The U.S. pet food industry has proven to be a dynamic and lucrative retail segment bolstered by America’s ever deepening human-animal bond. Lately the market’s dynamism has sparked a series of notable mergers and acquisitions, the most recent—and perhaps most intriguing—of which is J.M. Smucker Co’s agreement to purchase premium pet food company Ainsworth Pet Nutrition in a $1.9 billion deal that is being offset by an estimated $200 million tax benefit. Ainsworth Pet Nutrition is best known for its popular Rachael Ray Nutrish line of premium natural pet food and treats.
Through Big Heart Pet Brands and other assets in its brand portfolio, J.M. Smucker is already active in the pet food business. However, the Ainsworth Pet Nutrition acquisition further entrenches J.M. Smucker as a major, established presence in a multi-billion dollar market that is notably on the uptick in terms of annual sales growth.
In the report U.S. Pet Market Outlook, 2018-2019, Packaged Facts estimates the overall U.S. pet industry—including pet products and services—had sales of $86 billion in 2017, up almost 5%. Pet food was the largest category, accounting for 39% of the pet market’s retail sales.
Superpremium and natural pet food brands such as Blue Buffalo (acquired earlier in 2018 by General Mills) and J.M. Smucker Co’s new gem Nutrish are projected to spur future growth in the pet food segment. Packaged Facts’ research reveals that natural pet food continues to fuel overall pet food market growth, outpacing the growth of regular pet food by at least double the annual percentage growth rate. Further, Packaged Facts survey data reveals that half of pet owners agree that natural/organic brand pet products are often better than standard national brand products. And industry sales seem to indicate that consumers are putting their money where their pets’ mouths are by increasingly buying premium pet foods.
The growing popularity of superpremium and natural pet foods has caused a shift in the market. For the first time in years mass channels appear poised to surpass pet specialty in pet food sales growth, a phenomenon Packaged Facts attributes directly to mass premiumization. Packaged Facts pinpoints two major hallmarks of the crumbling divide between pet specialty and mass retailers: the entry of major specialty brands (J.M. Smucker’s Nature’s Recipe, General Mills’ Blue Buffalo) into the mass market and the acquisition of Blue Buffalo by General Mills, which Packaged Facts predicts will rapidly escalate mass premiumization. It will be interesting to see how J.M. Smucker Co’s acquisition of Ainsworth Pet Nutrition/Nutrish deepens this development, especially as other marketers continue creating superpremium-type products specifically for the mass channel, such as Mars with CRAVE.
Ultimately in 2018 and beyond, Packaged Facts forecasts a mass-market-based natural pet food groundswell. Even as superpremium products continue to advance online and mass marketers and retailers face mounting pricing pressure, mass sales of superpremium/natural pet food will inevitably get a nice bump as more grocery and mass-merchandiser shoppers trade up to brands which—while still priced higher than the former pet foods of choice—suddenly seem more affordable and accessible.
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