Pet Food and Pet Care Retailing - UK - May 2005

SUMMARY

Two major influences are shaping the market and apparently pulling it in opposite directions.Changes in consumer lifestyles, such as increasing numbers of working women and dual-incomehouseholds, are making traditional pet owning more difficult as less time is spent in the home.

In addition, pet ownership is less common in the older generations and the UK has an ageingpopulation, therefore there are fewer pet owners and in particular potential owners are seekinglow-maintenance and less demanding pets. This means that large dogs in particular are losingpopularity and the cat and other small animals are growing in numbers. At the same time, there is adistinct change in the way pets are viewed within the family with the tendency to humanise them andtreat them as another child or member of the family. It is this second and more positive factor thatis having a major impact on what and how much consumers are prepared to spend on their pets.

TABLE OF CONTENTS

Introduction and Abbreviations

Definitions

Research methodology

Consumer research

ACORN

Abbreviations

Executive Summary

Still growing despite fewer pet owners

Quality of pet food of growing importance

Shrinking number of larger pet owners

Competing affections

Not an income issue, its a lifestyle issue

The indulgent owner

Petcare greater potential than pet food

Pet passports create new niche

Echoes of the baby market

Convenience for the inconvenient

No end to pampered pets

Growth potential in services

Pet shops and grocery stores share the market

Pet ownership not driven by affluence

Older families are key

Tesco leading grocer for pet products but pet shops most popular overall

Pet stores important for accessories

Pets at Home has a real stake in the market

Small chain growth

Changing legislation on medicines could boost specialist sector

Convenience purchasing is key

New users seek knowledge

Pet shop customers most loyal

The future

Retail Sales

• Figure 1: All retail sales, at current and constant 2000 prices, 2000-05
• Figure 2: Retail sales of pet food, products and services, at current and constant 2000 prices,2000-05

Retail sales of pet food

• Figure 3: Retail sales of pet food, at current and 2000 constant prices, 2000-05
• Figure 4: UK sales of cat and dog food, at current prices, 2000-05
• Figure 5: UK sales of cat and dog food, at constant 2000 prices*, 2000-05

Petcare products/accessories

• Figure 6: The market for pet healthcare and pet accessories, at current prices, 1998-2005

Pet insurance

• Figure 7: Value of the pet insurance market, 1998-2005

Vets・fees

• Figure 8: The UK market for vets・fees and medication, at current prices, 1998-2005

Sector Structure

Pester power

• Figure 9: Trends in the UK child population, 2000-10

Ageing population

• Figure 10: UK population, by age group, 2000-10

Household structure

• Figure 11: Number of households in the UK, by size, 2000-10

Working women

• Figure 12: Structure of the working population, by gender, 2000-10

PDI and consumer expenditure

• Figure 13: PDI and consumer expenditure, at current prices, 2000-10

Lifestyle changes

• Figure 14: Trends in the number of holidays taken, 1996-2003

Expenditure on pets

• Figure 15: Household spending on pets, 2001/02 and 2002/03

Pet ownership

• Figure 16: Trends in pet ownership, by type of animal, 1999-2004
• Figure 17: Population of dogs and cats and the number of households owning these animals,1995-2003

Pet passports

Legislation

Proposed changes to veterinary medicine laws

Obesity in pets

Expenditure on pet insurance

• Figure 18: TGI data for main shoppers with pet insurance, 2002-04

Consumer Shopping

Key findings

Pet ownership

• Figure 19: Pet ownership, by type of pet, February 2005
• Figure 20: Type of pet owned, by gender, age and socio-economic group, February 2005
• Figure 21: Type of pet owned, by lifestage, presence of children and Mintel痴 SpecialGroups, February 2005

Where consumers buy pet food

• Figure 22: Where consumers purchased pet food in the last month, February 2005
• Figure 23: Where consumers purchased pet food in the last month, by gender, age andsocio-economic group, February 2005

Not all outlets meet the familys needs

• Figure 24: Where consumer purchased pet food in the last month, by lifestage, presence ofchildren and Mintel痴 Special Groups, February 2005
• Figure 25: Where consumers purchased pet food in the last month, by store used regularly forgrocery shopping, February 2005

Where consumers buy petcare products

• Figure 26: Where consumers purchased petcare products in the last 12 months, February 2005
• Figure 27: Where consumers purchased petcare products in the last 12 months, by gender, age andsocio-economic group, February 2005
• Figure 28: Where consumers purchased petcare products in the last 12 months, by lifestage,presence of children and Mintel痴 Special Groups, February 2005
• Figure 29: Where consumers purchased petcare products in the last 12 months, by car ownership,February 2005

The Consumer ・Detailed Consumer Demographics

Question 1

• Figure 30: Type of pet owned, by gender, age and socio-economic group, February 2005
• Figure 31: Type of pet owned, by lifestage, presence of children and Mintel痴 SpecialGroups, February 2005
• Figure 32: Type of pet owned, by marital status, by working status and car ownership, February2005
• Figure 33: Type of pet owned, by region and ACORN categories, February 2005
• Figure 34: Type of pet owned, by media usage, stores used regularly for grocery shopping andcommercial TV viewing, February 2005

Question 2

• Figure 35: Where consumers purchased pet food in the last month, by gender, age andsocio-economic group, February 2005
• Figure 36: Where consumers purchased pet food in the last month, by lifestage, presence ofchildren and Mintel痴 Special Groups, February 2005
• Figure 37: Where consumers purchased pet food in the last month, by marital status, workingstatus and car ownership, February 2005
• Figure 38: Where consumers purchased pet food in the last month, by region and ACORN categories,February 2005
• Figure 39: Where consumers purchased pet food in the last month, by media usage, store usedregularly for grocery shopping and commercial TV viewing, February 2005

Question 3

• Figure 40: Where consumers purchased petcare products in the last 12 months, by gender, age andsocio-economic group, February 2005
• Figure 41: Where consumers purchased petcare products in the last 12 months, by lifestage,presence of children and Mintel痴 Special Groups, February 2005
• Figure 42: Where consumers purchased petcare products in the last 12 months, by marital satus,working status and car ownership, February 2005
• Figure 43: Where consumers purchased petcare products in the last 12 months, by region and ACORNcategories, February 2005
• Figure 44: Where consumers purchased petcare products in the last 12 months, by media usage,stores used regularly for grocery shopping and commercial TV viewing, February 2005

Retail Market Shares

Cat food distribution

• Figure 79: UK retail sales of cat food, by type of outlet, 2003
• Figure 80: UK retail sales of cat food, by type of outlet, by value, 1999-2004

Dog food distribution

• Figure 81: UK retail sales of dog food, by type of outlet, by value, 2003
• Figure 82: UK retail sales of dog food, by type of outlet, by value, 1999-2004

Distribution of OTC medication

• Figure 83: UK retail sales of pet healthcare, by type of outlet, by value, 1999-2004

Distribution of the pet accessories market excluding cat litter

• Figure 84: UK retail sales of pet accessories (excluding cat litter), by type of outlet, byvalue, 1999-2004

Distribution of cat litter

• Figure 85: UK retail sales of cat litter, by type of outlet, by value, 1999-2004

Retail Profiles

• Figure 86: Pet retailers, number of outlets, 2000-05

Pet superstores

Pets at Home

• Figure 87: Pets at Home, financial performance, 1999/2000-2003/04

Jollyes

• Figure 88: Leonard F. Jollye (Brookmans Park) Ltd, financial performance, 1999-2003

Pets Corner

• Figure 89: Pets Corner, financial performance, 2001-03

Acorn Pet Centres Ltd

PamPurred Pets Ltd

Countrywide Farmers PLC

Partners Pet Supermarkets Group Limited

Big H Pet Superstore

Online retailers

PetPlanet

Pets24.co.uk

Manufacturer-operated Internet sites

Garden centres

Wyevale

Klondyke

Notcutts

DIY multiples

Focus DIY Ltd

Other retailers

Wilkinson

• Figure 90: Wilkinson Hardware Stores, financial performance, 2000-04

Argos

Veterinary practices and other outlets

Grocery multiples

Tesco

Sainsburys

Asda

Other grocery retailers

Conclusions

Retail Practices and Operational Issues

Retail structure has changed

Last couple of years have been marked by move to trading up

Pets are surrogate children now

Changes in pet ownership are characterising the market

Are rabbits the "new cats"

Growth in demand for the exotic

More people trading up to premium pet food ranges

Organic OK but natural has more appeal

New directions for product development in food

Accessories follow food

Gifts and treats growing in importance

Fashion influences

Specialist operators still offer the consumer key points of difference

Grocery multiples may grow share of the pet accessories market up to a point

Specialists can develop the healthcare sector

Pet accessories and treats are better positioned for Internet growth

Retail landscape to continue to change through consolidation

Garden centres offer good opportunities

Concerns for future

Influences for the future

The Future

More Pets at Home stores but not an easy ride

Independents will continue to disappear

Independents need to 壮ell・specialism to survive

Grocers continue to grow share

More niche products in pet food

Services will become more professional

Lifestyle factors dont advocate certain types of pet ownership

Demographics not in favour

Changes in ownership landscape continue

Indulgent owners still on the up

More treats and special occasion gifts

Pet insurance continues to grow

Healthcare sector healthy

Forecast

• Figure 91: Forecast of the total market for pet food, accessories and services, 2005-10
• Figure 92: Forecast of the pet food, accessories and services, by sector at current prices,2005-10
• Figure 93: Forecast of the pet food, accessories and services, by sector at constant 2005prices, 2005-10

Pet food

Vet fees and pet insurance

Pet care and accessories

Factors used in the forecast