Is the pet food market experiencing a powershift?

As the top three pet food manufacturers lose market share, we ask are independent manufacturers the future of the industry? Casey Cooper-Fiske investigates Hill’s, Purina and Royal Canin are the big three household names for any pet owner. Founded in Missouri in 1894, Purina is the oldest of the three, and it took up the Ralston Purina name in 1902 after originally trading under the Robinson-Danforth Commission Company, before eventually succumbing to the financial mite of food manufacturing giants Nestlé to become Nestlé Purina PetCare. The new pup on the block as far as the big three are concerned is Royal Canin, founded in France in 1968 by a French vet called Jean Cathary who was convinced pets were facing skin and coat conditions due to a poor diet. In the middle lays Hill’s. The Kansas-founded company specialises in foods for cats and dogs with specific diseases, in 1976 Hill’s moved under the Colgate-Palmolive umbrella of companies. Despite the history, financial muscle, wide availability and instant brand recognition the majors are losing ground to independent manufacturers. A report by Swiss investment bank UBS found that combined independent retailers held the largest share of the pet food market of 33.7 percent, the second largest percentage belonged to Purina who had a share of 23.9 percent. UBS analyst Pinar Ergun said upon the report’s release that the market shift toward independent retailers was down to “strong appetite for premium offerings” and a “willingness to pay-up for proven health benefits”. The research also listed the main reasons pet owners choose a certain type of food, with the cost of the product only coming third, behind vet recommendations and the health benefits of the food. At the time Ergun accused the big three of “not adapting fast enough to consumers’ changing needs” saying that this left “significant market share opportunity for challenger brands”. So do these independent brands have the staying power to hold market share for a significant time? What are they doing that the major manufacturers cannot? Jack Walker of independent manufacturer Scrumbles says there is a “growing gap in the quality between independent and mass pet food brands” adding that the independents are “offering great products with more choice” and “responding more quickly to changing consumer needs”. Walker and wife Aneisha Soobroyen set up the company after they were unable to find yummy, good food that didn’t cost the earth and said at the time, that a lot of other pet food options contained “nonsense like artificial preservatives, colours or flavours and unnecessary nasties like salt, sugar and pea protein”. Walker says that he feels consumers “want to trust the brands they feed to their cats and dogs” adding “in recent years big brands have failed to do their bit to maintain the trust they once had”. Walker’s comments carry significant weight in light of recent incidents which have seen Mars Petcare recall several products in Australia after over 70 dogs contracted the fatal megaesophagus disease. Mars Petcare paid for the euthanasia costs for the dogs and also for replacement dogs for those affected. Sainsbury’s was also forced to recall a large proportion of its pet food products after they were found to contain “higher than specified levels of vitamin D”. The high vitamin levels can cause a vast build up of calcium in the blood of animals, causing problems such as frequently urinating and vomiting. Only this month evidence of a roach infestation was found at a US Mars Petcare production plant by Food and Drug Administration investigators. Walker attributes the shift away from the major brands to “growing transparency, awareness and conscious consumerism” pointing out he felt the big manufacturers “favour their profit margins over the welfare of their consumers”. Walker says that shoppers are noticing that they’re being neglected by the major manufacturers and are “voting with their wallets”. He says that in the modern pet food market “anyone with the inclination to do so can quickly work out who makes which brands” and says that it is very easy for consumers to find out the nutritional value of food and what its made from. The Scrumbles founder also makes a point of saying: “We don’t answer to shareholders and that means we don’t have to compromise,” adding: “We choose ingredients for our recipes because they are good for cats and dogs, and they taste great, not because of how much they cost.” Kevin Glynn founder of independent pet food manufacturer and subscription service Butternut Box echoes Walker’s comments, saying “buying mass-produced cans of food off the shelf isn’t always going to be the best option” particularly for animals with “sensitive stomachs or allergies”. Glynn references the “clean-eating” trend in both human and pet food as the reason for a consumer shift towards independent products, adding that his company along with many other newcomers to the market are offering “something modern and fresh”. Glynn’s comments further echo Walker’s that transparency and honesty about what goes into their food is what sets the company apart from the mass produced products of the majors. In relation to the quality of food produced by majors, one independent retailer Scampers, claims that food produced by Mars and Nestle will only “contain four percent of the named meat in them”. Scampers says this means a ‘chicken’ meal may only contain four percent chicken the rest, it says, will be made up of other meats and derivatives with their origin unclear. The retailer describes derivatives as “leftovers” and says that they are not the type of ingredient that will keep pets healthy. It appears that in the case of Scampers the independent is directly battling the majors as it has set up its Where’s The Meat? scheme to highlight lower quality ingredients in pet food produced by major manufacturers. The scheme also saw Scampers fling the major brands from its shelves leaving its stock completely made up of food made by independent manufacturers. Scampers echoed Walker’s statement that major manufacturers had become obsessed with profit over the health of their consumers’ dogs. The price of the food is not of high importance to Walker, just like many other pet food manufacturers, and with price only the third most important factor for consumers when buying pet food, why should it be? While major manufacturers look to make their food affordable it appears they are sacrificing the quality ingredients which consumers hold as their number one concern. Despite saying price is not Walker’s number one concern, he does point out that “it shouldn’t only be pets that are lucky enough to come from wealthy homes that get good nutrition”, stating that Scrumbles makes its price as low as it can. Glynn says that Butternut Box cuts out middleman markups to ensure it keeps its cost as low too. He says that the company is always working to “see how we can reduce the cost to customers so in the future” pointing out that one cost reduction method they will be trialing is “delivering more food at once for a reduced cost”. Pet Gazette spoke to the Pet Food Manufacturers Association (PFMA) deputy CEO Nicole Paley, to ask whether independent retailers can hold market share for a significant period of time. Paley said that PFMA’s market research has shown “the most dynamic areas of growth in both the cat and dog food markets, have been in specialist, niche products, including those with health benefits”, however she warned that “the field of pet nutrition moves at a fast pace and the offering has changed dramatically over the years”. Paley says that independent companies are recognising that the pet food landscape is changing and taking note that pet food is becoming more influenced by the dining habits of humans. To the contrary of the claims of independent manufacturers that major companies are only interested in profit, Paley says that larger companies have been instrumental in “furthering the science behind animal nutrition”, which she says benefits smaller companies. Smaller companies can adapt quickly to trends according to Paley, meaning that when they see a gap in the market, they can respond quicker than larger companies. Addressing concerns regarding the quality of pet food made by major brands, Paley said that manufacturers are “all subject to the same legislation to ensure standards, safety and that the correct nutrition is delivered”. Paley continued to insist that current consumer trends are down to the pet food market paralleling the “human food arena” saying that consumers currently think “what is good for me, is also good for my pet,” but she said it was not only independent manufacturers who were addressing these trends adding “companies small and large are responding to these industry trends”. It would seem that the adaptability of the independents is working in their favour for now and possibly, the sector will start to see a levelling out of the playing field if not a complete power shift.