Pet Services Will Help Industry Yield Unprecedented Sales in 2021
Both despite and because of enormous flux, the U.S. pet industry continued its upward trajectory in 2017, with sales of products and services rising 5 percent. Strong numbers in veterinary services and pet food/treats contributed to the advancement of the market, which totaled $85.6 billion in 2017, according to Packaged Facts’ Pet Market Outlook 2018-2019 report. The fastest growth category was veterinary services, up 6.3 percent to $26.9 billion, followed by nonmedical pet services (up 5 percent to $8.8 billion), pet food (up 4.9 percent to $33.1 billion) and pet supplies (up 2.5 percent to $16.8 billion). No surprise, the pet product channel making the biggest strides is the internet, which is not simply robbing Peter to pay Paul, though it’s certainly recasting channel shares. E-commerce made enormous strides between 2014 and 2017 and will grow to 20 percent of the market by 2022, surpassing pet specialty chains (excluding their online sales) and supermarkets and nipping at the heels of mass merchandisers (discount stores and superstores).
Continuing the trend of channel migration, pet food and supplies are experiencing much of their growth outside of the core mass-market and pet specialty channels, namely online, where annual percentage sales gains have been in the mid double digits. Both channels are feeling the e-commerce heat, although mass channels appear poised to benefit from the transfer of the premiumization trend from pet specialty to mass.
Already driving this trend were the crossover of Nature’s Recipe and Blue Buffalo, along with the introduction of superpremium-type mass products such as Mars’ Crave and Nutrish’s Peak. With Blue Buffalo’s February 2018 acquisition by General Mills, however, it now appears that all bets are off.
In early March 2018, I practically ran into a pop-up display for Nutro in my local Kroger store, even though a subsequent internet search revealed that Mars—whether taking a stealth approach to mass-market infiltration or just testing the waters—had made no prior announcement. Against the online surge, mass premiumization might not be able to deliver market share gains to supermarkets and mass merchandisers, but it should perk up their pet food sales for the next few years and mitigate the market share losses now dogging the pet specialty channel. At the same time, across all channels, online continues to overlap with brick-and-mortar, leaving retailers with little choice but to embrace omnichannel strategies, which, in some cases, involve competing against themselves—for example, with PetSmart’s Chewy.com drawing shoppers away from its brick-and-mortar stores.
The services side of the U.S. pet industry is also rife with flux. Within the veterinary market, operators continue to consolidate and pet specialty big boxes continue to build out veterinary services, as in Petco’s launch of Thrive complete veterinary services.
In nonmedical pet care services, the big news, again, involves the internet. During the past few years, three well-funded startups—Rover, DogVacay (now merged into Rover) and Wag!—have begun connecting pet owners with independent pet care professionals at the local level via Uber-like apps, affording quick access to pet sitters who have been vetted and insured. Services like these have already dramatically changed the pet sitting and boarding business model, and this party is just getting started. Petco has invested in Rover and snapped up other online service providers including PetCoach, PupBox and PetInsuranceQuotes.com, and PetSmart’s portfolio of digital resources now includes petMD.com, Pawculture.com, AllPaws and BlogPaws, as well as Chewy.com, PetSmart.com and OnlyNaturalPet.com.
As the internet continues to reconfigure the market and pet owners increasingly cross-shop or consolidate their business with a single source, the most important trend of all will be products and services able to capture the holy grail of any product marketer, retailer or service provider: customer loyalty. With the competition ramping up each and every day, that might not be easy. But as other categories of consumer packaged goods level off or decline, there’s a reason why General Mills just bought into pet: With sales projected to top $100 billion in 2021—including approximately $40 billion in pet food and treats—the U.S. pet industry continues to be a very good bet.
David Lummis is the lead pet-market analyst for Packaged Facts, a division of MarketResearch.com. The data cited above is drawn primarily from Packaged Facts’ latest pet market report, U.S. Pet Market Outlook 2018-2019.