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European Pet Congress 2008

European Pet Congress 2008. Views behind the stage of the pet market Bianca Corcoran Account Director Client Services, IRI With support by IRI European Pet Teams. IRI Information Resources. Leading Market Research Company; Headquarters Chicago.

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European Pet Congress 2008

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  1. European Pet Congress 2008 Views behind the stage of the pet market Bianca CorcoranAccount Director Client Services, IRI With support by IRI European Pet Teams

  2. IRI Information Resources Leading Market Research Company; Headquarters Chicago IRI Germany; Head Office in Nürnberg, Subsidiary in Düsseldorf „Bitte widerstehen Sie der Versuchung, zu viele Daten zu präsentieren. Da Ihr Vortrag der erste des Morgens ist, sollten die Zuhörer nicht überfordert werden.“ Paneldata from all major shops (Grocery, Drugstores, Specialities) More than 10 years experience in the Pet market

  3. Table of Contents Key Themes and Trends The Market The Consumer Strategies

  4. The bottom line • The Pet markets are growing steadily • In value due to price increases • Hybrid buying behavior • Basic food is being bought at the discounters • Expensive quality is being bought at specialists • Super Premium Quality growing fast • But could be under pressure due to the financial crisis and the expected changing of consumer behaviors

  5. Trends • Health, Light, Functional Food is increasing • Products for sterilized cats entered the market. • Orientation on specific target groups by ages and sex • “old trend” – Lifestages being a part in most product portfolios but it’s not a growing market anymore • High purchasing power of this target group due increasing number of Silver Agers • High propensity to consume in this group • Single Serve is still popular • Ready to use portions are convenient

  6. Trends • Wellness & Pleasure • It isn’t a contradiction • There are many ways of enjoyment and pleasure … • Entirely new taste experience • Emotions • Lifestyle: Active/In Home/ Sensitive

  7. Trends • Organic/Nature Food is still a niche • …but becomes more and more important • A sustainable way of living influences our life and the way we shop • Organic goes Luxury or Luxury goes Organic

  8. Comparison of all countries

  9. Dogs population in Europe Estimated Dogs population in Europe (in Mio) 8,2 8,1 7,4 5,7 4,5 2,0 1,7 1,5 1,2 1,0 0,7 0,7 0,6 0,5 0,5 GB Italie Grèce Suisse Suède France Norvège Autriche Pays-Bas Irelande Portugal Espagne Belgique Danemark Allemagne Sources : TNS 2006 et Pet ownership Survey 2007

  10. Cats population in Europe 11.9 Cat population in Europe (in Mio) 10 9.5 8.1 3.1 2.8 2.4 2.1 1.6 1.5 1.2 1.1 0.9 0.7 0.5 GB Italie Grèce Suède France Suisse Irlande Belgique Espagne Norvège Portugal Autriche Pays-Bas Danemark Allemagne Sources : TNS 2006 et Pet ownership Survey 2007

  11. Cat + Dog Food sector trends – all Countries Volume change by sector Value change by sector USA W.EUROPE C.E.EUROPE Cat & Dog Food and Snacks – 52w/e February 2008 (incl. specialists where applicable)

  12. Market Development*: Germany +0,3%(Grocery incl. HD+Drugstores+Non Grocery) Volume Sales (in Tons) Pet Food is a BIG market About 1,0 million tons +0,3% Avg. prices are increasing due to higher commodity prices and the success of high value brands Own Label is catching up the leading brands - now has some Super Premium / Nature / Bio variants +0,2 % +0,2 % +1,9 % -1,5 % -8,3 % -25 % *YTD: Jan-Aug

  13. Market Development*: Germany +4,0%(Grocery incl. HD+Drugstores+Non Grocery) Value Sales (in Th. €*) +6,0 % Pet Food is a BIG market About €1,8 billion +2,9% +6,1 % +1,4 % -0,7 % -16 % *YTD: Jan-Aug

  14. Market Shares 2008*: Germany Catfood Value Sales in % Dogfood Value Sales in % +10,5% +1,5% +4,9% +12,1% +3,6% +1,8% *YTD 2008: Jan-Aug 2008

  15. Base Price Elasticities of major categories Germany Elastic Inelastic

  16. Market Development: UK +4,5%(only Grocery) Volume Sales (in Tons) Pet Food is a BIG market About €2 billion* at retail pet food is the 6th largest grocery category Largest pet care category becoming more reliant on deeper promotions Own Label is catching up the leading brands - now has some Super Premium variants +2,3 % +0,4 % +7% +20% +18,8 % +3,3 % -47,9 % * = £1.57 billion; ER: 1€=0,772 GBP/14.10.08

  17. Market Shares 2008*: UK Catfood Value Sales in % Dogfood Value Sales in % +1,3% +3,3% SS +6,7% MS -6,1% +9,4% -0,3% +23% +10,7% *YTD 2008: Jan-Aug 2008

  18. Market Trends: UK • Pet Food is a BIG market • 14 million cats & dogs eat 100 million meals every week • 1 million cats & dogs are born every year** • Buyers are VALUABLE SHOPPERS • Pet food buyer spend 70% more per shopping basket than per the average shopping basket • Pets are more likely to be owned by families- these are key shopper groups • Buyers are FREQUENT shoppers • Pet food is bought every 11 days*** ** compared to 700,000 babies *** coffee is bought less than once a month

  19. Market Development: France -1,3%(only Grocery) Volume Sales (in Tons) -2,3 % Pet Food market: 552 Th. Tons Dog population declines since 2000 Cat population is increasing +0,04 % *ER: 1€=0,772 GBP / 14.10.08

  20. Market Shares 2008*: France Catfood Value Sales in % Dogfood Value Sales in % +13,6% -6,3% +0,3% +7,4% +5% *YTD 2008: Jan-Sept 2008

  21. Market Trends: France Dogs Consumer´s behaviours depend of their animal characteristics (big or small) Cat food market is a variety market • Mix between wet and dry food is the most usual behaviour (66% of owners) • 25% of cat owners bought cat food in a specialized shop • On average 6 visits per year; average expenses are 141€ per visit Big Dogs: Screening the shelf with his eyes, identifies his usual item, eventually checks the pack size • Small Dogs: Less automatic buying, more research, verifying the product’s caracteristics Longer time in front of shelves: larger offer, variety seeking, anticipating a time of pleasure to share withe the cat

  22. Market Development: Italy +1,9% (Grocery + Discounters + Pet Specialities) Volume Sales (in Tons) +2,3% Pet Food: 293 Th. Tons 8,129 million families buy dog and cat food Pet Shops and trad. Pet Shops growing by 4% and have a volume market share on the market total of 36% +1,3%

  23. Market Trends: Italy • The most growing segments are the premium and super premium brands • The dry cat/dog food categories are characterized by a higher level of service as well as innovation • Innovation is developed in three different areas: science (functional products and scientifically up to date from the nutritional point of view), natural (a natural and healthy food) and taste (development of new and different taste in meat, fish and vegetables also mixed together) • Over 5,3 million the families buy about 19,4 kg per year of wet cat food • Dry food, often considered as complementary to main meal, reaches about 11,4kg per year

  24. Base Price Elasticity Benchmarks Italy BENCHMARK Very Elastic Products <-2.2 High Elasticity Elastic Products [ -1.2; -2.2] [ -1;-1.2] Slightly elastic [-0.5; -1] Inelastic

  25. Market Development: Spain +6,8%(Grocery + Pet Specialities) Volume Sales (in Tons) Pet Food: 152,5 Th. Tons Dog food is leading the market*; dry dog food is leading sale wet dog food is nevertheless slowly growing 6% since last MAT dry and wet cat food had the same growth, 10%. +8,5% +3,2% -4,2% -13,9% +0,0%

  26. Market Shares 2008*: Spain Catfood Value Sales in % Dogfood Value Sales in % +5,7% +9,3% +11% +27% +14,2% *YTD 2008: Jan-Aug 2008

  27. Market Trends: Spain • Trend for saving moneys buying large formats • This is the case of format more than 10K selling this last period 21% more • Consumers are spending less money in snacks (a luxury nowadays!) • Single serve grew 16%, being buiscuits the prefered snack • Private Label has grown significantly since last MAT 15% with a 40% share

  28. Price Elasticity Benchmark: Spain Elastic Inelastic

  29. 3 Szenarien (Capital 14/2008)

  30. Future strategies of the consumers ? Less consumption Substitution Brands Shoptypes Abdication Lower usage Own Labels Vs. Brands Drugstores/Discounter/Fressnapf vs. Pet specialities Economy Bands Vs. Super Premium Brands GfK ConsumerScan

  31. Price isn‘t the major purchase criteria! Competent Staff at the POS Take Time for Expert Advice Large Assortment Good Price-Performance Ratio Easily Accessible Comfortable/Enjoyable Atmosphere

  32. Strategies • Wikipedia: A Strategy is a long term plan of action designed to achieve a particular goal, most often "winning." Strategy is differentiated from tactics or immediate actions with resources at hand by its nature of being extensively premeditated, and often practically rehearsed. Strategies are used to make the problem easier to understand and solve.

  33. Overview of the threat of brands depending on the meaning of emotional differentiation and the security requirement for the relevant category high „Feel special“-categories „Feel special and safe“- categories Meaning ofemotionaldifferentiation „Exchangeable commodity“-categories „Feel safe“-categories low low high Requirement for security in consuming the category

  34. Strategies In Current Inflationary Environment Marketing Mix Strategy: Focus on Effective Advertising • Advertising reduces price elasticity in 50% of all observed brands: Marketing Mix Strategy: Avoid Deep Discounting • Deep discounts increase promotional price sensitivity • Quality trade deals with lower discount levels offer similar lifts as deep discounted TPRs … Internet, Blogs…

  35. Strategies In Current Inflationary Environment Innovate and Expand Shelf Presence • Expanding distribution lowers price elasticity in 65% of brands • Innovation, improved packaging & product reformulations reduce elasticity innovation Follow, Don’t Lead (Price Increases)! • Products that lead the category in price increases experience disproportionate volume declines Category discipline plays a key role Incrementally Reduce Quantity and Count • Downsizing is most effective when: • Size change is relatively small • New innovation accompanies the size change

  36. ELWMS = Eierlegende Wollmilchsau Thank You for Your Attention!

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