Health and Wellness Opportunities in Global Pet Care

1. Health and Wellness Opportunities in Global Pet Care Lee Linthicum 14 April 2010

2. Passport Custom research About Euromonitor International • A trusted business intelligence source • Helping clients make informed decisions • Consumer-focused: industries, countries, consumers • Subscription services and custom research • 600 analysts in 80 countries • Regional research hubs • Industry specialist client support teams

3. Global Market Overview Key Trends and Market Drivers Health & Wellness Opportunities Future Outlook and Strategic Recommendations Q&A

4. Global Market Overview Euromonitor International Global Pet Care Coverage ALL CHANNELS COVERED: Supermarkets/Hypermarkets Discounters Pet superstores Pet shops Veterinary clinics Homeshopping Internet retailing Direct selling Other grocery and non-grocery retailers SEGMENTS COVERED: Dog food Cat food Bird food Fish food Small mammal/reptile food Cat litter Healthcare Dietary supplements Other pet care products CONSUMER INSIGHTS: Pet indicators Social trends Demographics Macro-economics Pet expenditure in 52 markets = 98% of total global expenditure

5. Global Market Overview Global Pet Food and Pet Care Products: 2004-2009

6. Global Market Overview Global Retail Value Sales by Category: 2009

7. Global Market Overview Global Sales of Dog and Cat Food: 2004-2009

8. Global Market Overview Retail Volumes Get Boost From Downturn, Emerging Markets

9. Global Market Overview Global Retail Value Performance by Price Platform

10. Global Market Overview Dog/Cat Food Global Retail Distribution Landscape

11. Global Market Overview Grocery Channels Halt Retail Value Share Decline In 2009 • Non-grocery sees first share loss in decade in 2009 • Grocery retailers hold steady at 53.2% of global retail value • Internet retailing drives non-store another 10 bps in 2009

12. Global Market Overview Global Pet Specialists Constrained in 2009…

13. Global Market Overview …As Supermarkets/Hypermarkets Appeal to Price Conscious

14. Global Market Overview Global Premium Dog and Cat Food Competitive Landscape

15. Global Market Overview Dog and Cat Food Retail Value Performance by Region • Greatest opportunities still in Latin America and Eastern Europe • Russia remains primary engine of growth in Eastern Europe • Brazil most dynamic market in Latin America but Mexico hurting

16. Global Market Overview Dog and Cat Food Absolute Retail Value Growth by Region

17. Global Market Overview Dog and Cat Food: Largest versus Fastest Growing Markets 10 Largest Markets in 2014 10 Fastest Growing Markets to 2014

18. Global Market Overview Prepared Dog and Cat Food on the Rise in Russia

19. Global Market Overview Dog/Cat Food: Untapped Potential in Emerging Markets

20. Global Market Overview Dog/Cat Food by Price Band in Key Emerging Markets

21. Global Market Overview Key Trends and Market Drivers Health & Wellness Opportunities Future Outlook and Strategic Recommendations Q&A

22. Key Trends and Market Drivers Global Dog and Cat Food Market Drivers • Pet ownership • Pet humanisation • Premiumisation • Health and wellness

23. Key Trends and Market Drivers Ageing Consumers Promote Pet Population in G7 Markets

24. Key Trends and Market Drivers Dog/Cat Population Growth in Key Emerging Markets • Dog/cat population will surpass 50 million animals in Brazil during 2009 • China and Russia also see steady gains in dog/cat population • Strong growth in India but dog/cat population still under 10 million

25. Key Trends and Market Drivers Urban Culture Will Soon Dominate the World Half the world’s population urban by 2015

26. Key Trends and Market Drivers Changing Demographics and Cultural Attitudes • Ageing consumers • Younger consumers staying single/childless longer • Rising disposable incomes in emerging markets • Increasingly urban populations • Busy lifestyle and longer working hours • Pet humanisation influencing purchase decisions • Willing to pay a premium to improve pet’s quality AND quantity of life

27. Key Trends and Market Drivers Dog and Cat Food: Key Growth Segments • Fastest growing segments globally: 1998-2009 Retail Value CAGR • Cat treats and mixers : 8% • Premium dog food: 8% • Healthcare: 7% • Dog treats and mixers: 6% • Premium cat food: 6% • Dietary supplements: 5% • Economy dog food: 4% • Mid-priced dog food: 3% • Mid-priced cat food: 3% • Economy cat food: 3% • Treats, healthcare, premium food driving global growth!

28. Key Trends and Market Drivers Global Dog/Cat Food Retail Value Share by Price Band

29. Key Trends and Market Drivers Premiumisation: Human-Led Ingredients, Applications Whiskas Cozinhado ao Vapor by Mars (Portugal) Gourmet Gold Soufflé by Nestlé (France) Kwispelbier “Dog Beer” (Netherlands) Gourmet Perle Duck by Nestlé (Bulgaria)

30. Global Market Overview Key Trends and Market Drivers Health & Wellness Opportunities Future Outlook and Strategic Recommendations Q&A

31. Health and Wellness Opportunities Dog And Cat Food Health & Wellness Product Trends All Natural and Organic Fortified and Functional Weight Management Food Allergies and Hypoallergenic • Free from: • Gluten • Soy • Wheat • Hydrolyzed proteins • For sensitive skin and digestion • “Food Minus” • Less calories • Lower fat • “Food Plus” • More fibre • Fortified with L-carnitine • “New Premium” • Renewed importance after Menu Foods Recall • Shift from purely organic to “all natural” • Joints • Dental • Immunity • Digestive • Beauty • Age/breed/size/lifestyle specific

32. Health and Wellness Opportunities Dog And Cat Food Health & Wellness Product Examples All Natural and Organic Fortified and Functional Weight Management Food Allergies and Hypoallergenic

33. Health and Wellness Opportunities The US$520 Billion Global Health & Wellness Market

34. Health and Wellness Opportunities Organic Food And Beverages Go Mainstream…

35. Health and Wellness Opportunities …But Manufacturers Need to Seek Out New Markets

36. Health and Wellness Opportunities Natural, Organic and Human-Grade Dog and Cat Food

37. Health and Wellness Opportunities Functional Dog and Cat Food Trends • Pet humanisation leads to specialised formulas addressing: • Weight loss and management • Arthritis relief • Sensitive skin • Diabetes • Digestive / Urinary tract health • Immune system support • Mental development and health

38. Health and Wellness Opportunities Leading Fortified/Functional Trends And Ingredients

39. Health and Wellness Opportunities Fortified/Functional Dog and Cat Food Pedigree Joint Care+ by Mars (UK) Whiskas Immuno Cat Food by Mars (Russia) Royal Canin Oral Bar by Mars (Netherlands) Yorkshire Terrier Junior by Royal Canin (Spain)

40. Health and Wellness Opportunities Retail Value Performance For Human Pre/Probiotic Yoghurt

41. Health and Wellness Opportunities Retail Value Performance For Human Fish Oil Capsules

42. Health and Wellness Opportunities Global Nutraceuticals Worth US$228 Billion In 2008…

43. Health and Wellness Opportunities …But Retail Sales Still Concentrated In Developed Markets

44. Health and Wellness Opportunities Health and Wellness: Product Segmentation by Age Pedigree Puppy Weaning (India): Fortified with calcium, phosphorus for healthy bones and teeth Gimpet Comert’s Cat- Milk (Romania): Similar to breast milk and fortified with taurine for cardiac health

45. Health and Wellness Opportunities Cats, Small Dogs Grow Share of Global Pet Population

46. Health and Wellness Opportunities New Opportunities Emerging For Pure Breed Formulas • Urbanisation boosts pure-breed popularity • Increasingly seen as status symbols • Paris Hilton effect • Moscow Pet Fashion Week • Pure breeds face more health problems • UK-based Animal Health Trust estimates more than 350 inherited diseases identified in pedigree dogs • Swedish study found pure breeds pets had an average life expectancy of 6.7 years versus 8.5 years for mixed-breeds • Sainsbury’s Pet Insurance in the UK found twice as many pedigree owners file claim • Cardiac arrest • General illness • Skin tumors/dermatitis • Diabetes

47. Health and Wellness Opportunities Dog and Cat Food for Weight Management Key Trends and Developments Doggy Fat Camp Nestlé Pro Plan Adult Reduced Calorie Arden Grange Adult Cat (UK) • June 2007: Pfizer introduces Slentrol for canine obesity • Pet “fat camps” • Efforts by pet food manufacturers: • Reduce calories • Lower fat content • Increase fibre • Fortified with L- Carnitine, CLA, fish oils

48. Health and Wellness Opportunities Food Intolerance and Allergies • Hydrolyzed proteins • Free from gluten, soy, wheat • For sensitive skin and digestion • Market opportunities still focused in: • Western Europe • US

49. Global Market Overview Key Trends and Market Drivers Health & Wellness Opportunities Future Outlook and Strategic Recommendations Q&A

50. Future Outlook and Strategic Recommendations Global Sales of Pet Food and Pet Care Products: 2009-2014 Global Pet Food and Pet Care Products retail value sales still forecast to grow at an average rate of 2-3% annually from 2009-2014