The pet industry, a significant segment within the Consumer Packaged Goods (CPG) market, has seen unprecedented growth and transformation in recent years. According to Bloomberg Intelligence, the pet industry is expected to increase from $320 billion today to almost $500 billion by 2030. As more and more people welcome furry, feathered, or scaly companions into their homes, pet products have become a staple in households worldwide.
However, this booming rise in the pet industry is not without its challenges. The demand for pet products, while robust, brings forth the complexities of excess inventory and perishability for CPG manufacturers. Pet CPG brands face the intricate task of managing diverse product categories, each with its own shelf life, leading to potential waste and operational inefficiencies.
In this blog post, we'll explore the evolving pet industry landscape, delve into the recent developments in this thriving sector, and discuss how pet CPG brands can navigate these challenges through innovative solutions in discounting processes.
Types of pet products and their perishabilities
Food and treats
The pet food sector, notably diverse, ranges from treats to standard kibble to premium, organic offerings. Managing the variable shelf lives of these products presents a unique set of challenges, further compounded by the rising trend of fresh, preservative-free pet foods that require even more careful handling and expedited distribution to maintain freshness and nutritional value.
Bloomberg Intelligence’s report predicts that premium fresh frozen food, currently only 1% of the market, may soon outpace other categories due to growing awareness of the health effects of food on pets.
Health and grooming products
Echoing trends in human healthcare, the pet health and grooming sector is increasingly driving demand for higher quality and specialized health and grooming products. Recent developments, such as General Mills' acquisition of Fera, a pet supplement brand founded by veterinarians, exemplify a commitment to elevating pet nutrition.
The market for pet pharmaceuticals is expected to grow significantly, potentially topping $25 billion by 2030, with treatments becoming increasingly complex, such as monoclonal antibodies. In fact, 72% of pet owners are expected to use prescription medications for their pets for the next 6 months.
Pet toys and accessories
Beyond nutrition, the pet industry extends its reach into toys and accessories. This segment, less perishable but equally significant, reflects the evolving preferences of pet owners with sustainable and technologically integrated products gaining more prominence. The demand for eco-friendly, durable toys, and accessories that incorporate smart technology for pet health monitoring and interactive play is growing as pet owners seek the best for their pets’ entertainment and wellbeing.
Consumer spending trends in the pet industry
The pandemic has led to a significant increase in pet ownership, with 5 million more pets in the U.S. since the pandemic began. Morgan Stanley predicts an 8% annual growth in the pet industry by 2030 and Bloomberg Intelligence anticipates an increase of 13% in the U.S. pet population due to the advancements in elderly pet care. Both estimates reflect not just numerical growth but a changing demographic landscape, resulting in a corresponding growth in demand for pet products and services.
The humanization of pets
Pets, once relegated to mere companionship, have ascended the ranks to become integral family members. This transformative wave, known as "humanization," sees pet owners extending the same care and consideration to their furry friends as they would to any family member.
Ron Coughlin, CEO of Petco, amplifies the chorus of change, describing humanization as "a powerful consumer insight and powerful segmentation" echoing across demographics. Younger generations, particularly Millennials and Gen Zers, have been pivotal in driving the pet industry's growth and in driving “upward pressure on premiumization”. In 2022 alone, consumers poured a staggering $136.8 billion into pet products, a 10.8% surge from the previous year.
Shift towards premium and organic products
The market's shift towards premiumization is evident in the growing popularity of brands like The Farmer’s Dog and Open Farm which offer 100% human-grade food. In fact, in 2021, it was reported that 6% of Americans spend more on their pets’ food than their own food, and 11% reported spending the same amount. Nestle Purina found that 40% of pet owners “would pay more for a food that was made specifically for their pet’s nutritional needs.”
This trend is contributing to longer pet lifespans and greater investment in complex healthcare and nutrition. As pet lifespans increase, there's a growing market for elderly pet care products and services, ranging from specialized diets to age-appropriate health and mobility aids.
Sustainability as an imperative
Consumer demand for sustainable products is reshaping the industry. 40% of pet parents consider environmental issues in their purchasing decisions, driving brands to adopt more sustainable practices in production and packaging. This consumer-driven demand is pushing the industry towards more ethical and environmentally responsible practices.
Noteworthy initiatives like Dog & Whistle crafting dog food from unused natural whole foods underscore a shift toward sustainable and purposeful pet nutrition. “We know that hunger is the World’s Dumbest Problem because it is not a scarcity problem but a logistics problem and feeding dogs may be just the beginning. Dog & Whistle makes quality food accessible to dog lovers in the community by helping food industry businesses redistribute high-quality excess food and covert it into human-grade dog food.”
Partnerships like Tyson Foods and Protix also exemplify the industry's move towards sustainable and innovative solutions. By constructing a facility dedicated to converting food byproducts into insect proteins for pet food, Tyson Foods is addressing both environmental concerns and the rising demand for sustainable pet nutrition.
Impact of e-commerce
The surge in e-commerce has revolutionized pet product sales. With sales estimated to reach $57.7 billion by 2030, capturing nearly a third of the market, the digital transformation is reshaping how pet products are sold and distributed. Online platforms are not only offering convenience but also a wider range of products, including specialty items that may not be available in traditional retail settings.
This shift necessitates strategic adaptation from pet brands to stay competitive in the digital marketplace, catering to a consumer base that increasingly favors online shopping for convenience, variety, and value.
Complexities of pet product inventory for CPG brands
Inventory management in the pet industry is challenging due to the diverse product range and varying shelf lives. The high turnover in roles related to excess inventory management, as observed in major CPG companies, indicates the dynamic and complex nature of this task.
A leading CPG company's experience with high turnover in their closeout program highlights the need for robust strategies and systems to handle surplus pet product and shelf-life variations efficiently:
“We're managing variable shelf lives across different portions of our portfolio. It requires that we are able to move product at certain times, noting we have some customers who are very finicky about how much shelf life they have versus other customers that give us a bit more flexibility.”
Noting the rising trend in sustainability, he added:
“There's definitely an opportunity for us to supplement our closeout channels and look for alternative markets to be able to push the product into. The last place anyone in this building wants the product going is to a landfill.”
With an increase in innovation and more premiumization, this shift requires outlets for inventory when companies make wrong bets, underscoring the need for flexible and efficient inventory management solutions.
Efficient discounting becomes a cornerstone for pet CPG brands seeking to navigate the complexities of inventory management. As the industry grapples with diverse product categories and variable shelf lives, automation offers a harmonious solution.
With 39% of consumers continuing to shop omnichannel, pet brands need to optimize their strategies for both online and in-store experiences. This includes prioritizing inventory by channel and effectively forecasting demand across multiple channels.
Manufacturers must also navigate the complexities of promotional strategies and seasonal demands. For example, demand for certain products like flea treatments and dog sweaters fluctuates with seasons, requiring proactive planning and accurate forecasting.
The future of pet CPG
The pet industry's growth trajectory is impressive, driven by factors such as the humanization of pets, the rise of premium products, and the increasing role of technology in pet care and product distribution.
The success of pet industry companies will hinge on their ability to leverage technology and innovation to meet evolving market demands and consumer expectations, ensuring a competitive edge in a rapidly evolving market.
The pet industry, reflecting societal changes and consumer behaviors, presents a dynamic and complex landscape. Understanding these trends and adapting strategies accordingly is crucial for brands seeking to thrive in this competitive market.
Discover how Unilever US is redirecting their unused inventory to reach more American households in our latest press release!