The Pet Products Arms Race

According to pet industry statistics, on Valentine's Day 2013, Americans spent more than $800 million on cupid-oriented treats for household pets. Market reports from the National Retail Federation show that tokens of love from owners to pets included everything from heart-shaped chew toys for dogs, to sleek red leather collars for cats, to edible 'flower arrangments' for dogs and cats. It's all another indication of how pet industry retailers are quickly adapting to the growing market trends of pet owners who view their four-legged friends as family members.

Indeed, big pet retail chains including PetSmart and PetCo have for a decade come to recognize the acceleration of the trend. Many franchises offer a growing variety of pet products and 'pet care services,' that include grooming, boarding, training and 'beds' and 'strollers' for pets.

It is probably something of a stretch to characterize these increasingly elaborate offerings as a flat out Retail War, but the up-selling of more and more items and services designed to 'humanize' pets by a core group of large pet industry businesses is taking on the tone, at least, of a pet industry arms race.

Consider these findings by a leading pet industry analyst, David Lummis of PackagedFacts, in his 2012-13 annual pet industry outlook report:

During the late 1990s, PetSmart and Petco began moving into non-medical pet services including grooming, boarding, and training, dramatically altering this competitive landscape. During the past decade, PetSmart and Petco have brought services like grooming “out of the back room” and into the national spotlight, forced independents to spruce up their operations, fueled the trend toward premium services, and encouraged other retailers and investors to expand in the field. No doubt, the PetSmart/Petco push has come at the expense of more than a handful of independent service providers. But the big-box involvement has been a net gain for non-medical pet services, with some independents having turned to their own advantage pet owners’ increased awareness of premium services.

In addition, Lummis found that while overall sales of pet products nationwide have slumped slightly during the recession, 'big box' retailers such as PetCo and PetSmart have continued to see healthy revenues, in part due to the diversification of their inventory and by adding more 'pet care services" -- including veterinarians -- and pet owner education information:

• From 2005 to 2011, PetSmart services grew at a compound annual rate of 12%, with yearly gains in the 10%-11% range from 2008 to 2011, up from 9%-10% in 2006-2007.
• PetCo's services and sales have continued to grow at a commensurate pace, topping $200 million in 2011.

In addition, the North American Pet Health Association (NAPHA) reported that in 2012 pet owners spent more per capita on 'discretionary' items than on veterinary care for their furry family members.

"One driver for this upward motion is the influence of retailers like Petsmart pushing services—not only in-store veterinary practices but also boarding and grooming—into the mainstream shopping experience," the NAPHA indicated on its blog.

Interestingly, even a few non-pet retailers, too, are seeing some increased revenues thanks to the growing 'humanization of pets' trend from owners. The Build-A-Bear-Workshop Company told Forbes Magazine recently that its sales staff at some franchise locations are seeing increasing numbers of customers who purchase only the clothing meant to garb a bear that has built at the store.....without having actually built a bear at the store.

It turns out that more and more customers -- not always, but usually women -- are purchasing tiny skirts, rain jackets and sweater ensembles that are meant for the Build-A-Bear constructed toys, and bestowing them on their 'toy sized' dogs or cats. The American Pet Products Association estimates that 15 percent of all American pet owners will 'dress up' their pets at one time or another.

With that kind of activity likely to increase among customers, it is a good bet that the animal products retail arms race is only going to pick up steam in the coming years.

To learn more about the latest trends and data on the Pet Industry, click below for a free SlideShare highlighting 20 "Sizzlin' Stats."

Thanks for reading!

-- Amy Alexander
Sr. Writer/Content Manager

When Pet Healthcare Hits Home

My name is Jeff Miller and I'm a Research Specialist at MarketResearch.com. Like most cat owners my wife and I have the most awesome cat you'll ever meet. Thirteen years ago my wife peered into a box full of crying kittens and was instantly smitten with this tiny ball of grey and white fur.

Immediately the name came to her: "Grey!" And thus she was named.

For the last 13 years we've been very lucky to have our little companion. A true friend. She's been with us through life's ups and downs and has never asked for anything in return other than fresh food, water and a little lap time.

Then something happened.

Over the course of a few months Grey began to change. It was subtle at first; a little more needy, a little less hungry. But then the changes became more dramatic until we realized that our happy-go-lucky kitty, who charmed everyone she met, was slowly changing into this hyperactive mess who couldn't hold down her meals.

She was miserable. We took her to the vet who suggested a few remedies-changing water more frequently, improving her diet, etc-but despite minor improvements she continued losing weight.

A healthy cat is a happy cat.

Finally we decided to take her back to the vet for blood tests. For Grey, the vet's not so bad. As a matter of fact, she tends to lie there, purring, completely oblivious as they poke and prod in an effort to learn what might be the cause of her illness. And to be honest it's not so bad for us either. It feels good knowing you're doing what you can for the friend that you love.

Afterwards we took her home and awaited the blood test results. A week later we get the call.... Hyperthyroidism. Finally we had a diagnosis to treat! The regime called for prescription pet medication and--much to Grey's delight--more wet food!

We were of course very relieved as this is a very common disease for cats and quite treatable. And while we've only had her on the new program a month, she's already gaining weight and returning to her old self-cute and charming.

Why did I write this particular story? As well as being a Senior Research Specialist, I'm a proud cat owner who wants both consumers and industry folks to understand that the research we sell, the markets you focus on, really come down to the human element-we love our pets. They are, in fact, our family.

Even as I write this, Grey lies on my lap and we share a small knowing glance.

Thanks for reading,

Jeff

Obesogenic Nation

The causes of being overweight or obese are multifaceted.  At the bottom line, it's about consuming more calories than the body burns off in energy.  However, this imbalance may be triggerd by many interconnected factors, including environment, psychological, cultural and socioeconomic factors as well as overeating, lack of exercise, slow metabolism, and genetic makeup.

On its Overweight and Obesity webpage (www.cdc.gov/obesity), the Centers for disease control states that, “Behavior and environment play a large role causing people to be overweight and obese. These are the greatest areas for prevention and treatment actions.”  In fact, the CDC calls American society “obesogenic” because it is characterized by environments that promote increased food intake, unhealthy foods, and a sedentary lifestyle.

Obesity not only takes a toll on people’s health, but it also it places a financial burden on the nation’s healthcare system.  A study by Cornell University that appeared in the January 2012 issue of the Journal of Health Economics calculates that obesity currently accounts for almost 21% of total U.S. healthcare costs—more than twice that of previous estimates. 

As delineated in F as in Fat:  How Obesity Policies are Failing in America, 2012, the latest of nine annual reports by the Trust for America’s Health and the Robert Wood Johnson Foundation, the medical cost of adult obesity in the United States is difficult to calculate but estimates range from $147 billion to nearly $210 billion per year. Most of the spending is generated from treating obesity-related diseases such as diabetes.  Medicare and Medicaid are responsible for $61.8 billion of the $147 billion.

At the CDC’s Weight of the Nation conference in May 2012, a new report presented by Study leader Eric Finkelstein, a Health Economist at Duke University in Durham, NC and published in the May 2012 issue of the American Journal of Preventive Medicine projected that the ranks of obese Americans would swell even further in the coming years, rising to 42% of the adult population by 2030 and adding nearly $550 billion in additional medical costs over the next two decades.

Due to obesity’s scope as a national healthcare problem, it has also become a political issue, as federal, state and local governments try to help bring the crisis under control through new new legislation, nutritional guidelines, and public health initiatives.

In 2009, the Obama Administration took aim at obesity—particularly childhood obesity—with its Let’s Move program, which brings together several federal agencies to focus on improving nutrition and encouraging exercise.  State and local governments are also trying to combat obesity by legislating policies and food environments to make healthy nutrition and physical activity choices more available and affordable.  Some local governments are providing tax breaks and streamlined permits to encourage fresh-food grocers and farmers’ markets to set up shop in neighborhoods that need them, and zoning neighborhoods to encourage more sidewalks and bicycle paths. 

Public health experts believe that the best way to attack the obesity crisis is to prevent people from becoming obese in the first place.  They especially emphasize children, based on a finding from the landmark Bogalusa Heart Study conducted by Tulane University between 1972 and 2005:  77% of obese children go on to become obese adults, while only 7% of non-obese children do.  Other studies show that school-based programs can help prevent and reduce obesity.  Currently, Packaged Facts estimates that U.S. retail sales of the weight management products and services  (foods and beverages, meal replacements and diet aids, and commercial weight management programs) topped $36.9 billion in 2012.  Commercial weight management programs are projected to pick up steam by 2015 and grow the fastest through 2017, based on expansion to online and new markets and cyclical innovation. 

Health & Safety Data Boosts Pet Healthcare Trends

We've all seen the pet owners who enjoy bringing their BFLF (Best Four-legged Friend) along to the local pet retailers' during Saturday morning errands. These dedicated 'pet parents' are spurring a big increase in the finely targeted displays at your local pet store. Pet stores are overflowing with information about the ingredients and safety benefits of the pet care products on the shelves.

That's because pet retailers are responding to two important market forces:

1) Customers are feeling the pinch of the economic recession in recent years.

2) Pet owners at certain income levels are also increasing spending on items designed to extend their pets' life-cycle and preserve their safety and overall health.

This explains in part the rise in light-hearted print, online and television advertisements focused on 'functional toys' (think rawhide chews that keep dog's teeth healthy), and powerful new over the counter anti-flea treatments and other medications for cats and dogs. In addition, pet industry experts point to a growing recognition on the part of manufacturers and retailers of the benefits of 'premiumization."

The list of pet care products and services that are high quality gets longer by the day, it seems, and includes:

-- Organic, heart-healthy foods.

-- High-tech therapies and medical treatments.

-- Luxury services such as 'pet hotels."

And it is at ground level where consumers are most able to see and experience the pet retailers' growing focus: Now more than ever, they are homing in on tactics and strategies designed to meet the needs of pet owners seeking bargains on pet health care products that will ensure the wellness and safety of their pets.

That is a necessary adjustment, given that a parallel upward pet industry trend shows that brand and channel loyalty -- i.e., consumer's devotion to a single manufacturer or service provider -- has declined in recent years.

Consider these 2012 findings by David Lummis, a leading pet industry expert:

"With pet ownership and overall U.S. household growth rates modest at best, the market has been seeing little incremental growth overall, so the trick has been to drive dollar gains by converting pet owners to higher price products and services. With the economic slowdown, however, pet owners have begun to look at product pricing more critically. For the first time, in our February 2011 Pet Owner Survey, [we] queried pet owners about product pricing, and a resounding 74% were in agreement that, 'many pet products are becoming too expensive,' with 35% in strong agreement. By March 2011, this attitude had improved only somewhat, with the overall agreement figure at 70% and strong agreement at 28%."

Thus, pet retail outlets and marketers have bumped up displays emphasizing overall value, as well as increased the numbers of pet health care products targeted at customer's concerns on improving pets' longevity and total 'wellness." Lummis also found that online sales of pet products and services, too, have be on the increase.

But, unlike a Saturday visit to your local mega pet-mart, any online shopping that 'pet parents' engage in probably doesn't include free treats for their furry BFLF.

Thanks for reading!

-- by Amy Alexander

Market Trends Show the Power of Pet Humanization

Pet industry statistics make it no secret that the more affection pet owners feel for a pet, the higher their levels of spending. The pet stores that welcome dogs inside, offering biscuits at the checkout are genuinely being pet-friendly—but it’s no coincidence that those pet products are located at the cash register, the better to engage exactly the kind of pet owner who brings their pet to the store.

Data from Packaged Facts' pet owner surveys bear out the relationship between the depth of the human/animal bond and the level of pet care spending. For example, in comparing the 61% of pet owners who strongly agree that their pets are part of the family—the pet parents—to the minority 11% who strongly disagree, we find that:

• Only 6% of pet parents buy low-priced pet foods, compared with 33% of those who don’t consider pets to be part of the family.
• Only 12% of pet parents are spending significantly less on pet products because of the economy, compared with 30% of those who don’t consider pets family.
• Only 19% of pet parents have skipped out on providing routine vet care for their pets within the past 12 months, compared with 67% of those who don’t consider pets family.
• Only 22% of pet parents have spent less than $25 in the last 30 days on pet products, compared with 40% of those who don’t consider pets family.

The current proliferation of specialty pet products and services in fact hinges on the “humanization” of pets. Thus the growth in products and services such as pet multivitamin pills, pet exercise toys and mind games, personalized cat litter box mats, and doggie daycare fees. (Charm City dogcare in Baltimore, for instance, even throws in special homemade treats on Mondays, to help dogs ward off those back-to-the-grindstone blues.)

Thus too the all-terrain puppy strollers, for new but well-heeled dog parents, or the heated massaging orthopedic wellness pets beds, which are especially soothing for dogs who are past their frisky days, often in tandem with their owners.

More traditional product categories, of course, also fully leverage the pet humanization trend. Thus pet food with gourmet flavors or natural formulations (Purina Chef Michael’s Carvery Creations; Natural Balance Adult Turkey Formula, preserved naturally with mixed tocopherols that boost the immune system), pet treat label claims echoing those in the human snack aisles (high in EPA/DHA omega-3), and green tea leaf clumping cat litter.

Such products attract pet owners who want the very best for their pets, as befits members of the family. Among singles, couples with younger children, childless couples, empty-nest Boomers, and seniors—that is, a very wide range of pet owner demographics—the human/animal bond is a potent emotional and economic force.

With pets firmly embedded in our homes, it follows that pet wellness gets elevated to family health care status. Pet parents are not only willing but eager to invest in pet care both preventive and therapeutic that is directly beneficial to their pets’ health. While in large part a function of the human/animal bond, the awareness of pet wellness issues has been amplified by demographic and societal trends, and particularly the growing seriousness about health issues including diet, weight management, lifestage nutrition, and the importance of exercise.

Although this trend is perhaps most pronounced among aging Baby Boomers, healthcare costs and access issues are compelling most of us to become more proactive about personal and household health.

For more evidence of the spillover of human health and wellness concerns into the pet market, consider the above-average market growth rates for these items:

• Pet supplements.
• Functional pet treats such as rawhide chew toys (for improving dental health.)
• Pet medications.
• Pet insurance, and a range of other directly health-focused pet care purchases.

Natural and organic pet products are also benefiting, as they are in the human products market, despite the bargain shopping strategies and high price sensitivity that characterizes consumer spending in the wake of the Great Recession.

Pet wellness dovetails with human health in other important ways, too. According to our Packaged Facts survey data, 44% of pet owners strongly agree that their pets have a positive impact on their physical health (and another 33% somewhat agree).

Even more strikingly, 50% strongly agree that their pets have a positive impact on their mental health (and another 34% somewhat agree). Few persons, places or things can consistently pull down those sorts of numbers. With the possible exception of bulk chocolate, those special treats for Fido might just be the best health care expenditure going.

-- by Amy Alexander