Dog and Cat Food

SIC 2047

Companies in this industry

Industry report:

This industry consists of establishments primarily engaged in manufacturing dog and cat food from cereal, meat, and other ingredients. These preparations may be canned, frozen, or dry. Establishments manufacturing feed for animals other than dogs and cats are classified in SIC 2048: Prepared Feeds and Feed Ingredients for Animals and Fowls, Except Dogs and Cats.

Industry Snapshot

While most manufacturing industries in the United States were struggling during the economic recession of the late 2000s and early 2010s, the pet food sector seemed to be holding its own. According to the American Pet Products Association (APPA), U.S. sales of pet food increased from $16.8 billion in 2008 to $17.5 billion in 2009. APPA president Bob Vetere commented in a May 2010 article in Flexible Packaging, "People become more attached to their pets in times of uncertainty and stress, so we continue to reward them for their unconditional love and companionship." Indeed, an August 2009 survey by the APPA showed that, despite the recession, 80 percent of surveyed pet owners had not changed their spending patterns when it came to caring for their cat or dog.

Other figures from the Pet Food Institute showed that U.S. manufacturers produced more than 8 million metric tons of dog and cat food in 2008, up from 7.6 million metric tons five years earlier. A majority of U.S. households had at least one dog or cat as a pet in the late 2000s, with the pet dog population at more than 67 million and the pet cat population at more than 83 million.

Organization and Structure

The dog and cat food segment of the pet food industry primarily is made up of two types of firms. One is the large, general manufacturer producing a variety of dog and cat foods along with other types of feed or food for humans in other divisions or subsidiaries. The other type is the specialty firm that exclusively produces pet food, which is usually health-related or specialized in some way. Traditionally, the general firms sell their product in grocery stores while the specialty firms sell their products through veterinary offices or specialty stores.

The pet food industry is subject to federal and state regulation. In 1958, the manufacturers of pet food formed the Pet Food Institute (PFI), a national trade association. PFI acts as a spokesperson for the industry before the various regulatory agencies and bodies, sponsors research, represents the U.S. industry in international meetings, and works on uniform standards for pet food. PFI worked with the American Association of Feed Control Officials (AAFCO) to develop a uniform law on pet food standards that states may use as a model whenever they consider changes to their laws and regulations on the topic. Each state has its own set of laws and regulations that apply to pet food.

Regulation of the Pet Food Industry.
At the federal level, pet food labeling and advertising claims are regulated by the Food and Drug Administration (FDA), the Federal Trade Commission (FTC), and the Department of Agriculture. All pet food plants are subject to FDA inspection, and many of the FDA's canned food regulations apply to pet foods. Many manufacturers produce or sell products in more than one state, which means their product and its labels must also meet each state's regulations. In 1996, the AAFCO passed new regulations, which went into effect in 1998. These regulations govern the use of the terms "lite" and "less fat" on the U.S. pet foods' labels. In 2000, the AAFCO published rules regulating the use of the label information that read, "Animal feeding tests using AAFCO procedures substantiate that [the product] provides complete and balanced nutrition for all life stages." Before 2000, this label could be used on products that had not been tested but were in the same family of products. The regulations, which became effective in 2005, more strictly and narrowly defined the term "family."

Several recalls of pet food in the late 2000s led the FDA to draft the Animal Feed Safety System (AFSS), which, according to the agency's web site, "will incorporate risk-based, preventive control measures for ensuring the safety of animal feed." As of 2010, the project was still in the draft stages.

Sales Outlets/Product Distribution.
Dog and cat food traditionally is sold in grocery stores, pet stores, and by veterinarians. Veterinarian sales are especially prevalent for those brands that are marketed as a health specialty. Health consciousness for pets paralleled the general trend toward health consciousness for humans in the late twentieth and early twenty-first centuries. This movement led to increased attention to labeling and awareness of obesity in pets and the development of more specialized pet foods, with greater emphasis on health in the marketing of the product. Grocery stores, however, still remained the largest outlet for sales of pet food.

In the 1980s and early 1990s, the advent of the discount retailer as a major economic force in the United States began to change that trend. The biggest loser was the grocery store. The interest in health foods allowed those brands traditionally marketed through veterinarians and breeders to retain market share while the share of the grocery store fell to the discount chain. Efforts to stem the flow with cheaper, in-house brands had only moderate success because people continued to prefer national brands but wanted them at a lower price. Grocery stores began to market more premium brands and expand their pet offerings in an effort to lure pet owners back to their shelves.

The downward trend in supermarket sales was also due to the proliferation of pet megastores such as PetSmart and Petco, which sell premium brands at discount prices, undercutting supermarkets by 10 to 30 percent. Soon after, online Internet shops such as Pets.com and Petopia.com also entered the market.

Background and Development

The first commercially prepared dog food was a biscuit product introduced in England around 1860, according to the Pet Food Institute. Dry dog foods were subsequently developed with formulas based on the nutritional knowledge of the day. After World War I, canned horse meat for dog food was introduced into the United States. In the late 1920s, the first commercial pet food diet was developed by the Ralston Purina Company. In the 1930s, canned cat food and dry meat meal dog foods came into use. These were succeeded by dry expanded type pet foods, which came onto the market during the 1950s. The 1960s, notes the Institute, "were marked with great diversification in the types of food available to the pet owner including dry cat food, many more varieties of canned products, and new soft-moist products. With the growth of the industry has come a greatly expanded use of by-products from the meat, poultry, and seafood processing industry. Approximately 1.1 million tons of these by-products are now used annually in pet foods."

The flat growth of the 1980s led to price wars in the early 1990s as the various manufacturers vied to take a larger share of a stagnant market. Flat growth in U.S. sales also led the U.S. pet industry to look at exports as a means of expanding the market. At the same time, the Pet Food Institute, the association to which 95 percent of all U.S. pet food manufacturers belong, tried to expand the number of U.S. pet owners by targeting groups not usually associated with pet ownership, such as singles. Their success in increasing ownership was primarily through the promotion of cat ownership since cats need less attention and are more adaptable to the lifestyle of the single person.

Beginning in the mid-1990s, pet owners began to follow the general food trend to healthy diets, leaving behind traditional pet foods for those with more protein and fewer chemical additives and preservatives. The largest growth in the pet food market was in the super-premium brand segment. These often were veterinarian recommended diets focusing on the needs of older or overweight pets.

Pet food sales continued to be a dynamic industry into the late 2000s. Enhanced status as family member for a pet is commensurate with care, affection, and attention and, because more people were treating pets like children, a corresponding increase in spending on pet products was noted. In fact, the pet industry doubled in size between 1994 and 2004. This was palpable in the growth of high-end, diverse, and healthier pet foods. Premium, natural, and organic pet food, once reserved for the pampered, became standard fare for dogs and cats in a growing number of households.

Proctor & Gamble is credited with setting the stage for the enhanced-value segment of the industry when it acquired premium brand Iams in 1999. By 2004, Iams was up 8 percent in dollar sales for the year and 5.6 percent in unit sales, holding the top place in food, drug, and mass merchandiser sales (excluding Wal-Mart), according to Information Resources Inc. data.

The most important trends in dog and cat foods in the late 2000s was the manufacturing and marketing of premium and super-premium foods to cover all bases, from natural and raw diet foods created to parallel the diets found in dogs in the wild, to breed-specific specialty food mixtures. In between were organic foods, as well as special diet foods catering to such concerns as weight loss, omega-3 fats, improved skin, kidney health, allergies, tartar control, and kosher products. Moreover, convenience played a major part in spiking the value of products, with pouch formats increasing for both dogs and cats. Sales of pouch products increased 16.1 percent for cat food and 13.7 percent for dog food in 2007.

Safety was a major issue for the industry in the late 2000s. In 2005, the Diamond Pet Food Co. issued a recall in 23 states because some of the pet food made at its plant in Gaston, South Carolina, contained aflatoxin, a naturally occurring chemical that comes from a fungus that can cause severe liver damage. In 2007, several companies issued recalls of pet food contaminated with melamine, which turned deadly when mixed with cyanuric acid in products imported from China. Ultimately, the 2005 recall involved 19 varieties of dog and cat food, and the 2007 recall included more than 100 brands of pet food, with dozens of pet deaths and many illnesses attributed to contaminated pet food in both of those years. These safety issues caused pet owners to become more discriminating in their pet food choices. "Natural, Organic and EcoFriendly Pet Products in the U.S.," a report released by Packaged Facts Inc. in 2007, projected that the market for natural pet food would double by 2012, even after registering record growth in the wake of the recalls in 2005 and 2007. Sales of natural pet food through supermarkets, drug stores, and discount stores increased more than 200 percent to $29 million in 2006. Through the first half of 2007, sales totaled $82 million. "The impact of the pet food recall may be felt for years to come, as consumers make product safety a top concern and marketers respond by placing appeals like product safety, reliability and quality at the forefront," said Don Montuori, Packaged Facts' vice president of publishing.

Current Conditions

The most significant trend in the cat and dog food industry in 2010 was the focus of pet owners on their animals' well-being. Consumers were increasingly treating their pets as family members--and paying the bill to keep them healthy and happy. According to a March 2010 article in Nutraceuticals World, the growth in the premium and organic pet food industry "is reflective of the emotional and personal roles pets play in the average family, even in a slow economy. Owners are willing to reduce spending on other household and leisure items so their 'best friends' can continue to enjoy high quality pet products." Sales in the frozen and refrigerated segment of raw and lightly processed dog food rose to $165 million in 2008, an increase of almost 20 percent in grocery store sales, according to Information Resources Inc. Some experts predicted this segment of the industry would continue to grow and perhaps follow the lead of Australia, where fresh pet food accounted for 20 percent of the market.

Nutritional supplements for pets were also on the rise and accounted for half of all U.S. animal nutrition sales in 2008, growing more than 7 percent to $1.4 billion, according to Nutrition Business Journal. Packaged Facts predicted that pet supplement sales would grow 39 percent between 2010 and 2015. Reasons for this growth, other than the increased humanization of pets, included a growing interest in natural and organic products, an aging pet population, an influx of new products, and an increasing acceptance of pet supplements by veterinarians and other industry participants.

Another trend in the industry that coincided with the increased humanization of pets was the increase in humanization of pet foods. In other words, producers were working to make pet foods "look and feel" like human food, according to Nutraceuticals World. Examples of products that exemplified this development included Woofy Pop Popcorn Dog Treats, Nestle Purina Chef Michael's Canine Creations Dog Food, and Merrick Venison Holiday Stew with Vegetables and Red Apples, among others. Producers also segmented the industry by producing foods for specific breeds (e.g., Royal Canin Mini Yorkshire Dog Food), vegetarian foods (e.g., Pet Guard Organic Vegetarian Pet Food), and foods that were allergen-free (e.g., Natural Balance Limited Ingredient Diets Potato & Duck). Several organic blends were also coming onto the market, in addition to foods that boasted health-enhancing ingredients, such as glucosamine, chondroitin, omega fatty acids, and antioxidants. According to APPA president Bob Vetere in Flexible Packaging, "These higher quality products and services, combined with a strong consumer focus on their pets' well-being, make health and wellness the most powerful trend in 2009 across the entire pet industry....We want to keep our pets healthier, longer, and are willing to spend what it takes to make it happen."

Industry Leaders

The leading company involved in the manufacture of dog and cat food in the United States in 2010 was the Nestle Purina Petcare Company of St. Louis, Missouri, which resulted from the purchase of Ralston Purina by Swiss-based Nestle in 2002. Its brand names included Cat Chow, Beneful, Friskies, Alpo, Fancy Feast, and Mighty Dog. Nestle Purina PetCare had annual sales of $828.3 million in the late 2000s. Other industry leaders were Del Monte Foods of Pittsburgh, with brand names such as Kibbles 'n Bits, Meow Mix, and Gravy Train; and Mars Petcare Inc. of Franklin, Tennessee, with brand names including Pedigree, Sheba, and Whiskas. Proctor & Gamble Company of Cincinnati, Ohio, already a leader in the premium market with its Iams and Eukanuba brands, planned to increase its presence in the natural pet food segment when it announced in July 2010 that it would purchase Natura Pet Products.

For sales, specialty stores such as PetSmart and Petco held significant market shares. Pet superstores accounted for more than 15 percent of pet food sales.

America and the World

The United States remained a major exporter of pet foods, with $1.1 billion worth of product exported in 2009, according to Supplier Relations US LLC. Major export markets were Japan, Canada, Mexico, and the European Union. Imports of pet foods were valued at $407 million that year.

Euromonitor International reported that dog food accounted for 44 percent of expenditures on pet care and supplies worldwide in 2009; cat food accounted for 27 percent. Global sales of cat and dog food totaled $52 billion, and supermarkets and grocery stores continued to hold the majority of the market, accounting for about 53 percent of sales. The United States remained the largest market for pet food, followed at a distance by Brazil, Japan, and the United Kingdom. India and Russia were predicted to be the fastest growing markets through the 2010s.

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