SLOW GROWTH: A SELF-INFLICTED WOUND?

The European petfood industry is suffering from slow volume-growth if any.

The analysis is simple: dog and cat populations don't show any sign of significant increase (the dog population is stable at best), the fast growth markets of the recent past have reached their maturity stage, dog-owners change their feeding-regime from wet to dry and – on top of that - the spectacular increase of superpremium in the last decade, implying less food-intake in grams because of its high nutritional density.

Overall the European market (if there is such a phenomenon) has definitely not yet reached its genuine saturation. In virtually all geographic markets we're still far away – in comparative terms – from the N.American situation. In other words, if we should reach the levels of calories provided by industrially prepared that the N.American market has been accustomed to over the last years, there is still attractive room for growth.

But the European petfood industry seems to be failing in this respect.

Key contributors to this trend are an increasingly strong internal focus in most companies (caused by a drive for further cost-effectiveness/reduction and absorbing the effects of mergers and/or takeovers), the evident lack of genuine new product development, a focus on competition leading to marginal improvements of own products for the sake of gaining a few sharepoints, but not for the sake of growing the market.

These are evidently business factors that are in the control of the manufacturers.

Another clear influence for slow growth is the changing make-up of retail-distribution. Chains and groups gain in influence very rapidly in an increasing number of countries in Europe. They gradually start to define the retailing-landscape, but more importantly, the retailing culture. More particularly on the specialty retail side, where a "grocery mentality" starts to emerge. Chains and groups don't have the objective to grow the market (that would be tooaltruistic); their goal is to take marketshare, make a handsome profit and be done with it. In fact, by being – sometimes outrageously – demanding (service, terms etc.) in relation to the performance they offer, the chains and groups deliberately lower the total value of the market; to the detriment of the manufacturers' financial performances, who can thus spend less on a.o. new product development, which is vital for further market-growth.

If all parties involved continue to behave as if the petfood market in Europe is totally saturated ( i.e. offers no more scope for growth as a market), we will soon see this self-fulfilling prophesy culminating in less manufacturers that can survive, thus a less attractive and diverse product-offer, thus less interest in the products , thus lower values, thus ....... etc.

A bleak prognosis, but certainly a realistic one if manufacturers and retailers alike keep inflicting wounds upon themselves.

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