With the number of cats and dogs kept by Americans as household pets continuing to multiply, as well as new types of feed and pet food being developed to meet their needs, the opportunities for meat and poultry processors to supply ingredients for pet food – or even to make branded pet foods themselves also increasing. Processors are taking advantage of this larger market. And with the increasing emphasis on dogs and cats as members of their owners’ families, rather than “just animals,” the number of choices of dog and cat food types is increasing, providing an even larger customer base for the meat and poultry industry, including slaughterers and processors.
Cause for paws
“There’s no doubt that the dog and cat population in the US continues to grow, especially the numbers of animals being kept as pets,” says Kurt Gallagher, spokesman for the Pet Food Institute, a trade association representing manufacturers of pet food, mostly for dogs and cats. “Back in 2003, there were about 78 million cats and 61 million dogs being kept as pets in the United States. Today, these numbers have increased to 83 million cats and more than 67 million dogs, totaling 150 million animals. And surveys show over half of all American households share their homes with at least one dog or cat,” according to Gallagher.
“So, there is a corresponding growth in the amount and types of food being developed for our pets,” Gallagher says.
In today’s market, the number of pet owners who consider dogs and cats as family members has spawned a market for products and services targeting pampered pets. As demand for pet spas, doggy daycare centers and even $200 per night luxury kennels grows – even in the face of the recession – so, too, have the opportunities for demographic-focused, pet-food makers. Fewer owners regard pet-feeding as an afterthought and the days of feeding Fido table scraps mostly have been replaced by healthier and more-expensive alternatives. The trend has spurred many owners to look for more nutritious and healthy foods specific to the age, breed and health need of their dogs and cats. The pet food industry has responded to this interest by manufacturing varieties of higher quality foods.
Pet food has become a very big business in the US, and continues to become even bigger. According to the Pet Food Institute, US pet-food sales now total more than $17 billion a year, compared to $13 billion just seven years ago. The greatest amount is dry dog food, at more than $7.4 billon now, followed by dry cat food, at $3.3 billion annually with more than $2 billion worth of wet cat food right behind. Looking at it another way, the total amount of dog and cat food produced each year is more than 8 million metric tons, with the greatest amount being dry dog food, followed by wet cat food.
Pet food itself has changed a lot over the years. Dogs traditionally were fed from huge bags of kibble (dry food or pellets made by extrusion, similar to the process used to make certain breakfast cereals). Cats ate kibble, too, although in smaller amounts. While kibble sales are still strong, there are now many other forms of food, including refrigerated and specialty foods that may come in trays similar to the way some human foods are packaged. There are also foods designed with veterinarian guidance. For example, Hill’s Pet Nutrition Inc. offers its Science Diet, what it calls “wellness nutrition” for various stages of dogs’ and cats’ lives; Pet Nutrition based on veterinarian guidance; and Prescription Diets, which must be obtained with a veterinarian prescription. Prescription Diets, which other companies call therapeutic diets, specialize in helping dogs and cats with urinary, mobility, weight management, sensitive stomach, skin and coat health, aging and oral health problems. Indeed, pet-food offerings are more refined than ever.
Pet-food manufacturers in the US must comply with considerable regulations with regard to product claims and food safety, a topic that garnered unprecedented attention after this past year’s widespread recall of pet food related to a Salmonella outbreak. FPI’s Gallagher says good nourishment is an important part of today’s commercial pet foods formulated for all stages of pet growth, so it is easy to find well-balanced meals for dogs and cats. He says the Association of American Feed Control Officials sets laws, regulations and standards for making sure pet food is healthy and nutritious. AAFCO is also developing regulations on organic pet food, which is appealing to pet owners, just as interest in organic human food is increasing. While meat and poultry processors make ingredients for pet food under US Dept. of Agriculture inspection, pet food itself is regulated by the Food and Drug Administration. Canned pet food must conform to FDA’s low-acid canned food regulations, as well.
Processors sit up
Most of the large meat and poultry processors in the US sell at least some ingredients to pet food makers. Small and very small processors get involved as well. While meat and poultry processors supply meat ingredients, other suppliers furnish manufacturing equipment, packaging, analytical testing, packaging and other services to pet food makers.
Mark McMahon, assistant vice president of rendering solutions for Cargill Meat Solutions, Wichita, Kan., says Cargill supplies four of the five major pet food manufacturers in the US, as well as three smaller pet food companies.
“Dogs are carnivores,” McMahon says. “So, the animal-protein and fat products the processors produce are key ingredients in the manufacturing of pet food. We are an ingredient supplier of protein meals and fat. For the pet-food companies we deal with, we supply beef meal, pork meal beef tallow and pork grease.”
“We do not see it [the recession] impacting our business,” McMahon points out. “We presume premium brand demand would be down, relative to private-label brands,” he says.
McMahon believes new types of pet food products emerging on the market today are creating more of a market in the pet-food industry for meat and poultry processors. “Yes, they [pet-food makers and consumers] will switch from one animal protein source to another. This creates more of a demand for the various animal proteins,” he says. He also believes many of the large meat and poultry slaughterers and processors are in the pet food manufacturing business mostly as ingredient suppliers. “There is an opportunity for processors to produce value-added ingredients. Contrast that with the animalfeed industry [for farm animals] that views meat and other ingredients from meat and poultry processors only as a commodity.”
One growing trend in the pet-food industry helping meat and poultry processors is the establishment of partnerships between the processors and the pet-food makers. McMahon says Cargill is involved in such partnerships. “We establish partnerships because [the companies we have partnerships with] become loyal and consistent customers. And they are not a least-cost formulator like the animalfeed industry. For the most part, they are not price buyers and value our products as more than just a commodity,” McMahon says.
Another example is John Morrell & Co.’s acquisition of Premium Pet Health LLC earlier this year. Morrell is a wholly-owned subsidiary of Smithfield Foods Inc., Smithfield, Va. Morrell recently acquired the remaining 49 percent interest in Premium Pet Health, a leading protein by-product processor that supplies many of the leading pet food processors in the US. Smithfield’s president, Larry Pope, said the company was pleased to be the sole owner of Premium, and logical to invest in a company synergistic to Smithfield’s fresh pork processing business. With sales of $12 billion, Smithfield Foods is the leading processor and marketer of fresh pork and packaged meats in the US, as well as the largest producer of hogs.
Opening pet doors
Tyson Foods not only has partnerships with pet-food manufacturers, but has also gotten into the pet food processing business itself. Tyson Foods changed the focus of its shutdown production plant in Independence, Iowa, and re-opened it as a pet food processing facility this year. The Independence plant had made deli meats, but was closed when the company stopped production in some of its deli meat operations. The plant had once employed 300 people and had been in operation for more than 50 years. The company spent more than $6 million renovating the plant, and the pet-food products being made there are pet treats, being sold nationally under multiple brand names. The facility re-opened earlier this year.
“The $3 billion pet-treats market has experienced more than an 8 percent compound annual sales growth over the past five years and does not appear to be adversely affected by the economic slowdown,” says Dave Hogberg, general manager of pet products for Tyson Foods. “We believe this is an area of great opportunity and this initiative is a natural extension of our strategy to value-up raw materials into higher-margin categories.”
So, at the Independence plant, Tyson Pet Products Inc. launched a line of 100 percent natural “True Chews” dog treats, for what it describes as consumer demand for American-made natural pet treats. Tyson Pet Products Inc. is part of the company’s Renewable Products Division, which, like other processors, is focused on increasing the value of meat and poultry by-products in such areas as pet products, renewable energy, nutraceuticals and biotechnology. Jeff Webster, group vice president of renewable products for Tyson Foods, says the chews segment of the pet treat market is a significant untapped opportunity. Chicken, beef and pork in the True Chews treats come from various Tyson locations in the US.
Historically, Tyson has been involved in supplying raw materials to pet food manufacturers. The Independence plant is the first the first facility producing finished, retail-ready pet treats.
But Tyson Foods also has set up a partnership with a pet-food manufacturer that is making new types of dog and cat food. Last year, Tyson and Freshpet formed a strategic alliance to help the pet-food maker to grow the refrigerated, fresh pet-food products sold by the pet-food company based in Secaucus, N.J., with its processing plant in Quakertown, Pa. Both companies believe this fresh cat and dog food will have a great appeal to pet owners who are greatly concerned about the health of their animals.
Cathal Walsh, founder of Freshpet in 2005 and co-owner of the company now with John Phelps and Scott Morris, says the pet-food products the company is making with ingredients from Tyson are fresh, refrigerated pet food, not dry, wet or from a pouch.
Gary Mickelson, Tyson spokesman, says the company has made quality, meat-based ingredients for the pet-food industry for years, but this partnership is the first launch into branded, finished pet food (via the Freshpet brand). “We believe this will transform pet food,” Mickelson says.
Walsh says the company developed fresh, refrigerated dog food and treats under Freshpet Select and Deli Fresh brands four years ago, and now has added cat food. The products are meat-based, he says, with vegetables, brown rice, cooked and refrigerated. “We pasteurize the meat, refrigerate it, keep it refrigerated and ship it refrigerated to stores,” Walsh says. “The food is not raw, because even though dogs are somewhat immune to Salmonella, they can still pick up pathogens from raw food.”
Both Walsh and Tyson believe the alliance is an extension of Tyson’s experience in making innovative, refrigerated protein products for families, as well.
“Having a partnership with Tyson is wonderful,” Walsh says. “Tyson is accelerating our growth. They help us in logistics, refrigeration, networking and world-class research and development. And they supply each of my lines with ingredients, including chicken and beef protein. We also have a whole range of other suppliers, who furnish our vegetables, like carrots, peas and other ingredients.”
“Fifteen years ago, we would have been a niche and nothing more. Today, Freshpet foods are being sold in places like Kroger Stores, Safeway, and Wal-Mart, as well as Pet Smart, Petco, and independent pet specialty stores. We’re certainly not a ‘niche’ idea anymore.”
Bernard Shire is M&P’s Washington correspondent, contributing editor and feature writer based in Lancaster, Pa. He also works as a food safety consultant and writer for Shire & Associates LLC.