Marketing Report Dog Food

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Dog Food Marketing Report

ACS 0a - 00

Fall 00

TABLE OF CONTENTS

Historical Perspective 1

Marketing Strategy Analysis

Target Market Analysis 1

Product Analysis

Price Analysis

Place Analysis

Promotion Analysis

International Perspective 4

Legal Issues 5

Conclusion 5

References 6

Appendix (if necessary) 7

HISTORICAL PERSPECTIVE

Since the first commercial pet food, a dry dog biscuit was developed on the early 1860s by James Spralt, of Cincinnati Ohio (Report of Feb, 17). Like other high volume commercial products today, the marketing of dog food developed from the Production Orientation to Marketing Orientation period in hundred years. From 1860 to 145, the marketing management philosophies of dog food focused on the Production Orientation. Consumers could only purchase low quality dog food and supplies from the pet store.

However, after World War II, the market expanded sharply. In the 160s, dog food products became closer to their present forms (Report Aug15, 001). Since the 170s, new technology has spawned new ingredients from dry foods to semi-moist, new textures and nutrients for pet foods. This is a sign that the market was developed into the Marketing Orientation.

During the same time, more and more business became aware of the concept of Market Segmentation including the pet food industry. Dog food companies target the consumers from who purchased the general products to who consumed the specific requirements of dog foods. In recent years, the Positioning of most dog food companies transferred from supplying the fundamental products to the premium and super premium quality items. In addition, the dominant marketing trend in the pet food is the industrial consolidation.

MARKETING STRATEGY ANALYSIS

Target Market Analysis

Market segmentation Successful dog food companies choose the Multi-segment Targeting Strategy. They use a variety of bases for positioning, such as Price, Quality and product class e.g wet dog food vs. dry. They mainly Segment consumer markets by Demographic segmentation. For example, the typical purchasers of pet food tend to be above-average in income, middle-aged, white, and to have children living in the household, particularly children age 6 or over. Accord In the recent years, as the positioning of pet foods transferred from the fundamental products to the premium and super premium quality items, the dominant marketing trend in the pet food is consolidation. For examples, in 15, Nestle has acquired Alpo, and Heinz has acquired Quaker. (Report Jan, 000 and Feb 17)

Market size and growth The whole pet food market is growing steadily. For example, the U.S pet food market is $10.4 billion in 001, up .0% over 000. Since 1, the market has grown at annual rates in the .0% to .5% range. Dog foods occupy 58% of the pet food market share in terms of dollars. (Report of June, 00)

Factors in future growth Positive factors the size of the dog pet population is currently at an all-time high. Consumers heightened nutritional awareness, baby boom demographics and industry consolidation. Negative factors Slow-growth economy and potential of rising commodity prices.

Market projections Overall, the pet food market is projected to rise to just over $1. billion in 006 and 11% increases over 001.

Marketers Two types of pet food marketers generalists and specialists, with the market dominated by the generalists. Top three in pet food Ralston-purina, Nestle and Heinz¡¯s.

Consumers According to Simmons Market Research Bureau, 4% American Adults own one or more dogs (Report Jan1, 15). The most significant demographic factor in owner ship of dogs is the presence of children in the household. The consumers can be divided into four types according to product forms. The first group of dog food consumers mainly consumes dry dog food that the market share is %. The second group mainly purchases dog snacks which the market share is 5%. The third group chooses canned dog food that the market share is 1%. The last group consumes semi moist dog food which the market share is 4%.

Product Analysis

The dog food industry is a highly competitive one. In 001, 11.5 billion was spent in the pet food market and this number is growing by 6% annually(1). Companies have tried to meet every niche of this growing market by producing deep product lines to address customer preferences. Food technicians have been learning more about dog preferences in order to improve their products. They¡¯ve found that dogs prefer products which are sweet or salty and enjoy both rough and creamy textures. They also prefer products which are amorphously shaped and dense. Four major dog food categories attempt to meet fido¡¯s needs and preferences. They are Dry Food, Wet Food, Puppy Food, and Dog Snacks(?). Dry Food is usually packaged in bags, sacks, and stand up pouches(1). It contains approximately 55% starch, a type of meat, and preservatives(). Dry food helps clean a pet¡¯s teeth as they crunch their way through it.(4) Wet food is usually sold in thermoformed PP/EVOH/PP trays with peelable lids(1). Pets prefer wet food over dry; however, it is costly and messier. Puppy food comes in both dry and wet food types. It is formulated specifically for the beginning stage of the life cycle(4) and should not be changed frequently(5). Dog snacks come in a variety of forms such as bones and biscuits. They usually have a lower nutritional value; however, dog snacks are also becoming healthier. Product brands are established around nutritional value and pet enjoyment. With such companies as Nestle, Procter and Gamble and ????? competing in the dog food industry, entrance is difficult and advertising is fierce.

Price Analysis

Pricing is an essential part of Dog Food marketing, since it directly influences consumer decision making in the grocery store. According to Resenfeld (187), some market research indicates that dog owners spend more time browsing in the pet food aisle than they do at any other aisle in the supermarket.

Dog Food prices vary widely with each individual product, and product line. In the dog food industry, since there are several different marketing approaches that are being used, individual product prices tend to reflect these differing approaches. Some dog food product lines incorporate the use of a Prestige Pricing to differentiate themselves on the shelf as a premium dog food. These include ¡°FOOD A¡±, ¡°FOOD B¡±, ¡°FOOD C¡± (See Appendix A). (Pets.com)

Odd-Even Pricing and psychological Pricing are being used in all cases as all prices end in odd numbers and are just below the full dollar value. (See Appendix A)

Place Analysis

Historically, dog food has been selectively distributed. Recently pet food products are being distributed intensively. Grocery stores, department stores, specialty pet supply retailers, and convenience stores all sell dog food. Lately, even premium products are making their way into grocery stores and department stores(8). Generally, customers prefer shopping here as it is quicker and simpler then making a separate trip to buy food for their pet. The department store Wal-mart started selling pet supplies due to their high profit margins and they already have an estimated $billion in pet supply sales which almost matches annual sales of industry leader Petsmart(7) In 000, Canadian Grocerers saw overall dog food sales reach $15 million (up 5%)(8) In the same year, grocery stores accounted for 47% percent of dog food sales.(8) The move to intensive distribution was spurred by market research in the 0¡¯s which showed that approximately 70% of U.S. pet food buyers never shopped at specialty pet supply retailers(). In order to compete the specialty stores are moving from a ¡°product and vendor focused business model to a paradigm designed to create long term relationships with a customer segment defined as the pet enthusiast¡±(10) In a further attempt to expand distribution of pet food companies have begun to sell dog and cat food online. This product placement attempts to circumvent the cumbersome and inconvenient process of shopping for pet food do to the bulk size and weight of these items.(10)

Promotion Analysis

The principle idea behind promotion is that retailers try to communicate the differential advantage that their product has over competitors. However, conveying product information to the consumer has become more of a challenge in the pet food industry since the Competition Bureau of Industry Canada has set forth guidelines. The guide talks about all claims concerning pet food products included in labelling, advertising, promotional materials, and all other forms of marketing in connection with the sale of these products (1). Nonetheless the guide is restricted to the labelling and advertising of pre-packaged pet food only, and does not apply to pet treats. However, these are only guidelines, and are not enforceable through law.

The dog food industry is involved in three of the four areas of the promotional mix. These include advertising, sales promotion, and public relations. Much of the advertising of dog food takes place in dog enthusiast magazines such as Dog World, and Modern Dog Magazine. These magazines act as medium to connect dog owners with promotional information aimed at dog health and longevity.

The dog food industry uses more of a consumer sales promotion, instead of a trade sales promotion. These promotions include coupons/rebates, premiums, sampling, and point of purchase displays. Many times at local pet food stores or even grocery stores there are coupons that are displayed on shelf, or in point of purchase displays for the consumer to receive a discount. However during the mid-nineties the total number of coupons issued for dry dog food fell three percent, due to a hostile price war (). Recently companies have decided to offer coupons through a new source, the Internet. Butchers Pet Care offered 1,000 money-off vouchers through their website (4).

Since there is not much publicity surrounding dog food, some producers have to make their own fanfare; this is called public relations. The Hills Pet Products division of Colgate Palmolive has sponsored a dog sled journey to the North Pole (). By simply sponsoring an event, the companys name may be mentioned throughout the media.

INTERNATIONAL PERSPECTIVE

Internationally, there has been a large increase in the amount of dog food purchased. From 14 - 18 dog food sales have grown worldwide by 16.5%, with the largest increase in Eastern Europe, and the Asia-Pacific region (5). With even more potential growth to occur, Doane Pet Care Enterprises, the pet food maker for Wal-Mart, has decided to open a plant in Europe to try to establish themselves as the largest provider of dry pet foods in Europe (6). Even Norway has partnered with an Alaskan firm to carry a dog food produced by Kobuk Fuel and Feed Company, which has been tested as the best dog food in the world (10). In Japan there is an established market, where one in five families own a dog (), but many manufacturers are trying to institute new products in the market. Vanguard International Foods has recently begun to sell home made dog food, with a mix of fresh chicken, sardine, and tuna (7), as well as a low calorie dog food that is suited to dogs that require weight loss (8).

The United States market is similar to Canada. The pet food market, which includes both dog and cat food, has grown at an annual rate between .0% and .5% since 1 and had a market of $10.4 billion in 1 (11). By 006, the American pet food market is projected to rise to over $1. billion, a 17% increase over 01 (11).

LEGAL ISSUES

There are several legal issues that affect the Pet Food market in general. The most obvious issue is the government quality control regulations that apply in a given market. According to the Pet Food Institute (00), quality control is implemented in the United States Federally through, the Food and Drug Administration (FDA), in each state through feed laws and the Association of American Feed Control Officials (AAFCO), and through the US Department of Agriculture (USDA). In Canada, quality control is not implemented nationally by the government, but is instead promoted by both the Pet Food Association of Canada (PFAC), and the Canadian Veterinary Medical Association (CVMA). The PFAC and the CVMA in turn use the AAFCO as a source for their standards. In Canada it is up to the consumer to ensure that at least one of these three associations logos are displayed on the package to ensure good quality pet food.

Other legal issues which faces pet food manufactures in Canada, are the Consumer Packaging and Labelling Act and by the Competition Act. These two acts are in place to define what information must be provided, and to ensure that information provided to consumers on packaging is both true and verifiable. A government guideline is currently being developed by the Government of Canada¡¯s Competition Bureau (00) to explain in detail what the good labelling practices for pet food include. These regulations deal with such issues as, how pet food names reflect their ingredients, the requirements for ingredient lists and the presence of guaranteed product analyses.

In addition to these standard legal issues, there are also legal issues that may affect the dog food industry indirectly through their suppliers. This is exemplified in a recent court case decided in June of 00, where producers of vitamin B4, an ingredient in dog food, were found guilty of price fixing between 188 and 18 (¡°4 Companies¡±, 00). The implications of this could have an affect on both the cost of dog food ingredients, as well as the consistency of supply of these ingredients in the future.

These individual cases as with all of the above legal issues, while initially appearing as insignificant and minor inconveniences, could cause major problems for manufacturers if not monitored closely.

CONCLUSION

Since the first dog biscuit was developed in the early 1860s, the dog food industry has enjoyed tremendous growth. It has gradually moved from production oriented industry to a marketing oriented one. Successful companies have utilized multi-segment targeting with position, price, quality and product class as bases differentiation.

The US pet food market reached 10.4 billion in 001 due to an all time high dog population and heightened nutritional awareness. Four main dog food categories have arisen to meet customer demand Dry food, Wet Food, Puppy Food, and Dog Snacks.

Prices within the industry vary widely with each individual product and product line. Dry food is generally healthier and cheaper then wet food; however, dogs prefer the taste of wet food over dry. Often prestige pricing is employed to differentiate one product from another.

Pet food has moved from a selective distribution system to an intensive distribution system. Dog food can be found at grocery stores, department stores, specialty pet supply retailers, and convenience stores.

This intensive market exposure has led to intensive promotion. The dog food industry uses consumer sales promotion to attract customers. Coupons/Rebates, premiums, sampling, and point of purchases displays are but some of the techniques employed.

Internationally, the dog food industry is also in the growth stage. Worldwide sales increased by 16.5% from 14 ¨C 18 with no signs of slowing down. Due to an increase in nutritional awareness quality control has become an important issue in pet food industry. In Canada the industry is self regulated with the Consumer Packaging and Labelling overseeing package guidelines. However, most dog food manufactures look to the guidelines established by the US (AASOMETHING) to insure quality production.

REFERENCES

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Canada. Competition Bureau. (00, October ). Guide for the Labelling and Advertising of

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Retrieved November , 00, from Proquest Periodical Abstracts. Multiple databases.

Pet Food Institute. (00) Pet Food Report A consumer¡¯s guide to pet food.[Created by the Pet

Food Institute]. Retrieved October 0, 00, from http//www.petfoodreport.com/

Rosenfeld, J.P. (187). Barking up the Right Tree. American Demographics, May 187; , 5,

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