This industry consists of establishments primarily engaged in manufacturing dog and cat food from cereal, meat, and other ingredients. These preparations may be canned, frozen, or dry. Establishments manufacturing feed for animals other than dogs and cats are classified in SIC 2048: Prepared Feeds and Feed Ingredients for Animals and Fowls, Except Dogs and Cats.
311111 (Dog and Cat Food Manufacturing)
Retail sales of pet food totaled $11.2 billion in 1999. The industry's growth rate in the 1980s was relatively flat, with an average growth of 1 or 2 percent annually. However, in the late 1990s, the growth of the market expanded approximately 4 percent, with growth coming mainly from the premium and specialty brands. A 1999 article in Progressive Grocer suggested this might be due to the booming economy and that as baby boomers' children were leaving home they were spending more lavishly on their pets.
The flat growth of the 1980s led to price wars in the early 1990s as the various manufacturers vied to take a larger share of a stagnant market. Flat growth in U.S. sales also led the U.S. pet industry to look to exports as a means of expanding the market. At the same time, the Pet Food Institute—theassociation to which 95 percent of all U.S. pet food manufacturers belong—tried to expand the number of U.S. pet owners by targeting groups not usually associated with pet ownership, such as singles. Their success in increasing ownership was primarily through promoting cat ownership since cats need less attention and are more adaptable to the lifestyle of the single person.
Another 1990s effort to overcome flat sales was the development of "upscale" healthy and gourmet pet food products. This paralleled a similar trend in the larger food industry. Established specialists in this area of the pet food market benefited greatly. By the end of the decade, grocery stores, which were losing sales to superstores such as Petco and PETsMART, began to compete in the specialty food market and redesigned their pet food aisles to include a wider variety of specialty items from cat snacks and party packs to grooming other supplies. Sales growth in pet supplies ranges between 4 to 15 percent, far surpassing the growth in food sales. The industry also continued to advertise heavily on television, spending $126 million on network television advertisements in the late 1990s.
Beginning in the mid-1990s, pet owners began following the general food trend toward healthy diets, leaving behind traditional pet foods for those with more protein and fewer chemical additives and preservatives. According to Supermarket Business , the largest growth in the pet food market was in the super-premium brand segment. These often were veterinarian recommended diets focusing on the needs of older or overweight pets.
The dog and cat food segment of the pet food industry comprises primarily two types of firms. One is the large, general manufacturer producing a variety of dog and cat foods along with other types of feed and/or food for humans in other divisions or subsidiaries. These manufacturers sell their products primarily through grocery stores. The other type is the specialty firm that exclusively produces pet food, which is usually health-related or other specialized type. Traditionally, the general firms sell their product in grocery stores while the specialty firms sell their products through veterinary offices or specialty stores.
The pet food industry is subject to regulation at the federal and state levels. In 1958 the manufacturers of pet food formed the Pet Food Institute (PFI), a national trade association. PFI acts as a spokesman for the industry before the various regulatory agencies and bodies, sponsors research, represents the U.S. industry in international meetings, and works on uniform standards for pet food. PFI worked with the American Association of Feed Control Officials (AAFCO) to develop a uniform law on pet food standards that states may use as a model whenever they consider changes to their laws and regulations on the topic. Each state has its own set of laws and regulations that apply to pet food.
Regulation of the Pet Food Industry. At the federal level, pet food labeling and advertising claims are regulated by the Food and Drug Administration (FDA), the Federal Trade Commission (FTC), and the Department of Agriculture. All pet food plants are subject to FDA inspection, and many of the FDA's canned food regulations apply to pet foods. Many manufacturers produce and/or sell products in more than one state, which means their product and its labels much also meet each state's regulations. In August 1996, the AAFCO passed new regulations, which went into effect in January 1998. These regulations govern the use of the terms "lite" and "less fat" on the U.S. pet foods' labels. In January 2000 the AAFCO published rules regulating the use of the label "Animal feeding tests using AAFCO procedures substantiate that [the product] provides complete and balanced nutrition for all life stages." Before 2000, this label could be used on products that had not been tested but were in the same family of products. The new regulations more strictly and narrowly define the term "family;" producers have until 2005 to comply.
Sales Outlets/Product Distribution. Dog and cat food has traditionally been sold in grocery stores, pet stores, and by veterinarians. Veterinarian sales are especially prevalent for those brands that are marketed as a health specialty. Health consciousness for pets paralleled the general trend toward health consciousness for humans in recent years. This movement led to increased attention to labeling and awareness of obesity in pets and the development of more specialized pet foods, with greater emphasis on health in the marketing of the product. Grocery stores, however, still remained the largest outlet for sales of pet food.
In the 1980s and early 1990s, the advent of the discount retailer as a major economic force in America began to change that trend. The biggest loser was the grocery store. The interest in health foods allowed those brands traditionally marketed through veterinarians and breeders to retain market share while the share of the grocery store fell to the discount chain. According to a 1999 article in Progressive Grocer, supermarket chains saw their share of the total pet food market fall to 50 percent. Efforts to stem the flow with cheaper, in-house brands had only moderate success since people continued to prefer national brands, but they wanted them at a lower price. Grocery stores began to market more premium brands and expand their pet offerings in an effort to lure pet owners back to their shelves.
The downward trend in supermarket sales was also due to the proliferation of pet megastores such as PETs-MART and Petco, which sell premium brands at discount prices, undercutting supermarkets by 10 to 30 percent. By the end of the 1990s, online Internet shops such as Pets.com and Petopia.com had also entered the market but had yet to show a profit.
The first commercially prepared dog food was a biscuit product introduced in England in about 1860, according to the Pet Food Institute. Dry dog foods were subsequently developed with formulas based on the nutritional knowledge of the day. After World War I, canned horse meat for dog food was introduced into the United States. In the late 1920s, the first commercial pet food diet was developed by the Ralston Purina Company. In the 1930s canned cat food and dry meat meal dog foods came into use. These were succeeded by dry expanded type pet foods, which came onto the market during the 1950s. The 1960s, notes the Institute, "were marked with great diversification in the types of food available to the pet owner including dry cat food, many more varieties of canned products, and new soft-moist products. With the growth of the industry has come a greatly expanded use of by-products from the meat, poultry, and seafood processing industry. Approximately 1.1 million tons of these by-products are now used annually in pet foods."
According to Prepared Foods there were 121 new pet food product introductions in 1996 versus 174 in 1995, including flavors such as salmon filets and pate. New specialty products included "Wheat Grass for Cats" to help with their digestive tracts, and fancy dog treats such as "Canine Cookies". In general new products offered each year total more than 100, with 105 new products offered in 1998, and an astounding 251 new pet food products introduced in 1997.
In 1999, the pet market continued to experience growth, with retail pet food sales of more than $11 billion, up from $10.6 billion in 1998. The number of dogs in the United States in 2001 was 60 million, and cats numbered 75 million. Roughly 55 percent of U.S. households included at least one dog or cat. In the late 1990s, cat food sales were up 8.8 percent. Cat ownership is increasing faster than dog ownership, due in part to a growing tendency by cat owners to have more than one cat. Due to an increasing awareness of the relationship between pet health and proper nutrition, the majority of the growth in the pet food market is in the specialty food category.
The total value of industry shipments grew from $8.55 billion in 1999 to $8.82 billion in 2000. Pet food imports to the United States grew from $175.2 million in 2000 to $186 million in 2001, and exports grew from $885.7 million to $1.009 billion over the same time period.
Leading companies involved in the manufacture of dog and cat food inthe United States include the Ralston Purina Company of St. Louis, with 1999 sales of $4.7 billion and brand names such as Cat Chow and Meow Mix; Nestle USA, Inc., a subsidiary of Nestle S.A., which had 1999 international sales of more than $5.2 billion and brand names of Friskies, Alpo, Fancy Feast, and Mighty Dog; H.J. Heinz Company of Pittsburgh, with 1998 sales of $9.3 billion, and brand names such as 9 Lives, Ken-LRation, and Gravy Train; and Mars, Inc. with 1998 sales of more than $1.5 billion and brand names of Kal Kan, Pedigree, Sheba, and Whiskas. Specialty stores such as PETsMART and Petco also held significant market shares. Pet superstores accounted for 15 percent of pet food sales.
According to Supermarket Business, in 1999 canned cat food sales were led by Heinz's 9 Lives, with $188.7 million in sales, while the leading brand of canned dog food was Nestle's Prime Cuts, with sales of $118.8 million. The leading semi-moist dog food that year were private labels, with $24.3 million in sales, while the leading semi-moist cat food was Ralston Purina's Happy Cat brand, with $8.1 million in sales. Kal Kan Pedigree Mealtime led in the dry dog food category with $331.3 million in sales, and Purina Cat Chow led the dry cat food category with $133.7 million in sales.
According to Pet Food Industry, the United States has managed to maintain a favorable trade balance in the pet food industry. Exports amounted to $821 million in 1998, while imports were at $184 million, according to the United Nations Food and Agriculture Organization. Canada, Japan, and the European Community are the three biggest markets for U.S. dog and cat food product exports.
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