Premiumization and pet humanization are slowly impacting the value growth
in Australasia’s pet food market.
With general stagnation and a limited competitive landscape, Australasia’s petfood market has managed to remain outside the global spotlight, but severalrecent trends in the region point toward potential changes in the market.Australasia’s market trends may also be important reflectors of overall trendsin the global pet food market, such as pet humanization.
Petfood Industry listed Australia as a stagnant or declining pet food marketin 2017, predicting that “value-growth will come from upgrading consumersbecause volume-growth is stagnant or may even be declining a little in view ofthe growing population of smaller-sized dogs.” In Australia, value growth hasindeed increased while value growth declines, according to a Pet food OutlookReport from Statistica (see Figure 1). However, slight fluxes in Australasia’spet food market invite a more complex examination of the market’s trends andprospects.
Western trends impacting Australasia pet food market
New Zealand and Australia emerge as major players in the Australasia region,and both countries have witnessed steady value growth alongside pethumanization and growing concern for pet health. “The importance of theAustralian market can be understood in terms of the emerging western trendsand lifestyle choices,” according to an October 2017 report from MordorIntelligence. The report examines the Australia pet food market and forecaststhe 2017–2022 period. The country’s pet food market was valued at US$1,489.7million in 2014 and is predicted to grow at a CAGR of 1.9 percent to matureinto a US$1,670.4 million market (see Figure 2). According to the report, thismakes Australia the second-largest market after Japan in the Asia-Pacificregion.
Figure 1: Total revenue (or value growth) should continue to rise inAustralia into 2021
Figure 2: The percent CAGR (Compound Annual Growth Rate) of Australia’s petfood market has been reducing since 2016, although pet food market revenuecontinues to rise.
Australasia’s market remains in line with American and Western European trendsof premiumization and pet humanization, but these trends are emerging muchmore slowly in Australasia for a number of reasons. Most importantly, theAustralian market’s economy segment has remained stronger because of thecountry’s growing middle class, which has generally supported the economicpricing segment, according to Mordor Intelligence. Supermarkets are theleading outlets for economy pet food, which is sold in bulk and dominated bylarger brands, such as Mars and Nestlé Purina, making it more difficult forsmaller, premium brands to penetrate the market.
Pet superstores in New Zealand, however, are making efforts to improve theirdistribution of smaller companies’ products, according to a EuromonitorInternational report on pet products in New Zealand in May 2017. Slowly,smaller premium companies’ products are making their way onto supermarketshelves and into the homes of more health-conscious owners of smaller andolder pets.
Top pet food companies in Australasia
1 VIP Petfoods
- Revenue (2016): US$300,000,000
- Brands: Fussy Cat, Gourmet Fresh, Chunkers, Frosty Paws, Supreme Fresh, Natures Goodness, Gourmet, Mega Bite, Meat Lovers, Brownie
- Pet food markets served: Western Europe, Asia Pacific, North America
The Australian Pet Food Market report from Mordor Intelligence lists VIPPetfoods as a major player in the Australia market alongside Nestlé Purina andMars. After ten years of steady growth, VIP labels itself one of the world’slargest producers of fresh chilled pet food. As the demand for premium petfood products has gradually risen in Australia, VIP has expanded its productrange to include premium wet and dry pet food for both dogs and cats, as wellas a range of premium pet treats.
VIP launched its Fussy Cat Grain-Free Cat Kibble in October 2011 and won aconsumer award for Product of the Year in 2012. Following this success, thecompany launched another premium brand, Natures Goodness Grain-Free DogKibble, a year later in October 2012. The product was a finalist for theProduct of the Year award in 2013. VIP’s success can be attributed not only toits adaptability to market trends but also its international presence.
VIP expanded into the US market when the company launched its products in HEBgrocery stores in Texas, aided by Quadrant Private Equity, which acquiredV.I.P. Petfoods in 2015. VIP’s acquisition of foreign brands has alsocontributed to the company’s financial growth. VIP acquired UK-based dog foodproducer Billy + Margot in October 2016.
A Chinese agribusiness company, New Hope Group Co., along with other Asianinvestors, acquired VIP in November 2017. Since then, VIP has continued toexpand, acquiring Consolidated Manufacturing Enterprises from its owners,Indigenous Business Australia and Ridley Agriproducts, in January 2017.
2 Australian Pet Brands
- Pet food markets served: Australia, Asia Pacific, Italy, Germany, Bahrain
Australian Pet Brands is a private-label subsidiary of VIP Petfoods. Thecompany maintains six production plants across Australia and is a majorsupplier to the private-label pet food industry in the Australasia region.Although the company exports their pet food to European markets, its strengthlies in its ability to access locally grown and fresh protein and grainproducts.
Consumer preferences in Australia have been shifting gradually toward premiumand superpremium products. In response to this trend, Australian Pet Brandsmaintains “a long-term research and development program to deliver innovativepremium and superpremium pet food products that ensure clients can create andmaintain a competitive advantage in the market,” according to the company’swebsite. To remain competitive, the company is also focusing on investing inautomated manufacturing products and processes that will deliver volumefulfillment on a variety of premium products, most importantly fresh chilledpet food.
3 Ziwi Pets
- Revenue (2016): US$19,500,000
- Brands: ZiwiPeak
- Pet food markets served: Latin America, North America, Middle East, Western Europe, Eastern Europe, Asia Pacific, Africa
As a competitive player in the New Zealand pet food market, the ZiwiPeak brandhas utilized its locally sourced products to penetrate the global market. Thecompany now sells its products in more than 25 countries, but all Ziwi’s meatand seafood products are sourced and manufactured in New Zealand. Thecompany’s focus is air-dried raw pet food, wet pet food and treats for dogsand cats.
A Euromonitor International report on pet products in New Zealand released inMay 2017 predicted that New Zealand’s total pet population would declineslightly in 2017, but the report also predicted that all pet products wouldcontinue to develop positively due to the continued pet humanization trend.This trend has prompted companies such as Ziwi to upgrade their premiumproducts for an aging pet population and increasingly health-conscious petowners.
4 K9 Natural Foods
- Revenue (2016): US$17,533,000
- Brands: K9Natural, FelineNatural
- Pet food markets served: North America, Western Europe, Asia Pacific
As value growth exceeds volume growth in Australasia, one premium producttrend has risen to the top: dog and cat food mixers products, also known as“toppers” or “sprinkles.” K9 Natural Foods was one of the top two brands inthe dog food mixers category in 2016. These toppers are freeze-dried andmarketed not only as nutritional supplements but also as a way of enticingpicky eaters, and they are a “prominent beneficiaries of the pet humanizationtrend,” according to a Dog Food in New Zealand report from EuromonitorInternational in May 2017. The report also forecasted that the “toppers” andpremiumization trends would continue in the coming years, as New Zealandersfavor smaller breeds of dogs, and the overall pet population is aging. Ingeneral, this shift in the pet population may provide a better market forpremium products.
The company also broadened its distribution channels in 2016 when K9 NaturalToppers were launched in supermarkets in addition to the pet superstore chainPetStock.
Growth of domestic brands in Australasia
Although major foreign brands continue to dominate the Australasia pet foodmarket, domestic pet food companies are growing. In 2016, Mars was the leadingbrand of dog food in New Zealand with an overall value share of 20 percent,though its share was down slightly from 2015, according to EuromonitorInternational’s Dog Food in New Zealand report. The slight downshift isnotable, as it may be in part due to the premiumization trend in bothAustralia and New Zealand. Domestic companies in this region, such as VIPPetfoods, may find their competitive niche in the premium market, as some arebetter positioned to locally source their products.
The pet humanization and premiumization trend in Australasia may point to arise in domestic brands. According to Euromonitor International, value growthof pet food in both Australia and New Zealand will continue to grow, whilevolume terms gradually decline (see Figure 3).
Figure 3: Percent volume growth of Australia’s pet food market is decreasingdue to changing market trends and consumer preference for premium products.
By Anna Girgenti Pet Food Industry.com
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