The UK PET ACCESSORY Market Report 2002

SUMMARY

The UK market for pet products was worth approximately ?3.6 billion at retail prices in 2001, representing an estimated 5% increase over the previous year.

The market can be divided into 4 main sectors: pet food, pet accessories, vet/insurance fees and kennelling.

In general, the pet industry has experienced steady underlying growth in recent years, reflecting a mature market. Key factors influencing overall performance of the pet market are consumer confidence, PDI levels, household pet ownership levels, mix of pets owned, new product developments and changes in retailing.

Within the total UK pet market, pet food holds the dominant share at approximately 46%, worth an estimated ?1.63 billion in 2001. This mature market has seen a decline in volume sales of dog food as a result of the decrease in dog ownership. However manufacturers have been attempting to stimulate growth through investment in new product development and premium products, such as dry food and high nutritional added-value foods.

Vets/Insurance account for 28% of the market, worth ?997m in 2001. Growth in this sector has been in the insurance area, reflecting growing concern for pet welfare and the range of treatments available. The grocery multiple, Tesco, operates in this sector encouraging customers with in-store promotional literature and special offers.

Pet accessories represent 14% of the total UK pet market, with an estimated market value of ?511m in 2001, an increase of around 5% from the previous year.

Steady underlying growth has been a feature of this market which can be attributed to a combination of factors including the number and mix of pets purchased. Manufacturers have stimulated consumers to trade up to higher quality accessories and premium-priced products have seen good growth, e.g. in the bedding and collars markets. Product innovation has been important in several markets, including toy and care product sectors, as companies attempt to differentiate their products and increase sales.

The care products sector, at 34% of the pet accessories market, holds the dominant share and is worth ?175m Rsp in 2001. Flea treatments/wormers hold a large share of the care products market at 34%, and are partly responsible for good growth in this market. Maintenance products are a major sector as well at 29% and include the large cat litter market, accounting for 90% of this market. The health and vitamins sector has positively contributed to growth within the care product market and has a 20% share in 2001. Grooming equipment is a smaller market with a 17% share and is showing signs of slowing rates of growth.

Generally, there is a trend towards animal care and maintenance with more expenditure on 'preventative' care products which were previously only available from veterinary surgeries. There is substantially more information freely available for pet owners concerning the health and care of their pet. This approach has been adopted through magazines, television programmes, trade associations, manufacturers and retailers.

Toys hold the second largest share of the pet accessory market at 33% and are valued at ?169m Rsp in 2001. The product range is extensive and includes scratching post, tunnels/wheels, tank equipment, rubber toys etc. Growth has been particularly high in relation to other product sectors and by 2003 it is expected toys will hold the dominant share within the total market for pet accessories. The market has seen an increase in the number of innovative toys, a degree of trading up with high quality toys available and a trend towards more interactive toys and training toys rather than purely leisure/fun-based products.

Storage and feeding products account for 22% of the market, with a value of ?112m Rsp in 2001. Baskets and bedding hold the dominant share of the market at 30% with a market value of ?34m. Hutches, tanks and cages have a market share of 16%, 22% and 25% respectively. Brand identity tends to be lower in these sectors, with a high level of non-brand ranges supplied by hutch/cage specialists.

Collars, leads and harnesses is a much smaller sector within the pet accessories market, accounting for 9% and worth ?47m at Rsp in 2001. This sector is in slow decline due to its dependence on dog ownership, which is currently in decline. However, growth has been stimulated by niche products such as cat collars and growth at the upper premium end of the leads and collars market, e.g. designer collars.

Competition is high in the pet accessory market and consequently the market has seen a number of acquisitions, although it still remains a highly fragmented market. The leading suppliers in the market are Armitage, Lawrence (Interpet, Mikki, Petlove), Masterfoods (Pedigree) and RC Hagen, but they only account for around 20% of the market.

Imports account for a significant proportion of the market and these are commonly from the Far East, especially in the cat and dog toys and collars and leads markets. Mostly these imported products are aimed at the lower end of the market, although there is some evidence that an element of trading up is taking place in the toy market with higher quality imports entering the market.

In terms of the distribution channels, the key change has been the rapid growth of pet superstores, such as Pets at Home. While independent stores have seen a gradual erosion of market share to 33%, pet superstores have enjoyed good growth and now account for 29% of the market. Grocery multiples hold a smaller share at 12% and supply a more limited range of pet accessories. DIY multiples are a much smaller distribution channel at 4%, with a low priority in pet products except Focus DIY through their PetWorld stores. Acquisitions have also played a role in the distribution channels, with Pet at Home acquisition of Pet Mart the most notable.

TABLE OF CONTENTS

CONTENTS and LIST OF TABLES & CHARTS

1.INTRODUCTION

2. SUMMARY

3. ECONOMIC ENVIRONMENT

3.1 GENERAL

3.2 GDP

3.3 INFLATION & INTEREST RATES

3.4 UNEMPLOYMENT & CONSUMER SPENDING

3.5 HOUSING & CONSTRUCTION

3.6 STERLING

3.7 CONCLUSION

4. PET MARKET

4.1 INTRODUCTION

4.2 GENERAL TRENDS

4.2.1 Retail Trends

4.2.2 Industry Trends

4.2.3 Social Trends

4.3 PRODUCT MIX

5. PET ACCESSORY MARKET

5.1 DEFINITION

5.2 PET ACCESSORIES MARKET SIZE

5.3 MARKET SHARE OF PET ACCESSORY PRODUCTS

5.4 CARE PRODUCTS

5.5 TOYS

5.6 STORAGE AND FEEDING PRODUCTS

5.7 COLLARS, LEEDS AND UTILITY PRODUCTS

5.8 MISCELLANEOUS

6. SUPPLIERS

6.1 SUPPLIER OVERVIEW

6.2 BASKET/BEDDING SUPPLIERS

6.3 CAT LITTER SUPPLIERS

6.4 MAJOR SUPPLIERS

7. DISTRIBUTION

7.1 MARKET SHARE OF DISTRIBUTION CHANNELS

7.2 INDEPENDENT PET SHOPS

7.3 PET SUPERSTORES

7.4 GROCERY MULTIPLES

7.5 DIY MULTIPLES

7.6 MAIL ORDER/CATALOGUE/INTERNET

7.7 GARDEN/AQUATIC CENTRES

7.8 OTHERS

7.9 WHOLESALERS

8 KEY MARKET INFLUENCES

8.1 HOUSE-MOVING LEVELS

8.2 HOUSING STOCK

8.3 INTEREST RATES AND INFLATION

8.4 PERSONAL DISPOSABLE INCOME AND SAVINGS RATIO

8.5 EMPLOYMENT/UNEMPLOYMENT

8.6 POPULATION PROFILE

9. FUTURE PROSPECTS

TABLES and CHARTS

CHART 1 UK PET MARKET - PRODUCT MIX BY VALUE 2001

TABLE 2 GDP PERCENTAGE CHANGE PER ANNUM 1980-2004

TABLE 3 TOTAL UK PET MARKET BY VALUE (?BN RSP) 1994 - 2005

TABLE 4 PET OWNERSHIP LEVELS BY HOUSEHOLDS (MILLIONS 1993 - 2000)

CHART5 PET MARKET SHARE BY PRODUCT - % BY VALUE 2001

TABLE 6 UK PET ACCESSORY MARKET 1994 - 2005 (?M RSP)

TABLE 7 PET ACCESSORIES. - MARKET SHARE BY PRODUCT MIX 2001 (?M RSP)

CHART 8 PET ACCESSORY MARKET - PRODUCT MIX BY VALUE IN 2001

TABLE 9 MARKET SIZE OF UK CARE PRODUCTS MARKET 1996-2005 (?M RSP)

TABLE 10 MARKET SHARE OF CARE PRODUCTS BY VALUE 2001

CHART 11 MARKET SHARE OF CARE PRODUCTS - % MIX BY PRODUCT

TABLE 12 UK TOYS MARKET 1996-2005 (?M RSP)

TABLE 13 MARKET SHARE OF TOYS BY TYPE OF PET BY VALUE - 2001

CHART 14 MARKET SHARE OF TOYS BY TYPE OF PET - % MIX BY VALUE 2001

TABLE 15 UK STORAGE & FEEDING PRODUCTS MARKET 1996-2005 (?M RSP)

CHART 16 MARKET SHARE OF STORAGE AND FEEDING PRODUCTS - % MIX BY VALUE 2001

TABLE 17 MARKET SIZE OF UK COLLARS, LEADS & UTILITY PRODUCTS MARKET 1996-2005 (?M RSP)

TABLE 18 MARKET SHARE OF MAJOR SUPPLIERS - 2001 BY VALUE

TABLE 19 MARKET SHARE OF BASKETS & BEDDING SUPPLIERS - 2001 BY VALUE

CHART 20 DISTRIBUTION CHANNELS FOR PET ACCESSORY PRODUCTS IN 2001

TABLE 21 NEW HOUSING COMPLETIONS 1990-2003 GREAT BRITAIN ('000)

TABLE 22 HOUSING STARTS 1993-2002 GREAT BRITAIN ('000)

CHART 23 VALUE OF NEW UK HOUSING OUTPUT AND RMI OUTPUT (?M)

TABLE 24 NUMBER OF PROPERTY TRANSACTIONS IN ENGLAND AND WALES 1994-2002

TABLE 25 STOCK OF DWELLINGS IN GREAT BRITAIN 1971-2000

CHART 26 INTEREST RATES AND INFLATION (RPI) FROM 1990-2003

CHART 27 PDI & SAVINGS RATIO

CHART 28 NUMBER OF EMPLOYEES IN EMPLOYMENT GB - JUNE 1981-01 (MILLIONS)

CHART 29 AGE DISTRIBUTION OF THE RESIDENT UK POPULATION 1998 ('000)