Misconceptions & Opportunities in the $95B US Pet Food Market
There are good reasons to think that the pet food and treat market will continue to healthily grow, but one popular reason to come to this conclusion seems misguided. Check out this growth strategy example.
Grand View Research (GVR) has valued the US pet food market at around 95 billion dollars in 2021, and projected it to grow at a compound annual growth rate near 5%.
GVR and other consulting firms often argue for the projected growth of this market with three kinds of arguments. One is that, in theory, a significant increase in the number of pets, driven by adoptions during COVID-19, should increase the number of consumers in the market.
Another reason is that concerns about climate change will inspire consumers to prioritize pricier “sustainable” pet foods, which would increase pet food and treat revenues. Finally, it suggested that shifting cultural attitudes towards pet ownership, a trend often labeled as “humanization,” will inspire purchases of more expensive and higher-quality foods for pets.
Two of these reasons are plausible, and the other one is not. Overall, this suggests we should accept a less rosy (but still optimistic) projection of growth in the pet food market. And pet food brands need to build their growth strategy with all the facts, not merely assumptions.
Growth Strategy Misconception:
No, There Wasn’t a Pandemic-Driven Pet Adoption Boom
Let’s reconsider the first argument, as it relies on a false assumption. It is essential to know that, as the American Veterinary Medical Association has noted, there was not really a pandemic pet adoption boom in the U.S, despite the media hoopla to the contrary.
Media reporting mistakenly conflated the rising adoption rate with an increase in the absolute number of pets adopted relative to normal years.
“the adoption rate-or percentage of pets that were adopted [in America] was up [during the COVID-19- Pandemic], but the actual number of pets adopted was down substantially.”
In other words, while the pandemic changed many things, it did not cause anything like a huge increase in the overall number of pets owned.
This means it is unwise to think that a significant increase in the number of pets, driven by adoptions during COVID-19, will increase the size of the overall pet food and treat market. In short, we should reject the conclusion of that argument because one of its assumed premises is false. To be sure, the number of pets owned has increased over the last 30 years, but that’s independent of the COVID-19 pandemic (and the growth rate has been very modest anyway!)
Growth Strategy Opportunity:
Climate Concerns Will Drive Growth in the Pet Food Market
It seems at least somewhat plausible to think that concerns about climate change will significantly fuel more growth in the pet food and treat market, insofar as consumers will actually feel motivated to purchase more expensive and sustainable pet food and treats.
I’m usually very skeptical about this kind of claim. Normally, the mere fact that consumers will be concerned about climate change is by itself poor evidence consumers will, in fact, be willing to pay more for a product in order to avoid contributing to climate change. And, many market reports seem all too comfortable making this kind of questionable assumption.
I’ve touched on the problems here at length in another growth strategy example, regarding the overly optimistic projections of growth in the reusable water bottle market. But in general, if we want to show that fears about climate change will change consumers’ preferences towards more sustainable products of whatever kind, you’d ideally want surveys showing consumers are actually willing to prioritize doing exactly that or accepting a price hike in order to acquire more sustainable goods.
We have something like this kind of evidence in a survey reported by Pets International magazine, which claimed more than 60% of respondents (from the US and other countries) said they would be willing to pay more for pet food in more environmentally-friendly packaging. And so, it seems fair to suppose climate change concerns will drive growth in the pet food market. Brands have reason to include this motivation in their growth strategy plans.
Growth Strategy Opportunity:
“Humanization” Maybe Drives Growth in the Pet Food Market?
“Humanization” is the unfortunately clunky turn of phrase used to refer to the trend of pet owners who anthropomorphize pets as part of the family (as if they were “humans”). And many refer to this as “humanization” because they assume that humans are deserving of ethical concern, and extending similar ethical concern to pets is akin to treating them as humans.
Intuitively, it makes sense to think that increasing ethical concern for pets would drive owners to spend more on them. And, it is hard to otherwise explain how the amount of spending in the pet food and treats category has grown much faster than the number of pets owned overall. In roughly the last 30 years, the number of pets in the US has increased by 56%, while the amount spent on pet food has increased by a whopping 366%! Interestingly, these pets are likely eating too much, as veterinarians resist overfeeding and overspending on dog and cat treats.
While it is not likely that changing ethical attitudes towards pets are entirely responsible for this growth, it seems safe to assume “humanization” does somewhat drive growth in the pet food market.
Pet Food Market Growth Strategy Conclusion
Ultimately, while the effects of the COVID-19 pandemic have been exaggerated with regard to the pet food and treat market, there are still plausible reasons to project growth in this industry. Pet food brands need to develop growth strategy plans to keep up with demand and outfox the competition.
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