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Country Report

USA Flag Pet Care in the US

| Pages: 75

Price: US$1,900

About this Report

EXECUTIVE SUMMARY

Steady growth through premiumisation

US pet care growth improved in 2013 due to moderately improved volume sales and especially through ongoing product premiumisation. Dog and cat treats and non-therapeutic premium pet food led the pet food industry’s growth. The increased humanisation of pets continued to fuel growth in the market, with pet products strongly benefiting from this trend.

Growth through reverse innovation: The more natural, the better

Echoing recent years’ trend towards natural products, 2014 growth in the pet food industry was spurred by premium products including grain-free, organic, freeze-dried and raw pet food varieties. In an ironic twist of inventiveness, frozen raw pet foods are emerging as leaders in the pro-natural wave as wary consumers, concerned about the sourcing, transparency and adequacy of food ingredients, seem to be going back to basics, seeking niche products whose value added resides in not appearing manufactured.

Increased consolidation and portfolio diversification

The pet food industry has experimented rampant consolidation pressures throughout the review period, with merger and acquisition activities intensifying since 2009. Most of these trends have been fuelled by the growth of premium natural and healthier pet food products. Through an increased consumer awareness of healthy diets and intensified pet humanisation, the demands for better-quality formulas and healthier ingredients have permeated preferences across price platforms. The proliferation of brands with healthier claims has motivated major global pet care leaders to further consolidate in order to expand their portfolio selection to secure a strong market share across all segments.

The tip of the iceberg of internet retailing

Whilst pet superstores continue to account for the largest share of retail sales, internet retailing has been the fastest-growing distribution channel. Despite the impressive growth rates of online sales, the US internet retailing take-off has been slow relative to that of other developed markets. The best is yet to come. Cognizant of the impending growth potential of online sales, the hegemonic pet superstores have tried to secure their market foothold by offering value-added services. Nonetheless, creative partnerships and new business strategies will be needed to trump the convenience, affordability and wide variety brought forth to pet lovers through the consumer-friendly internet.

Pet demographics and growth potential

Pet ownership decisions reflect consumer confidence in the state of the economy in the current and near-term expectations. As the sluggish economic recovery takes a stronger foothold, pet populations are on the rebound, reflecting the time-lagged adjustment of consumer expectations. Preferences have adjusted to the demands of current on-the-go lifestyles, with urbanisation playing a key role in driving the differential rate of growth of pet types, strongly favouring smaller-sized pets. As the downsizing of pets continues throughout the forecast period, the deceleration of volume sales will pose new challenges, further increasing the industry’s reliance on premiumisation. Growth will be driven through innovative products whose manufacturers are capable of emphasising their natural features.

Premium pet foods achieve growth through natural positioning

Over the 2009-2014 review period, premium dog food value sales maintained some of the highest growth amongst pet food categories (excluding dog treats), achieving 14% growth with a CAGR of 3% in value sales for both dry and wet premium dog food. With retail volume sales growing at flat rates tied to dog population dynamics (ie preference for smaller dogs with lower caloric intake), unit price growth and product premiumisation continue to drive growth in the market. To illustrate, over 2013, premium dog food value sales grew close to 4%, reaching US$6.7 billion. Whilst premiumisation is much more prevalent in dog food, premium cat food value sales also exhibited healthy growth over the 2009-2014 review period, achieving a CAGR of 3% for premium wet cat food.

These indicators illustrate how despite constrained household budgets resulting from the challenging economic times experienced during the 2008 economic crisis and the subsequent slow recovery, US pet owners, who strongly associate product pricing with superior quality, consistently showed a strong willingness to spend more in premium pet food products in order to ensure a well-balanced, nutrient-rich and high-quality diet for their pets. As consumer confidence in the current and future state of the economy improves, these consumption trends are expected to further consolidate, driving growth throughout the forecast period in spite of reduced volume growth due to shifts in pet preferences.

The inertia in pet food premiumisation has been maintained partly due to the continued humanisation of pets, which motivates consumers to ensure the best-quality products for their pets, just as they would for another family member. The same mechanism lies at the heart of the direct transmission of human health and wellness trends to pet food, which has greatly spurred the demand for higher-priced grain-free, low-glycaemic, human-grade and ultra-premium organic pet food products. Grain-free product categories exhibited some of the fastest growth, close to a third of new pet products claiming to be grain free according to The Petfood Industry Magazine. The grain-free momentum is here to stay and has already expanded beyond pet food to incorporate other pet care products including cat litter and healthcare products such as flea and tick treatments. Other niche product developments rapidly emerging as growth drivers include freeze-dried, dehydrated and refrigerated raw pet food, with raw pet food benefiting from the opportunity to include functional ingredients such as probiotics not compatible with the standard manufacturing method of other pet food types. The innovation, convenience and consumer trust associated to freeze-dried pet food have positioned these products as the fastest-growing type of healthy pet food, followed by grain-free and natural products.

The growth of ultra-premium products and ingredients is changing the competitive landscape of pet food as an increasing number of modern grocery retailers like Wal-Mart launch more affordable natural and organic pet food product alternatives. The grain-free trend has permeated pet food products across price categories, blurring the lines of product differentiation across pet food segments. Yet, the potential for these developments in the modern retail and mass market channel to significantly affect value sales growth rate of super premium pet foods is weak, as it largely depends on the ability of lower-positioned brands to successfully win the confidence of consumers whose shopping habits are driven by quality and trust in brands’ reliability rather than on price.

Current impact

The importance of premium dog and cat foods to growth in the overall industry cannot be understated. Of the US$2.3 billion dollars of absolute value growth forecast in dog and cat food between 2009 and 2014, 52% has emerged from growth in the premium segment.

Despite their relatively high prices, natural brands at the high end of the pet specialist channels such as Blue Buffalo and Natural Balance have continued to achieve the fastest growth rates within the non-therapeutic premium pet food segment. Part of their success can be attributed to their marketing and advertising strategies which primarily focus on ingredient quality, sourcing and food safety. Additionally, Blue Buffalo’s distinctive ad campaigns, stressing the naturally wild ethos of pets, attract consumers who associate the brand with promoting their pets’ most natural instincts and vigour.

The growth of these brands, also major players within the grain-free segment, has challenged the hegemony of well-promoted mid-tier brands from major manufacturers, paving the way for smaller brands such as Solid Gold, Wellness, and Merrick’s Organix and Natural Ultamix to gain wider national pet specialist distribution. As a result, successful established competitors within the premium food space have adjusted to consumer preferences by eschewing lab-based or “synthetic” premium formulations and expanding their product selection to include more natural-based formulas such as Hill’s Ideal Balance and Nutro’s Natural Choice.

The industry’s emphasis on natural and organic products has been reflected in recent merger and acquisition activity with Del Monte Foods Inc (now Big Heart Pet Brands) acquiring Natural Balance in 2013 and Merrick acquiring Castor & Pollux Natural PetWorks in 2012. Furthermore, the impetus of modern grocery retailers to expand the presence of natural and organic pet food product alternatives in the mass-market channels through the development of healthier product lines within private label has also created consolidation pressures amongst key manufacturers looking to develop strategic tiered-brand structures that would allow them to secure a strong foothold across pet food categories and solidify their broad market share. The very recent (April 2014) sale of 80% of Procter & Gamble Co’s pet care business unit, including the whole of the US market, to Mars Inc, provides an example of the consolidation trends within the mature pet food industry. Through the acquisition, Mars Inc will be able to fill the gap in its portfolio selection, already encompassing economy, value-based brands such as Pedigree and Whiskas as well as speciality brands such as Banfield and Royal Canin. Previously lacking a sizable premium brand in mass retail such as Iams, Mars Inc will through Procter & Gamble’s divestment develop a more solid tiered-brand strategy and expand its presence across distribution channels.

The pet superstore channel’s emphasis on pet wellness through natural product mix and quality of ingredients has also encouraged growth amongst natural and organic pet product brands. As natural and organic products try to populate the mass-merchandising space, pet superstores have intensified their commitment to ultra-premium, high-quality brands through promotion of product innovation, consumer education and service excellence via the specialisation of associates’ knowledge of pet nutrition and ingredients’ strength. In an effort to maintain product differentiation between the pet specialist channel and the hypermarkets or mass merchandisers channel, over the review period, PetCo (with an estimated market share of 20%) has modified its product mix in favour of niche brands, notably offering products not carried by competitor PetSmart such as the increasingly popular holistic pet food Solid Gold product line and Canidae brands.

Outlook

Premium dog and cat food are expected to account for an increasingly larger share of total volume, amounting to close to 32% of dog and cat food volume sales by 2019 with natural brands remaining as primary beneficiaries. Unit price growth is expected to continue throughout the forecast period, with retail value sales of premium dog and cat food expected to record absolute constant growth of US$1.3 billion, most of which (93%) is expected to be driven by growth in non-therapeutic dog and cat food retail value sales.

Food safety concerns and consumer perceptions regarding the reliability of formula claims will continue to drive growth for premium natural and organic pet food products. Growth in natural foods, especially those with a premium and functional component claim, will also continue to respond to pet weight management concerns amongst consumers as well as to the increased interest in preserving the quality of life and longevity of pets.

The humanisation of pets will continue to sustain the growth in natural pet foods in the years to come as human health and wellness concerns are inherited by the pet care industry. The future in natural pet foods will be dominated by products featuring omega 3 fatty acids, probiotics (mostly expected in frozen pet foods) and ingredient mixes supporting energy metabolism whilst also offering cardiovascular health amongst other health benefits.

For manufacturers, the continued strengthening of natural and organic trends will require a steady, considerable investment in research and development of new ingredients and manufacturing techniques. With the spread of natural pet food products out of the pet specialist channels, manufacturers of premium and niche brands will need to increase spending on consumer education efforts – through packaging, advertising, in-store marketing and cosponsored consumer awareness campaigns with pet superstores.

Regulation will also induce some industry adaptation as the US Food and Drug Administration’s (FDA) preventive control rule for feed and pet food under the Food Safety Modernization Act (FSMA) imposes new quality controls and standards for food manufacturers. Greater consumer knowledge of ingredients’ properties, certification and labelling standards can emerge as an additional challenge for pet food manufacturers. The potential for backlash against natural and health claims perceived as false or “greenwashed” by brands is not limited to mid-tier or economy brands, as even premium brands such as Purina One and natural pet food products such as the Natura Pets brand selection have been impacted by recalls that can damage brand perception and credibility, regardless of whether the recalls have been mostly voluntary.

Product differentiation, innovation and wider distribution will prove to be the key strategies needed to maintain and improve market shares in an increasingly competitive environment looking to capitalise on the growth of the natural and organic segment that has consistently driven the pet care industry’s growth despite some weak economic times.

Downsizing: The changing demographics of US pet care

US demographic change plays an important role in determining the growth rate of pet care as shifting trends in the characteristics of the US population affect pet ownership and spending preferences. Common demographic factors likely to impact the pet care industry include the age distribution of the population, ethnic composition, urban vs. rural concentration and proportion of households owned vs. rented. Trends within these factors such as the ageing of the baby-boomer generation, Millennials’ consumption preferences, increased propensity to delay marriage, debt burden, flat rates of home ownership, marginally slower rate of increase in the share of the urban population and the US Census Bureau’s projections of greater international immigration during 2014-2019 relative to that over 2008-2013 have all contributed to the industry’s expectation of deceleration in pet populations’ growth rate in the years to come, especially in terms of dog and cat populations, the preferred pets in the US. Moreover, dog populations have also experienced significant composition changes since the late 1990s, with the relative proportion of dog types by size shifting in favour of smaller breeds (defined as canines under 20lbs).

Cognizant of the potential impact of demographic trends on the pet care industry, manufacturers are closely following the changing composition and distribution of the US population in order to better tailor their existing product lines and new launches to the needs of consumers. It is important to note that a portion of future predictions of pet populations are highly reliant on assumptions regarding age and culture-specific preferences, which are still hard to predict as the same precondition can lead to very different pet ownership and spending outcomes. For example, one could argue that Millennials’ debt burden (80% higher than that of two generations ago) might influence them not to get a pet; however, their economic optimism, likelihood to postpone marriage and inclination to live in greater urban agglomerations may also make them prone to seek other types of bonding through pet ownership.

The potential for human wellbeing improvement through pet ownership has recently received the attention of academic researchers, pet industry experts and human health providers via the multidisciplinary Human Animal Bond Research Initiative (HABRI) founded in 2011. Additionally, different key industry players – including manufacturers, retailers and pet care service providers – are already actively engaged in a number of pet ownership and adoption promotion initiatives. The success or failure of these proactive industry measures will be a major determinant of pet ownership and spending in pet care going forward.

Current impact

One of the most remarkable shifts in US pet ownership preferences over the last 10 to 15 years has been the rate of increase in the population of small dogs, with its share in the overall US dog population expected to reach 41% in 2014 increasing seven percentage points since its 2007 pre-crisis levels. Despite the impressive rate of growth of small dog populations, increasing by 25% between the years 2005 and 2009, the growth in this dog type has decelerated ever since, whilst still overtaking medium and large dog populations’ relative proportion. During the 2009-2014 review period, the population of small dogs is expected to increase by 17% whilst that of medium-sized dogs (20-50lbs) is expected to decline by 11%, making medium-sized dogs the least numerous type of dog in 2014. Large dog populations, which experienced a greater decline than medium-sized dog breeds during the recessionary period, have experienced a slight deceleration in their rate of decline, decreasing by 5% between 2009 and 2014 as opposed to the 7% rate of decline observed over 2004-2009. More importantly, after eight years of declining rates of population growth, 2013 saw the return to positive growth of large dog types, a trend that further intensified during 2014.

The polarisation of dog owners’ preferences towards small and large dogs has been documented by several independent organisations such as the American Humane Association (AHS). The dog population trends are further supported through pet registration statistics such as those tracked by the American Kennel Club (AKC), whose data show that as pet owners have become more confident about the economic recovery in the post-recession years (2011-2014), they have returned to their historic preference, favouring larger breeds such as Labrador Retrievers, German Shepherds and Golden Retrievers. Furthermore, three out of the five most common types of dogs in the largest US cities have consistently been dog breeds above 20lbs, with 2011 preferences being maintained through 2013.

Increasing urbanisation – or an increased growth in the percentage of total US population residing in urban areas – helps explain the recent evolution in small dog populations. The rural US population has been in decline since 1990, the point at which it reached its modern peak level. Currently, the US population is predominantly urban with an annual growth change estimated around 1.04% in 2012. The urban population of the 10 largest US cities grew close to 7% between 2005 and 2010, and is estimated to grow a little over 5% between 2010 and 2015. Preference towards small dog populations and their corresponding higher growth rate seem to mirror the more rapid increase in urban populations observed between 2005 and 2010, levelling off in more recent years as urban population growth decelerates relative to prior years.

Other big influences on pet ownership are the rate of home ownership, household composition and decisions to marry and have children, all of which are in turn sensitive to economic conditions. Average age at marriage is estimated to reach 30 years old for males and 27.6 for females by 2015, reflecting the continued preference towards marriage postponement. This statistic directly affects the number of single-person households, which is expected to grow by about 4% from 2009 to 2014. Couples without children and single-parent households have increased as well. Whilst family formation has not been a necessary condition for pet ownership, initiatives such as the HABRI are already looking to capitalise on ongoing household composition trends to boost pet ownership via the promotion of the psychological and physical health benefits of owning a pet. Finally, preferences for small dogs amongst young pet owners and pet lovers with Hispanic descent support the momentum in the small dog population’s growth, especially as these populations gain a growing share of the US population.

There is wide industry consensus in that one of the main drivers of pet care sales over the last 10 years, especially in the category of pet products, has been spending by the baby-boomer generation who, having watched their children leave the home, have refocused their attention and discretionary spending on their pets. However, this segment of consumers is not infinite; as the US population continues to age, the percentage of the population beyond 70 years old – the average age at which pet ownership becomes less attractive – is estimated to increase by 8% across 2010-2015.

Ongoing initiatives seeking to spread awareness of the health and wellness benefits of pet ownership can help at restraining the impact of the ageing of the pet-indulgent baby-boomer generation. Such campaigns are likely to reach a wide segment of the population as the human benefits of pet ownership span racial and age divides.

Outlook

Despite a 4% contraction in the overall dog and cat population of the US over 2009-2014, the population regained positive growth at a little below 1% in 2012 and grew just above 1% during 2013. A total 4% growth is expected for dog and cat populations over 2014-2019, amounting to a little less than 1% per year. Dog population growth is predicted to be primarily driven by growth in small dog types, expected to show a constant annual rate of growth of 3%. Spending per pet is expected to remain high, as owners, who even in the toughest economic times were reluctant to sacrifice the quality of products they offered to their pets, will now have greater spending flexibility to invest in the wellbeing of their beloved companions.

The urban population of the US will increase by 5% during 2014-2019, whilst the rural population will continue contracting by close to 4% over the period. Population in the 10 largest US cities is estimated to grow at a total just below 5% over the 2015-2020 period, a rate marginally lower than in the prior 5-year period. Urbanisation pressures will continue into the future, thus maintaining high growth for small dog populations and potentially causing improved growth in other pet types. The composition of dog populations by size has been shown to be sensitive to economic conditions and broader US demographic trends. Contingent on stable economic conditions and improved consumer confidence in the overall future of the economy, the relative shares of dog types by size will continue to favour small and large dogs over the 2014-2019 forecast period. This pattern is also preserved through the inertia of dog ownership in the US market, where according to the American Humane Association, close to 40% of pets are acquired through family members and acquaintances, allowing for non-linear growth of breed types once they gain share.

Ageing, with the impending retirement of the baby-boomer generation, is another trend that will impact the pet care industry over the forecast period. The US population above 65 years old is expected to balloon by 17% over the 2014-2019 period, increasing from 45.7 million in 2014 to an expected 53.3 million in 2019. The relatively high wealth of the retiring boomer generation could help maintain high value sales per pet as the last cohorts of these older generations engage into pet ownership. However, as a greater percentage of these generations ages beyond the consensual average age limit of pet ownership (roughly estimated at 70 years old), it remains to be seen whether they will acquire new, likely small, pets or simply exit the market for pet ownership.

Given foreseeable demographic changes, the industry will need to diversify its marketing strategy to appeal to a wider set of consumer segments. The Millennial generation is likely to become a premier target. A knowledgeable, Millennial-savvy marketing strategy conscious of the many ways in which this generation differs from its Generation X predecessors will be crucial to growth in the market. Research shows that some of the ways in which Millennials differentiate themselves from prior generations include the following: they are the generation with the highest educational attainment and largest amounts of college debt burden in American history; they are also the most racially diverse population (with an estimated share of 43% non-whites); they exhibit higher median ages at first marriage than any prior generation; they have low rates of home ownership; they tend to be optimistic about the future; they are value focused, extremely tech-savvy and social media driven.

It is still early to make too many predictions regarding how the multiplicity of these factors will combine to shape pet ownership and spending amongst Millennials, especially as the relative importance given to each of these characteristics in the determination of pet preferences amongst Millennials remains to be seen. It is also worth noting that the lifestyle, diversity and openness of Millennials make them more unconventional than other generations, a factor that could impact their willingness to opt for pets other than cats and dogs.

Whilst the pet superstore channel continues to account for the largest share of total value sales, internet retailing is poised to boom within the forecast period. The viral growth in e-commerce will pose important challenges to traditional bricks-and-mortar pet stores, especially as their own websites compete with the low freight costs of giant companies such as Amazon. As a result, some of these superstore retailers should be expected to focus more and more on in-store specialised pet services such as personalised pet beauty and grooming care.

Social media and the human-pet connection

The pet-related social media activity has boomed in recent years; what started as a trend looking to illustrate pets’ importance as an extension of the family has increasingly become a way to portray pets as an extension of the self (especially amongst younger, selfie-proud generations). Social media have been instrumental in keeping the humanisation of pets alive, helping the industry at creating brand awareness, identification and loyalty.

Pet owners are amongst the most enthusiastic participants in online communities, sharing experiences, product reviews and media regarding their pets. Whilst all consumer packaged goods industries must recognise the importance of social media networks in building their business, pet care marketers must be amongst the most sensitive to the challenge of building a robust social media profile. The most successful brands in the industry have understood the crucial role that social media play in creating the loving-care storyline needed to attract consumers and convince them that they genuinely care for their pets as family members.

As both established and entrepreneurial industry players build a reliable social media presence in response to the wide base of inordinately active and Web-savvy repeat consumers amongst pet owners, transparent, genuine and inclusive online interactions with customers will become much more of a strategic necessity for brands. Furthermore, the importance of social media should not be underestimated in a pet care landscape necessitating both an increased pace of product innovation (to continue to differentiate premium products) and a vehicle to communicate how the human-pet bond positively affects the health and wellbeing of humans at all ages and across all cultural groups. By conveying a credible human-pet bond rhetoric, brands convince owners that they take a stake in the health, livelihood and wellbeing of pets, thus helping to build a relationship of trust and loyalty with consumers.

Current impact

Whilst all consumer packaged goods companies include social media in their marketing mix, pet care companies have the unique advantage of a product that attracts ample consumer engagement and interest. Online tracking of website visits demonstrates that engaging with brands through their presence on Facebook, Twitter or other social media is frequently more common than visiting the marketer’s own brand website, with Facebook profiles garnering the most hits.

Fostering a positive brand image involves a demonstrable commitment to animal welfare. This can be achieved by engaging with enthusiastic pet owner communities through online networks. As the US population’s demographic change proceeds, social media are providing the ideal environment to promote the human-pet bond sentiment needed to further spur pet humanisation. This helps maintain positive growth in the industry despite the decelerated increase in volume sales resulting from shifts in pet preferences.

Pet owner enthusiasts actively wish to share photographs, stories and tips regarding pet ownership; moreover, they are very receptive to promotional content featuring either the human-pet bond or the vigour and happiness of their pet companions. Understanding the many channels through which social media involvement can help boost sales (be it through pet ownership promotion, emotional brand identification or as a commercial platform), key industry players have already taken major steps towards creating a refined social media presence. In June 2013, Nestlé Purina PetCare announced the acquisition of Petfinder – an online pet adoption site owned by Discovery Communications LLC. Nestlé Purina revamped the site with an assortment of pet care-related content including nutrition and animal welfare information for each breed type and age group. With Petfinder representing 307,024 adoptable pets from 13,400 adoption groups, the acquisition helps strengthen Nestle Purina’s brand equity whilst providing a new brand-owned media platform for advertisements.

Outlook

The existing feedback between the increased humanisation of pets and pet-related social media content will continue into the future. Pet humanisation trends will continue to translate into a wider presence and support of pet-related content in the web of social online interactions. At the same time, a well-grounded online social media ethos will continue to allow consumer behaviour trends to catch on and spread across cultural, regional and age boundaries.

Social media will continue to be a source of new consumers, especially as the industry adapts to US demographic change. Between 2013 and 2020, the 20-to-34-year-old demographic will grow by 3%, the 35-to-49-year-old demographic will grow by 2% and the 50-to-64-year-old demographic will grow by 3%. The demographic over 65 years old, however, is expected to experience a total population growth rate of 24% through 2020. This will be key at shaping how all consumer packaged foods manufacturers – including pet food marketers – think about reaching the consumer.

Given the universality of the emotional bond between pets and humans, and thanks to the increasing involvement of baby-boomers with the online world, a part of the same core online media content can be used to breed brand loyalty across age groups. After all, simple, popular social media attention grabbers such as playful puppy pictures break the barriers to communication with most consumer types. However, tailored social media sites responding to specific cultural and generational characteristics, lifestyles and expectations will be crucial.

The importance of engaging with Millennials though social media cannot be underestimated. The Pew Research Center defines Millennials as “digital natives” due to their almost natural rate of technological adoption and usage. More than 80% of Millennials are on Facebook, exhibiting of course the highest rate of online activity across generational groups. A solid social media brand presence with ample opportunity for consumer engagement and tailored content will not only help pet food and product providers to capture the fleeting attention of the tech-savvy, rich content-thirsty Millennial Web user. Most importantly, it will help companies to make sense out of the myriad of factors affecting Millennials’ attitudes towards pet ownership and spending. Investing in a wider and more strategic social media presence will thus guide the innovation needed to maintain the industry’s growth.

The road to maturity: The pet dietary supplements category

Pet dietary supplements have occupied a unique position in the US pet care industry. Despite prior assessments of continuously improving growth, pet dietary supplements sales growth has moderated. Spending on premium pet food products and pharmaceutical healthcare has thus far dwarfed pet dietary supplements spending. The still weak consumer awareness regarding the specific value added of supplements and the proliferation of super-premium, niche pet food brands with holistic health claims could curtail future growth of pet dietary supplements.

Pet dietary supplements will continue to mature as a category, attracting new product development and wider national distribution. Recent (since 2011) focus from pet superstores and independent pet stores on this area has been a major driver of growth, and will continue to be so over the forecast period. Consumer awareness and educational campaigns will be another key factor driving growth into the future all the while a rapid pace of industry consolidation will allow for brand identification and repeated sales.

Current impact

Pet dietary supplements sales grew by 2% in 2013 and are forecast to maintain such growth throughout 2014. Although positive, this growth falls below the levels achieved by pet healthcare and premium dog and cat food. The rise in premium foods with functional ingredients and specific nutraceutical claims, similar to those found in pet dietary supplements, has posed challenges to supplements sales growth.

The already broad awareness of the health benefits associated with special vitamins and product components such as omega 3 fatty acids and antioxidants, inherited by the pet care industry through the deep humanisation of pets, nonetheless has not yet translated to sales penetration of stronger pet supplements. The true challenge resides in overcoming consumer hesitation to purchase stand-alone supplements when the same components are featured as special ingredients of premium pet food products.

Supplement companies have invested into educating consumers and ensuring retailer support for the category. Many supplement and vitamin formulas for animals have taken a functional approach to marketing and labelling, with the name of the vitamin or specific product component (glucosamine, fish oil, antioxidant, probiotic) receiving greater prominence than a large brand. GNC Pets, the first large-scale national partnership between the US pet care retailing leader, PetSmart, and GNC, the leading US supplement manufacturer, provides a key example of a collaboration aimed at attracting health-conscious shoppers by emphasising the role that supplements play in the path towards balanced nutrition for both owners and their pets.

Outlook

Pet dietary supplements growth is expected to remain positive but decelerate over the forecast period, with value sales increasing by 10% at constant 2014 prices over the forecast period (2% CAGR), reaching US$483 million by 2019. This is still a fraction of the US$2.2 billion forecast sales of pet healthcare products in 2019.

An increased merger and acquisition activity is to be expected during the forecast period, which will help to reduce the number of vendors and support recurrent sales and brand equity. In a market that has been characterised by an overabundance of products, insufficient information and ambiguous validity of labelling claims, sales can be boosted through a reduced variety of clearly defined product offerings. It remains to be seen whether the expected consolidation of pet dietary supplements will motivate major branded pet care players to enter the category they have thus far neglected.

Several factors could help set up greater category growth. As supplement manufacturers compete against the larger marketing budgets and greater consumer reach of fortified/functional pet foods, education of consumers will continue to be the defining strategy. Consumer awareness campaigns and labelling emphasising relative content of active ingredients will help to demonstrate supplements’ value beyond premium pet food. Social media will be instrumental in boosting awareness of the specific benefits conferred by pet dietary supplements as well as in engaging with owners to create brand equity.

Fostering greater collaboration with the veterinary clinics channel through endorsements will help reinforce the importance of supplements for pets’ health and encourage sales through proactive consumer behaviour. An increased support for probiotics, natural plant-based antistressors and functional multivitamins will likely contribute to the category’s differentiation from pet healthcare. Retailer education and functional merchandising strategies will be needed to demonstrate supplements’ value beyond premium pet food. Streamlining of brand portfolios, functional product placement and quality-based merchandising will help boost sales by clarifying product offerings to consumers.

Internet retailing will continue to be an expanding channel of distribution thanks to its convenience and its already established position as a major retail channel for human supplements. Building distinct supplement brands that consumers recognise and respect will also require broader channel distribution. New channels could include wider availability in healthfood stores or high-end supermarkets, particularly Whole Foods and its competitors.

Online Retailing

It is clear that e-commerce will reshape how business is conducted across most industries worldwide; however, the extent of its effects across markets and industries is still a matter of speculation. For now, it is just beginning to be seen how deeply the creative spirit of the digital wave will transform the retailing landscape, simultaneously redefining consumers’ preferences and expectations at the same time it responds to the demands of increasingly digitally driven lifestyles.

Current impact

Despite the US high internet penetration rate (defined as the percentage of the population with internet access), positioning the country as the recipient of the second largest share of world internet users, the take-off of online retailing in the US has been relatively weaker when compared to the likes of UK, Japan and Germany.

In the US, e-grocery shopping is still an untapped channel as high delivery costs have undermined the boom of internet retailing for heavy products within this category, including, for example, the vast majority of pet food products. Of the expected US$30.4 billion sales of pet care in the US, internet retailing is expected to account for 6% of total value sales, the majority of which is driven by online sales of pet products. Pet food internet sales are expected to make up only slightly over 1% of value sales. In spite of the strong growth of online pet food sales (their total value share increasing by more than 100% since 2009), online shares of pet food in the US have remained much lower than in markets such as Japan (10.4%), the UK (7.0%) and China (5.3%). Tellingly, online pet food shares are also higher in consumer markets with lower internet penetration rates such as Spain with an e-retailing pet food share of 5.3% and a population share of internet users estimated at 74% (more than 10 percentage points lower than in the US).

Amongst the reasons underlying the relatively low figure in the US are its extremely high level of car ownership (approximately 89% of households had a passenger car in 2013) and its highly developed bricks-and-mortar retail infrastructure, the best in the world, with just over half of value sales of pet food being accounted for by supermarkets and pet superstores.

Cognizant of the tantalising opportunities still available within e-grocery shopping, of which pet care is part, notable e-retailers like Amazon are increasing their investment in the segment. Amazon’s launch of Pantry (and Prime Pantry) is poised to shake the channel by offering new ways of overcoming the weight-constraining delivery costs associated with items such as pet food kibbles.

The internet’s suitability to promote and sell infocentric health and wellness products, the increased humanisation of pets and the pro-natural trend within pet care have influenced the proliferation of e-retailers, bringing thousands of convenient, innovative and healthy pet care products closer to pet lovers. The two pet superstore leaders – PetSmart and PetCo – have already invested considerably in their own online platforms whilst other pet care retailers such as PetFlow.com, PetFoodDirect.com, PetFoodExpress.com, PetSupermarket.com, PetlandDiscounts.com and PetsnMore.com are gathering greater momentum.

Outlook

The online retailing channel for pet care is still ripe with opportunity and growth potential. As in the past, pet products, including pet dietary supplements and pet supplies, will continue to drive the e-retailing share of total value pet care sales. However, given the recent interest in exploiting the possibilities within grocery e-retailing, online pet care value sales are expected to grow by 21% between 2014 and 2019 , amounting to a 4% CAGR at constant 2014 prices.

The growing importance of online retailing will be supported by a number of factors including, primarily, retailers’ investment in the channel to reduce shipping costs, demographic trends such as the participation of Millennials in the market and the positive effects of the spread of pet lovers’ online shopping across related fmcg products.

Manufacturers will be able to benefit from growth in the online retail segment via strategic marketing of pet care products, exploiting storylines that highlight the human-pet connection and allow for the interactive engagement of pet lovers with product offerings and pet-caring companies.

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Overview

Discover the latest market trends and uncover sources of future market growth for the Pet Care industry in USA with research from Euromonitor's team of in-country analysts.

Find hidden opportunities in the most current research data available, understand competitive threats with our detailed market analysis, and plan your corporate strategy with our expert qualitative analysis and growth projections.

If you're in the Pet Care industry in USA, our research will save you time and money while empowering you to make informed, profitable decisions.

When you purchase this report, you also get the data and the content from these category reports in USA for free:

The Pet Care in USA market research report includes:

  • Analysis of key supply-side and demand trends
  • Detailed segmentation of international and local products
  • Historic volumes and values, company and brand market shares
  • Five year forecasts of market trends and market growth
  • Robust and transparent market research methodology, conducted in-country

Our market research reports answer questions such as:

  • What is the market size of Pet Care in USA?
  • What are the major brands in USA?
  • How did the downturn affect pet care spending?
  • Which is the best-performing category within pet care?
  • Which is the fastest-growing pet food manufacturer?
  • How have pet specialists fared in recent years?
  • What are growth prospects for pet care in the next 5 years?

Why buy this report?

  • Gain competitive intelligence about market leaders
  • Track key industry trends, opportunities and threats
  • Inform your marketing, brand, strategy and market development, sales and supply functions

This industry report originates from Passport, our Pet Care market research database.

Table of Contents

Pet Care in the US - Industry Overview

EXECUTIVE SUMMARY

Steady growth through premiumisation

Growth through reverse innovation: The more natural, the better

Increased consolidation and portfolio diversification

The tip of the iceberg of internet retailing

Pet demographics and growth potential

Premium pet foods achieve growth through natural positioning

Downsizing: The changing demographics of US pet care

Social media and the human-pet connection

The road to maturity: The pet dietary supplements category

MARKET INDICATORS

  • Table 1 Pet Populations 2009-2014

MARKET DATA

  • Table 2 Sales of Pet Food by Category: Volume 2009-2014
  • Table 3 Sales of Pet Care by Category: Value 2009-2014
  • Table 4 Sales of Pet Food by Category: % Volume Growth 2009-2014
  • Table 5 Sales of Pet Care by Category: % Value Growth 2009-2014
  • Table 6 NBO Company Shares of Pet Food: % Value 2009-2013
  • Table 7 LBN Brand Shares of Pet Food: % Value 2010-2013
  • Table 8 NBO Company Shares of Dog and Cat Food: % Value 2009-2013
  • Table 9 LBN Brand Shares of Dog and Cat Food: % Value 2010-2013
  • Table 10 Penetration of Private Label in Pet Care by Category: % Value 2009-2013
  • Table 11 Distribution of Pet Care by Format: % Value 2009-2014
  • Table 12 Distribution of Pet Care by Format and Category: % Value 2014
  • Table 13 Distribution of Dog and Cat Food by Format: % Value 2009-2014
  • Table 14 Distribution of Dog and Cat Food by Format and Category: % Value 2014
  • Table 15 Forecast Sales of Pet Food by Category: Volume 2014-2019
  • Table 16 Forecast Sales of Pet Care by Category: Value 2014-2019
  • Table 17 Forecast Sales of Pet Food by Category: % Volume Growth 2014-2019
  • Table 18 Forecast Sales of Pet Care by Category: % Value Growth 2014-2019

DEFINITIONS

SOURCES

  • Summary 1 Research Sources

Pet Care in the US - Company Profiles

Church & Dwight Co Inc in Pet Care (USA)

STRATEGIC DIRECTION

KEY FACTS

  • Summary 2 Church & Dwight Co Inc: Key Facts
  • Summary 3 Church & Dwight Co Inc: Operational Indicators

COMPANY BACKGROUND

PRODUCTION

COMPETITIVE POSITIONING

  • Summary 4 Church & Dwight Co Inc: Competitive Position 2013

Hill's Pet Nutrition Inc in Pet Care (USA)

STRATEGIC DIRECTION

KEY FACTS

  • Summary 5 Hill’s Pet Nutrition Inc: Key Facts

COMPANY BACKGROUND

PRODUCTION

COMPETITIVE POSITIONING

  • Summary 6 Hill’s Pet Nutrition Inc: Competitive Position 2013

Iams Co, The in Pet Care (USA)

STRATEGIC DIRECTION

KEY FACTS

  • Summary 7 The Iams Co: Key Facts

COMPANY BACKGROUND

PRODUCTION

COMPETITIVE POSITIONING

  • Summary 8 The Iams Co: Competitive Position 2013

Nestlé Purina PetCare Co in Pet Care (USA)

STRATEGIC DIRECTION

KEY FACTS

  • Summary 9 Nestlé Purina PetCare Co: Key Facts

COMPANY BACKGROUND

PRODUCTION

COMPETITIVE POSITIONING

  • Summary 10 Nestlé Purina PetCare Co: Competitive Position 2013

PetSmart Inc in Pet Care (USA)

STRATEGIC DIRECTION

KEY FACTS

  • Summary 11 PetSmart Inc: Key Facts
  • Summary 12 PetSmart Inc: Operational Indicators

INTERNET STRATEGY

COMPANY BACKGROUND

PRIVATE LABEL

  • Summary 13 PetSmart Inc: Private Label Portfolio

COMPETITIVE POSITIONING

  • Summary 14 PetSmart Inc: Competitive Position 2013

Sergeant's Pet Care Products Inc in Pet Care (USA)

STRATEGIC DIRECTION

KEY FACTS

  • Summary 15 Sergeant’s Pet Care Products Inc: Key Facts

COMPANY BACKGROUND

PRODUCTION

COMPETITIVE POSITIONING

Cat Food in the US - Category Analysis

HEADLINES

TRENDS

COMPETITIVE LANDSCAPE

PROSPECTS

CATEGORY INDICATORS

  • Table 19 Cat Owning Households: % Analysis 2009-2014
  • Table 20 Cat Population 2009-2014
  • Table 21 Consumption of Cat Food by Prepared vs Non-prepared: % Analysis 2009-2014

CATEGORY DATA

  • Summary 16 Cat Food by Price Band 2014
  • Table 22 Sales of Cat Food by Category: Volume 2009-2014
  • Table 23 Sales of Cat Food by Category: Value 2009-2014
  • Table 24 Sales of Cat Food by Category: % Volume Growth 2009-2014
  • Table 25 Sales of Cat Food by Category: % Value Growth 2009-2014
  • Table 26 Sales of Premium Cat Food by Category: Value 2009-2014
  • Table 27 NBO Company Shares of Cat Food: % Value 2009-2013
  • Table 28 LBN Brand Shares of Cat Food: % Value 2010-2013
  • Table 29 LBN Brand Shares of Cat Treats: % Value 2010-2013
  • Table 30 Forecast Sales of Cat Food by Category: Volume 2014-2019
  • Table 31 Forecast Sales of Cat Food by Category: Value 2014-2019
  • Table 32 Forecast Sales of Cat Food by Category: % Volume Growth 2014-2019
  • Table 33 Forecast Sales of Cat Food by Category: % Value Growth 2014-2019

Dog Food in the US - Category Analysis

HEADLINES

TRENDS

COMPETITIVE LANDSCAPE

PROSPECTS

CATEGORY INDICATORS

  • Table 34 Dog Owning Households: % Analysis 2009-2014
  • Table 35 Dog Population 2009-2014
  • Table 36 Consumption of Dog Food by Prepared vs Non-prepared: % Analysis 2009-2014

CATEGORY DATA

  • Summary 17 Dog Food by Price Band 2014
  • Table 37 Sales of Dog Food by Category: Volume 2009-2014
  • Table 38 Sales of Dog Food by Category: Value 2009-2014
  • Table 39 Sales of Dog Food by Category: % Volume Growth 2009-2014
  • Table 40 Sales of Dog Food by Category: % Value Growth 2009-2014
  • Table 41 Sales of Premium Dog Food by Category: Value 2009-2014
  • Table 42 NBO Company Shares of Dog Food: % Value 2009-2013
  • Table 43 LBN Brand Shares of Dog Food: % Value 2010-2013
  • Table 44 LBN Brand Shares of Dog Treats: % Value 2010-2013
  • Table 45 Forecast Sales of Dog Food by Category: Volume 2014-2019
  • Table 46 Forecast Sales of Dog Food by Category: Value 2014-2019
  • Table 47 Forecast Sales of Dog Food by Category: % Volume Growth 2014-2019
  • Table 48 Forecast Sales of Dog Food by Category: % Value Growth 2014-2019

Other Pet Food in the US - Category Analysis

HEADLINES

TRENDS

COMPETITIVE LANDSCAPE

PROSPECTS

CATEGORY INDICATORS

  • Table 49 Other Pet Population 2009-2014

CATEGORY DATA

  • Table 50 Sales of Other Pet Food by Category: Volume 2009-2014
  • Table 51 Sales of Other Pet Food by Category: Value 2009-2014
  • Table 52 Sales of Other Pet Food by Category: % Volume Growth 2009-2014
  • Table 53 Sales of Other Pet Food by Category: % Value Growth 2009-2014
  • Table 54 LBN Brand Shares of Bird Food: % Value 2010-2013
  • Table 55 LBN Brand Shares of Fish Food: % Value 2010-2013
  • Table 56 Forecast Sales of Other Pet Food by Category: Volume 2014-2019
  • Table 57 Forecast Sales of Other Pet Food by Category: Value 2014-2019
  • Table 58 Forecast Sales of Other Pet Food by Category: % Volume Growth 2014-2019
  • Table 59 Forecast Sales of Other Pet Food by Category: % Value Growth 2014-2019

Pet Products in the US - Category Analysis

HEADLINES

TRENDS

COMPETITIVE LANDSCAPE

PROSPECTS

CATEGORY DATA

  • Table 60 Sales of Pet Products by Category: Value 2009-2014
  • Table 61 Sales of Pet Products by Category: % Value Growth 2009-2014
  • Table 62 Sales of Pet Healthcare by Type: % Value Breakdown 2009-2014
  • Table 63 Forecast Sales of Pet Products by Category: Value 2014-2019
  • Table 64 Forecast Sales of Pet Products by Category: % Value Growth 2014-2019

Segmentation

This market research report includes the following:

  • Pet Care
    • Pet Food
      • Dog and Cat Food
        • Cat Food
          • Cat Treats and Mixers
            • Cat Mixers
            • Cat Treats
          • Dry Cat Food
            • Economy Dry Cat Food
            • Mid-Priced Dry Cat Food
            • Premium Dry Cat Food
              • Therapeutic Dry Cat Food
              • Non-Therapeutic Dry Cat Food
          • Wet Cat Food
            • Economy Wet Cat Food
            • Mid-Priced Wet Cat Food
            • Premium Wet Cat Food
              • Therapeutic Wet Cat Food
              • Non-Therapeutic Wet Cat Food
        • Dog Food
          • Dog Treats and Mixers
            • Dog Mixers
            • Dog Treats
          • Dry Dog Food
            • Economy Dry Dog Food
            • Mid-Priced Dry Dog Food
            • Premium Dry Dog Food
              • Therapeutic Dry Dog Food
              • Non-Therapeutic Dry Dog Food
          • Wet Dog Food
            • Economy Wet Dog Food
            • Mid-Priced Wet Dog Food
            • Premium Wet Dog Food
              • Therapeutic Wet Dog Food
              • Non-Therapeutic Wet Dog Food
      • Dog and Cat Food by Price Platform and Type
        • Dog and Cat Food by Price Platform (Excl Treats and Mixers)
          • Economy Dog and Cat Food
            • Economy Dry Cat Food
            • Economy Dry Dog Food
            • Economy Wet Cat Food
            • Economy Wet Dog Food
          • Mid-Priced Dog and Cat Food
            • Mid-Priced Dry Cat Food
            • Mid-Priced Dry Dog Food
            • Mid-Priced Wet Cat Food
            • Mid-Priced Wet Dog Food
          • Premium Dog and Cat Food
            • Premium Dry Cat Food
              • Therapeutic Dry Cat Food
              • Non-Therapeutic Dry Cat Food
            • Premium Dry Dog Food
              • Therapeutic Dry Dog Food
              • Non-Therapeutic Dry Dog Food
            • Premium Wet Cat Food
              • Therapeutic Wet Cat Food
              • Non-Therapeutic Wet Cat Food
            • Premium Wet Dog Food
              • Therapeutic Wet Dog Food
              • Non-Therapeutic Wet Dog Food
          • Therapeutic Dog and Cat Food
            • Therapeutic Cat Food
              • Therapeutic Dry Cat Food
              • Therapeutic Wet Cat Food
            • Therapeutic Dog Food
              • Therapeutic Dry Dog Food
              • Therapeutic Wet Dog Food
          • Non-Therapeutic Dog and Cat Food
            • Non-Therapeutic Cat Food
              • Non-Therapeutic Dry Cat Food
              • Non-Therapeutic Wet Cat Food
            • Non-Therapeutic Dog Food
              • Non-Therapeutic Dry Dog Food
              • Non-Therapeutic Wet Dog Food
        • Dog and Cat Food by Price Platform (incl Treats and Mixers)
          • Cat Food by Price Platform
            • Cat Treats and Mixers
              • Cat Mixers
              • Cat Treats
            • Economy Cat Food
              • Economy Dry Cat Food
              • Economy Wet Cat Food
            • Mid-Priced Cat Food
              • Mid-Priced Dry Cat Food
              • Mid-Priced Wet Cat Food
            • Premium Cat Food
              • Premium Dry Cat Food
                • Therapeutic Dry Cat Food
                • Non-Therapeutic Dry Cat Food
              • Premium Wet Cat Food
                • Therapeutic Wet Cat Food
                • Non-Therapeutic Wet Cat Food
              • Therapeutic Cat Food
                • Therapeutic Dry Cat Food
                • Therapeutic Wet Cat Food
              • Non-Therapeutic Cat Food
                • Non-Therapeutic Dry Cat Food
                • Non-Therapeutic Wet Cat Food
          • Dog Food by Price Platform
            • Dog Treats and Mixers
              • Dog Mixers
              • Dog Treats
            • Economy Dog Food
              • Economy Dry Dog Food
              • Economy Wet Dog Food
            • Mid-Priced Dog Food
              • Mid-Priced Dry Dog Food
              • Mid-Priced Wet Dog Food
            • Premium Dog Food
              • Premium Dry Dog Food
                • Therapeutic Dry Dog Food
                • Non-Therapeutic Dry Dog Food
              • Premium Wet Dog Food
                • Therapeutic Wet Dog Food
                • Non-Therapeutic Wet Dog Food
              • Therapeutic Dog Food
                • Therapeutic Dry Dog Food
                • Therapeutic Wet Dog Food
              • Non-Therapeutic Dog Food
                • Non-Therapeutic Dry Dog Food
                • Non-Therapeutic Wet Dog Food
        • Dog and Cat Food by Type (Excl Treats and Mixers)
          • Dry Dog and Cat Food
            • Dry Cat Food
              • Economy Dry Cat Food
              • Mid-Priced Dry Cat Food
              • Premium Dry Cat Food
                • Therapeutic Dry Cat Food
                • Non-Therapeutic Dry Cat Food
            • Dry Dog Food
              • Economy Dry Dog Food
              • Mid-Priced Dry Dog Food
              • Premium Dry Dog Food
                • Therapeutic Dry Dog Food
                • Non-Therapeutic Dry Dog Food
          • Wet Dog and Cat Food
            • Wet Cat Food
              • Economy Wet Cat Food
              • Mid-Priced Wet Cat Food
              • Premium Wet Cat Food
                • Therapeutic Wet Cat Food
                • Non-Therapeutic Wet Cat Food
            • Wet Dog Food
              • Economy Wet Dog Food
              • Mid-Priced Wet Dog Food
              • Premium Wet Dog Food
                • Therapeutic Wet Dog Food
                • Non-Therapeutic Wet Dog Food
      • Other Pet Food
        • Bird Food
        • Fish Food
        • Small Mammal/Reptile Food
    • Pet Products
      • Cat Litter
      • Pet Healthcare
      • Pet Dietary Supplements
      • Other Pet Products

Statistics Included

For each category and subcategory you will receive the following data in Excel format:

From Passport

  • Market Sizes
  • Company Shares
  • Brand Shares
  • Distribution
  • Pricing
  • Analysis by Type
  • Number of Vets
  • Pet Ownership
  • Pet Population
  • Prepared Gap
  • Product by Life-Cycle
  • Products by Ingredient
  • Veterinary Clinics for Pets
  • Other Pet Products by Type

Market size details:

  • Retail volume
  • Retail volume % growth
  • Retail volume per capita
  • Retail value retail selling price % growth
  • Retail value retail selling price local currency, USD, EUR, GBP, CHF, JPY
  • Retail value retail selling price per capita local currency, USD, EUR, GBP, CHF, JPY
  • Retail value manufacturer selling price % growth
  • Retail value manufacturer selling price local currency, USD, EUR, GBP, CHF, JPY
  • Retail value manufacturer selling price per capita local currency, USD, EUR, GBP, CHF, JPY

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