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Sizzling Stock: Behind the Masked Bag

Posted: May 30, 2014, 9:50 a.m. EDT


Private label foods and treats are gaining ground.
By Keith Loria
Private label pet food once was something consumers saw in individual pet stores and small franchises; major chain stores also offer such products under their own house brand names.
Art Bouskos, national sales manager for Cal Premium Treats in Perris, Calif., said that in meetings at Global Pet Expo in Orlando, Fla., this year with Petco and PetSmart, estimates were that by 2015, both would be approximately 75 percent private labels.
"Demand is already picking up,” he said. 
A few years ago, private label manufacturers were offering more fresh items for store shelves, but because of recalls and cost challenges, companies now are starting to add a food glycerin to preserve food on the shelf for longer. In fact, one manufacturer was told by Costco that the chain would only buy pet food with glycerin from now on.
Today’s private label requests come down to three things—grain free, single source and sustainable, said Jocelyn Brasseur, president of PLB International in Boucherville, Quebec, Canada.
"We have amped our efforts with this because it’s what consumers are asking for,” she said. "Bloggers, veterinarians and manufacturers are all influencers that put emphasis on these trends.”
 Private Label

Private label foods can keep pet owners coming back to a store. Antpkr/Shutterstock

Another trend industry insiders see is the influence that comes from the human food category, as pet owners seek ingredients touting health benefits for humans and desire them for their pets.
With the dog treat segment growing ahead of most other segments, there will be an overabundance of new entrants into the marketplace in the years ahead, said Spencer Taylor, CEO of Sentinel Pet Group LLC in Springville, Utah.
"It will be important to choose those who are established in the industry and will be able to sustain their product offering over time,” he said. "Many of the brands we talk with are new startups that don’t have a comprehensive view of what it takes to succeed as a brand owner. Some who begin down the path and get past the first or second shipment of product are unable to handle the cash-flow requirements and therefore fade away quickly.”
As a private label manufacturer, Sentinel Pet Group doesn’t manage brands but produces for other brands. 
"Our customer launched new fish food and aquarium products as well as soft and moist dog treats,” he said. "We currently are working on a few unique products, including raw dog treats and premium horse treats. The raw and fresh dog segment is particularly interesting to us, and we believe we will continue to see growth in this category.” 
The Players
Cal Premium Treats has new products in the works concerning all-natural cold extrusion and expects to make an announcement about its products come fall, Bouskos said. 
"What we have seen lately is rawhide has sort of died out and people are trying to reinvent rawhide; bones are dying out and so we try to reinvent bones,” he said. "This industry is headed toward all packaged foods and all natural.”
Simmons Pet Food Inc., headquartered in Pennsauken Township, N.J., strives to execute a "quick-to-follow” strategy, whereby once a leading brand establishes a popular product format or formulation, it quickly offers an analogous product to its customers. 
According to the company’s website, its manufacturing and product development capabilities permit the company to introduce analogous products to its private-label customers within a matter of months following the introduction of a new product by a branded manufacturer.  
Holly Sher, owner of Markham, Ill.-based Evanger’s Dog & Cat Food Co., which has a private label component and an Evanger’s brand component, said that although expectations for quality are rising, consumers must adapt to increased prices.
"What I am finding with private label lately is that [customers] are asking for something that can’t be delivered—high protein, low fat, but at cost savings,” she said. "People are looking for more and more exotic meat, which is hard to get. There are novel proteins, but they can’t get as much as they want for what they want to pay. They need to understand that chicken feeds well, beef feeds well, and those are the price points they are asking for.”
Understanding the Retailer
When it comes to purchasing private label food options, retailers run the gamut from independent single-store operations to national chains, and distributors enjoy the buying power to allow them to more fully leverage private label strategies.
"Offering private label pet food helps to generate customer loyalty and bolster margins,” Sher said. "You need to put these private label products out front and have employees recommend them so you can establish a trust and relationship with your customer.”
Even those companies in the industry that work with independent retailers on a small-scale basis are seeing big success because the private labels help a customer identify with a store better, Bouskos said.
It’s important for retailers to know where and how the products they are selling are made, Taylor said.
"Sometimes the brand owner is in the U.S. but they may have products made by a manufacturer overseas,” he continued. "Of course with the recurring issues with treats or ingredients from international suppliers, it’s important to offer customers treats that offer a safe, healthy solution for the pet parents shopping at their stores. In terms of opportunities, if a store expands to multiple locations, it is easier than ever to establish a store brand and have products made with their own label/brand.”
PLB International manufactures both dog and cat private label formulas and understands that private label is the leading edge of many retailers’ image and reputation. 
"The retailer’s store brand carries a message about the retailer and the quality of the products to be found in the store,” Brasseur said. "You can find national brands at any store, but you can only find the retailer’s brands at the retailer’s store. So, we help them keep their consumer loyal.”
A sound strategy that can help a retailer find success in the private label realm is to offer something the store believes in, Brasseur added.
"As the private label sends a message about the retailer, I believe the private label products should reflect the philosophy of the retailers, which is the reason why the consumers as well as the employees are loyal to the retail store,” she said. "Some private label products could be lower priced to closely copy national brands where the retailer would make more money.”
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