This article was published in the June 2020 issue of Pet Food Processing. Read it and other articles from this issue in our June digital edition.
Once upon a time, pet food brands more or less followed a tried-and-true formula of creating product lines for specific distribution channels. As a product increased in popularity, it was often moved or graduated to larger distribution channels. Now, as brands look to buck traditional routes and the associated restraints, manufacturers are seeking new ways to meet and accommodate customers in a variety of distribution channels.
Deciding where to start
Employed to reach customers where they shop, as well as improve and drive better user and customer experiences, an omnichannel distribution strategy allows a company to be in multiple places at once. That could be selling online, in independent brick-and-mortar pet specialty or through big box retailers. While it’s increasingly possible to be everywhere at once, it’s often beneficial for a brand to first understand what channels are not a good fit, and why. This requires knowing the audience in each channel and its associated wants and needs.
The first step in figuring out better ways to serve audiences in multiple channels necessitates committing to a new level of organizational readiness that includes extensive customer knowledge, strategy, technology and company-wide communication. Once in place, companies need reliable, easy-to-deploy systems that help with safety, distribution and compliance at a low cost of ownership.
Vormittag Associates, Inc. (VAI), Ronkonkoma, N.Y., offers enterprise management software to assist with the complexity of these varied yet interlinked processes. VAI’s cloud solution reduces the complexity of managing all the moving parts of a manufacturing business. Mediated by software and technology, the real-time enterprise resource planning (ERP) solution offers integrated management of a company’s main business practices using one database.
“As a manufacturer and distributor, you need a solid ERP system to make sure products are delivered on a timely basis,” said Joe Scioscia, vice president of sales at VAI. “This includes the back-office technology to fulfill orders quickly and efficiently along with a good digital marketing strategy that allows you to do email blasts and post on social media, track content consumption and better understand the marketplace and where you can sell.”
Working with mid-market-sized companies, VAI is a witness to the growth in private label products coming from small businesses and the explosion of pet food and treat offerings. This includes a growing number of small players catering to the market for health and wellness products using unique flavors and age-specific formulations. As more look to enter the pet food and treat space, they’re leveraging technology with online e-commerce as the biggest area of growth.
“The technology side of the equation is challenging and not every company knows of the best ways to take advantage of all the different marketplaces to sell to and how to get product out to the channels,” said Joe Scioscia, vice president of sales at VAI.
But just being online is not enough. Scioscia cautioned a high level of organizational readiness is necessary to make e-commerce successful. Despite this, VAI said the supply chain remains underfunded relative to its intricacy. Complexities created within organizations by silos between vital players like sales and marketing leave data and analytics underleveraged to grow sales.
“The technology side of the equation is challenging and not every company knows of the best ways to take advantage of all the different marketplaces to sell to and how to get product out to the channels,” Scioscia said.
While the go-to channel options often include big players such as Amazon, Alibaba and Chewy, Scioscia acknowledged it can also be beneficial to have a tool to assist in handling the multiple channels. To be more effective, he recommended exploring a cloud-based inventory management solution such as SellerCloud, an all-in-one e-commerce home.
The virtual middleman for online selling offers an option for companies that struggle with technology to be visible without having to build multiple interfaces. SellerCloud allows a business to post products to more than 40 channel integrations with exposure through one central engine. When an item is sold, SellerCloud allocates it to a sales order and inventory decreases across all channels. This service also includes the ability to integrate with fulfillment by Amazon (FBA) and to sell internationally.
Sustainable, yet effective
Efficient selling is critical, but if the package doesn’t arrive in a condition that is safe, reputable and pleasing to the consumer, the sale may not become repeatable. The Packaging Machinery Manufacturers Institute (PMMI), Reston, Va., represents packaging manufacturers that want to ensure product is delivered safely and shelf life is extended in the right quality and presentation while protecting the format. Until very recently, this included a strong focus on the sustainability and environmental impact of a manufactured product supported by a range of new biomaterial options coming into the market.
Because biomaterial films can’t run as quickly, the packaging line must slow down. Slower run times decrease productivity and increase the cost of the product, leaving manufacturers unable to optimize the materials to run at high speeds, according to PMMI. Amid the COVID-19 outbreak, those learnings are on hold as packaging’s focus shifts from sustainability and environmental concerns to safe packaging formats that travel well through e-commerce and the extensive handling that’s required.
TC Transcontinental Packaging, Montreal, stated the current environment makes plastic packaging more suitable than ever for its ability to increase food security and extend product shelf life at home and in-store.
Jorge Izquierdo, vice president, market development, PMMI, shared that product developed for brick-and-mortar will generally be touched six times. In omnichannel, there can be as many as 15 to 20 touches depending on the channel. Extra touches place additional strain on the durability of the packaging materials.
“When dealing with omnichannel, you typically can’t do it on your own, you need trusted partners for distribution and fulfillment, track and trace,” said Jorge Izquierdo, Packaging Machinery Manufacturers Institute.
“When dealing with omnichannel, you typically can’t do it on your own, you need trusted partners for distribution and fulfillment, track and trace,” Izquierdo said. “It’s a key consumer expectation to know where the product is at all times and when it will be delivered. You need to know how to communicate when partners are ready to deliver. If there’s a bottleneck, you still need to be able to fulfill the promise to the consumer using communication, synchronization and alignment with partners.”
Knowing the partners
Resulting growth in the use of centralized fulfillment centers and contract manufacturers offer new options to outsource more work to outside trusted partners who are current on omnichannel efforts. Holly Sher, president of Evanger’s Dog & Cat Food Co., Markham, Ill., described the long-term partnerships built between manufacturers and distributors to be similar to a good marriage. For the 85-year-old company, this includes working with a distributor that’s not only familiar with the line(s) but the people and ingredients behind the products. Sher points out, however, that as the number of SKUs continue to increase, there will be a limit on the amount of time a distributor has to sell.
“Right now, we’re seeing many retailers and distributors increasing orders of canned and dry food,” Sher said. “Consumers are stocking up to feed their animals, but we can’t say what will happen in a couple of months, especially during these uncertain times.”
To optimize its distribution opportunities, Evanger’s works with a small distributor and a large distributor in each region. Because some distributors call on similar customers, there can also be an added benefit of competition among distributors. Sher predicted a growing appreciation for products made in the United States, double-digit growth with family-owned distribution centers (big and small), and a to-be-determined element regarding the February merger of Animal Supply Company and Phillips Pet Food & Supplies.
Processor KLN Family Brands, Perham, Minn., chooses to focus on only selling to independent pet retailers. As a family-owned and -run business, the manufacturer of NutriSource branded products looks to support similar businesses. By understanding the needs of its customers, the company finds that most understand and appreciate the company’s choice to concentrate its efforts in only one channel. This includes employing a sizable sales force that works daily with its retail and distribution partners to focus on marketing efforts and consumer-based advertising and promotions, according to Darren Fujii, chief growth officer, national sales manager, KLN Family Brands. By choosing to support the independent retailers, the company is not selling to Amazon and Chewy but instead relying on its partners to provide the e-commerce and delivery options consumers are looking for and supporting its brand in return.
“We have long-built and solid relationships with our distribution partners and are in constant communication with them,” Fujii said. “Our model is to partner with one of the national distributors as well as a strong regional distributor in each market. Our partners understand our business model and provide the support we need.”
Increasingly, brands are breaking channel lines as changes in pet food and treat sales distribution continue to add pressure on retailers. With more e-commerce players, Fujii said he sees an increase in the competitive landscape but maintains that not all channels can provide the same services or experiences.
Ready or not
Particularly in the current environment, many predict investment in e-commerce will continue to grow substantially. Brands willing to invest in and maintain a well-designed, intuitive, mobile-friendly e-commerce site will allow manufacturers to reap the retail margin while establishing a personal relationship with their end customer, according to Chris Ruben, industry consultant at PetindustryPros.com.
Manufacturers must remain aware of audience needs as they pursue an e-commerce strategy.
“Identify your strengths and determine which market(s) best fit your brand and product messaging,” said Darren Fujii, KLN Family Brands.
PMMI recommends manufacturers interested in e-commerce adopt a streamlined approach of developing products that work well throughout the various distribution channels and minimize the number of SKUs to simplify changeovers.
“Unless you have really deep pockets, it’s hard to be all things to all pet parents,” Ruben concluded. “Research relentlessly, conduct a thorough competitive analysis and test, test, test. Identify your strengths and determine which market(s) best fit your brand and product messaging.”
“Many manufacturers are looking to fulfill unbelievable demand... This increased demand places incredible pressure on manufacturers, many of whom are working at 120%, three shifts, seven days a week with no stopping for simple maintenance," said Jorge Izquierdo of PMMI. "Instead of trying to manufacture a large number of SKUs, they are concentrating on the SKUs they can manufacturer at higher speed with limited changeovers. Before COVID-19, there was more emphasis on switching from format to format; now manufacturers want to run the fastest and get the most product in the market.”
“The cloud is becoming very important in any industry and businesses have the ability to work from home from any place and from any device," said Joe Scioscia of VAI. "Having your ERP infrastructure in the cloud allows workers to access the back-office systems whenever and wherever they are required.”
“It’s important to keep the industry moving and motivated," said Holly Sher of Evanger’s Pet Food. "This affects us all. If protein manufacturers are not selling to the restaurants, they can continue selling to pet food manufacturers and to the grocery store. If they shut their doors, no one is getting food. It’s scary to stop. Also, a lot of people are calling and asking how they can get their product shipped quicker. Some are even asking to send their own shipping labels to ensure they receive the food for their animal(s).”
“Changing dynamics coupled with more than 600 brands of pet food and treats in the marketplace today makes it increasingly difficult to break through the clutter," said Chris Ruben of PetindustryPros.com. "Standing out in one channel, let alone all channels, requires a well-researched plan for each and the ability to shift between channels as market conditions like COVID-19 demand.”
Read more articles about the modern pet food and treat retail environment.