Nestlé sinks its teeth into pet-food sector

The larger packaged goods companies have invested heavily in the pet-food sector in recent years, and competition is about to hot up with the launch of Nestlé Purina’s One. By David Benady

The fur is set to fly between three of the world’s most powerful corporations over which of them makes the healthiest, tastiest pet food. The trigger will be when Nestlé Purina, the world’s largest manufacturer of pet food, launches its Purina One dried cat and dog food brand in the UK this July (MW last week).

Already a $400m (&£217.7m) brand in the US, where it takes more than ten per cent of the market, Purina One appeals to those cat and dog owners looking for health benefits from pet food. Nestlé Purina is leaving nothing to chance in its aim of achieving &£90m UK sales over the next three years.

It is spending &£10m on the launch, with an advertising campaign by Publicis. Alongside this it will offer 1 million people a money-back guarantee on the product if, after 30 days of feeding their cats or dogs exclusively One, they don’t “see the visible results for themselves”.

Nestlé Purina marketing manager of cat brands Louise Redcliffe says One has a health formulation with a mix of nutrients and vitamins which ensures that within 30 days, people will notice their animals are more energetic and alert, and have healthier coats, brighter eyes and fresher breath. “We will challenge consumers to come back and tell us what they found,” she says.

The brand will compete head on with Procter & Gamble’s Iams and Eukanuba dried pet-food brands, which retailers call “super premium” products – in other words, they are very, very expensive.

Nestlé, P&G and Mars-owned Pedigree Masterfoods have all made major purchases in the dried pet-food sector, as it becomes clear that promoting the health benefits of food is the best way of pushing up prices in a market that seems to be facing long-term decline. They have also moved into pet-related products, such as pet insurance, in the search for revenue as pet ownership is in decline in the UK.

According to research company Mintel, dog ownership is on the wane while cats are meowing their ways into more people’s homes, as the number of single-person households increases. But overall, pet ownership is falling. Still, there is a trend towards the humanisation of animals and brands can use this to squeeze more price increases out of owners who increasingly see their animals as fully signed up members of the households, with equal rights to humans.

Dried pet foods were once the preserve of specialist pet shops and veterinary surgeries, but brands have spent billions of pounds buying into this market and are helping supermarket chains to tempt customers from the specialists. Over the past ten years, dried food has taken about half the pet-food market. The wet sector has hit back with pouches, but trends are moving towards dry food.

Corporate reputations are resting on the success of marketers in promoting dried pet foods. P&G paid $2.3bn (&£1.42bn) for its Iams pet-food business in 1999. Then Nestlé bought Purina in early 2001 for more than $10bn (&£6.89bn) and many analysts said the company had paid too much for the business. Nestlé says the launch of Purina One in the UK was an important factor in making the buy, and that its success will be crucial at a global level.

Six months after the Purina buy, Pedigree parent Mars bought Europe’s largest nutritional pet-food manufacturer, Royal Canin, for &£1.2bn. There have been conflicting assessments of the success of P&G’s UK launch of Iams – in the grocery trade – and Eukanuba – sold only by specialist outlets. When it was first introduced in 2000, Iams suffered negative publicity after animal rights campaigners filmed mistreatment of animals in a laboratory where the pet food was being tested, and called for Crufts Dog Show to refuse to take Iams’ sponsorship.

Many believe this severely dented the launch. Iams is still sponsoring Crufts, and P&G claims the allegations related to practices under Iams’ previous owner and points to its code of practice, which says it does not conduct tests on animals that it would not do on humans. The code also says that it will not kill animals in experiments.

Other observers say customers were confused about how much of the product they should use and why it was so expensive. It was reported that P&G spent &£28m on launching the two brands, but only sold &£35m worth of product in the first year. Iams was relaunched after just 18 months and one buyer at a leading supermarket says it has performed well: “Overall, the range does pretty well. It means customers who would go to specialists can fulfil all their needs in a grocery store.”

Iams external relations manager Robin Sharpe says: “Iams is doing very well, we are pleased with its performance.” He says that TNS figures show Iams is the number one in dried cat food and Eukanuba dog food is top seller in the super premium sector in specialist outlets. Some observers wonder how much of a market there is for promoting pet foods on their health benefits. One source says that Bakers Complete has become the most successful dried dog food because it plays on owners’ desire to see their animals enjoying their food, while Winalot focuses on helping dogs have an enjoyable life.

But the observer adds: “Purina One taps into consumers who are concerned and even neurotic about what they feed their animals. It will struggle in the UK to capture a mainstream audience, because it doesn’t have the enjoyability value that UK owners have become used to with other brands.”

Nestlé has divided UK pet owners into six categories, placing Purina One customers in the category of “expert providers” – they are well-off, pressed for time and are looking for nutritional benefits from pet food. If this group is 15 per cent (&£300m) of the total market, Nestlé believes it will be able to mine a rich seam market with Purina One.

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