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AMA RESEARCH Market Report : UK Pet Accessories Market : July2004

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Introduction and Overview

AMA Research have published the 4th Edition report on the ‘Pet Accessory Market – UK 2004-2007’ - incorporating original input and primary research, it represents an up-to-date and informed review of this expanding market.

The total UK Pet Market is substantial, with a retail value in excess of £3.9 billion in 2003. While food is the dominant sector, accessories represent a substantial and growing part of the pet market.

Areas covered in the report are:-

TOYS.

CARE PRODUCTS.

STORAGE AND FEEDING PRODUCTS.

COLLARS, LEADS AND UTILITY PRODUCTS.

The report has been compiled by marketing professionals with a background in Home and Garden products and answers the need for QUALITATIVE AND QUANTITATIVE ASSESSMENT - it is therefore invaluable to any company currently interested in the Pet Market or considering entry into this sector. Information is collated from a wide range of trade and other sources.

Of particular interest:

Detailed assessment of the Pet Accessory Market, by product sector.

New detailed research on the flea treatments/wormers and cat litter markets.

Review of the major pet accessory suppliers.

Analysis of the distribution channels for pet accessories.

Review of future prospects for pet accessories.

Key areas of coverage in the report include:-

THE MARKET

Review of the overall UK Pet Market and trends in last decade - food, accessories, vet/insurance fees, kenneling etc. Current performance by sector and future prospects forecasted to 2007.

Assessment of the Pet Accessory Market - developments in recent years. Market performance in 2003 and future prospects up to 2007.

Factors influencing growth - pet population, changing mix of pet ownership, cultural and social influences, new product developments, changing retailing trends influencing product awareness etc.

THE PRODUCTS

Pet Accessories by product groups, market size, trends, forecasts and factors influencing market developments, key growth sectors.

Storage and Feeding Products - market size 1997-2007 and mix share in 2003 - Analysis of baskets, bedding, hutches and cages, tanks and aquariums etc. - a review of size, product trends and influencing factors.

Care Products - market size 1997-2007 and mix share in 2003. Detailed analysis of grooming equipment, maintenance products, flea treatments/wormers, cat litters, health and vitamins etc. - a review of sector market sizes, product trends and influencing factors.

Toys – market size 1997-2007 and mix share in 2003. Analysis of dog, cat, reptile, fish, bird and small animal toys - a review of sector size, product trends and influencing factors. An assessment of training, activity, interest and utility toys.

Collars, leads and utility products - market size 1997-2007 and mix share in 2003, a review of product trends and influencing factors.

Review of the miscellaneous items e.g. cat flaps, letterbox cages, etc.

SUPPLY AND DISTRIBUTION

Analysis of major suppliers - market shares, product strengths, market positioning, distribution strengths etc.

Review of fragmented supply structure - potential for rationalization / acquisition.

Analysis of major distribution channels - shares by major channels, growth of pet superstores.

Changes in supply and distribution structures in recent years and forecasts of future trends - new channels emerging.

Basket and bedding sectors – supplier shares by value.

Executive Summary

In 2003, the UK market for pet products was worth approximately £3.9 billion at retail prices, representing an estimated 5% increase over the previous year.

The market can be divided into 4 main sectors: pet food, pet accessories, vet/insurance fees and kennelling and the chart below illustrates our estimate of the mix of the market between the major product sectors in 2003.

In general, the pet industry has experienced steady underlying growth in recent years, reflecting the maturity of the market. Key factors influencing overall performance of the pet market are consumer confidence, PDI levels, household pet ownership levels, the mix of pets owned, new product developments and changes in retailing.

Within the total UK pet market, pet food holds the dominant share at approximately 45%, worth an estimated £1.76 billion in 2003. This mature market has seen a decline in volume sales of dog food as a result of the decrease in dog ownership. However manufacturers have been attempting to stimulate growth through investment in new product development and premium products. For example, high nutrition foods with added vitamin and mineral supplements, and single-serve products have added value to the market.

Veterinary fees and insurance premiums account for 29% of the market, worth £1.13bn in 2003. This sector has seen an increase in the last 2 years, largely due to a growing concern for pet welfare and growth in the insurance area. Tesco, the grocery multiple, operates in the insurance sector and encourages customers with in-store promotional literature and special offers. The veterinary market has seen some decline, due in part to the growing number of treatments available over-the-counter, for example, worm and flea treatments. The large pet superstore, Pets at Home, even offer veterinary surgeries in some of its stores.

Pet accessories account for 14% of the total UK pet market, with an estimated market value of £547m in 2003, an increase of approximately 3% from the previous year. The market has seen steady underlying growth for a number of years but in 2003-2004 has begun to exhibit lower levels of growth. High levels of competition are a feature of this market together with high levels of imports, especially at the lower end of the market, putting pressure on UK manufacturers. However, growth has been stimulated by consumers trading up to higher quality accessories and premium-priced products, particularly in the bedding and collars/leads markets. Product innovation has been important in several markets, including toy and care product sectors, as companies attempt to differentiate their products and increase sales. The market is has also been affected by the number and type of pets purchased.

Toys hold the largest share of the pet accessory market at 34%, having overtaken care products as the largest product sector. Growth has been particularly high in relation to other product sectors and this is expected to continue. The toys market is valued at £186m RSP in 2003 and the product range is extensive including scratching posts, tunnels/wheels, tank equipment and rubber toys. The market is characterised by an increase in the number of innovative toys, a degree of trading up with high quality toys available, and a relatively low unit cost when compared with some other areas within the pet accessories market. Additionally, toys benefit from ‘gift’ and ‘impulse’ purchases and from the modern trend amongst owners of indulging their pets.

The care products sector, at 33% of the pet accessories market, now holds the second largest share, having been overtaken by the toys sector in the last 2 years. It is, however, still a sizeable market and is worth £181m RSP in 2003. Flea treatments/wormers hold a large share of the care products market at 36% and have seen good growth in the last 2 years. Maintenance products are a major sector at 29% and include the large cat litter market, accounting for 85% of this sector. The health and vitamins sector, with a share of 19%, has seen a small decline due to the inclusion of vitamins and minerals in many high-value pet foods, although other supplements such as remedies and tonics have contributed positively to growth. Grooming equipment is a smaller market with a 16% share and is showing signs of slowing rates of growth due to the decrease in the ownership of dogs.

The care products market has benefited from the increasing humanisation of pets, with owners more likely to indulge them. The market has also been stimulated by an increase in over-the-counter treatments, previously only available from veterinary surgeries. There is generally more consumer awareness of preventative treatments, fuelled by information provided by consumer magazines, television programmes, trade associations, manufacturers and retailers.

Storage and feeding products account for 22% of the market, with a value of £120m RSP in 2003. Baskets and bedding hold the dominant share of the market at 28% with a market value of £34m. Hutches, tanks and cages have a market share of 17%, 24% and 26% respectively. Poor performance has been seen in the bedding market in the last few years although the market has benefited from sales at the upper end of the market. Sales of cages and tanks have seen good growth in the last 2 years and have benefited positively from increases in small animal and fish ownership.

Collars, leads and harnesses are a much smaller sector within the pet accessories market, accounting for 9% and worth £49m at RSP in 2003. This sector is in slow decline due to its dependence on dog ownership, currently in decline. However, growth has been stimulated by niche products such as cat collars and growth at the higher quality and premium end of the leads and collars market, for example, designer collars.

Competition remains high in the pet accessory market and consequently the market has seen a number of acquisitions, although it still remains highly fragmented. The leading suppliers in the market are Armitage, Interpet (Mikki, Petlove), Masterfoods (Pedigree), RC Hagen and Bob Martin, who account for around 20% of the market.

Imports account for a significant proportion of the market and these are most commonly from the Far East, especially in the cat and dog toys and collars and leads markets. Mostly these imported products are aimed at the lower end of the market, although there is some evidence that an element of trading up is taking place in the toy market with higher quality imports entering the market.

Kennelling is estimated to account for 8% of the total market, valued at £313m in 2003. This market has been fairly stable, in terms of market share, for the last 5 years.

In terms of distribution channels, the key change has been the rapid growth of pet superstores, such as Pets at Home. While independent stores have seen a gradual erosion of market share to 30%, pet superstores have enjoyed good growth and now account for the largest channel at 31%. Grocery multiples hold a smaller share at 12% and supply a more limited range of pet accessories. DIY multiples are a much smaller distribution channel at 4%, with a low priority in pet products except Focus DIY through their PetWorld stores. Acquisitions have also played a role in recent years in the distribution channels, with Pet at Home acquisition of Pet Mart in 1999 the most notable.

List of Contents

1	INTRODUCTION
2	SUMMARY
3	KEY MARKET INFLUENCES
3.1	GDP
3.2	INTEREST RATES AND INFLATION
3.3	UNEMPLOYMENT
3.4	STERLING
3.5	EXCHANGE RATE FLUCTUATIONS
3.6	HOUSING AND CONSTRUCTION
3.6.1	The Housing Market
3.6.2	Households
3.7	CONSUMER DISPOSABLE INCOME LEVELS AND SAVINGS
4	PET MARKET
4.1	INTRODUCTION
4.2	GENERAL TRENDS
4.2.1	Retail Trends
4.2.2	Industry Trends
4.2.3	Social Trends
4.3	PRODUCT MIX
5	PET ACCESSORY MARKET
5.1	DEFINITION
5.2	PET ACCESSORIES MARKET SIZE
5.3	MARKET SHARE OF PET ACCESSORY PRODUCTS
5.4	TOYS
5.5	CARE PRODUCTS
5.6	STORAGE AND FEEDING PRODUCTS
5.7	COLLARS, LEEDS AND UTILITY PRODUCTS
5.8	MISCELLANEOUS
6	SUPPLIERS
6.1	SUPPLIER OVERVIEW
6.2	MAJOR SUPPLIERS
6.3	SUPPLIERS WITHIN SPECIFIC MARKET SECTORS
6.3.1	Basket/Bedding Suppliers
6.3.2	Cat Litter Suppliers
7	DISTRIBUTION
7.1	MARKET SHARE OF DISTRIBUTION CHANNELS
7.2	PET SUPERSTORES
7.3	INDEPENDENT PET SHOPS
7.4	GROCERY MULTIPLES
7.5	GARDEN/AQUATIC CENTRES
7.6	DIY MULTIPLES
7.7	MAIL ORDER/CATALOGUE/INTERNET
7.8	OTHERS
7.9	WHOLESALERS
8	FUTURE PROSPECTS

Tables and Charts

Text © 2004 AMA Research

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Last updated by Amanda Porteous 2004