ROCKVILLE, MD. — Following the release of its 2020-2021 US Pet Market Outlook, market research firm Packaged Facts has created a short video series in which David Sprinkle, research director, and David Lummis, senior pet market analyst, discuss impacts to various segments of the pet industry during and after COVID-19.
“We were both positioned to and compelled to rethink what was going to happen [and] what to expect in the pet market because of COVID-19,” Sprinkle said.
Packaged Facts released dismal predictions for most pet industry segments, especially with regards to discretionary purchases and services. However, pet food and treats are not expected to bear the brunt of these impacts as pet owners continue to stock up on pet food and treats during the course of the pandemic.
The market research firm decided to alter its projections to account for potential COVID-19 impacts, although the situation globally and in the United States remains volatile.
“It was just becoming very clear to us and everyone else that this was going to be much more serious and much longer-lasting than anyone had previously thought,” Lummis said.
Pet food predictions
One opportunity for pet food and treat brands is for private label and house brand products to gain market share. Packaged Facts based these assumptions on pet industry trends seen during the Great Recession of 2008.
“In the two years following [the Great Recession of 2008], we did see a shift to private label,” Lummis said. “It wasn’t really dramatic, which leads me to believe that the impact this time around may be even less. Part of that is because there has been such a groundswell of premiumization over the past 10 to 12 years since the Great Recession.”
Lummis reiterates that as more premium name brands enter the mass market channel, there is not likely to be a drastic change.
“It’s such a boom trend right now and particularly in the sense that it has recently crossed over from pet specialty into the mass market… I think there’s a lot of momentum there for those types of higher-priced brands, relatively speaking, to continue to attract consumers and, to a degree, I do believe that would offset any dollar losses to private label,” Lummis said.
There is still an opportunity for some growth in private label pet foods, Lummis said, because most house brands are already producing super-premium formulas, just selling at lower-price points, to keep up with the overall market trend. Depending on how long consumers are under economic stress as a result of the pandemic, pet owners could look to trade down to lower-priced non-discretionary pet products, such as pet food and cat litter, after they begin to run out after initially stocking up.
He went on to explain that there could be an opportunity for mass market retailers to develop their own private label pet foods during this time or increase promotional efforts behind existing house brands.
“As consumers, particularly economically strapped consumers who are less likely to be shopping in the pet specialty channel and more likely to be doing all of their shopping in one place, whether it’s supermarkets of supercenters, but supermarkets in particular have tended to not focus on their own private labels to a degree that I think they should,” Lummis said. “It’s also something that they need to focus on in order to continue to protect themselves against further losses to e-commerce.”
During their conversation, Sprinkle asked Lummis if he believes supermarkets will begin devoting more cold storage shelf space to the growing fresh and refrigerated pet food category,
“Clearly the fresh pet food trend is going strong right now, whether it’s a refrigerated brand like Freshpet or it’s the freshly made products that you order online for home delivery, I think that is an area that supermarkets will increasingly move into, but I don’t see that as necessarily getting a big boost from the pandemic,” Lummis answered. “I think people and supermarket operators, for now, are going to be really more focused on the nuts and bolts keeping everything together.”
Lummis also predicts pet treat sales will continue to rise as pet owners spend more time at home with their companion animals and look for additional ways to pamper them.
“I think it’s a good time for pet treats and chews, again because with pet owners spending so much more time at home and cherishing their pets more than ever for the contact and the emotional support that they’re able to offer, I think it’s very likely that pet owners are going to want to treat their pets more hardily than they might have normally,” Lummis said.
E-commerce vs brick-and-mortar
On trend with years of growth for online shopping, e-commerce is expected to get a boost from adjusted consumer behavior amid COVID-19.
“Every report that we’ve seen whether it’s the quarterly report that just came in from Chewy or whatever Amazon reveals to the public indicates that online shopping is going gangbusters, including in the pet market,” Lummis said. “…We actually increased our projection of internet share of pet product sales. We had projected a 24% share in 2020 up from 22% in 2019 and we revised that internet share upward to 31% for 2020.
“So, obviously, that’s a massive gain, internet is stepping in where brick-and-mortar retailers simply can’t fill the demand right now with consumers staying at home,” he added. “It’s going to be ongoing — the biggest spike will be 2020 — but continuing on through 2024 we do project that internet will continue to gain share at the expense of particularly large pet specialty chains.”
Traditional brick-and-mortar retailers will need to step up their offerings and presence in the market in order to make up for losses to e-commerce. Lummis suggested order online, pick up in-store services could help drive sales for this channel.
“More broadly speaking across brick-and-mortar, I think it’s going to be all about what we’ve been calling omnichannel where consumers are going to continue to expect to be able to order their products online, including their groceries online, and pick them up in-store and have them ready,” Lummis concluded. “These trends are already underway, but I think they’re going to gain momentum during and after the pandemic.”
View the full video series to hear impacts, challenges and opportunities facing other pet industry segments.
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