Wholesale costs of pet food have risen as much as 25 percent in the last year. Package sizes have shrunk by similar amounts. So it’s no surprise that many pet retailers are adjusting their prices as well as their product mixes to keep customers walking through their doors.

So far, pet owners are still buying high-quality foods, according to Susie Atherton, owner of Canine Creek Pet Wash & Boutique in Tehachapi, Calif., as well as founder of the online organization Pet Industry Retailers. However, they seem to be tightening their belts elsewhere. “In our experience, customers might be cutting back on ‘non-essential’ pet supplies to save money, but they are not compromising quality when it comes to feeding their pets,” she said. 

Kevin Richardson, who co-owns four Chicago-area Soggy Paws stores, agrees that health-conscious shoppers are switching to less expensive—but still healthy—brands and cutting out extras such as treats.

Pet owners see rising prices everywhere so they understand rising pet food prices, according to Connie Packard Kamedulski, who owns Animal Fair Pet Shop L.L.C., a pet supply store in Ridgefield, Conn. “What they won’t tolerate, however, is a formula change to lower quality in conjunction with a bag size decrease and a price increase,” she said.

Many pet retailers say they have had no choice but to pass along price increases to their customers.

Packard Kamedulski stressed the importance of raising food prices right along with the manufacturers.

Soggy Paws stays on the lower end of manufacturers’ suggested mark-ups, Richardson said. “We also have a tendency to eat between half and two-thirds of the mark-ups,” he said. “This is not always wise because what happens is that when we do finally raise the price, it’s not always an incremental increase, but is sticker shock for the customer.”

Canine Creek has absorbed small wholesale prices increases, but eventually passes them along as margins erode. “Although no one likes higher prices, we’ve found that people are generally more concerned with quality than the lowest price,” Atherton said. “At Canine Creek, we spend a great deal of time educating pet owners about nutrition and passing out free samples. Because of this, our customers are convinced it’s worth paying more for superpremium brands.”

The key is to add value. “We try to have the manufacturer’s reps come in as often as possible and educate both me and the staff. We use flyers and brochures on the sales floor,” Packard Kamedulski said. “And when a customer asks a question about dog food, one of us will personally talk to them and suggest what might work for them and their specific dog.”

Retailers also are bringing in additional value-oriented products in an effort to retain customers.

“We are still concerned about meeting the needs of budget-conscience customers, so we’ve brought in new brands with a lower price point that still meet our quality standards,” Atherton said. 

Packard Kamedulski also has swapped out some inventory to cater to customer demands. In addition, she hands out free samples rather than coupons to keep people coming back.

“I think one thing that can benefit the industry is to change the terminology. When I hear superpremium, I think ‘luxury item,’ ” Richardson said. “Buying healthy is not a luxury. In fact, buying healthy is cheaper.” To illustrate his point, he cited a simple recipe for a fresh and healthy tomato sauce for four—for less than $2.

Manufacturers aren’t blind to the challenges posed by price increases. Natura Pet Products (Fremont, Neb.) recently issued a press release justifying price increases for its Innova and EVO products by explaining that quality ingredients come at a price. The company also announced in January that 100 percent of its ingredients now come from non-Chinese suppliers.

Nature’s Balance Care L.L.C. (Estacada, Ore.) took a different approach by “rolling back prices to the 1990s,” according to Missy Wryn, the company’s chief executive officer. She said the company was able to reduce prices by obtaining supplier discounts, freezing salaries and reducing its own profit margins.

An article in the March 2009 issue of Consumer Reports, published by Consumers Union (Yonkers, N.Y.), recommended pet owners buy pet food based on overall nutrition rather than brand.

It also cautioned against homemade pet food—good news for retailers. “Most experts said they hadn’t seen a pet get sick from inexpensive food,” the article said. “However, half said they had seen pets become ill from eating homemade pet food, a growing trend since the 2007 recall of some commercial pet food contaminated by melamine.”

—By Michelle Peterson [April 2009 PET AGE]