As the nation’s pets outnumber the people, red meat producers seeopportunities.
A ustralia’s red meat industry is looking at raising its game to capturethe wet dog food market it lost to multinational pet food manufacturers. Theopportunity is certainly there as the number of pets eclipses the number ofpeople , creating an AU$13 billion (roughly US$8.97 billion; 30% of which waspet food) market in 2019 for pet products and services.
A 2019 survey of pets and people commissioned by Animal Medicines Australia(AMA, an organization representing leaders of the animal health industry inAustralia) found 28.5 million pets co-existing with 25.5 million people inAustralia. The survey also established that 5.9 million, or roughly two-thirdsof Australian households (61%) have a pet. That would be three in fivehouseholds, which is more than the pet-perhousehold rate in the United States(57%) and in the United Kingdom (40%), according to Newgate Research, whichdid the report for AMA.
Feeding all these pets — led by 5.1 million dogs and 3.8 million cats — costsAustralians over AU$3.9 billion (roughly US$2.69 billion) in 2019, the surveyshowed. Dog food accounts for 57% of all pet food spending, valued at anestimated AU$2.3 billion (roughly US$1.59 billion). Cats’ pet food spendingshare is 32%, at AU$1.3 billion (roughly US$897 million).
Australians’ other pets include millions of fish, birds, small mammals,reptiles and farm animals like horses, goats and even alpacas.
Meaty pet food opportunities
The hefty pet food bill has convinced Australian red meat producers thatthere’s a high-value business opportunity waiting for them in the petindustry. At stake is Australia’s domestic pet food market, expected to growat 4.6% annually to US$2.8 billion through 2023. To get into the pet foodmarket more profitably and compete with commercial pet food manufacturers,members of the industry organization Meat and Livestock Australia (MLA) saidthey must play on their core strength, which is meat — fresh and raw.
“Pet food isn’t a new category of use for red meat, but it’s underrated andundervalued,” said Michael Lee, MLA group manager of science and innovation.“We wanted to search for high-value opportunities for red meat within the petfood market segment.”
In scoping the field, the MLA funded a 2019 study to see how its members canbest get into the pet food market using real ingredients that are free ofpreservatives and synthetics. Initial findings based on consumer trends showan opportunity to move from standard by-products with low margins to value-added products that fetch better prices. They also found strong demand for rawand fresh pet food products.
MLA tapped a business growth adviser firm to look at high-value opportunityspaces in pet food that red meat producers can fill in. It came back with areport informing MLA that the best opportunity “is in the wet dog food market,given the high global consumer interest in raw and fresh pet food worldwide.”
The report also noted a trend that follows the “wild” diet of pets based onsingle-protein sources and raw meat as key ingredients, especially for dogfood. But the study found little opportunity for Australian beef and lamb incat food, which is usually made from chicken or fish. And while there are low-value meat by-products that can be turned into pet treats, the report ratedtreats as a nonviable opportunity for red meat producers due to anoversaturated market.
“Now’s the time to reimagine pet food to benefit Australian producers,” saidLee. “Products that don’t qualify as food-grade products for human consumptioncan be used to make pet food products at increased value and in premiumformats that the pet owner relates to.”
Demand for premium raw and fresh pet food is currently coming from only 1–3%of Australia’s pet food market, but MLA can potentially help bring it to 10%if they can fine tune red meat designed for pets, the report said.
“This means understanding the changing consumer and seeing opportunities wherewe can win with Australian red meat … There’s untapped potential in pet foodcategories within Australia and internationally — we need to now look atproduct and business model innovations to succeed,” said Lee.
Instead of losing profit margin by selling by-products to pet foodmanufacturers, abattoirs can valueadd themselves by working directly withAustralian start-up companies like Lyka, which are trailblazing the premiumraw and fresh pet food subscription model. In theory, the study suggested thatabattoirs can also increase the Australian premium dog food market size by 5%and increase their own profit margins by producing and selling value-added rawand fresh beef and lamb dog food products.
For maximum profitability no part of an animal should be wasted, so butcherscould upcycle low-value meat and bone parts and turn them into healthy andtasty protein dog treats. Lee said animal hides that were previously wastedare now ingredients for high-protein supplements for older dogs witharthritis.
“Finding and capitalizing on opportunities such as this is a step towardbringing increased market share to Australian red meat producers,” said Lee.“It is also a step toward new value chains to grow red meat demand.”
It is worth noting, though, that in Australia pet food is essentially self-regulated with voluntary standards developed by the Australian VeterinaryAssociation, the Royal Society for the Prevention of Cruelty to Animals(RSPCA), the Pet Food Industry Association of Australia and StandardsAustralia.
Meanwhile, the MLA also has its sights on the international pet food market,which they said is projected to be worth US$128.4 billion by 2024. Theorganization hopes the premium Australian red meat brand could also beleveraged for export markets and help them bring home the bacon.
Pet market trends
Australia’s pet population may explode even further in the next year as nearly3 million households (31% of all households in the country) are consideringgetting a new or additional pets.
Sixty-one percent of Australian households currently have a pet and 686,000 ofthem are thinking of acquiring another one or more within the year, the AMAsurvey showed. Meanwhile, if housing or other lifestyle factors were not anissue, an estimated 2.3 million pet-free households would also get a pet.
Despite the abundance of pet food choices already available, the AMA surveysaid that a quarter of dog owners and one in 10 cat owners feed their petsleftover table food. Also, a small group of dog owners (16%) and cat owners(4%) in the survey, usually women from lower-income households, said they makefood for their pets at home. Only one in five dog owners surveyed visit thebutcher shop for pet food.
Source: ALMA BUELVA Petfood Industry.com
Image: Bigstock
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