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Report: Opportunities in $29B US Pet Food Market

Glenn Polyn//September 22, 2020//

Cute funny dogs eating dry food at home

Report: Opportunities in $29B US Pet Food Market

Glenn Polyn //September 22, 2020//

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Press release: Packaged Facts

Throughout much of 2020, the U.S. pet industry has been living up to its recession-resistant reputation, with pet food actually benefiting as a result of short-term pandemic-related buying and stockpiling. Given pet food’s essential nature, the future outlook is mostly positive as well, with a number of longer-term potential opportunities beginning to come into focus, according to market research firm Packaged Facts in the recent report Pet Food in the U.S., 15th Edition.

Packaged Facts estimates U.S. retail sales of dog and cat food approached $29 billion in 2019, up 6 percent over 2018. Much of the growth in the pet food market can be attributed to the rapid acceleration of online sales, driven especially by and, whose swift advances have been more than offsetting the resultant drag on brick-and-mortar sales. Even with much of the activity now occurring in mass channels and online, pet food premiumization also remains an important market growth driver as pet owners continue to trade up to products including formerly pet-specialty-exclusive and similar brands now available in mass channels, and fresh pet food options including refrigerated and freshly prepared on demand.

Looking ahead, Packaged Facts projects that pet food sales will reach nearly $31 billion by the end of 2020, growing 7 percent, compared with the 6% rate of growth the research firm forecast prior to the coronavirus pandemic. Beyond 2020, Packaged Facts expects pet food sales to gradually moderate to 5.5 percent in 2021 and 2022 and to 5 percent in 2023 and 2024.

Beyond the aforementioned market trends, Packaged Facts identifies several other opportunities it expects will positively impact growth in the U.S. pet food industry in 2020 and beyond. These include, but are not limited to:

Opportunity 1—New Pet Ownership

The brightest note for the pet food industry during the age of coronavirus is the increase in pet adoptions and ownership that has taken place during the first half of 2020 and appears likely to continue throughout the year. Part of the reason for this across-the-board spike is a strong component of doubling down on pets by pet-loving households adding to their menagerie, as well as additions by households with children. In Packaged Facts’ April/May 2020 survey:

  • 12 percent of adults with children under age 18 at home adopted a pet because of coronavirus compared with 8% of adults overall.
  • 10 percent of cat owners, and 9% of dog owners reported that they had adopted a pet specifically because of coronavirus.
  • One in four (25 percent) current pet owners acquired a pet of any type (whether dogs, cats, or other pets such as fish, birds, small animals, or reptiles) in the last 12 months, with 14 percent acquiring dogs and 12 percent acquiring cats.
  • 10 percent of pet owners acquired a pet in the last 3 months—during the initial coronavirus pandemic—with 5 percent acquiring dogs and 4 percent acquiring cats.

As of mid-year 2020, Packaged Facts projects a 4 percent growth in the pet ownership household base in 2020. This growth will bring the total number of pet-owning households in the U.S. to nearly 71 million, or 56 percent of households overall. Aside from premiumization, one of the biggest pet food market drivers is growth in the pet population, so the adoption increase strongly suggests continued sales gains even with the negative economic impact of the pandemic. Pet food marketers and retailers would do well to target new pet owners and secure their long-term loyalty from day one through “puppy promotions” and new pet welcome packages.

Opportunity 2—Private Label Pet Products

As the economic fallout of the pandemic continues and millions of pet owners face the threat of financial duress, a shift to lower-cost private-label brands of pet food seems inevitable, and history supports a store-brand bump. Although pet food shoppers demonstrate a high degree of brand loyalty, these same consumers are not indifferent to store brands’ advantages. Previously, in the immediate aftermath of the Great Recession, Packaged Facts found that consumers’ heightened value-consciousness gave private label a boost across many categories. Packaged Facts survey results from April/May 2020 support this shift, with 47 percent of pet owners buying lower-cost store brand products more frequently—and even without the belt-tightening, pet owners are more likely than not to agree that stores brands are good quality products. In another Packaged Facts’ Survey of Pet Owners in 2020, 44 percent of pet owners agreed that store brands are as good quality as national name brands, with only 23 percent disagreeing. As a result, contract manufacturers of private-label brands, and the retailers that sell them, will likely benefit in the months and years ahead.

Opportunity 3—Sourcing as “The Next Natural”

“Natural” has long been one of the top premium pet food appeals. But with natural formulations now ubiquitous in the pet food market, the days of relying on the “natural” claim in and of itself to sell pet food have dwindled, forcing marketers to get creative in finding similarly appealing options. Accordingly, claims such as “fresh,” “limited ingredient,” and “superfood” have all gained traction, as have foods featuring exotic and alternative proteins. At the same time, today’s pet owners are not only looking for ingredients that support overall health and help manage health conditions, they are also looking to avoid ingredients they feel are unsafe or that have been raised/harvested/created in a way that is socially, ethically, or environmentally irresponsible. In response, pet food marketers need to promote sought-after ingredients while being fully transparent, with product websites and labeling telling the full story of where the ingredients come from and how the products are made. Looking ahead, Packaged Facts expects to see marketers and retailers of premium pet foods increasingly involved in sustainability, animal welfare, and socio-economic system initiatives.

In Packaged Facts’ February/March 2020 Survey of Pet Owners, 48 percent of pet owners agree that pet retailers’ participation in welfare and rescue causes plays a role in where they shop for pet products, and the same percentage agree that the participation of brands in causes impacts their decision on which products to purchase. Additionally, 69% of dog and cat owners are concerned about the treatment of animals raised for use in pet food and treats/chews. Sustainability is of similar importance. Pet food marketers will have to go the extra mile to satisfy consumers’ growing demand for sustainable business practices, product safety, and corporate transparency.

Opportunity 4—Grain-Inclusive and Limited Ingredient Recipes

Pet food opportunities are emerging from the health controversy surrounding grain-free pet food, which is under investigation for a possible link to pet illness and deaths stemming from DCM (canine dilated cardiomyopathy). Marketers of superpremium kibble and wet foods are increasingly coming back around to grain-inclusive formulations, a trend that began to gain momentum in the last few months of 2019 and moved into high gear during the first months of 2020. Of particular interest are ancient grains such as spelt, quinoa, sorghum, amaranth, quinoa, millet, buckwheat, and chia. Also ripe for additional development, given the grain-free debacle, are recipes containing plant-based superfood ingredients such as kale, spinach, and blueberries that can stand in place of the more “undesirable” grains such as wheat and corn. With the resolution of the FDA investigation of the DCM situation still possibly years away, marketers will need to address pet owner concerns and offer new premium options above and beyond grain-free.

Opportunity 5—Focus on Felines

Historically speaking, the U.S. pet industry has been unapologetically canine-centric. One reason is that dog ownership rates have been increasing while cat ownership rates have remained flat. Another is that dogs tend to be more lucrative in terms of products and services. As a result, pet product manufacturers, retailers, and marketers have tended to give cats short shrift, including in the minds of cat owners.

In Packaged Facts’ February/March 2020 Survey of Pet Owners, cat owners were asked whether they perceive that cats, compared with dogs, are “sometimes treated as second-class.” Across the board of industry players to varying degrees, the answer is “yes,” including for pet food/treats, non-food products, pet specialty stores, mass stores, and veterinarians. What would cat owners like to see? Informal responses to that question include “better selection of products (other than different sizes/counts of the same thing),” “more natural things for cats to eat,” “better selection of food for aging cats (or hairball or urinary infection or raw food formulations),” “chewy hard food,” “healthier canned food,” “better food topper products,” “more nutritious and delicious cat treats,” and “samples of the pet food to bring home.”

Based on an informal survey of new product introductions and email promotions over the past few months, Packaged Facts concludes that marketers and retailers are getting the message. More and better products and services for cats, and more marketing attention, stand to encourage cat owners to invest more heavily in the health and happiness of their purr babies and—most important of all—attract more Americans into the feline fold.