Pet food trends: The rise of clean labels

1. Pet food trends: The rise of clean labels Presented by Lynn Dornblaser Mintel International

2. Mintel: Who we are • Mintel GNPD: Tracking new products around the world • Mintel Oxygen: Providing insight into markets and consumers • Mintel Inspire: Understanding consumer behavior • Mintel Menu Insights: Following US menu trends and activity • Mintel Global Market Navigator: Snapshots of global market size

3. Today’s presentation • First, a look at the numbers • The size of the market: pets, market, introductions • Key claims that pet food carries • What we mean by clean labels, and why we care • A few comments regarding humanization of pet food (and pets) • A look at the key types of products • What we know about consumer attitudes • Some thoughts for the future Objective: Help you understand what we see in the market regarding “clean labels,” and why it’s important

4. The pet population continues to grow • Fish out-number cats and dogs, but those continue to grow in number in the US * includes rabbits, hamsters, guinea pigs, ferrets, mice, rats, gerbils, chinchillas, hermit crabs, pot-bellied pigs and hedgehogs. Data shown are as reported on APPA site Source: American Pet Products Association, 2004/05; 2007/08; 2009/10 National Pet Owners Survey

5. Global introductions drop in 2010 due to dog food/treats • All products for dogs declined in 2010, while products for cats were flat or increased slightly • Europe’s lead in introductions due mainly to proliferation across countries Pet food introductions, global, by region and subcategory, 2007-2010 Source: Mintel GNPD

6. US introductions driven y pet specialty stores • Specialty stores (e.g. pet stores) account for a third of all new product introductions • Most pet food subcategories are relatively flat, barring a big drop in dog treats Pet food introductions, global, by region and subcategory, 2007-2010 Source: Mintel GNPD

7. In supermarkets, pet food driven by Nestle * 52 weeks ending May 17, 2009 and May 16, 2010 Note: Data may not equal totals due to rounding Source: Mintel/based on SymphonyIRI Group InfoScan® Reviews Source: Mintel Oxygen

8. US pet food across all segments shows a bit of growth Total U.S. retail sales of pet food, by segment, 2008-10, in millions of dollars Source: Mintel/based on Bureau of Labor Statistics, Consumer Expenditure Surveys; Symphony IRI InfoScan® Reviews

9. Most prevalent claims focus on inherent goodness • Clearly, the topic of “clean labels” is an important one, as the three most prevalent claims on pet food focus on those formulations • Note that this pattern is similar to what we see in food/drink for ourselves Source: Mintel GNPD

10. What we mean by “clean labels,” and why we care • What we mean by clean labels • Clean, simple packaging that conveys clearly the benefits of a product • Easy to understand ingredients • Ones that consumers eat themselves • Ingredients that provide clear, easy to understand benefits • Why we care • Ties in with CPG trend of “simplicity” • “Inherent goodness” of ingredients a major trend in all CPG; consumers translate that to pet food as well • In the wake of recent pet food contamination issues, consumers are more focused than ever on what’s in the products they buy Insight: Clean labels are becoming as important to pet food as they are for human food

11. And we care because they are our pets 72% 52% 50% Of US consumers say they consider their pets part of the family Of US consumers say they allow their pets to sleep on the bed with them Say that they like to spoil their pets Source: Mintel Oxygen

12. First, a few thoughts about “humanization” of pet food • Humanization is part of what we mean when we talk about clean labels • Ingredients consumers already know • Functionality that is familiar • But can humanization go to far? • Vegetarian pet foods (really?) • Foods that require so many steps for preparation (mixing, topping, baking . . . ) • Is it time for the industry to provide what pets need, but educate the consumer as to what “humanization” should be all about with pet food? • They are animals, after all . . . Comment: Yes, of course, we love our pets, but they are PETS—they are animals with needs that differ from ours

13. And some brands recognize that Taste of the Wild High Prairie Canine Formula and Rocky Mountain Feline Formula, grain-free pet foods with unique animal protein sources, Finland Natura Pet Products Evo Wild Cravings, turkey and chicken formula grain-free treats for cats, said to be protein rich, USA

14. “Feed your dog’s inner wolf” K9 Natural’s Freeze Dried Raw Dog Food, USA, positioned as having 100% natural, balanced nutrition The company says “the product is made from fresh New Zealand produce, and based on the actual diet of the Grey Wolf, which shares 99.8% of its DNA with domestic dogs, hence their dietary needs are the same

15. This is perhaps taking “humanization” a bit far Ice Cream Factory Ice Pet, ice cream for dogs, in strawberry, vanilla, cream or bacon flavors, Brazil Candie’s Crunch, snacks for pets and their people, made with human food grade ingredients, said to be suitable for the whole family, Czech Republic TDB Peanut Butter Mini Donut Dog Treats, USA

16. One way to “humanize” pet food: Customization Mars’ Sheba Sole & Tasty Bonito, Japan, premium cat food kibbles in small individual packs, to be a main meal, an addition to other meals or a snack Mars’ Pedigree Meaty Mixers Lamb & Poultry in Jelly Dog Food, UK, for mixing with dry dog food XisDogMolho Chicken Flavored Dog Sauce, Brazil, to be used on dog food Source: Mintel GNPD

17. Clean labels: Literally, this often means simple packaging • Simplicity usually appears in terms of clean, simple packaging in pet food in general • Private label pet food in simple packaging can easily overbalance and appear “cheap” • Simple formulations are more likely to appear in some of the most expensive brands, and rarely appear in private label Tesco’s Just Nature wet cat food, UK Carrefour’s Discount Meat Croquettes, Spain

18. Sometimes, pet food packaging looks like human food • Pack graphics make these canned meals look much more upscale, and provide a sense of familiarity Nature’s Variety’s Homestyle Beef & Bison Stew, USA Blue Buffalo’s Chicken Pot Pie cat food, USA

19. Simple ingredients: As few as possible, easy to understand Taxi's Dog Bakery Peanut Butter On The Go Dog Treat is handmade and 100% all natural. (US) Thrive 100% Real Chicken Treats for Cats contains 100% natural ingredients. (US) Rachael Ray Nutrish Just 6 Crunchies With Lamb are tasty dog treats made with six simple ingredients. This product is intended for intermittent or supplemental feeding. (US) Source: Mintel GNPD

20. Provenance in pet food • Provenance is less about where ingredients are from, and more about what the ingredients are in the products • This has turned into a focus on vegetables Costco’s Kirkland Signature Healthy Weight Dog Food, USA Carrefour’s dry dog food, Spain, made with vegetables 20

21. Provenance also can mean a name consumers know Tyson’s 100% Natural True Chews dog treats, USA Note language on pack: “Proudly made in Independence, Iowa”

22. Or variety names that seem familiar Mars Petcare Whiskas range including Filet Mignon; Rotisserie Chicken; and Seared Ahi Tuna, USA Nestlé Purina PetCare Alpo Chop House, a range of dog food including flavors such as Rotisserie Chicken and T-Bone Steak, USA

23. “Fresh,” meaning chilled or frozen • Although not a big trend (and mostly in the US market), chilled or frozen pet food and treats is growing a bit • Ties in clearly to the trend of giving oneself small treats Freshpet’s Select Chicken, Vegetable, and Rice dog food, USA, sold chilled Paws Fresh Pet Food’s All Natural Bites, Australia, dog treats made with fresh chicken, rice, and vegetables

24. Organic and all natural grow, across all markets • In human food, we have seen organic and natural grow fairly consistently over time • Although there are significant differences between “organic” and “all natural,” many consumers, especially in the US market, do not entirely understand those differences • We are, however, beginning to see a bit of a shift regarding these claims in food and drink, as skepticism arises regarding benefits • However, this does not entirely extend to two categories: baby food and pet food • Organic and natural continue to grow, and continue to be a significant pair of claims Comment: We expect organic and all natural to continue to grow in pet food and treats

25. Natural claims in pet food appear prominently on pack Mars Whiskas All Natural Temptations treats for cats in a free range chicken flavor, Canada Frolick Chicken Snackers, treats for dogs with real chicken, said to be all natural, USA

26. Organic and natural appear at all price points Castor & Pollux’sOrganix Canine Formula dry food, USA, made with organic chicken, brown rice, and flax Price Chopper’s Best Friends Natural cat food, USA

27. Use of specific ingredients: Vegetables, grains, protein • This is likely the area in which we see the most activity that ties in with the concept of clean labels • The focus is on ingredients that can be easily understood by consumers, and that provide significant nutrition as well • Although the concept of few ingredients or only ingredients that consumers understand may not be practical for pet food, communicating contents in this way is • It is reassuring to consumers, as they understand at least some of the ingredients • It helps consumers feel they are giving their pets the very best possible Insight: Be sure to tie the inclusion of these ingredients to the benefits they provide the pets

28. This is where we see activity from the largest companies Nestle Purina PetCare’sBenefulIncrediBites dog treats, USA, with a focus on wholegrains and vegetables Nestle Purina PetCare’s One Beyond dog food, USA, with white meat chicken as the first ingredient, plus wholegrains from oats and barley

29. And unique positioning from others Blue Buffalo’s Wilderness Natural Evolutionary Diet cat food, USA, made with duck Breeder’s Choice AvoDerm dog food, USA, made with avocado, lamb, and brown rice BG Before Grain dog food, USA, made with 96% chicken and no byproducts or grains

30. Some final thoughts • The issue of clean labels in pet food is an important one • Consumers want to know what is in the foods they feed their pets • Products need these key descriptors to differentiate themselves • Across all CPG, this focus on clear messages and language consumers clearly understand is growing, and is not going away Insight: Help consumers understand what is in your products with the clearest communication possible

31. For more information Lynn Dornblaser Director, CPG Trend Insight tel: 312 450 6117 email: lynnd@mintel.com