Growing Market for Nutritional Pet Foods, Supplements

Since the early days of man, domesticated animals have shared his journey. Whether guarding sheep, catching vermin or carrying passengers, companion animals have long served a purpose for humans. In more recent times, service animals have helped lead the blind or aid paraplegics in living more normal lives.

But Americas love affair with its furry and feathered friends has come even further of late. From doggy day care to pet spas, designer clothing lines and toys designed to teach, the pet industry is extending its reach into previously homo sapiens-only territory.

Interconnected trends of humanization and premiumization are driving the pet industry to new heights of sales growth, attracting great interest from all sectors. In fact, Packaged Facts reported the global pet food market topped $49 billion in 2008, posting an annual growth rate of up to 6 percent in recent years. Growing at an even faster pace is the market for pet supplements, which the National Animal Supplement Council (NASC) has put at around $650 million for dogs/cats alone, growing up to 18 percent annually.

To put it in perspective, Gerry David, executive vice president, sales and marketing, Oragenics Inc. noted, If you took all movie ticket sales, music sales and video sales combined in 2007, more money was spent on pets.

The idea of humanization could easily be illustrated by looking at the Sarah McLachlan spot recorded for the American Society for the Prevention of Cruelty to Animals (ASPCA) to promote adopting shelter pets, playing to the human-pet bond with closeup images of sad and lonely pets. Lesley Burkett, marketing assistant, Trouw Nutrition said the humanization factor is seriously impacting the market growth. From pet spas to pet insurance to pet clothes, she said, the idea is Whats good for you is good for your pet.

David Lummis, Packaged Facts, has seen this trend accelerate. In the past seven to 10 years, marketers have really caught on to that human-pet bond, he said. Theyre pitching products like human foods to justify the higher cost, because its about taking care of the health of your best friend. He noted the cycle actually perpetuates itself, as taking better care of the animals promotes a longer and healthier life, validating the purchase.

Additionally, there is a synergy between the consumers interest in purchasing nutritional products for their pets and their interest in their own health. Pets have become another member of the family and pet owners want to provide for their pets so they live longer, healthier lives, said Giuseppe Abrate, president, Kemins petfood ingredients division. Pet owners are seeking the same nutrition and functional ingredient benefits for their pet that they are seeking for themselves. Bret Wyant, sales rep, American Laboratories, agreed, Consumers of nutraceutical products are well aware of the benefits. In turn, they are learning that their companion animals can also benefit from the consumption of pet nutraceuticals.

As an extra bonus, said Bill Bookout, president, NASC, the effects of nutritional supplements and enhanced foods are more apparent in animals than they generally are in humans. If the owner is giving the pet a certain product, they can tell whether its workingthe pets skin and coat are more shiny or they arent limping, he said. There is no placebo effect, so owners can see the tangible benefits.

There are a number of categories in the pet nutrition market specifically experiencing growth, as well as specialty ingredients of interest. Jeff Alix, business development manager pet industry, DSM Nutritional Products/Animal Nutrition & Health North America, said there are two areas he sees contributing to the fast market growth in the pet industry. First, there are more differentiated food products, for the unique needs of different breeds, a shift from basic life stages, or an animals lifestyle. Through advertising and the ease of information gathering via the Internet, consumers have a much greater awareness of what aspects of nutrition and safety are important, which ultimately translates to their making more informed choices when purchasing pet foods. The second area is the ever-growing senior consumer demographic, who are being constantly bombarded with nutraceutical ingredient health benefit messages by the human nutrition industry. These consumers project their health concerns on their pets and, in many cases, their concerns are legitimate.

To address those health concerns, marketers are rolling out a dizzying array of pet foods with functional claims. Mintel reported in 2008 there were 509 pet foods introduced with functional claimsincluding teeth and tartar prevention, joints/bones/muscles, skin and coat, immune system, and digestive and urinary tract; in 2007, there were 302. So far in 2009, said Mintels Krista Faron, the overriding trend is natural, which addresses ingredient safety and wholesomeness. Were seeing more whole grains, fruits and vegetables, she said. Companies are highlighting these ingredients and emphasizing the freshness. What youd feed your pets with regular foods versus overprocessed foods.

Marco Giannini, president/founder, Dogswell, noted, People want to feed their pets food that they would eat themselves. As a result, there is a strong trend of making foods with fresh fruits and vegetables, and high-quality protein. Burkett agreed there is great interest in all-natural and human-grade ingredients, from fruit extracts to blueberries.

Many companies are also adding nutritional ingredients into pet foods to make them more functional. Alix said vitamins and minerals are among the top spends for pet food manufacturers, who call out the vitamins on the front panel to illustrate the nutritional density of their offering. From more advanced innovation in nutrition, we see: ingredients that claim to support puppy cognitive function and skin/coat health such as omega-3 fatty acids; natural-source glucosamine and chondroitin for joint health in senior and large-breed dogs; fiber used to reduce the caloric density in weight management products; and probiotics and prebiotics. Prebiotics are more common because they can be easily incorporated into the product formula and support general gut health claims.

Joint health has been one of the hottest categories for functional pet foods or supplements. Joint health ingredients such as chondroitin have long had a lot of consumer acceptance, Abrate said. And in the specific case of joint health, long-term administration of anti-inflammatory medications can cause serious side effects. This, coupled with high medication costs, has pet owners seeking natural products that are safer and less expensive.

Paul Dijkstra, CEO, InterHealth Nutraceuticals, agreed with the potential of the natural joint health category. Ingredients for healthy joints are a hot area of supplementation, primarily because of the high number of animals, mainly dogs and horses, that suffer from osteoarthritis, he said, adding The Arthritis Foundation has noted the condition affects up to 20 percent of adult dogs in the United States. Published studies on InterHealths UC-II® undenatured type II collagen ingredient support its efficacy in addressing animal arthritis. Dijkstra noted, UC-II decreased overall pain by 63 percent, decreased painful limb movement by 92 percent, decreased lameness by 78 percent, and worked faster and was 2.5 times more effective than glucosamine+chondroitin in providing overall pain relief.

In addition to probiotics, enzymes and flavors are making inroads as nutritional ingredients that can help address gut health. Companion animals have similar digestive issues as humans do, Wyant said. Pancreatin USP is an excellent choice for enzymes, as it naturally contains protease, amylase and lipase, as well as trypsin and chymotrypsin. Additionally, animal-sourced enzymes are on the rise due to the fact that they contain natural proteins.

Beyond the current hot ingredients, there are trends on the upswing. You see how closely pet food trends mirror human food and beverage trends; they really take cues from those categories, Faron said. As an example, she cited a growth in pet foods and products targeting energy and relaxation. Its all about calming or de-stressing, she said. The energy side is more about interesting positioning and marketing to stand out from competitive products. The relaxing products are incorporating ingredients such as lemon balm or chamomile that weve seen in human products like teas.

One energizing ingredient posting growth is L-carnitine, which studies have shown can aid fat and energy metabolism. Jason Woodworth, Ph.D., technical service manager, North America, Lonza, said: There is a huge demand for functional ingredients in pet nutrition and the trend is increasing. L-carnitine, the active ingredient in our Carniking, is an excellent example of a functional ingredient that continues to pique new interest because our research supports its applications and inclusions in pet nutrition products. He added the company has traditionally seen greater usage in the food segment, but there is growing interest from the supplement and treat sectors.

His observation was echoed by other industry members. Functional foods and treats are becoming more popular because they provide nutrition for pets, along with functional benefits, eliminating the need for pills and tablets, Giannini said.

Wyant added: If you have ever tried to give a pet a capsule, you know that most likely it will not want to take it. An easier method is to offer tablets or chewables, which can also be used as a treat, as long as the flavor masks any bitter tastes that may be present.

Treats do appear to be the hot buzz. The functional treat category has seen significant growth over the past five years, Alix said. Consumers have reacted positively to the concept of treat and chew products delivering health benefits in addition to the reward factor, which has resulted in an outgrowth of new treat-like supplement products in the market.

And Dijkstra cited a report from Packaged Facts that found high-growth segments in the pet industry to span functional treats, customized supplements, veterinary-exclusive products and easier-to-administer forms. Packaged Facts Lummis noted, There is a lot of convenience associated with the treats segment, and a fair dose of marketing appeal with treats that incorporate functional ingredients.

Unfortunately, those functional treats may be treading on thin ice, whether positioned as dietary supplements or simply foods with nutritional or functional ingredients. A report issued by the National Academies, prepared for FDA in 2008, estimated up to one-third of dogs and cats in the United States are being fed an animal dietary supplement; however, FDA has noted the Dietary Supplement Health & Education Act (DSHEA)which created the category of dietary supplements for humans as a subset of fooddoes not apply to animals. NAS reported: Current regulations addressing animal dietary supplements are in disarray. Clarification is required to clearly differentiate between an animal dietary supplement and a food additive or animal drug, as well as factors that differentiate regulation of human and animal supplements. ... Many challenges stand in the way of determining whether or not animal dietary supplements are safe and at what dosage.

Bookout noted NASC was formed in 2002 to address concerns about pet supplements. Currently, under the law, there are only two categories for nonanimal food chain animals: feed or drugs, he said. There was no language in DSHEA mentioning animals; theyre neither specifically included nor excluded. However, FDAs Center for Veterinary Medicine (CVM) published a notice in the Federal Register that since animal supplements werent specifically mentioned in DSHEA, the agency took that to mean the intention was to exclude them.

In response, NASC submitted a proposal to CVM with a timeline outlining specific objectives to address the agencys concerns (GMPs, adverse event reporting, safety protocols) and asked the agency to exercise regulatory discretion until implementation could take place. The agency agreed to work with us, which has allowed companies to take advantage of the near-term opportunity while working on long-term benefits for all stakeholders, he said. In the past four years, the association has established GMPs as well as an AER system, and continues to work with FDA to implement its proposal.

Dijkstra noted NASCs leadership in the area has been noteworthy. The lack of an official regulatory environment for animal supplements is an area of concern for manufacturers intending to enter the companion animal products category, he said. Formal regulatory acceptance of a pet supplement category will cause strong credibility and therefore consumer confidence in this segment, creating a boost in the pet supplement market as companies launches a plethora of new products.

Part of NASCs proposal included establishing an AER system, which responded to serious concerns raised by FDA and the National Academies about how to track the safety of pet foods and nutritional products. The issue of safety related to pet foods came to the fore in 2007, when the melamine adulteration situation resulted in massive recalls of pet foods and angry consumers demanding more oversight. However, Lummis noted the recalls had an interesting effect: It caused consumers to ask questions and backed up their rationale for spending more on higher-priced foods and super-premium brands. Overall, the pet food market did fine and even better than in previous years.

The GMPs were also an important part of the NASC proposal and have been a focus of pet food regs as well at CVM since the melamine crisis, Alix said. Historically, the frequency of pet food recalls was no greater than that of human food products, he noted. The current concern regarding product safety mainly relates to identifying adulterants in ingredients and food products imported from countries with lower-quality standards.

Faron added the concept of food safety is intertwined with that of transparency about country of origin. Wyant said, Many suppliers are in countries that do not have the same quality and ethical concerns as U.S. ingredient processors. Choosing a U.S.-based ingredient processor will help companies gain trust and knowledge by directly auditing their processing facilities and laboratories easily.

It is a good idea to audit facilities, ask questions about ingredient sourcing and demand more documentation of QC practices. Manufacturers are seeking to source the right raw material supplier for the right ingredient, which has led to a much greater focus on quality assurance and quality control, Dijkstra said. Material testing by reputable and carefully selected laboratories is more critical than ever, as is traceability. Many manufacturers are now demanding documentation for complete traceability of particular ingredients.

Presuming the regulatory paradigm is resolved and the quality issues addressed by suppliers, could there be other factorssuch as a recessionthat could adversely affect the growth potential for marketers seeking to enter the space? The answer from most folks seems to be, not really.

The recession could have an impact, but the pet market tends to be recession resistant, Lummis said. Additionally, so much of the market on the premium side is targeting higher income demographics and theyre likely better able to insulate themselves in the down economy. We might see a slowdown in growth by 1 percent or so, to maybe 4.5 percent growth in 2009.

Many consumers may well view supplements and other pet care products as a way to avoid costly medications or vet visits, Dijkstra said, in addition to turning their interests away from more expensive out-of-house hobbies and toward pampering the family. He added, Theres also untapped consumer demographicssuch as the 20 million dog- or cat-owning households who use human supplements but not pet supplements, and who are excellent prospects since they are pet owners who appreciate the benefits of nutritional supplements.

Alix concluded, In most Western cultures, pets have a status similar to children. This means that these pet owners are motivated to meet the needs of their pets based on their current awareness level of those needs. Both human and animal industries continually strive to increase the consumer awareness of health issues and the benefits of nutraceutical-type ingredients to prevent, minimize or cure adverse health conditions. Subsequently, this will continue to drive consumer pet product purchases toward products with new, innovative nutrition and functionality, supporting a greater sense of well-being for themselves and their pets.