The Top 10 Global Pet Food Leaders: Part 1

Today, see pet food leaders 6-10, and check back on Tuesday for 1-5!

The global leaders in the pet food industry have a large responsibility on their shoulders. Consumer confidence has been shattered by the 2007 pet food recalls, and it is up to the big companies, the name brands, to rebuild that trust and help move the industry forward into a new era of pet food.

Top 10 global petfood leaders
These influential industry giants know just where to sit and stay – at the top After a tumultuous and media-scrutinized year, our industry has seen plenty of changes. Some things, however, remain relatively consistent, like the 10 companies that lead the petfood industry in global sales. But just like the March 2007 pet food recalls and the resulting push of fresh, organic and natural products, there’s always room for a few surprises. Although most companies profiled are familiar names, two Brazilian companies have entered the ring.

Lead dogs and new pups
The latest information from Euromonitor International shows the continued growth of the global petfood market since 2001. As of fall 2007, worldwide dog and cat food sales stood at US$45.12 billion, a 4.9% increase over the previous year. Euromonitor projects this growth to continue at a compound annual rate of 2.9%, reaching about US$52 billion by 2012.

For overall market sales, research companies like Euromonitor are able to provide data close to real-time. For individual company sales and market shares, data lags by a year. Thus, Tables 2 and 3 present the top 10 global petfood companies by sales and growth, respectively, as of the end of 2006.

6. Affinity Petcare SA
World headquarters: Barcelona, Spain
Approximate 2006 global retail sales: US$0.59 billion
Officers: Carlos Argenté, CEO/VP marketing; Franc Andreu, operations managing director; Frances Blanch, VP R&D; Patricia Larumbe, VP business development
Top brands: Affinity, Ultima (UK), Brekkies, Brekkies Excel (cat), Advance, Advance Veterinary Diets, Premium Dog
New products: Special Care Urinary Tract Health, Special Care Hairball Control (both for cats)
Website: www.affinity-petcare.com
Employees: 720

Affinity Petcare, a division of Agrolimen SA, says it is committed to the following values: imagination, innovation, flexibility and a scientific and systematic approach. The company offers a wide range of products, from special veterinary diets to super premium pet foods to value-priced products for cats and dogs.

Affinity products are distributed mainly in the European Union, but the company is building a distributor network within the fast-growing Eastern European petfood market, too.

Besides expanding distribution, Affinity’s growth strategy is based on new product development and strong promotion efforts. Its new Special Care cat foods draw on expert veterinarians and nutritionists, the company says, to treat specific conditions such as urinary tract health and hairballs. Both are dry diets.

7. Nutro Products Inc.
World headquarters: City of Industry, California, USA
Approximate 2006 global retail sales: US$0.56 billion
Officers: David Kravis, CEO; Mike Satterwhite, executive vice president; Ladd Hardy, senior vice president, marketing
Top brands: Max Dog, Ultra Dog, Natural Choice Dog, Max Cat Gourmet Classics, Natural Choice Complete Care Cat
New products: Ultra Large Breed Puppy and Adult; Natural Choice: Sensitive Skin & Stomach Formulas, Complete Care Indoor Kitten & Weight Management, Senior Brown Rice & Lamb Meal, Dog Healthy Desserts, Small Bites Lite & Senior
Websites: www.nutroproducts.com; www.ultraholistic.com

Nutro Products Inc. was purchased in May 2007 by Mars Inc., but for the sales reporting period used in this article, Nutro was still a separate company. The company prides itself on using natural pet food ingredients, making foods pets drool over and thrive on, and being at the forefront of research. Though affected by the March 2007 recalls, it has since stepped up its safety and testing programs to prevent future incidents.

Since the introduction of its Max line in 1985, Nutro has expanded the dog food line to include a variety of products for every stage of a dog’s life and a full line of foods for cats. The popular Natural Choice line now includes treats and biscuits as well as wet foods for both dogs and cats.

Nutro experienced growth in its superpremium holistic brands with new products such as Natural Choice Complete Care Indoor Kitten & Weight Management.

8. Unicharm PetCare Corp.
World headquarters: Tokyo, Japan
Approximate 2006 global retail sales: US$0.29 billion
Officers: Toshio Takahara, chairman; Gumpei Futagami, president/CEO
Top brands: Aiken Genki Gin no Sara, Neko-Genki Silver Spoon, Gaines Pakken
New products: Ginno Sara for Dogs 10 years and older, Fukkura Dry for Dogs 10 years and older, Gainer Pakken White Meat Chicken, Ginno Spoon Retort Pouch, Ginno Sara Kyono Gohobi (treats)
Website: www.uc-petcare.co.jp
Number of employees: 180

Unicharm PetCare Corp. is a division of Tokyo-based conglomerate Uni-Charm Corp. and is continuing to take advantage of Japan’s steadily growing pet population of 25 million companion animals. The company believes the key to its continuing rise is a strong emphasis on four pet food trends: indoor cats and dogs, small dogs, overweight animals and the aging pet population. To differentiate itself from other fast-growing Japanese petfood manufacturers, Unicharm emphasizes the speed of converting consumer needs into products and applying technology to premium pet foods.

Unicharm is betting on pet humanization to drive consumers to more premium and superpremium products like its new semi-moist dog food Gaines Pakken White Meat Chicken and Ginno Spoon Retort Pouch, a wet cat food.

Since Gumpei Futagami became president and CEO of the company in 2001, the pet division has grown 13%-14% annually. To continue a healthy growth, Unicharm faces challenges in improving product quality, safety consciousness and gaining profits in an environment where raw materials are increasingly expensive.

9. Total Alimentos SA
World headquarters: Três Corações, Brazil
Approximate 2006 global retail sales: US$0.20 billion
Top brands: Big Boss, Big Boss Nuggets, Lider, Família Max, K&S, Nero, Equilíbrio, Supreme, Snacks
New products: Supreme Cães Sensíveis, Feitiço Bolas de Pêlos, Nero Refeição, Lançamento Big Bom, Kitute Higiene Bucal
Website: www.totalalimentos.com.br

New this year to the Top 10 profiles, Total Alimentos SA is a Brazilian-based company operating from its facility since 1974. The company’s single objective: to provide consumers innovative products with high levels of technology.

Total Alimentos credits investments in technology, research, new ingredients and communication with customers as reasons it currently occupies such a prominent position in the production of food for dogs and cats in Brazil and worldwide. From 2005 to 2006 the company experienced a strong 30.4% growth rate, with overall growth of over 200% from the year 2000 (Table 3).

With pioneering technologies in palatability of dry and wet foods, Total Alimentos prides itself on modern and exclusive processes. The company also claims to be the only petfood manufacturer certified in ISO 9001, GMP and HACCP. Total Alimentos thinks these programs contribute to the controls of its processes and products, ensuring consumers safe and reliable petfood, since they comply with multiple international standards of pet food safety.

10. Nutriara Alimentos Ltda.
World headquarters: Arapongas, Paraná State, Brazil
Approximate 2006 global retail sales: US$0.20 billion
Top brands: Foster, Freddy’s, Bybo, Dog Show, Blog Dog, Dog Friends, Tommy, Fulldog, Floop, Dunga, Ringo, Pitoko Mix, Pitty, Bidu, Street Dog, Pitukão Pitukinha, Gatto, Street Cat, Blog Cat, Clean Cat, Pitukats
New products: Dog Show Gourmet, Dog Friends Dry food, Gatto Meat, Fish & Mix
Website: www.nutriara.com.br

The second new petfood company from Brazil to appear on our list, Nutriara Alimentos Ltda. was founded in 1991. Initially production was directed at birds, pigs, bovine and equine breeders. It wasn’t until 1996 that the company opened the pet segment of its business, but it took little time for Nutriara to secure a position in the competitive petfood market.

Nutriara expanded its activities and facilities, changed over its production lines and began focusing its investments solely on petfood. Since 2000, the company has experienced 72.3% in growth (Table 3) and doesn’t plan on slowing down any time soon. With an enormous range of products for both cats and dogs, many of which are top sellers, the company strives to offer pet products for animals of all ages, sizes and special health needs.

Currently, Nutriara products can be found in every region of Brazil, as well as Argentina, Uruguay, Paraguay and Chile. Focusing on increasing production, the company has recently built another facility in Uruguay. Nutriara has also formed a partnership with Cargill Animal Nutrition and is preparing to take on the rest of the world, one piece of kibble at a time.

Selling Pet Food Safety to Consumers

Consumer concern over pet food safety creates opportunity for marketers of homegrown, alternative petfoods Although the largest pet food recall ever has ceased making daily headlines as it did from March through May, consumer concerns over the safety of the US food supply remain at an all-time high and will continue to transform the petfood market. Some of this concern is warranted, and much of it reflects a newfound public awareness of just how closely intertwined the human and animal food supplies are, as the differences between human and pet food regulation begin to disappear.

The melamine implicated in the pet deaths was also found in protein ingredients commonly used in human foods, including bread, cereal, pasta and veggie burgers. And it was consumed by more than 150,000 hogs and broilers, which were eventually released for processing and human consumption. This joint decision by five US federal agencies was based on tests confirming that the meat was safe, although the Food and Drug Administration (FDA) and US Department of Agriculture called for additional scientific analysis.

Melamine aside, US consumers have reasons to worry. These include E. coli infection of spinach and Salmonella infection of peanut butter in the past 12 months and limited FDA staff and funding.

A wakeup call
Prior to the petfood recall, most Americans were unaware of the alarming state of affairs with food safety. Apparently, not even frequent contamination or infection of human food products was enough to warrant major media coverage, making the amount of attention the pet food recall received all the more remarkable.

Even as the media was chowing down on the recall tragedy, the US public tuned in to this pet industry news in surprising numbers. During the week ending April 30, 2007, nearly three in 10 Americans (28%) followed the petfood recall “very closely” while another 17% said it was the single news story they followed more closely than any other, according to the Pew Research Center. Only the Iraq war attracted more public interest.

For years, pet industry insiders have been claiming a sea shift in the human-pet relationship. If this doesn’t affirm the intensity of emotion, nothing will. Despite the horrific circumstances of the recall, for petfood manufacturers able to rise to the occasion, this high interest level may turn out to be a positive and bellwether of things to come.

For example, Packaged Facts’ June 2007 report, Product Safety and Alternative Pet Foods: North American Market Outlook, speculates that billions in petfood retail sales may be in play as consumers consider switching pet food brands. The estimate derives from recent surveys showing the number of pet owners who’ve said they are open to switching, which ranges from 8% in a GfK Custom Research North America study to 27% in one by the Pet Food Institute. If those percentages are applied evenly to 2006 North American petfood sales of US$16 billion, you get a potential brand shift of US$1.3 billion to US$4.3 billion.

Packaged Facts believes those billions could soon be going toward purchasing alternative products such as natural and organic pet food, raw petfood, refrigerated and homemade pet food, as well as other categories explained below. Indeed, such movement may have already started.

Knee-jerk reaction: no China
Addressing the primary food import concern raised by the recall, one knee-jerk reaction is “China-free.” This makes sense in some cases, such as in eliminating suspect China-sourced ingredients. Major pet food brands including Menu Foods and Mars division Royal Canin USA are, for example, either cutting back on pet food ingredients from China or phasing them out altogether. Menu says it won’t resume using them until the company and the world community are assured they are safe.

In fairness, China isn’t alone in turning out below-par foodstuffs, and in most countries, executing food safety officials for putting the public at risk (which recently happened in China) isn’t an option. Plus, Chinese-made ingredients are now so ubiquitous in the US food supply that any form of scaling back without causing serious trade disruptions would take years. But, the fact that the China-based addition of melamine and other toxic ingredients to ingestible products has been part of a deliberate and widespread pattern is enough to give any consumer pause.

In the short term, therefore, consumers concerned about the health of their pets and families may respond to label claims like “safe” and “China-free,” which, until the new mandatory country-of-origin food labeling regulations kick in (see sidebar), may be the next best thing. Even the often seen “made in the USA” doesn’t ensure product safety since, for example, that Sara Lee bread you may have toasted this morning contains ingredients (vitamin supplements) from China.

One company betting on positive consumer response is Food for Health, based in Orem, Utah, USA, which says its products are made from organically grown foods processed and packaged in the US without chemical additives. Its new labeling plans call for “safe” and “China-free” stickers on human and pet supplements, including its Healthy Dog line.

100% US-sourced ingredients
In light of the petfood recall and the pending country-of-origin pet food labeling, the Packaged Facts report predicts that “100% US-sourced” will emerge as a key pet food market positioning in the coming months, especially among alternative products like organic and raw pet foods. After the recall, Newman’s Own Organics spent weeks researching the source of the ingredients used in its petfood line, and the company recently announced that every ingredient in its products comes from US sources.

Ninety percent of the ingredients used in North Hollywood, California, USA, based Artemis Pet Food Company’s human-grade products are US-sourced, with the rest coming from Canada (7%) and New Zealand (3%), according to the company. Sales for this $20 million business have soared by 25% to 50% as a result of the recall, even though its dog food costs nearly three times as much as the average bag of supermarket petfood.

Going local
Packaged Facts also predicts much stronger interest in products made from locally grown ingredients. Human-grade organic pet food producer Evanger’s, whose business has surged as a result of the recall, buys all its ingredients locally, most of them within 40 miles of its plant in Wheeling, Illinois, USA. In an interview with the Chicago Tribune (May 28, 2007), company vice president Joel Sher said that buying locally has taken on much greater importance since the recall. “You’ve got to know your suppliers and the kind of people they are. With the local ones, you can know as much as you want to know. You can visit them.”

Packaged Facts’ expectations for “locally grown” as a potent petfood sales proposition is not based solely on the recall. Trends in the petfood market don’t just follow human food trends, they often do so at accelerated rates, and the trend toward locally grown is in full swing on the human side.

In its May 2007 report Fresh and Local Foods in the US, Packaged Facts conservatively estimates that locally grown food could be a $7 billion business by 2011, up from its current level of about $5 billion. This optimistic forecast is based on trends including the rapid growth of farmers’ markets, consumer perceptions that locally grown products are tastier and healthier, consumers’ growing desire to support their local economy and corporate support for sustainable agriculture.

Country-of-origin labeling
Mandatory country-of-origin labeling is on the way for food products sold in the US, though not without controversy. Originally set to go into effect in 2004, implementation of the new law was repeatedly pushed back by the formerly Republican-controlled US Congress, most recently until 2008. In early 2007, however, the newly empowered Democrats introduced legislation to move the deadline back up a year, and in July 2007 the House Agriculture Committee voted to require country-of-origin labels on meats starting in 2008.

This is not just a partisan political issue. Overwhelmingly, US consumers want to be informed about where their food comes from. In a Consumer Reports survey of more than 1,000 Americans conducted in June 2007, 92% said they wanted to know which country produced the food they are buying. Many also said they’d like the choice of buying products made with ingredients sourced only in the US, since food imports can no longer be assumed safe.