NONFOODS: Pet Care: The tail wagging the market

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NONFOODS: Pet Care: The tail wagging the market

While the pet food recalls of 2007 may have given the natural and organic pet product category a shot in the arm, it was merely the gravy on top of an already sumptuous segment. Ever-increasing interest in natural and organic pet products among U.S. consumers has been driving double-digit sales growth in recent years.

According to Natural, Organic and Eco-Friendly Pet Products, a new study released in September by New York-based market research firm Packaged Facts, 2007 U.S. retail sales of natural pet products were about $1.3 billion, up from $558 million in 2003, and will top $2.5 billion by 2012.

Product recalls aside, a key driver of the segment's growth was the entry of major marketers into the game. Until the early 2000s, natural and organic pet products were mainly the realm of smaller marketers, some of which had been around for decades, but few of which had annual sales of more than a few million dollars.

Since then and continuing through the present, however, large pet market players have been steadily increasing their presence in the natural -- if not yet fully organic -- segment, including Nestle, Purina, Mars, Del Monte, Hill's, and, most recently, Iams on the pet food side, and Central Garden & Pet, Spectrum Brands, Hartz Mountain, and Sergeant's on the nonfood side.

Although pet specialty outlets are still the primary venue for natural and organic products, this year these products have been rapidly infiltrating food, drug, and mass outlets. In June 2006 Wal-Mart added several varieties of Natural Life brand certified organic pet foods for dogs, as well as an adult cat formula, for example.

Who's buying

Nearly half (48 percent) of the dog- or cat-owning households in the United States, representing 25.1 million consumers, seek out natural or eco-friendly products, according to Simmons data cited by Packaged Facts. Consumers in these pet-owning households specifically look for organic and natural products, and are willing to pay more for them.

The largest segments of natural pet consumers include non-Hispanic whites (20.5 million), homeowners (17.8 million), and women (16.2 million), along with households without children (15.6 million).

The segments with the highest propensity to seek out natural, organic, and eco-friendly products include Asians (who index at 140, meaning that they're 40 percent more likely to seek out natural or organic pet products than the average pet-owning household), those with graduate degrees (index of 127), those living in homes valued at $500,000 to $749,999 (index of 126), those living in the Pacific region (index of 118), and households with an income of $150,000 or more (index of 117), who are typically either professional/technical or managerial employees.

On the nonfood side, Packaged Facts estimates U.S. retail sales of natural pet care products at $279 million in 2007, up 16 percent over 2006 sales and 98 percent over 2002 sales. Unlike pet food, the overall pet care classification didn't see the major sales bump stemming from the pet food recall of spring 2007, although the pet health segment is likely benefiting from this trend. Packaged Facts forecasts continued strong growth in sales of natural pet care products through 2012, when sales are expected to reach $457 million.

Of the three natural pet care categories, cat litter is the largest by far, accounting for over three-fifths (61 percent) of 2007 sales, although natural pet health products posted the highest 2003-2007 compound annual growth rate (CAGR), at 22 percent. Based on this higher rate of growth, natural pet health products have increased their share of the natural pet care market to 28 percent in 2007, from 25 percent in 2003.

About one-quarter of natural cat litter sales take place in food, drug, and mass channels (including Wal-Mart), with pet specialty stores, natural product retailers, and Internet retailing accounting for most of the remaining sales, the report says. By contrast, other natural pet care categories haven't yet infiltrated mass retail channels to any significant degree.

As in the case of natural litter, Packaged Facts expects other natural pet health products to become increasingly segmented across the board, addressing an ever-widening range of grooming supplies and condition-specific supplements, nutraceuticals, and OTC remedies. Established collections of natural HBC products, such as those of Halo Purely for Pets and Cain & Able, will continue to expand, and new collections will continue to merge human spa-style appeals with natural and organic appeals.

Packaged Facts also expects to see all of the big names in nonfood pet supplies -- Hartz, Sergeant's, and 8 in 1 among them -- push further into natural pet care, forcing smaller marketers to up the ante with organic products and eco-friendly and other ethical claims -- all to the benefit of the pet-owning consumer.