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White Paper Market-Driving Trends for Pet Food & Care Products and Packaging The U.S pet market has been on a high for several years, continuously expanding, and expressing growth even in times of economic hardship. According to the U.S Pet Market Outlook 2010-2011, 61 million Americans households own a pet, meeting the needs of nearly 400 million pets. Pet owners are found to turn to their furry friends’ in the midst of hard times for companionship, and express their appreciation in providing better foods, toys and care products for their loved pets. Over 3,000 new toys, treats, and other products were introduced alone in 2012 at the Global Pet Expo. Consumer spending in the U.S pet market is predicted to reach $62 million in 2013, up 4.7% from 2012 (Source: Packaged Facts). It is likely spending will continue to increase as pet ownership among the millennials generation has also jumped to its highest level. The ever expanding pet market has increased competition amongst brands, who are actively seeking new and innovative ways to differentiate their products. Brands are now converting to the norm of adding natural product lines to their range of products in order to appeal to pet owners’ purchasing habits of more natural products, including organic pet food and ecofriendly products. It is found extremely difficult for new brands to emerge in the pet market due to the all the regulations and rules having to be passed to produce a product. This is in lieu with consumer demand for products perceived to be safer which has impacted the way marketers now position their products. Even with all of these factors, pet owners are less price sensitive than in previous years which encourages brands to create more higher-end products. Each year there has been a steady increase in the amount of pet care, food and toys products launched. Competition for every pet food dollar has never been so intense, and pet food marketers’ are focused on presenting products that stand out as well as remaining relevant in the industry. Although online shopping equals approximately 6% of the transactions, discount and online retailers are also putting the pressure on pet retailers, offering quality products at lower prices. Innovative product a n d p a c k a g i n g d e v e l o p m e n t i s a key factor in taking advantage of the growing pet market. The top two ways that pet owners find new products include browsing the store shelf and television advertisements (APPMA). Packaging not only improves the shopping experience, but can also play a large role in consumer loyalty to your brand. There are many major trends influencing the growth of the pet market, this paper addresses what we find as the guiding market drivers and how packaging can be utilized in order to take advantage of potential growth areas. Humanization of Pets The family dog, cat, or fish is no longer considered to be the family pet. Instead, they are a family member that deserves premium quality care. Approximately fifty percent of all pet owners not only buy Birthday or Christmas presents for their animal, but also let the dog sleep in the bed. As humans anthropomorphize their pets, they purchase products and services for their pets that are fun and an extension of their own personal lifestyle. The humanization of pets remains a strong trend, as manufacturers and retailers are introducing everything from humanstyle pet food to pet temporary tattoos. In order to stay ahead of the competition, new and established pet brands must convert consumer needs into tangible products that offer convenience and ease-of-use. People want their pet products to convey a premium quality and packaging that is inferior to human product standards will fail to deliver the necessary shelf impact to draw in shoppers. The pet food and care segment is one of a handful of markets where price sensitivity is very low. Consumers are more interested in the quality, taste and functionality of a product and selecting packaging that communicates this message will make your product standout on the store shelf. One great example is Iams Savory Sauce, which is a topping equivalent to human foods like ketchup that is primarily used to enhance the eating experience for the dog. The package conveys the message of quality and taste very clearly in its sauce style PET container and flip-top dispensing closure. This package makes the product look so appetizing; it’s likely to be mistaken for human grade gravy. Pet Owners are less Price Sensitive Pet owners have become increasingly devoted to their pets, having been found to reduce spending on their own less essential needs even during the toughest of times. During the recession, sales of pet products rose 4.8% in 2009 to reach $53 billion, meaning the market added two and a half billion dollars in the midst of the biggest economic crisis. Pet Owners Survey also shows pet owners are migrating to pet specialty channels and online retailers. The pet market’s advantages are many, with the emotional impact of the human/animal bonding at the top of the list. As the US moved out of recession, shoppers continued to demand greater value in pet products and services they purchase. Pet owners may have cut back in some areas but continued to spend on small indulgences for their pets, such as snacks and toys. People are willing to pay for products that enhance their pet’s health, especially with the increasing trend of natural and organic pet food. Pet owners are willing to pay $80-$90 for a bag of dry pet food if it’s high-end natural food. Brands are building more loyal customer bases which encourage pet owners to try new, and potentially more expensive, natural products willingly spending on their pet’s health and wellness. Stella & Chewy’s brand, a premium brand, has been experiencing a 50% growth year over year due to their innovative approach to pet food including no fillers, organic fruits and vegetables and healthful probiotics, vitamins and minerals. Stella & Chewy’s high cost of $40 for a bag does not seem to dissuade customers to purchase, as the packaging is also made more accessible to its customers. Packaging is a key as it can influence customers purchase intentions. Pet owners are looking for fresh food for their pets whilst also consisting of a shelf-stable format, therefore the right packaging is essential. Brands can use more eco-friendly package designs, such as closures and bio-plastics, in which will appeal highly to a larger audience. Brands Adopting Natural Product Lines More and more brands have adopted more healthy and natural product lines due to the increase of pet owners’ heightened awareness of pet health and wellness. In 2009, natural pet foods accounted for $1.5 billion in sales (2010 Packaged Facts Report). Customers are willing to spend more in order to maintain their pet’s health and brands are taking advantage. A few examples of popular brands which have adopted natural product lines include Hill’s, Walmart, Nestle Purina and Merrick. Product differentiation amongst brands has become extremely necessary, and factors such as packaging can increase differentiation. The trends in pet food now consist of gain-free, human grade and organic ingredients. The magnitude of the pet food recalls has encouraged the pet owner to educate themselves on what e x a c t l y i n g r e d i e n t s o n p a c k a g i n g a c c l a i m s f o r , such as “wheatgluten” and “meat by-product.” Many consumers are questioning the integrity of their brand and are considering a switch to something new. This gives new players an opportunity to differentiate themselves with ingredients that offer healthier alternatives to the usual name-brand food. However, companies must also follow specific rules when making a claim being labeled on their product delaying the time, sometimes dramatically, for a product to even enter the market. Innovative packaging that communicates the message that the ingredients used in a pet food brand are healthy and of human quality will definitely appeal to today’s pet owner. For example, Old Mother Hubbard’s oven baked dog treats are packaged in a bag that looks fresh from the bakery with text that lists the healthy ingredients of oatmeal, eggs, apples, and carrots on the front of the bag. Nutraceuticals and Pet Supplements Market projections for the Pet Supplement and Nutraceutical Treats in the U.S retail sales at $1.6 billion by 2017 including chewable tablets or soft chews, gels, pastes, liquids, powders, sprays, and pet food toppers as well as nutraceutical treats, natural and organic products, senior and other condition-specific products. As in human supplements, aging is the core market driver as pets suffer from age-related conditions. Pet owners are becoming more aware of these issues and seek to increase their knowledge on products that can maintain their pets’ health. Sales growth in the nutraceutical and pet supplement market has began to moderate, with nutraceuticals becoming increasingly popular in pet food. Brands are now trying to outline what types of vitamins, supplements, and nutritive additives would make a difference in pets and which can be implemented as food ingredients. This also challenges marketers’ positions as they are trying to maintain relevant amongst all the competition whilst remaining informative and outlining key factors of products for customers. Selling pet supplements means educating consumers and retailers about their benefits and differences, especially veterinarians. This is mainly due to the undefined boundaries between pet supplements and food and can be difficult for pet owners to acknowledge the difference. If you’re selling organic, natural pet products or nutraceutical supplements, your packaging ideally should help your brand capitalize towards the ongoing healthy trend. When packaging vitamins, it is also important to remember that the human is still operating the package. 21st Century’s entire line of pet products uses Weatherchem’s NutraFlapper flip-top closure that not only ensures easy access, but also product safety. Difficult child-resistant and continuous thread closures can be especially hard for aging adults. It is also important for the packaging to communicate in an easy and fun way why organics and pet nutrition are the right products for your pet. Eco-Friendly Products and Safety Companies have also started to embrace more sustainable packaging practices and production processes in reaction to consumers responding to eco-friendly products. The state of the environment is a growing concern among many people, and has already been established that a lifestyle change for ourselves will very likely translate into a lifestyle change for our pets. Brands are beginning to create an eco-friendly world which appeals to consumers’ green lifestyle. Websites such as http://www.eco-dogs.com/ is an example of a place where consumers are more comfortable and pleased with their purchase as the brand carries the same values as they do. The website includes products from dog houses to pet treats. There is an increasing awareness of the diminishing supply of global natural resources and of the negative effects of pollution on the world around us. Pet products manufacturers should “think green” when creating products and packaging. If you’re selling an eco-friendly product, make the packaging eco-friendly as well. One brand we know that’s trying to make a positive difference is Purina One Beyond. Made with 92% renewable material and bio-plastic lining, the package provides better preservation of the product as well as providing a sustainable package design. There are a variety of items eco-friendly consumers can purchase such as pet beds made from plastic bottles, recycled dog toys, and even biodegradable waste bags. We’re fully aware the heightened concern pet owners have about the safety of the products they purchase. In Packaged Facts’ August 2012 Pet Owner Survey, approximately two-fifths of pet owners feel that natural/organic brand pet products are better than standard national brand products, with 63% reporting they are very concerned about the safety of the pet products they buy. Consumers are also more interested in buying local and paying more attention to where their pet food is made. Emerging Pet Markets Regions such as Eastern Europe, Latin America, and South Asia are all seeing a strong growth in the market for pet food and care products. According to Pet Food Industry Magazine, pet food and care sales in Asia were expected to grow 5% each year from 2007-2012. Additionally, Eastern Europe saw a 10% growth in its pet product retail sales over the past year (Euromonitor). As these developing areas gradually improve in overall standard of living, many consumers find themselves with a rising disposable income. Part of this income is being spent on care for their new pet companions. There is an increasing awareness of pet food and care products and distribution of such items continues to improve throughout these regions as well. For the pet manufacturers that are interested in international growth in emerging markets, establishing your brand early is central to a successful product launch. It is likely that the packaging innovations that are appealing to this type of consumer on food products will also appeal to them on pet food and care products. Understanding what types of packaging delivers convenience in their terms will help build brand loyalty in the pet market. Mold-Rite Plastics | Stull Technologies | Weatherchem Corporation