By Corrine Harris and Michael Johnson//January 1, 2024//
By: Corrine Harris and Michael Johnson//January 1, 2024//
The U.S. pet industry has always been a growing and evolving sector, and the last few years, in particular, have been a wild ride. Over 80 million pet-loving households drive this market, and since 2020, these wonderful consumers have helped the industry weather a pandemic and the turbulent economic environment left in its wake. Pet owners want the best for their furry families, and this has manifested in the industry’s relentless push for better products via premiumization and humanization. Simply put, if something seems cool, trendy, delicious, healthy, nutritious, beneficial, exciting, sustainable, and whatnot, to consumers as human beings, then of course we want it for our pets.
Today, viewed from 30,000 feet, the pet industry is strong. Sales growth continues, and a testament to our success is the ever-increasing number of retailers, manufacturers and brands jumping into the pet market.
Some of this strength, however, is an illusion. The economy has been in an extended inflationary period, and this battering has taken its toll on shoppers. Dollar sales continue to increase, but a deep look at the numbers shows, generally, unit and volume sales are flat to negative. Consumers are being asked to spend quite a bit more for pet products than what they are used to, and are getting less product in return. They have adjusted to this by bending, but not breaking: pet owners have changed the way they purchase – they are trading down, buying less expensive food, buying fewer or cheaper treats, and making nonedible pet supplies last as long as they possibly can before replacing them. They are also shopping for more accessible, convenient, and less expensive venues for their pet supplies – and sellers are taking notice. In November alone, several large retailers have issued cautions about consumer spending softness heading into the end of the year.
An epic battle between humanization and inflation is playing out on pet shelves, and consumers are caught in the middle. As we enter 2024, many Americans likely feel that we are just entering the fourth fiscal year of 2020. Despite inflation around consumer goods being on a downward trend, pet food prices are still 22.9% higher than the pre-pandemic era. In comparison, an 8.5% increase in the U.S. median household income justifies how pet parents are adapting to these new challenges.
Nonetheless, key product innovations continue to entice and excite consumers. Compelling offerings like sous vide, freeze-dried, and air-dried offer consumers new, delicious, and nutritious ways to feed their pets, but these developments are not inexpensive.
Historically, these are the conditions where value pet brands reign supreme. How can manufacturers and brands continue to provide high-quality, premium products, but also expand their consumer bases through product price accessibility?
There are spaces in which the pet industry should never compromise: No pet brand is ever immune from safety and quality testing, or the quality of their employees. It is easy to see the recent costs of trying to save money in these areas with large product recalls, paid out in not only animal but human health. Having less spending power means the choices we make for our pets are now more important than ever.
In most industries, cost is an indicator of the quality. The iPhone 15 Pro Max costs more than the iPhone because it can do more. Freeze-dried and air-dried products, which are seen as ultra-premium product forms, cost significantly more than extruded kibble. In pet products, especially the formulation of pet food, the whole is greater than the sum of its parts, meaning that it is possible to make better products while cutting or maintaining costs.
Professional expertise is one of the key components of making premium pet food products more accessible. Fresh pet food, or sous vide, is a great example of this. In the hands of an expert formulator, it is possible to reformulate to offer both cost-savings and a superior nutritional profile, with greater product palatability. We know because this is one of many wins BSM Partners has created for clients this year. Having a formulation team that knows which cost-friendly ingredients can make food tasty and has the skills to put together a nutritious formula can be a huge asset, especially for premium brands that have seen raw material challenges and need help to avoid passing on those increased costs to the consumer.
Like fresh pet food, air-dried and freeze-dried are very popular due to the high percentage of meat in the formula. They are certainly more expensive due to the elevated ingredient cost and low yields. Meat is about 70 percent water and that water has to be removed during processing as air-dried generally has 10-14 percent water, and freeze-dried around 5 percent. Greater nutrient retention from gentler processing methods is very appealing to consumers. The lure of shelf-stable raw is hard to ignore. For both product forms, formulation expertise can accomplish the same results as discussed above in fresh formulas. Organ meats are rich in macro and micronutrients and can help reduce cost, and different dry ingredients can help with product appearance and quality. Nonetheless, any product that is 80-95 percent fresh meat will be governed by the cost of that meat. This is where technology truly shines, by reducing cost, increasing microbial log reduction, and even increasing yield. Most technology is not self-implementing, and it is circumstances like these that highlight the necessity of engineers and the power of processing.
All pet brands are only as strong as the people standing behind them and engineers are another vital area of expertise for establishing the process of making pet food. Biscuits are generally a very cost-friendly product that does well in times of financial difficulty, but the volatility of the market has forced some premium biscuit brands to find new manufacturing locations. Switching production locations can present significant costs, especially if that new production location has different equipment and the product begins to suffer in quality. Cracks and breaks in biscuits might not impact nutrition, but it does impact appearance and feeding ability. Engineers save the day by making changes to process parameters, like baking temperature and time, so that they can optimize and increase the quality of the existing formula without additional ingredients to solve these problems, which drives up prices. Working with BSM Partners allows you to pursue premium innovation while keeping product costs manageable.
Premium might be a marketing term, but most pet parents are looking at quality for their pets through the lens they determine quality for themselves, sometimes even making sacrifices in their food purchases to keep the best food in their pet’s bowl. It is expensive for companies to maintain a team of experts themselves, but, other options do exist, with the leading choice being those with the mentality that nothing is impossible on the journey to give our pets the best lives possible.
Corrine Harris is a Product Innovation Manager at BSM Partners, specializing in formulation across kibble, canned, and sous vide formulation. Her Master’s Research and previous work in the pet food industry are focused on nutrigenomics and vitamins. Michael Johnson is Consumer Insights Principal at BSM Partners, specializing in marketing, branding and consumer selling.