Pet Care Products: Pampered Pooches

It could make for some embarrassing merchandising moments, but retailers might be forgiven for confusing some of today's pet food products with those intended for human consumption.

Many of the trends seen in the wider grocery market over the past few years – a move to healthier and organic eating, exotic treats, and premium foodstuffs – have made their mark on the pet food sector too. While the biggest culinary excitement their grandparents could look forward to was the flavour of tinned meat on the menu that day, today's Fidos and Fluffs could well be enjoying bottled water, soup, ice lollies, gravy substitute or desserts – just some of the recent specialist lines launched for cats and dogs.

Companies behind some of the biggest pet food brands are replicating dishes which pet owners – or as some even call them, “pet parents” – would eat themselves. Gastro-pub style recipes in cans of Nestlé PurinaWinalot British Favourites include beef stew and lamb hotpot, while its pouches of Gourmet Pearl Ocean Delicacies offer salmon and shrimp for the more sophisticated cat. Then there's the pasta and vegetables in Masterfoods' Pedigree Better by Nature! pouches, while its cans of Pedigree Simply Select Cuts are said to: “look and taste good enough” for pet owners to eat.

At the same time, Britain's preoccupation with health and diet is feeding through to the pet market. There is an emergence of organic, low in sugar and functional products, whether probiotic, hypo allergenic, heart healthy, life-stage specific or enriched with Omega-3.

According to Mintel, half the dog and a fifth of the cat population is overweight, so a number of lower-fat options have arrived on the market. These include Nestlé Purina's Bakers Complete Weight Control dry food for dogs.

Pet owners are becoming “increasingly aware of what they feed their pet in the same way that they are with their own diet”, says Helen Booth, a director of the firm which makes the hypoallergenic Feelwell's Probiotic Treats for dogs. Stocked by Waitrose and Pets at Home, they're soon to be joined by a cat option.

Hand in hand with this is a greater concern over the fish and meat content in pet food, says Ian Oliver, managing director of IOCS, the importer of Feline Fayre. Until recently the product was on an exclusive deal with Asda, but Nisa-Today's and Pets at Home are now stocking the range, which has a 70% fish content in its 400g cans (rrp 49p) and 60% in its standard 85g pouches (rrp 28p). Oliver is optimistic that by widening distribution, Feline Fayre will become the number three premium brand behind Sheba and Gourmet in the next couple of years. “The breadth and price of our range is second to none,” he says.

The trend for convenience products in grocery is being replicated in pet food with the much documented success of premium-priced pouches – particularly for cats – and complete dry food for dogs. Supermarkets can now, in fact, expect to get at least 50% of cat food sales from pouches and 25% of dog food business from complete dry, says Masterfoods.

Premium and functional have certainly become the watchwords of the growing £2bn-plus prepared pet food market, says Musgrave Budgens Londis buyer Steve Uglow. “It is becoming increasingly sophisticated with products tailored for animals that lead different lifestyles [such as Masterfoods' Perfect Fit cat food, with an active and in-home option], as well as their age and type. The category continues to grow with the increase in added value products and premiumisation,” he says.

All of this is giving supermarket buyers the confidence to encroach on niche brands, once the preserve of specialist pet stores. It is also leading them to diversify out of standard meals, with larger offerings of snacks and products which until recently were not associated with animals. Pet Project, for example, has developed a soup for dogs, Procter & Gamble has Iams Savory Sauces, there is bottled water for cats and dogs from Special Waters SAS, desserts for dogs from Town & Country Petfoods and chocolate chip dog cookies wrapped in upmarket gift-type packaging with a ribbon from Armitage Brothers.

Some products would seem to demand an even bigger change in the way we think about pet food, such as the Just Desserts range from Town & Country Petfoods, although the market's initial response to that line has been positive. Currently, Sainsbury's, Tesco, Makro and the independent pet trade are listing the 59p cans which come in Apple & Cranberry Crumble and Summer Fruit Pudding, at 100 calories a time. And so far sales have met overall targets since the UK launch last December , says marketing director Peter Parkinson.

Do many customers find it strange feeding their dog puddings which contain grains and real fruit – such as apple, cranberries and strawberries? “The marketing emphasis in this first year is on creating awareness and gaining acceptability for this unique and unusual concept,” says Parkinson. Serving dogs sweet tasting puddings is not necessarily against nature. Wild dogs naturally seek out fruits to satisfy a sweet tooth and the concept has a proven track record in Canada and USA, where pet owners are urged to replace titbits, rather than the main meal, with puddings, says Town & Country.

It has been functional lines – such as Pedigree's tooth cleaning Dentastix and recently launched JointCare meaty treats – which have dominated snacks. And Masterfoods predicts that this, together with a growth in natural rawhide dog treats, will continue.

Organic pet food – which represents less than 1% of the current market – is another area of potential growth, according to Mark Johnson, general sales manager at Pero (Foods), which supplies organic complete dry dog and cat food and dog treats. Johnson left Procter & Gamble last October to kickstart the re-packaged range, which at the time was stocked solely by Waitrose in the multiple sector. Since then, Budgens and, this month, Pets at Home have come on board and Johnson is optimistic that others will follow, attracted by the brand's authorisation from the Organic Farmers & Growers certification body and the potential for organic pet food growth.

The company carried out a survey in January which showed that one in four pet owners would try organic pet food if it was sold at the same price as conventional premium products – the price position which Pero recommends. “If only 10% of these went on to feed organic continually it would give a market of £40m,” says Johnson. Pero (Foods) plans to capitalise on the expected growth in organic pet food by developing a wet food dog tray for January next year – which will compete with the Butcher's Choice Organic foil trays launched by Butcher's Pet Care in March this year as the first mainstream organic dog food brand. Pero also plans to bring out a puppy and kitten version of its complete dry food this October and it is investigating launching an organic cat food in a pouch in early 2008.

[u]Feeding the dragon[/u]

The British are warming to cold-blooded pets, with reptiles challenging the ownership supremacy of dogs (at 6.8 million in the UK) and cats (at over 9m). For these “on your own terms” pets can be kept in flats, by people who are out at work all day or have allergies. There are in fact more than five million reptiles kept as pets in the UK – led by bearded dragons, leopard geckos, corn snakes and tortoises – and the interesting development for supermarkets is that in the next few years dried artificial food is likely to become an increasingly important part of their diet.

While it would be unlikely that supermarkets would want to put live crickets, locusts and mealworms or dead mice on their shelves, this artificial food would open up the exotic pet market to them, says Chris Newman, chairman of the Federation of British Herpetologists. “I would be surprised if the likes of Tesco is not selling bearded dragon food by the end of the decade,” says Newman. Pet food manufacturers such as Rolf C Hagen have already developed artificial food for reptiles, including bearded dragons, which are the “single biggest growth area” of reptilian pets in the UK, says Newman. “These little lizards from Australia grow to 18in and behave more like a dog than a reptile. They like people, are inquisitive and can be taken out of their vivarium to sit on the sofa with you when you get home from work.”

Expanding into reptile food would be a natural progression following on from supermarkets’ move into food for wild birds, aquarium fish and small mammals. Within small mammals, food for rabbits represents the biggest opportunity – worth an estimated £33m last year – followed by guinea pigs at £12m and rodents at £8m, according to the Pet Food Manufacturers’ Association.

Musgrave Budgens Londis has identified small animal food as a developing sector for this year, with a programme of regular promotions and features planned, says its petfood buyer Steve Uglow. “We’ve seen significant growth with consumers now tending to pick these products up as part of their weekly shop,” he says. “We are looking to develop the area by illustrating to our retailers the great sales possibility.”

But many supermarkets are missing out on a one-stop shop opportunity by offering bedding for these smaller animals. Nisa-Today’s, for instance, buys in hay and straw centrally – a move which is worthwhile because of its high margins and ability to gain loyal customers.

As supermarkets continue to encroach on pet specialists’ business they will need to brush up in two areas, says Masterfoods: providing more information about pet care and encouraging shoppers to browse. Supermarkets could do this with pick and mix offers on dog snacks and treats and by changing the year-round offering. While many supermarkets introduce stockings and novelties for pets at Christmas, they often do not take advantage of other seasonal opportunities.

This summer, for example, Pets at Home is pushing products which help to avoid animals suffering from the heat – Special Waters bottled water, ice lollies, dog paddling pools and ice coolers for cages and aquariums are examples.

Meanwhile, parasite control can also become more of an issue in the warmer weather.

Buyer's view

Graham Chadwick, Asda's petcare buying manager

Everything is going premium, particularly in cat food. You just have to look at the recent launches, for example, Whiskas Oh so…, Sheba pouch, Gourmet Solitaire, Felix Roasted and Gourmet Pearl are all aimed at trading customers up. This trend is now coming through into dog food, with products such as Pedigree Better by Nature!, Winalot Roasted and Butcher's Superior.

Pouches are performing exceptionally well at the moment – particularly cat pouches where we are seeing strong double digit growth year-to-date. However, pouches will never replace canned entirely. While canned cat food is declining right now, there will always be the loyal can users and this category is still and will continue to be hugely important for Asda.

Complete dry cat food is struggling right now and super premium dry cat (Iams, Purina One and Perfect Fit) is declining quite seriously. It's a different story on complete dry dog food – this area continues to grow very strongly in Asda with Bakers, Wagg and own-label driving this.

Our customers love their pets and really enjoy pampering them and keeping them healthy. Healthcare, toys, accessories and cat litter are all performing well in Asda. Bob Martin, Good Boy/Girl, Catsan and own-label are all seeing good growth.

We are enjoying fantastic growth across small mammal, fish and bird food and we doubled our range in this area in 2006, which is really paying dividends, with Wagg and Aquarian performing very well. But we have no plans to get into exotic animal food at the moment. We see treats, accessories, healthcare and toys becoming increasingly important to deliver growth.

Own-label is very important to us and all areas are performing very well at the moment, especially dog treats, dry complete dog, canned cat and cat pouches.

Buyer's view

Steve Uglow, petfood buyer, MBL

The pet food category is becoming increasingly more sophisticated with products tailored for animals that lead different lifestyles as well as their age and type. The category continues to grow with the increase in added value products and premiumisation.

We've seen continued growth in pet food pouches. Single serve pouches are performing extremely well in the cat sector, but less so in the dog sector. I think perhaps the sizing of pouches is more appropriate for cats, whereas complete is the best seller in the dog sector as a more convenient feeding option for dogs.

Cat pouches may begin to out sell cans, but I think it's unlikely that cans will disappear from the market all together. Pouches are still very much a premium product, usually twice as expensive as the cans and there will still be consumers who would rather purchase the cans. The challenge in-store is to continue to grow the range of pouches whilst maintaining an appropriate can selection.

I think the complete dry for dogs has become so popular due to the continuous product development – the options just get better and better across the brands. Big developments over the last year have been in semi-moist options like Bakers Meaty Bites.

A developing sector this year is small animal food. An area previously reserved for pet stores, we've seen significant growth with consumers now tending to pick these products up as part of their weekly shop. We've seen the Wagg brand performing well in Londis and the Supa Select brand in Budgens. We are looking to develop the area by illustrating to our retailers the great sales opportunity with regular promotions and features. It's still a small sector, but I think we can expect to see even further growth in the future.

I think the future of the category as a whole will see further premiumisation and the loss of slower sellers and economy brands as customers begin to trade up within the category. I also think life-stage products will remain popular and continue to develop – people are taking greater care of their pets and as the animals grow older their diet needs to change to fit their developing needs, which is where innovative new products like those with “joint aid” properties will continue to grow.

Consumers tend to be very brand loyal when it comes to their pets. Our best sellers at the moment are Felix, Gourmet and Bakers. I think this is because, at the moment, their promotional offer and range is right for our customers. We're also in the process of listing organic dog and cat completes and dog treats from Pero which could be an excellent point of difference for our independent retailers, along with our own label range, which we are continually developing. Following an upgrade and re-launch of the range last year we developed our own semi-moist complete for dog with has been performing very well in store.

SOURCE: Checkout August 2007