It's raining cat and dog food

Prepared Foods, April, 1989 by Alison Otto

It's raining cat and dog food!

Just think what it might be like, if, as Iams' pet food commercials suggest, dogs and cats ruled the world. Dinner-time conversation might go something like this:

Tingalingaling! Tingalingaling!

"Yes, madam?"

"Meowwwww. We've made our dinner selections, James. I'll start with a little ocean fish with shrimp in aspic--you know, the Unique brand. And then bring me one of those darrrrrling little Sheba entrees-salmon, I think. Oh, and James, I'll take my scratching post in the library. And then, of course, a little Pounce treat before bed with warm milk."

"Fine, madam. And for you, sir?"

"Kibbles'n Bits! Kibbles'n Bits! I just can't wait to get me some Kibbles'n Bits!"

"Ahem ... your diet, sir?"

"I guess you're right--I am getting a little thick around the collar. You better bring me Fit & Trim--it does have one-third less fat and less salt."

"Very good, sir, and the usual bedtime treat?"

"That's right, James--a couple of mint-flavored Milk Bones. There's nothing worse than waking up in the morning with, uh, doggy breath."

Sound like a bad episode of the Twilight Bone? Perhaps, but actually it's more than just whimsy. Anthropomorphism aside, the fact is that pampered pets eat better than many people.

Last year, Gorman's New Product News tracked 100 new dog and cat food products, the likes of which cater to every finicky taste in the animal kingdom.

There's food for fat cats, small dogs, and senior dogs. There's ice cream for dogs. Carnation even offers home delivery of pet food.

Ruling the kingdom

Is there a method to the madness? Pet food manufacturers say there is. First of all, at $5.6 billion, the dog and cat food market is big business--second only to the $6-billion cereal category in the prepared foods market.

A study by Packaged Facts, a New York research firm, predicts that the market for all pet food will grow to $7.2 billion in 1992.

Perhaps more important, for manufacturers that can weather the dog days of increasing raw material costs, pet food can be a cash cow.

"It's an extremely profitable business, and the bigger you are the more profitable you are," says John McMillin, an analyst with Prudential-Bache Securities in New York. He estimates that market leader Ralston Purina will reap more than $400 million in profits from pet foods this year, with operating margins exceeding 20%.

Domination is the key in the animal food kingdom, and manufacturers have implemented the strategy they've used for prepared people foods throughout the 1980s: introducing value-added pet products as a way to improve margins.

Faced with stagnating dog food sales, and America's new penchant for felines, pet food manufacturers are unleashing a new breed of center-of-the-bowl fare for both dogs and cats.

"It's a trend of the '80s," says Dick Curd, a spokesman for Carnation, which was the first cat food company to launch an upscale single-serve canned cat food, called Fancy Feast, in 1982.

Indeed it is. Just as quality, convenience, and variety are buzzwords in the people-food market, they are also the keys to marketing in the animal food kingdom.

Although there are hundreds of products to choose from, the pet food market is controlled by a handful of established food companies like Ralston, Carnation, Quaker, Heinz, and M&M Mars (Kal Kan).

The pet food category is divided into four main segments--dry, canned, semi-moist, and snacks--and each company has devised a different strategy to carve a piece of the pet food pie.

With pet food sales of $1.5 billion, Ralston, for example, is clearly the market leader, but the company's main emphasis is dry products. Heinz, Carnation, and Kal Kan are clawing it out in the canned cat food category, and Quaker competes in the dry, canned and semi-moist categories.

Dog gone, it's a cat's world

Several trends have coalesced over the last few years to change the way these manufacturers approach the pet food market.

One key factor is that, over the last decade, Americans have come to fancy felines. In 1982, there were 48 million dogs in U.S. households and only 44 million cats, according to the Pet Food Institute. Over the next six years, cat displaced dog as man's best friend. In 1988, the 57 million cats outnumbered dogs by 7 million.

The shift has taken its toll on dog food sales, particularly the dry segment, which has captured about $1.7 billion a year since 1983. In the dog food segment, SAMI reports the biggest 1988 gains in canned products (up 4.2% to $890 million) and dog snacks (up 7.4% to $402 million). The semi-moist category, which includes products like Quaker's Gaines burgers, dropped 9.8% to $165 million.

At the same time, cat food sales have been increasing. Spurred by sales of "gourmet" products like Carnation's Fancy Feast and Heinz' Amore, sales of canned cat food moved up 4% last year to $1.2 billion. Dry cat food gained 5.9%, reaching $799 million. As in dog food, semi-moist products lost share, down 4.4% to $214 million.

Rabid competition

Though it may not be a dog-eat-dog world for pets, there's rabid competition among pet food companies. Ralston has the top position in both dog and cat food, but company chairman and CEO William Stiritz describes the dog food market as "a constant struggle for market share."