Trend Watch 2011
While the pet industry, in general, seems poised to have a great year, there are five product segments that are expected to be particularly lucrative in 2011.
While many retail segments are struggling to survive in the current economic climate, the pet industry continues to be one of the few that’s still growing. Rockville, Md.-based market research firm Packaged Facts reports that the pet market totaled $52.69 billion in retail sales in 2009 (up five percent versus 2008), and overall industry sales are expected to hit as much as $59.28 billion by the end of 2011.
The pet retail industry’s apparent sustainability has largely been driven by the continued importance of the family pet in U.S. households, as well as the many new products and services being introduced to better cater to these companion animals. “Much has been written about the trend toward the humanization of the pet,” notes Justin Jones, president of the Grapevine, Texas-based Espree Animal Products, a manufacturer of natural grooming and animal care products for dogs, cats and horses. “The desire for quality, healthy products has trickled to the pet market, as pet owners view their animals to be members of the family needing the best care.”
The trend toward quality products that offer real value to both pet and owner is evident in every aisle of the pet store, from food to health products to grooming services. “Quality has become more important than cost, as consumers seek out the safest and healthiest products,” says Bette Schubert, co-founder of Bravo!, LLC, a Vernon, Conn.-based manufacturer of raw diets and all-natural treats, bones and chews. “Consumers are looking for quality ingredients, not just a package that says ‘quality, all-natural,’ but one that actually backs up the claim.”
This consumer demand is fueling several major trends in the pet industry, including the growing popularity of raw diets, grain-free products, health care, natural and organic products, and services such as grooming, daycare and dog walking. Each of these trends has already had a significant impact on the pet industry, but retailers should expect to see their momentum grow exponentially in 2011 and beyond.
Natural & Organic Products
The shocking pet food recall of 2007, which was history’s largest, contributed greatly to the trend toward natural and organic products that began years earlier. A host of pet manufacturing companies, ranging from the familiar to the upstart, have provided a steady stream of natural, organic and eco-friendly products for pet retailers of all sizes. These natural products include a wide range of items, such as food, treats, dietary supplements, flea control, medicine, shampoos and bedding materials.
A year after the pet food recall, natural or holistic pet food sales reached $15 billion annually. Since then, pet retail industry research shows that the market segment is growing at a healthy 20-percent annual clip.
Sources report some interesting developments within this market segment. For example, they say that pet owners are becoming savvier than ever in evaluating product labels and ingredients panels. Bambi Mohr, sales manager for Waterbury, Vt.-based Canus Vermont, reveals that natural products consumers, who comprise her company’s primary market, are 85 percent female and educated, read labels, and will pay a premium to give themselves and their family healthy options. “The natural products market is thriving because it is not a trend; it’s a lifestyle choice that’s here to stay and grow,” Mohr said.
According to Jim Rich, president of Tustin, Calif.-based Sittin Pretty Natural Dog Bakery, a manufacturer of healthy baked snack treats for dogs, natural-minded pet owners are also looking closely at where product ingredients are sourced.
“Our products are baked in California using all U.S. ingredients,” he says, noting that the company’s largest selling product, Turkey Sticks, is made with California-grown free-range, organic turkey. “There is strong demand for natural health care pet products made in the U.S. We’re finding that American dog care professionals [major influencers of pet owner purchases] have a negative perception of Chinese ingredients.”
While the U.S. natural dog chews market has grown phenomenally in recent years (retail sales exceed $1 billion annually), Roger Wilson, pet product manager for the Springdale, Ark.-based Tyson Foods Renewable Products, concedes that product quality in this market segment is still uneven.
“There is a trend toward more natural pet products, but not all natural pet products are of the same quality,” Wilson says. “That is why we believe our company, as sellers of the True Chews product, has a responsibility to find the right solution when it comes to chews. This responsibility goes for our retail partners as well.”
As consumers continue to educate themselves about the ingredients found in pet foods, a big market for grain-free products has emerged. Many consumers are taking to heart the warnings of some veterinarians that grain-based pet foods are harder for pets to digest, are likely to cause allergies and can exacerbate such conditions as itching, paw licking and dull coats.
Another driver of this trend toward grain-free nutrition for pets is the growing problem of obesity among dogs and cats. “Recent data suggests that 48 percent of all dogs and 54 percent of all cats in North America are obese,” says Laura Marseglia, brand manager at Tewksbury, Mass.-based WellPet. “So our canine and feline recipes are designed to provide high protein, lower carbohydrate nutrition without the excess calories that can lead to weight gain and all the associated problems.”
To accomplish this, all of WellPet’s recipes include lean meats, whole grains, fruits, vegetables, but no wheat, corn, soy or artificial flavors, colors or preservatives.
Ultimately, the appeal that grain-free products hold for pet owners lies in the health benefits that they provide. “The grain-free diet market is definitely thriving, largely because it is a market where pet parents can discover dietary solutions that improve the lives of their pets,” says Jill Gainer, brand director for St. Louis-based Nature’s Variety, which bills itself as the only pet company offering three forms of grain-free diets–raw, wet and dry.
The grain-free trend has even trickled into the pet treats segment. Gainer says that Nature’s Variety is getting a great response to its grain-free biscuits. “This shows that there is truly a need for a high-quality, protein-rich treat in the grain-free category,” she explains.
Even with all of the sales growth that pet specialty retailers have experienced in the grain-free segment, companies like WellPet and Nature’s Variety are not resting on their laurels when it comes to ensuring the continued success of these products. “Wellness is dedicated to working with our pet specialty retail partners to help them educate pet parents about the value of grain-free nutrition,” Marseglia says. “We encourage our retail partners to educate and inform consumers about utilizing our in store materials–signage, shelf talkers and brochures–to help them.”
A diet emphasizing raw meat and fresh, uncooked produce, such as vegetables, is another rising trend among pet parents. “The market for raw diets continues to show growth above that of the pet food sector in general,” says Sanford Goodman, CEO of Stella and Chewy’s, the Muskego, Wis.-based manufacturer of frozen and freeze-dried raw diets and treats. “In fact, based on discussions we’ve had within our channel, we believe our company is growing faster than the sector as a whole.”
Bravo!’s Schubert says that as the trend toward raw food grows, manufacturers are starting to offer more complete lines of raw food products. “We are also seeing new manufacturers coming into this category,” she adds.
According to raw food marketers, putting a pet on this type of diet can provide several advantages, including greater stamina levels, better teeth, glossier coats, fewer ear infections and improved weight control. However, some veterinarians are still wary about the trend, warning that a raw food diet may not be properly balanced and that it has the potential to be contaminated with harmful bacteria such as salmonella or e-coli.
Goodman says that his company and others in the market sector are addressing veterinarian concerns. He points out that Stella and Chewy’s uses a hydrostatic high-pressure process that kills such bacteria without altering properties to raw feeding. To address concerns about raw diets not being complete and balanced, manufacturers like Bravo! and Stella and Chewy’s are supplementing them with vitamins and minerals.
Pet Health Care
According to Packaged Facts’ Pet Market Outlook 2010-2011, pet owners spent close to $20 billion on veterinary services in 2010. That figure represents an increase of nearly nine percent over 2009, and veterinary expenses are expected to go up another nine percent next year. While some of this growth can be attributed to an expanding and aging pet population, increases in veterinary care costs are also a significant factor.
Considering the expense involved, it is no surprise that pet owners are now taking a much more proactive approach to their pets’ health. “There is a grass roots movement driven by the consumer’s desire to maintain a healthy lifestyle for themselves and their pets by preventing illnesses without traditional invasive medical care,” says Pamela K. Bosco, president of the Bartlett, Ill.-based Pet King Brands. “Products pertaining to body health, such as food, skin and oral care, are of primary interest because they discourage illnesses when they are scientifically formulated and include quality ingredients.” Pet King Brands develops dermatology and oral care products utilizing the patented ZP3 Enzyme System.
As in the other product segments mentioned above, the key to success for health care products lies in delivering value to pet owners. Pet health care companies believe the long-term prospects for the sector are good because the solutions are getting better and better. However, they also note that the category could use better oversight, especially when it comes to defining terms such as “natural.”
“In the pet health care market, products are not regulated in any meaningful way, so there are no set guidelines on what is meant by natural,” Jones says. “Manufacturers and retailers are trying to educate consumers, but there is still a lot of misinformation out there.”
Business Week magazine has described the pet services sector as “one of the fastest growing in the pet industry.” In fact, according to Packaged Facts’ Pet Market Outlook 2010-2011, more than $6 billion was spent on non-medical pet services (grooming, dog walking, boarding, training, etc.) in 2010. And industry experts say that this trend shows no signs of slowing.
“We are confident that the pet services sector will continue to grow in 2011,” says Rich, noting that three of the pet care centers Sittin Pretty Natural Dog Bakery operates in Southern California are growing rapidly.
This is not to say that all pet services were immune to the effects of the recent recession. Susan Briggs, president of the Pet Care Services Association, notes that many of her associations’ members that offer boarding saw a decrease in “pet nights” over the past two years–a trend that finally reversed course in fall 2009.
“We have also seen an increasing trend in provision of add-on services while pets are boarding or in daycare that mirror activities human children would do in camp,” says Briggs. “Swim sessions, nature hikes, art projects and special party events are found at many of our members’ pet resorts. We are optimistic that these trends will continue to grow in 2011.”
As pet retailers gear up for 2011, there is ample reason to be optimistic, given the strength of these trends and the continued economic health of the pet retail industry, despite the recession. Many industry experts are confident that these segments will be a permanent part of the pet retail industry landscape, and pet specialty retailers are perfectly positioned to take full advantage.
“Pet retail employees are key influencers when it comes to customers seeking appropriate products for their pets,” Jones says. “So to best guide the customer, employees must have a solid knowledge of the key features and benefits of products.”
Ron Chepesiuk is a freelance business writer based in Rock Hill S.C.