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MP15038

MAPS PET FOOD MARKET JUNE 1998

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EXECUTIVE SUMMARY

The UK market for Pet Food in the UK has shown steady growth in the last five years, despite a decline in ownership of one of the most important sectors, that of dogs. Changes in lifestyles have meant that pets which require less constant attention than dogs, such as cats or pet fish, have become more popular. The increasing levels of cat ownership, plus the growth in popularity of premium and super-premium foods for cats and dogs has ensured that sales have continued to increase by value between 1993 and 1997.

The UK Pet Food market is affected by a number of factors, including levels of pet ownership and trends in the type of pets owned, as well as socio-demographic factors. Key demographic factors include the increase in the number of single-person households, an increase in the number of children aged under 15, and social factors such as the increase in the number of women working outside of the home.

In 1997 the overall UK Pet Food market was valued at £1,438m, an increase of 10 percent on 1993, with 1.3 million tonnes sold, representing a decline of 6 percent over this period. The market is split into three main product sectors: dog, cat and other pet food (other pet food covers small animal feed, bird seed and fish food). In addition, the market can be segmented according to the type of food, with the main sectors being moist food, dry food, semi-moist food and treats.

The largest sector within UK Pet Food market by both value and volume is that of dog food, taking a 52 percent and 55 percent share respectively. Cat food represents the second largest sector, accounting for 46 percent of the market value and 44 percent of volume. The market for other pet food takes the remaining 2 percent by value and 1 percent by volume of the total pet food sector. It is to be expected that the dog food market should take the largest share of sales in both volume and value terms, as dogs are in general larger and require more food than cats. The share taken by dog food has, however, declined since 1993 in both volume and value terms as dog ownership has declined and cat ownership has risen. It should also be noted that the share taken in value terms by other pet food is twice that taken by volume. This is due to the nature of this type of food, being very light in weight but relatively expensive, weight for weight.

While the overall market has grown in terms of value, performance by sector has been variable. In the dog food market growth by value has only been 8 percent to £746m, reflecting the decline in dog ownership and a trend towards smaller dogs. The fact that there is any growth at all in this sector is due to the trend towards more premium varieties of dog food. As levels of personal disposable income (PDI) rise and consumers opt for smaller dogs that are cheaper to feed, they are therefore more likely to buy the best they can afford. With regard to market volume in the dog food sector, the continuing trend towards CDDF (complete dry dog food) has led to a decline in the size of the market, down by 10 percent between 1993 and 1997 to 728,000 tonnes.

In the cat food market, growth by value has been stronger, at 11 percent between 1993 and 1997 to reach £667m, while the market has fallen slightly in volume terms by just 2 percent to 583,000 tonnes. A slight increase in cat ownership has helped to boost the market value, with the trend again towards more premium and super-premium cat food brands. The growth in popularity of complete dry cat food has had an impact on market volumes in that there has been a slight fall in the market by volume.

The other pet food market sector, covering small animals (rabbits, hamsters, gerbils etc), caged birds and fish has shown the strongest growth of all pet food sectors, although this growth is from a much lower base. By value, the market has increased by 32 percent to £25m while in volume terms growth has been less marked, at 17 percent to 14,000 tonnes.

The UK Pet Food market is becoming increasing concentrated in terms of supply, with just two companies dominating the overall market in 1998. When multi-national company Nestlé took over Dalgety in spring 1998 the market concentrated even further. Dalgety itself owned the Spillers brand and had itself bought Quaker Oat’s pet food business in 1995, including brands such as Felix, Delikat and Chunky. Nestlé already had a small presence in the pet food market with its Friskies Go-Cat and Mighty Dog brands, and is now the owner of leading brands such as Felix, Winalot, Prime, Arthur’s, Kattomeat and Bonio. The other leading player in the pet food market, and the overall market leader, is Pedigree Petfoods. Unlike Nestlé, Pedigree has a strong presence in all pet food sectors, including other pet foods. Key Pedigree brands include Pedigree Chum, Pal, Whiskas and KiteKat.

Despite this concentration of supply, there are still a large number of smaller brands such as Butcher’s, Pascoe’s, Gilpa and Baker’s, mainly in the dog food sector. The market for dog and cat food remains heavily brand oriented though, with the leading manufacturers investing heavily in research and promotion in order to maintain their leading roles in the main market sectors.

Pedigree Petfoods and Nestlé are the dominant players in the dog and cat food markets while the market for other pet foods is somewhat more fragmented. In this sector there is still a role for the smaller specialist suppliers, although even here the market leaders still play an important role. Pedigree, for example, owns the Aquarian brand in the fish food market, the Trill bird food brand and the Thomas small animal food brand.

The dog and cat food markets are characterised by high levels of main media expenditure in what is a very competitive market. Expenditure in 1997 stood at £30.7m, up by 61 percent since 1994, and representing 4 percent of total sales. Expenditure in the cat food market was slightly lower, at £25.4m, representing 3.8 percent of total sales. By contrast, expenditure on other pet foods was negligible, with below-the-line promotion and trade support more important in this sector. The leading dog and cat food brands advertise heavily via television, with campaigns designed to encourage pet owners to switch brands, especially in the mature and most competitive moist canned food sectors. In the dry pet food sector there has been an increase in above-the-line promotion, but there tends to be more in the way of below-the-line support in this developing sector.

The retail distribution of pet food is dominated by the grocery multiples who account for over three-quarters of sales in the cat food sector and well over a half of sales in the dog food sector. The grocery multiples are less dominant in the other pet food sector, which is more fragmented and less heavily branded than the cat and dog food markets. The higher proportion of cat food sales via the grocery multiples is because this sector is biased towards moist canned foods. Canned foods are very straightforward for large supermarkets to market and merchandise and so most offer a very wide range of brands and varieties.

One of the key trends in the pet food market in terms of retailing over the last five years has been the development of the pet superstore. This has enabled the pet trade as a whole to maintain, and in some cases increase, its share of the total pet food market. Pet City was one of the first nationwide pet superstore chains, retailing anything from pet food to accessories and equipment. When the chain was taken over by the US based PETsMART chain in 1996, there followed a rapid expansion in the number of stores to nearly 80 in 1998. Other pet superstore chains include Jollye’s with a chain of 21 stores. These type of retail outlets have succeeded as they have been able to offer a one-stop shopping destination for those looking to buy pets such as birds and small animals as well as food and accessories.

Exclusive consumer research commissioned by Market Assessment in April 1998 has shown what factors are most important to purchasers of pet food in the UK. The dominance of the grocery multiples in the retailing of pet food is demonstrated by the fact that 42 percent of respondents considered that availability in a supermarket was the most important consideration when purchasing pet food. The same proportion also considers that the suitability of the product for their pet is important. Slightly fewer, at 39 percent, consider a wide variety of flavours to be important, with the same response for in-store promotions. The importance of branding is backed up by the fact that a quarter of respondents consider a well-known brand name to be important whereas only 13 percent consider it important that the product is own label. Of all respondents, results show that 46 percent of the population do not own a pet at all.

The UK Pet Food market is set to grow steadily in terms of value over the next five years, as greater consumer affluence makes it more likely that they will opt for premium and super-premium brands. In addition, as trends in pet ownership move away from dogs (and larger dogs in particular) towards smaller and lower maintenance pets such as cats and fish so pet owners are tending to spend more on their pets. The market is likely to remain highly competitive with the leading manufacturers continuing to advertise heavily in order to gain market share. There is likely to be further rationalisation and concentration of supply, with more mergers and takeovers possible over the next five years.

The total pet food market is forecast to reach £1,580m by 2002, representing growth of 10 percent over 1998. The fastest growing sector is likely to be that of other pet food, which is set to grow by 15 percent to £30m. The cat food market is forecast to grow by 13 percent to reach £760m. The dog food sector will show the lowest level of growth, at just 6 percent, coinciding with the general decline in dog ownership in modern households.

Text © 1998 MAPS

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