Premium Plus
When customers click on the pet care link at Kroger.com, they find a wealth of information about pet products and services. One standout section begins with the headline “Now Available at Kroger — Ultra-Premium Pet Foods & Treats.”
The copy then continues: “Now you’ll find specialty pet store quality, right where you already shop! With over 90 new items, you’ll have more options than ever before, including natural, organic and grain-free options. Plus discover super food, limited ingredient and specialty diet choices to cover all your furry friend’s needs.”
Beneath the verbiage, logos for Simply Natural, Iams, Purina Beyond, Newman’s Own Organic, Abound, I and Love and You, Rachael Ray Nutrish, Three Dog Bakery, and Nutrisca are prominently displayed.
Kroger’s push to promote premium pet products kicked off in June 2014, when the company began stocking SKUs from the ultra-premium brand I and Love and You in about 2,000 stores, according to “U.S. Pet Market Outlook, 2015–2016,” a report from Rockville, Md.-based Packaged Facts.
In doing so, the Cincinnati-based grocer tapped into a trend toward premiumization in the category.
“Much of the dollar growth in the U.S. pet market has come from higher-ticket sales of products and services, as opposed to volume gains,” the report notes. “Fueling this trend is a steady stream of superpremium products and services.”
By the Numbers
According to “The Humanization of Pet Food,” a March 2016 report from Schaumburg, Ill.-based Nielsen, pet food currently accounts for 76 percent of the pet care category. Healthy treats, specialty pet foods and other premium options are among the segments experiencing significant growth.
“There isn’t much people won’t do for their pets, and this sentiment has only strengthened over the past few years,” Nielsen reports. “In the U.S., 95 percent of pet owners currently consider their pets to be part of the family — up seven points from 2007. Increasingly, pet owners are moving from expectations of ‘high quality (for pets)’ to ‘humanized’; that is, they desire pet food options that address the same health concerns currently influencing human food production, such as unnatural preservatives and genetically modified ingredients — and they’re serious about these preferences.”
Packaged Facts research confirms that premium products are the darlings of the pet aisle today.
According to “Pet Product Retailing in the U.S.: Channel Competition and Consumer Shopping Trends, 2nd Edition February 2015,” “Despite any money-saving tradeoffs pet owners may be making, premium products remain the market drivers in the U.S. pet market. Because there’s no set definition for premium, it’s difficult to say just how much of the market is premium, but Packaged Facts estimates that premium products account for approximately two-fifths of the market.”
Food isn’t the only premium segment experiencing a surge in the pet category. For example, Arm & Hammer, a brand of Trenton, N.J.-based Church & Dwight, introduced Clump & Seal cat litter at a premium price level in early 2014. The product earned more than $100 million in its first year on the market, Packaged Facts notes.
Why Premium?
What’s fueling the favorable market for premium pet products? According to Packaged Facts data, pet owners’ belief that natural and organic products, which make up the majority of premium products, are safer than regular pet foods is a big part of the appeal.
Not only did 41 percent of pet owners agree that natural and organic pet foods are safer products, a growing percentage of them also said they would buy more natural and organic products if they were more available. In fact, the percentage of respondents who would buy more natural/organic products if they were more available grew from 30 percent in 2012 to 39 percent in 2014, Packaged Facts reports.
Health-related products are also driving sales. Packaged Facts notes that 68 percent of pet owners were willing to spend more to ensure the wellness of their pet, and 64 percent believed that high-quality foods play a part in preventive health care.
Ray of Sunshine
On the supplier side, Ainsworth Pet Nutrition has also observed an increasing interest in premium pet products, according to Steve Joyce, VP of marketing at the Meadville, Pa.-based company.
“Over the past few years, we have definitely seen a trend in the humanization of pets,” Joyce affirms, “and as consumers are treating their furry companions more and more like family, they are more willing to invest in higher-end products — a trend that has been enormously positive for the pet food industry.”
Products from the Rachael Ray Nutrish line of dog and cat food are the most popular premium items from Ainsworth, a company whose motto is “Pet Store Quality. Supermarket Easy.”
“While all of our Nutrish recipes are made with simple, wholesome ingredients, our most recent product offering, Rachael Ray Nutrish Dish — a meat-first, no-corn, -wheat or -soy product with whole-food inclusions of real chicken, fruits and veggies — has been very well received,” Joyce asserts.
Field Report
Toby Nelson, president of RT Nelson Sales and Marketing, in Altoona, Iowa, has a good handle on the premium pet market. As someone who sources premium pet products to stores such as Hy-Vee, Nelson understands the positive results seen by retailers that merchandise and market premium pet supplies.
“From day one, when I took on the pet business — 10 to 12 years ago — I started working with premium and gourmet products,” Nelson recalls. “In a good-better-best scenario, I deal with the better and best products. The average customer is a good customer, but that isn’t who you make money with. Premium products have a lot of profit potential.”
West Des Moines, Iowa-based Hy-Vee is one retailer that not only understands the pluses of premium, but also embraces some higher-priced items. Creating in-store displays that tout such products can help drive customers to premium purchases. “In-line purchases tend to be planned, but displays create impulse purchases … and there is a nice margin,” says Nelson, who often hands out samples at pet store events to introduce shoppers to premium pet lines.
“Customers who shop pet specialty maybe once a month but go to the grocery store three to four times a week start to notice,” he continues. “Carrying [these kinds of] quality products and having a good selection of them leads to repeat sales — and repeat sales say it all.”
“As consumers are treating their furry companions more and more like family, they are more willing to invest in higher-end products.”
–Steve Joyce, Ainsworth Pet Products
“Premium products have a lot of profit potential.”
—Toby Nelson, RT Nelson Sales and Marketing