THE ROYAL TREATMENT

JEFF WELLS

Retailers are merchandising treats for pets that mimic their masters' tastes. Take a walk down any pet aisle today and you'll find an assortment of cat and dog versions of human comfort foods like ribs, bacon and eggs, pizza and even fortune cookies. They're marketed alongside many healthy and all-natural offerings that promise longer and healthier lives for precious pets.

In many cases, the treats reflect both the shape and flavor of favorite human foods, utilizing everything from fresh ingredients to special sauces.

“The treat department is not just for the typical rawhide bone anymore,” said Tandy Arrant, category manager for pet treats, United Supermarkets, Lubbock, Texas. “The products are much more diverse and tend to reach out to the shopper's own personal taste rather than that of the pet.”

Although it's the pets who eat the treats, it's the humans, after all, who buy them.

Indeed, consumers make a stronger connection with treats that cater to their own food preferences. As human tastes become more sophisticated, pet treat manufacturers are producing wider varieties of novel snacks.

The pet treats category is one of the fastest-growing areas of the supermarket. Both the percentage of consumers who buy treats and the units of treats sold have risen dramatically over the past few years, according to the American Pet Products Manufacturers Association (APPMA), Greenwich, Conn. That growth is projected to continue at more than 20% annually, according to the London-based research firm Euromonitor International.

“There's a lot of competition out there, but there are a lot of dollars to be spent,” said Bob Vetere, president of the APPMA. “Everybody who markets smart is going to find a niche where they can plant a foothold.”

Sources say the opportunity is ripe for supermarkets, which can take advantage of treats' impulse-buy appeal, among other things.

“We especially look into [merchandising] these products for quick in-and-out buys,” said United's Arrant.

Jack Paulk, pet food buyer for Bashas', Chandler, Ariz., said he places special stand-alone carts around the pet aisle in some of his stores. These hold bags of food on the bottom shelf and treats on the top, and are refreshed every three weeks. Doing this, he said, promotes the impulse buy and helps draw attention to some of the smaller treats that might get lost in an entire section.

Paulk also uses space within the aisle to capture spur-of-the-moment purchases.

“We take items like bones that hang well and put them at the end of the aisle to capture that impulse sale.”

Another key to merchandising treats in the supermarket setting is to provide plenty of differentiation. Sources said this is crucial, given consumers' tendency to sample across the product spectrum.

“With treats, it's easier to explore different items and try different things,” said Beth Higgins, retail analyst with Euromonitor. “There's just a range of products out there, and a range of price points as well.”

NATURAL FIT

When Margot Kenly started Blue Dog Bakery in Seattle in 1998, the natural pet products market was still in its infancy. Believing that consumers shouldn't have to make a special trip to buy healthy snacks for their dog, she began producing and selling her peanut-butter-and-molasses treats to Issaquah, Wash.-based Costco on a part-time basis.

Eventually her homemade treats caught on. Currently, Kenly's all-natural, low-fat treats are merchandised by Whole Foods, Weg-mans, Albertsons, Harris Teeter, Meijer, Safeway and Stop & Shop, among others. The selection includes natural cheese, peanut-butter-and-molasses, grilled chicken, and bacon-and-cheese-flavored treats.

Kenly said Blue Dog Bakery experiences sales growth of 30% to 40% per year.

“I've always felt it's important that people have access to those natural pet products in their local store,” she said.

Blue Dog Bakery was in on the ground floor of what sources say is the fastest-growing segment in pet treats. Following the popularity of natural products on the human side, consumers, who are becoming increasingly label-savvy, focus in on packaging and buy into the wholesome, healthy claims for their pets.

“It's easy for pet owners to read the labels, recognize those ingredients and think, ‘Oh, this is a good, high-quality product,’” said Higgins.

Nutrition Business Journal estimates that natural pet and pet nutrition products will grow to well over $2.5 billion in yearly sales by 2010 — up nearly $1 billion from last year's sales total in the category. According to its recent report, natural pet treats should be a key component in this growth.

“The average dog owner spends $68 a year on treats, while a cat owner spends about $43,” the report said. “Many of those consumers, especially those who shop in a natural foods store for themselves, are begging for treats that are natural and wholesome.”

HEALTHIER AND HAPPIER

People have always loved their pets, and lately these connections have grown stronger. With the ranks of elderly and retired individuals growing and seeing their children leave home, pets often fill an emotional void in people's lives.

Additionally, sources say, popular culture promotes the idea of the pet as more than just a pet, and more like a true member of the family — and even as another child. Higgins pointed to the rise in popularity of pet boutiques as a testament to this.

With their importance increasing, furry companions are receiving better care from their owners. In the pet treats category, this means growing sales of products that are nutritious and that provide a utility such as cleaning teeth and gums.

“I think for a treat SKU to have long-term, steady growth, it has to meet some of the health expectations and not just be cute,” said Bashas' Paulk. He said that health-pegged treats are best sellers in his stores, in part due to the abundance of elderly and retired individuals in his Southwest market.

Paulk pointed to S&M NuTec's Greenies bones and treats and Purina's Busy Bone as category leaders. Both brands promote teeth-cleaning ingredients — a prominent function in the category.

“Teeth cleaning is definitely the dominant utility, especially with the rise in popularity of small dogs, who typically have more problems in this area,” said Higgins.

At the same time, people increasingly prize their pet's happiness in human terms. As a result, consumers are more willing to buy upscale and gourmet treats, especially those that emulate indulgent human favorites.

One of the leaders in this segment is Del Monte Foods. Among other brands, it manufactures Snausages, which include selections such as Fortune Snookies and Roverolis. Dog fortunes and sayings such as “You had me at ‘here boy!’” and “Cats are not chew toys” are printed directly on the Fortune Snookies treats. Roverolis are beef-and-cheese dog treats with an Italian taste and aroma, according to the manufacturer.

Last year the company asserted its growing interest in the category by purchasing two well-known pet treat brands: Milk-Bone, for $580 million from Kraft Foods, and Meow Mix, for $705 million from Cypress Group.

Del Monte's dog treat sales have increased by 10% annually since 2001, according to the company.

“Del Monte has really embraced this ‘humanization of pet’ trend, given the emotional connection and reaction our brands evoke,” said Matthew Park, vice president of marketing for Del Monte Pet Products.

Many agree it is innovation and differentiation that will drive sales growth in the future. This means continuing to merchandise new lines of treats that cater primarily to human tastes.

“Our category sales are driven by new items,” said Gloria McDonald, spokeswoman for Brookshire Brothers, Lufkin, Texas. “About twice a year we come out with a new string of items, usually in January and June.”

Cat's Meow

The majority of sales in the pet treats category have, as they say, gone to the dogs. But that doesn't mean retailers should forget about Fluffy and Mittens. According to analysts, the largest opportunity for growth in the category is with cats.

London-based research firm Euromonitor International expects feline treat sales to increase at an annual rate of 28%. Sales of dog snacks, on the other hand, are pegged to grow 20% annually.

“Normally people don't think of treating their cats, because they don't respond the same way a dog does,” said Beth Higgins, retail analyst with Euromonitor. “But cat treats have seen strong growth in recent years. A lot of manufacturers are trying to change that mind-set with pet owners.”

The most popular cat snacks, according to Higgins, are those that feature a health utility — teeth cleaning or hairball management, for example. This is certainly the case at Chandler, Ariz.-based Bashas', according to pet food buyer Jack Paulk.

“The cat treats that are good for the teeth and gums seem to have caught on with the consumer,” he said.
— J.W.