Grocers that focus on pet products are learning that it is not just an area of high volume, but high margins as well.
Forget fetch with Fido or Felix. Pet owners today want to play Let’s Make a Deal with retailers.
The competition for pet dollars has never been greater. Pet superstores, mass retailers, the Internet and a sluggish economy have created a pet shopper that demands value and is willing to channel surf to find the best deals.
According to Packaged Facts’ U.S. Pet Market Outlook, 2013-2014 report, pet consumers’ loyalty to a particular channel has been waning for the past several years. In 2006, 53% of pet shoppers claimed to be channel-loyal, the report states; that number now hovers around 43% to 44%. For supermarkets specifically, channel-loyal shoppers dropped from 34% in 2008 to 28% in 2012.
There was a time when supermarkets were the “go to” option for pet owners. Increased competition may have contributed to consumers’ migration away from supermarkets, but industry observers say there is more to it than that: it has been a case of many supermarkets neglecting the category.
That is now changing.
“Grocers are realizing that if they want to compete in pet they need to open their eyes and expand their reach,” says Terry Hannaford, CEO of St. Marys, Ont., Canada-based Omega Paw. “Retailers have opened up and realized that there are not just one or two manufacturers anymore. There are others that have great products. I’m seeing almost a switch back, as consumers see grocery adding more to its lineup than just the standard two or three SKUs.”
Grocery’s renewed dedication to pet goes beyond just adding more SKUs to the shelf. Observers say many retailers are dedicating more space as well.
“We are really seeing the expansion as far as more shelf space,” says Leslie Yellin, executive vice president for Moonachie, N.J.-based Multipet International. “Buyers are saying to me ‘upper management wants me to expand.’ The whole grocery community is recognizing this and this is something we need to put more focus on because we are seeing the incremental sales.”
Ideally, grocers would like the pet section to become a destination shop for consumers. However, with the exception of food and perhaps cat litter, pet products are generally more of an impulse purchase. “Nobody wakes up and says ‘I’m going to buy a dog toy today,’” says Yellin.
The impulse nature of the category is the reason Yellin says it is imperative that retailers keep their assortment fresh. Multipet helps retailers do that by changing up the products it offers every quarter. Retailers seem to be catching on.
“Now we have chains asking us, ‘what can we do to make this more fresh, different,’” says Yellin. “They understand that keeping the same products on the shelf for too long can get old quick. We are always pushing retailers to get them to recognize that it is like a fashion category. We show them that by rotating style and having a variety on each peg helps increase sales.”
As with fashion, pet trends come and go and it is important to strike when the iron is hot. For example, observers say right now the trend in dog toys is products with mixed materials, a plush with rubber, for example.
Along those lines, Multipet recently introduced the Loofapillar, a plush toy that includes rubber, tennis balls and rope. Yellin says the Loofapillar has had great placement and that retailers recognize the “Loofa” face but the product is completely different than what they have seen before, thus engaging consumers.
The cat product set seems to be undergoing a bit of a renaissance as observers are seeing extremely high turns in that segment. “The cat owner has always been finicky, but now we have found new, innovative things and we have seen this category grow greatly,” says Yellin. Playing on cats’ natural instinct and attraction to feathers, Multipet offers giant boa feathered cat wands that feature mixed materials and sounds.
Some observers say that focusing on the cat segment actually provides retailers a strong opportunity to become that coveted “destination shop.” Grocers can best do this by linking cat litter, toys and treats to cat food.
“Grocery stores remain the No. 1 outlet for cat food purchases, but grocers are missing an opportunity if they don’t expand this basket to include incremental items, most notably cat litter and treats,” says Tina Le Lay, vice president marketing – cat food and litter for The Hartz Mountain Corp., based in Secaucus, N.J. “These are two categories that have extremely high penetration rates—76% and 45% respectively—and ones in which consumers are always searching for something new to try.”
Hartz latest entry into the litter category is Hartz Multi-Cat Litter, which utilizes technology from Japan-based Unicharm Corp. Le Lay says more than half of cat households have more than one cat and that the litter is specially formulated for the higher demand needs of multi-cat households, providing clumping that is extra firm and small allowing for cats to share a litter pan and for clumps to be cleaned out with no odor left behind.
“Hartz Multi-Cat does not contain overpowering fragrances or high dust,” says Le Lay. “It is inline with an important consumer trend for a more natural litter experience, for both consumers and cats.”
A natural litter experience is exactly what Mark Hughes, national sales and marketing manager for Pet Care Systems, maker of Swheat Scoop Natural Clumping litter, says Swheat Scoop offers.
“Consumers are becoming increasingly concerned about the ingredients in every product they use and many shoppers, especially those with young families, prefer products that are all-natural or chemical-free,” says Hughes. “They are also becoming increasingly receptive to products that are friendlier to the environment. So when they go shopping for the furry members of their family they respond positively to pet products similar to the ones they use for themselves.”
Hughes says Swheat Scoop’s natural enzymes work to eliminate—not mask—litter box odors while natural starches form firm clumps when exposed to moisture. The litter is clay- and chemical-free and 100% biodegradable. Pet Care Systems, based in Detroit Lakes, Minn., is aggressively promoting its new 6.82-pound box to the grocery trade.
Omega Paw has also placed an increased focus on cat products. Along with its Roll’ N Clean self cleaning litter box, which Hannaford says is the company’s most outstanding product, Omega has recently introduced two cat treats, Meowtinis, made with white fish and garnished green olives and Cranberry Cabernet, made from real cranberries.
“These are fun cat treats that are significantly better than other cat treats on the market, but they also have a fun element to them that really appeals to consumers,” says Hannaford. Omega Paw’s Brew Buddies dog treats line has also been expanded and now includes five products.
Like any other category, the introduction and continued innovation within the pet category are important. However, most would add that retailers need to pay close attention to their options, ensuring that they offer shoppers legitimate innovation and not just “new products for sake of new products”—and value still plays a role.
Officials at the Kent Pet Group, maker of World’s Best Cat Litter, understand the importance of balancing value and innovation. “We are continually exploring more ways to get our products into the hands of the consumer—at the right value,” says David Tagliatela, director mass and grocery for the Muscatine, Iowa-based company. “We are constantly developing new products to stay ahead of the curve and be the cutting edge for innovation. At the same time, we understand the strains this economy has put on families, and as a result have invested and given back by way of constant promotion at shelf to help families afford the best possible products for their pets.”
Retailers can also innovate by simply featuring products they did not previously offer. The grooming segment is a perfect example, says Shay Moeller, product manager, North America consumer pet for Sterling, Ill.-based Wahl Clipper Corp.
“Grocery channels should realize they are a destination for other pet products outside of food and treats,” he says. “These same dog owners bathe, brush and cut their dogs hair. When grocers focus on these items the category grows tremendously.”
Moeller says that Wahl’s natural shampoos have generated a lot of excitement. In addition to the all-natural shampoos, Wahl has launched a line of No-Rinse waterless shampoos and doggie deodorants and a Lithium Ion Pet Clipper.
Hartz’ parent gets recognition
Unicharm, the parent company of Hartz Mountain Corp., was named as one of the most innovative companies in the world by Forbes Magazine. Unicharm is based in Japan and registering just under $6 billion in annual sales, was the 14th ranked company on the list, which was published by Forbes in September.
Unicharm purchased Hartz in late 2011 and plans to invest in the Secaucus, N.J.-based company and expand its product line into different segments of the pet business.
Unicharm also produces a number of personal care items, including diapers and sanitary napkins. It is currently ranked as the seventh-largest producer of pet food in the world.