The pet care market is certainly a lucrative one and one that has seen unprecedented growth over the last couple of years, triggered by the COVID-19 pandemic. The proportion of households who own pets increased from 45% in 2019 to 64% in 2022, meaning that the broader pet care market, including food, accessories, grooming and veterinary care, is expected to reach over £7 billion this year.
This has been good news for the specialists in the sector, with both Pets at Home and Jollyes registering top line annual growth well into the double digits. This boom has also been good news for branded pet food manufacturers such as Royal Canin and the category is one in which private label penetration is relatively low and in which brand loyalty is typically very strong.
Even in this era of significant economic headwinds, pet food is one of the few areas where most shoppers will not trade down, instead preferring to retain or even upgrade the brands that they normally buy.
As well as the pet ownership boom, there have been other significant drivers of growth, not least the so-called humanisation of cats and dogs as well as the premiumisation of the market: owners are much more aware of the need to provide healthy and age-appropriate diets. Our client Royal Canin offers a tailored approach to pet nutrition that cuts through by offering ranges designed specially for individual breeds and lifestages.
Pets at Home has reported that the lower end of the market has been growing by 10%, the mid-tier has been generating growth of 17%, and the very top of the market has been seeing sales accelerating by 23% year-on-year. This premiumisation is a process that Pets at Home says is helping to expand gross margin and enhance loyalty.
Of course, it wouldn’t be a high growth part of the market if supermarkets were not looking to cash in too: it has been noticeable in recent years that some of the major multiples have tried to more aggressively increase their involvement in the pet sector. Sainsbury’s has recently upgraded its pet departments with new shelf strips and point of sale as well as introducing sections devoted to tails.com – the online retailer and pet food brand that Nestlé Purina invested in in 2018. It is also noteworthy than Sainsbury’s has dedicated some of the space freed up by the recent HFSS regulations to emergent pet brands such as Forthglade.
Asda, meanwhile, has unveiled a new pet concept in a few stores, with specialist pet brands like Petface and Denzel’s afforded their own bays as well as digital screens installed in the aisle for the provision of pet services, such as insurance. While Tesco and Morrisons have yet to follow suit in terms of a more concerted effort to gain share in the pet food market, it is fair to conclude that the supermarkets are more than aware of the opportunity presented to them by this buoyant market.
Pet care is a rare category in that, for branded manufacturers, Aldi and Lidl offer limited opportunity, with the bulk of their ranges (100% in Aldi’s case) devoted to own-label and the only opportunities for branded suppliers in the shape of periodic appearances in special-buy promotions. By contrast, variety discounters, such as B&M and Home Bargains, present a more attractive opportunity for branded manufacturers as they become more of a frequent destination for pet care. B&M in particular has significantly increased the space given to the category and it is noticeable that there is a lot more collaboration between them and suppliers in terms of shopper marketing and the provision of bespoke displays.
At a time when economic headwinds are forcing shoppers to make some tough decisions of where they shop, how they shop and what they buy, the pet care market remains a relative oasis of calm in terms of ongoing growth and premiumisation. It is also a fascinating market in that super-premium brands have so far declined to significantly expand their presence in mainstream grocery, instead preferring to remain in the authoritative and less cut-throat world of veterinary surgeries and specialist pet stores. This makes perfect sense as dedicated and conscientious pet owners generally seem to prefer the advice-rich environment of specialist retail rather than the more commoditised, price-led approach favoured by the big grocers.
That said, it seems likely that the supermarkets will continue to try and further encroach into the more lucrative premium end of the market. This could be achieved by offering an improved environment as well as by enhancing segmentation in a category where the age of the consumer is important and where different credentials in terms of ingredients and sustainability are becoming increasingly powerful influences on purchase decisions. Asda and Sainsbury’s have demonstrated the only real way to take on the specialists is by enhancing their propositions and it will be interesting to see others follow suit.
One thing is for sure, we remain a nation of pet lovers who want the best products for our furry friends.