Summary
Unless Colgate changes their "go-to-market" strategy for the Hill's Science Diet product, I predict they will continue to see sales declines in a category that is very profitable and has significant growth potential.
My recommendation is that Colgate seriously consider offering their Hills product to the FDMC channel and follow the route previously taken by Procter & Gamble with Iams. Traditional retailers would welcome their brand and pet specialty would not be likely to drop it.
Analysis
Pet food is one of the few categories that has maintained acceptable sales growth during the recent recessionary period. Pet ownership continues to grow in the U.S. and abroad, and most pet owners are picky about what they feed precious pets who are often a substitute for children and other forms of companionship.
Private label pet food still struggles to gain more than a 10% share of category penetration. There are only a handful of private label pet food suppliers in the U.S., and they do not have the capital to pursue the innovation afforded the other brands.
Many of the top food consumer goods companies compete in the pet food category because of its potential growth and profitability. Among them are the following:
- Procter & Gamble with Iams. Under the Iams brand they have just introduced a new line primarily for food/drug/mass/club (FDMC) called Proactive Health - geared to draw more specialty pet customers into the FDMC channel.
- Nestle with their Purina One, Purina Pro and Beneful brands
- Masterfoods with their Pedigree brands and Royal Canin for pet stores
[Hill's Science Diet does not compete with these brands across the FDMC channel
Yet these brands all compete with Science Diet in the specialty pet channel.]
In order to differentiate themselves from the growing threat of FDMC, the specialty pet stores and vets are pushing a wide array of alternative products, many of them coming to market within the last two years. They include:
Nutro Products Inc. - the Natural Choice, Nutro Max and Nutro Ultra brands
Natural Balance - endorsed by Dick van Patten
Eukanuba
Avoderm - Petco only
Wellness Pet Foods - Old Mother Hubbard brand, (exotic, premium, healthy)
Solid Gold - holistic health care
Blue Life Protection Formulas
Roger Davidson consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
