It's likely to result in increased advertising in 2010 and 2011, as was the case in 2009, when pet food and pet care advertising surged 22% (the 2010 numbers are not yet in), according to David Lummis, senior pet market analyst for Packaged Facts.
"Despite consolidation and changing ownership of brands, the number of key brands should remain essentially the same," Lummis tells Marketing Daily. "And under new owners, brands like Natura will likely receive additional marketing support as they are further developed and expanded."
Under Procter & Gamble, Natura announced on Feb. 28 that it is expanding its pet specialty channel distribution of Innova-branded products from independents to regional and national pet specialty chain stores, which implies a much higher level of marketing support for the brand, Lummis says.
During 2010, Procter & Gamble/Iams acquired holistic pet food maker Natura, Nestlé Purina bought fast-growth treats maker Waggin' Train, and Del Monte was snapped up for $5.3 billion by a group of investors including KKR. Already this year, Wind Point Partners acquired Petmate, which has expanded from pet carriers to a wide-ranging line of pet accessories.
"More broadly speaking, brand differentiation is more important than ever in today's pet food market, because products are becoming more sophisticated in terms of ingredients and health claims, such that more information is needed to communicate their benefits vis a vis lower-priced competitor brands," Lummis says.
According to Packaged Facts' "Pet Food in the U.S., 9th Edition," retail sales of pet food reached $18.4 billion in 2010, up 2.8% over 2009 levels. While this rate represented a slowing of category growth (the first time since the turn of the century that sales didn't grow by 3% or more annually), it also signaled the pet food market's relative strength in the face of economic hard times.
Breathing additional dynamism into the market are health-related marketing and product development initiatives including new weight-loss foods and programs from major market forces including Hill's and Purina and a flood of special-diet and condition-specific functional foods and treats.
Packaged Facts expects to see additional acquisitions of natural pet companies by mainstream market leaders during 2011 and 2012. It would not be surprising, for example, to see PetSmart or Petco snap up a leading producer of natural/holistic pet food, in order to fast-track their own expansion into natural via an exclusive brand, which could in effect become the chain's private label.
Five companies stand out as possible acquisitions targets: WellPet LLC, which is currently in the hands of investment management company Berwind Corp; Natural Balance, a top marketer of natural pet food in the pet specialty channel and a top seller for Petco; Halo Purely for Pets, majority owned by private equity fund Pegasus Capital Advisors; Nature's Variety, which produces natural raw and traditional pet food (its parent corporation, M.I. Industries, is backed by investment firm Catterton Partners) and Castor & Pollux, a top organic pet food brand in the pet specialty and natural supermarket channels.
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