Clarkston Consulting recently attended the 2023 Petfood Forum Conference – a gathering of thousands of pet food industry professionals, including brands, manufacturers, raw material suppliers, supply chain partners, and funding organizations. Over three days, the group came together to dissect the current market, network, and form meaningful partnerships, as well as predict the future of the pet food space. Among all of the conversations, our team synthesized together five key trends that are impacting space and should be considered by any pet food industry participant.
2023 Petfood Forum Conference: 5 Takeaways
1. Seeking ways to become more consumer-centric as a pet food company
In the pet food industry, partners at all levels are seeking to get closer to the consumer, understand and anticipate their needs, and orient their products and services to support that end consumer. This includes partners who are traditionally several steps removed from the end consumer, such as ingredient formulators, suppliers, and equipment manufacturers. All industry participants are looking for new avenues to integrate feedback into their products to help serve their customers’ customers.
They are seeking this in several ways; first, greater attention to consumer trends, behaviors, and values that drive consumption behavior. Just as the pandemic changed consumption and purchasing behaviors, recent uncertainty in the economy is causing consumers to re-think habits. While research shows that they continue to spend near or at the same levels for their pet, what they spend on and expect from products and services continues to evolve. Value chain partners that anticipate and respond to these changing trends help their customers win and grow, supporting their own growth along the way.
In addition, they are seeking out more strategic partnerships and joint business planning with their customers. Just as CP companies have been increasingly seeking a more robust partnership with retail partners, so too are other partners along the value chain. They are seeking to transition from a transactional supplier to form a more strategic and deep-rooted alliance. This includes concepts such as risk sharing, joint investment, and long-range planning.
Several in the pet food industry are also seeking outside input that connects them more directly to the consumer. Several are commissioning voice of the customer (VOC) exercises to gather first-party data about consumer and customer needs that are tailored toward their own ability to serve the market and their own business constraints.
2. Identifying ways to promote greater agility and adaptability to respond to changing trends faster
Along with greater consumer centricity comes the need to become more agile to changing market dynamics and evolving consumer needs. Companies are seeking out ways to be more responsive and have shorter cycle times for change to address the latest trend or opportunity. The trend is also increasingly pervasive throughout the full value chain, even with partners historically that were transactional suppliers of standardized products and services.
In order to achieve it, they are first seeking to stay connected with the latest market research and consumption patterns that are indicative of new trends or changes in consumer sentiment. The pet food industry continues to take cues from the human food industry in terms of what trends may likely translate to their furry family members. Even with economic uncertainty, many key consumers continue to trade up, seeking out products’ new functional benefits in pet food.
Internally, companies are finding ways to modularize products and create more flexible services that can adapt to changes rather than building for additional scale and limiting the ability to shift. The ability to supply smaller batches for brand trials continues to be increasingly important as companies seek consumer data to aid retail sell-in.
3. Focusing on nutritional optimization, functional food, and supplements for pets
If there’s one trend in human food that’s in the midst of translating into pet food today, it’s creating food with functional benefits. Some are emerging integrated into the core food product and others have launched and gained traction as supplements or add ons for your pet. Among these, some of the most popular emerging categories are vitamins, pro and post-biotics, and formulations optimized for joint, bone, brain, or skin and coat health.
These functional foods and supplements represent a high-margin opportunity for many pet food manufacturers and are highly attractive as a result. Several industry suppliers such as Cargill, Eurofins, and Kerry now offer the ability to produce these products at scale or integrate them into existing manufacturing processes for core food. Just as the case in human food, the winners will be the brands that can break through the noise with simple messaging, drive product and benefits awareness, and drive trial and repeat purchase. Unlike human food, where you can self-assess the product benefit after consumption, the marketing messaging is even more central with furry friends.
Given the massive growth potential of the category, companies are also looking for innovative partnerships to help further their brand ambition and improve the basket ring for their brand. This includes partnerships up and down the value chain to ensure supply and to find collaborative ways to create brand awareness and prominence in-store and online.
4. Driving efficiency and cost reduction in the supply chain through technology and automation
Unsurprisingly the need to create greater efficiency and cost reduction throughout the supply chain continues to be a major focus for pet food companies as they face inflation and margin pressures from an increasingly competitive market. Waste reduction efforts and inventory optimization initiatives continue to be more important to recapture margin, be more competitive, and pass savings on to consumers.
Companies are approaching this primarily through the use of greater technology and automation within manufacturing, quality, warehousing, and distribution. They are ensuring that they have the right technology and data backbone that provides speed and then implementing solutions that automate and provide better foundations for decision-making across both planning and execution. Equipment manufacturers also continue to offer new innovative solutions that reduce manual effort, improve throughput, and increase quality metrics. At the same time, companies are seeking out the use of more sustainable inputs and supply chain componentry to reduce their environmental impact by minimizing waste.
Ultimately these efforts are helping the bottom line and improving customer satisfaction by providing better products. Companies that are able to execute this trend in conjunction with consumer centricity and market agility are winning with their customers and navigating the current market uncertainty.
5. Optimizing packaging: simplicity, durability, sustainability
Considering the centrality of packaging in the pet food industry, creating high-quality, affordable, simple, durable, and sustainable packaging is critical. Balancing across those attributes at the same time continues to be a challenge in the industry. There are many packaging suppliers that offer high-quality products, but all are being pressed to improve the sustainability and recyclability of their products. Established players like Hood Packaging and new entrants into the space like PetPak are all offering new solutions for products that reduce the amount of packaging required.
Companies are continuing to reassess their pack sizes in response to economic uncertainty, inflation, and pressures from companies like Amazon to reduce gross weight and dimensions of large pack. Most companies have adjusted their sizes down over the last two years, and companies will need to continuously balance that as one lever of margin protection against consumer sentiment of shrinkflation.
Regulatory bodies across the US, EU, and elsewhere continue to provide guidance and shape the future of packaging. For example, the FDA has issued guidance recommending that food packaging manufacturers and users minimize or eliminate the use of perfluoroalkyl and polyfluoroalkyl substances (PFAS). Additionally, several U.S. states have taken action to restrict or ban the use of PFAS in food packaging. As a result, pet food companies may need to comply with state-level regulations if they operate in states that have restricted or banned PFAS in food packaging.
The Future of the Pet Food Industry
We expect that conversations around these five takeaways from the 2023 Petfood Forum Conference will continue into 2023 and beyond as pet food industry leaders continue to identify ways to be more consumer-centric, navigate the inflationary landscape, and pursue innovative initiatives to stay ahead in an increasingly competitive market. To chat more about these takeaways or other emerging trends or topics in the pet food space, reach out to us today.
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