The Point of Origins
As consumers increasingly look for products that are made and sourced safely, retailers must have a good understanding of which products meet the demands driving the Made in the USA trend.
Made in the USA is still a favorite product feature among consumers, especially among pet owners who equate the phrase with safety. That is good news for retailers that hope to attract and maintain customers who do not mind paying a premium for these items. More good news is that industry experts say this premium is no longer very high, as the cost differential between products made in China and those made in the USA is getting smaller.
The tricky part is figuring out how much of a product must be manufactured domestically to satisfy educated, worried pet parents. If an ingredient is sourced from another country, can the manufacturer still put a “Made in USA” label or a tiny American flag icon on the packaging? Can the retailer still promote the product as safe and domestically made?
Retailers and manufacturers are willing to grapple with these and other questions, because they know pet parents do indeed want to purchase these high-margin products.
Michael Levy, founder and co-owner of Oakland, Calif.-based Pet Food Express, says his 54-store pet store chain has been hearing requests for Made in the USA products for more than five years. “When a customer says, I want to avoid stuff from China, or I want all products Made in the USA, they are asking, ‘Is this safe for my pet?’” he says. “Really that is what it comes down to.”
More recently, the question has evolved into, “Where are the ingredients sourced?”
Levy says some high-quality brands of pet foods and treats are made in, or contain ingredients, from other countries. Pet Food Express’ store employees are educated about these foods, so they can answer questions from customers. “There are fabulous ingredients and quality control coming out of other countries,” he says. “To say just Made in the USA kind of dumbs it down somewhat.”
Other countries do offer safe ingredients, says Jim Castleberry, director of merchandising for Pet Food Express. He explains that rules in New Zealand are so strict that the meats are in essence organic. Cattle from Brazil are grass fed.
It is important to offer foods with ingredients from countries and regions with strict food-related regulations, Castleberry says, and it helps that the retailer knows its suppliers well. “We have an advantage because we have direct relationships with manufacturers,” he says. “An independent has to rely on a distributor to have that conversation.”
Doing Your Due Diligence
Some independents say they initiate their own conversations with manufacturers. That helps them navigate the wide assortment of products.
“We try very carefully not to buy from China,” says Delta Farrington, owner of the online retailer Eco Dogs And Cats. Farrington says she occasionally calls manufacturers to ask them about ingredients and other details, such as the material used in a leash. “Normally, they are honest. You have to call or email, and just take that a step further. You have to be diligent.”
Another way to communicate with manufacturers, says Farrington, is to meet them at trade shows. “There’s a lot of products out there [that are made in the USA],” she says. “I was surprised.”
Rebecca Case, employee supervisor for Diane’s Discount Pet Supplies and Adoption Center in Pottstown, Pa., agrees that it is difficult to find out whether an ingredient was imported because many labels do not provide these details. “Having the source on there is great, but it’s rare,” she says.
Case adds that customers who are concerned about whether ingredients come from the U.S. are usually asking about treats. “The major recalls have been more treats rather than foods, so the focus is more on treats,” she says.
Sometimes people ask for Made in the USA toys. One customer adopted a dog at the center and insisted the pup have toys that were made in the USA. “We have some,” says Case. “We’d like to increase that, but it is hard to find. Treats and food you can absolutely find.”
Employees get involved too, sometimes taking a photo of a food they find at other stores. Another source for ideas is distributor reps, and Diane’s Discount Pet Supplies limits its suppliers to small, reputable companies. “We are not into big mass-market companies,” Case says. “We like the smaller, more high-quality companies.”
Retailers expect manufacturers to provide information about the products, says Jonathan Asher, executive vice president, director of account management for Fort Lee, N.J.-based Perception Research Services International (PRS). “They are demanding the manufacturers bring them the data,” he says. “We see that across every category, every retailer, every manufacturer.”
That is because some consumers are educated about ingredients, so they will seek, for example, lamb from New Zealand. “If there is a higher quality perception, that sort of benefit might override the idea of Made in the USA,” says Asher. “You have to figure out on a case-by-case basis what is the prioritization, and can they coexist.”
Asher says if a food contains lamb from New Zealand, and the manufacturing process occurs in the U.S., the consumer will likely trust the safety of the product. In 2012, PRS conducted a survey that found that 80 percent of shoppers say they notice “Made in the USA” labels on products, and 76 percent said they would be more likely to purchase a product after seeing the Made in the USA claim.
Asher points out that two years ago people tended to cite the economy as a good reason to buy Made in the USA products. Now, people point to safety and quality.
The PRS survey also asked people about “Made in China” claims. Fifty-seven percent said they are less likely to purchase products that are made in China, because of safety and quality concerns. Any positive associations with products made in China were related to a lower price.
Today, that is not much of a positive association, says Carol Frank, managing director and pet industry specialist at SDR Ventures, Inc., an investment bank in Greenwood Village, Colo. “For consumables, any cost savings from being made overseas is outweighed by the benefit of how people perceive having a ‘Made in the USA’ symbol,” she says. “When it comes to hard goods, it’s a different story, but when it comes to putting something in a dog or a cat’s mouth, there is very little trust and confidence put in products made outside the U.S. or Canada.”
In fact, Petco announced in May that it would no longer sell China-made dog and cat treats, as of the end of this year. In its press release, the 1,300-unit chain listed brands that feature Made in the USA products, and also noted that Petco does carry safe treats from New Zealand, Australia and South America. PetSmart followed with its own announcement, saying it would stop selling China-made treats in 2015.
Frank predicts that consumer demand for this feature will increase in the near future. “In the next five to 10 years, I do believe it is going to be the norm,” she says. “People will require consumables to be made in USA. I throw Canada in there as well.”
She adds that consumers are not as willing to pay a premium for Made in the USA toys and other hard goods as they are with consumables, but that may change. Frank points out that the exchange rate with China continues to be less favorable, while shipping and labor costs are increasing. Also, automation is becoming easier, further decreasing the cost to manufacture in the U.S. Therefore the cost differential between made in China and made in the USA has shrunk, she says, and that could stimulate more manufacturing in the U.S.
The Future of the Movement
Sourcing will become a bigger topic too for consumers. Maria Lange, senior product manager on market research firm GfK’s retail and technology team, says the market and consumer information firm does not currently measure attitudes about where Made in the USA product ingredients are sourced, but that might be an area for future research.
“We do not differentiate between source, and packaged and manufactured, but it is definitely something we have been in discussion about,” she says. “We know it’s important.”
The New York City-based GfK does have information about claims on where products are made. In August 2014, 39 percent of products launched in the pet foods and treats category had a “Made in the USA” label. Also, 44 percent of pet food and treat items had some type of country-of-origin claim, so 56 percent did not make any claim about where the product was made.
Lange says GfK just started tracking this, so the firm does not know whether this is an increase. Still, manufacturers do seem eager to put the Made in the USA claim on packaging. “It’s a way for showing quality,” she says. “They are assuring the customer they are buying a quality product.”
She predicts that the next trend will be to highlight regional sourcing and manufacturing—a sort of pet version of the locavore trend. “Manufacturers are trying to market to very specific regional customer,” says Lange. “I think it’s definitely becoming part of the premiumization.”
Levy, from Pet Food Express, agrees that there will be sustained consumer interest in product sourcing and manufacturing. “It will continue,” he says. “How much more is it going to ramp up? That remains to be seen. It’s on most people’s radars in pet specialty shops.”