Nov 21 2017
Increasing numbers of people are treating their pets like family members, which is giving rise to pet humanisation trends. Consumers have become more conscious of having a healthy lifestyle and diet, and now want the same for their pets. Households have become more willing to invest in their pets’ care and diet, which is driving demand for higher quality pet food and boosting overall pet food production.
Capitalising on this trend, Quadrant Private Equity has entered into a one-billion-dollar agreement to sell their majority interest in Real Pet Food Company (RPFC) to Hosen Capital, New Hope Group and Temasek. David Grant, RPFC’s CEO, will join the board of the partner group. Australia’s Foreign Investment Review Board has yet to approve the acquisition, but RPFC plans to expand globally to become one of the world’s top five pet food companies. The company will initially expand into the United States and Asia, where pet humanisation have grown strongly.
Increasing demand for high-quality pet food is projected to boost pet food producers’ revenue over the next five years. Higher demand is also anticipated to create a highly competitive market, which is likely to see companies release premium products in an attempt to differentiate themselves.
For example, in 2016, VIP Topco, the holding company for RPFC, launched Farmers Market, a new premium pet food brand. This brand, made from natural ingredients sourced from farms, is different to other brands the company produces, and offers over 60 options, including fresh, frozen, wet and dry pet food. Despite strong competition, VIP Topco’s revenue increased by 0.3% in 2016-17 (latest available data).
Mars Australia has also responded to premiumisation trends by operating through several pet food brands that target specific breeds and address pet health concerns such as digestion and weight management. In particular, Royal Canin offers pet food individualised to different nutritional requirements for specific breeds and weight categories. Mars Australia’s revenue from pet food manufacturing is expected to increase by 0.3% in 2017 to reach $697.6 million.
Rather than focusing on flavour, consumers are seeking pet food that also provides nutritional benefits through high-quality ingredients and manufacturing standards that are as high as those for human food. This demand has driven manufacturers such as VIP Topco and Mars Australia to invest in research to produce more sophisticated and premium products. Despite increasing competition, as the pet humanisation trend continues to grow, research investment is forecast to assist industry and company revenue growth.