Only the best

As more consumers seek higher-quality healthful meals for themselves, they also are giving similar attention to what their pets are consuming. Concerns for the health of their pets are leading more consumers to demand premium pet products. For instance, shoppers list natural/organic as one of the top three factors influencing their pet food purchase decisions, along with taste and price, reports Mintel, a global market research firm, in its May 2015 “Pet Food — US” report.

“People are looking to eat healthy and figure that if it is good enough for me, it’s good enough for Sparky and Rex,” says Bob Vetere, president and CEO of the Greenwich, Conn.-based American Pet Products Association. “Consumers are more conscious of the additives and ingredients in their pet foods. They want their pets to be healthy, strong and to live longer.”

Many shoppers also are willing to pay more for the items that they perceive as being better for their pets. Triggering the movement is an evolution of the prime consumer base from baby boomers to millennials.

Pet ownership among baby boomers is declining as they age, while millennials — with high levels of per-capita spending relative to income and who will see their earning power grow in the short to medium term — are picking up the slack, reports Euromonitor International, London.

“Economic concerns hindered the ability of many millennials to enter pet care during the recession, but they are becoming increasingly important as pet owners as the economic recovery continues,” Euromonitor notes in its July 2015 “Pet Care in the US” report. “This demographic shift among pet owners has huge ramifications for the prospects of pet care in the U.S.”

A large customer base

Pet care revenue opportunities, meanwhile, are ample, with 70 percent of U.S. households owning a pet, Mintel notes. Seventy-three percent of households have dogs, while 51 percent own cats. Next in popularity are fish (which are in 17 percent of pet-owning households), birds (9 percent), small animals such as guinea pigs, hamsters, rabbits and mice (6 percent), and reptiles and amphibians, including snakes, turtles and lizards (5 percent).

With pet care one of the fastest-growing areas in the United States, Euromonitor states that competition among retailers is intensifying. Emerging competing channels include home improvement and gardening stores, as well as Internet retailers.

Retailers, however, will eventually be vying for pieces of a smaller revenue pie. Mintel forecasts that the pet food market — based on inflation-adjusted dollars — will decline 3 percent from 2014 to 2019. Contributing to the decrease will be a drop in households with children — the consumer segment most likely to own pets — as millennials delay marriage and childbirth, Mintel states.

It also will be difficult for sellers of specific brands to attract new customers. Mintel research found that 54 percent of pet owners say they are completely satisfied with their current brand, while just 28 percent state they sometimes experiment with other pet food brands.

Differentiation is vital

Store brands could grow their presence in the sector by differentiating themselves in an increasingly crowded market, Vetere notes.

One way to offer differentiation is through the ingredient list on pet foods.

Many consumers already are closely reading ingredient labels before purchasing pet foods, says Chris Ruben, chief marketing officer for EuroCan Pet Products, a New Hamburg, Ontario-based supplier of dog and cat treats.

“They want the ingredient deck to be clean with limited additives and preservatives and to include recognizable items such as chicken, beef and kale,” Ruben says. “The shoppers want to do what they can to keep their pets out of the veterinarian’s office.”

Gary Cartlidge, key accounts and business development manager for Armstrong Milling Co. Ltd., a Hagersville, Ontario-based manufacturer of premium wild bird and small animal food and companion bird products, agrees.

“Customers can justify paying twenty dollars for small animal food if it makes the pet healthier,” he states. “Parents want the animal to have a nice, long, healthy life so their little girls won’t worry that it will die. It is important to have food that is digestible so more goes into animals, and that also promotes good dental hygiene.”

Offering higher-quality products is a key way for retailers to better differentiate their private label items from the national brands, Ruben states.

“Retailers just can’t put their brand on a me-too product and expect to be successful,” he continues. “Consumers see through that, and many want the items to be superior to the national brands.”

Make it visible

To best support store brands, Cartlidge says retailers should situate the items in the center of shelf displays so shoppers can easily compare private label pet foods to the surrounding national brands. And shelf signage also could be used to contrast the ingredients and pricing of the different selections.

Retailers could also leverage stand-up packaging that can be resealed for freshness and to prevent spills, he recommends. Such packages contain more space for graphics and messaging and allow for a window that enables shoppers to view the contents.

Other effective merchandising vehicles include print and digital media and cross-promotions such as marketing cat food alongside litter on displays, Cartlidge adds.

“The private label products should have features that are equal to or greater than the best pet specialty brands,” he says. “Retailers need to give shoppers comfort in knowing that the store has done its homework in developing quality selections.”

Know your customers

It is crucial, however, that each retailer’s private label pet products are relevant to each store’s specific customer base.

“You are going to find pet products being sold everywhere, even at auto supply outlets, so retailers need to come up with something unique and that is available only at their outlets,” Vetere says.

Cartlidge agrees.

“The biggest mistake some retailers make is that they don’t recognize who is coming through their doors,” he says. “When there is strong activity from high-income customers, retailers can get away with offering high-end glamour and high-tech products, while blue collar workers may be looking for generic-type items. It is important to understand the consumer groups.”

Therefore, retailers and their suppliers will likely operate most effectively by having a common vision on the most suitable private label products for the retailer’s customer base, Cartlidge states.

“Like-minded companies can do amazing things when they work together,” he says. “When there is the same degree of interest in the products, there will be more face-to-face meetings by the parties and fewer e-mails sent, which will result in quicker achievements with fewer mistakes.”

Such achievements include creating unique formulations that “are not just the same offering as what is available at the store down the street but with a different name,” Ruben adds.

“Private label does not work for everyone because some retailers use the wrong ingredients, offer the wrong selections or sell items that come from the wrong countries” where there are food safety concerns, he notes. “Without the commitment, retailers are better off just promoting the national brands.”

Do offer differentiation based on ingredients.

Don’t just offer “me-too” products.

Do use displays and signage to promote store brand pet supply benefits.

Don’t assume all stores have the same customer base.