From organic dry pet foods to meat snacks for animals, dehydrated pet treat products have increased in popularity around the world in recent years, especially in North America. Dominating the global pet food market with 37 per cent of global revenue, the North American pet food industry was valued at USD27.7 billion in 2016. This article details how the North American pet treat industry has grown in recent years, industry growth drivers, analysis of the North American pet treat industry, and opportunities and threats that companies need to consider.
The North American Pet Treat Industry
To understand North America’s pet treat industry, it’s important to have context based on the broader pet food industry. From 2017 to 2022, the North American pet food industry is expected to grow at a compound annual growth rate (CAGR) of 4.4 percent to USD35.9 billion. Revenue in the North American pet food industry reached 38.4 billion in 2020. It’s important to note that dehydrated pet treats, including dehydrated pet food and meat snacks for pets, make up a portion of this wider industry. While dehydrated pet treats are a segment of the broader pet food industry, pet treats are growing at a faster rate than any other pet care category.
According to market research firm Euromonitor International, pet treat sales, particularly for dogs and cats, has grown rapidly in recent years. On a global scale, dog treat sales are growing at a CAGR of 6 per cent, while cat treat sales are growing at a CAGR of 9 per cent. With North America being home to the largest population of pet dogs and cats in the world, this is promising news for entrepreneurial companies looking to fulfill the demand for premium dehydrated pet treat products. The image below details the breakdown of pet ownership in the United States by animal.
As detailed in the image, the US has the highest dog and cat populations in the world at 69.92 million and 74.05 million, respectively. Birds and aquaria are also popular pets in the US. Birds make up 3.95 percent of the pet population, while aquaria make up 27.5 percent of the pet population.
Similarly in Canada, the breakdown of dogs and cats amongst households who own pets is relatively even. In 2020, there were approximately 8.1 million cats in Canadian households and 7.7 million dogs. With pet ownership increasing around the world, especially throughout the COVID-19 pandemic, the market of pet owners looking for healthy quality dog food is growing.
For companies producing dehydrated pet treat products, these statistics provide a strong indication that focusing product development and marketing efforts on pet treat products for dogs, cats and aquaria would help these companies reach as many North American homes as possible.
How the North American Pet Treat Industry has Evolved
The pet food industry, and in turn, the pet treat industry has evolved as pets have become increasingly well cared for and pampered by their owners. This evolution started to occur more rapidly from 2015, which saw a 72 percent increase in sales volume for dehydrated pet food. In dollar terms, sales volume of dehydrated pet food grew from USD15.2 million in 2014 to USD26 million in 2015. The rapid growth in the sales volume of dehydrated pet food has been driven by consumer demand for higher quality pet food and treats and increasing rates of allergies in pets. Some of these allergies have been attributed to the subpar quality of ingredients in value pet foods and treats, further driving the desire for pet owners to feed their pets food that is healthy and high quality.
Referred to as ‘pet humanization,’ pets are being treated with more care and have better hygiene, which has increased consumer demand for high-quality pet treat products. According to the report, North America Pet Food Market - Growth, Trends and Forecasts (2017 - 2022), in 2016, 17 percent of North American dog owners purchased pet food that advertised a high amount of omega-3 fatty acids. Similarly, with cats, 12 percent of cat owners opted for cat foods with a high amount of omega-3. Also of interest to pet owners are pet food products with claims of high antioxidants, probiotics and prebiotics. In 2016, approximately 14 percent of dog owners and 12 percent of cat owners opted for pet foods that advertised high amounts of antioxidants.
As consumers have become more aware of the importance of healthy, wholefoods, this has sparked extra attention towards healthy pet food as well. This presents a significant opportunity for dehydrated pet treat producers to continue evolving their pet treat offerings and utilize dehydration technologies to reduce waste and increase revenue. For example, unlike humans where several parts of an animal aren’t seen as desirable for human consumption, pets enjoy the flavor and texture of less desirable parts of an animal. This can include items such as dehydrated pigs ears, beef liver, kangaroo heart and chicken necks for dogs. Not only does this reduce waste in meat production, but it offers companies throughout the meat and poultry supply chain an opportunity to expand their product base and increase revenue.
An area where the pet food industry hasn’t followed other consumer-focused businesses is sales channels. For most consumers, pet food purchases typically happen in-person at a grocery store or a pet supply store. In Canada, for example, 92 percent of consumers said they purchased pet food instore. These figures indicate that pet treat producers should consider prioritising distribution through instore channels to reach the highest number of consumers possible. While the pandemic may have driven some consumers online, many households are still completing grocery shopping instore which is when pet food is typically purchased — as part of the weekly grocery shop.
What do Consumers Like and Dislike about Pet Treats
As consumers have become healthier and more aware of what foods are best for their health, they’ve focused on feeding their pets the same quality foods. Dog publication, Whole Dog Journal, for example, explains that the most important consideration should be ingredients when consumers buy pet treats. This is why consumers are opting to buy pet treats where they understand every ingredient, much like purchasing food for human consumption.
Beyond the pet treats and food itself, consumers also look to other elements of pet treat products that will influence their buying decision. These elements include recycled or recyclable packaging, minimal packaging, and small treats or treats that are easy to break into bite-sized pieces. Interestingly, consumers may also be more receptive to labelling that highlights that the product is free of artificial colors or preservatives, but may be less receptive to a label such as “no corn,” or “no wheat”. Consumers want to know what’s beneficial about a pet treat, so making this the focus of the label is more persuasive than stating if a particular ingredient isn’t in the product.
Using the dog treat segment as an example, ethical dog breeding information website Breeding Business summarised some of the most appealing characteristics of single-ingredient dog treats sold in the USA. These single-ingredient treats are common in the dehydrated pet treat segment as single ingredients can be flavored and dehydrated to provide a healthy, high-quality treat that consumers feel good about feeding their dogs. The most common features listed on the packaging of these dog treats include local ingredients, no additives, low-fat protein sources, and Omega 3 fatty acids. Further, consumers have noted that the long shelf life and ease of handling with these products provide convenience without compromising on health benefits for their pets.
Opportunities and Threats in the North American Pet Treat Industry
Similar to the North American meat snack industry for human consumption, the price of meat is a key factor in the profit margins companies can secure on their pet treats. As the price of meat fluctuates, price increases can’t always be passed down the supply chain, which results in diminished profit margins. This is a key risk that dehydrated pet food and treat producers need to keep top of mind and address in their business planning and strategy.
The high price of dehydrated pet treats compared to other types of pet treats is another potential threat to producers. According to Breeding Business, single-ingredient dog treats, a key segment of the dehydrated pet treat industry, can be up to five times more expensive than regular treats. For that reason, pet treat producers need to be creative about how they market their products, so consumers buy based on ingredients and the health benefits to their pets, not price.
The big opportunity for pet treat producers stems from capitalising on how consumers have become more conscious of the ingredients in their food, often resulting in a buyer becoming less price conscious. In Canada, for example, dog owners spend an average of CAD1,090 annually on dog food. Further, the ‘humanization’ of pets and desire to feed them high-quality, healthy food should be a key consideration as companies develop their dehydrated pet treat products. If a company is helping reduce waste in the meat production industry, a likely case if a company uses meat offcuts that humans don’t buy, this also provides a positive key message given people’s growing focus on sustainability and caring for the environment.
North America is the largest pet food market in the world. Coupled with increasing consumer demand for healthy, high-quality food for their pets, there's a significant opportunity for companies to tap into these trends by offering high-quality dehydrated pet treats.
Accounting for 37 per cent of global market share in the pet food industry, North American pet treat producers can continue to grow their business by increasing their consumer base within North America. Given the size of this market, growing domestically first is an effective way to test new products and increase sales of existing lines without the expense and complication of exporting to international markets. Consumer demand for locally-sourced and produced foods will also help to drive this growth as consumers have become more conscious of the food products they buy for themselves and their pets.
Effectively marketing dehydrated pet treat products isn’t just about the ingredients and treat itself. As detailed by pet industry publications, consumers are attracted to clean, minimal packaging that clearly explains how their pet will benefit from consuming their product. This can also help to overcome price sensitivity amongst consumers by highlighting the quality of ingredients and health benefits to pets. For companies who can incorporate all of these elements in their dehydrated pet treat products, there's a significant opportunity to become an influential force in the growing pet treats industry.