Predictors to Watch
Pet businesses’ latest endeavors offer clues as to the
direction the industry is likely headed this year and beyond.
BY DAVID LUMMIS
At any given moment, it would be an understate- ment to say big changes are afoot in the U.S. pet industry. Vast and multifaceted, the market is expected to add another $3.8 billion in value in 2019 to total
$93.5 billion across its four principal categories: pet food
( 38 percent of the market), veterinary services ( 33 percent), nonfood pet supplies ( 19 percent), and nonmedical pet services ( 10 percent). Moving into 2019, however,
the stakes seem higher than ever as the long-term market
drivers of premiumization and humanization wear and
tear, e-commerce crunches brick-and-mortar, and pet
ownership appears to have leveled off. If that sounds
a tad ominous, perhaps it should. These are headwinds
to be underestimated only at peril in a saturated market
that has defied gravity for more than a decade.
Well aware of the challenges, marketers, service providers, and retailers old and new have gotten busy in
ways that are reshaping the U.S. pet industry, and their
hits and misses will be bellwethers marketwide. Here are
some of the biggest trends and initiatives to keep an eye
• Under its new leadership, Petco is purging its shelves
of products with artificial ingredients. At a time when
natural pet food has long since gone mainstream, it’s a
gamble that could determine not just the future of the
nation’s No. 2 pet chain, but also the ability of natural
pet food to endure as a pet specialty channel bulwark.
• With Blue joining pet specialty crossovers Nutro and
Nature’s Recipe in mass merchandisers and supermarkets, and being further rolled out by its new parent
General Mills, the trend mainly responsible for keeping pet food dollar sales in the black has officially
morphed into mass premiumization. In the short term,
this might be a windfall for the brands and retailers directly involved. Looking ahead, the multibillion-dollar
question is whether the mass-market pricing demands
strangle the superpremium goose.
• While it is largely responsible for the breakdown of the
pet specialty/mass-market divide, the e-commerce
boom has more than offset brick-and-mortar losses
in pet product sales overall. It has forced brick-and-mortar retailers to become omnichannel competitors
and to add new services such as click-and-collect (order
online, pick up in store) and home delivery. These expanded options are great for pet owners. But by “
covering all bases,” retailers such as PetSmart/ Chewy.com
and Walmart/ Walmart.com (and Jet.com) are competing not just with pureplay e-tailers, but also with themselves. This could be a win-win—as one leading retailer
put it (and I’m paraphrasing), “If we’re going to lose
to e-commerce, we’d rather lose to ourselves”—but it
definitely increases the pressure on brick-and-mortar
retailers less able to adapt.
• As with natural, the days of grain free as a pet food
market shot in the arm appear numbered. Grain-free
formulations have gone mainstream to such a degree
that the novelty is off and the price pressure in on.
Even more ominous is the U.S. Food &
Drug Administration (FDA) warning of
a possible link between grain-free pet
food and canine dilated cardiomyopathy (DCM). The science is far from in,
and there might be nothing there. But
confirmation of a link could be a blow
not just to grain-free pet food, but to the
pet market as a whole. With the long-term effects of substituting tried-and-true grains with the likes of peas, lentils,
and potatoes unknown, marketers have
invested millions in developing and promoting grain-free pet food as nutritionally advantageous, and “we
didn’t know” won’t cut it if pet owners’ canine “
babies” end up paying the price.
• After a number of false starts in years past, freshly
made, minimally processed, human-grade pet food
appears to be coming into its own judging from substantial capital investments in companies including
NomNomNow, The Farmer’s Dog, Ollie and Pet Plate.
Suggesting the trend might go mainstream sooner rather than later, Walmart’s Jet.com has teamed up with
Ollie to home deliver Ollie’s fresh meals, and Petco has
joined forces with JustFoodForDogs to bring the California-based fresh pet food chef-staffed kitchens into its
stores—a move that, taken together with the retailer’s
artificial-ingredient embargo, goes a long way toward
positioning Petco as the Whole Foods of the pet market.
In a business in search of the next big superpremium
pet food thing, a big part of the future may be fresh.
• High-tech pet products are becoming pet care service
providers, feeding and watering pets, scooping litter,
alerting pet owners to product replenishment needs
and pet behavior, reordering supplies via Bluetooth/
internet, and allowing pet owners to keep tabs on and
communicate with their pets from afar. Tracking devices and monitors (aka pet wearables) detail through
smartphone (or computer) not just the pet’s location,
but also its vitals, and can directly update veterinarians. In its December 2018 report, Durable Dog and Cat
Petcare Products, 2nd Edition, Packaged Facts estimates
that tech-based durable pet care products (defined as
those using Bluetooth, GPS or RFID, and those able
to connect to Wi-Fi or home networks) account for 8
percent of the durables market, with sales of $400 million in 2017.
• The e-commerce heat is reinvigorating the trend of pet
specialty stores adding services to such a degree that
major brick-and-mortar pet retailers are exploring
new store formats. Top of the list (again) is Petco, which
is rolling out PetCoach stores featuring veterinary and
other services along with JustFoodForDogs pantries
and high-quality merchandise. PetSmart is testing a
new store concept called The Groomery featuring clas-
sic grooming services and “hand-picked” products.
Receiving less fanfare, but perhaps most intriguing,
VetIQ is opening veterinary clinics in Walmart stores.
The mega-retailer has downplayed the relationship as
“landlord-tenant,” but it nevertheless smacks of testing
the waters for a more direct foray into veterinary (and
other pet) services, which, given Walmart’s pet busi-
ness savvy, seems overdue.
• Making it clear that online subscriptions are where
it’s at, all major pet food e-tailers avidly encourage
auto-replenishment, and fresh food purveyors such as
NomNomNow and The Farmer’s Dog do the same. An
influx of internet-based startups have begun offering
via subscription customizable boxes of pet supplies,
including PupBox (acquired by Petco in 2017), Bark-Box and Meowbox. Also banking on repeat business
are service-linked products such as the American Kennel Club’s Link AKC Smart Collar with a built-in GPS
tracker, whose monthly $10 fee is discounted under a
one- or two-year plan.
• Tracking human trends, Uber-like services are disrupting the pet sitting, walking and boarding businesses. Three well-funded startups—Rover, DogVacay
(merged into Rover) and Wag!—have paved the way
for connecting pet owners with independent pet care
professionals who have been vetted and insured. Already, such services have changed the pet sitting and
boarding business model, and this smartphone party
has just begun.
• As if e-commerce businesses weren’t doing well enough,
major internet players including Amazon and Chewy
are building out further. One front is private label,
onto which Amazon has unleashed brands including
Wag, Solimo and Simply Perfection since May 2018. In
July, Chewy.com launched Chewy Pharmacy, and, in
November, Petco began offering Express Scripts-pow-ered pet prescriptions and OTC medications on Petco.
com and PetCoach.com. The writing is on the wall:
Don’t expect the e-commerce onslaught to slow anytime soon or fail to branch out in additional ways. If, for
example, Walmart is mulling pet services, don’t think
Amazon/Whole Foods isn’t.
David Lummis is the lead pet-market analyst for Packaged Facts, a division of Mar-
ketResearch.com, author of Packaged Facts’
U.S. Pet Market Outlook, 2018-2019, due
out this month, and project manager for
Packaged Facts’ most recent pet market report, Pet Food in the U.S., 14th Edition
E-commerce and online
services will continue to
impact the industry.