Trends & Opportunities in the Pet Category: Q&A with Nielsen’s Maria Lange 6/18/2020
Maria Lange, Nielsen’s VP of Pet and Cannabis verticals, was slated to speak at ECRM’s Pet Program this past April, but as the pandemic threw a wrench in the works, we transformed that program into a Virtual Session that was held last week, hosting more than 1,600 meetings between retailers and suppliers of pet products over the span of four days.
And in place of the in-person thought leadership session, participants were able to get a first-look at the video Q&A with Maria hosted by ECRM VP of Content Joseph Tarnowski, during which they covered some key trends in the pet category, including the impact of Covid-19, the “re-grainification” of pet food, sustainability, and premiumization.
With the Pet Virtual Session now behind us, we’re opening up the Q&A for everyone, and below you’ll find an edited excerpt from the interview, as well as links to the full podcast and video interviews.
You will also want to check out the interview with Bartell Drugs’ General Merchandise Category Manager Howie Cohen, one of the buyer participants of the Pet Virtual Session, who – in addition to discussing how his GM category was impacted by the stay-at-home orders – also give’s a retailer’s perspective of the ECRM Virtual Session Experience.
Listen to the full podcast interview (view video below)
ECRM: Can you talk a little bit about how the pandemic has impacted the pet category?
Lange: I think there are lots of similar trends to what’s happening with products for consumers, and then there's some that might be a little unique to the pet industry. One big trend that we started seeing when states started locking down was a big stockpiling of products, including pet food. We saw really strong sales spikes across all retail channels for pet food in mid-March, followed by a big decrease towards the end of March and leading into April. The reason is that pet is a fixed consumption category; your pet is not going to eat more just because you buy more food. So you buy food, load the pantry and it's going to last longer than it would have otherwise. Then, as we got into more into April, we saw the curve moving up again.
Also similar with other categories was the big shift towards online shopping, as pet owners sought to avoid going into stores. This is also driving some channel shifting as well, where we are seeing the pet specialty channel being impacted as shoppers consolidate their trips. If you can get your pet food at a grocery store or wherever you get your groceries and potentially avoid one additional stop, people are doing that. Because of this, looking at the numbers of year-over-year trends, we are seeing the food, drug and mass world is less impacted by Covid than the pet specialty world.
One thing is a little unique from all this has been the pet ownership trend. While we don’t have the numbers yet, we’re hearing anecdotally of a spike in pet ownership happening right now, which certainly could be a benefit for the industry long-term.
ECRM: I've certainly seen that among my friends. As far as dog food goes, what’s happening with grain-free food and the issue of dilated cardiomyopathy (DCM)?
Lange: DCM started first popping up back in 2018, and the FDA actually started investigating a potential link between grain-free foods or legume-heavy foods and a possible link to heart disease in dogs, particularly large breed dogs. Then there was a follow up in early 2019, but I think the update by the FDA in the summer of 2019 is really what kind of brought the issue to a peak.
That’s when the FDA named 16 specific pet food brands that were making up the cases of DCM. It's still under investigation, but it almost seems that the pandemic right now has kind of pushed it a little bit off, but certainly the industry wants answers, particularly since in 2019 grain-free foods were actually the fastest growing types of food in the pet retail channel, and was making up nearly 50 percent of all sales in the pet specialty channel. Grain-free has been a newer trend for food, drug and mass, but it was a very profitable one, because grain-free foods are usually come at a higher price than traditional pet foods. Long story short, that investigation has slowed that growth. Now we are at a stage of re-grainification, where grain-free is declining and grain-in foods are increasing, and pet brands are looking to see how can they bring grain back into their portfolio.
ECRM: Sustainability is a trend that spans categories, with consumers increasingly looking for products that are better for the pets, better for the planet, and better for the people making them. How has this impacted the pet category?
Lange: It certainly is a buzz word when it comes to the industry, and like most of the trends we're seeing in the pet food industry, it comes from the human side. Over the past few years we're seeing more momentum picking up. Many large CPG manufacturers are looking to reduce the use of plastic or find meat alternatives. Because you think about it in the U S there are probably 120 million plus pets, and there have been some studies out there saying that cats and dogs, through their consumption, are adding to the impact on the on the environment. And the industry is evaluating how to make pet food brands more sustainable when it comes to packaging, processing and sourcing. And even down to the meat itself, they are looking for alternative options, such as lab-grown versions.
ECRM: Are they also looking into insect protein?
Lange: There is some momentum in the U.S. pet industry when it comes to insects like mealworms or soldier fly protein being used as a source. What might be driving this is the Millennials and their views on sustainability. When we looked at our sustainability data that examines how sustainable certain generations are and how willing they are to change their habits to make an environmental impact, we see that Millennials are more likely to do this than Generation X, Gen Z or Baby Boomers. And since millennials are the largest pet-owning population, it’s a trend definitely worth keeping an eye on. And research shows that in some cases pets find insect-based foods even more palatable than some meats.
In the UK, the British veterinarian association has advocated for feeding insect protein to dogs and cats because of how good it is for them. Right now, insect protein is not an approved ingredient for dog and cat food in the U.S., but I think we can't be too far away from also seeing it approved, at least for some types of insects.
ECRM: How about the local aspect of sustainability?
Lange: That's one of the sustainability trends we've been observing for a while in the pet industry where manufacturers are showing more transparency on where the ingredients originated, and some are looking to be more sustainable by sourcing locally. Some retailers even have kitchens where you can pick up your fresh food right there in the store; it’s prepared more or less in front of you. So that's another way of showing me how the carbon footprint is being reduced.
ECRM: At last year’s ECRM Pet retailer panel discussion, premiumization was a big topic of conversation. Is that still the case in the face of financial insecurity some consumers are experiencing during the pandemic?
Lange: Premiumization has never really stopped. It’s part of that humanization trend and often the dog eats as well, or sometimes even better than their owners. There are many exotic proteins for dogs and cats that are popular, such as kangaroo or boar, and we’ve moved beyond the days where you would just open a can or scoop out traditional kibble. Now they are getting a raw alternative type of kibble that is more nutritious with more protein, and it’s more palatable. But it's a very costly manufacturing process, and it shows in the price you pay for it.
But if you're looking at what's driving growth, it's those raw, alternative pet foods, the frozen and fresh foods as well as other premium dry and wet foods, especially at the specialty retailers. But premium may face a bit of a hurdle to overcome right now, especially as unemployment may put a little pressure on consumers’ wallets. So perhaps some may mixed in freeze-dried or air-dried or dehydrated foods or frozen foods into their dog's regular food as a kind of a treat, or they may be doing this a little less premium. It’s a little early for us to tell right now, but certainly I know our team is going to look at very closely what consumers are doing long-term, whether they are switching, how they're switching, or are they keeping the premium pet food and maybe saving in other categories. There are a lot of households that would cut back on their own nutrition before they cut back on their pet’s nutrition. Plus, it's hard to change a dog’s or cat’s food; you have to bring in the new food gradually. If their pet likes a certain food, they may not want to mess with that.