During the pandemic-era recession, pet food sales continued to grow faster than the overall US economy.
A global boom in “pet culture” among millennials and members of Gen Z topped by pet owners’ rising demand for quality food for their furry friends suggests it’s a great time to be in the
pet food business.
The NZX-listed Scales Corporation thinks so, with a market presentation underlining powerful trends in the US$115 billion ($188b) global pet food market.
While the pandemic accelerated pet ownership, households with millennials and members of Gen Z (those born between the mid to late-1990s and early 2010s) were expected to sustain it, the presentation said.
Scales’ research showed globally in 2021, 65 per cent of 18-34 year olds planned to get a pet or add one to their household in the years to 2026.
Demand for top-quality pet food was driving growth in most pet food segments, with market “premiumisation” showing 78 per cent growth between 2019 and 2022, the presentation by the 30-year industry veteran said.
The emergence of “pet culture and humanisation” was leading to a global rise in pets kept for companionship alone, according to Scales, which cited an expanding middle-class as helping drive pet population growth in emerging markets.
In the US, Scales’ biggest meat pet food market, millennials now accounted for a third of all pet owners, the largest proportion of any generation. The value of the US dog and cat retail market in 2023 was US$56.9b, by far the biggest share of all developed markets.
China’s pet population rose 113 per cent between 2014-2019, coinciding with a relaxation of ownership restrictions and a falling birth rate, Scales’ presentation said.
Families in the US, Brazil, European Union and China alone had more than half a billion dogs and cats.
The pet food industry had proved resilient to economic recessions and downturns, the presentation said.
In the 2020 pandemic recession, sales of pet products and services swelled at a faster rate than the overall US economy, with 16.2 per cent growth, while in the 2008 financial crisis, the industry posted a 5.1 per cent increase in sales.
Scales managing director Andy Borland told the Herald the business-to-business company didn’t have statistics for New Zealand because it was primarily an exporter.
New Zealanders have around 4.3 million pets of various types, according to Companion Animals NZ.
This country ranks among the world’s highest with regard to cat ownership rates, with around 40 per cent of households having at at least one cat, the organisation said.
Borland said the pet food industry was a big user of fish and poultry (not horse meat, as urban myth would have it: “It’s not a well-used product in our world.”), but in New Zealand’s case, the main ingredients were beef, pork and lamb.
Salmon was a high-value ingredient opportunity and species diversification was a focus for Scales, which has operations in New Zealand, Australia, Belgium and the US via its interests in the Shelby Foods, Meateor, Esro and Fayman brands.
A breakdown of its current ingredient use shows lamb/ovine meat use of 23 per cent; beef 43 per cent; pork 29 per cent, chicken/poultry 1 per cent; salmon and venison 2 per cent.
Borland said the 127-year-old company issued the presentation “to tell our story”. Because Scales wasn’t a retail brand, it wanted to explain its Global Proteins business, which brings in up to 60 per cent of its total revenue.
“It’s a good story from New Zealand,” he said.
Global Proteins achieved its 2023 financial target of $25 million earnings before interest, tax, depreciation and amortisation in FY21. It has reset that target to $70m in the 2027 financial year, the presentation said.
Revenue target in FY27 is $330m, underpinned by nine projects in New Zealand, Australia, US and Europe, six of which were completed or in development. Three were being investigated.
Global Proteins’ revenue in FY23 was $298.5m.
The presentation offered breakdowns of growing global pet food segments with high levels of protein.
It said the global dry dog food market was valued at US$42b ($68b); wet dog food US$13b ($21b); dry cat food US$21b ($34b); wet cat food US$20b ($32b); snacks and treats US$19b ($31b).
Scales provided ingredients for all these segments.
Total meat ingredient in the US pet food market was 2.9 million tonnes; 1.5 million tonnes in the Western Europe market; and nearly 238 million tonnes in the Asia-Pacific market.
The meat component of total ingredients for the US market was 28 per cent; 24 per cent for western Europe; and 8 per cent for Asia-Pacific, the presentation said.
Global Proteins’ sales by market were US 129,000 tonnes; western Europe 1600 tonnes; Asia-Pacific 6600 tonnes.
Scales estimated its serviceable market across pork, beef, lamb, fish and poultry was 50 per cent of the total meat ingredients volumes, based on internal market knowledge and source. The estimate excluded rendered meals and some byproducts.
Andrea Fox joined the Herald as a senior business journalist in 2018 and specialises in writing about the dairy industry, agribusiness, exporting and the logistics sector and supply chains.
