Special Treatment
by Jennifer Boncy
August 1, 2012
Retailers have much to gain and little to lose by taking the time and effort to carefully assemble a winning assortment of natural treats.



It was not long ago that health-conscious pet owners looking for all-natural treats for their pets would find only a smattering of options at their local pet specialty retailers. In fact, finding any all-natural treats at all may have proven tricky. After doing a little research, many found themselves making quite a trek to get to the nearest retailer with a respectable assortment of the healthy fare they sought.

The pet product market today, however, is quickly becoming a Mecca for selective, ingredient-conscious pet parents, and the abundant variety of natural treats now available makes it easy for these consumers to find products they feel good about serving to their pets. Meanwhile, retailers have realized that the natural treats category can be a sales powerhouse. Having these products regularly stocked can turn occasional store browsers into frequent, loyal customers.

The more choices the market has to offer, however, the more decisions retailers have to make. Retailers face the hurdle of building an assortment culled from the many contenders vying for precious shelf space. They have to sift through an ever-growing number of options to find that magical mix of products that has the potential to do it all—meet the needs of the store’s customers, generate repeat business and turn a profit.

The upside, however, is that the effort can pay off in a big way.

“The category has great revenue and profit generating potential,” says John Gigliotti, president of Whole Life Pet Products, which makes freeze-dried treats for dogs and cats. “In some cases, there is more profit to be made in a bag of high-quality treats than in a bag of food.”


Starting Point
Any retailer hoping to attract and meet the needs of pet owners with a keen eye for natural products, however, will have to start by ensuring that its stock of “natural” product meets the standards of this discerning customer base. While a manufacturer’s use of the term “natural” does not denote some kind of federally regulated or mandated stamp of approval, it does draw attention to some key characteristics that consumers have come to expect when they buy a natural product.

“When a product is referred to as natural, that usually means it does not contain anything artificial,” says Marco Giannini, CEO of Dogswell, which makes a variety of treats including its latest line, Vitality Jerky Bars. “For example, our treats do not contain any artificial flavors, colors, or preservatives such as BHA/BHT.”

Customers’ expectations of these products are also closely tied to their demands for higher-quality products—a particularly persistent theme in the pet food and treats market ever since the mass pet-food recalls a few years ago. With an eye honed on picking out the best possible treats and food for their pets, pet owners scrutinize ingredient panels thoroughly before purchasing. “It is becoming more common for consumers to hold their pet food to the same standard as their own food,” says Giannini. “Consumers are doing their own research and really care about ingredients.”

Dean Triandafellos, president and CEO of Beefeaters Holding Company, which has built up a substantial selection of treats, says that pet owners today are, in fact, the most savvy yet. “Today we are selling to the most educated owners in the history of the pet industry.”

He adds that retailers are eagerly heeding the call for high-quality, natural products. “Consumers want healthy foods and treats for their pets. As a result, we have seen the retail space allocated to this segment increase year over year,” Triandafellos says.  “In all channels, natural treat/food sections started to emerge within the pet aisles.” 

With so many retailers striving to meet the growing demand for natural treats, manufacturers are providing ample variety. These companies have tapped into the trends that are shaping the overall pet food market—from grain-free fare to functional formulas—and are adeptly applying them to the treat category, adding to the deepening well of options. The grain-free trend in pet food, for example, inspired the introduction of grain-free treats, and like many pet diets on the market today, there are now treats designed and marketed to address particular conditions or concerns, from obesity to joint mobility. Others are formulated for training—these are likely to be low in calories and high in palatability. A mix of manufacturing processes, from fresh and frozen to freeze-dried and jerky, also delivers variety to the table—and the options continue to multiply.

Treat manufacturers are widening the range of proteins they use in their products, and they are increasingly incorporating ingredients that, until recently, were not commonly associated with pet foods, such as fruits and vegetables. As manufacturers have gained momentum in the category, many have peppered their product portfolios with new flavors and varieties. Whole Life, which has been extending its lines over time, is a prime example.
“Speaking of our own brand, we went from three flavors six years ago to 13, including meats, fish, organ meats, cheese and sweet potato, with a ton of new items in the works,” says Gigliotti.


Be Choosy
All this variety, however, is somewhat of a game changer for retailers. The steady stream of new products may add life to the natural treats category, but Dave DeLorenzo, president of Vetscience LLC—makers of Fruitables brand pet food and treats—cautions that, with so many options on the market, retailers have to become more judicious and informed about what they choose to stock.

“There has been a tremendous increase in functional treats and ingredient-focused formulas, including grain free, organic, herbal and dehydrated,” he says. “It creates a tremendous amount of variety for the consumer, but a conundrum for the retailer with limited space. How does the store cope with increasingly specialized products and assortment?”

Some retailers may be tempted to cram their shelves with the broadest selection possible, in the hopes of meeting the needs of everyone who walks in the door. Others, however, may conform to the school of thought that the best strategy is to stick with the familiar. DeLorenzo, on the other hand, advises retailers to re-evaluate their assortments and assess how those products are performing.

 “I think what they need to do is an assortment rationalization, and take a hard look at their sales,” he says. “They may have products that are favorites of their long-time consumers that aren’t pulling their weight in the category.”
An assortment flabby with non-selling dead weight is a waste of valuable shelf space. DeLorenzo suggests pruning the shelves of any slow-moving items and freeing up space for new products and proven sellers. The end result may be increased sales and higher profits.

“What they have to do is go in and look at items that are selling one, two or three percent,” DeLorenzo says. Of course, trimming a slow-moving product from the inventory may seem like a bad idea if it happens to be a favorite of a few long-time customers, but there are ways to keep those pet owners happy.

“Special order [the product],” DeLorenzo says. “Or, if you know Mrs. Smith likes a [particular] product, keep one or two on hand, but don’t shelve it. Try to keep the shelving as clean as possible.”

Another thing that manufacturers suggest that retailers keep in mind is that many customers these days are placing a higher premium on quality than in the past. They often bypass the least expensive item on the shelf in favor of a product they perceive to be of superior quality.

“Don’t sell your customers short by only offering cheaper alternatives,” says Gigliotti. “Indulgent pet parents want the very best and are willing to pay more to support a brand that they trust. Treats connect pet owners to their pets on more levels than food—high-quality treats satisfy a pet parents’ need to keep their pet healthy and safe, while also satisfying their need to feel like they are spoiling their pets.”

Being choosy, however, should not preclude retailers from offering as broad of an assortment as possible after taking into consideration the amount of space available and the profitability of the products.

Triandafellos urges retailers to carry a wide variety of natural treats and to be mindful that the “business is changing everyday.” With manufacturers continually cranking out new varieties, the market offers plenty for retailers that are looking to freshen up their assortment with new products, if the old ones are not generating excitement and sales. Retailers, however, will have to stay on top on the trends to make the most of the category.

“It requires more work at the retail level,” he says, “but the return on that investment can be outstanding.”