US Pet Food Sector – Demand Outlook & Innovation
Opportunities – 19 March 2021
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Specialist:
Title:
Moderator: Nyree Hinton (NH), Third Bridge Sector Analyst
German Trivino (GT)
Former VP, Finance & Business Development at Blue Buffalo Co Ltd
Agenda:
1. Pet food industry dynamics and e-commerce disruption
2. Competitive positioning among leading brands and manufacturers
3. Key innovation trends including premiumisation, health and wellness focus and prescription diet
4. Mid-term outlook
Contents
Q: Could you give an overview of the US pet food industry? What are the main categories and who are the
top competitors?
Q: What were the main drivers of pet demand and adoption pre-coronavirus?
Q: How fragmented is this industry? Is the market structure different across wet, dry and treats?
Q: What are the challenges facing the industry?
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Q: How have the pre-coronavirus trends around pet adoption and health and wellness been impacted by the
pandemic?
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Q: How would you describe the industry's M&A landscape? Has coronavirus acted as a catalyst for
consolidation, or do you think the industry will only get more fragmented?
Q: Unlike other CPG categories, pet food isn’t really exposed to food service, insulating it from the steep
demand drop-off in that channel. Are there any channels within the pet food sector that you think
experienced unexpected weakness?
Q: What pressing supply chain risks is the pet food industry facing?
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Q: What are the market dynamics for dry vs wet food? Are sales correlated or do they typically work
inversely? Does one typically outperform the other?
Q: Could you elaborate on customers shifting away from processed categories and towards healthier,
unprocessed food? Where does the pet food industry stand on health and wellness?
Q: Could you elaborate on the rise of science-based and veterinarian diets?
Q: What impact has e-commerce had on this industry?
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Q: What is your outlook for the US pet food industry? What are the best- and worst-case scenarios over the
next six months?
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US Pet Food Sector – Demand Outlook & Innovation
Opportunities
Transcription begins at 00:00:00 of the recorded material
NH: Welcome to Third Bridge Forum’s Interview, entitled US Pet Food Sector – Demand Outlook and
Innovation Opportunities. I am Nyree Hinton and I will be facilitating today’s Interview with Mr German
Trivino, former VP of Finance and Business Development at Blue Buffalo.
German, before we get started with today’s Interview, please state I agree or I disagree to the following
statement: You understand the definition of material non-public information and agree not to disclose any
such information, or any other information which is confidential, during this Interview.
GT: Yes, no problem with that. We’re going to be abiding by that.
NH: Understood. Thank you, German. Could you start by giving our audience an overview of your background
and various roles you’ve held in the industry?
GT: I’m German Trivino, I’ve been perhaps 18 years of direct experience in the pet food industry, with Hill’s
Pet Nutrition, the pet food category for Colgate-Palmolive, within the US and overseas. Later, with Blue
Buffalo where I was a Vice President of Finance and Business Development in charge of an area called
strategic growth initiatives, which was mostly trying to get the company to other markets overseas, as well as
open prescription side of the business. Since then, I have been an active player in the pet space, in the pet
food, as adviser for multiple consulting and PE firms, trying to help them open businesses here and there. I am
part of a board of directors of another pet-related product company, being a firm in Brazil, trying to open
markets here in the US for other products in the pet space as well.
[00:02:02]
Q: Could you give an overview of the US pet food industry? What are the main categories and who are the top
competitors?
GT: A little bit of perspective on that. We’re talking about a market in the US where pet food as such might be
around, in 2019 different researchers called the market around USD 30bn. A USD 30bn market that is actually
growing still in single digits, similarly to what is happening in other places in and around the globe. The global
pet food market is around probably about USD 30bn as such and the pet industry overall might be around
USD 95bn estimated. That gives you a little bit of a perspective of how that works. North America plays about
one-third of the total pet food production globally. When you look at the market as such, typically when you
look at pets, we’re calling cats and dogs and other pets, the vast majority of the market is with the cat and dog,
I would say, probably in terms of volume and value nearly about 90% the total market that we refer. If you
look at the market in the US as such, roughly the dog vs cat market might be around 60% dog vs cat, and both
of them growing around that CAGR that is just about 5%, if you compare the last 10 years of the market. Feel
free to jump in at any moment in time because this discussion of the market is quite diverse, so if you guys
want to understand it a little bit better, or help me understand where you would like me to dig deeper.
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[00:04:38]
Q: What were the main drivers of pet demand and adoption pre-coronavirus?
GT: I think one of the major components of this evolution, at least in the US, this pet food market, is the
humanisation of pets, which is really the main driver for what we call premiumisation. There are also health
and wellness trends in different categories, which mirror, I think, a little bit of the broader packaged goods
industry. There is also a trend that is perhaps quite interesting also, more like a branded category element, it’s
kind of a market that is showing a bigger presence of brands and also strong emerging private label
penetration. At the same time, there are new trends in the market with let’s call it a market that is becoming
more open to e-commerce channels, where there is more presence of a consumer that wants to be delivered
more with convenience, because if you’re talking about pet food, then it’s a heavy item by definition. You’ll see
a faster CAGR of a composition of the total market more towards e-commerce because of that. Perhaps
another element to mention is a key component of what we call loyalty to certain brands. The loyalty
component of certain brands is becoming a little bit more challenging, particularly for the wellness side of the
market.
There is also the prescription side of the market that is having a complete different dynamic and we might
actually see, if itis of your interest, we can talk about that later. The brand loyalty there is completely different,
the economics are completely different. That’s actually what happens, I’d say, prior to what we call a pre-
COVID stance, so a market that is humanised, growing more in volume, not only in volume but also in value.
At the same time, once you hit COVID, as it happened for many other industries, the pet food industry also got
a really good impact. Pet adoption rates went up, so by definition, once you have a new pet, then the volume is
just starting going up. There are multiple statistics that we know have a hit where the consumer became more
aware of the pet by staying at home and, therefore, volumes on a per dog basis or a per pet basis started to go
up, premiumised spend. For the market, it’s been only good news.
[00:08:32]
Q: How fragmented is this industry? Is the market structure different across wet, dry and treats?
GT: In tradition, this market, if you look at treats, start talking about treats first, treats out of the three
categories that you mentioned is the one that is mostly fragmented. There are only one or two major players in
treats that do, in my opinion, proper category management and execution. Other than that, there is a vast
majority, it’s a huge amount of labels and manufacturers out there and that is a category that is really difficult
to read. At the same time, because it is so fragmented, there is a consumer that is rather frustrated with that,
and that, like I was speaking to some other consultants, only means huge opportunities. That’s why you see the
Milk-Bone of the world and other brands that actually start bringing the proper category management
execution and they are becoming quite successful. If you look at the treats market, you see plenty and it’s an
explosion of brands out there and it’s quite difficult to navigate. When you look at the cat and dog food, you
always have to also do a segmentation, whether it is the dry food or wet food. “Wet” is probably understood as
canned food and some people use it as toppings on top of the dry, which is not probably the best mechanism to
feed your dog, but both of those markets are rather traditional. Then you have the big names. If you look at
that market carefully, you need to be able to segment it, whether it is the value market, whether it is the
premium or super-premium market. In all of those segments, you always see that the vast majority of the
premium brands will have roughly about 5-8 major players, everybody knows their names.
The value players are more quite distinct as well, Pedigree, a little bit of the Purina brands also there, Iams.
With that, that market still has a lot of fragmentation. The reason for that fragmentation, both on what we call
the more not so super-premium brands but more value brands both in the dog and wet as well as in the treats,
is because this industry has very, very low barriers of entry. Virtually, I could just go into (audio distorts 12.05)
a month, I’ll be able to open a new label with co-manufacturers out there in Missouri or in Kansas or in the pet
food corridor, what they call, and in the market very quickly. It’s a different story when you talk about the
prescription side of the business, where the barriers of entry are very high and, therefore, the fragmentation of
brands in that market is very low. In my opinion, truthfully, if you want to become a true pet food company,
Private and confidential 4
you demonstrate your worth only once you get into the prescription side of the business. You require a lot of
research and development, a lot of investment, and really the major judge to that is the veterinarian
community. Considering that for you to sell that product, that’s not something that you buy off the shelf, you
have to have a prescription, so therefore it’s a prescribed product that comes basically through your
veterinarian. For you to be able to gain the veterinarian community and then the prescription on your behalf,
you really need to do a lot, a lot, a lot of work. Because of that, the fragmentation in that market is very, very
low because only a few really can make it. The benefits of being in that market are humongous because then
you have not only the highest margin across all pet food categories and portfolio, but also a significant halo
effect on the wellness side.
[00:14:09]
Q: What are the challenges facing the industry?
GT: There are a lot of issues. Industry where you see a fast-emerging private label that has noted that, with a
little investment, they may actually try to carve out some of the fundamentals of premium products. I’ve noted
that private labels, it takes very little for some of those guys just to name their bags as “natural” or “organic” or
that type of thing that is somewhat a key fundamental for premium pet food. There is always out there a
consumer that takes very little just for them to say, “This is organic, this is a little bit of premium,” and this
information leads that consumer to say, “I’ll take this private label product,” and is, in their opinion, very little
differentiation with the true fundamentals, so the value proposition of a premium brand. A lot of that is going
against really what the industry should stand for. Premium products require really good investment to create a
(audio cuts out 15.43) that stands for true health, long-term health of the pet. My personal concerns are that
some players out there might not be investing enough or just misusing some of the value propositions for the
true premium brands and then might actually hurt the entire category.
There is another concern, there are issues with the stability in the products that might actually create, at the
same time, opportunities. We see in the market that the good players, the smart players, are actually
transforming those challenges into avenues for growth. We see a new trend in the market, for example, in the
dry side, and you’ll probably see these more and more coming, the last time I was actually down there in
Florida with the biggest pet trade show in the US, called Global Pet, there is a new emerging trend for freeze-
dried products, which is a new way to manufacture kibbles. Those opportunities come from challenges. You’re
selling a product that might not be stable enough the moment that you’re bringing it across the ocean or
during seasons where temperatures can be challenging. Therefore, new manufacturing formulas might
actually give a benefit to the consumer of a more stable product and also better palatability. Those are
challenges that become opportunities in the market. I think the industry is poised for tremendous growth. We
see it coming now in what we see here after COVID. It’s only positive outcomes for the industry overall.
[00:18:04]
Q: How have the pre-coronavirus trends around pet adoption and health and wellness been impacted by the
pandemic?
GT: This industry, as we mentioned before, roughly was growing around 4-5% CAGR. Probably 2020 has
created a spike. The expectation for 2021, from 2020 already, was for 7.4% based on some publicly spoken
information. The challenge for 2021 is very likely that we will continue. Pet adoption rates have gone up
significantly. Not only that, because some folks actually look at just pet adoption as part of the market, but the
reality is that they should be looking at also the net impact of not only adoption but a lower incidence of
euthanasia in the market. We’ve seen that also, before and after, the context of euthanasia has actually
dropped as well. The compound effect of both has actually created here, let’s call it population to feed. At the
same time, we have noticed that the average price per pound of pet food over the years has actually gone up. If
you compare to the prices that you had, probably averages back there 10 years ago, it’s easy to see about 50%
increase on a rate-per-pound basis.
Private and confidential 5
With that said, part of that is a component of premiumisation. We’ve seen that, during this COVID era, one of
the hypotheses in the market was that most likely people would be more conscious of the type of spend on
products. Some people say, “My income will be limited, therefore I have to prioritise,” whether the dog used to
eat premium food, they might actually be more open to more value foods. That, without a doubt, is something
that was noticed. At the same time, the interesting part is that there is a counterbalance effect of consumers
that were more curious about premiumisation. That is really good news for the industry per se, because then
the whole element of premiumisation has actually lifted up even further, which is something that in my
personal opinion I was not expecting something like that. More prices, better quality of food out there.
[00:22:07]
Q: How would you describe the industry's M&A landscape? Has coronavirus acted as a catalyst for
consolidation, or do you think the industry will only get more fragmented?
GT: I have to stay away from details because of being very close to this. I want to be brief on this topic. There
is a lot of value out there. A lot. Great, great value. In a market where there’s such proliferation of brands, what
really matters is to have an attentive eye on what brand is really making a difference and try to buy them when
they haven’t actually got to a valuation point that is attractive. I think there is plenty of room for consolidation,
there is plenty of room, let’s say, track the value that comes from a consumer that recognises a good execution
on-shelf, a good brand. I think consolidation of this, this is a perfect market for leveraging supply chain
synergies. Without a doubt, the answer to your question is yes, it is a perfect time. COVID has brought some of
these guys, they brought good news in the market, that’s actually a little bit of the issue. It has also brought,
post-COVID, some challenges also when it comes to margins and raw material availability and so on. It’s
perfect situation for trying to buy a good deal out there.
[00:24:42]
Q: Unlike other CPG categories, pet food isn’t really exposed to food service, insulating it from the steep
demand drop-off in that channel. Are there any channels within the pet food sector that you think experienced
unexpected weakness?
GT: The food service comparison you made, it’s very peculiar because we know that restaurants and all that,
the industry has been limping there. Pet food actually is quite insulated from that perspective. It’s like many
other CPG businesses, they have been quite bullish. Retail is having a tremendous year as well as e-commerce.
When you look at any potential risk or downside, it’s very uncommon. What I’ve seen with the data that I’ve
been able to analyse and the conversations that I’ve had with players in the market, it’s only positive, it’s not
something that is going the other way.
[00:26:13]
Q: What pressing supply chain risks is the pet food industry facing?
GT: It’s not so specific. Obviously, the pet food industry, coming from a year where consumption was so high,
it creates impacts on shelf and consequently all the way down into the supply chain. Some of the same pain
points that we have seen in other CPG industries, where freight across the ocean has been the same, container
availability is equally impacted for those brands that are sold in the US, imported from overseas. Then you see
inflationary pressures. Commodities, you guys know, it’s a CBOT type of behaviour, commodity world. There
is the supply and demand, crops and all that whole story, but the pressure on supply and demand usually
tends to permeate into different components of inflationary impacts on the cost of goods sold. I would say, at
the same time, pricing has been selective, it’s not so much that I’ve seen price increases that are off the charts
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to compensate that pressure. I think if there is this value gain, it’s more to do with portfolio realignment on
premiumised brands. I believe that for the most part is key.
The other component there is the B2B and B2C realignment. It’s opening a market, highly more competitive.
To some extent, while the manufacturer will be tempted to try to gain compensation on some of those
pressures that are coming after COVID, a competitive environment is more active on the B2C side where it’s a
little bit more limited. This is actually affecting the majority of the retailers and manufacturers. All
manufacturers, without a doubt, the CAGR on the e-commerce is faster, so that this becomes a more
competitive, more direct consumer messaging. It’s actually helpful and beneficial to premium brands because
the shopper in those retail environments is more conscious of understanding what’s in the bag, what were the
ingredients, understanding really what the brand stands for and helps that dynamic, where private labels
become more (inaudible 29.47), it’s less tempting for those shoppers, compulsive buyers. The guy who really
wants to understand the brand is more on the B2C world. I think a little bit of insulation through the fact that
they have a consumer base that is more prone to understand the true value of the brand, that helps them to
justify an eventual pressure on pricing.
[00:30:28]
Q: What are the market dynamics for dry vs wet food? Are sales correlated or do they typically work inversely?
Does one typically outperform the other?
GT: There is nothing I can comment on, as I say, that points at the fact that the CAGR for the two markets is
diverse. I think they are somehow correlated. It’s normal to see, if you look at the shopper in this instance, if
we have a quick sum of how folks in the US are buying pet food, first and foremost, the first thing to note is
that in a normal household in the US you may actually see that whoever is buying is buying for the most part
for a household that is heavily indexed to single-dog homes. At the same time, there is a market that is quite
important when you see that there are two dogs in the house, where there are two dogs. Also, on the cat side of
the market, there is perhaps more a multi-cat market. When you think about that composition, then probably
see that the cat market is totally more over-indexed to wet food than the dog food and that’s important to see.
For a typical manufacturer, a higher mix of wet food is way more convenient than dry. You make more money
on a per pound basis.
As far as CAGR goes for the statistics that I’ve seen, there is nothing that you could say it demonstrates that
there are different COVID growth behaviours. Perhaps on the defence for wet food, we will see a little bit of
innovation when it comes to forms. In my opinion, a strange new behaviour is the consumer that would like to
see that the wet food that they serve looks more natural, which is really from the perspective of their
researches has nothing to do. Some folks prefer to see a gooey type of wet food that looks natural because it’s
got some natural grains or chunks of meat on it. On the dry side, the trend perhaps is being disrupted by these
new shapes that I mentioned before, like the freeze-dried. Those are perhaps a couple of key elements on the
market dynamics that are worth highlighting.
[00:33:56]
Q: Could you elaborate on customers shifting away from processed categories and towards healthier,
unprocessed food? Where does the pet food industry stand on health and wellness?
GT: I think in terms of the buying power, if that’s what you’re looking for, we know that people who own a dog
in the US, whether like we said before about 60% of the households in the US are one-dog households, two
dogs are probably another, it’s a significant amount still, 27%, those markets tend to create opportunities on
both the dry and the wet. One component of that, and a little bit of a challenge, is that the wellness side has
these growing concerns on the industry for folks who just want to try new brands and the switchability of diets
is something that affects also the health of the dog. It’s something that sometimes is highlighted against the
manufacturer themselves. It’s key to see that if an owner, like in this case you decide to go to the store and buy
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a bag of food and one day you just put it out there for your dog to try, the challenge at that moment is whether
your dog likes it, the dog sniffs it, and then if the dog doesn’t like it, it just walks away. It’s a huge component
not only about the quality of the research and development that you put into manufacturing that pet food, but
also the compliance, which is understood in the market, basically saying, “Is the dog really going to go and
actually take it?” Once you get into that element, then it’s the component of switchability, is the dog going to
love it? If the dog is going to stay with that brand for a while or it’s going to switch.
Switching is something that typically affects the health of the dog and that’s something that, moment that you
switch to the new brand, the new brand, moment you put the new kibbles on the plate for the dog and the dog
actually tries it, sniffs it, she likes it, but you’ll see that the dog is going to have a period of adaptation, so to
speak, where the dog may actually go through an unstable tummy and then the shopper might actually judge
that it’s a problem with the new diet. The reality is that a dog needs to adapt. A little bit of this industry is
misinformed. The problem with wellness of the switchability is creating this halo effect of misinformation in
some instances. Part of that is a challenge for the industry to begin. Thus, the benefits of, too, some loyalty
programmes. Before that, basically own dogs in the US, they might actually have a differentiation depending
on whether you have big dogs or small dogs, and at the same time the shopper behaviours. One thing that we
know is that, while for younger generations, I’d say a big percentage of small dogs are quite evenly distributed,
for older generations there is a higher indexation to smaller dogs. Thus it’s also the shopper behaviour varies
tremendously between how they select the food, at least for the wellness side. The older generations are less
prone to switchability. They tend to be more loyal to a particular brand and stick to it. The younger
generations, but primarily those folks, shoppers that are younger than, let’s say, 25 years old, they are
probably one of the worst when it comes to switchability. They switch brands constantly.
[00:39:37]
Q: Could you elaborate on the rise of science-based and veterinarian diets?
GT: Prescription and diet, which is what we call, I would say, or where vast majority of the diets spent, it’s
through research and development in that market. It really obeys two particular needs, so it’s a need-based
market. For example, if you think about the life stage of a dog, the first thing you do, you get a puppy and then
food, the type of food you give your dog at that stage has to be tailored. There is still also research and
development depending on the evolution of the dog at different life stages, even for the wellness channels, for
the wellness segment. When it goes through different life stages, then yes, the dog will go from puppy to more
adult and then later it becomes senior, and thus the diet also changes. The science adapts equally, because
your dog might actually have bigger propensity to obesity or to develop issues with bone or dental issues, so
the needs are everywhere. The art for a good manufacturer is to really create a proper CRM around it.
Therefore, now there is a trend in the market where manufacturers should know that German has a dog and
his name is Fido and then they should know that it’s a breed such-and-such and present already, with proper
communication, which would be the needs for that particular dog, going forward, keeping the consumer aware
of what’s next as opposed to have the consumer navigate the category themselves. That’s where the true
manufacturers on the wellness side connect their research and development to buy the proposition that is
easily understandable by the consumer.
Otherwise, what happens typically is that the challenge for the consumer ultimately is that a dog that used to
be healthy, if it is fed the wrong food, then you will end up seeing that dog ultimately in the veterinarian and
then eating or being fed a prescription diet to course correct an issue that could have been prevented early in
the game. A lot of issues of the research and development really become a sellable point if it’s properly
connected through CRM, alternatives to the consumer to create prevention, to create an attention to proper
food, build up, that’s the value of the super-premium brands, where you can actually see what’s behind the
kibble, how is the kibble made. Great executions, of course, and I could only speak highly of what we at Blue
Buffalo were, Blue Buffalo’s value proposition was really standing for what’s behind the formulation, having
meat first as one of the components of the formula, as opposed to meat derivatives.
The industry, it’s actually having that higher-level scrutiny which is beneficial, like we said before, for these
types of brands. The whole element of investment on science will actually create those opportunities,
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particularly for those products that you have to just show why a premium brand is more effective about
reducing obesity in the cat. It’s going to show why, as opposed to the person just choosing to go and buy a
private label that just simply labels themselves as “premium” or “organic” or “natural”, which is basically the
major issue there I was referring to, of one of the major challenges in the industry. There are multiple things
that might become illnesses later on in the life of the dog that if you properly do the messaging with the
consumer, then you help the consumer to understand if you truly care about your dog, as we know is
happening in the industry, that is in some cases one who is beyond being a pet but is more like a family
member, then folks are willing to really research what they are giving to their dog. They’re willing to spend a
little extra money to give the benefit of that research. That’s how we see that trend in the last 10 years. That’s
what is behind the premiumisation element.
NH: How does affordability play into the strategy of marketing these products to consumers? At what point
are they priced out of the market?
GT: I think it all varies depending on the consumer. Some consumers are actually more price-sensitive than
others. Some others are more willing to compromise the border between what they conceive as the good brand
or good enough. Because of that, there is actually an emerging section of new players, like Rachael Rays of the
world, that in my opinion were very smart on their marketing positioning. They put a rather good enough
product on the R&D side, they advertised themselves very carefully, but at the same time as a premium brand
company, but the differentiation is the price points. Those are price points that notably are lower than the
super-premium brand. What we’ve seen is that the messaging to the consumer has been such that it eroded
some of the share of market of the highest premium brands. That’s more currently to your point that there is
still a need or a niche out there that can test the fundamentals that if you’re a super-premium that you have to
be quite expensive. There is super-premium messaging that actually took a little bit of share from those
brands. There is consciousness of that. There is definitely a trend of some consumers that are attentive. In my
personal opinion, what happens with those manufacturers that are sitting between the super-premium and the
value segments, perhaps it would be negative for some players in the industry on the super-premium brand,
but at the same time it’s positive for the overall industry at the same time, because then you’ll see also the type
of consumer that’s coming from value brands trading up into super-premiums, kind of an entry level into the
super-premium brands.
I think my perspective of this in the overall is still positive because we see an industry, we look back what
happened 20, 15 years ago or beyond, where if you look at the amount of pounds consumed in the industry
and you look at how much of that was true premium pet food, it was really a vast majority of market folks that
used to just feed their dog the scraps of the table. That, over time, you see that the consumer is more aware of
the fact that, by doing so, you end up having that dog faster than not into a veterinarian office, as opposed to
just feeding them properly. With that said, that whole trend of recomposition from scraps to value brands,
from value brands to premium and from premium to super-premium has created value for the brands. This
value in the industry, the premiumisation in the industry, is stronger than the issue on value-seekers that
might actually say, “I prefer to stay at a low level of investment.” We’ve seen that. That’s why you notice that
the indexes on rate per pound for the last 10 years have been significant. It’s about 50%, like I mentioned to
you before. That’s way more than anything that you see on inflation for any CPG other segment.
[00:50:01]
Q: What impact has e-commerce had on this industry?
GT: Huge. Obviously, I have huge direct impact into that. Like for many other CPG industries, e-commerce is
disruptive on what brick-and-mortar used to, and particularly in the area of pet food. Looking back, 10-15
years ago, where pet food used to be, for value brands, you find it in the supermarkets, for premium brands
you will find them in the specialised businesses, brick-and-mortar. There is obviously a consumer that says,
“Why I need to go to the pet store and carry a heavy item and I have to…” first of all is the issue of being a
heavy item if you really buy smart. You want to buy smart, then you buy big bags not small bags. On a rate-
per-pound basis, it’s a better deal, but then it’s the inconvenience of carrying them. Second of all is that then
your dog consumes that bag always, therefore it’s a repeat purchase. The combination of those two is a perfect
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success story for e-commerce. You get delivered at home, the convenience of not carrying that bag, and
actually better pricing.
Because of that, the CAGR on the e-commerce side is way higher than what we’ve seen in the industry. We
talked about an industry that is growing around 5%. E-commerce is easily close to 7% in the last five years.
Another topic to that element is that many of the specialised businesses are seeing huge pressure on traffic in-
store, PetSmarts of the world, and themselves had to reinvent themselves so that they also became, they had to
just create their own arm, and everybody knows that, of e-commerce themselves. Therefore, nowadays you’ll
see that everywhere.
[00:52:36]
Q: What is your outlook for the US pet food industry? What are the best- and worst-case scenarios over the
next six months?
GT: I think it’s positive, like I said before. I’m quite bullish on that industry. I think the bigger challenges that
we have are related to an industry that was benefited of a new set of consumers who want to try premium
brands. The challenge for them is how can they really retain those consumers, those shoppers. I think overall
adoption rates and all these are creating something that might stay. My outlook for the future is also positive
with new shapes and forms and new research and development. I think the component of compliance that I
mentioned before probably (audio distorts 53.47) where new ways to manufacture, freeze-dried kibbles might
actually elevate the palatability aspect of the food, might actually be something very positive. It creates
massive challenges at the same time, because of manufacturing, the number of co-manufacturers that are out
there who can actually do that type of food is quite limited. At the same time, it’s something that I see already
in the last year as a very positive trend in the market. These whole new shapes and forms of freeze-dried and
dehydrated food might be something to look at. I keep looking at that segment quite attentively, since it’s an
area of growth, where is a new and up-and-coming consumer who is avid for probably another avenue for
premiumisation. It is actually basically responding to a need that is in the market related to palatability.
[00:55:18]
NH: Let me close by saying thank you, German, for your input. Clients, if you would like to speak to German
in a private call or meeting, please let your relationship manager know. Thank you again for joining Third
Bridge Forum's Interview today, this now concludes our meeting. Goodbye.
Transcription ends at 00:55:32 of the recorded material
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