The first hurdles to take

 In the late 80’s of the last century some of the US manufacturers saw opportunities in Europe for their superpremium brands and products. Of course there were already diets available to be prescribed by the veterinary profession. The foods brought to market - these were imported from the USA - initially faced the problem of not understanding - by the trade and the dog & cat-owners - the concept of nutritional density, i.e. lower daily food-intake to enhance the animals wellbeing. Furthermore the prices chrged for a bag of food were at that time 2-2.5 times more expensive than those for the leading dry brands. To create demand for the new concepts, the manufacturers sought their way through market through the influencer-route, the breeders and veterinarians.

The definition

All official bodies have desparately tried to define superpremium, without - in my opinion - succeeding sofar. First of all we should not forget that superpremium is typical manufacturers’jargon. Our end-buyers do not relate to products as do manufacturers and as a consequence their wholesale and retail-partners.

Key in the possible definition of superpremium are: high quality ingredients with superb digestibility resulting in maximum availability and subsequent absorption of the essential nutrients.

What continues to puzzle me is the wet products for dogs and cats that are sold under superpremium brands. What is superpremium about 70-75% of tap-water in a can of dog or catfood?

The misunderstandings

Partly because the superpremium segment is - still - ill-defined, many manufacturers claims superpremium without really providing foods that fit this claim. I have heard people say that 30/20 is a superpremium; implying that anything with 30% protein and 20% fat meets the standards. Nothing is less true; superpremium is not about percentages but about metabolism and situation.

Another phenomenon that saw the light in the mid-90’s of the last century was  the rise of copycats, i.e. brands that claimed to meet superpremium standards, until then more or less imposed by American brands. The copycats came to market with basically a pricing-claim: “as good as X (the leader) but 40% cheaper”. A claim unworthy of belief! Not only because the performance of these copycats could not even stand in the shadow of genuine superpremium products, but also because the final decision-maker - the dog or cat-owner simply did not want to gamble and stuck to the high-priced brands.

The market-development

The phase of pioneering probably lasted until the mid-90’s of the last century. The superpemium concept got more appreciated and accepted, resulting in fast growth for the category. This was most certainly helped by a few factors: the growing appreciation for dry foods in general (more for dog than for cat) nad linked to that increased levels of nutrition-consiousness among dog and cat-owners. What should also not be forgotten is that owners grew more concerned about the wellbeing of their animals, knowing that food is a main contributor to that wellbeing!

The growing popularity of superpremium led to further product-segmentation. Initially by extending the life-cycle/life-style concept; i.e. having more products available for the various stages in life and for the various specific situations (allergies etc.) one can perceive. The number of references sold by the manufacturers thus grew successfully.

The myth that surround the category 

In some countries wholesale and retail-partners persist in believing that good superpremium products can only be developped and sold by the big multi-national companies. This may have been the case some 10 years ago, but manufacturers in Europe have caught up with their - primarily N.American - counterparts. I dare say that some of the European manufacturers bring excellent products to market; products that do very well in comparative testing against the leading superpremium brands. These products deserve to have their chance in the market-place and therefore deserve the support of the trading partners.

The current situation

Superpremium does not enjoy the spectacular growth of the 90’s of the last century anymore.

However, the concept has become understood and got popular. A rough estimation is that in Europe around 5% of the total volume of petfood sold is superpremium. To compare, in the USA this is about 15%.

The European superpremium category is estimated to represent around € 1,600,000,000 PVP in 2004.

Through natural evolution superpremium now enjoys a fairly wide-spread distribution; not only in the traditional pet specialty outlets, but also in garden-centers, veterinary clinics, modern self-service agri-stores and do-it-yourself outlets. In some countries grocery retailers have tried to sell superpremium products but they essentially failed because they had no personnel available to tell the “superpremium story”! It has been stated by professionals in the industry that superpremium helped pet specialty retail to survive and to grow. I wholeheartedly agree with that statement. Before sup-repremium came to the European market one could observe share-erosion for the pet specialty outlets. Mass distribution and other types of outlets grew their pet assortments and increasingly threatened the position of pet specialty. Because  superpremium was and still is the domaine of pet specialty the increasingly nutrition-conscious consumer had but one option: buy the food in pet specialty!

Shelf-dominance?

The basis for the development of superpremium products has been the so-called life-cycle/life-style concept; i.e. it has taken into account the age of the animal and its degree of activity.

The graph hereafter visualises which plethora of development opportunities lay open to the manufacturers, ranging from food for very old and lazy dogs (A) to foods for hyper-active puppies (B). The concept has historically been more adapted to dogs than to cats.

In the framework of the  4 quadrants products were developped; initiallyat a low speed, but gradually the development of  products became so massive that the trading-partners of the manufacturers lost their way in the highly extended product-ranges the manufacturers brought to market. And find it increasingly difficult to cope with 190 references from one manufactuer.

Of course the manufacturers have - or claim to have - a justification for this exponential growth of their ranges. Science continues to provide them with better nutritional and physiological insights which provides the opportunity to develop yet another product. The question is how long one can pull on the elastic band before it snaps!

A more cynical view on the exponential development of superpremium product-ranges is - as some people in the industry suggest - manufacturers seek to dominate the retail-shelves.

The impact for the industry

Where does this continuous extension of product-ranges lead to? I have no doubt in my mind that smaller and medium-sized manufacturers will be hard-pressed to follow the development; i.e. only the global or multi-national manufacturers will have the R&D and marketing funds available (and spend them) to persist in this development. The consequence is that the smaller and medium-sized manufacturers will be marginalised. This leaves the trade (both at wholesale and retail-level) with a poorer choice of suppliers/manufacturers. I doubt if an oligopoly on the supply side is in the longer-term interest of the trade and the consumers. And I expect that ultimately the reaction of the trade will be to look for private label alternatives which would not be in the interest of the branded manufacturers.

The upcoming legislation

Regulations surrounding petfoods in general become more stringent and increasingly difficult to comply with. Because the petfood-regulations are a “derivate” of the food-chain regulations; which in my point of view is increasingly undefendable because dogs and cats are not part of the food-chain!

Although nothing is really certain at the moment, it can be that the regulations - a very important EU directive is waiting to be executed - become so stringent that non-EU suppliers will find it too difficult to continue to supply the EU market; i.e. N.American brands not manufactured in the EU will either disappear from the market or find ways to continue to supply the market by having their products manufactured in the EU. This will not change the market per sé, but the supply-side will definitely look different from today.

The future for the product-category

I have no doubt in my mind that the category continues to have growth-potential. Albeit with more conservative growth-rates than in the last decade or so, but still attractive enough to continue to pay special attention to this category.

In Europe the prepared petfood penetration (PPP) is still low as compared to N.America. And in Europe we see enormous differences among the various countries.

Given the fact that there is still an unexploited market open to all stakeholders, i.e. manufacturers, wholesalers and retailers, it stands to reason that also the superpremium category can enjoy a good and profitable future.

Our end-buyers - the consumers - have a natural inclination to upgrade their choice; after all they want to do the best for their animals - that do not have the means to express themselves other than by refusing the food they get - and therefore tend to be less price-consciouss than for the food they consume themselves.

It is my opinion that the price-weapon - price-promotions - is used too early in the development stage of the category which is by no means saturated. Instead of giving the consumer a price-reason to buy, the stakeholders would do better in using the margin given away in further educating the consumers as to the health and well-being advantages superpremium offers. To further popularise the superpremium category and thus increase the value of the market as a whole; to the benefit of all!

Functionality has gradually become a part of the superpremium proposition to the consumers.

The so-called “food +” concept! If initially the proposition was health and well-being oriented, one now sees that most of the superpremium products contain special ingredients to promote e.g. joint mobility, to help the immune system, to diminsih the formation of hairballs etc.

This today sets superpremium apart from the so-called premium segment (as superpremium ill-defined as to their standards) which narrowed the gap between standard products and superpremium ones. The quest for new and improved superpremium products will continue, most likely leading to a further expansion of product-ranges. Because the total offering of superpremium products becomes so complex for the end-buyer, manufacturers who restrain themselves in the development of their assortments (can one cover 90% of the requirements of dogs and cats with 6 and 3 products respectively?) will be successful, provided that they get the opportunity to be on the retailers’shelves; including the ones in super- and hypermarkets

To conclude.

The superpremium category is not a whim; it has found a solid foundation in the European market for dry dog and catfoods. The category has healthy growth-perspectives provided that the stakeholders have a focus on the market growth-opportunity rather than the short-term gain in marketshare. Global players will continue to bring new products to the market to increase their market-position and to dominate the available shelf-space. Local manufacturers of excellent superpremium products will get squeezed in this process unless their trading partners give them the opportunities their products deserve.

Snacks: in the Thesaurus described as a bite, nibble, morsel, titbit. And that is their primary function: in-between meals, preferably without spoiling the appetite!
In that respect snacks fit the trend towards humanisation of the pet perfectly.
Arguably one of the most attractive categories in the pet industry; not so much from a volume, but much more from a value point of view.
Also a category which is in its earlier stages of development; less so from a product development point-of-view, but certainly in terms of household-penetration.
Taking this into consideration, you can say (with a degree of simplification) that the category offers very attractive opportunities for growth for players who take this category seriously.

When thinking about snacks, isn’t it funny to observe that on the one hand one of the oldest technologies in the industry (baking) can be found in the same product-category as highly sophisticated technologies, some of which being a cross-over from the human food industry?
It does show that snacks offer a wide choice of options where product-formats are concerned.

However, technology available in-house seriously limits the options for the manufacturers. Once manufacturing-capacity is installed (which is always less versatile than one initially thought!) it will turn out that the market is not ready (yet) to absorb the volumes that would allow the manufacturer to produce with some degree of efficiency. It would not be the first time that the dilemma between volume (= efficiency) and value (= margin) shifts in the direction of volume at any price, thus leading to price-erosion; at a stage where the technology has not even had the opportunity to generate some initial ROI. From a consumer point-of-view there is no reason for price-erosion. The pet-owners who care (their numbers are growing quickly throughout the world) accept products that are reasonably priced provided that they offer the meaningful extra she or he is attracted to. With perceived benefits for the animal! Pet-owners want to do the best they can do for their animals (with the possible exception of chain-dogs that will never get a snack however cheap it wouild be); from that perspective the category is not as price-sensitive as other categories in the industry. After all, what is the price-tag for emotion?

There seems to be a general belief that snacks require more or less continuous new product development. This may often seen to be the case if you look at the frequency and number of “new” product-launches, but it is a known fact that products that were developped some 30 years ago for the US market still lead the category in that market; without major alterations to the original product-concept! Needless to say that these products are huge contributors to their manufacturer’s bottom-line.
But what if you would start from scratch: would you tap into existing technologies or seek ones that are new to the industry?
The key driver for that decision is the orientation one has: volume or value?
The approach to the investment will clearly differ from cost-orientation = volume to versatility-orientation = value. Evidently the financial rewards will be different as well.
The volume-orientation more or less inevitably leads to the necessity of accelerated penetration, because copycats are bound to appear rather sooner than later; whereas the value-orientation allows for creaming the market from a niche point-of-view; the product being less prone to copying.

Product-formats have of course changed over the years: from an important part of the feeding-regime to indulgence and subsequently to functionality; the latter can be seen as part of the feeding-regime, in sofar that functional snacks provide the (nutritional) extras that are seen to be vital for the animals’health and wellbeing.
Particularly the functional snacks will have a lot of mileage, because they combine ratio = functionality with emotion = indulgence in a pet environment where the consiousness of pet-keeping – with its given set of responsibilities – increases rapidly.

In conclusion you could say: the category is a very interesting one; meaningful creativity is rewarded by the end-buyer and as long as manufacturers are not “trapped” in their own technologies, the spread of development-opportunites is enormous and potentially lucrative.