As we enter 2024, we are preparing for an evolution of pet food industry trends carrying over from previous years, all of which are underpinned by lingering inflationary impacts on customer and business spending. According to Packaged Facts, about one-third of pet owners who switched pet foods in the last 12 months moved to a lower-priced option. As inflation persists, some pet owners may opt to trade down on non-discretionary spending for their pets.
The global pet food industry has remained resilient, climbing to over $140 billion in 2023, and is expected to grow at a CAGR of 5.32% by 2028. With more than one-third of global revenue coming from the U.S., the sector can be expected to be guided heavily by North America. Globally, as Gen Z pet ownership continues to rise, younger spending power will influence consumer preferences in areas like health and wellness, sustainability, and value-driven decision-making.
Many trends are similar to what we’ve seen in recent years, but new categories are beginning to see sub-segmentation as owners seek new ways to benefit their pets. Additionally, manufacturers are using new tech and strategies to gain greater share in a continuously saturated market. Below, we highlight five trends in the pet food industry to keep in mind this year:
2024 Pet Food Industry Trends
Trend #1: M&A Leveraged as a Tool to Drive Business Objectives
Despite slowed M&A activity in 2023, we saw more than 25 M&A deals, including notable transactions from J.M. Smucker, Natural Balance, and Post Holdings. The main drivers of acquisition activity from these major players included the refinement of brand portfolios and the improvement of manufacturing and production capacity.
For example, Post Holdings participated in several pet food deals this year, including an agreement to acquire Perfection Pet Foods that included assets such as two manufacturing facilities. These facilities provided Post Holdings additional capacity to insource additional production. In addition, one of the benefits from the merger of Natural Balance and Canidae included the consolidation of all product manufacturing in a single facility.
Looking ahead to 2024, we expect manufacturers to leverage M&A to gain synergies in manufacturing and work towards hitting profitability goals. The pace of acquisitions in 2024 will be impacted by fluctuating interest rates and available capital from well-positioned acquirers. Categories across treats, supplements, and pet health are favorable candidates for M&A activity due to the driving health-focused mindset of pet owners.
Trend #2: Sustainability Remains Top of Mind, but More Nuanced
Nearly 70% of worldwide pet owners are concerned about climate change and make daily choices with this in mind. As such, pet food manufacturers should recognize the direction of consumers’ preferences and tailor messaging based on what their target consumers value most about sustainability in their pet products. We are seeing pet food manufacturers double down on sustainability efforts ranging from sustainably sourced proteins to sustainable packaging and striving toward carbon neutrality.
Honing in on pet food formulas, mushroom-based and insect-based pet foods are gaining more traction over standard meat ingredients. While far less carbon intensive than meat, mushrooms and insects can provide a significant amount of protein, which is appealing to consumers who seek specialty diets. According to NIQ, pet parents have searched for “vegan” diets for their pets 45% more in 2023 than the previous year. Manufacturers that can enter these growing segments early may be able to stand out compared to traditional companies.
Continue reading by downloading the full report below.
Read last year’s Pet Food Industry Trends Report here.
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Contributions from Jake Park-Walters