Table of contents
Key takeaways
The European pet food market comprises businesses that produce, distribute and/or sell pet food. Across the European landscape, we identified that most pet food producers either have a clear focus on branded or private label. This research further covers large retailers and speciality store chains, as well as wholesalers of pet food.
The production segment has a highly mature and capital-intensive nature, with several FMCG giants (e.g. Nestlé, Mars, Unilever) owning significant market share, followed by a fragmented long tail of private label producers and smaller players with premium positionings. We believe there is still ample room for private label producers to execute cross-border roll-up strategies. The retail and wholesale segments are more local, with most growth opportunities coming from e-commerce.
Sponsor-led interest in this “zero-beta market” (interview by Gain.pro) has been significant given (i) stable and sustainable growth rates, (ii) attractive profitability upside in premium niches and (iii) the fragmented private label market with room for buy-and-build plays (e.g. United Petfood). Recent investor activity has mainly centred around the high-end branded segment, which offers the greatest margin expansion potential on the back of brand-building investments.
ESG topics are primarily brought to the industry’s attention by external shareholders. Relevant topics are the same as those in human food production, albeit with a time delay. ESG focus points are regional sourcing, livestock conditions and organic ingredients. However, external supervision from authorities on these matters is lower than for other consumer goods industries.
Company benchmarking
Market growth
The European pet food market has grown from ~€20.5bn sales in 2017 to ~€21.8bn per year-end 2020 (+2.1% CAGR 2017-2020), thereby serving ~88m households. In 2020, European pet food producers were responsible for a total production volume of ~8.5m tonnes (FEDIAF, June 2021)
Statista (December 2021) estimates the European cat and dog food market to grow at a CAGR of ~4% from 2020-2025 to reach ~€15.4bn in sales by 2025. In 2020, every second European household owned at least one cat (~25%) or dog (~24%) (FEDIAF, June 2021)
European executives expect the EU market to document ~3-4% YoY growth in the next five years (interviews by Gain.pro). According to one executive, the market for wet pet food is anticipated to register above-average YoY volume growth at ~6-7%
Positive drivers
Evident growth opportunities in the higher-margin premium segment (>8% CAGR 2020-2025) driven by the ‘pet humanisation’ trend wherein pet owners prefer food products with nearly human-grade dietary and nutritional benefits (interviews by Gain.pro)
Margin expansion potential using pet food as a lure to attract customers and cross-sell higher-margin products like toys and accessories, as consumers increasingly look for one-stop-shop propositions to fulfil all their pet-based needs at once (interviews by Gain.pro)
Widespread e-commerce adoption and emerging D2C distribution models offering opportunities to capitalise on personalised pet (food) products that boost customer lock-in and loyalty, backed by higher price points that materialise in more attractive profitability margins (interview by Gain.pro)
Negative drivers
Consumer demand increasingly pivoting towards smaller pets (e.g. rodents, birds) that require less maintenance, leading to a structural downtick in food volume (interview by Gain.pro) as people opt more and more for smaller dwellings (Housing Europe, March 2021)
Required investments to lower ecological footprints (e.g. new & more expensive nutrients) driven by (i) sustainability concerns associated with conventional dry pet food production and (ii) supply limitations of key animal-related raw materials following a decades-long shrinkage of EU livestock populations (Eurostat, October 2021)
Increasingly blurred competitive landscape in which branded producers are more and more competing with former customers. Backed by private label partnerships, speciality stores and large retailers are stepping more into mid- and premium market segments at lower price points vs. traditional branded producers (interview by Gain.pro)
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Pet food industry.
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Detailed assessments of the market outlook
Insights from c-suite industry executives
A clear overview of all active investors in the industry
An in-depth look into 83 private companies, incl. financials, ownership details and more.
A view on all 194 deals in the industry
ESG assessments with highlighted ESG outperformers
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