ANIMAL MAGNETISM

Stephanie Fagnani

Competing with alternate channels for pet owners' dollars has been a ruff task for supermarket retailers, but several told SN that to become best in show, grocers need to continue to obey the simple rules associated with supply and demand.

As more and more American consumers open their homes to various species of animals, grocers are staying on top of the trends that ensue, which have, for the most part, mirrored those within the two-legged world with respect to attention to health and wide product selection.

Still, the competition is always nipping at grocers' heels.

According to the 2001-2002 National Pet Owners Survey, conducted by the Greenwich, Conn.,-based American Pet Products Manufacturers Association, discount stores were the No. 1 place respondents shopped for dog and cat needs. The grocery store was tied with pet stores as the second channel of choice.

Expenditures in the U.S. pet industry are projected to reach an estimated $29.5 billion this year and then jump again to a projected $31 billion in 2003, according to APPMA calculations, leaving supermarkets with a lot to lose.

Advertising pet selections prominently and offering frequent price breaks are the methods being used by many of today's retailers to stay top-of-mind for consumers. Also, variety is the spice of life.

"We need to continually look at promoting the items at a competitive price, but I think that variety is where you're going to become a market owner of that particular product," Archie McGregor, owner of Archie's IGA in St. Maries, Idaho, told SN.

"The variety would almost be more important than multiple sizes of a particular product."

His store devotes a 44-foot aisle to pet food and supplies that cover the gamut of species, from dogs to goldfish to hamsters. One endcap is also dedicated to pet products, which he uses to offer reduced-price items.

While McGregor said he sees increasing interest in products designed for smaller animals, like bedding materials and vitamins, the bulk of pet aisle sales remains tethered to canines and felines. "Dog food is going to drive your highest volume and then cat food next and then, of course, your cat litters," he said. "Where we're seeing the growth in the market is in the premium dog foods and cat foods, and that's probably where we're seeing the dollar sale increases."

Although the Salisbury, N.C.,-based Food Lion carries accessory items such as collars, toys, brushes, and flea and tick prevention items, the retailer's pet aisle is dominated by pet foods and by products for dogs specifically, spokesman Jeff Lowrance told SN.

According to market research firm ACNielsen, Schaumburg, Ill., total pet food sales reached $7.8 billion in combined food, drug and mass channels for the 52 weeks ended April 20, representing a 5.2% increase from the prior year. Of that total, $1.4 billion was generated from dry cat food sales and $2.5 billion was derived from the sales of dry dog food.

Premium pet foods from manufacturers like Iams and Purina One have brought a new sophistication to supermarket pet aisles, one that parallels the growing devotion between pet owners and their pets.

"I think our consumers are more aware of growth and development for their pets and senior pet foods, so they are looking more for those products," Kyle Bova, category manager at Penn Traffic, Syracuse, N.Y., told SN.

"We've kind of dwindled back on some of the Iams, and now Purina One has come on board fairly strong and we're trying to expand that category a little bit to offer the consumer better premium foods for their pets and larger sizes," she added.

At Penn Traffic, which has about 218 stores under various banners, pet aisle sales have grown over last year and "as a company, we are reviewing our planograms as to how to expand that particular section," Bova said. "We try to segregate those aisles and have something for every type of consumer, whether it's a premium product or a budget pet product."

To stay current, the stores are constantly rotating stockkeeping units to accommodate newer items that are being introduced to the marketplace.

"There are always new items in the category," Bova said, adding that to successfully compete with the likes of Wal-Mart, the stores "continue to have products on a price break where you can entice a customer to continually come back to your store because they know they can get this product for 'X' amount of time at a particular retail or through our printed advertisements."

Food Lion stores try to "remain competitive on price and promotion, and offer a good variety of products" to keep shoppers coming back to its pet destination, Lowrance said.

IGA's McGregor upgraded the connection between his store and its pet consumers a few years ago when a farm store across the street began getting heavily involved in the pet business. Located in a rural community of just 2,500 residents, he stepped up promotions and started providing information on the quality of various dog foods. Through those tactics, he was able to maintain and grow his pet section.

IGA will sponsor its 3rd Annual Hometown Pet Adoption Event during the retailer's annual Kids Fest Promotion, slated for July 27 through Aug. 3. Internal information that the retailer sends out to the independent store owners claims that pet care is the third-largest category in the grocery department and that eight out of 10 IGA shoppers purchases pet care products.

Also according to the literature, hosting one of these adoption events will help stores increase overall store traffic as well as pet care sales, attract new customers of families with children and pets, and generate excitement for store personnel.

In addition to special pet events, grocers are delving more and more into promoting various pet items for different holidays.

"It's to the point now to where you have dog treats at Easter, at Halloween [and at] Valentine's. They sell, and I think it's something that we weren't marketing before and you're going to pick up some extra sales if you have them identified that way and displayed at that time of year," McGregor said.

Of the dog-owning respondents to the APPMA study, 79% bought their pooch a gift in the course of the year 2000, with at least half of those owners saying they did so for Christmas or for no special occasion at all. Other holidays mentioned included Easter, Valentine's Day and Halloween.

And, as with human grocery options, the evolution of packaging design plays a large role in the future of the pet category, both during holiday seasons and throughout the rest of the year.

While the retailers that SN spoke with notice a declining interest in canned pet foods, they are optimistic about some of the newer container options.

"I've seen some changes. A lot of the plastic reusable scoops, whether it's a litter or a pet food, I'm seeing a lot of those. Pet snacks are all coming in recloseable bags. The cans are now going to recloseable pouches, which is neater for the consumer," Bova said.

At Food Lion, category managers think the new pouches of dog and cat food for Mighty Dog and Friskies brands -- created to compete with Pedigree and Whiskas -- will continue to build interest in the pet aisles, according to Lowrance.

"Too often we think that we've got what all of our customers want; we don't need to look at any of these new items. That's a misconception on our part as retailers," McGregor said. "We need that change and that selection."