What’s Feeding Pet Stores?
Sales data collected from more than 11,000 pet specialty stores reveals the pet food trends that are driving success for retailers across the country.
What nutrition products will succeed and which will fail in the years ahead? And how can retailers use that information to decide what to stock in their store?
“If only I had the answer to that, I think I could be rich,” says Holly Morin, owner of The Fuzzy Dog, a pet store in southwestern New Hampshire. “I think every retailer struggles with trying to figure out what to carry, what to stock, what to try, [and] what to weed out when it doesn’t work. It’s almost like you put a blindfold on, you spin yourself around, and you just try to see where you can hit the donkey.”
Despite the fact that she opened her 1,000-square-foot store just four years ago, Morin is no newbie when it comes to pet food. Before moving into retail, she was a territory manager for Primal Pet Food and previously did product demonstrations for WellPet. She has leveraged her experience to assemble a broad selection of pet foods that includes everything from kibble to freeze-dried and frozen-raw options, focusing on brands she trusts enough to feed to her own animals, as well as those brands that specifically support independent retailers. This is an approach that has helped The Fuzzy Dog build a loyal local following and a solid customer base rather quickly.
Regardless of the specific selection strategy a store employs, the nutrition category plays a vital role in the independent pet retail market. If retailers want to hook a loyal customer, they generally need to be that customer’s primary source for pet food. After all, it’s purchasing pet food that will keep those customers coming back for regular visits, during which retailers can attempt to interest shoppers in the other products on the store’s shelves.
Yet, looking at nutrition entirely as a tool for generating repeat visits leaves a lot out of the equation. While that may be its most obvious role, it’s far from its most important one—at least for independent pet retailers.
The comparatively smaller size of these retailers often allows them to be more agile than their larger competitors, making it easier to stay on trend or even slightly ahead of the curve. In addition, their focus on customer service often allows independents to serve as a valuable educational resource for local pet owners in a category that’s the subject of an overwhelming amount of contradictory information online. That, in turn, enables these stores to focus on quality over quantity, offering high-quality diets and sometimes hand-selling them, when necessary.
When done well, these factors have consistently served as a differentiating factor to pull shoppers into independent stores and keep them coming back. But tracking the latest trends is often difficult, especially when a store has only its own data to rely on.
That’s where market research firm GfK can offer solutions. Free for retailers, the company’s POS Tracking system tracks global data on pet food, as well as other pet specialty product categories. Each SKU is coded for 30-plus features, including species, form type, grain-free, life stage, breed/size, protein, bag size, bag type, country claim, UPC and more.
For this article, Pet Business partnered with GfK to get the latest data for the pet food market—which, at the time this article went to print, included data collected up to October 2017—so we could dig into what is currently selling in pet specialty (and what’s not) to shed some light on this complex subject for store owners.
Natural Still Trending
Perhaps one of the best ways to forecast what trends are likely to take off in pet food is to track those that succeed in the human market. The pet humanization trend is officially here to stay, and pet owners continue to seek out products for their pets that match their own diets.
One trend that got its start in exactly that way is natural pet food. Natural food and treat products continue to make up the majority of nutrition product sales in pet specialty—71 percent in 2017, according to GfK.
“This is the leading type of food we sell,” says Roman Versch, president of the PET DEPOT franchise. Natural products are so important to PET DEPOT, in fact, that the chain—which includes several corporately owned locations and 32 franchise locations, including nine animal hospitals—is trademarked as the “Natural Pet Food Headquarters.”
Altogether, the company’s locations carry over 52 brands of premium pet food, with most individual stores selling between 25 and 30 brands. Within that mix are a wide variety of brands—some of which are available from online retailers and big-box stores.
“We find that we’re able to grow brands that are sold online and at big-box if we keep them in stock and we compete on price,” Versch explains. “We don’t have to be cheaper, we just have to be competitive.”
That said, PET DEPOT has also made the decision to bring in brands that have gone out of their way to support independent stores and to work with manufacturers of those brands to offer incentives that are designed to inspire customers to give them a try.
Another pet nutrition trend that grew out of evolving human diets is grain-free, which initially gained traction alongside the paleo and gluten-free trends in the human market. While some nutritionists and retailers debate the value of grain-free foods, no one is arguing against its rising popularity with shoppers.
This has led stores to give grain-free products an ever-growing amount of shelf space. According to GfK data, the percentage of shelf space given to grain-free foods and treats has nearly doubled over the last five years—from 24 percent in 2013 to 41 percent in 2017.
“Grain-free has definitely increased in my store, even in the past four years,” says Morin, noting that the trend continues to grow even in the small, rural community that makes up her customer base.
While GfK’s research shows that the grain-free trend has begun to slow, it remains strong—so strong, in fact, that while overall market growth for pet retail is flat, grain-free product sales outpace the total market growth by eight percentage points and accounted for 42 percent of all pet food sales in 2017.
Raw Diets Revving Up
While the growth of grain-free sales may be slowing a bit, raw diet sales are making significant gains. In the 12 months ending with October 2017, raw diet sales accounted for $195 million, more than doubling from the $64 million the category accounted for in 2013. Frozen raw sales, in particular, grew 10 percent from 2015 to 2016, and another 15.9 percent from 2016 to 2017.
Retailers seem to be recognizing this growth and bringing in more products. In fact, GfK data shows the average number of raw pet food products pet stores carry has grown from 19 items per location to 35 over that same time period, with 69 percent of retailers opting to carry raw food (up from 50 percent in 2013).
Johnna Devereaux is one such retailer. Owner of Fetch RI, in Richmond, R.I., Devereaux is a canine and feline nutritionist who opened her store in June 2014. After growing quickly, she spent two and a half years looking for a larger space before finding her current location, which she moved into in February 2017.
“When I first opened in February at the new location, I didn’t have a freezer,” she says. “Within the first 15 days, I had so much demand that I had to go out and buy three freezers.”
Still, Devereaux had to go even further to keep up with increasing requests from customers. “I went from zero to three [freezers] in 20 days,” she says. “Now they’re full and I’m trying to figure out where I am going to put a fourth, because I have so much demand for it that I need to have the stock.”
Despite this promising growth, however, sales of these products remain a fairly small slice of the bigger pie, with only 1.3 percent of all pet food sales at pet specialty retail in the U.S. falling into this category.
Of course, freeze-dried raw food and treat sales are also growing at an impressive rate. While the pet nutrition category only grew 0.7 percent year over year, this subcategory saw 24.3 percent growth. This was largely driven by the dog category, which grew 26.5 percent, though cat freeze-dried raw diets also showed growth (16 percent).
GfK reports that 78 percent of all pet retailers now stock these products (up from 61 percent just five years ago).
In addition to the significant trends mentioned above, there are several smaller trends happening in the industry that are worth mentioning and monitoring in the months ahead. These include organic pet foods, limited ingredient diets, exotic protein foods and treats, and products that incorporate ancient grains.
Despite their growth in the human-food market, organic products have mostly been slow to launch in the pet industry, though this may be due to a lack of investment on the part of manufacturers rather than a lack of interest on the part of pet owners. Organic products brought in $21 million in 2013, before dropping to $16 million in 2015, just to rebound slightly this past year, hitting $20 million in 2017. It’s yet to be determined whether pet food manufacturers will eventually commit to the additional cost of becoming certified-organic in a significant way and whether that commitment might be enough to relaunch the category.
Limited ingredient diets are also underperforming somewhat in the wider marketplace. According to GfK’s data, sales in this category are actually down slightly year over year, by 1.2 percent. This is in spite of the fact that some individual retailers report success within the category and the continued interest and concern about pet allergies among pet owners.
“[Limited ingredient diets and limited ingredient treats] is the No. 1 demand that I’m seeing in my store,” says Devereaux.
While limited ingredient diet sales may not be quite where some retailers hoped, foods with exotic proteins have seen sales grow steadily over the last three years. Sales nearly doubled from 2015 to 2016 (to $17.1 million annually) and then continued to grow at a respectable 30 percent, to $18 million in 2017. Still, this is a relatively small share of the overall pet food market.
Diets that contain ancient grains make up another category that, while still small, bears watching. Sales of these foods more than doubled since 2015—from $9 million to $19 million in 2017. However, as mentioned, these products represent a very small percentage of sales at just .5 percent of all “with-grain” pet food sales.
Of course, like Devereaux, an individual store may find its shoppers falling outside these broader trends—one store may see raw as its most profitable product line, while another might find it can’t stock exotic proteins fast enough.
So, while it’s important that retailers keep their fingers on the pulse of the industry as a whole, it’s even more critical that they stay tuned into the products that make up the lifeblood of their individual store. Sometimes, when it comes to stocking products, it’s the simple approach that pays off the most.
“Most pet stores like myself have a large inventory value in pet food,” says Versch. “You want to be careful bringing in new items, because if you buy them, [that] doesn’t mean they automatically start selling. We tend to wait until we’re hearing about it. We have customers come in and ask, ‘Do you have this brand? Do you have that brand?’”
Devereaux agrees. “I kind of have this golden rule,” she says. “My employees laugh at me about [it], but so far it hasn’t really failed me. If someone comes in and asks for an item and we don’t have it, I make a mental note. If a [second] person comes in to ask for it and we still don’t have it, I sure as heck am not going to let a third person come in and ask for it and not have it.” PB