Do you have a pet? If you are like 70% of the U.S. population, you likely do. We certainly love our furry family members as pet "ownership" shows no signs of slowing. In fact, COVID-19 only fueled this furry frenzy of pet ownership. Whether working remotely or just a bit lonely from social distancing, many Americans added a pet to their households. Now, more than 90.5 million U.S. homes hear a bark, meow, growl, or the like on a regular basis.
With this deep affection for Fido and Fluffy, it's no surprise that the pet food and supply industry – an industry that often engages in Minimum Advertised Pricing (MAP) strategy – is growing by leaps and bounds. According to the American Pet Products Association (APPA), sales for the U.S. pet care industry topped $100 billion for the first time ever in 2020.
Post-pandemic, the pet care industry has continued to rise even higher than expected to $123.6 billion in sales – more than 7.5% higher than predicted for 2021. By the end of this year, pet food and treat sales in the U.S. are expected to grow to over $45 billion!
Unsurprisingly, much of this sales activity will be online. In fact, according to market researcher Packaged Facts, the "online boom" has accounted for much of the increased sales in pet food and care. Factoring in online-only retailers, like Chewy.com and Amazon, ecommerce of such products accounts for 36% of total sales. Packaged Facts further predicts this ecommerce number will rise even higher to 54% by the year 2025.
Despite the growing sales within pet food and care supplies, inflation is taking a real bite out of pet owners' pocketbooks. As with most products these days, prices of both pet essentials and discretionary items are also on the rise. According to the U.S. Department of Labor, nationally, pet products costs have risen by an average of 8.3% from roughly a year ago. What's a pet-parent supposed to do?
Online advice often barks the same order time and again: look for deals online. While this makes sense for the savvy consumer, when adding in the popularity of e-tailing for pet product purchases, manufacturers within the pet supplies industry need to be careful when it comes to their MAP pricing. It's a "dog-eat-dog" world at times in e-commerce, with online retailers trying to beat each other to the buy box. Prices can vary dramatically with "bargain basement" e-tailers offering the lowest possible in order to secure a sale – some margin is better than no margin is the philosophy these online discounters operate by.
Ultimately, where consumers who are looking for online deals go, e-tailers willing to drop their pricing below MAP will follow. Manufacturers within the pet products industry need to keep a watchful eye on both their authorized and unauthorized dealers to ensure violations are not taking place. Complacency is a horrible breeder – because it breeds more violations. When manufacturers turn a blind eye to MAP violators or simply are too busy or too conflicted to deal with pricing violators, it gives an unspoken command to keep violating MAP.
Pet supply manufacturers have enough to worry about lately without adding widespread MAP violations to their plates. Supply chain management and production issues are both real challenges for these producers given the tremendous popularity of pet ownership and their subsequent demand for food and supplies.
According to the APPA 2021 State of the Industry Report, labor availability, a skilled workforce, and aging equipment and technology are the biggest production challenges industry manufacturers are facing. Moreover, the report shows that many manufacturers plan to address production issues with capital expense projects within the next five years. The results indicate that 45% of survey respondents plan to spend between $5 million and $10 million, while 24% anticipate spending $10 million to $50 million in capital expenses. That's a lot of bones!
In addition, it's reported that one-third of pet industry producers are planning significant expansion, with additions to existing facilities or with the creation of new ones.
With such fiscal investments on the horizon in order to meet the growing demands of increasing pet owners, it's more important than ever that industry manufacturers keep their revenue up while protecting their brands and preventing price erosion. To do so, producers engaged in MAP pricing need to ensure e-tailers remain within their policies. This does not have to be time-consuming or burdensome.
MAP monitoring software, like MAPCOP, is simple, affordable, and can be implemented quickly. Best of all, you can try this software for FREE (no credit card required), courtesy of MAPCOP, and test it out yourself. Stop chasing your own tail with MAP violations – sign up today for your free trial.