U.S Pet Owners...The humanization of pet food and vitamins brings new opportunities for retailers and CPG manufacturers. U.S. Pet Owners — July 2015 24 In recent years, pet food

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U.S Pet Owners July 2015

Introduction Contents 2

Pet ownership crosses many demographic boundaries, with Americans of different ages and levels of wealth reporting spending on pets.

Nearly 60% of U.S. households or about 82.5 million families own a pet, and many of them are spending a substantial amount of money on the care and feeding of their animals.

Introduction

Pet Statistics •  Industry Sales & Spend

•  Pet Care & Grooming

•  Pet Humanization

Conclusions & Implications

Pet Case Studies

U.S. Pet Owners — July 2015

Pet Owner Statistics


48% 52%

Sex

Men Women

Pet Owner Profile 4

Source: Simmons Winter 2014 Study

83%

7% 3% 7% 13%

Ethnicity

31%

19% 20% 17%

14%

18-34 35-44 45-54 55-64 65-75

Age

57% 26%

17%

Marital Status

Married Single Sep/Div/Wid

54% 46%

Children

Children No Children

36%

34%

30%

Household Income

Less than 50K 50-99K 100K+


Pet families are caring for more than one pet in their households.

5

Source: 2015-2016 APPA National Pet Owners Survey

6.1

42.9

54.4

2.5

12.3

1.3 4.9 5.4 14.3

85.8 77.8

7.5

95.5

9.5 9.3 12.4

Bird Cat Dog Horse Freshwater Fish

Saltwater Fish Reptile Small Animals

Number of U.S. Households that Own a Pet (millions) vs. Total Number of Pets Owned in the U.S. (millions)

Number of U.S. Households that Own a Pet Total Number of Pets Owned in the U.S


Among residents of the 50 states, Vermonters are more likely to have pets.

6

Top 10 pet-owning states

(percentage of households that owned a pet)

Top 10 states with the most dog owners

(percentage of households that owned a dog)

Top 10 states with the most cat owners

(percentage of households that owned a cat)

Top 10 pet-owning states

(percentage of households that owned a pet)

Top 10 states with the most dog owners

(percentage of households that owned a dog)

Vermont: 71% Arkansas: 48% Vermont: 50% Vermont: 71% Arkansas: 48%

New Mexico: 68% New Mexico: 46% Maine: 46% New Mexico: 68% New Mexico: 46%

South Dakota: 66% Kentucky: 46% Oregon: 40% South Dakota: 66% Kentucky: 46%

Oregon: 64% Missouri: 46% South Dakota: 39% Oregon: 64% Missouri: 46%

Maine: 63% West Virginia: 46% Washington: 39% Maine: 63% West Virginia: 46%

Washington: 63% Mississippi: 45% West Virginia: 38% Washington: 63% Mississippi: 45%

Arkansas: 62% Alabama: 44% Kentucky: 37% Arkansas: 62% Alabama: 44%

West Virginia: 62% Tennessee: 44% Idaho: 35% West Virginia: 62% Tennessee: 44%

Source: American Veterinary Medical Association (AVMA). The American Veterinary Medical Association (AVMA) study was based on results from 50,000 US households.


Industry Sales & Spend


Mars, Nestle and Blue Buffalo account for more than 90% of total pet food advertising spend in 2014.

8

Source: Monitor Plus

$190,585 $184,105

$105,612

$60,921

$12,495 $10,409 $8,934 $6,090 $3,892 $1,378

2014 Pet food advertising spend (000)

Total 2014 Pet Food AdSpend

$588M


Nestle and Church & Dwight are 2014 top spenders in the pet supplies category.

9

Source: Monitor Plus

$31,337 $31,237

$26,762

$24,404

$14,840

$12,255

$9,332 $9,258

$5,005 $4,726

Church & Dwight

Nestle Bayer Clorox Sanofi Perrigo Central Garden & Pet

Blue Buffalo Barkbox Sumitomo

2014 Pet Supplies Advertising Spend (000)

Total 2014 Pet Supplies

AdSpend

$190M


For 2015, it’s estimated that $61 billion will be spent on pets in the U.S.

10

Source: PPA National Pet Owners Survey Statistics

$29 $30 $32

$34 $36

$39 $41

$43 $46

$48 $51

$53 $56

$58 $61

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015*

Pet Industry Expenditures ($Billions)


Pet market sales across all categories continue to rise year over year.

11

Source: APPA National Pet Owners Survey Statistics & Statista

$19.85

$20.46

$21.26

$22.62

$23.04

$11.77

$12.65

$13.21

$13.72

$14.39

$13.41

$13.67

$14.21

$15.25

$15.73

$2.14

$2.21

$2.31

$2.19

$2.19

$3.79

$4.16

$4.54

$4.73

$5.24

2011

2012

2013

2014

2015

Sales ($Billions)

Food Supplies/OTC medicine Vet Care Live Animal Purchases Pet Services: Grooming & Boarding


Pet market sales across all categories continue to rise year over year.

12

Source: PPA National Pet Owners Survey Statistics

$551

$235 $269

$61

$333

$62 $83 $47

$398

$196 $246

$51

$130

$33 $43 $28

Annual Expenses for Dog & Cat Owners

Dogs Cats


Pet Care & Grooming


Demand for pet grooming, boarding, training and walking is at an all-time high.

14

Source: Ibis World

This change is fueled by rising pet ownership, increased disposable income and changing consumer preferences regarding pet care

14

Revenue ($m) Enterprises Employment (People) Wages ($m)

2014 6,046 94,511 158,138 2,256

2015 6,415 100,873 168,363 2,414

2016 6,769 106,211 178,241 2,568

2017 7,091 112,827 188,104 2,718

2018 7,406 118,388 197,703 2,865

2019 7,698 124,373 207,140 3,008

Revenue

$6B Growth

2009–2014

7% Businesses

94,511

42%

35%

12%

11%

Share of Revenue, by Business Type

Pet Boarding Pet Grooming

Pet Training Other


Pet medicines lead the fastest growing pet categories.

15

Retailers and manufacturers are positively purring over sales figures—particularly in hot categories like pet medicine, pet grooming, cat litter, dog treats and pet houses/carriers

Source: Nielsen


Pharmacies are now catering to both consumers and their furry friends.

16

Walgreens has entered a partnership with ShotVet, a Florida-based veterinary company, to offer accessible, walk-up clinics for cats and dogs.

•  Micro-chipping

•  Lyme & Heartworm Test

•  Strategic Deworming

•  Vaccinations

Source: Iconoculture


Pet Humanization


Pet ownership is a significant commitment. 18

Pet owners spend an average of nine hours per week feeding, grooming and playing with their pet.

Source: Mintel

94%

93%

83%

76%

70%

49%

36%

Preparing Food/Feeding My Pet

Playing With My Pet

Cleaning Up After My Pet

Grooming/Cleaning My Pet

Exercising My Pet

Cleaning Cage/Aquarium Etc.

Obedience Training

Weekly Activities, March 2014


Overall, US Pet owners prefer buying pet food from mass merchandisers and specialty chains.

19

Source: Statista

35%

25%

18%

11%

11%

Mass Merchandisers/Club

Pet Specialty Chains

Food Stores

Independent Pet Stores

Other

Share of Pet Food Sales in the U.S. in 2014, by Distribution Channel


Urban and Suburban pet owners prefer purchasing pet food at Petsmart

20

Source: Packaged Facts April/May 2014 Pet Owner Survey

…while rural pet owners are more likely to shop at Walmart.


Rural Pet Owners

Suburban Pet Owners

Urban Pet Owners

Walmart 46% 30% 30%

Petsmart 17% 33% 38%

Supermarkets 27% 28% 23%

Petco 12% 24% 27%

Supercenters/Discount stores other than Walmart 22% 21% 22%

Pet humanization spurs demand for premium foods and upscale products.

U.S. Pet Owners — July 2015 21

Source: Statista-Harris Interactive

44%

44%

12%

Do you typically buy name-brand or store brand pet food?

Name Brand

Something Else/I don't buy this.

Store Brand/House Brand/Private Label

Pet taste preferences & price are leading purchase factors.

22

Pet owners say flavor/taste that ‘appeals to their pet’ is most important. Other food aspects that rank high: price and made in the U.S.

Source: Lightspeed GMI/Mintel

45%

42%

36%

32%

27%

My pet/s would like the taste

Overall price

Made in the USA

Natural

Real meat is the first ingredient

Purchase Decision Factors for Pet Food — Top Five, February 2015


Pet owners associate treats with love. 23

45% of pet owners buy/use pet treats to show affection for their pets; however, pet owners buy different brands because they hold treats and food to different standards: food has to provide nutrition while pet treats are for fun; an indulgence.

Source: Lightspeed GMI/Mintel

46%

45%

41%

41%

22%

I give treats to my pet(s) just because

Pet treats are my way of showing I love my pet

I give my pet(s) treats daily

I use pet treats as a reward (eg good behavior, tricks)

I look for unique flavors or ingredients in pet treats

Pet Treat Behaviors — Top Five, February 2015


The humanization of pet food and vitamins brings new opportunities for retailers and CPG manufacturers.

U.S. Pet Owners — July 2015 24

In recent years, pet food trends have increasingly mimicked those of human food, such as "natural" ingredients and free-from ranges (e.g. gluten-free).

In fact, about 30% of all global pet food introductions in 2010, as reported by Mintel’s Global New Products Database, carried a “no additives/preservatives” claim, while about 17% were labeled “all natural.”

•  PetSmart now sells energy bars from Purina, and supplements from GNC

•  Wexford Farms Pet Food has released a new chicken and brown rice meal for dogs, which is designed to be eaten warm

•  Rachael Ray now offers Nutrish Just 6 dog food and dog treats made with only six main ingredients (plus vitamins and minerals)

•  Big Heart Pet Brands created the package for its Treats to Go product line, which includes Milk-Bone, Pup-Peroni and Nature’s Recipe brand treats.

Source: Datamonitor

New technology helps consumers watch, entertain, and track their pets.

25

Wearables are becoming a popular way for owners to track and record their pets activities

GPS Used to monitor a pet’s location, GPS enabled devices such as the Motorola Scout 5000 allow owners to “geo-fence” their pets into a particular location.

Cameras

Devices such as the Petcube function like baby monitors for pets when consumers are away from home. Petcube also features an integrated laser that an owner can control from his or her phone, giving a cat something to chase around the house while its owner is away.

Activity Trackers

Similar to fitness trackers like FitBit, the FitBark monitors the health of a pet by tracking its activity via an accelerometer sensor.

Source: Mintel

37% …% of adults aged 25-34 that are interested in using technology to aid their pet’s fitness or entertain their pets, compared to less than 20% of adults aged 55+.


Pet parents are finding their perfect pet online.

26

Similar to eHarmony and Match, companies such as AllPaws, a pet adoption site, is using the web to play matchmaker for humans and pets

Source: Iconoculture


Conclusions & Implications


Conclusions & Implications 28

Conclusion Implication

Pet owners are expected to spend more than $61 billion dollars on their pets’ care and feeding in 2015. About half of pet owners are as concerned with the health and well-being of their pet as they are with that of their family

Marketers should create affordable products or services that reduce the burdens of ownership while increasing the convenience, satisfaction or joys of pet ownership

The world is now fully digital and the rise of “Pet & Parent Matching” is upon us

To build brand awareness and loyalty, marketers need to leverage the use of online sites such as All Paws and Dognition

Many Hispanic households have a pet; however, they are less likely than other adults to place their pets on a pedestal to the degree that other adults do (or are perceived to do)

Advertising and promotional efforts need to be inclusive of Hispanics/Hispanic culture. This may encourage more sales as this community tend to support advertisers who connect with them exclusively


Case Studies


Case Study 30

The Shelter Pet Project- ARF Ogilvy Awards: Gold, Government & nonprofit, 2015 USA

Source: Warc

Problem Solution Results

Despite high rates of pet ownership in the US, relatively few pets are adopted from shelters, with the consequence that millions of potential pets are euthanized every year: this campaign aimed to improve adoption rates.

1.  Consumer neuroscience methods were used to help guide a new campaign.

2.  Research insights were used to find an optimum balance between high emotional engagement with the pets depicted in the creative and effective communication of brand and key messages.

Since the Shelter Pet Project was implemented, national reporting has found a significant increase in adoption from shelters and rescues and a corresponding decrease in euthanasia.

In addition, over 25% of visitors to the website were converted to key campaign goals such as searching for a pet in the online database, searching for a shelter, or learning more about pet adoption and the campaign.


Case Study 31

Petplan: Return of The Top Dog — IPA Effectiveness Awards, 2014

Source: Warc

Problem Solution Results

Following three decades of strong growth that had cemented Petplan Insurance as market leader, the brand was facing a series of new challenges- economic factors including a decline in disposable income, an explosion in competition, the commoditization of the category and the rise of comparison sites.

A 6-point brand pre-launch that included a new identity, a fresh focus online and new salience driving advertising (online advertising, contextual and behavioral targeting)

Brand share leapt 5% in one year and the campaign generated a ROI of 1.94.


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Contact

32

Kebrina Robinson Analyst, Tools and Insights [email protected] 212-590-7750

Kathy Grey Director, Tools & Insights [email protected] 212-590-0689


Documents

U.S Pet Owners...The humanization of pet food and vitamins brings new opportunities for retailers and CPG manufacturers. U.S. Pet Owners — July 2015 24 In recent years, pet food