U.S. Pet Food Market Perspective and Prospects, 2010 2011

U.S. Pet Food Market Perspective and Prospects, 2010‐2011

David Lummis

Packaged Facts Senior Pet Market Analyst

Today’s Agenda

Consider U.S. pet food market in context of overall pet industry and societal trends.

Evaluate pet food market in short‐term historical context (economy!).

Identify trends and opportunities.

Electrolux TV Spot— “Birthday Party”

Kenmore Washer TV Commercial

$52.69(5.0%)

$5.82(3.7%)

$10.71(2.5%)

$17.77(4.5%)

$18.40(7.5%)

$0 $60

Total Pet Market

Non-Medical Pet Services

Pet Supplies

Pet Food

Veterinary Services

U.S. Pet Market Retail Sales by Category: 2009 vs. Year Ago(in billions)

Source: Packaged Facts Pet Market Outlook 2010‐2011

Pets as Family

• Human/animal bond never stronger…

• Why? – Marketing

– Non‐traditional family units

– Digital age

– Even stronger with recession

• Shifting societal mores…

91%*

93%

93%

93%

73%

75%

77%

75%

19%

18%

17%

18%

0% 140%

Pet Owners

Dog or Cat Owners

Dog Owners

Cat Owners

Agree a Little Agree a Lot Any Agree

“Consider My Pet(s) Part of the Family”:By Percent of Pet, Dog/Cat, Dog and Cat Owners, February 2009

Source: Packaged Facts online poll, February 2009 (2,600 U.S. adult respondents, including 1,668 pet owners).

14%*

5%*

31%

26% 25%

0%

35%

Agree a Little Agree a Lot Neither Agree or Disagree

Disagree a Little

Disagree a Lot

Percent of Pet Owners Who Anticipate Spending Less on Pet Food/Supplies in Next 12 Months: February 2009

Source: Packaged Facts online poll, February 2009 (2,600 U.S. adult respondents, including 1,668 pet owners).

19.1%

35.7%

18.7%

20.5%

5.9%

0% 50%

Strongly Disagree

Somewhat Disagree

No Opinion/Not Applicable

Somewhat Agree

Strongly Agree

Level of Pet Owner Agreement with Statement:“I Am Spending Less on Pet Products Because of the Economy”

(February 2010)

Source: Packaged Facts online pet owner poll, February 2010

22%

31%

32%

42%

45%

53%

55%

61%

73%

NA

42%

37%

44%

48%

57%

58%

64%

NA

0% 100%

Choose Products Because of Loyalty Card Discounts

Select Products to Create More Meals at Lowest Total Cost

Buy Brands Other Than Preferred/Usual Brand Because They are on Sale

Seek Out and Buy Store Brands to Save Money

Make Additional Unplanned Purchases After Seeing Products/Deals in Store

Stock Up on Certain Items Because They Are on Sale

Choose Store Specifically Because it Offers Lower Prices on Things You Need

Look at Store Flyer Before or At Store

Make a Shopping List Prior to Going to the Store

2008 2009

Deal‐Seeking Behavior: Percentage of Shoppers Participating in Activity, 2008 vs. 2009

Source: IRI January 2010 Times & Trends: Price, Promotion & Merchandising: Balancing the Call Between Value and Price Relief

74%

67%

76%

71%

69%

64%

60% 80%

Discount Stores

Supermarkets

Pet Stores*

2004 2009

Percent of Pet Product Customers Who Shop Across Channels: By Major Retail Sector, 2004 vs. 2009

(U.S. dog‐ or cat‐owning households)

Source: Compiled by Packaged Facts based on data from Experian Simmons National Consumer Study, Fall 2004 and Summer 2009. This material is used with permission. Packaged Facts’ Pet Market Outlook, 2010‐2011

Cross‐Channel Warfare

TV Spot for Walmart’s Pet Specialty Brands

TV Spot for PetSmart’s 20% Off Sale

Walmart vs. Pet Superstores

22.9% 24.5%

52.6%

26.0% 27.3%

46.7%

0%

60%

PetSmart & Petco Walmart Other

2005 2009Packaged Facts’ Pet Market Outlook, 2010‐2011

Petco Launches“Unleashed” Store Format,Staff Training,Consumer EdPrograms

Premiumization

49.4%

49.1%

66.9%

63.6%

27.2%

27.7%

45.8%

36.4%

20% 80%

Pet Food

Pet Supplies

Non-MedicalPet Services

Veterinary Services

1998 2008

$70K+ Household Share of U.S. Pet Market Expenditures:By Category, 1998 vs. 2008(percent)

370

426

295

408

465

200

300

400

500

2005 2006 2007 2008 2009

(15.1%)

(-30.8%) (38.3%)

(14.0%)

Number of New Pet Product Introductions, 2005-2009(percent)

Source: Compiled by Packaged Facts based on data from Product Launch Analytics, a Datamonitor service. Reproduction, resale or other distribution of this content is expressly prohibited without the written permission of the publisher. Packaged Facts Pet Market Outlook 2010‐2011

56

36

47

28

56

50

62

90

135

138

40

39

48

48

60

50

75

104

142

154

49

51

53

61

62

67

78

108

185

249

0 50 100 150 200 250 300

Fresh

No Artificial Flavor

No Artificial Color

High Antioxidants

High Protein

No Preservatives

High Minerals

High Vitamins

Upscale

Natural

2009 2007 2005

Top Marketing Claims by Number of New Pet Product Reports,2005, 2007 and 2009


Pedigree+ Functional Pet Food Line

Humanization

TV Spot for Purina Fancy Feast Appetizers

Print Ad for Mars Cesar Sunrise

“Breakfast Food”

Zoo Med’s New Canned Reptile Foods

6.8%

13.7%

8.2%

11.0%

8.9%

7.5%

12.6%

7.6%7.0%

9.2%

0%

16%

Food Medications Devices Supplements Total

CAGR 2004-2008CAGR 2008-2013

Growth Rates in U.S. Retail Sales of Senior, Weight Management,and Special Needs Pet Products, 2004‐2008 vs. 2008‐2013

Source: Packaged Facts Senior, Weight Management and Special Needs Products for Pets (September 2009)

Print Adfor Kong Senior Toys and Treats

Celebrity Impact

Look, we all want the best for our furry family members. And that’s exactly why I worked with experts in pet nutrition to create Rachael RayNutrish. My Isaboo loves food and treats made with simple, natural ingredients. So, what are you waiting for? Take a look around. See just how good these foods are and learn a little more about my pet charity, Rachael’s Rescue.

Glenn Close and Pet in TV Show Damages

Category Cross‐Over

Nestlé Purina’sFortiFlora ProbioticSupplement

Nestlé Purina’s Licensed PetGear Line

TV Spot for PetSmart Charities Valentine’s Day Weekend Pet Adoption Event

Cause Marketing

Going Green

• 2009 a Big Year…– Cardinal Labs– Nestlé Purina– Mars– Novus

• Worldwise• Planet Dog• Green = $$$

Humane Society’s Humane Choice Organic Pet Food

Packaged Facts’ Pet Market “3 Ps”

The Human‐Pet Health Connection

8.1%

5.2%

4.1%

5.3%6.0%

9.9%

4.1%4.6%

6.0%6.6%

0%

12%

Veterinary Services

Pet Food Pet Supplies Non-Medical Pet Services

Total

CAGR 2005-2009CAGR 2009-2014

U.S. Pet Market Compound Annual Growth Rates by Category:2005‐2009 vs. 2009‐2014


$13.13 $13.88

$14.48 $15.20

$16.12

$17.00 $17.77

$18.57 $19.40

$20.18 $20.99

$21.72

$12

$23

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

(5 7%)

(3.5%)

(4.0%)

(4.0%)

(4.5%)

(4.5%)

(4.5%)

(5.5%)

(6.0%)

(5.0%)(4.3%)

U.S. Retail Sales of Pet Food, 2003‐2014

Source: Packaged Facts

34.9% 33.7%

20.3%

11.0%

40.7%

30.0%

18.5%

10.8%

0%

50%

Veterinary Services

Pet Food Pet Supplies Non-Medical Pet Services

2009

2014

Percentage Share of U.S. Pet Market Retail Sales by Category,2009 vs. 2014


Travelers Insurance TV Spot— “Things you care about”

Thank You!

Tel:

Email:

David Lummis

504‐931‐6322

[email protected]

Packaged Facts

Senior Pet Market Analyst

U.S. Pet Food Market Perspective and Prospects, 2010 2011

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