IRI Pulse Report Welcome to the Pulse Q3 2013 edition for pet. We hope you find it useful. Please do not hesitate to contact us if you have any questions or comments at EU.Marketing@IRIworldwide.com. Q3 2013 IRIworldwide.eu
About the Report This pet report is one of ten super category reports designed to show high-level comparison and analysis for retail markets across major countries in Europe. This report contains data gathered from around Europe. This market was split into the following categories: dog food, cat food, other pet food and pet accessories. The report highlights key metrics such as total sales figures, market trends, category shares, winners and losers for Europe and for individual countries. The data has been sourced from IRI retail databases and Eurostat, the statistical branch of administration for the European Commission. The countries included in the report are: France, Germany, Italy, the Netherlands, Spain and the United Kingdom (U.K.). The market channels used for each country in this report are as follows: Country UK ES DE NL IT FR Channels used Hypermarkets, supermarkets, drug stores and impulse outlets Hypermarkets, supermarkets, hard discounters, and drug stores, including the Canary Islands Hypermarkets, supermarkets, hard discounters and drug stores Hypermarkets, supermarkets, hard discounters and drug stores Hypermarkets, supermarkets, small self service, hard discounters and drug stores Hypermarkets and supermarkets For analytical purposes, the data sourced from available retail databases has been consolidated to provide consistent results. However, for some countries it has not been possible to source data pertaining to certain categories. When this occurred, it has been documented in the notes section found at the end of the report. 2
On the Radar The pet macro-category was not hit very hard by the economic recession. Its value growth across Europe in Q3 2013 stayed positive, but is definitely slowing down at +2.0%, which is slightly lower than the growth of Q2 2013 (+2.1%). The pet macro-category, generally speaking, does not grow like it used to in the past, but its trend is still better, or at least in line with, the trend of FMGC products. Value growth is driven by an increase in prices more so than by an increase in volumes. Price inflation and more premium sectors in small sizes matter to this value growth. Different tendencies coexist. Smaller premium products grow together with convenience products by private labels in most countries. ECONOMIC FIGURES INFLUENCING CONSUMER BEHAVIOR POPULATION IN MILLIONS UNEMPLOYMENT (%) AVERAGE 12 MONTHS INFLATION RATES GDP IN MILLIONS ( ) Jan. 2012 Jan. 2013 Sep. 2013 Average 2012 Sep. 2013 Average 2012 2012 2013 (Estimate) France 65.3 65.6 11.1 10.2 +1.2 +2.5 2 032 297 2 059 358 Germany 80.3 80.5 5.2 5.5 +1.8 +2.4 2 644 200 2 694 499 Italy 59.3 59.6 12.5 10.7 +1.8 +3.5 1 565 916 1 568 388 Netherlands 16.7 16.8 7.0 5.3 +3.1 +2.8 600 638 604 459 Spain 46.8 46.7 26.6 25.0 +2.3 +2.3 1 049 525 1 051 076 United Kingdom 63.4 63.8 7.5 7.9 +2.7 +3.7 1 901 001 1 854 920 Source: Eurostat, September 2013 3
GLOBAL TRENDS TOTAL PET VALUE SALES AND % CHANGE VS. PRIOR YEAR +2.7% +2.7% +0.0% -0.5% VALUE SALES IN MILLIONS ( ) Total EU 8632 UK 2224* DE 2093 FR 2046 IT 1227 ES 568 +7.4% +2.2% NL 473 *based on an exchange rate of 1.150 to the pound TOTAL EUROPE +2.0% TOTAL PET VALUE SALES FOR THE LAST SIX QUARTERS 2 500 2 000 1 500 479 498 508 521 535 516 490 549 526 498 504 521 France Germany Italy 1 000 500 292 306 316 302 299 76 78 83 80 111 131 134 142 141 142 311 200 144 Netherlands Spain 527 530 557 556 535 575 U.K. 0 01-juil.-12 01-oct.-12 30-déc.-12 31-mars-13 30-juin-13 29-sept.-13 Period Ending 4
Europe CATEGORY SHARE OF VALUE CATEGORY VALUE SALES 50.1% 36.7% Euros in 4 327 3 167 9.5% 3.6% 824 314 TOP 5 CATEGORIES: EVOLUTION Value sales ( ) and % change vs. year ago 4 327 3167 KEY TRENDS The value of the European market grew by 2.0% across the six countries in the year ending Q3 2013. This is slightly worse than the growth of the year ending Q2 2013 (2.1%), so Europe continues to slow down. Spain, the U.K. and France are confirmed as the top countries for growth in the year ending Q3 2013. 2.3 Total Sales 824 314 1.5 3.6-1.5 % vs. YA further growth of private label. Europe includes: France, Germany, Italy, Netherlands, Spain and the United Kingdom Cat food remains the core business and the trendsetter of pet care, showing the fastest growth after pet accessories. Dog food is also growing, but at a much slower pace. The growth of pet accessories is definitely positive, whilst other pet food stays negative. The marketplace continues to become more competitive for branded products, due to increased promotional activity and the 5
Europe TOP WINNERS: VALUE SALES 0 20 40 60 80 100 120 TOP LOSERS: VALUE SALES -6-5 -4-3 -2-1 0. 97.3 45.3 28.8-4.9 CATEGORY KEY FACTS The main contributor to the growth of pet care across Europe is cat food (+97.3 million ), whilst a smaller but relevant contribution comes from dog food (+45.3 million, where the driver is snacks and treats) and a visible contribution also comes from pet accessories. The dog snacks and treats segment is becoming increasingly more important and significant due to its growth in value and volume in all European countries. Wet cat single serve, and to a lesser extent dry cat food, is the driver for cat food and where brands are investing the most. The main point of innovation by major brands is on premium tastes in small sizes or new user friendly packages. No real new concepts or innovations entered the market, unless we consider the growing importance of the oral care concept in snacks and treats, which was introduced some years ago. 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 times we re living in. care appears to be an increasingly polarisedcategory. Economy products are growing (private label) as well as premium products in small sizes. The shopper is not unique and the shopper of dog food may behave very differently from the shopper of cat food. So, a key challenge for manufacturers is to develop proper ad hoc actions in different categories. Europe includes: France, Germany, Italy, Netherlands, Spain and the United Kingdom 6
France CATEGORY SHARE OF VALUE CATEGORY VALUE SALES 46.3% 16.5% 30.9% Euros, in 931 621 332 6.2% 125 TOP 5 CATEGORIES: EVOLUTION Value sales ( ) and % change vs. year ago KEY TRENDS Growth is still mainly driven by cat food. Wet cat growth was moderate (+1.2%), whereas dry cat continues to be very dynamic (+7.8%). 931 Snacks and treats is the fastest growing category. Cat snacks and treats (+17.6%) grew through assortment development (+24.1%), 621 whilst dog care and treats (+11.3%) benefitted from more new product development (+17.1%). The growth of the cat population had a positive 332 impact on cat food, but also on pet accessories, thanks to cat litter (+4.9%). 5.6 125 1.1 3.4 3.2 All other pet food is negative, except bird food (+6.6%). The dog food trend continues. Wet food is negative (-4.7%) with dry food positive (+3.4%), thanks to care and treat. Main meal (+1.4%) has also made a contribution to Total Sales % vs. YA growth. 7
France TOP WINNERS: VALUE SALES 0 10 20 30 40 50 60 TOP LOSERS: VALUE SALES -10-9 -8-7 -6-5 -4-3 -2-1 0 49.2 10.8 6.8 3.8 CATEGORY KEY FACTS Cat food is the main contributor to the market value growth, showing 49 million Euros of new sales. With the exception of multi-serve, all cat food sectors are very positive: Dry cat +7.8% Single serve wet cat +4.1% Snacks cat +17.6% food volume sales are increasing, driven by SKU range (+3.2%), and promotional activity is now stable. The assortment in pet food tends to increase in each segment, with the exception of wet dog. This proves how strategic this category continues to be for retailers, particularly with the development of the value offer. 8
Germany CATEGORY SHARE OF VALUE CATEGORY VALUE SALES 56.9% 32.3% Euros, in 1 191 676 7.4% 3.5% 154 72 TOP 5 CATEGORIES: EVOLUTION Value sales ( ) and % change vs. year ago 1191 676 154 72-4.4 0.1 3.2-2.0 KEY TRENDS The pet care and food category in Germany has registered a decline of -0.5% in its value sales, due to the decline in normal sales, as promotional sales are showing growth. Cat food, which is the main category, is stable in value due to the rise in average prices; however, there were dips in volume. The significant decline in Aldiand drug stores has resulted in an overall decline of the pet care and food categories. Private label showed decline in both value and volume, driven by a decline in cat and dog food. Apart from stable growth in cat food, all other pet foods showed decline in value, whereas only bird food is showing positive development in volume. Total Sales % vs. YA Within pet accessories, cat litter is compensating for the decline in other pet accessories. 9
Germany TOP WINNERS: VALUE SALES TOP LOSERS: VALUE SALES 0 1 2 3 4 5 6-15 -10-5 0. 4.8 1.1-3.3-14.1 CATEGORY KEY FACTS Cat litter, with a double digit sales value growth in discounters, is the growth driver for pet accessories. Private labels are showing double digit growth for cat litters.in contrast, national brands are declining. Within cat litter, clumping is the growth driver, and private label is driving its growth. In cat food, snacks are offsetting the decline of other types. In cat food, where private labels are showing decline, national brands with positive development are helping the category to show stable growth in value. Dog food is the most declining category, irrespective of a slight increase in promotional sales. A double digit decline in dry food has resulted in the overall decline, whilst snacks are showing growth. Dry dog food is showing a decline in all pack sizes, mainly in size class from 2.5kg to 4.9kg, its popular selling pack size, which contributes to more than half of this decline. Decline in price was unable to help fish food, and bird food is registering growth in sales. Where bird food is showing growth in volume, fish food is showing decline in both value and volume. Small animal feed / rodents is showing decline in all the channels, but mainly in hard discounters. Private labels are showing positive growth only in pet accessories due to the significant increase in cat litter. 10
Italy CATEGORY SHARE OF VALUE CATEGORY VALUE SALES 52.8% 33.7% Euros, in 648 414 11.3% 2.2% 139 27 TOP 5 CATEGORIES: EVOLUTION Value sales ( ) and % change vs. year ago 648 KEY TRENDS Total cat and dog food continued to increase in value sales in the year ending Q3 2013 (1.6% for cat and 2.2% for dog), but volume sales did not keep up, meaning value grew as volume declined for cat food and dog food. Value growth came from increasing prices. 414 Cat food remained the largest sector of the category, accounting for 52.8% of total value sales, and showed an increase of 1.6%, lower than dog food. accessories stayed very 139 positive (+7.2%) and other pet food is still heavily 1.6 27 2.2 7.2-7.5 losing value sales (-7.5%). Dry pet food is performing better than wet. Wet single serve drove the performance of cat food with a growth of 5.1% in value sales, whilst dog food also confirmed a negative trend for wet small and medium products (-0.9%). Total Sales % vs. YA Snacks and treats remains the fastest growing segment of the category, especially for cat (+51.4%) but also for dog food (+8.4%). 11
Italy TOP WINNERS: VALUE SALES 8 9 9 10 10 11 TOP LOSERS: VALUE SALES -3-2 -2-1 -1 0. 10.2 9.4 8.8-2.2 CATEGORY KEY FACTS The main contribution to the growth of the pet care category came from cat food, with a 10.2 million euro increase in sales. The growth of dog food is worth 8.8 million euros. accessories keep on being positive and are the second contributor to the sales growth of the pet care category with a 9.4 million euro increase. Products in small packages continue to drive the positive performance of the market, especially in cat food, confirming that the cluster of shoppers who keep on buying premium products (with user friendly packages and special tastes) are not affected by the difficult economic situation. The increasing attention to pets health is reflected in the considerable growth of the dog functional snack and treats segment. Cat snack and treats is still a niche market, but with a good potential of growth. accessories are growing better than cat and dog food, whilst other pet food is continuously losing value and volume sales. Since both promotional activities and private labels show a relevant growth in most of the segments, pet care is more and more a highly competitive category the percent of promoted volumes in pet food got up to 25.6 with a growth of +0.6 points versus 25.0 last year. Private label reached a 43.2% volume market share, with +1.2 points versus last year in hypermarkets, supermarkets and small self service stores. care is not a category that is highly impacted by the recession, as it is still growing far above the average for FMCG products of -0.7% for food and non-food products in Italy in the year ending Q3 2013 and -0.8% in Q3 2013. However, this growth in value goes together with a decline in volumes. 12
Netherlands CATEGORY SHARE OF VALUE CATEGORY VALUE SALES 50.8% 27.8% Euros, in 160 87 54 4.2% 17.1% 13 TOP 5 CATEGORIES: EVOLUTION Value sales ( ) and % change vs. year ago 160 KEY TRENDS The two largest categories, dog food and cat food, both dropped in value. This has been fully compensated for by the growth in turnover of other pet food and pet accessories. The same shift is visible in volume. 87 54 Versus last year, volume prices increased by 2.4%. Only prices of dog food stayed stable. In Q3, total turnover grew by 0.9% versus Q2 2013. However, compared to Q3 2012, turnover dropped by 2.0%. 0.7-3.0 7.0 13 8.5 Cat food is the largest segment. Turnover grew by 2.1% versus last quarter, but lost 2.6% versus last year (Q3 2012). The main driver of the pet care category is pet accessories. Although growth figures are getting less impressive, turnover in Q3 2013 Total Sales % vs. YA still grew 1.6% versus a year ago. 13
Netherlands TOP WINNERS: VALUE SALES TOP LOSERS: VALUE SALES 0 1 2 3 4-3 -3-2 -2-1 -1 0. 3.5 1.1 1.0-2.7 CATEGORY KEY FACTS Total supermarket turnover has been under pressure in period 10 and period 11, and showed a negative trend versus a year ago. Year to date, turnover grew by 2.0%. Year to date promotional pressure is sky high (22.1%). Also, the share of pet food sold on promotion increased from 11.8% to 14.1% (+2.3 percent point). Half the turnover comes from cat food (50.8%, and was 51.0% a year ago). Turnover on MAT-base is almost stable (-0.2%), while the number of pieces dropped by 6%. Volume dropped by 4.4%. Obviously, packages were bigger (+1.8%), and prices have been increased (+4.3%). 19.4% of all cat food turnover was sold on promotions. The total promotional value increased by 25.3%. The smallest segment within cat food, other cat food, is the only segment that grew in value (+16.4%) and volume and has increased its range. Unfortunately, this segment represents only 7.6% of total cat food turnover. Although frozen dog food showed a growth of 22.9% in turnover, the entire category of dog food lost 3.0% of turnover based on MAT. Volume declined by 2.9%. The share of bird food increased from 51.3% to 57.7% within the other pet food category. Higher selling prices (+6.4%) and more volume (+13.6%) are the reason. accessories grew by 6.4%. Growth is entirely coming from dog chew bones and cat litter. Both segments represent 89.9% of total value. 14
Spain CATEGORY SHARE OF VALUE CATEGORY VALUE SALES 60.4% 34.7% Euros, in 344 197 4.9% 28 TOP 5 CATEGORIES: EVOLUTION Value sales ( ) and % change vs. year ago 344 KEY TRENDS The pet food market showed good growth due to the growth of its three segments: dog food (+8.8%), cat food (+5.8%) and other pet food (+2.0%). Private label has reached 50.7% market share and it is higher in the dog food segment (55.2%). 197 Dry dog food experienced major growth (+9.8%). Wet dog food increased by only +4.0% in value, as this segment has a higher level of private label presence (+75.4%). Wet food is a more expensive 8.8 28 5.8 2.0 product, but private label is focused on formats with large volume, whereas branded manufacturers are focused on single serve products with a higher value but less weight. Total Sales % vs. YA Cat food experienced a growth of 5.8% in value. This increase in value is due to the success of single serve products. 15
Spain TOP WINNERS: VALUE SALES 0 5 10 15 20 25 30 TOP LOSERS: VALUE SALES -50-45 -40-35 -30-25 -20-15 -10-5 0 27.9 10.8 0.5 CATEGORY KEY FACTS All categories continued to grow. Dry dog food, the largest and cheap, along with snacks for dogs and cats, the newest and more expensive, were the sectors with major growth. On the other hand, private label continues to gain position, absorbing most of the growth of the market. Snacks and prizes, or treats for dogs and cats, continues gaining presence, increasing their volume. It is important to highlight the relevance of the prizes for cats category, which is still small, but has almost doubled in sales. Both monopolize a big part of the launches in this sector as a way of gaining added value and differentiation. Private label brands are gaining share. This major increase is in value as opposed to volume. This demonstrates the impulse of retailers own brands of major quality and added value for their brands, that are not bought on low prices alone. 16
United Kingdom CATEGORY SHARE OF VALUE CATEGORY VALUE SALES 49.0% 43.8% Euros, in 1 090 974 5.1% 2.1% 114 46 TOP 5 CATEGORIES: EVOLUTION Value sales ( ) and % change vs. year ago 1 090 974 KEY TRENDS The value sales of the U.K. market grew by 2.7% during the year ending Q3 2013. This was lower than the same period last year, which saw growth of 4.2%. Cat food is the largest sector with 49.0% value share and grew by 3.3%. Dog food share was 43.8% and grew at a slower rate of 2.0%. accessories grew the fastest at 6.8%, 3.3 2.0 114 6.8 46-4.2 whilst other pet food declined by 4.2%. Promotional activity continues to be below the total grocery level, but did increase from 37.5% (12 weeks ending March) to 43.0% (12 weeks ending July), but during the latest 12 weeks had dropped to 41.5%. Total Sales % vs. YA Private label products grew faster (+6.1%) than branded (+1.8%) and have seen value share increase to 19.2%. 17
United Kingdom TOP WINNERS: VALUE SALES TOP LOSERS: VALUE SALES 0 10 20 30 40-3 -2-2 -1-1 0. 34.7 18.7 7.3-2.0 CATEGORY KEY FACTS Although this year has seen very contrasting weather conditions in the U.K., where winter continued well into April and summer (July/August) was the hottest in seven years, this had little impact on pet food volume sales. The only sectors to show strong growth within pet food are cat and dog treats, which grew by 24.9% and 9.3%, respectively. New product development at the sub-brand level during the latest year accounted for 4.2% of value sales in the pet food category. The sectors which contributed the most new product development value sales were cat wet single serve and wet dog food, which together accounted for over 68.2% of new product development sales. Private label new development contributed 61.5% to total new product development sales. The average price per kilo for pet food increased by 4.7%, with cat increasing by 5.2% and dog food by 4.1%. Private label products increased by 4.5% and still remain 29.1% cheaper than the market. Pack sizes are still continuing to trend towards smaller sizes. Packaging formats are also being looked at, with one manufacturer recently introducing a plastic resealable tub to the wet dog food sector. 18
Final Notes Notes on Category Definitions for Countries Due to the diverse products found in individual countries across this market, it was necessary to consolidate the available data into the categories in this report. In some cases, it wasn t always possible to align products across all six countries, hence the need to highlight any anomalies in the report. Those exceptions are listed below: The U.K. data in this report only includes bird food, while the other countries include fish food and rodent food. The U.K. data in this report only includes cat litter and does not include pet hygiene products, aquarium accessories or pet toys. The Spain data in this report does not include this category. The Germany data in this report does not include pet toys. 19
Resources To gain insight into opportunities across specific categories, segments, channels or retailers, contact your IRI client service representative regarding custom analyses leveraging the following resources: IRI InfoScanCensus is a syndicated retail tracking service that enables manufacturers and retailers to acquire industry insights used to make better business decisions. IRI InfoScan Census utilizes the data thatiri collects from grocery, drug, and mass merchandise retailers to provide the most comprehensive and accurate syndicated data offering in the FMCG sector. With access to accurate, granular detail by category, geography, measure, and time period, clients have the tools needed to develop marketing and sales strategies based on product performance, distribution, and promotion responsiveness. All data about pet comes from IRI InfoScan Census. IRI Consulting provides strategic insights and advice, leveraging a variety of data sources, predictive analytics, enabling technologies, and business analyses to help FMCG manufacturers and retailers address significant sales and marketing issues effectively. FOR MORE INFORMATION Please contact Paolo Garro, Business Insights Director, IRI at Paolo.Garro@IRIworldwide.com or +39 0252.579446 with questions or comments about this report. About IRI. IRI is a leader in delivering powerful market and shopper information, predictive analysis and the foresight that leads to action. We go beyond the data to ignite extraordinary growth for our clients in the CPG, retail and overthe-counter healthcare industries by pinpointing what matters and illuminating how it can impact their businesses across sales and marketing. Move your business forward at IRIworldwide.eu Arlington Square, Downshire Way, Bracknell, Berkshire RG12 1WA, Tel +44 (0) 1344 746000 Copyright 2013 Information Resources, Inc. (IRI). All rights reserved. IRI, the IRI logo and the names of IRI products and services referenced herein are either trademarks or registered trademarks of IRI. All other trademarks are the property of their respective owners. 20