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The State of the Global Pet Food Industry: Challenges and Opportunities

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Euromonitor Pet Care Analyst Wiebke Schoon presented this deck at Global Pets Forum in Warsaw in January 2017.

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The State of the Global Pet Food Industry: Challenges and Opportunities

  1. 1. THE STATE OF THE GLOBAL PET CARE INDUSTRY CHALLENGES AND OPPORTUNITIES WIEBKE SCHOON GLOBAL PETS FORUM JANUARY 2017 – WARSAW
  2. 2. © Euromonitor International 2 Euromonitor International – strategic global market intelligence ABOUT EUROMONITOR INTERNATIONAL
  3. 3. © Euromonitor International 3 USD104 bn 2.6% 2.4% Global value sales 2016 2011-2016 CAGR 2016-2021 CAGR Pet care globally THE STATE OF THE PET CARE INDUSTRY – CHALLENGES AND OPPORTUNITIES Values in USD, constant 2016 prices, fixed 2016 exchange rate. Values for 2016 are estimated
  4. 4. KEY DRIVERS RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES Pet specialists Grocery retailing Internet retailing OUTLOOK AND KEY TAKEAWAYS
  5. 5. © Euromonitor International 5 Largest markets continue to perform well KEY DRIVERS 0 1 2 3 4 5 6 0 5 10 15 20 25 30 35 40 45 50 North America Western Europe Latin America Asia Pacific Eastern Europe Australasia Middle East and Africa %CAGR2011-2016 USDbn 2016 Pet Care Value Sales by Region and CAGR 2011-2016 Constant 2016 prices, fixed 2016 exchange rate
  6. 6. © Euromonitor International 6 0 0.5 1 1.5 2 2.5 3 3.5 0 5 10 15 20 25 30 35 40 Economy Mid-Priced Premium %CAGR2016-2021 USDbnDog and Cat Food by Price Platform 2016/2021 and CAGR 2016-2021 2016 value sales 2021 value sales 2016-21 CAGR % Premium dog and cat food set to see the strongest growth KEY DRIVERS Constant 2016 prices, fixed 2016 exchange rate
  7. 7. © Euromonitor International 7  Humanisation as a key premiumisation strategy KEY DRIVERS • Pet humanisation leads to a convergence of trends between human food and pet food • The “natural” trend is spilling over from health and wellness human food • Free-from, Paleo, superfoods and freshness are all human food trends trends being mirrored in pet food
  8. 8. KEY DRIVERS RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES Pet specialists Grocery retailing Internet retailing OUTLOOK AND KEY TAKEAWAYS
  9. 9. © Euromonitor International 9 Grocery retailers lead globally, ahead of specialists RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES Grocery retailers 40% Pet superstores 17% Pet shops 14% Internet retailing 6% Veterinary clinics 7% Others 16% Global Pet Care Value Sales by Channel 2016 USD104 bn Total value sales 2016 fixed exchange rate
  10. 10. © Euromonitor International 10 Internet retailing and pet superstores experience the strongest growth RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% Grocery retailers Pet superstores Pet shops Veterinary clinics Internet retailing Others Pet Care Sales by Channel 2011/2016 2011 2016
  11. 11. © Euromonitor International 11 Different distribution structures across regions set different challenges RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES 0% 20% 40% 60% 80% 100% Middle East and Africa Australasia Eastern Europe Asia Pacific Latin America Western Europe North America Importance of Distribution Channels by Region, 2016 Grocery Retailers Pet superstores Pet shops Internet Retailing Veterinary clinics Others
  12. 12. KEY DRIVERS RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES Pet specialists Grocery retailing Internet retailing OUTLOOK AND KEY TAKEAWAYS
  13. 13. © Euromonitor International 13 0 2 4 6 8 10 12 14 16 USA Germany Brazil Russia Poland Mexico Thailand USDbn Pet Care Value Sales of Pet Shops and Superstores in Selected Countries, 2011/2016 2011 2016 +16% +67% +61% +17% +79% +83% US registers the strongest actual value growth for pet specialists RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES +28% Current values, fixed 2016 exchange rate
  14. 14. © Euromonitor International 14 US – pet shops are finding their niches RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES • First opened in Chicago in 2006 • 42 outlets in 2016 • Focus on natural “Kriser's Approved” products • Sets out to offer exceptional customer service by very knowledgeable customer service assistants
  15. 15. © Euromonitor International 15 Maskota – a Mexican success story… in danger? RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES 0 100 200 300 400 2012 2013 2014 2015 2016 Number of Outlets 38 40 42 44 46 48 50 2012 2013 2014 2015 2016 %share Value Share within Pet Shops and Superstores in Mexico • Store concept adapted to include smaller formats • Focus on exclusive premium pet food brands key to its success • Services key for differentiation: home delivery, home beauty salon services, veterinary service • Toka+Kota (Touch Pets) Service: allows children to interact with dogs, rabbits, snakes, parrots, etc • Animal cruelty scandal caused consumer backlash
  16. 16. © Euromonitor International 16 Thailand – a fragmented pet specialists retail environment flying high RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES 33% of pet care sales generated by pet shops in 2016: USD250 mn 4.4% CAGR 2016-2021 for pet shops and superstores (constant, fixed exchange rate) Fragmented market: Manoon Pet Shop leads with 7% of value sales “Pet Idols” – Social media Grooming services Conveniently located for local neighbourhoods In-store vet services Availability of (exclusive) brands Professional advice Manoon Pet Shop in Ao Tor Kor market
  17. 17. © Euromonitor International 17 Focused on large cities Several types of private label products offered alongside mainstream brands Around 40 outlets, 11% value share in pet shops and superstores Offers a price-match with competitors’ prices Complements its stores with an online shop Poland: Kakadu competes on choice and price RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
  18. 18. © Euromonitor International 18 No strong economisation on pet food 40% of pet care value sales through pet shops Pet shops overtaken by modern grocery retail for the first time in 2016 Bethowen holds a 12% value share in the fragmented pet shops and superstores channel Russia – pet shops robust despite a difficult economic situation RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
  19. 19. © Euromonitor International 19 Germany – Fressnapf continues to assert its position RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES Fressnapf store in Berlin 0 200 400 600 800 1,000 1,200 1,400 2011 2012 2013 2014 2015 2016 USDmn Fressnapf Value Sales Germany, 2011-2016 Fressnapf Tiernahrungs GmbH store-based value sales, rsp incl sales tax Fixed exchange rate, current values
  20. 20. KEY DRIVERS RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES Pet specialists Grocery retailing Internet retailing OUTLOOK AND KEY TAKEAWAYS
  21. 21. © Euromonitor International 21 Grocery retailing – hypermarkets and supermarkets very important in pet care sales RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES Supermarkets Hypermarkets Discounters Independent Small Grocers Other Grocery Retailers Convenience Stores Forecourt Retailers Breakdown of Pet Care Sales Through Grocery Retailing in 2016 USD41 bn in 2016 Grocery retailing generated 40% of all pet care value sales globally Sainsbury’s, Leicester, UK
  22. 22. © Euromonitor International 22 0 10 20 30 40 50 60 70 %share Share of Pet Care Sales Through Supermarkets and Hypermarkets by Region Woolworths (supermarket in Australia) is positioned as a one-stop-shop and specialist for pet care products: food for puppies, kittens, adult and senior cats and dogs is available Product portfolio ranging from economy private label to premium, branded products, including chilled pet food Phantom brands make private label difficult to spot: Smitten and Apollo Supermarkets trying to shed their “too generalist” image RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
  23. 23. © Euromonitor International 23 Western Europe is the most successful battleground for discounters RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES 0 2 4 6 8 10 12 14 16 18 20 Austria Spain Germany Switzerland Western Europe %share Discounters' Share of Pet Care Value Sales in Selected Countries, 2016 Aldi, Germany
  24. 24. KEY DRIVERS RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES Pet specialists Grocery retailing Internet retailing OUTLOOK AND KEY TAKEAWAYS
  25. 25. © Euromonitor International 25 Internet retailing set for strong growth in all regions RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES 0 2 4 6 8 10 12 14 16 0 0.5 1 1.5 2 2.5 North America Western Europe Asia Pacific Eastern Europe Latin America Australasia Middle East and Africa %CAGR Valuesales,USDbn Pet Care Internet Retailing Sales 2016 and CAGR 2016-2021 2016 value sales 2016-2021 CAGR % Constant 2016 values, fixed exchange rate
  26. 26. © Euromonitor International 26 0 5 10 15 0 50 100 150 200 250 Apparel and Footwear Food and Drink Pet Care %CAGR USDbillion Global Internet Retailing Sizes by Category 2011/2016 and CAGR 2016-2021 2011 value size 2016 value size 2016-2021 CAGR Pet care internet retailing to see healthy growth, but remains small RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES Internet sales in pet care are still small compared with other channels Apparel and footwear is successful thanks to free returns policies in many countries, and often low delivery charges Food and drink faced bigger challenges, but has seen strong growth in a few markets Pet retailing has good arguments on its side for internet retailing – the challenge is to provide a service tailored to consumers’ needs Constant values, fixed 2016 exchange rate
  27. 27. © Euromonitor International 27 Amazon Dash Button – contradicting pet parents’ sentiments? RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES Convenience Shopping for pets as a chore
  28. 28. © Euromonitor International 28 • Strongly developed internet environment meets highly pet-centric society South Korea • Largest pet care market relatively underdeveloped in internet retailing • Recurring orders interesting for US consumers US • Click-and-collect has potential for growth • Supermarkets and specialists are expanding their product ranges UK • Zooplus key in driving pet care internet retailing • Fressnapf has shifted its focus to multi-channel Germany South Korea the ideal environment for pet care internet retailing RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES
  29. 29. © Euromonitor International 29  Distribution can be one of the main challenges in emerging markets  Bricks-and-mortar retail infrastructure still lacking in smaller places  Chained grocery retail presence often limited  Internet retailing can provide a means of leapfrogging this hurdle in order to reach the “long tail” of consumers in these small but numerous markets  Local online retailer Alibaba is expanding aggressively in rural China, building service centres where villagers can both make and pick-up orders Alibaba chases the “long tail” in China RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES 3 % 30 % 0 10 20 30 40 2011 2012 2013 2014 2015 2016 %share Share of Internet Retailing in Pet Care Value Sales in China 2011-2016
  30. 30. KEY DRIVERS RETAILING LANDSCAPE – OPPORTUNITIES AND CHALLENGES Pet specialists Grocery retailing Internet retailing OUTLOOK AND KEY TAKEAWAYS
  31. 31. © Euromonitor International 31 Pet care set to register healthy growth over the next five years OUTLOOK AND KEY TAKEAWAYS 0 10 20 30 40 50 60 2016 2017 2018 2019 2020 2021 USDbn Pet Care Value Sales by Region, 2016-2021 North America Western Europe Latin America Asia Pacific Eastern Europe Australasia Middle East and Africa +11% +7% +26% +22% +18% -1% +37% Constant values, fixed exchange rate
  32. 32. © Euromonitor International 32 Leverage the fact (and marketing message) that smaller players can cater to consumers in certain niches more appropriately than big competitors Creative approaches to products or distribution Manufacturers and pet shops can benefit from a virtuous circle if they support each other How can small players tackle the challenge of competing with big competitors? OUTLOOK AND KEY TAKEAWAYS
  33. 33. © Euromonitor International 33 Strengths •Strong global standing of pet specialists •Capitalising on human food concerns •Innovative retail strategies Weaknesses • Ethical or animal welfare • Limited distribution network in emerging countries Opportunities •Pet parents willing to spend money •Mirroring human food concerns •Internet retailing – reaching consumers Threats •Private label competition and downwards influence on pricing •Internet retailing – being left behind Pet care sees good opportunities if threats are kept at bay OUTLOOK AND KEY TAKEAWAYS
  34. 34. THANK YOU FOR LISTENING Wiebke Schoon Senior Research Analyst Food & Nutrition – Western Europe Wiebke.schoon@euromonitor.com +44 (0) 207 251 8024 EXT 1190

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