Supermarket chains are looking for ways to keep their dog food aisles better groomed. They are preening their programs because food stores continue to lose market share to mass merchandisers, "category killer" pet food supermarkets and even convenience stores. The losses keep coming despite a steady stream of new product introductions for supermarkets, including treats and nutrition-oriented foods.
Their latest strokes include:
Experimenting with new sets that combine canned, dry and semimoist foods instead of segregating them.
Increasing shelf space to make room for more high-margin treats and biscuits.
Carrying more "veterinarian
quality" dog foods.
Adjusting their pricing, advertising and display strategies.
Despite an ever-expanding array of new foods and treats, supermarket sales of dog food edged up only 0.2% to $2.8 billion for the 52-week period ended Oct. 9, 1994, according to figures supplied by Chicago-based Information Resources Inc.
Sales of shelf-stable canned dog food declined 2.5% to $754.2 million, while sales of semimoist dog food plummeted 8.8% to $84 million. The better news was that dry dog food sales eked out a 1.8% increase to $1.6 billion, while sales of dog biscuits, treats and beverages had sales of $436.6 million, a 1.2% increase.
The sheer volume that the dog food category generates makes it a category worth fighting for, retailers told SN.
"We're taking a good hard look at alternate-format stores that are presenting such a challenge to us," said Ned Meara, corporate grocery merchandising manager at Grand Union Co., Wayne, N.J., summing up the views expressed by many retailers.
"But the dog food category remains an exciting category, and it is one of the largest linear foot departments that we have in the store. Today's supermarkets have more pet food in the store than we do canned fruits and vegetables," he said.
Meara said chains need to get the word out that they carry much lower priced national brands, with the same nutritional value as the Iams, Science Diet and Eukanuba brands that are available to pet food supercenters but banned from supermarket sale by the manufacturers.
"Consumers are paying a premium, premium price for [veterinarian grade dog food], and they don't realize that the Purinas and Quakers of the world have products out there that are equal in food value," he said.
In the meantime, some supermarkets are reconfiguring their sets to eke out higher dog food rings and profits. One of the methods under testing is an "over and under" display, combining canned, semimoist and dry dog food in a horizontal shelf set to encourage shoppers to pick up more than one type.
Kroger Co.'s Nashville division, for example, is testing a new horizontal set that brings more attention to canned, a higher margin segment of the business. Initial results showed canned dog food volume had leaped 39% on average wherever the reset was used.
"The stagnation of the dog population challenges us to get a more profitable mix, which is our main interest in switching emphasis from dry to wet," said Bill Platten, the division's pet food category manager.
Rosauers Supermarkets, Spokane, Wash., is trying a similar experiment, according to Pat Redmond, merchandiser and grocery buyer.
"Back East a number of the stores have gone to an over and under merchandising method, where they have the canned goods and novelties on the top shelf," he explained. "That looks interesting."
Rosauers is testing the method at one store, but Redmond said it was too early to tell if it has been successful in increasing dog food sales.
Hughes Family Markets, Irwindale, Calif., is another chain "looking at the over/under set arrangement of products, in terms of adjusting our sets," said Mike Shultz, senior vice president.
"We are also seeing a move to the premium-type items, along with stockkeeping unit reductions on the slower moving brands. And a push toward value pricing," he said.
Steve Bowman, category manager at Baker's Supermarkets, Omaha, Neb., said his chain is constantly fine tuning its pet food aisle. It is also currently testing a set with canned positioned prominently over dry in one store.
"We have a couple of the pet food companies looking to get into category management and looking to come in and get reports for us. We will probably look at some of that," he said.
Jim Malzahn, grocery buyer at Xtra Super Food Centers, Pompano Beach, Fla., said he is contemplating cross-merchandising canned and dry food to get more of an effect from the department and because that is what his supermarket and pet food supercenter competition are doing.
"We currently have the two sections together, but still separate. We will have a canned food section, and a semimoist and dry food section. We are looking at possibly blending those two sections together. Even our competitors, such as Publix, have blended the items together, so that seems to be the trend," he said.
Other retailers have been adjusting their sets so that they can fit in more high-margin, fast-moving treats and biscuits.
"The treat category is very dynamic," said Meara of Grand Union, noting that treats now encompass about 12 feet of the chain's 80-linear foot department, up from four feet a few years ago.
"We have been able to increase our sales and not hurt our variety in this area by raising our top shelf a few inches and inserting another horizontal shelf throughout the department. We've been able to get that variety into the same amount of space simply by going up a little bit," he said.
"Treats are a very profitable part of the department, and it enables the customer to shop the department. If the customer is looking at a semimoist product, right above it is a treat, above the six-ounce can section is another kind of treat. There is enough there that we can effectively merchandise the category and maximize the sales we get out of it," he explained.
In addition to treats, retailers have also been stepping up the selection of foods comparable to the "vet grade" lines such as Iams and Science Diet in pet supercenters.
"Many companies are coming out with lamb and vegetable formulas, or lamb/rice. It is supposed to be more nutritional for dogs, and they are being produced in both canned and dry versions," noted John Corcoran, category manager at Big Y Foods, Springfield, Mass.
"With dog food there appear to be two distinct groups of consumers -- those that buy gourmet, and those that buy bargain," he added.
"The new trend that we're seeing is that our customers are purchasing more of the nutritional dog foods, since they are concerned about the diet of their pets," said an official of Harris Teeter, Charlotte, N.C.
The buyer from another leading Southern chain, who did not wish to be named, said he had only weeks before added "veterinarian grades of dog foods" to his set. "About a year ago we tried some similar products from Alpo, but they didn't make it. Our new line is from Carnation [Nestle]," he said. The buyer added that facings were tightened up to fit in the new line.
In a bid to make themselves more competitive, many retailers have been adjusting their pricing and advertising of the category. Some retailers said they were cutting back advertising after a switch by several leading manufacturers to everyday low pricing, while others said they are advertising more frequently.
"The manufacturers have changed their deal structure and have gone mostly toward an everyday low price. There are fewer deals out there now, and that will help to flatten our sales out," said Bob Lamb, grocery buyer for John C. Groub Co., Seymour, Ind.
"As a result, we're not advertising dog food as much because the manufacturers don't have the ad money they used to. The manufacturers have cut back on their spending and deals, and they have put it all into net, net pricing, which we use to lower our retails," Lamb said.
Peter Jost, a grocery buyer at Harp's Food Stores, Springdale, Ark., which operates "in the heart of Wal-Mart country," said the EDLP instituted by major manufacturers will make chains like Harp's more competitive and allow Harp's to win back market share on Alpo and Pedigree sales, which had been lost to Wal-Mart.
"It takes twice as long to get back market share as it takes to lose it. We have done some aggressive buying programs on Alpo and Pedigree to try to be able to match up with Wal-Mart, and have made some gains," he said.
"We have increased our advertising frequency and display support. That really benefits the customers because they see that they don't have to go to Wal-Mart to save money on this item," he said.
Bowman said Baker's is competing by stepping up pet food advertising and using EDLP and temporary price reductions on pet foods.
"We're working with vendors to do temporary price reductions so we constantly have heavy promotions going in-aisle. Probably once a month we are trying to run a pet department ad that has a mix of products," he said.
Corcoran said Big Y has changed its advertising strategy on dog food in the course of implementing an electronic frequent-shopper savings club program.
"We don't advertise multiple pricing because of the way we designed our club. We have found that single-unit cans of dog food don't sell very well as a sale item without multiple pricing, so we have had to adapt our marketing plan accordingly," he said.
Redmond said Rosauers has had success with a new line of budget canned foods manufactured by American Nutrition, Ogden, Utah, under the Adda Boy label.
"They are a little lower priced than Alpo and Pedigree -- under that 50 cents a can level -- and they have found themselves a market real quick," he said.