In a USD184 billion global pet care industry, 27% or USD50 billion worth of retail sales come from the premium segment*. Driving this segment is the underlying sentiment of providing the best for one’s pet. The human-pet bond has been evolving over the years. From simply being viewed as guard animals to now being considered as family members, companion pets have come a long way in their relationship with humans. The pandemic further improved this bond. While pets helped in combating loneliness and isolation, pet owners started paying more attention to the health, wellness and wellbeing of their furry, feathery or even scaly companions. The pet humanisation trend coupled with increased attention on one’s pet is supporting demand for premium offerings in the pet care industry, even in inflationary times.
Premiumisation despite inflation
Inflation levels across all regions grew from 2020 through to 2022 with no exceptions for pet food.
At a global level, the average unit price of dog and cat food grew by 7% in 2021 followed by 5% in 2022
Source: Euromonitor International
To manage margins, businesses responded by increasing prices, reducing volumes, modifying recipes and revising portfolios. While pet care was not immune to the impact of inflationary pressures, the industry did show resilience to it, with the premium segment continuing to show relative strength in volume consumption.
Today, the state of play of inflation remains varied across the world. Consumers challenged by price sensitivity are resorting to alternatives such as trading down, sourcing pet food from food banks or, in the worst-case scenarios, relinquishing their pets. However, consumers with the appropriate purchasing power continue to opt for premium offerings for their pets. Such diversity in spending patterns highlights the polarising impact that inflation has had on pet food.
In the short term, as inflationary pressures linger, similar dynamics are expected to continue. However, in the long term, the premium price tier is expected to be one of the faster growing tiers in volume terms and fastest growing in value terms.
Communicating value behind the premium price tag
A key element to drive premiumisation is to understand the different value propositions that support the premium price tag and communicate the same to consumers. Within pet care, nutrition, formats and experiences present opportunities to drive value. Many players have already deployed premiumisation strategies through these value propositions.
Nutrition
Consumer focus on pet nutrition extends from an enhanced focus on their own health and wellness. As people pay more attention to their own dietary choices and nutritional and calorific intake, they are extending this attention to their pets’ diets as well.
Developments in the premium pet nutrition space are targeting different aspects of nutrition
Source: Euromonitor International
Health claims, for instance, help to communicate the different functional, nutritional and health benefits of a product. Life stage nutrition, on other hand, brings in a level of differentiation by addressing nutritional needs specific to the life stage of the pet. Understanding nuances of nutrition beyond calorific intake can support development of innovative and curated offerings.
Formats
Formats in pet food are also witnessing a transformation as traditional kibble is generally perceived to be highly processed. Wet food formats, eg fresh, frozen, gently cooked etc, are gaining traction among pet parents. These formats usually come at a higher price point to their kibble counterparts.
These new formats are being supported by innovative business models such as subscription boxes. As an example, meal kits company Hello Fresh launched its premium pet food brand, Pets Table, in the US in 2023. It offers human-grade and air-dried recipes for dogs according to their calorific needs. Quality, convenience and customisation are some of the value appeals supporting the premium positioning while also enhancing the consumer experience.
Experiences
Experiences play a pivotal role in the premiumisation of pet care. Brands across the industry (and beyond) have been developing spaces and offerings that tap into elevating the experiential aspect of the human-pet relationship.
Cat treats, for instance, are being designed to offer a more intimate feeding experience. Retail offline offers immense potential in elevating the channel experience by providing spaces, activities and events that can be enjoyed by humans together with their pets. Lastly, even players outside the pet care industry are launching limited edition treats, such as the Pup’kin Spice Doggie Doughnuts range by Krispy Kreme in the US. This season-inspired offering creates a way for humans to include their pets in their experiences.
As shared experiences help create bonding moments, the human-pet bond should serve as an integral component informing the development of premium experiential offerings.
For further insights on premiumisation in pet care, read our report Premiumisation in Pet Care: Inflation and Beyond.
*Premium segment accounts for premium cat and dog food