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Private Labeling Is on the Rise

Posted: Jan. 28, 2008

By Kathleen M. Mangan

Pet product News ArchivesIn the wake of the recalls of pet food and Chinese-made toys in 2007, private-label brands (excluding those recalled) have seen a surge in popularity. Retailer inquiries into starting private-label brands have also skyrocketed, and the industry can expect to see more store brands on the shelves.

Consumers, and therefore retailers, are increasingly seeking all-natural, eco-friendly, high-quality products made in the U.S.A. The manufacturers that can fulfill these requirements are so maxed out with orders that many aren’t taking on any new business. 

Evanger’s Dog & Cat Food Co., one of a handful of pet food canneries in America, is a case in point. The Wheeling, Ill.-based company sources all ingredients domestically, including caviar, for the 50 varieties in the Evanger’s line plus the private label formulations, and none of the products were affected by the recalls.

Private label pet products
Private-label products for pets other than dogs can pay off for retailers.
Product orders doubled after the recalls, and to meet demand, the company went from 12-hour to 24-hour plant production, raised the minimum order from two to four pallets of each product, and stopped taking new customers, said Holly Sher, president. And still the company cannot meet the needs of existing clients. Sher has a new plant planned for the first half of 2008.

Sher said private-label brand growth has been especially strong, jumping from 30 percent to 50 percent  of Evanger’s plant production. She added that private-label customers are asking more specific questions, such as the food’s phosphorous or calcium content, and looking at documentation on ingredient sourcing and kosher and organic certification.

Capacity Is Key
Eagle Pack Pet Foods, based in Mishawaka, Ind., has had the same experience since the recall, according to John Cocquyt, vice president brand manager. The company produces pet food with highly digestible, naturally preserved ingredients; none of the brands were on recall lists. In 2007, production of private-label brands was up 15 percent, while the company’s branded line was up 20 percent.

“The phone rang off the hook for private-label business from retailers who wanted to dictate their own formula made by a company they can trust,” Cocquyt said.

But due to the steady sales growth of company and existing private-label brands, Eagle Pack decided it would not take on any new private label clients. The company is also considering building another plant, he added.

Private-Label Quality Assurance
 National Animal Supplement Council Quality Seal
• Wild Bird Feeding Industry Quality Seal
• Good Manufacturing Practices certification by the National Nutritional Foods Assn.
• Registered and inspected by the Food and Drug Administration or the Environmental Protection Administration, depending on the product.

“After the recalls, the door was open for a short time to get retailers to carry our branded or private-label lines, and to get pet owners to try it,” Cocquyt said.

He said that the hardest part of the marketing process is getting first-time customers; beyond that, the product must ensure customer retention.

Focus on Safe Toys
Although there have been no pet toy recalls since that segment of the industry is not regulated, more than 25 million toys for children made in China have been recalled. Two independent testing labs—ExperTox Analytical Laboratory and Ecology Center of Ann Arbor, Mich.—have found lead, arsenic, chromium, cadmium and mercury in some tested pet toys made in China. Market reactions are inevitable, no matter if levels are nontoxic.

West Paw Design, which manufactures pet toys and beds in Bozeman, Mont., with eco-friendly materials sourced in America, fielded double the inquiries for private-label products in 2007.

“People are concerned about the quality of all products they buy for their pets now, and there is a fear of imported goods,” said Spencer Williams, president.

West Paw Design’s private-label business was up 25 percent in 2007, with off-the-charts fourth-quarter growth for branded and private-label products. Williams expects the company’s private-label business to grow another 75 percent in 2008 based on the orders in development, although private label is only a small part of the company’s production.

Spillover to Holistic Products
Three Dog Bakery in Kansas City, Mo., has quite a following for its baked-fresh-daily, all-natural dog cookies with human-quality ingredients at its 50 locations. Julie Tarry, director of marketing and product innovation, said the company saw a 55 percent increase in sales in 2007.

“We see a trend to all-natural products, especially those made in the U.S.A., combined with the long-term trend of humanizing pets,” Tarry said.

Private Label Product Popularity
In 2006, store brands accounted for:

20.2% of all consumer products sold (unit sales)
19.2% of total pet food sold
47.2% of moist dog food sold
25.1% of dry dog food sold
22% of wet dog food sold
20.3% of dry cat food sold
18.1% of wet cat food sold
15.5% of moist cat food sold
15.4% of dog and cat treats sold
8.4% of remaining pet food sold
27.5% of pet litter sold
17.7% of pet care sold
1.2% of flea collars sold

Includes U.S. supermarkets, drug chains and mass merchandisers, including Wal-Mart.

Source: The Nielsen Co./Private Label Manufacturers Assn.

To further capitalize on these trends, extend its brand and address requests from customers for all-natural grooming products, the company decided to launch a private-label brand in November 2007 called the Fur Di Vine Collection.

The aromatherapy spa product line includes shampoo, conditioner, spritz, paw balm and soap, and is made without detergents, artificial colors or synthetic perfumes by Cain & Able. This Austin, Texas-based manufacturer produces essential oil-scented, all-natural products, and has seen sales climb since it opened for business in 2003.

The Fur Di Vine Collection is Cain & Able’s first private-label project as well. Despite constant private-label inquiries, Candace Smith, president, explains regularly to small retailers that they will find a private-label grooming line cost prohibitive because of the price of labels. She notes that Three Dog Bakery will be a successful private labeler because it has 50 retail shops, a strong graphic identity and a store branding strategy in place to support the new line.     

Phil Klein, co-owner of Whiskers Holistic Pet Care in New York City, said he saw spillover sales for his store-brand herbal extract line and other holistic products after the pet food recalls.

“New customers came to the shop for natural and home-cooked food, saw the difference healthier food can make and decided to go to the next level by adding herbs and supplements,” Klein said.

Long term, those pets will be healthier and caretakers will save on veterinary bills, he added. The Kleins opened their 1,000-square-foot shop 20 years ago, and soon after launched Whiskers Own herbal line with human-grade, certified organic ingredients when they couldn’t find products they liked. The shop also private-labels natural treats, leashes and  clothing.

Marketing Advantages
Bob Vetere, chief operating officer of the American Pet Products Manufacturers Assn., said that more and more retailers are private labeling, but not necessarily as a reaction to the China scares. He sees equal impetus from the marketing advantages.

“Retailers must distinguish themselves from each other,” he said. “A good way to do this is to offer a product no one else has.”

Vetere added that the recalls have raised the bar for quality ingredients, controls and production for contract manufacturers.
Petland, based in Chillicothe, Ohio, with 203 stores in the chain, uses private-label products to help brand the store with a high-margin and high-turn product selection not found elsewhere, according to Lee Redfield, vice president of marketing and merchandising.

Private-Label Referral Sources
• American Pet Products Manufacturers Assn.
• Private Label Manufacturers Assn.
• National Animal Supplement Council 
• Pet industry trade magazines and annual directories
• Industry trade shows
• Pet product distributors
“The gross margin is 5 percent to 10 percent higher on store-brand products, but that is not the primary benefit,” he said. “Private labeling offers differentiation, variety and some exclusivity to our product mix.”

Petland has been private-labeling products since 1978 and currently offers more than 500 different store-brand products, which is fewer than it offered 10 years ago.

“Our retailing strategy is built first and foremost around well-known brands,” Redfield said. “Our objective is to carry our own brand in some commodity categories where it is just enough of a differentiation to draw consumer awareness and recognition.”

Under the Petland brand are toys, collars and leads, plus some shampoos, stain and odor, and housebreaking items. The company does not private-label pet food. Since most of the products are made in America, the recalls had little impact on its business. Quality assurance on private-label products comes down to the vendor partnership, Redfield added. 

Private labeling is exclusively a marketing strategy for The Pet Care Company, with a 7,500-square-foot store in Hermosa Beach, Calif. Paula and Lewis Turner, co-owners, said sales volume has remained steady this year for their store-brand dehydrated liver treats made in America, and they make the same profit margin on their store brand as other treats.

But the product label is personalized with a photo of the store owners with their dog and acts as a constant reminder to come back to the store.

“It’s great advertising for the shop,” Paula Turner says. <HOME>

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