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Tuesday, March 13, 2012

The shrinking middle (pet market) class

Is the middle slipping out of the pet market?  In crunching the numbers for Pet Product Retail Channel and Consumer Shopping Trends in the U.S. 2012, Packaged Facts expected to see discount stores increase their pet product shopper base, given the ongoing economic sluggishness.  Instead, it’s the pet specialty channel that’s been advancing.  From 2007 to 2011, pet stores saw their customer base rise from 50% of dog or cat owners to 56%, a net add of 5.5 million shoppers.  Meanwhile the discount store pet product shopper base fell from 31% to 28%.
There’s no question pet owners, like virtually all Americans, tempered their spending during the recession.  But the steady shift into the higher-priced pet specialty channel makes it clear the upper end of the market is alive and well.  During the past decade, much of the value of the U.S. pet market has shifted into more recession-resistant higher-income demographics. The latest Census Bureau data confirm that this upmarket shift continues, both cause and effect of the product premiumization trend at play for several years now, increasingly concentrating pet market value among significantly higher-priced products.
Still, given the Great Recession, how to explain discount stores’ declining pet product shopper base?  Although Walmart, Target, and the like have been coming on strong in the pet market, they no longer have the price-focused consumer to themselves.  While the pet food recalls of 2007 took pet owners seeking safer foods out of discount stores and into the pet specialty channel, the recession has pushed discount store shoppers into even more bargain-priced channels.
Dollar stores and wholesale clubs have therefore been coming on strong, through a combination of EDLP and new store brand programs.  According to Gino Biondi, director of private-brand development for Family Dollar, pet “is one of FD’s fastest-growing categories, and our private-brand pet business is growing even faster” (Pet Business “Pet Aisle” special report, Fall 2011).  Also worth noting on this front is the new Simply Right store brand pet food line from Sam’s Club.
Where does all this upper and lower market action leave the middle?  Well, it’s clearly still there.  In Packaged Facts’ September 2011 Pet Owner Survey, 55% of pet product buyers characterize the pet food they buy as average priced.  However, unless you’re a NestlĂ© Purina or a PetSmart, your middle market prospects may be limited.  Why?  One of end of the spectrum are devoted pet parents—the dream consumers of the pet market—and these informed shoppers who know you get what you pay for.  At the opposite end of the spectrum are pet owners determined to buy on the cheap, without too many questions asked.
These days, the pet market line is increasingly drawn between those who view their pets as family members and buy the best foods they can afford for pet health and pet pampering, and those strongly focused on price.  As a result, pet shoppers are migrating in two directions—up or down, in either case siphoning shoppers out of the market middle.