Market Trends: Pet Supplements and Nutraceuticals

SUMMARY

With more and more pets living to a ripe old age, nutritional supplements for pets have become a fast growing business, as pet owners seek out health products for their furry friends that mimic those they use for themselves. At the same time, the regulatory gray area surrounding supplements for companion animals continues to constrict the market, a situation the National Animal Supplements Council is working to change through a concerted push within the industry to self-regulate while moving toward formal categorical recognition for the products. This all-new report covers supplement products in traditional forms, such as pills and liquids, as well as newer, nutraceutical forms addressing the all-important issue of palatability, such as gravies and treats. Its primary focus is on products for horses, dogs, and cats, but coverage also extends to other types of companion animals, including horses, birds, small animals, and herptiles. The report charts historical sales and projections; analyzes marketing and new product trends; profiles key players such as Farnam and Virbac; and examines detailed Simmons Market Research Bureau consumer data on pet owners' purchasing of pet supplements vis-à-vis number of pets owned, purchasing venues, other types of pet products purchased, and attitudes about health, as well as in relation to human supplement usage.

Introducing Market Trends

Market Trends is the latest product line from Packaged Facts. These timely, compact reports offer insight and analysis into new product trends, demographic shifts, and consumer behaviors that affect the food, beverage and consumer goods and services industries.

Report Methodology

The information contained in this report was obtained from both primary and secondary research. Primary research entailed attendance at industry trade shows; informal interviews with members of the trade; and an on-site examination of the retail milieu, including mass-market outlets, pet specialty shops, and veterinary clinics. Secondary research included extensive Internet canvassing and research- and data-gathering from relevant trade, business, and government sources; company reports including annual reports, 10Ks, and other financial releases from public companies; company profiles in trade and consumer publications; and other reports by Packaged Facts, which has been reporting on pet-related markets for nearly two decades.

Our market size estimates are based on Information Resources, Inc. (IRI) data for tracked mass-market retailers (supermarkets, drugstores, and mass merchandisers other than Wal-Mart), independent pet store sales-tracking surveys, reported revenues of marketers and retailers, and figures appearing in the trade press. Information on new product introductions is derived from reports in the trade press and online, as well as detailed Productscan data from Marketing Intelligence Service, Ltd., Naples, New York. Our analysis of consumer demographics derives primarily from the Simmons Market Research Bureau (New York, New York) fall 2004 consumer survey, which is based on approximately 28,000 respondents

TABLE OF CONTENTS

Chapter 1: Executive Summary

• Scope and Methodology
  • Scope of Report
  • Report Methodology
• Market Trends
  • Retail Sales Estimated at $950 Million
  • Figure 1-1: Estimated and Projected U.S. Retail Sales of Pet Supplements, 2000-2009 (in millions of dollars) Sales by Animal Type
  • Factors to Market Growth
• Competitive Trends
  • Most Companies Focused in Pet Health
  • Red-Level Threat: Pet Food Marketers Positioning on Novel Ingredients
  • New Product Trends
• Consumer Trends
  • Overall Pet Ownership Rates at 33% of U.S. Households for Dogs, 25% for Cats
  • One in Six Dog/Cat Owners Uses Pet Supplements
  • Figure 1-2: Pet Supplement Usage: By Number of Cats or Dogs Owned, 2004 (U.S. adult pet owners)
• Looking Ahead
  • Trends and Opportunities

Chapter 2: Market Trends

• Introduction
  • Market Definition
  • Defining "Nutraceutical"
  • Condition-Specific Products
  • Natural vs. Synthetic Products
  • Defining "Organic"
• Product Regulation
  • Pet Supplements in Regulatory Limbo
  • The Dietary Supplement Health and Education Act
  • DSHEA Under Fire
  • Current FDA Initiatives
  • Protecting DSHEA
  • FDA May Be Easing Up on Allowable Health Claims for Foods and Supplements
  • Qualified Health Claims
  • The National Animal Supplement Council
• Market Size and Growth
  • Retail Sales Estimated at $950 Million
  • Table 2-1: U.S. Retail Sales of Pet Supplements, 2000-2004 (in millions of dollars)
  • Market Composition
  • Sales by Product Form: Supplement vs. Nutraceutical
  • Figure 2-1: Share of U.S. Retail Sales of Pet Supplements by Form: 2000 vs. 2004 (percent)
  • "Natural" Share of Market
  • Sales by Animal Type
  • Figure 2-2: Share of U.S. Retail Sales of Pet Supplements by Animal Type: 2004 (percent)
  • Sales by Distribution Channel
  • Figure 2-3: Share of U.S. Retail Sales of Equine Supplements by Distribution Channel: 2004 (percent)
  • Figure 2-4: Share of U.S. Retail Sales of Pet Supplements Other Than Equine by Distribution Channel: 2004 (percent)
• Market Drivers and Forecasts
  • A Diamond in the Rough
  • An Expanding Consumer Base with Favorable Demographics
  • Figure 2-5: Household Usage Rates for Pet Supplements, 2000 vs. 2004 (percent)
  • Natural Products Top of Mind
  • Figure 2-6: Number of Natural, Organic, or "Natural-Related" New Pet Products, 2000-2004
  • Overall Pet Market Trends Mostly Favorable
  • The Aging Pet Population
  • The Overweight Pet Population
  • Pet Pampering
  • Table 2-2: Pets as Family Members, 2003 and 2004 (percent)
  • Table 2-3: Humans and Pet Well-Being, 2003 and 2004 (percent)
  • The Growing Pet Population
  • Favorable Human Demographics
  • Competition from Functional Pet Foods
  • Market Forecast: Double-Digit Annual Growth
  • Table 2-4: Projected U.S. Retail Sales of Pet Supplements, 2004-2009 (in millions of dollars)

Chapter 3: Competitive Trends

• Marketer Overview
  • Most Companies Focused in Pet Health
  • Specialty Product Marketers
  • Equine Supplement Marketers
  • Veterinary Channel Specialists
  • Mass Marketers
  • Red-Level Threat: Pet Food Marketers Positioning on Novel Ingredients
  • Competitor Snapshot: Ark Naturals
  • Competitor Snapshot: Farnam Companies, Inc.
  • Competitor Snapshot: Nature's Answer, Inc.
  • Competitor Snapshot: Nutraceutical Corp.
  • Competitor Snapshot: Nutri-Vet, LLC
  • Competitor Snapshot: Virbac Corp.
  • Table 3-1: Selected Marketers and Brands of Pet Supplements, 2005
• Marketing Trends
  • Advertising Trends
  • New Product Trends
  • Table 3-2: Selected Pet Supplement and Nutraceutical New Product Introductions, 2004-2005
• Retail Trends
  • The PETsMART/PETCO Factor
  • The Independent Pet Specialty Store Push
  • The Health and Natural Supermarket Factor
  • Veterinary Practitioners a Key Market Component
  • The E-tailing Contingent
  • Table 3-3: Selected E-tailers of Pet Supplements, 2004

Chapter 4: Consumer Trends

• Pet Ownership Overview
  • Methodology and Data Sources
  • Overall Pet Ownership Rates at 33% of U.S. Households for Dogs, 25% for Cats
  • Horse Ownership and Horseback Riding
  • Ownership Rates for Smaller Companion Animals
  • On the Web
  • Figure 4-1: Adult Ownership Rates for Selected Pet-Owning Classifications, 2004 (in thousands of U.S. adults)
  • Table 4-1: Household Penetration Rates for Selected Pet-Owning Classifications, 2000 vs. 2004 (U.S. adults)
  • Table 4-2: Horseback Riding in Last 12 Months: U.S. Adult Population by Percentage, Number, and Demographic Index, 2004 (U.S. Adults)
  • Table 4-3: Use/Influence of Internet: U.S. Adults Overall vs. Cat and Dog Owners, 2004 (percent)
• Pet Supplement Consumer Focus
  • One in Six Dog/Cat Owners Uses Pet Supplements
  • Figure 4-2: Pet Supplement Usage: By Number of Cats or Dogs Owned, 2004 (U.S. adult pet owners)
  • Pet Supplement Demographics
  • Pet Supplement Usage by Shopping- and Pharmaceutical Related Attitudes and Behaviors
  • Pet Supplement Usage by Purchase of Non-Food Pet Health Supplies
  • Pet Supplement Usage by Purchase of Dog and Cat Food
  • Figure 4-3: Pet Supplement Usage: By Purchasing in Pet Food Product Classifications, 2004 (U.S. adult pet owners)
  • Pet Supplement Usage by Pet Supply Purchasing Venue
  • Table 4-4: Pet Supplement Usage: By Number of Cats or Dogs Owned, 2004 (U.S. adult pet owners)
  • Table 4-5: Top Pet Supplement Demographics by Percentage, 2004 (U.S. adult pet owners)
  • Table 4-6: Top Pet Supplement Demographics by Number, 2004 (in millions of U.S. adult pet owners)
  • Table 4-7: Pet Supplement Demographics by Percent, Number, and Index, 2004 (U.S. adult pet owners)
  • Table 4-8: Pet Supplement Usage: By Shopping-Related Attitudes or Behaviors, 2004 (U.S. adult pet owners)
  • Table 4-9: Pet Supplement Usage: By Pharmaceutical-Related Attitudes or Behaviors, 2004 (U.S. adult pet owners)
  • Table 4-10: Pet Supplement Usage: By Other Non-Food Pet Health Supplies Purchased for Pets, 2004 (U.S. adult pet owners)
  • Table 4-11: Pet Supplement Usage: By Dog Food Types Purchased, 2004 (U.S. adult pet owners)
  • Table 4-12: Pet Supplement Usage: By Cat Food Types Purchased, 2004 (U.S. adult pet owners)
  • Table 4-13: Pet Supplement Purchasing: By Pet Supply Outlets Used, 2004 (U.S. adult pet owners)
• Human Supplement Usage: Pet-Owning Adults vs. All Adults
  • Introduction
  • Figure 4-4: Key Pet Supplement Consumer Prospects: Number of Users of Human Supplements vs. Number of Users of Both Human and Pet Supplements (U.S. Pet Owners)
  • Pet-Owning Human Supplement Users More Upscale
  • Supplements as Preventive Medicine
  • Table 4-14: Usage Rates for Human Vitamins: U.S. Adults Overall vs. Pet-Owning Adults, 2004 (U.S. adults)
  • Table 4-15: Usage Level Indices for Human Vitamins: By Pet-Owning Classification, 2004 (U.S. adults)
  • Table 4-16: Indices for Use of Human Vitamins by Demographic Grouping: U.S. Adults Overall vs. Pet-Owning Adults, 2004 (U.S. adults)
  • Table 4-17: Indices for Vitamin Use Among Consumers Who Agree with Selected Statements, 2004 (U.S. adults)
  • Table 4-18: Selected Vitamin- and Health-Related Attitudes and Behaviors: U.S. Adults Overall vs. Pet-Owning Adults, 2004 (U.S. adults)
  • Table 4-19: Indices for Selected Vitamin- and Health-Related Attitudes and Behaviors: By Pet-Owning Classification, 2004 (U.S. adults)

Chapter 5: Looking Ahead

• Toward Categorical Recognition
• Nutraceutical Treats and Other High-Growth Segments
• Going Organic
• Ongoing Need for Self-Regulation, Product Testing