industries experienced. Pet care will continue to see some growth from a consumer base comprised mainly of Egyptian nationals and, as the political upheaval subsides and foreign investment and expatriates return to the country, the pet population will grow in parallel.
This trend will be supported by demand from high-income consumers for convenience and by increased premiumisation of available brands. As a result, suppliers will be encouraged to import high-value premium products in the forecast period. Such items tend to be restricted when an economy faces a foreign reserves drain, as spending is shifted away from luxuries and towards necessities.
The political upheaval has made pet care reliant upon Egyptian nationals as the consumer base and it has developed that this consumer base will remain constant in Egypt, unlike the expatriate consumer population. Thus, consumer demand for pet care is likely to stabilise as its domestic demand does not depend on the unpredictability of the presence of the expatriate population.
Pet shops premiumise to keep big spenders
Pet shops proved an increasingly attractive channel to consumers at the end of the review period. During the unrest seen in 2012, many modern trade outlets were forced to close. However, pet shops remained open as they are mostly located in high-income areas of urban centres where political violence has been minimal. The entrance of the first pet specialist retailer in Egypt, Egy Puppy, retail market value shares began to shift toward this company away from modern retailers, mostly due to brand recognition and product premiumisation. Also, Egy Puppy is looking to continue to expand within Cairo and even into other major cities. This expansion will include sales of premium brands, such as Royal Canin, which are positioned as premium products mostly located in pet shops or sold by veterinary clinics.
In 2012, consumers started to face higher traffic congestion and crime rates, and the presence of small pet shops in areas of high pet ownership made it a more convenient channel. Consumers prefer to buy in bulk and pet shops are most likely to offer economy sized pet food in premium brands.
Pet shops saw strong growth in its channel value share in 2012 at 38% which was just above that of hypermarkets. This was linked to time-pressed consumers increasingly buying pet care and to their demand for economy sized brands. Pet shops also benefited from a comparative lack of products in modern grocery retailers and from offering geographical convenience and brand variety.
Pet shops maintained a dominant channel distribution value share in pet care, due to the placement of their stores in high-income urban areas, across major cities such as Cairo and Alexandria, where they could capture premium market value sales from modern grocery retailers. Sales are mainly accounted for by middle- and high-income consumers in Egypt’s largest cities, primarily Cairo, which accounts for the bulk of the nation’s wealth.
Pet shops are expected to become an increasingly significant channel in Egypt, with Pet Food value sales expected to 60% in the forecast period. Egy Puppy, notably, plans to expand its outlets volume in this channel. Value growth is expected to be particularly strong in the suburbs around Cairo and Alexandria. Hypermarkets is also expected to benefit from attracting a widening range of middle- and high-income consumers during the forecast period, thanks to offering attractive price promotions and bulk packs with lower unit prices.
Middle-income consumers continue to shift towards unprepared food
Egypt is characterised by widespread poverty, with many households struggling to afford their own food. In addition, the country has a large stray cat and dog population, with few consumers keeping pets. Only 3% of households owned a cat in 2012, while 2% owned a dog. Consumers’ attitude towards animals is generally not indulgent, with many of those that do keep animals owning them for functional purposes. Many consumers, for example, own guard dogs or breed birds in order to raise additional funds.
Due to widespread poverty and a generally unsentimental attitude towards animals, the share of prepared food in total consumption is low. Within dog and cat food, prepared food accounted for just 5% of total consumption in 2012. The majority of those with cats or dogs feed their pets on scraps. Within other pet food, sales were, meanwhile, threatened by the popularity of affordable, unpackaged food for birds and fish.
There was, however, a marked shift towards prepared food in 2012. Prepared cat food gained a marginal share of consumption in the year and rose by one percentage point overall since 2007. Prepared dog food, meanwhile, gained in consumption share by one percentage point in 2012 and by two percentage points overall since 2007. These trends are partly linked to a growing focus on pet dietary nutrition, with new owners of guard dogs, for example, being keen to ensure their dogs’ ongoing health. Many new guard dog owners opt for prepared food due to its convenience and time-saving benefits, while those who rehoused abandoned cats in 2012 often find themselves with more cats than they can feed with household scraps.
Egypt is expected to continue to face problems with widespread poverty during the forecast period, with such consumers generally remaining unable to afford to keep pets. Many middle- and high-income groups are, however, likely to adopt a more indulgent attitude to their pets during the forecast period. This is likely to be linked to a growing interest in pedigree dogs and also to a widening awareness of pet nutrition.
Non-prepared food is expected to continue to dominate overall dog and cat food consumption during the forecast period, while unpackaged products are expected to continue to pose strong competition to other pet food. Most consumers will continue to have an unsentimental approach to animals. However, prepared food and packaged food are expected to see strong growth in terms of percentages of overall consumption during the forecast period. Within dog and cat food, their shares could each increase to 7% of total consumption. This growth will be linked to a growing interest in pedigree dogs and also to a growing focus on pet health and welfare.
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