What’s new?

The first signs of awareness regarding pets’ health – more particularly the health of working dogs – became noticable in the late 19th century. It was then – rightfully so – perceived that the daily meal given to the animal lacked essential nutrients: vitamins & minerals.

Albeit from a small base, the product-category was perceived to be growing healthily (no statistics were available then) and started to attract lots of newcomers in the late 60’s and early 70’s of the last century, all wanting a slice of the growing and highly profitable pet health care (phc) pie. Certainly the pharmaceutical companies took an interest and developed scores of OTC products which were then primarily distributed through the veterinary channels. Smaller, non-pharma companies followed suit and numerous me-too’s came to market.
Most of these non-pharma companies entered the segment, because they felt they could capitalise on the brand-image existing for the products they already brought to market. On the whole these entries were opportunistic rather than strategy-led.
Because the larger pharmaceutical conglomerates had a vested interest in staying loyal to the veterinary channel, the followers popularised the category by selling their products through the specialty outlets.. In essence phc thus became more readily available and more commonly known, initiating further growth of the category.
It was not until the mid 80’s of the 20th century that mass-distribution hesitantly started to put some of the fast-moving phc products on their shelves.

The category developed gradually product-wise, from nutrition-supplementation for dogs (and to an extent cats) into a broad spectrum of products for all species. Nutrition wasn’t the only issue anymore. Antiparastics became an important segment in the category. The biggest impact on the category was supplied by anti-flea and anti-tick products (now counting for some 60% of the total category). Development of new, more often than not solution-oriented products, brought further growth and new companies entered the category. The most recent development is the one of nutraceuticals. These provide on the one hand a new challenge (their efficacy cannot always be sufficiently substantiated), but are on the other hand threatened by the clearly noticeable trend of functional foods and snacks. i.e. complete foods with nutraceuticals added, e.g. to promote joint mobility or to take care of skin and coat problems.
The more the category evolved, the more regulatory issues had to be dealt with. Developments led to the potential of using strong claims but more often than not, regulations were significant roadblocks for the use of these claims. And the burden of proof gradually became such that only the bigger operators could finance the R&D investments that were involved.

Where will the category go? On the product-side natural, as opposed to synthetic, solutions will see a healthy growth. Preventive rather than only curative will become an issue. The marketshares of the various channels of distribution will change somewhat; mass-distribution and specialty will see some growth of share, to the detriment of the veterinary channel. But most importantly, the number of suppliers will diminish, partly because R&D and marketing-investments become prohibitive and partly because the non-specialised suppliers (this is not necessarily the same as manufacturers) will have to refocus on their core activities. Although it is bound to be a gradual process, a shake-out on the supply-side is to be expected. Companies will either have to drop their phc-activity or they will seek alliances with peers to build a power-block which puts them in a position of sustainability in an era where competition will further increase and where regulatory hurdles become even higher than they are today.
But those companies that stay in the market can look forward to healthy market-growth and attractive returns!

Their relevance to the pet market.

Private labels seems to have different definitions. I’ve met manufacturers who define them as “everything other than my own brands”, whereas others restrict it to brands belonging to retailers with contolled distribution. Everything in between these two appears to be valid as well.
Over the last 10 years private labels – in this case being defined as brands owned and controlled by retail – have taken (sometimes significant) shares of market, primarily to the detriment of local manufacturers’ brands; certainly in the dog and catfood arena. And these shares continue to grow. As an example I can mention the development in grocery in Spain, where private labels represented around 5% of market-value 10 years ago – for dog and catfoods - whereas the figures for 2003 show that around 36% of market-value was represented by retail-owned brands.
Another example is Ol’Roy, the WalMart brand, which now takes 3rd place in the massive US market.
What drives this development?
To a great extent the development of retail itself. International consolidation and expansion leads to increasingly powerful retail-chains that have a vested interest in developing their own brand and its image. And petfoods fit perfectly well in this strategy. Because there are very strong manufacturers’ brands that serve as the benchmark. And furthermore, petfoods are high-interest products for pet-owning consumers.
This probably explains why slower moving non-food items are still predominantly sold under manufacturers’ brands.
Private labels are in essence the domaine of grocery retailers. Because of their widespread presence and the sheer number of end-buyers they serve. Specialty does not yet have those powerblocks and is therefore much less in a position to effectively deal with private labels. Of course you can occasionally see the odd “chain” of 10 shops in which one sees private labels, but the decision to go this route is more based on a strongly developed ego of the owners of the “chain” than on business relevance.
If private labels have grown exponentially in the last decade, is there an end to its growth?
Although one can never be in a position to forecast consumer-behavior over a very long period, I do believe that for petfoods continued growth will be shown, albeit that the growth-curve will flatten significantly.
For non-food items strong growth can be forecasted to the extent that it is expected that proper specialty chains will emerge and further develop and that it will be in the interest of these chains to enhance its specialist image by selling private labels.