Rockville (MD), August 17, 2020 — Throughout much of 2020, the U.S. petindustry has been living up to its recession-resistant reputation, with petfood actually benefiting as a result of short-term pandemic-related buying andstockpiling. Given pet food’s essential nature, the future outlook is mostlypositive as well, with a number of longer-term potential opportunitiesbeginning to come into focus, according to market research firm Packaged Factsin the recent report _ Pet Food in the U.S., 15th Edition_.

Packaged Facts estimates U.S. retail sales of dog and cat food approached $29billion in 2019, up 6% over 2018. Much of the growth in the pet food marketcan be attributed to the rapid acceleration of online sales, driven especiallyby and, whose swift advances have been more thanoffsetting the resultant drag on brick-and-mortar sales. Even with much of theactivity now occurring in mass channels and online, pet food premiumizationalso remains an important market growth driver as pet owners continue to tradeup to products including formerly pet-specialty-exclusive and similar brandsnow available in mass channels, and fresh pet food options includingrefrigerated and freshly prepared on demand.

Looking ahead, Packaged Facts projects that pet food sales will reach nearly$31 billion by the end of 2020, growing 7%, compared with the 6% rate ofgrowth the research firm forecast prior to the coronavirus pandemic. Beyond2020, Packaged Facts expects pet food sales to gradually moderate to 5.5% in2021 and 2022 and to 5.0% in 2023 and 2024.

Beyond the aforementioned market trends, Packaged Facts identifies severalother opportunities it expects will positively impact growth in the U.S. petfood industry in 2020 and beyond. These include, but are not limited to:

Opportunity 1—New Pet Ownership

The brightest note for the pet food industry during the age of coronavirus isthe increase in pet adoptions and ownership that has taken place during thefirst half of 2020 and appears likely to continue throughout the year. Part ofthe reason for this across-the-board spike is a strong component of doublingdown on pets by pet-loving households adding to their menagerie, as well asadditions by households with children. In Packaged Facts’ April/May 2020survey:

  • 12% of adults with children under age 18 at home adopted a pet because of coronavirus compared with 8% of adults overall.

  • 10% of cat owners, and 9% of dog owners reported that they had adopted a pet specifically because of coronavirus.

  • One in four (25%) current pet owners acquired a pet of any type (whether dogs, cats, or other pets such as fish, birds, small animals, or reptiles) in the last 12 months, with 14% acquiring dogs and 12% acquiring cats.
  • 10% of pet owners acquired a pet in the last 3 months—during the initial coronavirus pandemic—with 5% acquiring dogs and 4% acquiring cats.

As of mid-year 2020, Packaged Facts projects a 4% growth in the pet ownershiphousehold base in 2020. This growth will bring the total number of pet-owninghouseholds in the U.S. to nearly 71 million, or 56% of households overall.Aside from premiumization, one of the biggest pet food market drivers isgrowth in the pet population, so the adoption increase strongly suggestscontinued sales gains even with the negative economic impact of the pandemic.Pet food marketers and retailers would do well to target new pet owners andsecure their long-term loyalty from day one through “puppy promotions” and newpet welcome packages.

Opportunity 2—Private Label Pet Products

As the economic fallout of the pandemic continues and millions of pet ownersface the threat of financial duress, a shift to lower-cost private-labelbrands of pet food seems inevitable, and history supports a store-brand bump.Although pet food shoppers demonstrate a high degree of brand loyalty, thesesame consumers are not indifferent to store brands’ advantages. Previously, inthe immediate aftermath of the Great Recession, Packaged Facts found thatconsumers’ heightened value-consciousness gave private label a boost acrossmany categories. Packaged Facts survey results from April/May 2020 supportthis shift, with 47% of pet owners buying lower-cost store brand products morefrequently—and even without the belt-tightening, pet owners are more likelythan not to agree that stores brands are good quality products. In anotherPackaged Facts’ Survey of Pet Owners in 2020, 44% of pet owners agreed thatstore brands are as good quality as national name brands, with only 23%disagreeing. As a result, contract manufacturers of private-label brands, andthe retailers that sell them, will likely benefit in the months and yearsahead.

Opportunity 3—Sourcing as “The Next Natural”

“Natural” has long been one of the top premium pet food appeals. But withnatural formulations now ubiquitous in the pet food market, the days ofrelying on the “natural” claim in and of itself to sell pet food havedwindled, forcing marketers to get creative in finding similarly appealingoptions. Accordingly, claims such as “fresh,” “limited ingredient,” and“superfood” have all gained traction, as have foods featuring exotic andalternative proteins. At the same time, today’s pet owners are not onlylooking for ingredients that support overall health and help manage healthconditions, they are also looking to avoid ingredients they feel are unsafe orthat have been raised/harvested/created in a way that is socially, ethically,or environmentally irresponsible. In response, pet food marketers need topromote sought-after ingredients while being fully transparent, with productwebsites and labelling telling the full story of where the ingredients comefrom and how the products are made. Looking ahead, Packaged Facts expects tosee marketers and retailers of premium pet foods increasingly involved insustainability, animal welfare, and socio-economic system initiatives.

In Packaged Facts’ February/March 2020 Survey of Pet Owners, 48% of pet ownersagree that pet retailers’ participation in welfare and rescue causes plays arole in where they shop for pet products, and the same percentage agree thatthe participation of brands in causes impacts their decision on which productsto purchase. Additionally, 69% of dog and cat owners are concerned about thetreatment of animals raised for use in pet food and treats/chews.Sustainability is of similar importance. Pet food marketers will have to gothe extra mile to satisfy consumers’ growing demand for sustainable businesspractices, product safety, and corporate transparency.

Opportunity 4—Grain-Inclusive and Limited Ingredient Recipes

Pet food opportunities are emerging from the health controversy surroundinggrain-free pet food, which is under investigation for a possible link to petillness and deaths stemming from DCM (canine dilated cardiomyopathy).Marketers of superpremium kibble and wet foods are increasingly coming backaround to grain-inclusive formulations, a trend that began to gain momentum inthe last few months of 2019 and moved into high gear during the first monthsof 2020. Of particular interest are ancient grains such as spelt, quinoa,sorghum, amaranth, quinoa, millet, buckwheat, and chia. Also ripe foradditional development, given the grain-free debacle, are recipes containingplant-based superfood ingredients such as kale, spinach, and blueberries thatcan stand in place of the more “undesirable” grains such as wheat and corn.With the resolution of the FDA investigation of the DCM situation stillpossibly years away, marketers will need to address pet owner concerns andoffer new premium options above and beyond grain-free.

Opportunity 5—Focus on Felines

Historically speaking, the U.S. pet industry has been unapologetically canine-centric. One reason is that dog ownership rates have been increasing while catownership rates have remained flat. Another is that dogs tend to be morelucrative in terms of products and services. As a result, pet productmanufacturers, retailers, and marketers have tended to give cats short shrift,including in the minds of cat owners.

In Packaged Facts’ February/March 2020 Survey of Pet Owners, cat owners wereasked whether they perceive that cats, compared with dogs, are “sometimestreated as second-class.” Across the board of industry players to varyingdegrees, the answer is “yes,” including for pet food/treats, non-foodproducts, pet specialty stores, mass stores, and veterinarians. What would catowners like to see? Informal responses to that question include “betterselection of products (other than different sizes/counts of the same thing),”“more natural things for cats to eat,” “better selection of food for agingcats (or hairball or urinary infection or raw food formulations),” “chewy hardfood,” “healthier canned food,” “better food topper products,” “morenutritious and delicious cat treats,” and “samples of the pet food to bringhome.”

Based on an informal survey of new product introductions and email promotionsover the past few months, Packaged Facts concludes that marketers andretailers are getting the message. More and better products and services forcats, and more marketing attention, stand to encourage cat owners to investmore heavily in the health and happiness of their purr babies and—mostimportant of all—attract more Americans into the feline fold.

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