Dog Treats Part of Newest Market Shift

Around 70% of the dog and cat food market is controlled by five major players: Nestlé Purina, P&G (Iams), Mars Inc. (Masterfoods), Colgate Palmolive (Hill's Pet Nutrition) and Del Monte Foods Co. The industry recently experienced shifts by major players in the petfood category. The most recent news comes from Mars Inc., when it acquired Doane Pet Care. Before that, we heard of Del Monte's purchase of Meow Mix and Kraft's Milk-Bone dog biscuit brand. These purchases reaffirm that the area of interest continues to be in the cookies, snacks and pet treats subcategories and premium pet food products.

Recent market shifts

Mars Inc., which holds a 25% share of the pet food market, targeted Doane Pet Care Co., which makes dry (more than 70% of sales) and semi-moist foods, biscuits and dog treats. According to Bob Gamgort, North American president for Mars Inc., "the addition of Doane's US operations will provide production capacity to accelerate our innovation pipeline and grow our pet care business in North America."

Del Monte Foods Co., which holds a 3.2% share, invested US$705 million to acquire Meow Mix Holdings Inc., and US$580 million to include Kraft's Milk-Bone dog biscuit brand in its current arsenal of pet food offerings with stalwart brands such as Kibbles n Bits, Pounce, Meaty Bone and 9Lives.

The Meow Mix acquisition adds significant leverage to Del Monte's pet food business, which will not only make them a billion-dollar pet food business, but will enable them to compete with larger players in the spaceplayers like Nestlé SA and Mars. Meow Mix has a 16% share in the US retail grocery market and had US$250 million in revenue last year. The quest to innovate, increase competitive advantage and fuel growth as a result of these slightly different strategic acquisitions raises the question as to how the market will react, or change, vis-à-vis the retail consumer.

Consumer demand: A push or pull dynamic

The premium pet food segment is now the focal point for growth. This migration to premium and superpremium foods is anchored on functional pet food benefits and human-grade pet food ingredients. Though not as significant a driver as the trend seen with Baby Boomers, there is another trend evolving which could become an important strategic positioning tool in the future. The fast-paced workforce, fueled by the Generation X and Echo Boomer generations, and the increase in urbanization worldwide, makes it more and more difficult to consider dogs as pets; and, as such, the new professionals are becoming more interested in feline companions as an alternative. It will be interesting to see how these demographic forces impact the composition and mix of the petfood marketplace.