Dalgety rallies its petfood brands

Dalgety has staked 442m in petfood with its purchase of Quaker’s business. But will it have time to sort out its mixed bag of brands before rival Mars consolidates and Sainsbury’s launches a sub-brand?

It seems bizarre that so much – jobs, profits, and even the existence of a 5bn turnover company – can depend on the whim of dogs and cats. But that is the reality of the petfood industry where Dalgety has recently become even more dependent on the taste buds of small animals.

Best known for its ownership of Golden Wonder and Homepride – both of which it is in the process of selling to fund its purchase of Quaker’s European petfood business for 442m – Dalgety is now number two in the European petfood sector. Mars-owned Pedigree Petfoods is market leader with its Pedigree Chum and Whiskas brands.

The Quaker European Petfoods business, including the Felix and Chunky brands, will sit alongside Dalgety’s own Spillers brands, including Arthur’s, Prime and Winalot.

The job of sorting out the whole UK business has fallen to Alastair Sykes, Spillers’ new managing director recruited from McCormick Foods.

A European counterpart will also be appointed to concentrate on Dalgety’s share of the European non-grocery retail market. Both will report to chief executive Nigel Garrow, brought in to oversee the acquisition.

Pedigree Chum and Whiskas have had virtually unchallenged penetration of the petfood market. Chum has a 41 per cent value share of the dogfood market while half of all cat owners buy one of the Whiskas range and only a third buy one of the now Dalgety-owned Felix brands (MW Brandtrack March 17).

Dalgety has decided its future lies in petfood rather than snacks just as Quaker has decided to concentrate on soft drinks. Quaker has sold its European and North American petfood business to focus on building the Snapple iced-tea brand and its Gatorade sports drink, as well as continuing with its breakfast cereal brands, such as Quaker Oats.

The two companies are being integrated, but the union is not without potential problems. So far, Dalgety has appointed Quaker’s commercial director, Peter Farrand, to the role of UK marketing director. The company apparently has not decided whether it will appoint a European marketing director, but is likely to do so.

This leaves Spillers UK marketing director Simon Esberger without a role. Some sources suggest he declined the European post, but the company refuses to comment. Esberger, who came to Spillers after holding a European marketing role at Grand Metropolitan’s ice cream brand Häagen-Dazs, is apparently looking at new roles within the Dalgety group; his contract is with Dalgety, not with Spillers.

But the big question is, what’s going to happen to the brands? Despite the company’s reluctance to comment, own-brand products from supermarkets seem to pose the biggest threat.

Sainsbury’s is reported to be planning a sub-brand petfood and Spillers has been suggested as its supplier – which appears unlikely, given what it has to lose. However, ad agency Rainey Kelly Campbell Roalfe was recently appointed to handle part of the Spillers portfolio and is believed to be working on new product develop-ment, so there is an outside chance this could cover a sub-brand launch for Sainsbury’s.

The effect of such a launch on the market could be devastating, given Sainsbury’s success with sub-brands. Its Classic Cola is challenging Coca-Cola and Pepsi; Novon washing powder and Performers nappies are taking on Unilever and Proctor & Gamble, and Indiana Gold lager is taking on the big brewers.

As it is, own-label – as opposed to sub-brand – achieves only 14 per share of the market as a whole, while Sainsbury’s own-label has a four per cent share. The greater the number of pets in a household, the less likely their owners are to buy own label. A sub-brand might be a different story.

Certainly, it would be a worthwhile move for Sainsbury’s: the total UK catfood market

is worth about 450m. Prising only a few per cent of that away from the established brands would be lucrative.

“It’s probably the sub-premium brands, such as Choosy and Kit-e-Kat, which have less brand value and are most likely to be Sainsbury’s target. There’s a good case (for the retailer) to establish a strong sub-brand in this sector,” says Sarah Couchman, account director on the Spillers business at Bartle Bogle Hegarty.

The sub-brand has been talked of for some time – certainly since before Spillers’ acquisition of Quaker petfoods (which was officially completed at the end of last month) – and if Spillers was involved it has surely pulled out now, although there will be plenty willing to take its place. Apart from the potential sub-brand threat, the purchase of the Quaker brands poses brand-positioning problems for the company.

The most likely candidate for change is Spillers’ Arthur’s catfood brand (formerly called Kattomeat) which competes directly with Felix in the sub-premium sector, at 42p for 400g.

Arthur’s has not been performing well for some time, and although it is unlikely Spillers will drop the brand, it will almost certainly reposition it. Given Felix’s strength, its positioning is probably secure.

“Arthur’s could move up to take on a premium brand such as Whiskas or it could move down to take on a sub-premium brand like Kit-e-Kat. They could use it to ward off the threat of own-label,” says Couchman.

On the dogfood side there is likely to be less of a problem: Chunky, a “wet” dogfood would sit alongside Spillers’ “dry” dogfood Winalot without either losing out and the new company has more scope to follow rival Mars’ Pedigree’s rigorous and effective approach to brand building.

There will almost certainly be a shake-out of the new company’s agency roster, which includes Rainey Kelly Campbell Roalfe, Ogilvy & Mather, Bartle Bogle Hegarty and BMP DDB Needham.

Since Sykes will take up his post as UK managing director on the last day of July and before then Dalgety has to find a buyer for its Golden Wonder and Homepride brands, these issues are far from resolved.

But every day of delay allows Mars to consolidate its position further and offers Sainsbury’s more scope to succeed with its sub-brand launch.

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