Pet Care - Trends and Insights Across Europe (November 2012)

Pet Care - Trends and Insights across Europe
International PET Conference November 13 2012, Prague
Tim Eales Director of Strategic Insight SymphonyIRI Group, UK
Agenda
1. 2. 3.
European Economic Overview (SymphonyIRI Topline Report)

Do specific trends link Food and Pet Care categories? Pet Care Insights for the European market Summary and growth opportunities for the future
4.
Copyright SymphonyIRI Group, 2012. Confidential and Proprietary.
Agenda
1. 2. 3.

4.
Key findings
A unique crisis where prices are rising faster than earnings
HIGH PRICES
Consumer Recession has started more than a year ago now
Purchasing power is under pressure due to increasing prices which are impacting volume sales
FRUGAL SHOPPER
Price volatility and inflation are likely to be here to stay and will be the new norm, impacting shoppers behaviour
The frugal shopper is smarter, buying less and more wisely

DRIVEN BY PRIVATE LABELS AND PROMOTION
Promotional activity has started to increase in most countries
Own labels are challenging national brands across Europe

After the first half of 2012 Germany is the only country showing GDP growth
Euro area (17 countries) GDP down by -0.8%
Netherlands Germany UK Italy France Greece Spain
0,5 -0,4 -0,3

-1,6
-0,9 -2,8
Growth rates of GDP in volume (based on non- seasonally adjusted data)

Source : Eurostat Q2 12 Checked 2nd Oct 2012
5
-6,3
Unemployment rate is rising further although more stable in Germany and the UK
Netherlands Germany UK France Italy Greece Spain
24,4
25,1
10,3 8,1
June 12
10,7
5,3
(5.0)
5,5
(5.6) (8.2) (9.9) (9.7) (21.7) (23.5)
(Jan 12)
Source : Eurostat July 12

6
Price increases lead to more value, however they affect volume sales
Netherlands Germany UK Italy France Greece Spain
VALUE TREND
3,4 1,5 1,2 1,8 3
3,4
-3,8
2,6
VOLUME TREND
0,3 -0,7 -2,8 -0,4 -0,6 -2,8
UNITS trend for Greece
FMCG Growth H1 2012 - % change vs. previous year

7
Share of Private Labels is rising across Europe with its value share up 0.5% at 35.6%
Private Label Value Share and Evolution vs. Year Ago - FMCG vs. Pet Care
60%
+0.7%
Private Label Share of Total Market
50%
+0.5%
40%
+0.2% +0.5% +1.3%
30%
20%
+0.7%
10%
0%
Netherlands Italy UK* Spain France Germany
PL FMCG value share 2012 and share evolution vs. year ago
PL Pet Care Value share 2012 and share evolution vs. year ago
Source: SymphonyIRI Infoscan; 52 weeks ending 16th June 2012 versus same period prior year. *Source of FMCG: Kantar Worldpanel; 52 weeks ending 10th June 2012 versus same period prior year. Channel coverage: supermarkets, hypermarkets and discounters. ** Source: SymphonyIRI Market InsightTM; 52 weeks ended 9th September 2012 versus same period prior year. Channel coverage: grocery, Copyright SymphonyIRI Group, 2012. Confidential and Proprietary. drug and mass formats point of sales.
Share of Private Labels is rising across Europe with its value share up 0.5% at 35.6%
Private Label Value Share and Evolution vs. Year Ago - FMCG vs. Pet Care
60%
+0.7% +1.9%
Private Label Share of Total Market
50%
+0.5% -0.1% +0.2% +0.5% +1.3% +2.1% +0.4% +0.6% -0.4%
40%
30%
20%
+0.7%
10%
0%
Netherlands Italy UK* Spain France Germany
PL FMCG value share 2012 and share evolution vs. year ago
PL Pet Care Value share 2012 and share evolution vs. year ago
Source: SymphonyIRI Infoscan; 52 weeks ending 16th June 2012 versus same period prior year. *Source of FMCG: Kantar Worldpanel; 52 weeks ending 10th June 2012 versus same period prior year. Channel coverage: supermarkets, hypermarkets and discounters. ** Source: SymphonyIRI Market InsightTM; 52 weeks ended 9th September 2012 versus same period prior year. Channel coverage: grocery, Copyright SymphonyIRI Group, 2012. Confidential and Proprietary. drug and mass formats point of sales.
Summary - FMCG consumer reaction to economic uncertainty

FMCG price increases have reached the point that its impacting volumes in most countries in Food and Non Food and Own label share is rising Rising prices have predominantly resulted in increased value sales Price is the heart of the battle and different strategies are being developed to retain shoppers Promotion is changing less stocking for more expense control In France and in Spain consumption has increased In Greece, its the promotion war Although Germany has the healthiest economy and price rises have slowed down, its the biggest drop in volume sales for food

10
Shoppers are cautious about the cost of their shopping basket and are willing to buy value for money
Consumer Recession: return to a few basic principles that have been forgotten during a time of rapid expansion and waste People are buying what they need when they need it, buying less each time they shop and buying more often
Agenda
1. 2. 3.

4.
11
Similar trends dominate markets for Human Food and Pet Food...
High Quality Premiumisation Quality For Money
Health & Wellness
Weight Control
Private Labels
12
...although the desires and expectations of those actually consuming pet food differ considerably from those buying pet food
13
While pets focus on the essentials, their owners ask for extra benefits
Price? Design? Handling? Brand?
Food?!?
14
Our pets have become far more than a furry friend products adapt to needs
Konkurrenten?
Futter-Trends
adult/ kitten
diet, nutrition, fur shine
Feline Hairball Control
dental care
klassische Kandidaten
Um 1900
Um 1950
1970
1980
1990
2000
2010
2050
15
Whatever makes pet owners happy, is just good enough for the pet itself
Beauty and care products Wellness trips and holidays
16
Linking FMCG key trends to Pet Care throughout Europe

HIGH PRICES
High Quality: Shoppers expect ingredients to be highest standard many manufacturers turn to natural ingredients and flavours, knowing that cats and dogs were originally carnivores Premiumisation: innovations in the market focus on premium flavour combinations and smaller packaging shoppers seem to be willing to pay more money for convenience Quality for Money: even though budgets for Pet Food have not yet been reduced, consumers are comparing brands and assortments, hunting down bargains and are always on the lookout for better offers Health & Wellness: pet owners search for products with extra benefits that can do more for their pets than just feed them e.g. anti-hairball DRIVEN BY PRIVATE snacks, specific breed ranges, light food, Oral Care snacks
LABELS AND
FRUGAL SHOPPER
Private Labels: during tough economic situations, private labels are PROMOTION increasing in Pet Food in Germany e.g., private labels are pushed and treated like national brands
17
Agenda
1. 2. 3.

4.
18
The first half of 2012 shows rising value sales for Pet Food in all countries
VALUE TREND
5,0 3,2 1,1 1,9 5,8
7,6
VOLUME TREND
1,8 0,6 2,0 1,9
9,1
-2,4
Netherlands Germany United Kingdom Italy France Spain
Source : CR in % for Value and Volume Sales; Total Pet Care; All Grocery outlets; 1.HY 2012 vs. 1. HY 2011
19
Cat Food stands for more than half of the entire Pet Care Sales in Europe
Pet Care in Europe: 3.679 Million
+5,1
2.000 1.800 1.600
1.912
+3,4
1.437
52,0%
1.400 1.200 1.000
39,0%
+6,3
800 600 400 200
-2,7
239 91
2,5% 6,5%
Cat Food
20
Dog Food
Cat Litter
Other Pet Food

Source : Value Sales in Million ; CR in %; Market shares Value; Total Pet Care; All Grocery outlets; 1.HY 2012 vs. 1. HY 2011
Although Snacks show the strongest growth, wet food is the main driver for Cat Food
Cat Food in Europe: 1.912 Million
+4,2
1.500
67,0%
1.300 1.100 900 700
1.281
+4,2
497
500 300
+18,1
134
26,0% 7,0%
100 -100
Cat Wet
21
Cat Dry
Cat Snacks
Cat Care is star performer in the UK support through media, new products, promotions and core growth
Pet Care in the UK: 1.093 Million
+4,8
600
+4,6
533 474
500
48,7% 43,4%
400
300
+12,0
200
+3,5
100
53
33
3,0% 4,9%
Cat Food
22
Dog Food
Cat Litter
Other Pet Food

Being one of the largest players within the category, the UK sets trends
Value Sales. IRI Grocery Outlets .Pet Food. 52 w/e 6 Oct 2012.
Millionen
1.800,0 1.600,0
78,6 79,6 246,7 88,5 244,5
84,3 243,2
1.400,0 1.200,0 1.000,0 800,0 600,0
77,8 225,5
243,8
182,7 171,7 18,6 176,3 17,4 190,0
190,7 16,4 193,1
199,0 15,9 197,9
214,3 15,3 205,5
431,9
474,3
488,3
505,5
535,4
400,0 200,0 0,0 52 w/e 11 Oct, 08 Cat Dry Complete Dog Dry Mixer
23
146,6 24,3 127,7 150,6 27,8 138,3 138,9 35,6 147,9 130,6 46,7 154,2 123,9 59,5 153,3
52 w/e 10 Oct, 09
52 w/e 9 Oct, 10 Cat Wet Multi Serve Dog Wet Multi Serve
52 w/e 8 Oct, 11 Cat Wet Single Serve Dog Wet Single Serve
52 w/e 6 Oct, 12 Dog Dry Complete
Cat Treats Dog Snacks & Treats
Treats and Pouch format with constant increase in value sales

Value Sales Change. IRI Grocery Outlets .Cat Food Pack Type. 52 w/e 6 Oct 2012.
Millionen
70,0 60,0 50,0 40,0 30,0 20,0

0,8 5,5 12,8 7,8 0,2 0,0 16,9 13,0 2,2 7,4 -5,7 -8,8 -0,1 0,1 0,7 5,5 1,8 -6,6 0,0 11,1 0,6 0,0 28,4 3,4
40,7
10,0
9,5
0,0 -10,0 -20,0
1,0 -0,8
0,0 3,8 -0,1 -5,3 -4,3 -0,2
52 w/e 10 Oct, 09 Alu Tray

24
52 w/e 9 Oct, 10 Box Can Dome
52 w/e 8 Oct, 11 Pouch Tetra
52 w/e 6 Oct, 12 Tub Treats
Bag
On the contrary to Cat Food, pouches for Dog Food are not working in the UK
Value Sales Change. IRI Grocery Outlets .Dog Food Pack Type. 52 w/e 6 Oct 2012.
50,0
10,9 1,1
Millionen
40,0
30,0
16,8 15,3
20,0
2,5 10,0 8,0 3,4 3,8 6,0 4,9 -1,7 -4,1 -0,2 6,9 -0,8 -5,6 -0,5 7,1 -0,5 -2,4 8,3 0,3 5,1 0,5 0,4 7,5
10,0
0,0
-4,8
-10,0 52 w/e 10 Oct, 09 Alu Tray

25
52 w/e 9 Oct, 10 Box Can
52 w/e 8 Oct, 11 Pouch Sausage/Chub
52 w/e 6 Oct, 12 Treats
Bag
In Germany, a switch to smaller and more premium packaging like pouches generates value growth
Pet Care in Germany: 1.003 Million
+5,2
600
565
56,4%
500
+1,8
337
+ another 500 Mio. sales from Pet Specialty Channel!
400
300
33,6%
200
+1,6 -9,1
100
62
39
3,9%
6,2%
Cat Food
26
Dog Food
Cat Litter
Other Pet Food

Similar to the UK market, Treats and single serve stand for value growth
Value Sales in 1.000 . IRI Grocery Outlets .Pet Food. 52 w/e 5 Oct 2012.
257.488
253.012
251.669
247.509
232.888 158.442
242.703 159.736
245.528 164.541
259.805 166.755
497.414
522.513
526.072
566.725
281.924 117.234 168.190
278.740 131.032 177.435
261.621 139.807 183.470
256.896 154.898 176.188
52 w/e 9 Oct, 09 Cat Dry Complete

27
52 w/e 8 Oct, 10 Cat Wet Multi Serve Cat Wet Single Serve
52 w/e 7 Oct, 11 Dog Dry Complete
52 w/e 5 Oct, 12 Dog Snacks & Treats Dog Wet
Cat Treats
Germany reflects UK figures the limit for pouch growth has not been reached
Change of Value Sales in 1.000 . IRI Grocery Outlets .Cat Food Pack Type. 52 w/e 5 Oct 2012.
Value % Chg YoY
Pack Formats Dry Treats Can Flexi Pouch
22.091
MAT 10 5,5% 11,8% -0,7% 0,8% 9,8% -41,8%
MAT 11 3,4% 6,7% -5,5% -5,7% 7,1% 145,1%
MAT 12 -4,0% 10,8% -0,8% 1,5% 13,1% -100,0%

34.676
Mixed
2.028 13.798
17.533 3.530 8.774 15.091
9.245
6.035 -7.282 -17.134
-13.960
52 w/e 8 Oct, 10 Dry

28
52 w/e 7 Oct, 11 Can Flexi Pouch
52 w/e 5 Oct, 12 Mixed
Treats
Treats and Dry Food remain constant winners for the German market
Change of Value Sales in 1.000 . IRI Grocery Outlets .Dog Food Pack Type. 52 w/e 5 Oct 2012.
Value % Chg YoY Pack Formats Dry Treats Can Flexi Pouch Sausage Tub/Bowl MAT 10 0,8% 4,2% -0,8% -2,1% 0,5% 7,8% -34,9% MAT 11 3,0% 1,2% 3,0% -3,3% -17,7% -0,5% -49,7% MAT 12 1,3% 5,8% -3,2% 2,5% -37,2% -43,4% -99,1%
3.925 9.815 2.825 4.805 1.294 -2.414 -3.777 2.214 -4.363 14.277 2.742
52 w/e 8 Oct, 10 Dry

29
52 w/e 7 Oct, 11 Can Flexi Pouch
52 w/e 5 Oct, 12 Sausage Tub/Bowl
Treats
Strategic category development with broad assortments in all segments pushes Pet Food sales
Pet Care in France: 769 Million
500
+7,1
405
400
52,7%
300
+2,5
283
36,8%
200
+11,0
100
81
10,5%
Cat Food
30
Dog Food
Cat Litter
Even though Dry Cat food performs better than Wet food, single serve wet shows remarkable growth
Pet Care in Italy: 394 Million
+ another 348 Mio. sales from Pet Specialty Channel!
+2,4
137
100
300
+2,3
229
58,0%
200
34,8%
-3,3
28
7,2%
Cat Food
31
Dog Food
Cat Litter
Private labels have reached almost 50% market share which leads to lower prices for branded dog food
Pet Care in Spain: 246 Million
200 180 160
+7,9
149
60,5%
140 120 100
+8,3
85
34,6%
80 60 40 20
+0,1
12
5,0%
Cat Food
32
Dog Food
Other Pet Food

A negative trend for Dog Food sales in the Netherlands could be the result of less promotions
Pet Care in The Netherlands: 174 Million
+1,7
100
96
55,1%
-0,6
56
32,2%
+2,8 +3,6
15 7
4,1%
8,6%
Cat Food
33
Dog Food
Cat Litter
Other Pet Food

Agenda
1. 2. 3.

4.
34
Pet Care remains to be a promising category with further potentials for future success
The main contributor to the growth of Pet Care across Europe is Cat Food (+168 million ), whilst a smaller proportion is coming from dog food (+94.6 million , where the driver is snacks and treats) Wet cat single serve is the most important segment for Cat food, where brands are investing most, and to a lesser extent dry cat food Pet Care is not as promotionally reliant as most major FMCG markets, but promotions are growing across most of the countries and pushing sales The main focus of innovations by major brands is on new premium tastes in small sizes or on new user friendly packages; no real new concept innovations in the market unless we consider the growing importance of oral care concept in snacks and treats Private Label is growing across most of the markets and represents a cheaper but acceptable alternative offer compared to major brands, in the tough economic climate Pet Care appears to be an increasingly polarising category; economy products are growing (Private Labels) as well as Premium products in small sizes
35
Make sure to participate in a growing market without losing your focus on successful strategies and brands
Major brands are expected to create innovations in order to enliven the Pet Care market Down-Sizing could be a real alternative to think about smaller packaging is successful and private label products are a bigger threat the larger the pack sizes get Extra benefits and added value has to be communicated very precisely consumers ask for products with additional and relevant functions and these need to be demonstrated clearly or be self explanatory Formats play an important role for both cat and dog wet food think of the convenience trend that consumers search for in other categories as well New variants and flavour combinations approach the consumers desire for innovations Participate in future markets with high potentials e.g. the snack segment this is a field where manufacturers and retailers can ask for high prices
36
THANK YOU FOR YOUR ATTENTION

For further information please contact:
Tim Eales Director of Strategic Insight SymphonyIRI Group, UK tim.eales@symphonyiri.com Nina Kenfenheuer Consultant Client Solutions SymphonyIRI Group, Germany nina.kenfenheuer@symphonyiri.com

Pet Care - Trends and Insights Across Europe (November 2012)

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Pet Care - Trends and Insights Across Europe (November 2012)

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Pet Care - Trends and Insights across Europe

International PET Conference November 13 2012, Prague

Tim Eales Director of Strategic Insight SymphonyIRI Group, UK

European Economic Overview (SymphonyIRI Topline Report)

Copyright SymphonyIRI Group, 2012. Confidential and Proprietary.

European Economic Overview (SymphonyIRI Topline Report)

Copyright SymphonyIRI Group, 2012. Confidential and Proprietary.

Consumer Recession has started more than a year ago now

The frugal shopper is smarter, buying less and more wisely

Promotional activity has started to increase in most countries

Own labels are challenging national brands across Europe

0,5 -0,4 -0,3

Growth rates of GDP in volume (based on non- seasonally adjusted data)

Copyright SymphonyIRI Group, 2012. Confidential and Proprietary.

Source : Eurostat July 12

FMCG Growth H1 2012 - % change vs. previous year

Private Label Share of Total Market

Private Label Share of Total Market

Summary - FMCG consumer reaction to economic uncertainty

European Economic Overview (SymphonyIRI Topline Report)

Copyright SymphonyIRI Group, 2012. Confidential and Proprietary.

Health & Wellness

Copyright SymphonyIRI Group, 2012. Confidential and Proprietary.

Copyright SymphonyIRI Group, 2012. Confidential and Proprietary.

Copyright SymphonyIRI Group, 2012. Confidential and Proprietary.

diet, nutrition, fur shine

Feline Hairball Control

Copyright SymphonyIRI Group, 2012. Confidential and Proprietary.

Copyright SymphonyIRI Group, 2012. Confidential and Proprietary.

Linking FMCG key trends to Pet Care throughout Europe

Copyright SymphonyIRI Group, 2012. Confidential and Proprietary.

European Economic Overview (SymphonyIRI Topline Report)

Copyright SymphonyIRI Group, 2012. Confidential and Proprietary.

1.400 1.200 1.000

800 600 400 200

Other Pet Food

Other Pet Food

1.400,0 1.200,0 1.000,0 800,0 600,0

182,7 171,7 18,6 176,3 17,4 190,0

190,7 16,4 193,1

199,0 15,9 197,9

214,3 15,3 205,5

52 w/e 6 Oct, 12 Dog Dry Complete

Cat Treats Dog Snacks & Treats

Copyright SymphonyIRI Group, 2012. Confidential and Proprietary.

Treats and Pouch format with constant increase in value sales

70,0 60,0 50,0 40,0 30,0 20,0

0,0 -10,0 -20,0

0,0 3,8 -0,1 -5,3 -4,3 -0,2

52 w/e 10 Oct, 09 Alu Tray

52 w/e 9 Oct, 10 Box Can Dome

52 w/e 8 Oct, 11 Pouch Tetra

52 w/e 6 Oct, 12 Tub Treats

Copyright SymphonyIRI Group, 2012. Confidential and Proprietary.

-10,0 52 w/e 10 Oct, 09 Alu Tray

52 w/e 9 Oct, 10 Box Can

52 w/e 8 Oct, 11 Pouch Sausage/Chub

52 w/e 6 Oct, 12 Treats

Copyright SymphonyIRI Group, 2012. Confidential and Proprietary.

+ another 500 Mio. sales from Pet Specialty Channel!

Other Pet Food

281.924 117.234 168.190

278.740 131.032 177.435