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The pet food market A case study about marketing possibilities for a feed additive company Student: Pauline Paap Study: Major: Master Management, Economics and Consumer Studies (MME), specialisation Life Science, Innovation and Management (LIM) Minor: Animal Nutrition (ANU) Supervisors WUR: Prof. Dr. H. Dons Prof. Dr. Ir. WH. Hendriks Company: Orffa International bv. Company supervisor: M. Rovers M.Sc Date of colloquium: 12 December 2008 ECTS-credits: 30 Key words: Pet food market, supply chain, market research The Western-European pet food market is changing fast over the last years; the diversity of pet food products is enormous. This research project provides an overview of the macro-environment of the pet food market and the opportunities and chances for the company Orffa to enter this market. Orffa International is a supplier of high technical feed additives; like vitamins, flavours, anti-oxidants and minerals. The company will sell their products to the pet food market beside their current sales on the livestock market. The objective of this research project can be stated as follows: To give an overview of the current European pet food market situation and recommendations for further marketing decisions of Orffa, by making a SWOT-analysis based on the current collaborations within the pet food supply chain, the macro- environment of the pet food sector, the internal capabilities of the company Orffa and an investigation of the customers and competitors. Based on a theoretical review about supply chain, supply chain management and stakeholders, a methodology is set up to analyze the current pet food supply chain, the macro-environment and the influences of stakeholders on supply chain management. The market of dry pet food products is investigated for the countries Belgium, France, Germany, the Netherlands and Spain. For the analysis of the pet food supply chain and the macro-environment seven types of analyses are used. A customer analysis is done for the arrangement of pet food brands and manufacturers to the priority of a feed additive supplier. The figures and numbers of the West European pet food market are investigated in the economical factor analysis. The social factor analysis provides an overview of the latest trends. In the technical factor analysis, more than thousand pet food products are analysed on the use of additives for special animal health issues. Moreover, the metabolic adaptation of cats and dogs are investigated and a research to the the manufacturing process of dry pet foods provides information about the extreme environment which appears during the production. The political factor analysis includes the regulation about the trade possibilities of additives. Based on the previous analyses, the pet product portfolio of Orffa is evaluated in the company analysis. From this evaluation, the products with the highest potential to become successful in the pet food market is selected for the competitor analysis; the product portfolios of European additive suppliers are investigated and products with similar functions components were mentioned as competitive product. Finally, the information of the seven analyses was used to make an overview of the pet food supply chains. A small case study is done to the organisation, communication and relations in the supply chain. Three pet food manufacturers were interviewed based on a strategic sample; a private label producer, a private label and own brand producer and a large own brand producer. These producers represent three different parties, with different interest in the pet food market. The influence of stakeholders on the supply chain management was defined according to the presence of power, urgency and legitimacy; a stakeholder identification methodology. Based on the analyses described above, the following results can be provided. A feed additive supplier delivers their products to pet food manufacturers. The European pet food market is dominated by two manufacturers: ‘Mars Petcare’ and ‘Nestlé Purina PetCare’. Most of the pet food manufacturers bring several brands on the market, serving a different market segment. Orffa sells high technical feed additives, which are interesting for brands in the higher price segment, with large product portfolio’s and an international character. Western-Europe has a mature pet food market; small annual growth but a large share in the global pet food sales. The growth is mainly driven by increased expenditure per pet owner. The humanization of pets, animal health, safety concerns (mainly due to a dioxin crisis) and sustainability issues lead to the premiumization of pet foods; providing the best quality food and specific nutrition. A cat is a typical carnivore which needs a well defined high quality diet. The metabolism of a dog is a little bit more adapted to omnivorous diets. Extrusion is the most common processing method used to manufacture dry pet food diets. If feed additives are added to pet diets, the additives must resist the extreme conditions of the extrusion process. Another possibility is spraying the additive on the kibble in the last phase of the extrusion process. Overall, the palatability of the diet may not suffer because of the addition of the additive. Pet food manufacturers make statements or claims on the labels of their products. These statements can be classified into several health categories. For each health category, several additives are used to provide the positive effect on animal health. There are many regulations, on country and European level, which say something about the animal feed sector. The European regulations on ‘feed materials’ and ‘additives used in animal nutrition’ provides lists which indicates if the sales and use of additives are allowed. The feed additive may not be polluted with undesirable substances and the control on pollution must be strict. A FAMI-QS and GMP+ certifications are not obligatory for a feed additive company, but desirable if the company want to supply to the pet food market. Claims or statements on labels can only be made if the claim will not mislead the end-consumer and proven scientific evidence is available. Based on this research four products of Orffa were selected as products with the highest potential for success in the pet food market. For each of the selected product, the competitive products were found and a supply chain is made. An interesting product portfolio is not enough to have success in the pet food market. Scientific information about additives applied to pet health and pet nutrition are necessary. Knowledge from the stakeholder groups ‘veterinary’, ‘Universities’ and ‘interest organisations’ can be essential. The high technical innovative pet food products have short life cycles and sales are less predictable. A constant focus on the latest trends of the pet food market is for this reason essential. Finally, the large pet food manufacturers control the pet food market, companies which are active in this market should be aware of their power.