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Dogged determination

pet foodThrowing a piece of chicken under the table is a well-established tradition in Australia’s dog-owning households, but the can of cylinder-shaped mystery meat in the bottom of the pantry has nearly always been the default meal choice.

That is changing with a growing number of Australians extending the health consciousness that has disrupted establish grocery players to their furry friends, opting to dump the pet-food-only label for meals that would be equally in place on the dining table.

It is a business opportunity for Bondi vet Kate Andrews and animal-science graduate Kyra Duggan, who run online pet-food supplier Doggy Bag Delivery, supplying human-grade dog meals to  houses across Sydney. They are gearing up for national expansion after bootstrapping the company through an initial growth phase, with an eye on replicating the success of similar businesses overseas by biting at the heels of traditional FMCG brands on supermarket shelves.

Andrews, who is also the founder of pureplay gift company Thankfully, believes pet owners are putting a renewed emphasis on preventative health, choosing better-quality products that make for healthier dogs and fewer vet bills.

“People in general have become more health conscious, and it was really only a matter of time before people turned their attention to their pets,” Andrews told Inside FMCG.

New IbisWorld research pins the “pet humanisation trend” as a key factor underpinning a surge in the $182 million online pet-food industry, which it said is growing at an annualised rate of 9.2 per cent. In comparison, the broader $1.7 billion pet-food production industry – more than 86 per cent of which is controlled by Mars Australia, Nestle and VIP Topco – is anticipated to grow at an annualised rate of 1.6 per cent through to 2022.

Feeling pressure

IbisWorld senior industry analyst Nathan Cloutman said consumer tastes are shifting to the detriment of the market heavyweights, which he believes are losing upper-market consumers to boutique online brands and low-market consumers to the increasingly competitive private-label offers of Coles and Woolworths.

“Traditional manufacturers are starting to feel pressure from one side of the market on price and the other side of the market on quality,” Cloutman told Inside FMCG.

On the higher end, Ibis research indicates that consumers are spending more on pets across food, treats and accessories as part of a fur-baby trend. “People are having kids a bit later in life, and the pet has become a thing to spend your income on for people in their late 20s,” said Cloutman.

A 400g can of Mars’ My Dog wet food retails for $2.10 in supermarkets, whereas Doggy Bag’s products are sold in packages that equate to $5.50 for a wet dinner meal. On the lower end, supermarkets are investing heavily in their own products across the board, upping confidence in private label among consumers and undercutting middle-market prices in the pet-food aisle.

Swing to quality

Cloutman said traditional manufacturers are responding by appealing to the quality side of the market, opting to avoid the downward spiral of price competition. “Traditional pet-food manufacturers are expanding their product ranges and creating more premium offers with of a focus on nutritional content and natural ingredients.”

However, the strategy is limited in that supermarket suppliers cannot provide the convenience of delivery or personalised options, but Cloutman does not think traditional players are doomed, citing economies of scale as a factor protecting incumbent companies.

Andrews is looking to compete with traditional suppliers on a level playing field though, having secured a coveted industry certification that Doggy Bag’s products provide a balanced and full meal for pets. The company is now preparing to negotiate deals with veterinary clinics, inching in on a space that has been dominated by larger players for decades.

“A whole bunch of people say they make dog treats and whatever, but the reality is that they can’t partner with vets because they do not portion control their food,” Andrews said. “There is no quality standard around what they’re providing, and they aren’t actually providing all the nutrients needed for a balanced and complete meal.”

From shelf to screen

It is not just food, either. Drewe Apps, owner of pet-based online subscription service Olly’s Box, has been developing a treat- and accessories-based business predicated on healthy dog treats. He told Inside FMCG that the convenience of home delivery is unrivalled, and that consumers are beginning to shift their attention from shelf to screen when buying for their pets.

“People are time poor. People are excited by what they find rather than having to go to the store and have something given to them,” Apps said.

Ibis agreed, noting “Time-poor consumers are starting to use new purchasing and delivery methods for bulky and premium pet-foods. They are also using the internet to find specialised or luxury products, from designer wear for dogs to jewelled cat collars.”

Delivering nationwide, Apps is now looking at international growth opportunities, particularly in Asia where he said consumers are just as likely to buy into the service. Online pet-food and accessories providers in the UK and US are also weighing up global opportunities, having established themselves in their respective domestic markets.

Cloutman said the consumer trends emerging in Australia are more progressed overseas, with the likes of Butternutbox, PetPlate and The Farmer’s Dog weighing into the market. However, he does not believe traditional suppliers are facing an existential risk, noting that economies of scale and established market positions will allow them to weather pressure on market share, particularly as the entire pet-food and supplies market is growing.

This article originally appeared in the June edition of Inside FMCG print magazine.

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