Although pet food sales are growing, some major manufacturers are not celebrating.
Spending on pet food surpassed $32 billion this year but not all major companies in the market are feeling victorious. This is mainly because 2 main trends seem to be dictating the pet food industry as of late.
First, pet owners—largely millennials—consider their pets to be family members and are willing to go the extra mile to make sure their furry friends are well pampered. Added to this is a shift towards foods with organic components and those that are free from artificial flavors and ingredients. In short, run-of-the-mill kibble is no longer satisfactory for Fido and Fluffy.
While these trends bode well for the many niche products that have been introduced over recent years, mainstream pet manufacturers that once reigned supreme are starting to feel the effects.
Big Investments Show Signs of Strain
Three of the largest pet food manufacturers made large investments to grow their business over the past few years, but they may not be panning out exactly as expected. For example, in April, General Mills made headlines when it purchased Blue Buffalo for $8 million. Although General Mills’ pet-food sales rose in the last quarter, it did not match the growth Blue Buffalo experienced in the years leading up to the sale.
In fact, stocks for General Mills, J.M. Smucker, and Nestle have all dropped recently. The blame for this is not solely on pet food sales, however. Some of the companies’ food products for humans are struggling as well. “The challenges you see across both industries are actually quite similar,” Chris Mondzelewski, vice president of customer development at Mars Inc.’s North America petcare business, told the Wall Street Journal.
Smaller Pets May Mean Smaller Profits
Interestingly, research has found that the size of pets has had an impact on the industry as well. As many as 50% of dog owners in 2016 had dogs that were 25 lbs or less. And even though dogs are still the most popular pet in United States households, the number of specialty and exotic pets is creeping ever upward. Some analysts believe that the growing popularity of pets that are smaller in stature may correspond to fewer potential pet food sales since they consume smaller portions.
What’s Next?
It is clear that a shift in the pet food industry is underway, but many manufacturers may be questioning how far should they venture into the realm of holistic diets and natural ingredients. After all, human grade ingredients come with higher price tags that some pet owners are not willing to spend. General Mills acquisition of Blue Buffalo and J.M. Smucker’s purchase of the Rachael Ray line Nutrish exemplify, however, that even the largest companies are dipping their toes in healthier waters.
As the market continues to grow and the types of pets people bring into their homes expands it will be up to manufacturers and retailers—both new and established—to rework their growth strategies based on emerging trends. An example of this, for 2019, may be Petco’s decision to remove items with artificial ingredients from its stores and online marketplace. Initially, the retailer stands to lose more than $100 million in annual sales from the new business model, but will the move eventually prove to be lucrative? Will others follow suit? Stay tuned.
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