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Best of work from two years with OPIS newsletter Oil Express, 2012-2013 UPDATE: OPIS says I cannot show full articles; please contact me for full versions
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The petcare category is transitioning to take advantage of consumers' ever-increasing affinity for their pet
Fido, Kitty, Buddy and Garfield can all answer to a new name: "Recession-proof." According to the American Pet Products Association (APPA), even in the worst of the economic downturn of 2007-09, pet products sales rose. Americans spent more than $48 billion on their animal companions in 2010, and the forecast calls for $51 billion this year (to be continued after Institute POV).
- Almost two-thirds of American households have pets, creating a $19 billion pet-food industry. Sales have risen throughout the current economic downturn.
- The pet food recalls of 2007 (largely centered around Chinese animal feed with melamine) placed a harsh spotlight on safety standards, and shoppers began to pay closer attention to quality.
- A few decades ago, pet food was a fairly straightforward business with 95% of sales coming through supermarkets.
- Today, the grocery channel's share is 50% as sales have shifted to big boxes and specialty chains.
- Shopper marketers have to study the varying levels and types of relationships pet owners have with their pet when shaping marketing messages.
- More affluent pet owners are increasingly focused on products that tout health and nutrition, a factor that has driven up prices. Global CPGs like P&G are acquiring niche players in this category.
- There are two types of health-conscious pet-product shoppers: those focused on nutritional technology, and those demanding all-natural ingredients.
- On the other hand, in the mass channels, many shoppers are part of busy, dual-income households and their relationships with pets (outdoor dogs, for example) are extremely limited.
INSTITUTE POV: The petcare category is often used to illustrate the difference between a product's "consumer" and its "shopper." In reality, it's all about the owners. Expect to see more social media campaigns and smartphone tools figure into the shopper marketing in this category.
Why do we buy like this? When it comes to pet products, the answer is simple: love.
"It's almost like a societal shift is occurring where it's become more socially acceptable for pet owners to really pamper their pets," says David Lummis, a senior pet analyst for Rockville, Md.-based Market Research Group's Packaged Facts. "And it's not just about frivolous products. It's about the health of the pet and increasing the nutritional profile so that prices can also go up."
Lummis says that the widespread and highly publicized pet food recalls of 2007 (largely centered around Chinese animal feed with melamine) placed a harsh spotlight on the industry's safety standards. Shoppers began to pay closer attention to pet-product quality, boosting business in the natural/organic pet-product niche.
With almost two-thirds of American households (72.9 million homes) having pets, this represented an irresistible opportunity for the $19 billion pet-food industry. Global CPGs like Procter & Gamble began to snap up niche players such as Natura Pet Products, adding the holistic pet-food brands Innova, Evo, California Naturals, Healthwise and Karma to its Iams and Eukanuba portfolio.
"The industry," Lummis says, "is converting pet owners to higher-priced foods based on the affection that they feel for their animals and the belief that good nutrition – just like human foods – will be important to their overall health."
Jeff Metzner, Iams brand manager at P&G, says that today's health-conscious pet-product shoppers fall into two categories:
"In general, Iams' core consumers consider their pet to be part of the family and think first about health when choosing their pet food. This consumer wants to understand the nutritional technology in their pet food and is very interested in their veterinarian's opinion. The second approach is through natural ingredients. This consumer is seeking a healthy food but believes that natural ingredients are the key. For this consumer, the ingredients in the food are most important."
A Fragmented Path
A few decades ago, pet food was a fairly straightforward business with 95% of sales coming through supermarkets. Today, the grocery channel's share hovers around a mere 50% as sales shifted to big boxes like Walmart (on the price-value side) as well as specialized retailers like Petco, PetSmart and Pet Supplies Plus.
Dustin Lehner, vice president of shopper marketing at Catapult Marketing, Westport, Conn., says that as a result, the path to purchase for pet lovers is no longer one lane. Catapult, which counts Mars Inc.'s Pedigree brand as a client, changes its approach when focusing on a shopper at Southeastern U.S. grocery chain Publix or one at any Walmart. It's all about shopper research, Lehner says.
"What we've started to hone in on is this whole idea of these varying levels and types of relationships pet owners have with their pet – it's really starting to be, from the shopper's perspective, one of the key drivers of what we say and how we say it," Lehner says. "At a Publix for example, where I've got a little bit older shopper, typically an empty-nester, their pet has basically kind of filled that void of the child that's no longer in the home.
"Their level of looking at the ingredient, really looking at accessories, things like that, to basically treat that pet like their child, is much more prevalent than it would be at a Walmart, let's say. At Walmart, you tend to over-skew toward outdoor dogs, they're a busy, dual-income household, so there's a lot of things happening. Their moments with their pets are extremely limited: on the way to the car in the morning or coming home from work and get dinner started, fill the dog bowl and rub them on their head, and that's basically the interaction.
"So with Walmart, it was more about giving (the dog) the best you can, because when we started doing the research what we found was that Walmart shoppers, the food that they give their pet is one of the few things they really do for them – 'I would never buy him private label food because the food, for me, is kind of like treating him. I'm willing to spend the three dollars more because that's all I really do for him, buy him food.' If you look at Walmart, it was really much less about the relationship and more about, this is going to make you feel good because you're feeding him good food."
Tug at the Heartstrings
As the pet-products path to purchase has become more complex, marketers have created a variety of social awareness platforms and social media campaigns that play off consumers' deep feelings for (and some might say anthropomorphizing of) pets. One of the most successful is Iams' annual "Home 4 the Holidays" platform, which began a decade ago through an animal shelter network on the West Coast. The campaign has since gone global, serving more than 3,500 animal organizations.
The latest iteration of "Home 4 the Holidays" (Oct. 1, 2010, to Jan. 4, 2011) leaned heavily on heartstrings-tugging social media and in-store displays to help get more than 1.1 million animals adopted. In the U.S., Iams added a food-donation program named "Bags 4 Bowls." Two million meals were donated online through pet blogger sites, the Iams Facebook page and Iams' Twitter account. Another 3 million meals were donated at grocery, big-box and pet specialty chains using more traditional tactics – specially marked Iams bags of dog and cat food and at-shelf signage.
Given the highly social context of pet ownership, it's no surprise that smartphone tools have now begun to figure more prominently in petcare shopper marketing. Iams launched a fairly basic mobile site in April 2011. Sean Lee, Iams assistant brand manager, says the main goals of the site are to "educate consumers on the go, help them locate Iams products, allow them to connect with our communities [like Facebook], and provide access to user reviews."
Nestlé Purina was somewhat more ambitious when it launched its mobile app, named "The Petometer," in June 2011. The Petometer is designed to help consumers care for and monitor their pets. Sherry Smith, senior vice president of advertiser sales at Tampa, Fla.-based Triad Retail Media, says that once her company's work on the Nestlé Purina microsite on Walmart.com was established, Nestlé Purina asked for interaction away from the store and PCs.
"They came to us and said, 'We want to make sure we're reaching them while they're at home and drive overall brand awareness,'" says Smith, who works at Triad's Bentonville, Ark., branch. "We recommended an app that could track the history of your walks with your dog because it is linked to Google maps. You can set reminders for yourself, what times to walk your dog. There's a list of recommended exercises you can do with your dog. There's a calendar feature for tracking vet visits or grooming appointments." The app is available at Nestlé Purina's Walmart microsite, the iPhone app store or Android app store. Users can upload photos of their dog and share the routes and details of the walk (date, time, distance and pace) with friends on Facebook.
Smith says that Nestlé Purina doesn't try to "hard sell" anything inside the app; users are instead referred to the brand's microsite on Walmart.com for shopping tools like coupons, locational pricing or product availability by location.
"It is definitely seen as a sponsorship by Purina," Smith said of the app's value. "The brand specifics are not number one. Instead, it's really about giving consumers a tool that they can use to take better care of their pets. Who knows, as the app continues to develop and we make changes to it, we may include more on product information. But right now, it's about getting it into consumers' hands, letting them interact with it and seeing what they think."
Triad's relationship with Nestlé Purina and Walmart may be unique in the pet industry, says Smith, as it encompasses the brand showcase (i.e., a microsite) inside Walmart.com. The site has several functions: Direct visitors back to Nestlé Purina's main site for more information; share games (currently "The Fast and The Furriest" and "Yarn Ball Blocker"); offer articles on pets (such as "Puppy Necessities" and "Functions of Fiber"); and most recently, show episodes of a Triad-produced series named "Real Pet Stories" that chronicles the lives of pets at Tampa-area shelters. There's also a tab at Walmart.com/purina to help visitors find pets for adoption in their areas.
"What's nice about it is that it has a co-branded URL that Purina can leverage in their marketing campaigns and on their packaging," Smith says. "It is live all year. We're updating information at least monthly, working with Purina to make sure they've got the most up-to-date content and commerce information available."
Smith says what consumers see at the brand showcase will be consistent with what they see in-store:
"For example, last April, Purina promoted a puppy pack as 'Buy Puppy Chow, go to the website to enter a code, and get a free puppy pack to try.' It was a 360-degree approach that reached shoppers in the store and drove them back online, reaching them before they shopped again, driving them to the store, and giving them a nice giveaway based off their purchase of Purina products."
Nestlé Purina is involved with another campaign, this time in the grocery channel, that targets pet owners' human feelings for animals. "Tales For The Pet Lover's Heart" is sponsored by Nestlé Purina and grocery giant Kroger. It is also dependent on a website (Talesforthepetloversheart.com), where visitors can tell a story about a pet to have Kroger donate $1 up to $25,000 to welfare organizations across the U.S.
The site also links to Nestlé Purina's Facebook page, offers downloadable projects owners can do with their pets, relates the two companies' donations (not tied to pet stories) to animal welfare organizations and informs visitors of discounts at Kroger locations if they shop in late July and early August