Pricing Innovation


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Innovative pet food concepts have long played a critical role in helping independent pet specialty stores compete against grocery and mass retailers by providing them with an opportunity to display an advanced understanding of pet nutrition and offer customers products that deliver a host of benefits. But a new trend within some of the most important pet food categories is adding a new and somewhat surprising dimension to pet stores' competitive arsenal—price.

According to GfK, a market research firm that specializes in the pet specialty channel, pricing in several key pet food categories has increased at a slower than average rate. GfK's data, which is collected from pet stores across the country, reveals that while the average per-pound price of pet diets increased by 5.3 percent between 2013-2014, the price of grain-free pet foods increased by four percent, gluten-free diets by two percent, limited-ingredient diets by 3.4 percent and freeze-dried foods by just 1.4 percent. In fact, the only categories in which price increases trended higher than the average were refrigerated/frozen diets (11 percent) and, to a lesser extent, natural foods (5.6 percent).

 

The disparity in price increases becomes even more pronounced when viewed over a longer period. According to GfK, during the period between 2011-2014, the average per-pound price of pet food increased by 23 percent, while that of grain-free diets increased by 15 percent and limited-ingredient diets increased 6.7 percent. Meanwhile, price increases in the natural pet food category (23 percent) were on par with the average, and prices in freeze-dried and gluten-free categories actually decreased during that period. Refrigerated/frozen diets were the only ones for which price increases outpaced the average, at 30 percent.

When analyzing these pricing trends, Maria Lange, senior product manager for GfK, cautions that the relative size of each pet food category must be taken into account. Pricing in categories that represent just a small portion of pet food sales and have relatively few major players will inherantly be more volatile, as each new product entry or price change will have a bigger impact.

This pricing trend will be important for specialty retailers in their ongoing battle for market share in the pet care category. As you wil read in next month's cover story, while pet stores have traditionally avoided competing on price with grocery and mass retailers, in today's economic climate, it would be a big mistake to ignore the impact that pricing has on pet owners' shopping patterns.

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