Executive Summary

Pet foods represent a well established and significant part of the UK grocery trade. The main products are cat and dog food, which had a combined 98% of value sales in 1994. The remainder is accounted for by other pet foods which includes fish food, bird seed, and food for small animals such as rabbits, gerbils, hamsters and guinea pigs. This is a fragmented sector, with most of the product sold loose (by weight) through the specialist pet trade.

The UK pet food market has remained static in volume terms over the years, with market growth mainly attributed to consumers trading up to better-quality, premium products, focusing on convenience, health and choice.

In 1994, total retail sales of pet food rose by 3.6% to £1.33bn, while volume consumption fell by 2% to 1.38 million tonnes. Sales of prepared dog food rose by 2.1% to £623m, while prepared cat food increased by 5.8% to £600m. After many years of strong growth, sales of pet treats remained stagnant in 1994 at £87.1m.

Overall, the main growth areas in 1994, were in complete dry dog foods, which grew in volume by 5.8% to 182,000 tonnes, and 20.3% by value to £148m. This sector has become intensely competitive in recent years, with an increase in new product activity in the grocery trade.

An important development has been the increasing threat of own labels, with the leading retailers concentrating on high margin, super premium products. The advent of the specialist pet superstores has created a new dimension in pet food retailing, giving the consumer more choice and the benefits of one-stop shopping. The specialist outlets, e.g. veterinary practices, have also been given a boost by the increasing popularity of healthy pet products, such as scientifically-formulated varieties.

1995 has seen an increase in corporate activity, the most important being the recent acquisition of Quaker Oats European Petfoods operations by Dalgety in February 1995. The acquisition is expected to reinforce Spillers Foods' market position as the second largest pet food manufacturer in both the UK and the Continent.

Future prospects for the UK pet food trade look extremely bright. Key Note forecasts that retail sales will grow by an average annual rate of 5% from £1.39bn in 1995 to £1.69bn in 1999. Overall, the cat food sector will perform better than the dog food sector, with an average annual growth of 6.4%, with retail sales reaching £818m in 1999. Sales of dog food are forecast to grow by an average annual rate of 3.5% to reach £737m in 1999. Another important growth sector is pet treats.

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