U.S. Dairy GLOBAL Site... · Opportunities for Dairy Ingredients in the Global Pet Food Industry . ... 2.2.1.2 A Recent Case Study in US NPD………… ... Division Hill’s Pet

GLOBALPet Food Industry

AUGUST 2007

Copyright ©2007. USDEC. All rights reserved.

Market research

U.S. DairyExport Council®

Opportunities for Dairy Ingredients in the Global Pet Food Industry

August 2007

1.0 EXECU

1.1 1.2 1.3 1.4

1.5 1.6

2.0 GLOBA

2.1

2.2

3.0 THE R

FOR IN

3.1 3.2

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CONTENTS

TIVE SYNOPSIS……………………………………………….....

The Global Pet Food Market – Structure and Trends………..... Key Trends in Selected Markets………………………………..... The Regulatory Environment…………………………………...... R&D / NPD and their Dairy Ingredient Supply Implications……………………………………………………........ Strengths and Weaknesses of Dairy for Pet Food…………...... Conclusions – Key Opportunities for Dairy Ingredients……......

L PET FOOD MARKET OVERVIEW………………………......

Market Structure and Trends…………………………………......

2.1.1 Global Market Size and Trends………………………......

Key Trends in Selected Markets……………………………….....

2.2.1 The US Pet Food Market……………………………….....

2.2.1.1 US Research and Product Development….... 2.2.1.2 A Recent Case Study in US NPD………….....

2.2.2 The European Market…………………………………...... 2.2.3 The Japanese Market…………………………………...... 2.2.4 The Brazilian Pet Food Market…………………………... 2.2.5 The Chinese Pet Food Market…………………………... 2.2.6 The Pet Food Industry in Thailand…………………….... 2.2.7 Growth Drivers in the Pet Food Industry……………...... 2.2.8 Growth Constraints in the Pet Food Industry…………... 2.2.9 Foreign Trade – US Pet Food Exports……………….....

EGULATORY ENVIRONMENT – IMPLICATIONS GREDIENT SUPPLIERS………………………………………...

Overview…………………………………………………………..... The US……………………………………………………………....

1 1 2 3 4 4 5 7 7 7 10 10 13 15 17 19 24 30 31 32 33 33 37 37 37


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3.2.1 The US Registration Process for Pet Food Ingredients………………………………………………………..... 3.2.2 Case Studies – Definition of Ingredients for

Registration in the US…………………………………...... 3.2.3 US Label Claim Regulation……………………………..... 3.2.4 Ingredient-Linked Claims………………………………..... 3.2.5 The Headache about Supplements…………………….... 3.2.6 Summary ……………………………………………….......

3.3 Europe……………………………………………………………....

4.0 PROFILES OF SELECTED GLOBAL PET FOOD

INDUSTRY PLAYERS………………………………………………….....

4.1 Overview…………………………………………………………..... 4.2 Key Global Pet Food Companies…………………………….......

• Mars Inc. incl Doane Pet Care Company………………...... • Nestlé SA incl Nestlé Purina Pet Care……………………... • Procter & Gamble…………………………………………...... • Colgate Palmolive Company……………………………….... • Del Monte Foods Company incl Del Monte Pet Products... • The Meow Mix Company…………………........................... • Nutro Products, Inc…………………………………………....

4.3 Other US Companies……………………………………………...

• C J Foods Limited…………………………………………...... • Red Barn Pet Foods Inc……………………………………....

4.4 Other European Companies……………………………………....

• Masterfoods / Mars Inc and Waltham Centre for Pet

Nutrition…………………………........................................... • Nestlé Purina Petcare Ltd incl Nestlé Purina Petcare

Product Technology Centre (PTC)………………………...... • Corporación Agrolimen SA………………………………....... • Provimi B.V……………………………………………………..

4.5 Key Japanese Companies……………………………………......

• UniCharm PetCare Corporation…………………………...... • Nisshin Petfood Inc………………………………………….... • Morinyu Sunworld Co. Ltd………………………………….... • Nippon Petfood Co. Ltd……………………………………..... • Aixia Corporation…………………………………………….... • Inaba Petfood Co. Ltd………………………………………... • Sunrise Corporation………………………………………......

37 38 38 39 40 41 42 46 46 47 47 49 52 53 54 57 58

62

62

64 66 66 66 67 67 68 68 70 72 73 74 75 76


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4.6 Key Brazilian Companies……………………………………….....

• Nestlé Brasil Ltda – Pet Food Division…………………....... • Masterfoods Brasil Alimentos Ltda………………………….. • Total Alimentos SA……………………………………………. • Nutriara Alimentos Ltda………………………………………. • Mogiana Alimentos SA (Guabi)……………………………… • Royal Canin do Brasil……………………………………….... • Colgate Palmolive, Division Hill’s Pet Nutrition…………..... • Grandfood Ind e Com Ltda………………………………....... • Iams do Brasil (Procter & Gamble)………………………..... • Pra Bicho Ind e Com Ltda…………………………………….

4.7 Key Thai companies…………………………………………….....

• Perfect Companion Co Ltd………………………………....... • Thai Union Frozen Products Public Ltd Co (TUF)

and Songkla Canning PCL.................................................. • Unicord Public Company Ltd……………………………….... • S.K. Foods (Thailand) Public Co Ltd……………………...... • Royal Canning Co Ltd……………………………………....... • Hi-Q Food Products Co Ltd………………………………...... • Chin Huay Co Ltd…………………………………………...... • Kingfisher Holdings Limited………………………………...... • Golden Prize Canning Co Ltd……………………………......

5.0 DAIRY INGREDIENT OPPORTUNITY ANALYSIS…………………....

5.1 Marketing / NPD Strategies – Dairy Ingredient Supply Implications…………………………………………….......

5.2 Strength and Weaknesses of Dairy……………………………....

5.2.1 Dairy ingredient benefit profile………………………….... 5.2.2 Perceived disadvantages of and substitutes for

dairy ingredients…………………………………………....

5.3 Awareness and Attitudes Towards Dairy Ingredients……….....

5.3.1 Current and likely future usage……………………….......

5.4 Summary of Key Opportunities for Dairy Ingredients………......

76 76 77 78 80 81 82 83 83 83 84

84 84 86 87 88 88 89 89 89 90 91 91 92 92 92 94 94 95


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TABLES: Table 1.1a Volume and value shares by region, 2005…………………..... Table 1.1b Global market shares by value, 2004………………………..... Table 2.1.1a Dog Populations by Country, 2006…………………………..... Table 2.1.1b The global cat and dog food market by region,

US$ mn………………………………………………………….... Table 2.1.1c The global cat and dog food market by region, tones……...... Table 2.1.1d Average retail price for cat and dog food by region,

US$/kg…………………………………………………………..... Table 2.2.1 Top Five Pet food Marketers, USA, July

2006……………...................................................................... Table 2.2.2 Western European market shares, 2005................................ Table 2.2.3 Leading pet food (dog and cat food) companies by

retail sales value in Japan, 2000 – 2004................................. Table 2.2.4a Brazilian production of pet food, 2000 – 2006......................... Table 2.2.4b Pet food sales share by region, 2006...................................... Table 2.2.4c Share of sales by classification of pet food, %........................ Table 2.2.4d Illustration of high tax situation for pet food............................. Table 2.2.4e Indicative prices of key pet food ingredients in Brazil, April

2007.................................................................................... ... Table 2.2.9a US pet food export trends, 2001 – 2006, US$ mn.................. Table 2.2.9b Import duty levels for various key pet food markets, 2007...... Table 4.1 Top Pet Food Companies Worldwide, 2004........................... Table 4.4 Provimi plant capacities.......................................................... Table 5.3.1 Examples of dairy ingredient usage in pet foods....................

1 2 7 7 8 8 12 18 21 24 25 26 27 30 34 36 46 68 94


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1.0 EXECUTIVE SYNOPSIS 1.1 The Global Pet Food Market – Structure and Trends

In 2005, the global pet food market was worth US$ 42 bn. North America and Western Europe accounted for the vast majority of sales – 36.7% and 35.9% respectively. Table 1.1a Volume and value shares by region, 2005

Region Volume share, % Value share, % North America 37.9 36.7 Western Europe 31.2 35.9 Latin America 16.1 11.2 Asia Pacific 6.7 8.3 Australasia 3.5 3.4 Eastern Europe 3.2 3.3 Africa/Middle East 1.4 1.2 Total 100.0 100.0

Source: Euromonitor International Private label pet food is an important and even dominant feature in the global pet food market – while private label is considered to be a mature market in many regions, in particular Western Europe, the fastest growing pet food private label opportunities are in emerging markets, where pet food is the third largest growth category of all private label products. Another global trend is the shift from wet food to dry food – this trend is visible in markets such as Europe, where traditionally wet pet food has been the dominant product, as well as in markets where dry pet food is already more important, such as the Americas. The mature markets of Western Europe and North America are significant for value growth because of increasing demand for premium and super-premium products. Non-mature markets show both volume and value growth because of increasing pet ownership as well as increasing penetration of commercially prepared pet food. Countries such as Argentina, Brazil and Mexico are major players in the Latin American region, whereas Poland, the Czech Republic and Hungary show strong growth in Eastern Europe. The Japanese market dominates the Asia Pacific region, however China is becoming a very popular market for sales of mid-priced and premium products.


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From a competitive point of view, the large multinational companies (primarily U.S.-based) dominate not only in the mature markets of North America and Western Europe, but tend to lead most markets, as demonstrated in the table below. Since 2004, Mars Inc and Del Monte have both strengthened their position considerably through acquisitions. Table 1.1b Global market shares by value, 2004

Mars Inc - 24.6%

Nestle SA - 24.1%

Procter & Gamble - 6.8%

Colgate-Palmolive - 6.2%

Del Monte Foods Co -2.8%Private label - 11.5%

Other - 24%

Source: Euromonitor International

1.2 Key Trends in Selected Markets

In the U.S., higher prices rather than larger volumes are driving retail sales because of the ever-increasing demand for higher quality and premium/super-premium products. Key trends often mirror trends in the human food market: • Natural/organic

• Fortified/functional

• Weight control

• Life stage

• Breed/size specific

• Gourmet, etc.

The U.S. market is relatively concentrated with 75% of sales concentrated in five large competitors – Nestlé Purina dominates with a 32% share while four other companies (

Mars Inc, Procter & Gamble’s


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Iams, Colgate-Palmolive’s Hill’s Pet Nutrition and Del Monte) each

ls re increasing their market share at the expense of the major brands.

reed/size specific pet food, and Japanese pet owners are oncerned about lack of exercise and obesity in an aging pet

, there is also a number of large and highly competitive apanese manufacturers, most notably Unicharm and Nisshin Pet

a and Mars Inc lead the market, but there are also strong local players, most importantly Nutriara, Mogiana (Gaubi)

1.3

dicine of the FDA and by each of the States. odel regulations have been developed by AAFCO (Association of

y rocedures. Pet food has to be nutritionally complete, whereas pet od supplements do not – supplements are not regulated as of yet.

have around 10% of the market share. The European market mirrors U.S. trends in its growing demand for premium and super-premium products. The Western European market is estimated at around five mn mt and is growing at around 3% per annum. Eastern European pet food markets are thought to grow at around 2-3 times that rate. Dry pet food dominates, and private labeaKey trends are convenience, functionality, wellness and life stages. The Japanese market is the dominant Asian market and is growing strongly. Pets are increasingly filling the void left by an increasing number of single people and couples who delay having children. Increasingly, pets are kept indoors in apartments, and thus pedigree and small dogs are very popular. Japanese pet owners are becoming more aware of issues concerning health and nutrition. There is strong demand for bcpopulation. Mars Inc and Nestlé Purina lead the Japanese pet food market; howeverJFood. The Brazilian pet food market is growing strongly for a number of reasons – chief among them an increasing pet population, growing numbers of pets being fed commercially prepared pet food rather than table scraps and increases in local pet food production leading to a reduction in import demand. Premium pet food is growing most strongly. Nestlé Purin

and Total Alimentos.

The Regulatory Environment

The regulatory environment varies vastly among countries, leading to problems in trade and product transfer. In the U.S., pet food is highly regulated, whereas in Japan, for example, it is not regulated. U.S. pet food is more highly regulated than human food: as animal feed by the Center for Veterinary MeMFeed Control Officers). Regulations cover ingredients, labeling, claims and food safetpfo


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In the EU, regulation is even more complicated – since the 1970s, the European legislators have adopted a succession of hundreds of directives that affect pet food at all stages of its manufacture and marketing. The European Petfood Industry Association (FEDIAF) has

slation.

1.4

all about “marketing puffery” based on the ssumption that pet owners naturally think that what is good for them is

n gredient and then assessing the cost of including it in a pet food

y co-branding Friskies pet food and Carnation, despite the pet food including no or

.

1.5

Some of the key benefits that pet food manufacturers perceived

• bility – whey protein is a very efficiently digestible protein ffects such as malodorous gases and

• rotein

e beneficial for injection-molded treats

n the downside, perceived disadvantages of dairy over other

produced a guide to good practice which incorporates EU legi

R&D/NPD and their Dairy Ingredient Supply Implications

The pet food business isaalso good for their pets. R&D people in the pet food industry tend to focus on the “D,” not the “R” and therefore little clinical research is undertaken. Some companies’ R&D departments have links to universities involved in research in the area of pet nutrition. In general, pet food manufacturers tend to put the onus for research on ingredient suppliers, starting out by asking what claim they can make about ainformulation. Price is a major factor, putting dairy at a disadvantage. Dairy is weak in human nutraceutical foods and especially supplements, hence it is unlikely to make much headway in pet food applications. Nestlé attempted a dairy positioning b

very little dairy . This co-branding was not successful

Strengths and Weaknesses of Dairy for Pet Food

regarding dairy ingredients included:

• Palatability – dairy ingredients are thought to add a good taste and hence increase the pet’s appetite

Digestiwithout unpleasant side efeces

High-quality p

• Healthy image – the general “dairy halo” makes a product very label-friendly

• Functionality in improving consistency of treats – casein was mentioned to b

Oingredients included:


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• Fresh dairy does not offer the shelf life pet food manufacturers demand

• The key nutrients sought in pet food – proteins, vitamins, carbohydrates, calcium/minerals – are easily available from other, cheaper sources, whether animal or vegetable-based

• pelling messages or specific substantiated

•

pet food

• the extrusion process

a negative as

of the pet’s

.6 Conclusions – Key Opportunities for Dairy Ingredients

senting an ingredient opportunity. There is little excitement about dairy as an ingredient in the pet food industry.

Howevinto peopport

intolerance in cats and dogs – these ingredients should

•

There are no comclaims for dairy that could be communicated to the pet owner

Perceived lactose intolerance in cats and especially dogs leading to diarrhea

• Dogs and in particular cats are meat eaters, hence manufacturers like to have meat-derived proteins as first ingredients on the label

Dairy proteins are hard to use in

• The high level of minerals, especially calcium, iscalcium is already present in pet food in high doses through the use of bone meal – this can lead to overloading kidneys and cause renal failure

• The high price of dairy ingredients

1

There is currently very little usage of dairy ingredients in pet food, and little awareness of dairy pre

er some opportunities may exist to incorporate dairy ingredients t food. The high quality of dairy protein is recognized. Some

unities may exist for:

• Dairy derivatives with a low lactose content, such as de-lactosed milk powder or high protein WPCs to counter the perceived lactosebe aimed at the premium and super-premium sector

Whey protein may fill the demand for an efficiently digestible protein with the major benefit of avoiding malodorous gases and feces

• A key trend in the pet food industry is the growing demand for targeted pet foods addressing specific areas of concern – obesity, renal/liver issues and so on. Ingredients targeting these issues would have demand – if there was evidence of their effectiveness

In summary, the dairy industry has to address the “Two Ps” – price and proof, with proof (i.e. clinical evidence) being key. If the dairy industry


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could develop a substantiated claim, it may open up opportunities in the pet food industry. However pet food should not be the key target – the industry is highly trend-driven and any dairy ingredient success in the pet food sector may be overtaken by the next fad that comes along. Any growth of dairy ingredient usage in pet food applications would likely be a result of success within the human food industry.


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2.0 GLOBAL PET FOOD MARKET OVERVIEW 2.1 Market Structure and Trends

2.1.1 Global Market Size and Trends Table 2.1.1a Dog Populations by Country, 2006 Country Dog population, mn

USA 69.01

Brazil 31.40

China 26.15

Mexico 16.58

Japan 12.78

Russia 11.20

France 8.49

Source: Euromonitor International According to recent research, in 2005, the global market for dog and cat food was worth US$ 42 bn. Table 2.1.1b The global cat and dog food market by region, US$

mn Region Retail sales value, US$

mn % share

North America 15,454 36.7

Western Europe 15,104 35.9

Asia Pacific 4,730 11.2

Latin America 3,479 8.3

Australasia 1,417 3.4

Eastern Europe 1,391 3.3

Africa/Middle East 503 1.2

Total 42,078 100.0

Source: Euromonitor International In volume terms, the following picture emerges:


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Table 2.1.1c The global cat and dog food market by region, mt Region Retail volume, mt % share

North America 6,766,521.81 37.9

Western Europe 5,575,789.15 31.2

Latin America 2,881,443.96 16.1

Asia Pacific 1,190,719.15 6.7

Australasia 620,057.55 3.5

Eastern Europe 562,928.03 3.2

Africa/Middle East 257,773.21 1.4

Total 17,855,232.86 100.0

Source: Euromonitor International Asia Pacific appears to be the highest price region, whereas the Latin American market has the lowest average retail price. Table 2.1.1d Average retail price for cat and dog food by region,

US$/kg

Region Average retail price, US$/kg

Asia Pacific 3.97

Western Europe 2.71

Eastern Europe 2.47

Australasia 2.29

North America 2.28

Africa/Middle East 1.95

Latin America 1.21

Overall average 2.36

Source: iRIS Consulting based on Euromonitor International One interesting trend is the dominance of own-label pet food in the world market. In an international setting, own-label is considered to be a mature market in many regions, in particular in Western Europe. However, the fastest growing own-label pet food opportunities are in underdeveloped or emerging markets. According to AC Nielsen, pet food is the third largest growth category of all own-label products, behind cosmetics and baby food products. Globally, private label dog food sales, for example, are more than double brand name sales. Another interesting global trend is the shift from wet to dry food. According to Nestlé based on Euromonitor and Nielsen Grocery numbers, in Europe, for example, the market volume of wet food was


August 2007 9 USDEC

estimated at around 2.4 mn mt in 1995, decreasing to around 2.1 mn mt in 2003. At the same time, dry pet food increased from more than 600,000 mt to just over 1 mn mt. Similarly, in the Americas region, dry pet food dominates. Wet pet food volumes were relatively stable between 1998 and 2003, whereas the volume for dry pet food grew from around 5.5 mn mt to 7 mn mt. It is thought that this trend has resulted from several factors, one being health and hygiene – dry food offers less spoilage risk after being opened because of its lower water content. Additionally, dry food contains a moderate degree of dietary fiber and causes less plaque and tartar than canned food. From a growth perspective, the mature markets of North America and Western Europe are significant for value growth because of increasing demand for premium-priced products. Non-mature markets are seeing strong growth in both volume and value, largely attributed to increasing pet ownership as well as increasing penetration of industrially-prepared pet food. Countries like Argentina, Brazil and Mexico are the major players in the Latin American region, whereas Poland, the Czech Republic and Hungary are countries from Eastern Europe that are showing significant growth. Japan dominates the Asia Pacific region, accounting for 75% of total sales in that region. China, however, is becoming a very popular location for sales of mid-priced and premium pet food offerings. In summary, industry sources and research into the market tend to cite several key developments driving the pet food industry: • Increasing “humanization” of pets

• Product and packaging innovations

•

• levels of industrially prepared pet food in

• Consumers trading up to premium and super-premium products

Improvements in distribution

• Rising levels of pet numbers in emerging markets

Rising consumption developing markets


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2.2 Key Trends in Selected Markets 2.2.1 The U.S. Pet Food Market

The U.S. retail sales market value is driven by higher prices rather than volume, because of strong consumer demand for premium products across all categories. Upscale pet foods cover all bases: • Natural/organic

• Fortified/functional

•

nction”, “fatty acids for healthy skin and coat” and

et food, having made up 56% of

that focus on dogs and cats. estlé Purina continues to dominate the U.S. market with a 32%

t

eow Mix from Cyprus Group. The acquisition of Doane Pet

Weight control

• Life stage

• Breed/size-specific

• Gourmet etc Apart from “Breed/size specific,” the above mirrors the key trends in human food consumption. Pet foods are also showing up increasingly as not just human style, but also as “human grade.” According to Euromonitor’s Productscan Online, the umber one package claim in the first half of 2006 wasn

“upscale,” appearing on 94 new products. Other top claims included “antioxidant nutrients to support

mune fuim“natural”. In 2005, the retail sales value for the U.S. pet food market was estimated at US$ 14.5 bn, having grown by 5.4% from the previous year. Dog food accounted for 60% of this, with cat food making up 34% and other pet food the remaining 6%. Dry

od was more important than wforetail sales value in that year. Although hundreds of companies market pet food in the U.S., the market is relatively concentrated, with 75% of the business going to a few large marketers Nshare of sales (July 2006 data). Four other companies claim shares in the 10% range – Mars Inc, Iams (Procter & Gamble), Hill’s Pet Nutrition (Colgate-Palmolive) and Del Monte – the latter expanded their markehare in 2006 through its acquisition of Milk-Bone from Kraft and s

M



Products (the largest private label manufacturer) in 2006 and Nutro Products by Mars Inc in April 2007 considerably strengthened Mars Inc’s market share in the U.S. The leading players spent US$ 300 mn on consumer advertising in 2006, with specialty retailers such as PetCo and PetSmart contributing another US$ 57 mn. Pet ownership in the U.S. is increasing, with 63% of U.S. households in 2004 having a pet, up 7.6% from 2002. This means that 69.1 mn households in the U.S. have a pet. However, even more important than the growth in this number is the fact that the pet population is also living longer. The more specialized needs of an aging pet population and longer lives (meaning deeper emotional bonds between pets and owners) are leading to an increasing willingness by owners to purchase high-quality pet food. Almost half of all dogs and cats are six years old or older, which leads to increased sales of premium-priced foods, nutraceuticals and supplements designed to increase longevity. Another demographic trend that has spurred purchases of higher-value pet food are the increasing numbers of couples without children – these are more likely to purchase more expensive pet products and services since not having children frees up discretionary time and income. In the dog food segment, the primary market driver is the ongoing product up-scaling. While a big push a year or so ago was towards human-style novelty foods for dogs (pizzas, candy etc), the emphasis has now shifted towards human-grade fare, often overlapping with natural/organic. This is also the case for cat food, where additional variety and gourmet flavors continue to proliferate. Pet Food Industry Magazine sees the key U.S. trends for the future as follows: • Higher-priced pet foods

• Healthier fare with increasingly targeted benefits

• enient products (especially pre-portioned and

• se sales are predicted to top the

More convresalable)

• Gourmet/luxury foods and treats for pampering

Natural and organic – theUS$ 1 bn mark by 2010



• A shift back towards wet food in new and more upscale package formats – recent example products were

• gence of a new fresh foods niche mirroring, both in

• Steady growth in the supplement and treat market for

From pinpoin

• e to

• a previously unknown contaminant

ar dog or cat (nutrigenomics)

Owners will increasingly seek out nutritional advice from itionists and sources othe ral as general veterinarians a ed

er very specialist nutrition questio

T Pet food Marketers, USA, July 2006

launched by Nestlé Purina and Meow Mix

Emerpackaging and formulation, fresh food for people

pets

• A major push towards products that are made with ingredients used in human foods

a scientific point of view, leading veterinarians have ted the following trends:

Functional ingredients in pet foods will likely continube an important aspect of pet nutrition, as is the trend towards holistic products

Food safety will gain renewed focus given the recent recall because of

• Another issue, although a bit further out, may be the use of molecular biology to help pinpoint specific metabolic traits in an animal or breed that will help provide information on the best food for that particul

• nutrvet,

r than their local or genere not adequately qualifi

to answ ns

able 2.2.1 Top Five

Company Retail sales v alue share, %

Nestlé Purina 32.0

Mars Inc 12.0

Iams (Procter & Gamble) 11.0

Hill’s (Colgate-Palmolive) 10.0

Del Monte 9.0

Other (including own-label) 26.0

Total 100.0

Source: Pet Food Industry Magazine



2.2.1.1 U.S. Research and Product Development

Pet food companies are highly competitive. In the U.S., over 95% of the daily caloric requirement of pets is supplied by commercially prepared pet food. The number of dogs and cats is increasing, but at a slow pace. Manufacturers have to find new ways to distinguish themselves from the crowd in order to grab consumer attention. The pet food industry has also seen consolidation of the largest companies during the last couple of years. In 2006, Mars Inc bought Doane Products (the largest producer of dry private label products) and S&M Nutec (manufacturers of Greenies) – Mars Inc’s “shopping spree” continued in 2007 with the April 2007 acquisition of Nutro Products. Del Monte, in 2006, bought Meow Mix (the second largest dry cat food brand) and Milk-Bone (the leader in dry biscuits for dogs). However, the presence of fewer companies at the top has not stifled new entries into the arena. If anything more start-up pet food companies are emerging, as it appears to be such a robust industry. Competition among established companies is driven by improvements on existing products and the introduction of new products, all in an effort to increase shelf presence. This grab for the audience includes graphic redesigns and far beyond. Eukanuba, P&G Petcare’s top line, is in the midst of a relaunch that expands the offerings based on breed size across the entire line. Each item is now available in small, medium and large breed with new and updated graphics. These larger companies have their own research facilities, as well as the money to finance research. The competition in smaller companies is driven by “unique” approaches to products and ingredients. Since these companies do not have deep pockets or research facilities, they rely more on ingredients that have some marketing buzz to them, usually generated by prior use in human foods. Many of these companies are “fast followers” that are quick to adopt the strategies of the bigger companies. The vast majority of pet foods are now nutritionally complete for their intended use. Complete nutrition is a base line expectation of customers. Where commercial foods have a high level of caloric coverage, nutritional deficiencies are virtually unknown. When deficiencies are discovered, the industry moves very quickly to fix the



issue. For example, in the late 1980s it was discovered that some cats with dilated cardiomyopathy were in fact deficient in an amino acid-like compound – taurine. While most cat foods contained taurine, under certain conditions the levels were too low. Once this was identified and quantified, those products were supplemented with additional taurine. With complete nutrition now being the base line, consumers are looking for achievement of greater goals from their pets’ diets. They want pet food to:

• Help their pets live longer and to live healthier lives

• Help delay the pets’ aging process

• Help protect pets from chronic diseases

Fix other problems suc• h as itchy skin, hairballs

• sumers want pet food

s

roduct dres m. These systems include:

and even bad behavior

If the pets get obese, conthat will take the weight off

Additionally, consumers are looking for natural sources of ingredients to provide these benefits. The growth in natural products for pets has been phenomenal. The pet industry is also seeing the influx of organic products into the marketplace. As pet foods rely on by-products or co-products of human food production, it has taken time for there to be a critical mass of available organic ingredients for use in pet food. This should bode well for dairy ingredients as dairy co-products have been part of the animal diets for centuries. A segment of consumers think of themselves as pet guardians and they are tending to look for more humanized and natural foods. They are very distrustful of commercial products and ingredients coming from mass animal production for the human food chain. Rumors of hormones and toxins in pet food

gredients abound within this group of consumers. Thiinis a challenge for the acceptance of dairy co-products. In recent years, the developments in pet food have tended to address various metabolic systems of the pet. The back panel of most dry pet foods carries a list of numerous systems and details on the way the pad ses each of the

• Skin and coat

• Skeletal



• Oral

• Digestive tract

• Immune system

• Nervous/sensory system

The product designs in support of these claims come ditional essential

nutrients, nonessential nutrients and sometimes from

2.2.1.2

nd successfully corporated into the pet foods market. The inclusion of

he two companies discussed here, Hill’s Pet Products

However, based in part n P&G supported research, the recent edition of the

and ill’s both used their connections to projects involving

from conventional ingredients, tra

novel materials, either ingredients or nutrients.

A Recent Case Study in U.S. NPD

The following case study elaborates how certain products/ingredients can be developed ainthis example aims to provide a framework for the successful development and possible inclusion of dairy-based products into the pet food market. Tand P&G Petcare, are both involved projects related to canine health and nutrition and trainability among other things. P&G has been particularly active in supporting research into the functions and benefits of omega-3 fatty acids. Omega-3 fatty acids were not historically considered to be classically essential nutrients. oNational Research Council’s publication on the nutrient requirements for dogs, the Omega-3 fatty acids are now listed as conditionally essential. Originally, the work into Omega-3 fatty acids supported only skin and coat claims. The balance of Omega-3 to Omega-6 fatty acids – the classically essential fatty acids – was important in keeping down skin inflammation. That work led to a deeper look at inflammation and the role of Omega-3 fatty acids in immune response. The continued research led to the claims regarding immune function. One of the important Omega-3 fatty acids is docosahexaenoic acid, better known as DHA. It was found that DHA was not only important in immune system development, but also in neural development. P&GHhighly trained dogs to investigate the possible influence of DHA on trainability. The results are now seen with label claims about smart puppies with better trainability.



DHA is a naturally occurring nutrient in pet food. The main source is fish oil and comes into pet foods via whole fish, fish meal and fish oils. None of these ingredients are novel. P&G and Hill’s did the research and got a head start on using the claims. Once the work was publicized, other companies jumped on the bandwagon. The fast followers either included fish oil or based their laims on existing levels of fish in their products and

otential dairy-based ingredients. ommonly occurring ingredients, with essential or

exists in pets. These companies identify marketplace buzz about certain ingredients for humans,

manization of pets, include these oducts. These include ingredients

companies in the world. Last ear, Nestlé Purina’s Friskies brand of dry cat food unched a product improvement for New Friskies Feline avorites with the taste of Real Carnation® Milk. Nestlé urina leveraged the power of the Carnation milk brand,

cmade slightly softer claims. This led to an increase in the inclusion of fish or fish oils in pet foods across a wide portion of the market. This case study provides a roadmap for the successful development of pCnonessential nutrients or other compounds, that can be tested in the target animal and shown to have benefits, can be successful. Another route into pet foods is through smaller companies that are more willing to include ingredients that may have utility in humans, but where little or no research

and leveraging the huingredients in their prsuch as:

• Enzymes

• Hemp oil

• MSM (methylsulfonylmethane)

• Green tea and others

This was the same mechanism that led to the inclusion of glucosamine and chondroitin into pet foods. Milk is a very universal ingredient. Thus, milk and its derivatives have been present in pet foods for a long time. Thirty years ago Carnation was one of the largest milk-based, pet food companies in the U.S. The company has now morphed into Nestlé Purina Pet Care, one of the top two pet foodylaFPhowever, unsuccessfully.



Milk-Bone was one of the earliest dog food producst,

ogies and new nderstanding of metabolic functions, it may be that

ted for new uses. If the milk or milk components can be considered

be a p Some

• n be

• eat market is undergoing a huge tion from novelty products to functional There is a six to 18 months lag time

2.2.2

ound 35.9% of global pet food

ds – mirroring trends in the U.S. In

made at the time by National Biscuit Company, Nabisco. Milk-Bone made its reputation on the fact that the biscuits contained milk. The milk is still an important part of the dog biscuit – it is the fifth ingredient listed on the label. As the above examples suggest, milk has a place in pet foods. Overall, milk is perceived as a wholesome part of the diet. New research findings on vitamin D and calcium in weight loss might have an application in the pet population, which is thought to be about 25-30% overweight. Now with certain new technolucertain fractions of milk can be readily isola

natural or produced under organic conditions that would lus for use in those niche markets.

other aspects of trends and NPD are:

The day of traditional pet food kibble will soogone. More and more pet food kibbles will have pleasing colors, shapes, aromas and textures – intended to appeal to the owners. For the foreseeable future, anthropomorphism will continue to shape the pet food industry (U.S.)

The pet trtransformaproducts. between the introduction of human food ideas and its transfer to pet treats (U.S.), and this gap is decreasing

The European Market As mentioned earlier, the European pet food market is the second largest market in the world by value, behind the U.S.

arket, and accounted for armsales in 2005. Western Europe is an important market in terms of value growth as there is increasing demand for premium and uper-premium pet foos

Eastern Europe, Poland, the Czech Republic and Hungary are emerging as growth markets. Western Europe in 2006 was estimated to be home to 62 mn cats and 60 mn dogs.



According to FEDIAF, the European Pet Food Industry Association, pet food sales volumes in 2006 were around 5 mn mt, at a sales value of US$ 11.4 bn. Pet Food Industry Magazine (based on Euromonitor International) estimated 2005 European pet food sales at around US$ 15 bn. The Western European market is estimated to have grown by 3% per annum over the last three years. Pet food manufacturers in Europe

by just a few multinational layers, the largest of which are the “usual suspects” including

label anufacturer; with an estimated 10% market share in the

t food trends in Europe are increasingly irroring human food trends with convenience, functional foods,

rowth – oth in the branded, as well as the private label sectors.

The key players in the Western European pet food market are Mars Inc and Nestlé Purina, who together command a market share of above 64%. Table 2.2.2 Western European market shares, 2005

purchased around 2.75 mn mt of agricultural by-products within the EU for the production of pet food products. Eastern European pet food markets are expected to grow at two to three times the rate of Western Europe. Dry pet food dominates. In addition to normal anticipated market growth, the private label sector is gaining market share at the expense of major brands. There is a multitude of companies engaged in the manufacture of pet food in Western Europe – around 450 in total. However, as is the case in the U.S. – and indeed the global environment – manufacture and sales are dominated pMars Inc, Nestlé Purina, Procter & Gamble, Colgate Palmolive and Del Monte. The Spanish company Agrolimen is also a major player in Europe and increasingly in the global market place. The company Provimi is an important privatemWestern European pet food market. Similar to the U.S., pemwellness and life stage products driving innovation and gb

Company Share, %

Mars Inc 38.9

Nestlé Purina 25.2

Private label 23.9

Other 12.0

Total 100.0

Source: Nestlé Purina based on AC Nielsen Some brief profiles on key players are available in Section 4.4.



2.2.3 The Japanese Market

In 2005, the Japan Pet Foods Manufacturers Association estimated 13.1 mn dogs and 10.1 mn cats in Japan. While there has been an increasing trend in the number of pets over recent years, in 2006 there was a slight decrease with 12.1 mn dogs and 9.6 mn cats. However, pets are undoubtedly filling the companionship void of an increasing number of single people and aging couples, and are effectively getting their part of the “family treatment.” The majority of dogs kept as pets are pure-breeds, and they are kept indoors. Cats are mainly mixed breeds but also tend to be kept indoors. Japanese pet owner are becoming more aware and increasingly concerned about pet health issues – in particular where dogs are concerned. The feeding of functional foods has become more popular. However, with the realization that the use of functional ingredients in almost all pet foods was putting unnecessary stress on cats’ and dogs’ kidneys, the use of functional ingredients in pet food has shifted somewhat in recent times – from a general inclusion of functional ingredients in most pet foods to more discerning formulations that tackle specific issues and therapy areas. Pet owners tend to purchase pet food mainly in discount stores and home/garden centers – this is likely because of lower prices as well as more choice offered in these large establishments. However, purchasing of pet food in specialist pet shops, at veterinary clinics or via the internet is also significant. To summarize the situation of pet ownership and feeding in Japan, the following points are important:

• Pets tend to be kept indoors and tend to live increasingly

healthy and longer lives

• Pet owners are increasingly aware and concerned about pet health issues and the role of pet nutrition in pet health, and tend to pay careful attention to what they feed their pets

•

breed-

• insufficient exercise, pet obesity, allergies, diabetes, etc.

Pedigree dogs are much more popular and common as pets than non-pedigree dogs – this may lead to pet owners looking increasingly for foods that are specific and correspond to the relevant life stages

Issues for concern for pet owners include



The Japanese do not have a long history of living with pets in their homes and thus, continue to look for advic

• e

harm’s, strategy. Focus tends to be on four

• An aging pet population

Overweight dogs

pet food instead of table scraps. This diet shift is also improving the

ets. As indoor pets become close companions, wners often deem them worthy of special treatment.

s a result, the ratio of small dogs climbed from a 2% share of the canine population in 1995 to 47% in 2006.

top 10 dogs purchased these days are mall dogs.

of seven. In 2005, that figure

and information from specialists

Shifting social and demographic trends of a maturing and economically developing nation have been the dominant influence on many of Japan’s pet food manufacturers’, including leading supplier Unicdominant trends:

• Indoor pets

• Small dogs

•

Indoor pets

In 1996, 52% of dogs were indoor pets compared to 2005, when 78% of dogs were living inside. A 2004 study of the Japanese Pet Food Manufacturers Association showed that 60% of all cats and dogs were indoor pets, up from 50% a year earlier. Widespread changes in apartment management philosophy have also contributed to the pet boom – in 1998, only 1% of Tokyo metropolitan area apartments allowed pets. In 2005, 64% of new apartments in the same area permitted pets. Pets moving indoors have had two significant consequences: fewer pets are killed by cars, and more pets are eating

longevity of po

Small dogs As owners in Japan opt for smaller dogs, they tend to choose breeds such as Miniature Dachshunds, Chihuahuas, Shih Tzus, Toy Poodles and Papillons. In Japan, living quarters can be very small. A3Apparently, eight of thes Aging pet population With better nutrition and fewer outdoor pets dodging traffic, more Japanese pets are living to a ripe old age. According to a survey by the company Unicharm, in 1996, 36% of the pet population reached the age



increased to 44%. Hence, more products are coming on the the nutritional needs of older pets, such as

eats for healthy teeth etc.

nd feeding them better may make them afer, but they get less exercise. In 1996 only 14% of the

had doubled Table 2.2.3 Leading pet food (d nd c od) companies

by retail sales value in Japan, 2000 – 2004

market addressing tr Overweight dogs Keeping pets indoors asJapanese dog population was overweight. In 2005, this figure

to 28%.

og a at fo

Company

2000 market share, %

2004 market share, %

Rank, 2000

Rank, 2004

Masterfoods (Mars Inc) 22.8 20.6 1 1

Nestlé Purina 10.6 8.7 2 2

UniCharm Corp 7.2 8.4 3 3

Nippon Hill’s Colgate (Colgate-Palmolive Co) 6.3 6.8 4 4

Nisshin Flour Milling Co Ltd 5.0 5.8 6 5

Nippon Pet Food Ltd (part of Nippon Flour Mills Group)

5.9 5.2 5 6

Iams Japan (Procter & Gamble Co) 2.8 4.6 10 7

Sunrise Co Ltd 4.5 4.5 7 8

Maruha Corp (now Aixia) 3.7 4.0 8 9

PetLine Corp 3.3 2.7 9 10

Source: Pet Food Industry Magazine November 2006

her ese pet food suppliers include:

• Doggyman Hayashi

Key Japanese pet food companies are profiled in Section 4.5.

per annum. Based on ade interviews, pet food manufacturers feel that ingredient

Ot important Japan

• Inaba Pet food • Hagomoro Foods

R&D and the Use of Dairy Ingredients in the Japanese Pet Food Manufacturing Industry

In Japan, R&D trends appear to be similar to the U.S., Europe and other parts of the world. Japanese pet food manufacturers are actively engaged in product development, but tend to leave the research to either universities or other research institutions. For example, UniCharm Pet Foods claimed to launch, on average, around 30 different products tr



suppliers are responsible for proving certain benefits and substantiated claims for the ingredient or for a new formulation. Some of the responses given included: “The development is carried out by our company. As for

search, we either cooperate with distinguished research

e outsource to external laboratories and R&D centers.”

larger groups and source their ingredients from their parent

•

• Sunworld Co. Inc is part of Morinaga Milk

• o Shiryo Co.,

• Pet Food Co. Ltd is Inaba

d seasonings/flavors. Ingredients used n.

ual gredi he required benefits,

cern in particular is the nc

Key cr

A stable and consistent supply

• Quality/safety and whether or not any additives are contained in the ingredient – ingredients should be approved by the food hygiene law and feed hygiene law

• Cost

reinstitutions, or leave it completely to them.” “W “Yes of course we cooperate with other companies, suppliers etc.”

A lot of the large Japanese pet food manufacturers are part of

companies. For example:

Nisshin Pet Food Inc is a subsidiary of Nisshin Flour Milling Inc

MorinyuIndustry Co. Ltd

Nippon Pet Food Co. Ltd belongs to KyodLtd – one of the major animal feed manufacturers in Japan

The parent company of Inaba Foods Co. Ltd, dealing in fish and seafood

• Aixia Corp is part of Maruha Group, soon to be Maruha Nichiro Holdings, Inc after the integration of two of Japan’s major fisheries

The main ingredients for pet food are chicken meal, fishmeal, meat products, corn and wheat-based ingredients and a variety

f functional additives anovary, of course, according to the kind of product and formulatio

he blending processes/formulations, and not the individTin ents used, are perceived as giving tnutrition and functionality. One conbala e of fatty acids.

iteria for purchasing ingredients were given as follows: •



Country of origin was generally not given as a problem and most companies appeared happy enough to purchase imported ingredients, as long as the cost was not too high. However, some ingredients, such as wheat-based raw materials, are controlled by the Japanese Government and are purchased in-country rather than imported. Regarding the import of pet food ingredients, dairy is at a disadvantage as Japan has high import tariffs for most dairy-based ingredients, thus cost becomes prohibitive. The use of dairy ingredients in manufacturing Japanese pet food is extremely limited. The key uses of dairy ingredients are in milk alternatives for cats and dogs and some weaning foods, as well as the inclusion in some supplements. The use of dairy ingredients in dry food is almost non-existent, except for the coating of extruded particles for dogs with milk powder by Nisshin Pet foods. Some companies use whey derivatives or milk proteins as a palatant. Apparently whey/milk protein has the best results in improving taste and increasing the appetite, in particular in dogs. Another exception is the use of cheese powder in dog food. Apparently, dogs have a liking for cheese. Use of dairy ingredients in pet food is limited by three key factors:

• In the manufacture of dry/extruded products, ingredients

are exposed to high pressure and high temperatures which leads to browning if dairy ingredients are present

• Dogs have an intolerance to lactose, which causes diarrhea

• n particular when compared to other sources of protein

lated functionality could substantiate specific ealth claims.

ave a favorable image of milk s highly nutritious and healthy.

turers felt that dairy ingredients might ave a role in pet food if:

Dairy ingredients are expensive, i

Almost all pet food manufacturers interviewed in Japan appreciated the nutritional value, specifically the high protein quality found in dairy ingredients. Despite the limitations, there was a desire to use dairy ingredients as long as lactose-free ingredients were available at lower prices than they are now, or if new health-reh Apparently there has been growing popularity for lactose-reduced milk imported from Australia – some pet owners order this over the internet, as they still ha Overall, pet food manufach



• Costs could be reduced

They were easier to handle and store (i• .e. excelling in

•

specific functionality for pets – i.e. R&D, substantiated

rticipant admitted that the level of knowledge of dairy ingredients in the pet food industry was, in general,

2.2.4

s, principally because f the growth in the number of pets. Other factors leading to an

• for imported pet food as ange for local

production to replace imports

A small increase in the volume of exports

Table 2.2.4a Brazilia et food, 6

shelf life and were easy to blend/process)

There were to be more promotion of dairy ingredients to the Japanese pet food industry in the form of merit and

claims and clinical proof of functionality for dogs and cats

One industry pa

probably low.

The Brazilian Pet Food Market The Brazilian pet population at the end of 2006 was estimated at 29.7 mn dogs and 14 mn cats. The production of pet food has shown steady growth for a number of years at rates well above the growth in consumption of human foodoincreased local demand for pet food are:

• An increase in the number of pets being fed commercially prepared food

A reduction in the demand international standard manufacturers arr

•

T

he growth of local production is expected to continue.

n production of p 2000 – 200

Year Product 0 mt ion, ‘00 % increase

2000 1,000 5.26

2001 1,172 17.20

2002 1,234 5.29

2003 1,295 4.94

2004 1,426 10.11

2005 1,562 9.58

2006 1,721 10.21

Source: ANFAL-Pet



Exports from Brazil remain a very small percentage of world trade in pet food, but they are expected to grow steadily as Brazil increases its production of private label brands for export to Europe and Asia. In 2006, exports stood at 33,000 mt. In

te March/early April 2007, Brazil promoted its pet food at a

ort ome Brazilian products. One example is Nestlé Purina, which

he production of pet food dry rations is less than 50% of

06. onsumption is concentrated in the Southeast region of the

006.

Table 2.2.4b Pet food sales share by r

latrade show in Japan. The only major company selling in Brazil is Iams. The company recently opened a plant in Argentina to manufacture Iams and Eukanuba. It can supply the Brazilian market at zero duty. Some other multinationals import specific products and expsimports ProPlan, but exports some of its standard products. Tinstalled capacity. The consumption of industrially-produced pet food rations was estimated at 40% of the total consumption of pet food in 2005, but it is believed to have increased to 43% in 20Ccountry, which accounted for 74.2% of the market in 2

egion, 2006

Region % share of total sales

Southeast (SP, RJ, MG, ES) 74.2

South 11.8

Northeast 7.1

Central west 5.5

North 1.4

Total 100.0

Source: ANFAL-Pet

e 630 rands of pet food, but this tendency will decrease as large

companies, such as Nutriara, grow through acquisitions.

In 1994, there were 10 companies producing pet food, but now there are 82 companies with their own manufacturing operations and a total of 93 industrial pet food manufacturing plants. There are more than 130 companies marketing pet food. ANFAL-Pet has 47 members, which include all the multinationals and covers around 85% of total pet food sales. Most companies only sell in selected regions of Brazil and there are only around 20 companies that sell in more than 15 states. There arb



Pet food is classified into four categories: • Super-premium

• Premium

• Standard

• Economic

ecreasing while the share of economic pet food is increasing.

Table 2.2.4c Share of sales by classification of pet food, %

The top three categories provide all the food needed for dogs and cats (complete nutrition), but the economic rations are considered deficient in some of the essential nutrients. As the number of pets increase, the percentage of the market for super-premium and premium pet food is d

Classification % share

Super premium 4.0

Premium 8.0

Standard 23.0

Economic (sub-standard) 65.0

Total 100.0

Source: ANFAL-Pet

nd premium as a percentage of total sales ropped by 6%.

st products uch as Frolic are losing share rather than gaining.

r ats, although the proportion consumed by cats is increasing.

uring ractices. Other criteria are the maximum percentages of

Comparing the first few months of 2007 to 2006, the ratio of super-premium ad Most of the pet food sales are dry pet food, estimated at 96% of production in 2006. This is a much higher share than in European countries, for example, where wet and humid shares account for more than half of total sales. Semi-mois Total pet food volume is split between 92% for dogs and 8% foc In April 2007, ANFAL-Pet published a set of three manuals for pet food manufacturers with definitions of the minimum percentages of some essential nutrients, including amino acids, for standard, premium and super-premium cat food, dog food and puppy food, as well as rules for good manufactp



microbiological and chemical contaminants, such as aflatoxin, heavy metals etc. The principal reasons customers choose premium and super-premium pet foods are believed to be the protein levels and subjective criteria such as “reduced odor of feces” and “firmness of feces”. The ANFAL-Pet brochures suggest new criteria for the premium and super-premium products such as:

• Quality of the protein – amino acid analysis, digestibility,

absorption

• Product made from standard raw materials, purchased regularly from the same supplier, with standard characteristics, as opposed to being purchased on the spot, which would emphasize price rather than standard specification

• sted pet food) supplied by proteins, carbohydrate and fat

the rmulation of the product are approved by the association.

mark-up by the pet food shop on its sale the final customer.

Table 2.2.4d Illustration of high tax situation for pet food

The percentage of energy (dige

ANFAL-Pet aims to issue a sea, which would be printed on pet food packs to show that the manufacturing plant and fo One of the major problems in the Brazilian pet food business is the tax situation. The taxes, which should be paid on pet food, include the federal IPI sales tax, the federal PIS and Cofins tax paid on all invoices, and the state ICMS sales tax. In many cases, the industry is required to charge an additional ICMS tax to cover the tax on theto

Tax Rations for cattle Pe t foodBas an ic hum

foods

IPI 0% 10% 0%

PIS + COFINS 99.25% .25% 0%

ICMS De x 6%)ferred (ma 18% 7%

Subtotal 15.2 37.25 5% % 7%

Inferred ICMS 0% 10% 0%

Total 15.25% 47.25% 7%

ource: ANFAL–Pet

not issue invoices and consequently avoid paying taxes.

S ANFAL-Pet is trying hard to reduce these taxes as they give an unfair advantage to the smaller regional companies, which do



Around 30% of the pet food is believed to be sold without the correct taxes and consequently at unfairly low prices. The main Brazilian pet food manufacturers are Nestlé Purina, Masterfoods (Effem Mars) and Nutriara, with the companies Mogiana (Guabi) and Total Alimentos SA also important. Total Alimentos manufactures for Hill’s and Mogiana manufactures private label products for the key supermarkets. Premium pet food suppliers in Brazil tend to market their products at events such as fashion shows, sports events and interior design events. They claim that pet owners tend to transfer their own lifestyles to their pets. Some of the super-premium brands sold in Brazil are:

• ProPlan (Nestlé Purina)

• Guabi Natural (Mogiana)

•

ium (Sagemüller)

•

• Nutro Choice Lamb & Rice (Yporã)

y selling points of super-premium and premium pet food

for both cats and dogs in Brazil are:

•

to e intestine

Pedigree Advanced (Effem)

• K&S Equilibrio (Total)

• Hill’s Science Diet (Hill’s)

• Premier Pet (Premier Pet)

• Match Super Prem

CYNO (VA)

• Ossobuco (Nutron)

The ke

Dogs

• Increases resistance to disease

• Antioxidants to fortify the immunological system

• DHA to improve vision and brainpower

• High quality proteins to strengthen bones and muscles

Essential fatty acids to improve and shine the coat and improve the nervous and immune system

• Whole grains: rice for easy digestion and wheatimprove healthy functioning of th



• Tocopherol antioxidants to preserve the flavor and smell

•

• Firmer feces – easier to pick up in the street

foods, such as

ienc pared to ProPlan, Royal Canin and Eukanuba that protein is better. As a result, pet food

can be wer percentage of minerals without any need for the dog or cat to eat larger daily portions, and this reduces the risk of overloading the kidneys with urea/amino acids a g the volume of feces.

•

SP Brasil CEP 01311-9Tel: W3: www.anfalpet.org.br

ontact: José Maria Parra, President ice

as whey permeate, SWP or even WMP and SMP r inclusion into pet food. The lactose is not a suitable gredient except in very small quantities in weaning food for oung animals converting from breast milk to hard rations. here is no value in using lactose as a source of carbohydrate ecause vegetable and cereal sources of carbohydrate, based n corn or other low-price cereal crops, offer a massive price

• Control of tartar build-up on teeth

Reduction of odor in feces/gas

• Improved digestion – prebiotics, glucosamine, omega 3

• Improved skin, coat shine, reduced hair loss

• For cats: reduction of hairballs

The argument in favor of super-premium pet Sc e Diet, comis the quality of the

prepared with a lo

s well as reducin

Anfal-PetAv Paulista 1313 Cj 1030- Sao Paulo

23 +55 11 3541 1760

E-mail: [email protected] C

Antonio Texeiro de Miranda Neto, VPresident José Edson Galvão Franca, Exec Director E-mail: [email protected]

Key pet food suppliers in Brazil are profiled in Section 4.6.

Summary and Conclusions on the Brazilian Market As most dogs and cats are believed to be lactose intolerant, it would not make sense to recommend products containing lactose such foinyTboadvantage.



For the purposes of comparison, prices of key pet food ingredient razil for Apri T tive prices ey pet food ingredients in

Brazil, April 200

the following table gives some s in B l 2007:

able 2.2.4e Indica of k7

Ingredient Price, R$ per mt Price, US$ per mt

Rice bran 350 172.41

Meat meal 250 123.15

Meat and bone meal 300 147.78

Intestine meal 1,100 541.87

Corn bran 380 187.19

Corn germ meal 380 187.19

Fish meal 1,200 591.13

Soy flour 500 246.31

Wheat bran 450 221.67

Source: iRIS Consulting

could be considered.

be efficiently digested without the unpleasant side effects mentioned above – it is important

2.2.5

e demand for pet od has also experienced growth. While the Chinese pet food

There may be an opportunity to use dairy ingredients as a source of “quality protein”. In this case, dairy derivatives with low lactose contents such as delactosed milk powders and high protein WPCs Pet food manufacturers which produce super-premium and premium pet foods are interested in new proteins which are efficiently digested (high absorption and high energy conversion) by dogs and cats, without side effects such as unpleasant odors from gas and feces and with the right amino acid distribution in the protein. Certainly, whey proteins should

however that the amino acid profile is right for pets. Whey proteins would also be superior to casein and caseinates for this objective and at the same time provide an excellent flavor and taste profile. The Chinese Pet Food Market

Pet ownership in China is increasing; hence thfo



market is still small compared to other, developed markets, it shows growth potential. Dog and cat ownership in China has

espectively in 1999 to an tima 004. Estimated sales of dog and cat d re 6.9 mn in 2005, representing growth

increasingly

wever, global players have strengthened g facilities through recent ving their competitiveness.

ortunities in

2.2.6

increased from 5% and 14% res ted 7% and 15% in 2foo ached nearly US$ 21in sales value of 12% over the previous year.

rowth in the market is driven by: G

• One-child households

• An aging population

Both of these factors help create demand for pets, which are seen not just as animals, but also as an extension of the family.

econdly, perceptions are changing as pets are Sseen as companions, in particular by many urban dwellers that tend to have higher levels of disposable income and thus spend more on their pets. Additionally, many people are beginning to rely on their pets to relieve stress and loneliness. Also, many young Chinese see pet ownership as a fashion and identity statement. The Chinese pet food market is dominated by the multinational Mars Inc with its two key brands, Pedigree and Whiskas. It is thought to have a 58% market share of retail sales value. Another large multinational, Nestlé, opened a pet food manufacturing plant in China in February 2007. The US$ 10.3 mn factory is located in Tianjin city near Beijing and has an annual capacity of approximately 20,000 mt. Other pet food products are mainly manufactured by domestic companies and typically sold in outdoor markets. The absence of other dominant domestic or international players makes the market highly fragmented in various regions across China. This makes it hard for other foreign players to compete on price, as well as facing restrictions on import and distribution rights and local protectionism. Hotheir product offer and manufacturin

ergers and acquisitions, thus impromDomestic players are also making efforts to improve product quality and enter the medium price segment. It is predicted that,

s outside major players increasingly look for oppaChina and new products enter the market, the Chinese pet food market is set to grow.

The Pet Food Industry in Thailand



Thailand is interesting as it is a large producer and significant exporter of pet food, in particular to Asian markets.

lling categories in supermarkets.

eived as premium rade and high quality. The major U.S. brands available in the

oice, Nature’s Recipe, Pro Plan, arnam, Pet Products, Adams, T.F.H. and Bio Gloom.

Key growth trends for U.S. imports, in particular, were thought to

f pet food in Thailand are briefly profiled in Section 4.7.

2.2.7 owt

These

value in emerging markets

As a market it also has significance – in spite of the economic slowdown in 2002, pet product stores and pet clinics have proliferated in Bangkok because of the growing number of animal lovers. Ten years ago pet food and pet accessories were small items mixed in with other products on supermarket shelves, but today these products stand on their own as one of the best-se Recent trends in Thailand show that pets – in particular dogs – are increasingly valued as members of the Thai family, hence pet owners seek better quality foods to take care of their beloved animals. This trend means that pet foods are big business – there are nearly 500 outlets in Bangkok selling a variety of foods, accessories and so on for dogs, cats and small animals. According to trade sources, the pet food market was estimated at about US$ 75 mn in 2002 and thought to have grown by 35% in 2003 to US$ 34.7 mn. U.S. pet food is percgThai market include Pedigree, Nutro, Hill’s Science Diet, Eukanuba, ANF, Breeder’s ChF

include premium grade dog and cat food, especially those targeting healthy coats and low-fat products. Some of the key manufacturers o

Gr h Drivers in the Pet Food Industry

Industry sources tend to condense the two key drivers for growth in the pet food industry into the following main elements: To drive value in mature markets

• The ever-increasing humanization of pets

• Rapid R&D, leading to an explosion of new products

in turn point to consumer interest – even frenzy – as the driver of growth. To drive volume and



• Changing lifestyles – declining birth leading to increasing

lation pets can offer whose children

hese factors lead to:

2.2.8

ause of ina, which caused the

in the longer term is ss of living space, leading to

either fewer pets or the proliferation of smaller pets. Increasingly hectic and stressful lifestyles may affect the types of pet that dominate – away from the more attention-intensive pets such as dogs towards “easier” pets such as cats.

2.2.9 Foreign Trade – U.S. Pet Food Exports

The U.S. is the largest exporter of pet food in the world, with 2006 exports totaling more than US$ 1 bn.

pet ownership as substitutes for children Demographics – in an aging popu•comfort and companionship to the elderlyhave long left the home

• Growth in affluence

T • Increased pet ownership • Wider penetration of commercially prepared pet foods

over home-prepared (table scraps) Growth Constraints in the Pet Food Industry

The main constraint to growth seems to be the maturity of the largest markets – the U.S. and Western Europe. Another potential constraint to growth is that in these large, mature markets where pet owners are increasingly looking for super-premium products, there seems to be a growing trend towards “home-made” or “home-blended” pet food, in particular when there is a performance element. Scandals such as the recent product recall beccontaminated ingredients sourced from Cheaths of several pets, may additionally act as a catalyst d

towards more home-preparation of pet foods.

nother factor that may curb pet numbers Aincreasing urbanization with the lo



Table 2.2.9a U.S. pet food export trends, 2001 – 2006, US$ mn

Year Exports, US$ mn

2001 1,000.3

2002 791.3

2003 776.2

2004 776.7

2005 883.1

2006 1,044.1

Source: USDA U.S. pet food exports declined in the early part of this decade. The drop was due mainly to U.S. pet food manufacturers building production facilities around the world, especially in Europe, rather than cope with EU import regulations. However, now thought to be resulting mainly from changing attitudes towards pets and increasing demand for high-value premium pet foods, U.S. pet food exports are rebounding. According to Pet Food Industry Magazine, based on Euromonitor International information, U.S. exports in 2006 in US$ can be summarized as follows: • Canada – US$ 375.5 mn

In Canada, trends in human health and nutrition tend to be mirrored in pet food, with retail sales driven by value-added products.

• Japan – US$ 234.6 mn

The number of small dogs and older pets is increasing in Japan, and manufacturers tend to tailor and specialize their products increasingly to size and breeds. In response to increasing popularity of miniature breeds of dogs, Mars Inc, for example, offers specialized nutrition for Shih Tzus, Miniature Dachshunds, Chihuahuas, Toy Poodles and Papillons. The leaders in functional pet food are foreign brands such as Hill’s Science Diet. In Japan, young people delaying marriage and older people living alone are on the increase, and these sections of the population increasingly turn to pets as companions, ence pet food sales are forecast to increase. h



• Mexico – US$ 93.1 mn

Sales in Mexico are continuing to grow, with constant investment of the major players in the Mexican industry. Growth is attributed to increasing awareness of health and nutrition issues for pets, as well as more disposable income. Nestlé Mexico is seemingly shifting towards premium sales, with Iams leading the premium segment. Effem México and MaltaClayton cater for the mid-price segment.

• Australia – US$ 42.2 mn

Increasing urban consolidation and consequently less outdoor space is leading into increased preference of maller pets requiring less space. s

• Belgium – US$ 25.0 mn

rs are creasingly paying attention to their pets’ health.

• Taiwan – US$ 23.9 mn

and a widening product offering are also riving sales.

•

creasingly feeding ilable.

•

creased segmentation of the market by breed, ts vs working animals.

•

more than double the retail price. The market is

Masterfoods and Nestlé Purina PetCare dominate the market with a combined market share of 52%. The premium segment is popular, and consumein

The expansion of distribution outlets, in particular franchised pet stores and superstores, is driving sales value. An increasing disposable income because of a strong economyd South Korea – US$ 20.2 mn

The country has in recent years been taking more interest dogs as pets, with dog owners inin

their pets the best pet food ava New Zealand – US$ 18.0 mn

There is a trend towards a better quality product, with inoverweight pets and pe Israel – US$ 14.8 mn

Economy and mid-priced pet food remain the most popular products as premium pet food often commands



competitive with an increased selection of imported product offerings because of lower tariffs, as well as an

creasing number of domestic products.

•

ome

of the key pet food markets

Table 2.2.9b els for various key pet food

markets, 2007

in Hong Kong – US$ 13.7 mn

Pet are becoming ever more pampered in Hong Kong based on the increasing number of dual inchouseholds, as well as the delay in having children.

Naturally, different target markets have different duty levels and tariff regimes for pet food imports. The following table gives a brief overview of duty rates in somefor HS Codes 2309.10 – pet food.

Import duty lev

Market Import duty Comment Source

Brazil 14% For pet food in retail packs

Brazil Customs Service

8% Bulk total animal nutrition (HS 2309.90.10)

Brazil Customs Service

Canada 3.5% MFN Canada Border Services Agency

Japan Per each kg US$ 0.60, and US$ 0.60 for every 1% exceeding 10% by weight of lactose contained

General tariff APEC

Per each kg US$ 0.52, and $US 0.50 for every 1% exceeding 10% by weight of lactose contained

WTO APEC

South Korea 5% APEC

China 18% Pet food in retail packs APEC

5% Preparations for making complete or supplementary feeds (HS2309.90.10)

APEC

Mexico 10% MFN APEC

EU 0% Pet food in retail packs EZT – Deutsches Zollamt

EU 9.6% 2309.1090 – other EZT – Deutsches Zollamt

Source: iRIS Consulting based on various customs bureaux



3.0 THE REGULATORY ENVIRONMENT – IMPLICATIONS FOR

INGREDIENT SUPPLIERS 3.1 Overview

Regulatory variability among countries is high. This causes trade problems and product transfer between countries, adding to package inventories and labeling conflicts.

3.2 The U.S.

3.2.1 The U.S. Registration Process for Pet Food Ingredients

A former regulatory official often says that “pet food is more strictly regulated than baby food.” In the U.S., pet food is regulated as an animal feed by the Center for Veterinary Medicine (CVM) of the Food and Drug Administration (FDA) and by each of the 50 states. This has the potential to lead to massive chaos in the marketplace. However, model regulations have been developed by the Association of Feed Control Officials (AAFCO) in an attempt to promulgate more uniform regulations. More than one half of the states adopt the model regulations directly as their feed law. The regulations cover labeling, support of claims, ingredients allowed for use and food safety procedures. Pet food is additionally subject to the Bioterrorism Protection and Response Act, Title III Food Supply Protection. Enforcement actions can come from either the CVM or from any of the states. Most states require either registration of each product or licensing of the manufacturing facility. Import and export activities of products containing animal ingredients (i.e. most pet foods) are regulated and trade agreements negotiated by the U.S. Department of Agriculture (USDA). Veterinarians from the Animal, Plant Health Inspection Service of the USDA perform the inspection and sign the health certifications required for most cross-border transport of products. There are two processes for “approval” of ingredients. Firstly, the ingredient can be submitted to the FDA and found to be “Generally Recognized as Safe” (better known as GRAS) for the use in the target animal. Secondly, the ingredient can be subjected to review and approval via the AAFCO Ingredient Definition Committee (IDC). The AAFCO IDC process also includes a review by the FDA. Both of these processes are arduous and require a lengthy time to reach approval. Ingredient definitions can have restrictions based on:

• Manufacturing process



• Nutrient composition

• Contamination levels

Target animal

h the definition.

3.2.2

. This narrow approach to definition approval at

ention was made of pets. This proposal was tabled hich animals are included as

3.2.3

• • Intended use

Once approved, the ingredient can be used for the intended use in the target animal, as long as it complies witThis qualifier of “for the intended use in target animal” has been a complicating factor in the use of ingredients.

Case Studies – Definition of Ingredients for Registration in the U.S.

An interesting case study that demonstrates the possible problems/frustrations that can arrive because of the approval process involves defining the ingredient L-Carnitine (AAFCO 60.98). Carnitine was first proposed for definition in 1997. The definition was amended twice, once in 1998 and again in 2003, with final adoption as an official ingredient definition in 2004. The intended use is as a nutritional supplement. The first definition was for use in swine, poultry and fish with restrictions on usage levels for each animal. The amendment was for use in cats, again at a given level, but it was only approved for use in adult maintenance foods for cats. None of the previous target animal approvals had restrictions on life stage. This restriction for cats was not because there was anything found to be wrong for use in cats at any other life stage, only that the data submitted and reviewed by the CVM-FDA was for adult

aintenancemtimes appears arbitrary and can significantly affect the use of the ingredient. A second example is yucca schidigera extract. This ingredient is listed in the Code of Federal Regulations as a flavoring agent without restrictions on target animals. For many years, it has found use in the feed industry to help reduce waste odor. It can be included in pet foods but only for the stated purpose of flavoring. No reference can be made to its potential for odor reduction. Last year, a proposal was put forward to extend the intended use in the definition to include odor control in finished feeds of poultry or livestock, with an upper limit on the level of use. No mpending definition of exactly wlivestock.

U.S. Label Claim Regulation



The other part of the regulatory equation is the control of label claims. The FDA and the states regulate the type and ways in which claims can be made on product labels. Only two categories of products currently exist for animals: food and drugs. Food supplies taste, aroma and/or nutritive value, while drugs deal with diseases or abnormal conditions in the organism. Food can carry claims related to normal nutrition of essential nutrients and some structure/function claims provided that the “safe harbor” words are used. Health claims, as seen on human foods, and any claims specifically mentioning diseases or implying improvement in conditions are not allowed. The category of supplements, such as those in retail sale for humans, does not officially exist for animals. That is not to say

at they are not in the marketplace, but the FDA regulates them

on labels or in advertising of the product.

Broadl :

lcium for strong teeth and bones”

tamin E, and

•

• The “safe harbor” words allow for structure function

otes”. The word “improves” less

acceptable, unless linked to some established essential nutrient

3.2.4

Ingredient-linked claims tend to be for blends of ingredients,

tradem redient blends

theither as drugs or as food depending on the context presented

y, the regulation of claims can be summarized as follows

• Claims can be made for traditional functions of essential nutrients, such as “ca

• Claims can be made for more recently discovered functions of essential nutrients such as “Viantioxidant nutrient”

Some claims can be made for non-essential nutrients, such as “Vitamin C, an antioxidant nutrient”

claims, such as “Omega-6 and omega-3 fatty acids help maintain healthy skin and coat.” The “safe harbor” words include: helps, keeps, maintains, supports etc

A grey area word is “prom

function, such as “fatty acids improve coat condition.”

Ingredient-Linked Claims

which are sometimes covered by patents or that make up a arked system. These include claims for ing

such as:

• “OmegaCOAT® promotes a soft, healthy coat with an optimal ratio of fatty acids” from Eukanuba

• “Linoleic acid and FiberClean® help limit shedding and reduce hairballs”



• ces litter box odor” from Nutro

acids for healthy skin and coat” or “Natural fibers known to reduce components of litter box odor” or “Antioxidant

er claims are considered softer claims, they leverage the consumer knowledge generated

3.2.5

n the same shelves as treats, ut they have ingredients (such as unapproved feed ingredients

to keep up with the influx of food supplement-type products for pets on the retail shelf. In

During the writing of such a guideline, the FDA is very quiet that the guideline would

“Innovative OdorCheck™ System, a blend of ingredients that effectively redu

• “Advanced Protection®, a proprietary antioxidant formula, which is a unique and powerful blend […] which helps defend the body and brain from free radical oxidation” from Science Diet

This use of blends helps keep the system from being exactly copied by other companies, which supports the competitive nature of the pet food industry. Other companies might say “Omega fatty

nutrients for vitality.” While these latt

by the first set of claims and are acceptable from a regulatory viewpoint.

The Headache about Supplements

The in-between supplement-type products are a real dilemma for regulators. Are they treats or are they low regulatory priority drugs? If they are treats, then they must comply with the regulations for food. If they are drugs, then they must have a pre-market review and not make any reference to nutritive value. These items are being marketed obor additives) and/or claims that make them drugs. Some of them claim to be remedies. A few states such as South Dakota, Virginia and Michigan have laws governing animal remedies that differ from their state feed laws. The FDA has not been able

response, it is in the process of writing a Compliance Guideline.

about its contents. Some rumors areconsider a product a drug if:

• It does not make any reference to supplying nutritive values

• Its delivery system is like a pill

• It delivers more purified forms of compounds

The guideline may allow for low regulatory priority drugs that are not considered at this time to be an issue, but that the FDA can review and pull from the marketplace any of the low regulatory products, if any doubt is raised about the compounds. The question then arises for pet food manufacturers, what happens if



these compounds identified now as drugs occur naturally or are added to foods? Do these food products then become medicated feed? If that is the case, then the entire landscape of

nufacturing changes. There is an entire set of different regulations covering medicated feed manufacture and

3.2.6

nd then the FDA is notified that the review has occurred and of

essential utrients or other compounds that can be tested in the target

r ingredients already present in the food supply. The context and wording of the claims

the nuf ient.

pet foo

• Do proper research with the intended target animals

• Develop proper claims

• Gain acceptance by the regulatory authorities so that manufacturers can use the ingredients

pet food ma

licensing that currently do not apply to pet foods. The guideline may come out this year, but there is no set date for its publication.

Summary

In addition to the regular FDA internal GRAS review process for ingredients, the FDA has a process known as GRAS notification for human ingredients. Under GRAS notification, a dossier is submitted to the FDA and the company can market the ingredient until and unless the FDA objects. It has been the position of animal feed manufacturers that GRAS notification should also be allowed for animal feeds, including pet foods. GRAS notification involves the development of a complete dossier of publicly available information regarding a particular ingredient. This dossier is reviewed by an outside expert panel athe company’s intent to market products containing the ingredient. The FDA has a specified time period in which to respond with any objections to the notification. Again, this is NOT a current procedure for animal feed ingredients, but it has been on the table as a possible way forward for new ingredients. Commonly occurring ingredients, with essential or non-nanimal and shown to have benefits, can be successful. It is much easier to get approval fo

associated with the ingredient is critical to the ability ofma acturer to use the ingred There are opportunities for dairy-based ingredients to be used in

ds. The keys will be to:



3.3 Europe

In the EU, regulation is even more complicated than in the U.S. Since 1970, the European legislator has adopted a succession of directives and regulations with a direct impact on all stages of production and marketing of pet food. These EU directives number literally in the hundreds and cover areas such as:

• Officially laid down requirements to operate pet food plants

• Consumer information by specific requirements on the labeling of pet food as well as those on general advertising rules

•

• of additives according to their utility, efficacy and

• ific health certificates

•

•

od Industry Federation, has produced a

79/373 C: feedingstuffs

some, unadulterated and or merchantable quality

Labeling requirements for pet foods (statutory box)

Raw materials of animal and vegetable origin

The use innocuity

Health and sanitary measures and the specfor trade and processing of meat products

Sampling and methods of analysis for the control of raw materials and finished products

• Specific sanitary and safety controls and controls of labeling declarations

The use of dietetic pet food for use in animals whose metabolism is temporarily or irreversibly impaired

FEDIAF, the European Pet foguide to good practice for the manufacture of safe pet foods, which incorporates EU legislation. Some of the key EU directives regarding the use of ingredients and raw materials in the manufacture of pet foods include:

/EE Directive on the circulation of compound

Pet food may not represent a danger to animal or human health

Pet food may only be marketed if they are whole



82/471/EEC: Directive concerning certain products used in animal nutrition

Concerns products which act as direct or indirect protein sources and are manufactured by certain technical processes

Lists authorized products, composition, animal species for which the product is authorized and special provisions, if any

2004/217/EC: Decision establishing a list of ingredients whose use is prohibited in compound feedingstuffs

Banning certain ingredients for use in compound feedingstuffs

96/25/EC: Directive on the circulation and use of feed materials

Feed materials must not represent any danger to animal or human health or to the environment

Feed materials may only be put into circulation if they are of sound, genuine and merchantable quality

Labeling requirements for feed materials A non-exclusive list of feed materials with specific names,

description and compulsory declarations

999/2001/EC: Regulation laying down the rules for prevention, control and eradication of certain transmissible spongiform encephalopathies (TSE Regulation)

Rules for the prevention, control and eradication of transmissible spongiform encephalopathies (TSEs) in animals

Determination of BSE status – classification of countries or regions into 5 categories

TSE monitoring programs Animal feeding Specified Risk Materials (SRMs) Placing on the market and export of products of animal

origin including pet food Import of products of animal origin including raw materials

and pet food

2002/32/EC: Directive on undesirable substances in animal feed Feed materials may only be put into circulation in the EC

if they are sound genuine and of merchantable quality List of undesirable substances and the tolerated

maximum levels in feed materials and feedingstuffs



Dilution and mixing with other consignments of feed materials or feedingstuffs is banned

178/2002/EC: Regulation laying down the general principles and requirements of food law, establishing the European Food Safety Authority and laying down procedures in matters of food safety

Regulation applies to all stages of the production, processing and distribution of food and feed

It applies to feed produced for, or fed to, food producing animals, not directly to pet food. However the Regulation’s principles on safety, traceability, self-responsibilities and definitions must be observed by pet food manufacturers

Via Regulation 183/2005/EC on Feed Hygiene, the Rapid Alert System for Food and Feed (RASFF) applies to pet food

Basic principles of the regulation should be followed by the pet food industry, such as: − Feed safety requirements – feed must be safe − Traceability principles – full traceability of feed

materials and finished products

1774/2002/EC: Regulations laying down health rules concerning animal by-products not intended for human consumption

Animal and public health rules for the collection, transport, storage handling, processing and use or disposal of animal by-products, to prevent these products from presenting a risk to animal or public health

Approval of pet food plants including the requirements, which must be fulfilled by the plants

Specific health requirements for raw materials, processed animal proteins and pet food with regard to raw material origin (Category 3), heat treatment, prevention of recontamination, packaging and microbiological testing

Health requirements and health certificates for import of animal by-products including raw materials, processed animal proteins and pet food from third countries

1830/2003/EC: Regulation on the traceability and labeling of genetically modified organisms and the traceability of food and feed products produced from genetically modified organisms

Provides a framework for the traceability of food and feed produced from GMOs

The objective is to facilitate accurate labeling of feed products and to monitor the implementation of the appropriate risk management.



1831/2003/EEC: Regulation concerning additives in animal nutrition

List of authorized additives for pet food Maximum content and other provisions in the use of

authorized additives



4.0 PROFILES OF SELECTED GLOBAL PET FOOD INDUSTRY

PLAYERS 4.1 Overview

Industry sources state that the great majority of manufacturing is now directed by fewer than 25 companies around the world with fewer and fewer retail options. In 2004, the key pet food suppliers worldwide by turnover were as follows:

Table 4.1 Top Pet Food Companies Worldwide, 2004

Company

2004 market

share, %

2003 market

share, %

2004 retail sales, US$

bn


bn

Mars Inc 24.6 24.6 9.63 8.68

Nestlé SA 24.1 24.1 9.45 8.50

Procter & Gamble 6.8 6.8 2.68 2.42

Colgate-Palmolive Co 6.2 6.2 2.42 2.20

Del Monte Foods Co 2.8 3.0 1.09 1.06

Nutro Products Inc1 1.3 1.5 0.51 0.52

Agrolimen SA 1.3 1.3 0.49 0.45

S&M NuTec LLC (treats)2 0.8 0.5 0.31 0.18

Meouw Mix Co3 0.8 0.9 0.31 0.31

UniCharm Corp 0.8 0.8 0.31 0.27

Nisshin Flour Milling Co Ltd 0.5 0.5 0.21 0.19

Nippon Pet Food Ltd 0.5 0.5 0.19 0.18

Sunrise Co Ltd 0.4 0.4 0.16 0.14

Maruha Corp 0.4 0.4 0.15 0.13

Kraft Foods Inc4 0.4 0.4 0.14 0.14

Nutriara Alimentos Ltda 0.3 0.3 0.13 0.10

Mogiana Alimentos SA 0.3 0.3 0.13 0.09

Vitakraft-Werke Wührmann & Sohn 0.3 0.3 0.11 0.09

Pet Line Corp 0.3 0.3 0.10 0.09

Heinz Co, HJ5 0.2 0.3 0.09 0.09

Total Alimentos SA 0.2 0.2 0.09 0.07

Yamahisa Pet Co Ltd 0.2 0.2 0.09 0.08

Doggy AB 0.2 0.2 0.09 0.08

DoggyMan Hayashi KK 0.2 0.2 0.08 0.07

Süd-Chemie AG 0.2 0.2 0.07 0.07

Sunshine Mills Inc 0.2 0.2 0.07 0.07

Inaba Pet Food Co Ltd 0.1 0.1 0.06 0.05

Palmera SpA 0.1 0.1 0.06 0.05



Company

2004 market

share, %

2003 market

share, %


bn


bn

Provimi BV 0.1 0.1 0.06 0.05

Smack Co Ltd 0.1 0.1 0.05 0.04

Yeaster Co Ltd 0.1 0.1 0.04 0.04

Morando SpA 0.1 0.1 0.04 0.04

Monge & SAS 0.1 0.1 0.04 0.04

Iris Aoyama Co Ltd 0.1 0.1 0.03 0.03

DBF Pet food Co Ltd 0.1 0.1 0.03 0.03

Private Label 11.5 11.5 4.50 4.06

Others 13.3 13.1 5.22 4.63

Total 100.0 100.0 39.23 35.34

Source: Euromonitor International Notes: 1 Acquired by Mars Inc in April 2007 2 Acquired by Mars Inc in 2006 3 Acquired by Del Monte in 2006 4 MilkBone brand acquired by Del Monte in 2006 5 Merged with Del Monte in 2002

4.2 Key Global Pet Food Companies

• Mars Inc. World HQ: McLean, Virginia, USA 2004 global pet food sales: US$ 9.6 bn, 2005 sales 2.2%

down Plants/locations worldwide: 15 Employees: 7,000 Top brands: Pedigree, Waltham, Cesar,

Sheba, Whiskas, Kitekat New products: Schmackos (launched in

January 2006) Key people: Doug Cahill, President Pet

Food, Masterfoods USA Serge Dube, VP Sales Pet Food, Masterfoods USA Chris Jones, VP Marketing Pet Food, Masterfoods USA

Mars Inc is the world market leader in dog and cat food sales with around 25% of sales value in 2004. During that year, it acquired Del Monte’s veterinary brands IVD, Medi-Cal and Techni-Cal. The Corporation operates under the Masterfood USA umbrella in most parts of the world. It manufactures complete diets for cats and dogs, a variety of pet snacks and treats and a line of prescription diets.



Masterfoods USA has a special Functional Focus Category Management strategy that merchandises functional products together in a set – it has conducted a study that found that by better positioning dog treats in the functional treats section, new and incremental purchases resulted, growing the category substantially (by 9.6%). The new shopping set claims to make it easier for shoppers to locate treats and make them more willing to try new items. Early in 2006, Mars Inc signed an agreement to acquire S&M NuTec LLC, the North Kansas City manufacturer of Greenies dog treats. In summer 2006, Mars Inc acquired the Doane Petcare Co. However Doane’s European business was not part of this acquisition and was sold to a third party. In 2007, Mars Inc acquired Nutro Products and its assets, including a new production facility plant in California.

Doane Pet Care Company World HQ: Brentwood, Tennessee, USA 2004 global pet food sales: US$ 271 mn (2004 4th Quarter

only) Plants/locations worldwide: 24 manufacturing plants and

several distribution centers Top brands: Trail Blazer (dog food), Kozy

Kitten (cat food), G. Whiskers premium cat food, Bonkers cat treats

Key people: Doug Cahill, President/CEO Philip Woodlief, VP/CFO Doane represents the majority of own-label pet food sales worldwide. It is the largest own-label manufacturer of pet food and the second-largest manufacturer of dry pet food overall in the U.S. It sells to around 650 customers worldwide and has been the main supplier of own-label pet food to Wal-Mart since 1970, including the Ol’Roy brand – the largest selling brand of dry pet food in volume terms in the U.S. It also produces pet food for other important U.S. retail chains, including Kroger, Albertson’s, Winn-Dixie, Safeway, Food Lion, Bruno’s and Bi-Lo. When Masterfoods/Mars Inc acquired Doane, there were a lot of unanswered questions as to how/where some of Doane’s traditional clients (and Mars Inc’s competitors) might source their products – on the assumption that Mars Inc would stop supplying them. This has not shaken out completely yet, and up to now some of these customers have been retained.



• Nestlé SA World HQ: Vevey, Switzerland 2004 global pet food sales: US$ 9.5 bn approximately Top brands: Dog Chow, Cat Chow, Puppy

Chow, Kitten chow, Pro Plan, Purina ONE, Beneful, Fancy Feast, Friskies, Alpo, Mighty Dog, Felix, Come ‘N Get It, Chef’s Blend

Key people: Peter Brabeck-Letmathe, Chairman/ CEO

Nestlé’s acquisition of Ralston Purina in 2002 reinforced its position as one of the top two pet food manufacturers in the world. Pet Products International markets Purina in 75 countries around the world through a network of 11 manufacturing locations.

Nestlé Purina Pet Care St Louis Missouri USA Tel: Contact: Dr Steven Binder Background

NPP is a nutrition company, manufacturing pet food from food production by-products such as cereals, grains, meat and other commodities and adding additives that bring nutritional benefits to pets.

In general, benefits are based on health issues that include longer life, performance, digestion, a healthy lifestyle and other issues of interest to pet owners. That said, the products need to be appealing to their consumers so naturally there is a strong focus on palatability.

The key driving influence behind the business is that consumers (as in pet owners) have a strong tendency to humanize their pets. Ingredient Strategies NPP, along with all pet food manufacturers, must remain cost conscious. Human food manufacturers have the ability to sell dairy products (such as yogurts) but humans tend to only use such products once a day. Because of the need to formulate diets with balanced nutrition, animals will be consuming such products in every meal.



Ingredients must have a long shelf life. Typical expiration dates on pet food products are 18 months. Therefore the proposed ingredient must be stable in the end product formats, as well as for the period before processing. For example, the company seeks to minimize the requirement to keep ingredients frozen. Frozen storage can be expensive and NPP does not wish to oversize their freezing capacity unnecessarily. If ingredients are “expensive,” the supplier would need to take the supplement route to market – this is not for NPP. NPP is a full feed business – meaning that dogs and cats can live on the pet food/pet chow, water and air. Pet supplement products differ to the compound feed industry in that there is no requirement for them to be nutritionally complete or balanced. Ingredients for Health These are much the same as health ingredients targeted at humans however NPP does not focus on cholesterol. That said, the key ingredients for the pet food sector are the same as for the human food industries. The big winners are vitamins, antioxidants and so on. In this regard, milk needs to improve its nutrient profile, even among humans, to have appeal for pet food manufacturers. NPP uses some milk products however the key nutrients sought (i.e. proteins, vitamins, carbohydrates, calcium/minerals) can easily be derived from other sources. The company could go to dairy-based solutions if they were seeking specific benefits – for example immunoglobulins, bioavailable minerals, lactose (which may be either good or bad) and so on. Research and Development The U.S. R&D facility undertakes similar functions to the EU branch in Amiens, France. The division focuses mostly on health benefits and collaborates with suppliers, universities (providing grants for example) and so on. Often suppliers bring information (especially those that have been supported by Nestlé’s venture capital group). The section only focuses on pet health – mostly via pet food. It also has a line of treat products however, once again, consumers are more likely to buy these if they have specific health benefits. The company had looked at dairy ingredients from a nutrient perspective. It tends to break products down into their individual nutrients and assess these with competing sources for the same nutrients, for example calcium lactate versus calcium carbonate. If the dairy industry is looking to supply ingredients, these need to be AAFCO approved. AAFCO requirements may be different



to those of the FDA who require GRAS certification. For example, chocolate is approved for human consumption however it can kill pets. Thus, most chocolate products are not necessarily AAFCO approved.

In terms of cost, more expensive ingredients will be considered however NPP can “only afford what they claim.” If claims can be developed and delivered and the FDA endorses this, then the company will pay the premium necessary to incorporate the key delivery mechanism/ingredient into their product. For example, if the dairy industry could deliver a product that allows NPP to make the claim “makes your dog live two years longer” or even less specific claims such as “burns fat” or “prevents mange,” and NPP can prove and get approval for these claims, it would happily pursue the dairy ingredients required to back up such claims. As an example, Cheerios put a lot of effort into developing heart health claims in humans. The pet food industry would happily piggyback on the back of this work however if oats (the base ingredient for Cheerios) do not deliver the same benefit to pets, NPP cannot make such a claim on their packaging. NPP is required to take a very ethical approach. Some of the small pet food companies are allowed to do things in the marketplace, which NPP would not get away with. One example of this is glucosamine, which NPP incorporates in some of its pet food products. To do this, it required supporting data that glucosamine does in fact deliver a health benefit to pets. Other suppliers did not have to provide such supporting data and therefore launched glucosamine enriched products on the market faster than NPP.

Another requirement for the dairy industry is that their analysis for nutrients must be based on standard approved methods. For example, moisture testing cannot be done using ad-hoc type technologies. Approved methods will ensure that industry suppliers measure specifications in the way that NPP does. R&D Structure NPP pulls many of its ingredient ideas from NRC in Switzerland where basic research is undertaken. The NPP R&D sector concentrates on proving efficacy and clinical delivery of the ingredient. Such work is then made available to other divisions (e.g. marketing). If there is an interest and a potential commercial application for the product, the responsibility to meet marketing needs and ensure manufacturing ability is with the technical application center.



Exports Finished products are often difficult to export as borders often close down quickly. That said, it is even more difficult to export raw materials since they are still in unprocessed form. In terms of exports, the percentage of product exported is low, however it is still a large volume. Exports are targeted to markets with no production facilities or those that do not have specialist manufacturing processes. Japan is such an example, however Japan tends to source more product from Europe than the U.S. Dairy Sector Involvement

The dairy sector needs to pull together and do something (like the oat industry did in terms of heart health). This requires industry-wide cooperation. “Nestlé does not have enough money to educate the public on health benefits.” In NPP’s view, the industry and/or government need to do this. It is not only a matter of money, often regulatory bodies and other government/industry groups believe that as Nestlé has a profit motive their initiatives are not always for the good of the consumer/industry. NPP works with the oat and grains sector on collaborative R&D projects. Only some of these focus on nutrition, some also focus on improving existing ingredients in terms or making them better, easier to use and so on. There is also collaboration with the soy industry. The company has worked very closely with Solae (whose office is right next door) for a long time.

• Procter & Gamble World HQ: Cincinnati, Ohio, USA 2004 global pet food sales: US$ 2.7 bn Plants/locations worldwide: 6 (4 in the USA, 1 in the

Netherlands and 1 in Argentina)

Employees: 2,200 Top brands: Iams, Eukanuba New products: Iams Smart Puppy, Iams

Multi-Cat Formula, Iams Savory Sauce, Iams Select Bites, Eukanuba Small Breed

Key people: Dan Rajczak, General Manager



Bill Toler, General Manager Japan, Asia, Latin America, Australia Briain de Brutelier, General Manager Europe Marty Walker, General Manager Influencer

The IAMS Company, headquartered in Dayton, Ohio, USA, is a division of Procter & Gamble. It produces dog and cat food under the Iams and Eukanuba brands, as well as the Eukanuba veterinary line of products. The company’s primary market is the U.S., which in 2004 accounted for approximately 75% of sales – the remaining 25% of sales were achieved internationally, with key markets being Canada, the UK, Italy, France and Japan.

• Colgate Palmolive Company

World HQ: New York, New York, USA 2004 global pet food sales: US$ 2.4 bn Plants/locations worldwide: 5 Employees: 2,500 Top brands: Hill’s New products: Prescription Diet Canine j/d,

Science Diet Indoor Cat, Prescription Diet z/d

Key people: Robert Wheeler, Hill’s CEO Neil Thompson, Hill’s President International Justin Skala, Hill’s President North America Karen Padgett, Hill’s Chief of Veterinary Business Channel

Hill’s Pet Nutrition, Inc, headquartered in Topeka, Kansas, USA, is a subsidiary of the Colgate-Palmolive Company. Hill’s “Evidence-Based Clinical Nutrition™” is based upon the integration of research evidence with clinical expertise. Hill’s was the first company to combine the science of nutrigenomics with the clinical proof of a product in the area of canine joint mobility. The company is actively engaged with the veterinary profession, actively participating in continuing education in clinics, veterinary schools and at conferences. More than 170 of its approximately 2,500 staff are veterinarians.

The company sells its products in more than 85 countries worldwide.



• Del Monte Foods Company World HQ: San Francisco, California,

USA 2004 global pet food sales: US$ 1.1 bn Plants/locations: 4 Top brands: 9 Lives, Gravy Train, Kibbles

‘N Bits, Nature’s Recipe, Reward, Skippy, Jerky Treats, Canine Carry Outs, Meaty Bone, Pounce, Pup-Peroni, Snausages, Wagwells

Key people: Richard G Wolford, Chairman/CEO Todd R Lachman, Executive VP

Del Monte took over the North American pet food and pet snacks business – among other businesses – from the HJ Heinz Company in late-2002. Subsequently, in 2004 around one quarter of Del Monte’s net sales came from the pet food marketplace.

Del Monte Pet Products City of Industry, California USA Tel: Contact: Steven Bautista, R&D Background Del Monte Foods is one of the largest producers, distributors and marketers of premium quality, branded and private label food products in the U.S. The company owns a number of pet food brands including 9 Lives (cat food), Cycle, Gravy Train, Kibbles ‘n Bits, Reward, Skippy (all dog food) and Nature’s Recipe (dogs and cats). In late 2006, Del Monte added Milk-Bone dog treats to its line of pet food products, acquiring the brand from Kraft Foods for around US$ 580 mn. Milk-Bone’s revenues are in the region of US$ 180 mn per annum. Annual sales of pet food are in excess of US$ 3.0 bn per annum. Key Industry Trends In terms of dairy innovation, a few examples have come up from Nestlé. The three most relevant are:



• Two and a half to three years ago Nestlé started co-branding their pet products using the Carnation brand. In doing this they were clearly trying to use the equity from Carnation’s strong position in the human food market. This was the first (and only) example of co-branding a pet food with a human food. The sales effect was questionable – no marked sales increases (or reduction/ decline) was seen.

The branding was used on all Friskies brand cat food. The dairy content was low – probably less than 1%. Mr. Bautista doubted that it hit the 3% threshold for label declarations. Despite this, the packaging said “with Carnation milk.”

• A second example also involved Nestlé who started to

flag the top of their Purina Dog Chow lines with the claim “high in protein and nutrient rich like mothers’ milk”. Like the Carnation co-branding, this move did not do much for sales. Ironically, there were absolutely no dairy ingredients incorporated into the product.

•

ations. This concerned the Purina One line of products.

egulation

latory department within the State epartment of Agriculture.

of grey reas, which pet food marketers are looking to exploit.

umans, ere is no hard and fast evidence that this is the case.

A third example involved Nestlé again, claiming to put yogurt in their pet food formul

R The pet food industry is much more strongly regulated than the human food industry. Pet food manufacturers must make sure that pet food is 100% nutritionally complete whereas food manufacturers do not have this obligation. There are strong regulators involved in the industry – the FDA and AAFCO. Also every state has its own reguD Pet food regulators have issued a long list of approved ingredients. Manufacturers must prove any health claims – however they can use “soft” claims. There are lots a For example, the current trendy ingredient is glucosamine. There is anecdotal evidence that glucosamine may be beneficial for bone and joint health however for pets, as with hth



Ingredient Usage In the past, the pet food industry has lagged behind the food industry by two to three years in terms of incorporating new and novel ingredients. In recent years, this gap has closed and now human food trends tend to hit the pet food industry much quicker. For example, organics, which has only recently become a big deal in the U.S., is starting to emerge as a sector in the pet food business. Organics are growing, however this is from a very small base. Unlike the food industry, sports nutrition and performance enhancing ingredients produce little demand in the pet food market. The demand remains low even among owners of performance animals, for they typically formulate their own food or buy from highly specialized stores. As a result, pet food manufacturers will target their products towards “life stages” (i.e. puppy/kitten, adult, overweight/weight management) over “therapy areas,” (i.e. supplements and performance enhancing products). One of the latest target markets is for indoor cats. Marketers have identified special needs diets for indoor cats and developed special ‘indoor cat’ diets to include lower fat/lower calories. Also indoor cats have more idle time, which they spend preening. As a result, hair consumption, and therefore hairball occurrences, increase. Formulations higher in fiber are designed to minimize the effect of cats consuming too much hair. R&D R&D activities are proprietary to Del Monte. Del Monte prides itself as being a market leader and tends to launch innovative products first. Mars Inc and Nestlé tend to follow. This requires “a lot of great minds” in R&D. All R&D activities are managed in-house. Del Monte has made maybe three forays into dairy ingredients—all of which were unsuccessful. In some regards dairy is perceived to be a lot like soy. Soy has many positives but also some negatives surround the industry. Ten or 15 years ago Del Monte experimented with putting soy in some products because it delivered a good amino acid profile. Unfortunatley this caused bloating/gas and the products containing soy were eventually discontinued. This led to a campaign by Mars Inc that claimed their products use “no soy”. Some niche manufacturers even claim “dairy free,” however these are probably products targeted at the vegan/vegetarian market.



Del Monte has intermittently used dairy ingredients, such as whey, in the past. However, these products did not stay on the market for long. According to Mr. Bautista, Del Monte is not currently using any dairy products. This is not because Del Monte is against the incorporation of dairy. As a general rule, the pet food industry tends to be cost-driven and looks for cheaper ingredient solutions. Since dairy products are expensive, pet food manufacturers historically have opted for less expensive ingredients. If, however, a dairy ingredient manufacturer were to come to Del Monte with research that proved that dairy works well in treating some human conditions, Del Monte would incorporate it in a flash. However dairy has little to offer in this regard – it generally has a nutritional “halo” but no compelling or meaningful messages that have been articulated to date. Milk-Bone Milk-Bone is the leading dog biscuit in the world. It is in its 99th year of being on the market. It is the most widely recognized dog treat and is the clear market leader for all dog snacks. Milk-Bone used to be a nutritionally complete product however the owners took out the non-necessary ingredients a number of years ago. Milk-Bone always had milk in it – it is the fifth ingredient listed. Mr. Bautista was unsure whether there are actually any other dairy ingredients incorporated. If there are, it is at a relatively low level. At some point Milk-Bone moved from having “milk” equity to just being a quality treat. The milk component became far less important despite it being mentioned in the product name.

• The Meow Mix Company World HQ: Secaucus, New Jersey, USA 2004 global pet food sales: US$ 249 mn Top brands: Meow Mix, Alley Cat New products: Indoor Formula (dry), Kitten

Li’l Nibbles (dry), Marine Attraction (wet), On a Wing and a Prawn (wet), Surf ‘n Turf (wet), GoFish (treat), Kitty Catch (treat), On The Range (treat)

Key people: Richard Thompson, CEO Richard Kassar, Senior VP.CFO Michael Larney, Senior VP Sales



Scott Morris, VP Marketing Sam Noto, VP Special Markets John Phelps, VP Business and International Development

Vir Narula, VP Operations

When Nestlé purchased Ralston Purina in 2002, it was ordered by the FTC to divest the Meow Mix and Alley Cat brands. The Meow Mix Company thus came under the management of the Cypress Group, LLC, a New York-based investment firm. It was taken over by Del Monte in 2006. The company specializes in the production and sales of dry and wet cat food, tartar control treats and hairball formulae. It supplies the U.S. market.

• Nutro Products, Inc

World HQ: City of Industry, California, USA

2004 global pet food sales: US$ 514 mn Plants/locations worldwide: 3 Top brands: MAX, Natural Choice, Ultra,

MAX cat Gourmet Classics, Natural Choice Complete

Key people: Jerry Sicherman, CEO David Kravis, President Larry Hardy, Senior VP

Marketing Mike Satterwhite, Senior VP

Sales Contact: Rudy Lesche, Technical

Director

Note: Nutro Products was interviewed for this project in March 2007, shortly before its acquisition by Mars Inc in early May 2007. At the time of writing this report, the amount of money paid for Nutro Products had not yet been disclosed, leading to speculation in the industry that Nutro Product may have suffered as a result of the U.S. pet food recall and, hence, may have been snapped up at a much discounted price. While the U.S. and Canada are the company’s primary markets, it also has a growing business in Europe and Asia. It focuses on the “super-premium” end of the market and specialized niche areas, such as specialist foods for large breed dogs, indoor cats and the growing market interest in holistic pet foods.



Background Nutro Products was established in 1926 when the original owners bought the business from its British owners. The business was purchased by an investor in 1976. Nutro Products is a relatively small player in the U.S. pet food industry. Annual turnover is in the region of US$ 600 mn per annum. Around 10-15% of this is exported, with Europe accounting for about half of the exports and the other half going to Asia. Exports are growing rapidly. One advantage of being a small company is that Nutro Products can easily launch new ideas on the market as line extensions. Industry Trends The two key trends that Mr. Leschke is seeing are as follows:

• The pet food industry is chasing the human trend towards

health conscious food. In his words, “pet food follows GNC”

• There is an increasing movement towards raw food. Industry and regulatory authorities are against this. The argument is that raw food products are not balanced nutritionally, however, they also note that such products present major health issues, particularly when the meat source is off cuts from the human food industry and difficult products (e.g. spinal chord) could enter the food chain unprocessed

Nutro Products tends to follow the health/holistic industry trends. The company prides itself on using “quality” ingredients, for example the current hot product is Nutro Ultra. In this line, the company tries to make use of ingredients that have been successful in the human food business. Once such product that is currently successful incorporates cranberry juice powder. Cranberry juice is a good source of Vitamin C and shoppers believe that their pets will benefit from consuming it. This backs up a key industry theme – the belief that consumers assume hat what is good for humans is automatically good for pets. t Another industry trend is for canned foods to be more “kitchen friendly.” Consumers are demanding pet food closer to what the pet owners themselves may want to consume. Thus, the industry is moving closer to human food and closely tracks human food trends. Consequently, marketing and technical staff tend to pay a lot of attention to understanding what has or has ot been successful in the human food industry. n



Regulatory Issues

ood businesses in terms of what they can say to onsumers.

o not necessarily have to be 00% complete and balanced.

to successfully target puppies/kittens in their arketing.

airy Ingredient Usage

or those derived from cattle, created negative pressions.

ts. anned products containing beef are acceptable for export.

peal as consumers ake positive comparisons to human food.

only a couple of these in the company’s roduct portfolio.

but they did not market well and ere taken off the market.

ntaining milk that are dual-branded with the Carnation name.

The pet food industry is highly regulated whereas the pet supplements industry is unregulated. This allows the supplement manufacturers to support their products with claims that are medically based. They appear to have a wider scope than the pet fc The key difference between supplements and pet food is that unlike pet food, supplements d1 Pet owners, particularly dog owners, are encouraged to only use one brand/type of pet food for their pets and not to switch brands as dogs cannot adjust very well to diet changes. Thus consumer loyalty is relatively high and it is vital for pet food companies m D In the past, Nutro Products used low levels of BMP in some of its formulations as a flavor enhancer. Although a number of potential ingredients could carry this role, BMP also looked good on labels. However, the ingredient was removed several years ago because of issues that arose when BSE was prevalent. Beef products,im Today, Nutro Products does not export any dry beef products because they do not meet EU or Canadian import requiremenC Nutro Products does have some canned lines that make use of cheese. Cheese products have marketing apm The company also sells some lines containing probiotics, however there arep Nutro does not sell any milk-based products such as cat milk targeted at distressed/orphaned kittens. Mars Inc used to manufacture such products,w Nestlé does sell some products co



Nutro Products has never encorporated whey into their products. The company’s approach is to look at an ingredient and say “what can we say about this” and then look at the cost involved in using it. For example, when deciding whether to use marigold extract as a source of lutein, the company first looked at what it could claim—in this case, lutein might help eye health. After establishing a claim, the company must look at the cost of incorporating the new ingredient—is the claim worth the cost? Cost effectiveness will then determine whether or not to incorporate the ingredient. R&D Functions As with other companies in the industry, the R&D philosophy is mainly to undertake development – not research. Nutro Products prides itself on applying third party research quickly and effectively. In doing so, it gets products onto the market faster than its competitors. The only exception is in the area of skin and coat health, which is a specialty for the company. Here, the company works directly with researchers at Texas A and M Universities. Nutro has worked with suppliers in the past. Recently, the company tested some probiotics for a supplier. The trials were based on an exclusivity agreement. Most of the R&D work is led by the marketing department, which identify ideas that demonstrate potential. It is then the role of R&D to formulate those ideas into end products that are acceptable to the regulatory authorities. Following the industry trend that “if it benefits my health, it will benefit the health of my pet,” probiotics have become a popular ingredient. The use of probiotics is limited, however, by the inability to add them late in the production process. Additionally, probiotics cannot be added to canned food because they cannot withstand the extreme post-packing heat treatments to which cans are subjected. With regard to lactose intolerance – this is not something that Nutro Products has considered looking into given its low use of dairy ingredients. In terms of other proteins, the industry needs to be aware and avoid hypoallergenic products. Rice protein is used quite heavily for this reason. Rice and lamb are popular combinations for marketers. Corn and soy protein are also used but only for their bulk properties. Neither of these products have any functional/nutritional properties. Pet food manufacturers like to have animal protein as the first ingredient on the label; however



they do add vegetable proteins to balance out formulations. Calcium and phosphorus, for example, need to be limited because high doses of these nutrients are not good for cats and dogs – they lead to skeletal issues. All such issues are manageable with a good approach to product formulating.

4.3 Other U.S. Companies

• C J Foods Limited Bern Kansas USA Tel: Contact: John Krehbiel, sales Owner: John Kuenzi Background C J Foods is a custom manufacturer of pet food products. The company typically works with 30 to 35 active customers at any one time. These vary from small companies (e.g. Mom and Pop stores) to Fortune 100 companies, including the top five pet food marketers. Customers employ C J Foods to perform “unique and difficult” manufacturing jobs. The company is strong in the manufactureing of organic and hypoallergenic products. Should pet food companies wish to develop and market such products, they will typically opt to manufacture through a specialist third party manufacturer. C J Foods can be considered the customer’s own manufacturing operation. This is more than an idle sales claim – C J Foods, for example, carries out no formulation, nutrition, regulatory, packaging or marketing work itself, or on behalf of its clients. The client needs to address these issues either in-house or through other third party specialists in these areas. C J Foods is not necessarily a cheaper manufacturer than any of the players in the industry (for example Purina) – indeed it can be the case that it is more expensive. The company’s niche is that it understands how to say yes and it is willing to do what is hard/impossible for many of the standard product manufacturers to do. Many of the products sourced from C J Foods are sold by clients at the super-premium end of the industry. C J Foods currently manufactures the five most expensive retail dog foods in the U.S., along with possibly the three most expensive cat foods.



One of the company’s strengths is its ability to manufacture organic products. The company’s ingredients and facilities are organic certified. John Krehbiel estimates that about one week per month is dedicated to organic manufacture; however this does not necessarily mean that 25% of the production is organic – it does mean that around 25% of manufacturing time is dedicated to organic products. There are often long down time periods involved in setting the plant up for organic manufacture. Naturally these are charged to the customer. The company’s philosophy remains: No matter how strange or off-the-wall the request, C J Foods will find a way of doing it. Dairy Ingredients The company does use some SWP in its formulations – this brings some protein value and is “label friendly.” Industry Trends Hypoallergenic products are a recent trend within the pet food industry. The trend is fueled by veterinarians who often diagnose pet problems as allergies, despite there being no evidence of such allergies. The hypoallergenic trend has led to the development of high protein “grainless” diets. In many respects, the word “grainless” is misleading. Grain is in pet food formulations for two reasons:

• The extruder needs starch. The gelatinous nature of

grain starch makes powders become kibble. Starch is generally sourced from cereal grains

• Grains are cheap. In reality corn is much cheaper than chicken! Therefore, formulators need to include grains to keep formulation costs down

Grains have been an integral part of the pet food sector for many years. Veterinarians are now recommending grainless diets but there is still a need to incorporate starch into the products. In such cases, manufacturers are incorporating potato or tapioca to raise the starch levels but there is no evidence that these products are less allergenic than grains. Still, consumers are convinced and are prepared to pay a premium for hypoallergenic diets. As a result, manufacturers such as C J Foods are more than prepared to manufacture “consumer riendly” products. f

airy Products D



Vegetarianism is also an emerging trend in the industry, which naturally follows the human food industry. Another emerging trend that may be dairy friendly is the incorporation of DHA into products. DHA naturally occurs in mother’s milk and therefore

nths be removed from the market, whereas it would most likely

John Krehbiel does not see dairy as being key in pet

• very mature in the

• er protein sources do exist in the industry,

• have

horrible extrusion qualities. Successful extrusion

e

els. onsidering that much of the feedstock for the industry is

agnesium levels are also a major issue with cats. In cat food, be below 0.1%. Dairy, once again,

cerbate this issue.

• arn Pet Foods Inc h

has positive connections with dairy.

Probiotics could be included in a formulation for “label dressing” reasons at 0.2% of the total formulation. At this level, however, none of the probiotic bacteria would survive the extrusion process. To be truly functional, probiotic ingredients would need to be incorporated at 2% of the total formulation to ensure the survival of sufficient bacteria. Marketers are not always driven by what is functionally right. Many operate on the premise that it is easier to beg for forgiveness than to ask for permission. Products that do not adhere to regulations are given 12 mototake longer to gain approval before a product is launched.

formulations. He based this view on three points:

Both industries (dairy and pet food) areU.S. If dairy was ever going to be a strong player in pet food, it would have happened by now

The animals that eat pet food are usually meat eaters. Although othgenerally pet owners want to feel that pets’ diets are meat-based

For dry pet food, the extrusion process presents difficulties where dairy is involved for dairy products

products have a relatively low protein level, a relatively high fat/oil level, and plenty of starch and moistur

Whey, for example, is high in protein and has no fat. It is hygroscopic, which can be a nightmare for extruders. Another issue with dairy may be the high levels of minerals. Cats in particular have difficulties with high calcium levCchicken meal, which includes bones, calcium levels are already high. Incorporation of dairy will not help with this situation. Mmagnesium levels need to may only exa Red BLong Beac



California USA

at

S$ 30 mn. Most sales are made through Pet Co/PetSmart duct is exported to Asia and Australia/New

ealand. The company is not registered to export to the EU.

y ingredients used are some cheese flavors that go to a cheeseburger imitation product. Also, some MPH (milk

duct leads to some lactose intolerance omplaints – the company gets about 15-20 of these per annum.

ompany does not operate at the nutritional end of the business – it is a pet treat

s arder, thus longer lasting. Some manufacturers are Irish

eat manufacturers reduce the volumes of casein they re using. Casein prices are currently over US$ 4.00 per pound

ome milk products are found in the specialty end of the

Red Barn is growing rapidly – at around 30% per annum (which ing will allow). It is a private company

wned by two Canadians.

Tel: Contact: Dave Andersen, President

Red Barn was started in 1994/95. Annual sales are estimated Uchains. Some proZ Dairy Ingredients The only dairinprotein hydrolysate) is used as a binder in sausage slices and deli sticks. The cheese procRed Barn also uses MPH, which is sprayed onto a treat product to make it shiny. The only real pet food product manufactured by Red Barn is large chubs of sausage type products. The c

company. The important driver for their products is chew time – how long it takes a dog to consume the treat.

Significant volumes of casein are used in injection-molded treats. Casein has an advantage because it makes the treath(mentioned IDB), Greenies (just bought out by Mars Inc), Nylabone (Central Garden and Pet) and Aspen Pet Products. Increasing dairy prices have seen many of these injection-molded trawhereas tapioca starch, an alternative, is about US$ 0.41 per pound. Selling dairy into the pet food sector is a tough proposition – not many cats and dogs are starving from a lack of protein! Sbusiness. For example, some manufacturers produce milk replacements for kittens, which tend to use some WPC.

is all that internal financo



4.4 Other

• utrition

ha -on-t

4 1664 415 440

trition

in joint health

ne response

rst lactobacillus probiotic approved

• o 297

Tel:

ic Buyer

[email protected]

nology Centre (PTC)

European Companies Masterfoods / Mars IncWaltham Centre for Pet NFreeby Lane Walt m he-Wolds Melton Mowbray Leicestershire, LE14 1RT UK Tel: +44 1664 415 440, 415 535 Fax: +4

Some of the achievements that Waltham Centre for Pet Nuclaims include:

1975: Determined amino acid requirements of adult dogs

Defined healthy taurine levels in cats 1982: 1995: Developed the first diet to help control the formation of

both struvite and calcium oxalate bladder stones in cats 1998: Developed first real-time, non-invasive measure of

odiferous flatulence in dogs and the first nutritional supplement to reduce it

1999: Developed the only dog food supported by research data

that uses green lipped mussel to mainta 2000: First demonstration of the effects of dietary antioxidants

on puppy and kitten immu 2005: Waltham® has the fi

for use in cats and dogs Nestlé Purina Petcare Ltd PO B xNew Malden. Surrey, KT3 4WL UK

+44 0208 255 5954 Fax: +44 208 715 1416 Contact: Michael Boyar, Global Strateg

(Hydrocolloids & Emulsifiers), Zone Europe / Global Purchasing

Tel: +44 208 949 6100 +44 7736 235 807 Mob:

E-mail:

Nestlé Purina Petcare Product TechAmiens Technical Centre Rue du 24e RTS – BP 12



F-80800 Aubigny, France Tel: +33 22 96 30 00 (R&D) +33 22 96 33 30 (Factory)

rdes

• o ción

The acquisition was completed in March 2002.

ffinity is now the third largest European producer of dry pet pany’s other pet food brands include Advance,

ium and Special Care.

•

pet food lant in Russia. The company claims to have a 10% market

Contact: Paulo Fernandez David Bo

Corp ra Agrolimen SA Calle Aribau 185 187 Barcelona, Spain Tel: +34 93 209 1199 Agrolimen was founded in 1937 – today it operates 28 production units and is present in more than 80 countries. The company produces consumer goods and employs a total of 10,000 staff. Affinity pet food was established in 1963 as a 50:50 joint venture between Agrolimen and Ralston Purina. The objective was to market agricultural products. In 1976 it launched its first dog food, and by May 1996 it had become a dedicated pet food company. In January 2001, Nestlé announced its intention to purchase Ralston Purina. In January 2002, Agrolimen agreed to purchase 50% of the Ralston Purina-owned Gallina Blanca Purina, together with Ralston Purina’s shares in premium in Italy and Greece, with the objective to form a single entity. Consequently, Agrolimen acquired Boxco following the divestment decision relating to the acquisition of Royal Canin by Masterfoods. Afood. The comBrekkies, Prem Provimi B.V. PO Box 5063 3008 AB Rotterdam

etherlands NTel: +31 10 423 9500 Fax: +31 10 484 5624 E-mail: [email protected] Provimi is a manufacturer of animal nutrition that also has a dedicated pet food division. The company’s pet food division gained entrance into supermarkets in 2001 via the acquisition of Propesko, followed by the acquisition in 2003 of Rocofa and 2004 of Nama (No 1 pet food manufacturer in Slovakia). After four years, Provimi is now one the top five European private label pet food manufacturers. In 2004 it produced 243,000 mt of pet food, a vast increase from the 2002 production volume of 157,000 mt. In 2005, the company acquired the Polish number pet food manufacturer, Ben. It also opened a new2

p



share in the whole of Europe, and to be the market leader in private label pet food in Central and Eastern Europe. The company has a network of nine plants in Europe, six

o od and three for wet pet od manufacture, with the following capacities:

T Provimi plant capacities

dedicated t the production of dry pet fofo

able 4.4

Plant Ca t pacity, mDry pet food Czech Republic 45,000 Italy 25,000 Spain 75,000 Holland 85,000 Poland 8,000 Slovakia 20,000 Subtotal dry pet food 258,000 Wet pet food Rocofa 50,000 Czech Republic 40,000 Ben Poland 10,000 Subtotal wet pet food 100,000 Total capacity 358,000

Source: Provimi

private label manufacturer to be well established in Central Europe.

4.5 Key Ja Companies

• etCare Corporation

n Mita Twin Building West ita

to u 326

1122

ant

82 0081

Center

It claims to be the only

panese

UniCharm PHQ: Sumitomo Fudosa3-5-27 MMina -kTokyo 108-6Japan Tel: +81 3 6722 Itami Pl9-27 Kita-itami, Itami-shi Hyogo-ken 664-0831 Japan Tel: +81 727 Mie Plant and R&D



1319 i tawara H gashiabari hi ie-ken 518-0602

+81 595 65 1141 (plant) )

R&D Center (also Technical Department of Unicharm ):

531-7 Wadahama, Toyohama-cho

cquired the et food business of Ajinomoto General Foods, Inc and started

s Corp and in 001 it changed to Unicharm PetCare Corporation.

• Pet foods: dry and canned dog and cat foods

th r

foods trends in the pet food industry as follows:

• ge

• indoors, so a small pack

•

living longer

N -sMJapan Tel: +81 727 82 0257 (R&D ShikokuCorp 1Kanonji-shi, Kagawa-ken 769 1602 Japan Tel: +81 875 52 6816 Unicharm PetCare Corp has sales offices in seven major cities (Sappro, Sendai, Tokyo, Nagoya, Osaka, Hiroshima and Fukuoka) and distributes nationwide. The company was established in 1979 as a non-pet business. The parent company, Unicharm Corp, entered into the pet food business in 1986 and established a pet food manufacture subsidiary, Unicharm Seattle, Inc, in 1996 through the purchase of a canning plant in Seattle, Washington. In 1998, it apto manufacture pet foods in the plant in Japan. In 1999, the company’s name was changed to Uni-Heartou2 The company today has 180 staff and turns over approximately US$ 3.18 billion. It sells the following products:

• Pet toiletry products: foil sheets, cat litter, deodorant pills for cat litter, pet diapers, floor protection sheets, wet tissues for pets

Wi egard to pet foods, the company only manufactures dry while it imports wet dog and cat foods. It sees the key

Convenience – packaging should open easily and fold into a small parcel after use (In Japan there is a charfor garbage collection)

Product size– small dogs, which are becoming increasingly popular, are keptsize is important to prevent messy and/or over eating.

Tailored foods specifically formulated for breeds, sizes, life stages etc. – senior dog food is a huge trend since dogs are



•

ood sales since its inception in 1986.

a 33% share

over 20 new products since 2003 in its

urchasing criteria are quality, delivery and cost. ppliers are more interesting as they might are unique and not that easily available in

has to be reasonable. Here dairy advantage as they are subject to high

•

nda Nishiki-cho

Functionally addressing specific health issues – so-called “prescription food” mainly sold through veterinary clinics – this however is a segment that Unicharm has not yet become involved in as its main focus is on the mass market

Unicharm sees taste as one of the most important aspects of pet food – while food has to be nutritionally complete and healthy, all this means little if palatability is low and pets refuse to eat it. Unicharm’s high-value, high-margin products target special needs of the evolving Japanese pet market and have enabled it to nearly double its pet fOver the past two years, the success of Unicharm’s specialty products have made it the most dynamic pet food brand in Japan and the largest Japanese-owned marketer of pet foods, trailing only global giants Mars Inc and Nestlé SA in overall market share in Japan. The company has a 29% share of pet foods targeted at small dogs, 44% share of the market for senior dogs andof the market for overweight dogs. Its cat products have seized market share as well. Unicharm has launchedtwo core categories of pet food and pet toiletries. The company does a lot of product development, but on research tends to either collaborate or outsource to external research laboratories. Ingredient purchasing is centralized, and the key ingredients used include poultry and fish meal, meat products and grains such as wheat and corn. Milk and whey derivatives are used for palatability. Ingredients are procured through a trading company. Assuming the price is right, the origin of ingredients is not that important. The company is always interested in new ingredient suppliers, no matter whether they are Japanese or foreign. Key pSometimes foreign suhave ingredients that Japan, but the cost ingredients are at a disimport tariffs.

Nisshin Petfood Inc Q: H

1-25 KaChiyoda-ku Tokyu 101-8441 Japan



Tel: +81 3 5282 4670

: surumi Plant

ho, Kawasaki-ku

6 5331

C nter: asu Research Center

Japanese market (around 99%) and claims hold a 14% market share in dry cat food in its home market,

nd produces dry foods and semi-moist foods. The maining 30% of the company’s products are manufactured in

The plant is ISO9001 and ISO14001 ertified.

ood Inc operates independently and as self-sufficient unit, but values the alliance with other

shaped by the cognition that, in Japan, pets are increasingly being treated as

pet foo

PlantT3-1 Ohkawa-cKawasaki-chi 210-0858 Japan Tel: +81 44 36 R&D eN1242-5 Iguchi, Nasushiobara-shi Tochigi-ken 329-2763 Japan Tel: +81 287 39 5521 Nisshin Petfood Inc. is owned by the Nisshin Seifun Group Inc. It serves mainly the to6% share of the dry dog food category and 10% of the wet cat food market. Its business is mainly derived from cat food sales (65%), with dog food sales accounting for 35% and 5% made up by other products. The Tsurumi plant accounts for around 70% of the company’s pet food areThailand – these are mainly wet pet foods (principally canned and retort). In the Tsurumi plant, Nisshin manufactures around 4,000 mt per month. c The company has sales offices in eight cities (Sapporo, Sendai, Tokyo, Nagoya, Osaka, Hiroshima, Fukuoka and Sakaide) and supplies nationwide. Nisshin Petfood Inc was established in 1970 as a company to sell pet foods produced by Nisshin Flour Milling Inc. In 2001, four business units of Nisshin Flour Milling Inc were split into independent companies and a holding company – thus Nisshin Seifun Group Inc was formed, of which Nisshin Petfood Inc is a part. Today Nisshin Petfacompanies in the group. Its strategy isremembers of the family and therefore owners’ requirements of

d are changing. The company markets the following products:



• Dog food: dry dog foods, soft dry foods, semi moist foods, weaning foods for puppies and snacks

It addproduc

the substances listed above (apart malic acid which do not seem to

ts), cat food may also contain EPA, acids (Omega-6 and Omega-3), taurine,

n, chlorella (algate), herbs (basil and

• orinyu Sunworld Co. Ltd

el: +81 3 3779 5711

on of orinaga Milk Industry Co. Ltd. It sees itself as a pioneer of pet

igh-quality products.

purchases, but stated that key purchasing criteria were ability of ingredients.

l animals, pandas

• Health support products (supplements) for dogs and cats

• Cat food: dry foods, wet foods (canned and retort) and weaning foods for kittens

s the following functional components to its pet food ts:

• Dog food: polyphenol, catechin, glucosamine, beer yeast, herbs (camomile), oligosaccharides, linseed oil (alpho-linolenic acid), bifido bacteria, lactobacillus, GABA (γ-aminobutyric acid), soy peptide, calcium (milk calcium), collagen, dietary fiber, (apple fiber etc), DHA, Vitamin E, malic acid

• Cat food: In addition tofrom glucosamine andbe added for ca

ted fattyunsaturabeta-glucarosemary)

MHQ: 2-13-6 Nishi-Gotannda Shinagawa-ku Tokyo 141-0031 Japan T This company has another sales office in Osaka and distributes nationwide. It was founded in 1971 as a pet food divisiMfood in Japan and has made efforts to develop, manufacture and sell safe and trusted h

The company would not go into detail of its ingredient usage and

freshness, assured quality and trace The company markets the following products (both from ownmanufacture and import):

• Milk replacers for puppies, kittens, smaletc

• Dry foods for dogs and cats



• Snack foods/treats for pets

• Feeding bottles for puppies and kittens

dogs and cats

tic supplements for dogs and cats

and retail is mainly through the specialized l, such as pet shops, mail order (including internet

s and to • d

03-00n

el:

oratory)

aims that its

ies and other outside research institutes form a

lant and the laboratory are ISO9001 and ISO14001 ertified.

The company has sales offices in five major cities (Sendai, kyo,

n tionw

ppon anufactures and sells the following roducts:

• Enteral nutrition for

• Therapeu • Distributionchanneorder ) animal hospitals.

Nippon Petfood Co. LtHQ: Kyodo Bldg 9F 1-4-21 Yaesu, Chuo-ku Tokyo 1 28 JapaT +81 3 3274 0821 Plant and R&D Center Shizuoka Plant 2020-1 Umeyama, Fukuroi-shi Shizuoka-ken 437-1105 Japan Tel: +81 538 23 2811 (plant) +81 538 23 2814 (R&D Lab

The parent company of Nippon Petfood Co. Ltd – Kyodo Feed Co – started manufacturing the Vita-One brand of dog food in 1960-63. The Nippon Petfood Co. Ltd itself was formed in the 1970s. The Shizuoka plant was built in 1972 and expanded in 1983 and again in 1991. Today, the company clplant has the largest production capacity in Japan, with an estimated 10,000 mt output per month. The research laboratory was relocated from Yokohama to the present location in 1999, and is equipped with a test plant for pet food production. Contract research and collaborative research with universitcore of the company’s R&D work and technology. Both the pc

To Nagoya, Osaka and Fukuoka) and distributes a ide.

Ni Petfood Co. Ltd mp



• Dog food: dry, wet, weaning foods for puppies, milk

replacers, treats

• Cat food: dry, wet, weaning foods for kittens and milk replacers

nd bird foods

re supplied by the parent company, Kyodo Co. Ltd – feed company specializing in animal feed for

ry swine eef cattle.

•

uilding

ku

apan

entral Research Laboratory

ll plants where Aixia products are manufactured are under

aruha orporation. Taiyo Pet Food then also changed its name to

management of the ompany staged a management buyout in alliance with the

Maruha Group Inc – was established and Maruha Corporation

M ruh

• Fish a Raw materials aShiryo poult , , dairy cows and b Aixia Corporation HQ: Shiba-Nichome Daimon B2-3-3 Shiba Minato-Tokyo 105-0014 JTel: +81 3 3457 7811 R&D Center: C16-2 Wadai, Tsukuba-shi Tochigi-ken 300-4295 Japan Tel: +81 298 64 6700 Arequest to become ISO9001 and ISO14001 certified. The research center belongs to Aixia’s parent company, Maruha Inc. The company has sales offices in six major cities (Sapporo, Sendai, Nagoya, Tokyo, Osaka and Fukuoka). It distributes all over Japan and, apart from retail, also supplies major pharmaceutical companies, university research laboratories and other public and national research institutes. The company was established in 1990 as Taiyo Pet Food Co. Ltd, a fully-owned subsidiary of Taiyo Fisheries Co. Ltd. The focus was on manufacturing cat foods based on Taiyo Fisheries’ product canning technology and worldwide supply network. In 1993, Taiyo Fishery Co. Ltd changed its name to MCMaruha Pet Food Co. Ltd. In 2001, the cventure capital group Jafco. In 2004, a holding company –

became a 100% owned subsidiary of this group. In 2005, a a Pet Food Co. Ltd changed its name to Aixia



Corporation. In 2006, Maruha Group Inc bought back Aixia

ixia manufactures the following products:

and retort), dry, snack products – it leader in wet cat food

Dog food: Wet (canned and retort), and snacks, as well for laboratory animals

is increasingly focusing on developing functional

cific health benefits.

ke aspe rchasing is that all raw materials ust be clearly traceable.

• Ltd

N shika

to sell pet s began to

anufa

sell pet food in the domestic market as well. In 1989, the

compaShizuo oya, Osaka and Fukuoka) and supplies pet food nationwide. It prides itself on using fresh and selected quality

ods

shares from Jafco to own 76% of the total Aixia shares. A • Cat food: wet (canned

claims to be the market

• as specialist food

The companypet foods with spe One y ct in ingredient pum Inaba Petfood Co. HQ: Nextage Nishikasai 7F -2-3 i sei 5

Edogawa-ku Tokyo 134-0088 Japan Tel: +81 3 3804 5117 Plant and R&D Center: Yui-cho, Ihara-gun Shizuoka-ken Japan Tel: +81 543 75 3111 This company was set up in 1997 as a companyoods, which Inaba Foods produces. Inaba Foodfm cture pet foods and export them to the U.S. in 1958. The company gradually expanded its pet food exports and began to

premium grade cat food brand CIAO was launched. Today the ny has sales offices in six cities (Sapporo, Sendai, ka, Nag

raw materials, producing unique products. Inaba Petfood Co., Ltd sells the following products: • Cat food: Wet (canned and retort), dry, snack foods and

supplements – manufactured by Inaba Fo

• Dog food: wet (canned and retort), dry, snack foods, ice cream, and supplements – manufactured by Ianaba Foods



foods are also supplied.

uses green tea catechin, as it contains it activities of periodontal disease bacteria

reduces odors associated with urine and feces. Inaba se green tea catechin usages and

rates the catechin in all CIAO/INABA brand products, n tea deodorant component

corporated.” The deodorizing effect of chitosan on urine and

•

d ounded in 1959, when it began to

dogs. In 1967, the company was

oday it manufactures pet foods as well as treats and supplements for

d to contain functional ingredients, such as L-amine, chondroitin, mushroom extract, propolis,

in B mix, gingko leaf extract, calcium, beta-carotene, s, collagen, blueberry (anthocyanin) and gymnema.

4.6 Key Brazilian

• Rua Peru 145Tanquinho Riberão PretoCEP 14075-3São Paulo, SSP Brazil

In the dog ice cream product, some milk products and soy milk are used. For lactose intolerant dogs, milk products are substituted fully by soy milk and vegetable protein is used instead of milk protein.

Varieties of low-fat pet The companycomponents that inhiband also has patents for theincorpowhich are labeled as “greeinfeces odor is a pending patent application.

Sunrise Corporation HQ: 5F TSK Bldg. 1-2-8 Uchi-Honmachi Chuo-ku Osaka City 540-0026 Japan Tel: +81 6 6942 7181 This company has four plants, at Tottori, Okayama and two at Sakaiminato. It has sales offices in seven major cities (Sapporo, Sendai, Tokyo, Nagoya, Osaka, Hiroshima and Fukuoka) ansupplies all of Japan. It was fmanufacture toys for incorporated into Sunrise Industries Corporation and changed its name to Sunrise Corporation in 1988. Twet and soft-drydogs. New products tencarnitine, glucosVitamagaricu

Companies

Nestlé Brasil – Ltda Pet Food Division 1

10 P



Tel: +55 16 3601 4300

ent

Tel: +55 16 3601 4419

Brazil, producing a diverse line of products. It manufactures Purina pet food products in its

Canoas, RS. The key in Brazil are:

oPlan, Beneful, Dog Chow, Alpo, Bonzo and

Cats: ProPlan, Friskies, Cat Chow, Gatsy

reats tricock, Alpo Biscuits, Doguitos

Purina sells o t food and snacks (treats) for dogs and cats, includin p

• MasterfoodsAv Geraldo P irJardin Marag

ogi-Mirim

el: +55 19 3805 8600

Materials Tel: +55 19 3805 7815

ffem.com nt Manager

@effem.com

with Brazilian manufacturing operations in onfectionery, rice, cereal and pet food.

d brands manufactured by Masterfoods in Brazil re:

• Dogs: Pedigree, Champ, Frolic

W3: www.nestle.com.br Contact: Fernando Costa, Purchasing Department E-mail: [email protected]

Tel: +55 16 3601 4309/4419 Valencir Moura, Manager, Latin America R&D E-mail: [email protected] Tel: +55 16 3601 4392 Flavio Boldieri, Applications DepartmE-mail: [email protected]

Nestlé is the largest food company in

two plants in Riberão Preto, SP andnabrands manufactured by Nestlé Puri

• : PrDogsKanina

• • T : Deli, Duocrock, Nu

nly dry peg pup ies and kittens. Brasil Alimentos Ltda Silve a Franco 1011 oni

MCEP 13803-340 SP Brazil TContact: Marcelo Osório, Purchasing Manager Raw

E-mail: marcelo.osorio@eBianca Kolln, DevelopmeTel: +55 19 3805 7848 E-mail: bianca.ramos

Masterfoods Brasil (previously Effem) is the Brazilian subsidiary of Mars Inc,c The key pet fooa



• Cats: Whiskas, Kitekat, Sheba

Treats: Bi• scrock, Filezinho

e pr tions as well as wet in cans

ps its Brazilian pet foods locally.

se in other countries because food differently then Europeans,

rfoods’ pet food apparently contains small P. However, the company claims that none

ates. The usage of dairy r se if their inclusion can

rice. However, the comment on

ny onducted.

• otal Alimentos SA

ax: +55 35 3691 2007-02-28

E-mail: [email protected]

egan rted 12 years

Th oducts are available in dry raand pouches. When considering a new ingredient, a number of factors have to be considered: • The quality of the pet food

• The needs of the pet – the food has to be complete i.e. contain all the ingredients necessary for the pet to live and grow

• The needs of the pet owner

Masterfoods develoFormulations differ from tho

perceive pet Brazilians might for example. Some of Maste

ts of WMamouncontains WPCs or casein/caseiningredients in pet food is not rejected pebe justified in terms of functionality and pDevelopment Manager was not prepared to whether a t w had been cests ith dairy ingredients

TRodovia Fernao Dias Km 699 Distrito Industrial Tres Coracões Minas Gerais CEP 37410-000 Brazil Tel: +55 35 3691 2000/8 FW3: www.totalalimentos.com.br Contact: Anderson Duarte, Technical Director

Tel: +55 35 3691 2098

Total Alimentos is a Brazilian manufacturer of premium animal feed for farm animals, horses and pets. The company bproduction in 1974 however pet food production staago. All the manufacturing is located in plants in the same town. The line of pet food products includes milk substitutes for new



born puppies, intermediate products for puppies moving to dry feed and dry food for puppies and adult animals.

et food. The principal brand names are:

d corn derivatives. The

There is a perception that dogs have difficulty in digesting lactose, hence any dairy ingredients used in dog food should not contain lactose. Options are delactosed milk, which is purchased in liquid form and then dried in Total’s own spray drier, or derivatives of casein such as sodium caseinate. Total produces its own casein and sodium caseinate for use in its products, but is open to new suppliers that offer suitable ingredients at competitive prices. One reason to use delactosed milk is the high digestibility of whey protein and partially hydrolyzed sodium caseinate, which are superior to the digestibility of other animal proteins. The usage of dairy ingredients in Total’s pet food products is small and not expected to increase significantly in the next few years.

None of the pet food is considered to be in the economic category. Total only produces standard, premium and super-premium grades of p • Super premium: Equilibrio, Supreme

• Premium (dogs): Big Boss, Lider, K&S, Max, Nero

• Premium (cats): Big Boss, Lider, K&S, Max

• Dog snacks: Seducão, Big Bom, Salsito, Kitute, Total Bifinho, Big Bone, cereal and energy bar, Total Stick

• Cat snacks: Feitico, Miaumor

The key claims on some of the pet food snacks are to remove tartar, reduce bad breath, include a natural bacteriocide for the mouth, introduce prebiotic inulin fiber, and reduce the volume and odor of feces. The principal ingredients are all sourced in Brazil: dried meat,

testine/viscera meal, meat meal aniningredients for each formulation are selected based on the requirements for protein, minerals, carbohydrate, energy matrix, flavor, digestibility and so on. Fish meal is imported from Chile.



• Nutriara Alimentos Ltda Arapongas – PR: Rua Jurutau, 1.982 Parque das Industrias 3 CEP: 86.703-070 Brazil Tel: +55 43 3275 8000 Fax: +55 43 3275 2001 E-mail: [email protected] W3: www.nutriara.com.br Contact: Dr Marcelino Bortolo, Technical Manager

Tel: +55 43 3275 8074 E-mail: [email protected]

Nutriara is a Brazilian company that has been in the pet food business for 15 years. It has been the Brazilian market leader in dog/cat food for around eight years and now has a 25% market share. Both wet and dry products are manufactured in six plants in Southern Brazil. Around 2% of the pet food is exported. Nutriara markets it pet foods under a number of brand names. Many of these were acquired when Nutriara purchased smaller companies. The principal brands below are as follows. • Dog food: Disney Pets, Foster, Huggy, Freddy’s, Bybos,

Dog Show, Blog Dog, Dog Friends, Tommy, Full Dog, Floop, Dunga, Ringo, Pitoko Mix, Pitty, Bidu, Street Dog, Pitokão

• o, Street Cat, Blog Cat, Tommy Cat, Clean Cat, Pitukats

riations for puppies, large/small

ogs and older (senior) dogs.

al ingredients used in the manufacture of cat nd dog food are:

cluding low ash)

Cat food: Disney Pets, Foster, Gatt

Many of these brands have vad Some of the principa • Meat meal

• Meat/bone meal (in

• Poultry meat meal

• Intestine meal

• Fish meal

• Corn, rice, wheat, oats, bran

• Whole corn, rice, wheat, oat powder

• Corn, rice, wheat and oat meal



utriara at present does not have any special programs to

followi

problems/diarrhea

a little lactose but cats should w lactose levels

• limentos SA (Guabi)

s Magnolias 2 405 osa

Brazil Tel:

3: www.guabi.com.br

roduced in five plants) and dry et food for dogs, cats and domestic birds (manufactured in

ogiana increased sales by 20% in 2006 compared to the

at it is the Number 3 in the market fter Nutriara and Effem (Mars Inc).

Biriba, but there are also other brands of luding:

Sabor & Vida

Vegetable or cereal-based ingredients are of a lower cost than meat/poultry/fish-derived ingredients. Ninvestigate the use of dairy ingredients in pet food, for the

ng three key reasons: • Dairy derivatives are generally much more expensive

than the non-dairy ingredients listed above

• The lactose contained in many dairy ingredients means they cannot be used in significant concentrations since lactose causes stomach or intestinal

Puppies apparently can coivatives with lo

nsume be given der

Mogiana ARua daVila MinCampinasSao Paulo

+55 19 2729 4477 WContact: Sávio Ambrozini, Technical Director

Tel: +55 19 3729 4546 E-mail: [email protected]

Mogiana has been selling animal feed since 1974. Its line of products includes animal feed (ppthree plants), with production split around 50:50 between animal feed and pet food. The company exports to more than 20 countries as well as to Europe. Mmarket growth of 4-5%, principally via efficient distribution to pet shops. It now estimates tha The principal brand isdog and cat food inc •

• Natural

• Faro



• Heroí

• Fiel

•

he key ingredients are derived from corn, sorghum, wheat, und-up meat flour. Small volumes of

p-market products for puppies. are small at 1% or 2% maximum. WMP is added

ng appeal, as customers believe that milk r growing puppies while in reality WMP serves

tion in the formulation of the product.

• l anin

a French company, manufactures dog and cat od in Brazil for the local market and for export. The range of

products includes specialist products for mini, medium, maxi and giant dogs, for particular breeds such as Labradors or German Shepherds, and for indoor/outdoor dogs, obese dogs and mature dogs etc. The same exists for cats – outdoor/indoor, breed-specific (e.g. Persian, Siamese etc), fitness, beauty, life stages etc.

TopCat

• Cat Meal

Around 85% of the production is dog food and 15% cat food. Over 90% is sold in dry form and the rest (humid) in plastic pouches or (wet) in cans. The R&D Department in Campinas aims to produce products, which aid in producing firmer, less odorous feces, promote a shiny coat, have good flavor, are good for the animal’s growth and protect against disease. Mogiana owns kennels at the UNESP Jaboticabal University where it carries out palatability trials and conducts other analyses. Trice, soy and dried, groWMP are used in some uPercentagesonly for marketipowder is good fono func Roya C do Brasil Rua João Augusto Cirelli 210

Tamanduá Descalvado, SP CEP 13690-000 Brazil W3: www.royalcanin.com.br Tel: +55 19 3583 9000 Fax: +55 19 3583 4386 Royal Canin,fo



• Colgate Palmolive, Division Hill’s Pet Nutrition Rua Rio Grande 752 Vila Mariana São Paulo, SP CEP 04018-002 Brazil W3: www.hillspet.com Tel: +55 11 5088 5000 Fax: +55 11 5088 5284 Hill’s Pet Nutrition Inc. is a division of Colgate-Palmolive, which sells the Hill’s Science Diet and Prescription Diet brands of super-premium dog and cat food. In Brazil, the pet food is manufactured by Total Alimentos, but sold by Colgate-Palmolive.

• Grandfood Ind e Com Ltda uel Morte 74, cj 112 Rua Sam

Brooklin ulo CEP São Pa

Brazil W3: www.premierpet.com.br

il: m.br E-ma [email protected]: +55 11 5502 7400 T

Grandfood is a Brazilian pet food manufacturer specializing in the production of super-premium and premium dog food, sold respectively under the brand names PremieR and Golden. In addition to the general rations, the company also sells puppy nd adult formulations for at least ten different dog breeds. a

• Gamble)

o Togneri 115

260-010 l

3: www.iams.com

its brands Iams (cats) and Eukanuba (dogs) from that plant.

Iams do Brasil (Procter & Rua AgostinJurubatuba São Paulo, SP CEP 08BraziTel: +55 11 6523 0045W Iams, a U.S. company, established its first Latin American pet food plant in Argentina in 2006. It supplies the Brazilian market and many other countries with



• Pra Bicho Ind e Com Ltda Rua Italia Giusti 260 Parque de Carmo São Paulo, SP CEP 08260-010 Brazil Tel: +55 11 6523 0045 W3: www.prabicho.com.br Pra Bicho produces dog treats marketed under the brand name Petiscão, in the form of sticks or tablets. The company uses ingredients such as: • Ground up bones

• Powdered hide

Protein from p• owdered meat or chicken, to give 40-60% protein levels

nts are bound together with starch or gelatin

adhesives.

4.7 Key Thai companies

• Sathorn Road

Sa 0120

nd the e United States.

he company’s key products include:

The ingredie

Perfect Companion Co Ltd

re Tower, 14195 Empia a,

th Floor, South Yann w thorn, Bangkok 1

nThaila del: +662 670 9600 T

Fax: +662 670 9699

erfect Companion is part of the Charoen Pokphand CP GroupP– it is the lead business of the Pet Business Group within CP. Perfect Companion was established in 2001 to market pet foods and products. The company S.W.T. Co Ltd is the production arm for Perfect Companion’s range of pet and specialty foods. It is ISO 9002 certified and production protocols adhere too AAFCO and HACCP standards. The company has a Pet Care Center which contains the company’s R&D department, testing products for their nutritional value and also conducting alatability tests, following standards set by AAFCO ap

National Research Council (NRC) of th T



Dog food: • Dr LuvCare Adult dry dog food

• Dr LuvCare Toy dry dog food for small species

• Dr LuvCare Puppy

• SmartHeart Adult Dogs dry dog food

lassic C-Immune Formula dry dog

• g Food (dry)

cken and turkey, beef and

o Dog Food dry dog food

• A-Pro Adult dog and puppies dry dog food

cat food

SmartHeart cat food (dry)

Basedcompa

ecause it

ir and build muscles

•

• association with a healthy heart

• SmartHeart Puppies dry dog food

• SmartHeart Toy dry dog food for small species

• Companion Pets Cfood

CP Do

• CP Canned wet dog food (chilamb)

• A-Pr

Cat food:

• SmartHeart Kitten dry

• • Me-O Cdry cat food

• Me-O canned wet cat food in seafood, pilchards or tuna

on the ingredients they contain, some key claims that the ny makes for its pet foods include:

• Spirulina –is often called the perfect food b

embodies over 40 important nutrients, including betacarotine, to maintain internal health

• High quality proteins to help repa

• Omega fatty acids to help nourish skin and hair

Calcium and phosphorous to help build healthy bones and teeth

• Iron to help build red blood cells

Nourishes the heart with allicin, extracted from garlic, the herb long known for its



and circulatory system, which also helps control cholesterol levels

• Nurtures the brain with oil extract from oily fish containing s lecithin, which help

•

• Taurine to keep its eyes bright and sight keen

natural sense of balance

s s that it “promotes growth with

ggs to help build tissues and muscles.” t is the only one said to contain dairy-

ts.

• U ion F ublic Ltd Co (TUF) k a Can

400

art of the Thai Union Frozen Products around 9% of the group’s total

exporter of canned seafood. It has a total production capacity of

Canned tuna

rent styles of wet or formulated

DHA and Omega-3 as well aproduce red blood cells

With added vitamin C, your dog’s natural resistance to canine diseases is enhanced

• Herbal extracts nourish the heart • Fish oil extracts rich in DHA and Omega-3 together with

lecithin help nurture the brain, sharpening the feline’s five senses, promoting well-conditioned body function control and the body’s

One of the products – SmartHeart Kitten Food, is claimed to be the bridge f m mother’ro s milk to a full adult diet and containmilk protein. The product claim protein from milk and eThis kitten food producderived ingredien Thai n rozen Products P

ong l ning PCL S979/9-10 12th Floor, S.M. Tower Phaholyothin Road Samsennai, Phayathai

angkok 10BThailand Tel: +662 298 0029 Fax: +662 298 0442-3 Songkla Canning PCL is pGroup. Pet food accounts for turnover. Songkla Canning, established in 1981, is a major producer and

70,000 mt per annum and produces three main product lines: •

• Canned seafood (shrimp, crab meat and baby clam)

• Canned pet food, in diffeproducts



The company is HACCP, GMP and ISO certified and approved e DA.

Around 99% of the company’s business comes from third party

•

d in 1978 as a manufacturer of a wide

ted to specialize in canned tuna d so e of the leading tuna canners in Thailand. has processing capacity of around 400

t fo ed from a selection of raw materials – e:

Tuna with vegetables

• Tuna with shrimp

• Tuna with squid

• Sardine in jelly

• Pilchard in jelly

• Mackerel in jelly

The tuna and chicken variety includes some imitation cheese, but no real dairy ingredients.

by th F

manufactures for customers in the U.S., EU, Japan and Asia.

Unicord Public Company Ltd 404, Phaya Thai Road Patumwan Bangkojk 10330 Thailand Tel: +662 216 0200 Fax: +662 216 1468

Unichord was establisherange of foods. In 1984, it staran on became onIt a large factory with a mt of fish per day and exports to 35 countries. Pe od is manufacturavailable pet food product varieties includ • Tuna

• Tuna + chicken

• Tuna with rice

•



• S.K. Foods (Thailand) Public Co Ltd 152 Krungthonbury Rd Klongthonsai Klongsan Bangkok 10600 Thailand Tel: +662 437 0407-12, 439 3630-1 Fax: +662 437 0404 This company is another fish canning operation that manufactures and exports its products, including fish-based wet pet food available in 2.8 oz and 3.5 oz packs.

• Royal Canning Co Ltd 72/85-87 Rama 3 Road

, Bangkok 10120 Yannawaan Thail d

9 Tel: +662 295 2222-ax: +662 295 2221 F

Royal Canning has its main canning factory in Songkla. The company produced canned fish, canned fruit, canned vegetables and canned cat food. The cat food product offer ing

cludes: in •

cktail

ailable in:

•

• Prawn jelly

• Smoked salmon

Sardine

• Mackerel

• Pilchard

• Seafood Co

• Tuna All of these are av Brine

• Jelly



• Hi-Q Food Products Co Ltd No 16/17, Moo 7, Bagna-Trad Road, Km 9 Bangkaew Samutpran Thailand 10540 Tel: +662 750 0505 Fax: +662 750 2663, 750 2636 Hi-Q Foods was set up in 1986 to produce high quality canned foods. Initially the company focused mainly on exports. It made a commitment to research and development in particular in the pet food area in cooperation with their foreign partners. The company has two production facilities with a capacity of 100 mt per day each. Wet, canned pet food for both dogs and cats is made to order for its customers from sardines, tuna and other ingredients.

• Chin Huay Co Ltd Sa-mae Dam 19/144 Moo 7, Thakham Road,

tian, Bangkok 10150 Bangkhunland Thai

Tel: +662 416 0708, 416 1793 Fax: +662 416 1909, 4161630

-mail: [email protected] E Chin Huay is a manufacturer of canned and frozen foods. The

roduct line includes: p • and fruit

nes in aspic for cats

• s Limited

ahachai u Muan 74000 n

ax: +66 3442 5172

Kingfisher has a canning factory in Songkhla. It manufactures wet cat and dog food in the following varieties:

Canned fish, seafood, vegetables

• Frozen fish

• Dehydrated fruit

• Canned pet foods: sardi

Kingfisher Holding1261 Vicheanchodoc Road Thambol MAmph r g, SamutsakornThaila dTel: +66 3482 0642 FE-mail: [email protected]



For cats: • Red tuna meat in brine or jelly with a variety of toppings

• Whole meat tuna flakes in jelly or gravy with a variety of toppings

•

at)

bination of meats

liver in jelly

•

•

• rize d

8 , 185 ong 49/1 b maru,

ned seafood, canned fruit and canned vegetables, as well as some pet food. 100% of the company’s production is exported, with key destinations being the EU, the Middle East and Africa.

Seafood platter

• Mousse (whole fish me

• Com For dogs: • Chicken in jelly

• Chicken with

Beef in jelly

• Combination of meat

Specialist puppy food

• Beef/chicken soup

Gold Canning Co Lten P181,1 3 Soi Jaransanitw

ang a Bangkok 10700BThailand Tel: +662 434 8953 Fax: +662 433 5972 This company was originally established in 1986 as a canned food exporter to Middle Eastern countries. Today the company produces can



5.0 DAIRY INGREDIENT OPPORTUNITY ANALYSIS 5.1 Marketing / NPD Strategies – Dairy Ingredient Supply Implications

The key features of R&D and NPD in the pet food manufacturing industry can be summarized as follows:

• The pet food business is heavily driven by marketing puffery –

and pet food marketers work heavily on the assumption (which seems to have proven right) that pet owners naturally assume that what is good for them, is also good for their pets. As one industry source stated: “The pet food business follows GNC.” As an example, the current “hot” product at Nutro Products, a major U.S. manufacturer that has just been acquired by Mars Inc, is cranberry powder!

• In general, the R&D people in the pet food industry seem to be doing the “D”, not the “R” – there is very little research that goes on. Some companies’ R&D Departments have links to certain University faculties and departments that undertake pet nutrition research, but that appears to be the exception rather than the rule.

•

can I make about

•

rate it into pet food in a

•

these two cases of attempting a “dairy positioning” has been described as muted at best by industry sources

In general, pet food manufacturers appear to put the onus for research on their ingredient suppliers. The industry starts assessing ingredients by saying “what claimthis?” and then looks at the cost of inclusion

• Price is a major factor – this counts heavily against dairy

Dairy is weak in human nutraceutical foods and virtually non-existent in supplements, apart from sports nutrition, which has no role in pet food, not even for performance animals. Hence it is unlikely to make much headway when it comes to inclusion in pet food formulations. As one industry source stated: “if the dairy industry brought me a successful product claim that worked for humans, I would incorpoflash, but that is not going to happen”

Nestlé has attempted to adopt dairy “positioning” in a couple of ways – the most brazen was the company claim on some Purina labels stating “high in protein and nutrient-rich like mother’s milk” a few years back. A second example was the dual-branding of Friskies and Carnation. In both cases the pet food products included no – or virtually no – dairy ingredients. The success in



5.2 Strength and Weaknesses of Dairy 5.2.1 Dairy ingredient benefit profile

In general, there seems to be little awareness or excitement about the specific benefits that dairy ingredients offer within the pet food industry. Certain benefits that were mentioned include: • Palatability – there is a view that dairy ingredients act as

a flavor enhancer in pet food thus increasing a pet’s appetite – particularly in dogs. Examples were cited of the use of BMP as a flavor enhancer, inclusion of cheese flavors and cheese powders in dog food to enhance palatability and the use of whey to improve taste and increase appetite

• Digestibility – whey protein is a very efficiently digestible protein in that it boasts high absorption and high energy conversion without any unpleasant side effects such as malodorous gases and feces

• roteins are perceived

• clusion in pet food

•

milk powder coating

•

aware of specific, substantiated nutritional benefits that

.2.2 and substitutes for dairy

umber of ingredient options decline, the chance of developing

High-quality protein – dairy-based pas high-quality, complete proteins

Healthy image – in the minds of many pet owners, dairy has a certain nutritional “halo” and its inmakes the product very label-friendly

Functionality in improving the consistency and appearance of treats – casein was cited as being useful in injection-molded treats. It makes injection-molding easier and the treats harder, thus prolonging the chew time which is key. For dry pet food, was said to give a shiny appearance

Specific benefits – some dairy-based solutions may offer specific benefits through providing immunoglobulins, DHA, bioavailable vitamins etc. However there is no clear indication that pet food industry participants are

dairy ingredients offer Perceived disadvantages of5ingredients

According to some industry sources, over the last 15 years, a lot of healthy ingredients for pet food, such as corn, wheat gluten,

heat and soy, have been vilified for marketing reasons. As thewn



successful products also declines. In addition, product concepts with unique ingredients lead to plant and manufacturing complexity and higher costs. For example, in the U.S., almost all products today must be stabilized with natural preservative systems for marketing reasons. Stabilizing products naturally for a 12-18 month shelf life is one of the most difficult product

evelopment tasks today.

ome disadvantages of dairy ingredients include:

•

g fresh dairy ingredients

•

ally cheaper, sources – either animal or

•

e dairy

• oteins as

• –

•

in pet food in high doses through the use of bone

• e of dairy ingredients in pet food – the pet food industry is very cost-oriented, and

d S

Because pet food requires a shelf-life of at least 18 months, pet food ingredients must also have a long shelf-life Additionally, the pet food industry has a limited fresh or frozen food distribution makinimpractical or impossible to use

The key nutrients sought in pet food – proteins, vitamins, carbohydrates, calcium/minerals – are easily available from other, genervegetable-based

While dairy has a general nutritional “halo,” there are no compelling messages or substantiated claims that can be communicated to the purchasers. Dairy is at a disadvantage since it does not even have any specific substantiated claims for human nutrition. Thindustry needs to develop substantiated claims before the inclusion of dairy ingredients could be warranted

• Lactose intolerance leading to diarrhea in cats and dogs is a serious barrier for the use of dairy ingredients

Dogs and, in particular, cats are meat eaters, thus pet food manufacturers like to have meat-derived prthe first ingredient on the label and will then use vegetable protein to balance out the formulation

Dairy proteins are hard to use in the extrusion processwhey protein is high in protein, low in fat and hydroscopic and therefore difficult to extrude

The high level of minerals in dairy ingredients – in particular calcium – is negative as calcium is already presentmeal in meat ingredients. This can lead to overloading of pet’s kidneys – especially in cats – and cause renal failure

Price is a major barrier to the us



the current high dairy prices make it difficult to compete es.

5.3 Aware

5.3.1

dairy ingredients in the pet food sector. Some specific examples f inclusion of dairy-based ingredients are given below, however

volumes could not be specified (and are likely to be very small). Table Examples of

foods

with other, cheaper alternativ ness and Attitudes Towards Dairy Ingredients

Current and likely future usage As mentioned before, there appears to be very little usage of

o

5.3.1 dairy ingredient usage in pet

Ingredient Usage

Yogurt Added to a formulation to add flavor, and possibly to increase perceptions of the presence of probiotics in the formulation

BMP Used at low levels as a flavor enhancer in the past – was stopped when the BSE issue arose

Cheese flavors/cheese powders Inclusion in dog food formulations to give cheese flavor, which apparently dogs like

SWP For protein value and label-friendliness

MPH (milk protein hydolysate) As a binder

Casein In injection molded treats as it makes injection molding easier and the treat harder, thus increasing chew time

WPC Some included in milk replacers for kittens

Milk powder Occasionally used for coating of dry pet foods as it gives a nice, shiny appearance

Milk/whey protein Palatability enhancer – to improve flavor and increase appetite in pets

Source: iRIS Consulting based on trade interviews

Future usage of dairy ingredients seems to be severely

• ntiated claim to

• •

restricted because of the following issues already detailed previously in this report:

No compelling reason/specific substawarrant inclusion of dairy

High cost of dairy ingredients over and above substitutes

Lactose intolerance in cats and dogs, sensitivity of kidneys to overload of minerals/calcium



• Little awareness of or interest in dairy ingredients among pet food manufacturers. One comment recorded was that both the dairy and pet food industries (in the U.S.) are mature, so if there was an opportunity or benefit to including dairy in pet food it would have happened

• Little research seems to be carried out by pet food

5.4

n with industry participants, some opportunities ay exist to incorporate dairy ingredients into pet food. In general, the

oes exist for an efficiently igestible protein, because of its high absorption and high energy

here is some demand for targeted pet foods addressing specific areas

food industry as a major dairy ingredient application. Dairy ingredient marketers need to tackle the “Two Ps” – price and proof, with proof (i.e. clinical evidence) being key. If the dairy industry developed a claim in the human food industry, it may open up opportunities in the pet food industry. However, there is no guarantee since the pet food industry is highly trend driven. A pet food “success” for dairy ingredients might be a fleeting fad until the next big thing comes along.

already

manufacturers, who concentrate more on the product development side. Hence, the burden of conducting clinical research and to come up with substantiated claims is firmly placed on the ingredient supplier

Summary of Key Opportunities for Dairy Ingredients

That said, in discussiomhigh quality of the dairy protein is recognized in the industry. Given the issue of lactose intolerance, dairy derivatives with low lactose content, such as delactosed milk powder or high protein WPCs, could be considered for inclusion in pet food. The targets for these would have to be premium and super-premium pet foods because of the high price of dairy ingredients. Whey protein may fill the demand that ddconversion. An added major benefit is that it has no unpleasant side effects in pets, such as malodorous gas and feces. Again, targets have to be premium and super-premium products. One issue here is that the amino acid profile in dairy proteins needs to be right for cats and dogs, and research into this and evidence of this would have to come from the dairy ingredient suppliers. Tof concern, such as obesity, renal or liver issues. If the dairy industry could provide some research and proof of specific substantiated claims, then dairy ingredients might become more attractive for inclusion in pet food. However, as mentioned before, it is unlikely that this research impetus will come from the pet food manufacturing industry – hence the dairy industry would have to take the lead in this. In summary, given the current situation as laid out in this report, there seems to be little opportunity for U.S. dairy ingredient suppliers to target the pet

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U.S. Dairy GLOBAL Site... · Opportunities for Dairy Ingredients in the Global Pet Food Industry . ... 2.2.1.2 A Recent Case Study in US NPD………… ... Division Hill’s Pet