by Steve King, President, Pet Industry Distributors Association
Published in PETS International Magazine
In the October 2014 issue of PETS International, I noted that less than forty percent of U.S. based pet product distributors reported carrying products made in or sourced from Europe. Distributors’ ambivalence toward European products was based on several factors, including lack of consumer awareness or interest in European brands and an abundance of similar products available from companies in the United States. A general lack of knowledge about European brands and companies on the part of distributors contributed to the poor showing.
The strength of the dollar against the euro in recent years might be expected to boost the price competitiveness of European products in the U.S. But distributors reported that better pricing has not made such products more attractive in their eyes. What has changed in the U. S. pet industry over the past two years that might improve the prospects for European brands? What do European firms need to do to tap into this market?
A Large and Growing Market
Total pet spending in the U.S. has continued to grow at a steady rate, outpacing overall retail sales. Sales grew by 5.3% in 2015 to a total of $67.75 billion, driven largely by a big increase in spending on pet food. The American Pet Products Association projects a 4.5% increase for 2016. By contrast, total retail sales in the U.S. rose just 1.8% for the 12 months through August, with growth expected to slow through mid-2017. Economists at ITR Economics, who advise PIDA on economic trends, believe that “consumer fundamentals point to a more confident consumer for 2017 as wages rise and both unemployment and interest rates remain low.” Consumer survey firm Packaged Facts projects an even rosier picture for the U.S. pet industry, estimating total sales of pet products and services to top $95 billion by 2020.
The retail market for pet products in the U.S. is as diverse as ever. According to Packaged Facts, mass market outlets (Walmart, Target and others) control 21% of the dollars spent on pet supplies. Grocery chains represent 16% of total sales. The pet specialty channel, including market leaders Petsmart and Petco, other regional chains and independent pet stores, are 34% of the sales total. Other retail outlets, including dollar stores, wholesale clubs, drug stores and agricultural/feed & seed stores represent 25%, with Internet sales at 4% and growing.
Improving Prospects for European Products?
Pet product distributors, who largely service the independent sector of the pet specialty market, are slightly more likely to carry European brands than in 2014. But the percentage of firms that do remains below fifty percent. Consolidation has changed the distribution landscape in the U.S., with three large consolidators competing with smaller, regional distributors in most markets. These larger companies may be in better position to source European products that they can distribute on an exclusive basis to retailers across the country.
Yet a recent survey of distributors indicates that reluctance to take on European brands by U.S. distributors hinges on the same concerns as before:
- Lack of knowledge of European manufacturers/brands
- No manufacturer sales/marketing support in the U.S.
- Minimum order quantities too high
Product innovation is the key to unlocking the U.S. market. Consumers, particularly when shopping for pet products, are far more concerned with the value of a product (i.e. price +quality) than with brands. A 2015 study by Blackhawk Engagement Solutions found that, among factors affecting buying decisions, price and quality were cited by 75% of consumers surveyed, with only 31% indicating a brand preference.
Getting your products noticed by U.S. buyers can be as challenging as creating innovative items. Participation in the major U.S. trade shows, Global Pet Expo and Superzoo, should be in every manufacturer’s marketing plan if you want to compete in the U.S. (Full disclosure; PIDA co-produces Global Pet Expo with the American Pet Products Association.) The 2017 Global Pet Expo has done away with the International Pavilion where companies from all over the world were grouped, in favor of displays arranged by country. This should make individual countries’ manufacturers stand out more prominently than before.
Making it easy for distributors to do business with you is another critical factor. Having a stocking warehouse—or a relationship with a noncompetitive U.S. company to handle logistics—will allay concerns about long lead times and out-of-stock situations. Having U.S. based sales representation is just as important. This includes sales professionals to call on distributors’ buyers and field sales reps at the retail level that can promote new products, conduct in-store demos and offer localized marketing support. If you are just entering the U. S. market, partnering with an independent manufacturers’ representative company could be the most cost-effective way to establish your presence and make sure your products get shelf space.
Cracking the U.S. pet products market is no easier than it was two years ago. Developing innovative products that appeal to and meet the needs of pet owners, reaching buyers by participating in trade shows and establishing a marketing and logistics presence in the U.S. can be a formula for success for those with perseverance. Good luck!
Steve King is president of the Pet Industry Distributors Association, which represents wholesaler-distributors of pet products and the manufacturers that go to market through this channel.