Premiumization of pet care: developing value propositions


In the $184 billion global pet care industry, 27%, or $50 billion, of retail sales comes from the premium segment*. This segment is driven by the underlying feeling of providing the best for your pet. The human-animal bond has evolved over the years. From simple guard animals to now considered members of the family, pets have come a long way in their relationship with humans. The pandemic has further strengthened this bond. As pets helped combat loneliness and isolation, pet owners began paying more attention to the health, well-being and well-being of their furry companions, feathers or even scales. The trend toward humanization of pets, coupled with increased attention to pets, supports the demand for premium offerings in the pet care industry, even during times of inflation.

Premiumization despite inflation

Inflation levels in all regions increased from 2020 to 2022, with no exception for pet food.

Globally, the average unit price of dog and cat food increased by 7% in 2021, followed by 5% in 2022.

Source: Euromonitor International

To manage their margins, companies have responded by increasing prices, reducing volumes, changing recipes and revising portfolios. Although pet care has not been immune to the impact of inflationary pressures, the sector has demonstrated resilience, with the premium segment continuing to show relative strength in terms of consumption in volume.

Today, the inflation situation remains varied across the world. Consumers faced with price sensitivity resort to alternatives such as underselling, stocking up on pet food from food banks, or, in the worst case scenario, abandoning their pets. However, consumers with appropriate purchasing power continue to opt for premium deals for their pets. Such diversity in spending patterns highlights the polarizing impact of inflation on pet food.

In the short term, as inflationary pressures persist, a similar dynamic is expected to continue. However, in the long term, the premium price tier is expected to be one of the fastest growing tiers in terms of volume and fastest growing in terms of value.Dog Food Price Range

Communicate the value behind the high price

A key element to driving premiumization is understanding the different value propositions that support the premium price and communicating these to consumers. In pet care, nutrition, formats and experiences present opportunities to create value. Many players have already deployed premiumization strategies through these value propositions.Premium Pet Care

Nutrition

Consumer attention to pet nutrition ranges from increased attention to their own health and well-being. As people pay more attention to their own food choices and their nutritional and calorie intake, they are also extending this attention to the diets of their pets.

Developments in the field of premium pet nutrition target different aspects of nutrition.

Source: Euromonitor International

Health claims, for example, help communicate the various functional, nutritional and health benefits of a product. Life stage nutrition, on the other hand, provides a level of differentiation by meeting the nutritional needs specific to the animal’s life stage. Understanding the nuances of nutrition beyond calorie intake can support the development of innovative and curated offerings.

Formats

Pet food formats are also undergoing a transformation, with traditional kibble generally perceived as highly processed. Moist food formats, e.g. fresh, frozen, slow cooked, etc., are gaining ground among pet owners. These formats are generally offered at a higher price than their kibble counterparts.Average unit price of dog and cat food

These new formats rely on innovative economic models such as subscription boxes. As an example, meal kit company Hello Fresh launched its premium pet food brand, Pets Table, in the United States in 2023. It offers human-grade and dry-dried recipes. air for dogs based on their caloric needs. Quality, convenience and personalization are some of the value appeals that support premium positioning while enhancing the consumer experience.

Experiences

Experiences play a central role in the premiumization of pet care. Brands across the industry (and beyond) have developed spaces and offerings that leverage the experiential aspect of the human-animal relationship.

Cat treats, for example, are designed to provide a more intimate eating experience. Offline retail offers immense potential to enhance the channel experience by providing spaces, activities and events that humans and their pets can enjoy. Finally, even players outside the pet care industry are launching limited-edition treats, such as Krispy Kreme’s Pup’kin Spice Doggie Donuts line in the United States. This seasonally inspired offering creates a way for humans to include their pets in their experiences.

While shared experiences help create moments of bonding, the human-pet bond should be an integral part of developing premium experiential offerings.

For more information on the premiumization of pet care, read our report Premiumization of Pet Care: Inflation and Beyond.

*The Premium segment represents premium foods for cats and dogs


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