Recession-proof category, but winners and losers

You probably sat down this morning at your kitchen-table-home-office, like every morning nowadays, looking at the screen in front of you like it’s a crystal ball. You’re hoping to conjure certainty in the face of little and gaze at a future with well-defined outcomes and assurances. This can be hard to come by. On occasion it helps to have some of the most experienced minds in your industry offer perspective.

Emergent asked four leading voices in the pet care business to weigh in on current conditions and provide their observations on where the business is headed for the balance of 2020. Helpful news ahead – we summarize the key takeaways at the end of this article.

Despite the economic chaos and roller-coaster conditions at retail, one thing remains steadfast and true – people assign a higher pocketbook priority to furry family members.

The headline: despite the pandemic impact on businesses generally, pet food remains on a trajectory to finish the year ahead of 2019. That said, there will be winners and losers in the battle to come. Retailers and pet parents will remember those brands which were there for them, that communicated to build trust, supported them and remained present – and those which didn’t.

Out of sight is out of mind and some brands have gone underground in the last two months, creating an open invitation for more progressive players to step in and take share. As you plan for what lies ahead, here are assessments and recommendations from experts the industry relies on for guidance.

Participating in this report are:

Mark Kalaygian, Editor-in-Chief, Pet Business

Lindsay Beaton, Editor, Petfood Industry

Glenn Polyn, Editor-in-Chief, Pet Age

Jennifer Semple, Editor, Pet Food Processing

It’s a time of uncertainty and contradictions

1. Pet brands are trying to navigate uncertainty in the supply chain (meat packing plant closures) on one side and retail sell-through on the other. What’s your best take on the state of the industry’s health and what do you foresee happening in the next six months?

Mark Kalaygian: “Based on what I’m seeing, the industry is quite healthy. All reports are that the supply chain is holding up nicely, with minimal, isolated disruptions caused by logistical issues, as opposed to production problems.” While e-commerce has picked up momentum, “I believe when stay-at-home orders relax, traditional shopping patterns will return,” he reports. “That said emphasis on omni-channel strategies are important when people have a more limited number of shopping excursions.”

Lindsay Beaton: “While stay-at-home orders and social distance concerns may have prevented some people from getting to physical stores, e-commerce saw 77% growth in March as people stockpiled. However choppy sales conditions may continue for the rest of the year.  My gut is pet food companies should look at their e-comm strategies not just for now but as a new standard for doing business.”

Glenn Polyn: “Pet brands are in a good place, all things considered. Any who may be under duress were probably struggling before the pandemic happened.” The grain-free segment, one of the industry’s strongest categories over the last decade, took a sales hit following DCM-related media reports. “Those who were already more impacted by a DCM (grain-free) slow-down may be experiencing added pressures,” he said.

Jennifer Semple: “Pet food is typically a recession-proof industry and is expected to remain one. Package Facts is still projecting 4% growth for the year.” Knowing the importance of impulse buying to some more discretionary categories at retail, “treat sales may well be soft until consumers have a comfort level to go out and shop at the store,” she said.

2. On the one hand we have evidence that the value proposition for pet ownership is at an all-time high and pet rescue and shelters are seeing a surge in adoptions, yet we’re also observing evidence of balance sheet strain such as some retailers cutting headcount and reducing employee hours. What do you think is impacting the conditions between growing enthusiasm for pets in the home and pet food category fiscal health?

Mark Kalaygian: “The high levels of quality time people are spending with pets, and new ones in the household, could lead to a trade up in food quality to brands carried (mostly) at independents.” Right now, FDM (Food Drug Mass) channels are experiencing a lot of traffic based on consumer response to stay-at-home orders, “there is SKU overlap between big box chain (Petco, etc.) and FDM channel that could create some erosion for big box if FDM shopping patterns persist. We saw a similar dynamic play out during the ‘08/’09 recession. We think food sales will remain strong. However, it will be (increasingly) important to optimize channel strategy,” he explained.

Lindsay Beaton: “It’s true that animal shelters all over the U.S. are seeing adoptions and fosters in numbers they’ve possibly never seen before. Many shelters had to reduce staff or shut down entirely to protect their human workers and volunteers when the COVID-19 pandemic began spreading. The best way to look after their animals was to get them into private homes. With employees suddenly telecommuting or with reduced work hours, communities responded heartily. At the same time, these (temporary or otherwise) pet owners were unable to get to physical stores to take care of their new furry companions. The current conditions have served to speed up an already-occurring migration to online channels.”

Glenn Polyn: “The retailers I have spoken to tell me that their sales are on a roller coaster ride that changes daily. One day there might be a huge wave of customers clearing the shelves only to be followed by the slowest of days with hardly any sales. Some retailers may be cutting staff, and that’s to be expected as customers are mostly going to be seeking necessities. And the fact that pet owners aren’t always walking up and down aisles means they aren’t going to be impulse buying. Considering the pandemic is such a unique event, the wave of adoptions might not be permanent once the nation returns back to some semblance of normalcy.”

Jennifer Semple: “Boston Consulting and IRI reported a surge in pet food sales during March, likely due to panic buying, and followed by a dip. Pet ownership levels are strong but many of the opportunities for impulse purchasing and trying new pet foods and treats are suppressed right now without as many people browsing in physical stores. As communities open up, the drive to feed, nurture and pamper pets will help revitalize the industry. In the near term I expect pet brands will focus on their best sellers, while tracking how consumers are spending.”

3. What is your best advice to pet food companies working to optimize their plans and navigate current market uncertainty? If you were CEO, what are the top three moves you would make?

Mark Kalaygian: “Going forward, a strong, clear channel strategy is in order in light of e-commerce growth. Independent pet specialty retailers were already paying close attention to how pet food companies were balancing their approach to omni-channel sales before the pandemic struck, and that is only going to increase in the months ahead.

“If I were running a pet food business I would focus on the following: Make sure the supply chain is consistent and working across all retail segments and partners, and not just the larger accounts. No independent pet retailer wants to deal with product shortages while a bigger competitor down the street enjoys high fill rates.

“With a fair amount of overlap already I would consider how to create uniqueness and distinctiveness for brands in independent vs. big box channels.

“Given the growth and shift to e-commerce shopping I would make an added effort to help independents compete more effectively with online specialists.”

Lindsay Beaton: “According to a recent PFI survey, only 11.9% of pet food manufacturers cited ingredient shortages or inconsistent supply as a top challenge. That said it’s better to be prepared with multiple options should any supplier conditions change.

“If I were a pet brand CEO, I would pay attention to:

“Anyone who was already set up for e-commerce had a significant leg up when the pandemic hit and everyone started staying at (and shopping from) home. Now a much larger portion of the pet-owning population has come to understand their e-tail options. Subscription purchasing surged 28% in March.

“It seems wise for pet brands to either be doing business on the larger e-comm platforms or helping specialty retailers make sure their e-commerce platforms are robust and marketed well.

“According to market surveys, by and large consumers are pleased with the way their brands of choice are handling the COVID-19 situation and want to continue hearing from them. When people head online it also means they are doing research there, checking influencer sites, reading product reviews, browsing social channels so it’s important to have your marketing house in order.”

Glenn Polyn: “Communication is vital. CEOs need to ensure the brand message is getting across to both pet owners and to retailers. On the one hand, you want to help consumers realize their pet lifestyle goals to keep pets happy and healthy, and perhaps share their stories on social media channels. Not to be overlooked, now is also the time to create well-written, engaging, interesting stories that help retailers and distributors understand how the company values (and understands) their efforts and how their concerns and needs are being supported.”

Jennifer Semple: “If I were making the calls at a pet food company, I would communicate, communicate, communicate. I would frequently talk to distribution partners, retail owners, competitors and friends in the business to gauge what is resonating with customers, what the customer concerns are, how their purchasing habits are evolving, and I would optimize my processing efforts to better serve what I’m seeing in the market.

“I would also look to diversify to meet another product need, serve another distribution or sales channel, or identify how I could help another company serve their customers better by manufacturing for them.

“Another priority would be to rally the troops within the company. Be open with where the company currently stands, what the immediate priorities are and what the near-term and long-term goals are. I would provide avenues to receive input and ideas from all corners of the company to identify the clearest, most direct path to growth and opportunity. I think many companies are successful because they create a culture of ‘we’re all in this together’ and from that culture gain a better understanding of the company’s true strengths and opportunities.”

Optimism if the right moves are made

It’s cathartic to hear the words and passion coming from those who so closely follow the pet care industry and by virtue of their occupation, have routine detailed conversations with the leaders of many businesses both big and small. Anytime you see the words ‘recession proof’ in a sentence it brings a measure of confidence.

But the challenges nonetheless are steep and varied. Some brands will come out ahead and some will lose ground despite the forecasts. The reason is straightforward: uncertainty can sponsor a form of organizational retreat and withdrawal. While understandable, that condition helps create a self-fulfilling prophecy of defeat. It requires a measure of business moxie to stand in the breach and operate progressively.

Yet that is our call to action to the leaders who read this report. Here, in sum, is the counsel of your pet food prophets:

• The business remains generally in good condition despite a faltering economy.
• Communication is a resounding call to action and was repeated over and over for the very reason the experts have taken note of a retreat to silence. Not every story or word needs to be treated like a CIA top security file disclosure. Talking to customers and pet parents is necessary, important and will be rewarded.
• In a related insight, keep the intel investments going to assess how consumer attitudes and behaviors are shifting within this new cultural minefield they’re living in. To truly know them and their aspirations and concerns is the secret sauce for more effective marketing investments and messaging strategies.
• Segments of the business driven largely by impulse buying will indeed take a hit until store browsing fully returns.
• E-commerce is big and getting bigger, and likely to remain an important channel long after the pandemic recedes, so best to map strategy now.
• When assets are tight and every dollar needs to work like 10, focus on your best sellers and prioritize.
• Pay attention to supply chain conditions and make sure you have strategies in place should a healthy “Plan B” be required for continuity purposes.

It is important to know that as much as experts see some insulation for the pet food business given the out-sized priority families assign to pets, multiplied by their growing value in a chaotic, less secure world, it is the actions leaders take now that will inform the business outcome later.

Your true north is operating in service of retailer and pet parent needs, aspirations and the health and wellness of pets. Being mindful of consumer concerns and needs can help shape the one thing our experts repeated most often: communicate, communicate, communicate.

Editorial note: Emergent would like to express our heartfelt thanks to each of the editors who participated in this story. We appreciate your time and efforts to help inform the industry.

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Guidance as new voice required in the face of cultural upheaval

Whatever the marketing plan looked like four months ago, it’s changing now in the face of a new reality and shifts in consumer attitude. Here we will chart the conditions and explain an enlightened approach.

So you understand what sits underneath the shifts:

Awhile back when we were engaged in the home safety products category, we had access to reams of quantitative and qualitative research to help us understand what the barriers were to purchase of potentially lifesaving products. The primary hill climb can be summed up in six words: “It will never happen to me.” Home fires, carbon monoxide incidents and other similar close-to-home threats happen to “other people,” consumers believed. This complacency could only be disrupted when confronted with real people stories of loss and tragedy.

The self-assessment people made was, never in my backyard. Now that sentiment has broadly shifted.

The unfolding events around us all has created a new reality. The change can be summed again in a statement, only modified as “it CAN happen to me.” We are witnessing the emergence of primal fear, anxiety nourished with uncertainty, multiplied by the speed of change going on and accelerated by public policy moves in an effort to flatten the curve of pandemic impact.

People believe they are truly vulnerable, while news reports of continued escalation in COVID-19 cases operates as confirmation of that view.

What does this mean to you? There is a rapidly increasing need for emotional support and preparedness. If you’re wondering whether or not consumers are paying attention to your behaviors and communication, a new research report suggests they are closely watching your moves.

• Gfk research has been tracking the changes and in a recent report said that 73 percent of consumers say how companies react and handle the unfolding crisis will have an impact on future purchase decisions. No surprise, 85 percent of Gfk respondents indicated the virus is impacting their shopping behaviors, presaging a significant, and likely lasting, migration to e-commerce channels.

Primary call to action: consumers are looking for “a brand I can trust to guide me.” Thus, it’s time to step back and take a hard look at what initiatives and outreach in your current efforts are specifically addressing the need for trust creation.

Trust and safety are paramount

• How are you expressing and addressing empathy and support for the lifestyle upheaval and anxiety people are experiencing?
• Can you help people answer and manage the emergence of ‘family cabin fever’ conditions in the home?
• Can you provide lifestyle encouragement, advice and ideas to help home-bound families continue healthy living regimens and behaviors?
• Of note here, the more ‘unexpected’ it is from you in the areas to try to be helpful in, the more unselfish and trustworthy you appear.
• Time to enable and encourage community conversation of shared experiences and events in your social channels. People need a place to engage and share.
• Reveal details of your ingredient safety and testing standards in product creation. In fact, generally there has never been a better time than now to be transparent about everything.
• What are your manufacturing hygiene protocols and safety procedures?
• For emerging brands, communicate your supply chain integrity and ability to continue the regular flow of products to distribution. If there are limitations in this area, explain them openly and honestly.
• For food retailers, your customers are going to hit exhaustion with home meal preparation 24/7. How can you amp up your prepared meal solutions business to bring some welcome relief for home chef monotony syndrome?

Engagement likely to be at an all-time high

With fewer distractions and a feast of extra time on their hands, people will be more open to engagement and have the bandwidth to pay attention. Content creation strategies can help fill the void. That said, it’s important to observe the rules of being helpful and useful over product promotion hype.

In 2008 and 09 when the economy tanked, a great lesson was served to businesses everywhere. Companies that continued to invest and communicate experienced share gains over rivals who answered the soft economic conditions by going into a fiscal fetal position.

You have the chance now to be seen and heard. What you say will impact perceptions of your ability to be trusted and of value to consumers’ rapidly changing lives.

If you need help navigating in this time of great change, please let us know.

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Marketing now with meaning and empathy

According to Marketing Dive and research from DISQO, online search and purchase behavior has increased 59 percent in the last week, led by cleaning supplies and health aids, while massive sales bumps are occurring also around shelf-stable food and beverage products. The extraordinary conditions reveal signs of an emerging new phase, ‘Quarantine or Restricted Living’ preparation as consumers hunker down at home for the long haul.

On Monday, Amazon announced hiring of 100,000 new positions to help them keep up with the surge in online transactions and added pressures on their delivery infrastructure. Meanwhile restaurant companies are in full pivot mode, making new moves to answer the need for curated family meals available through pick-up and delivery.

• One restaurant in Chicago, Prairie Grass Café, has opened a hotline service called From Our Kitchen to Yours, in an effort to help home cooks with guidance and advice on cooking and meal preparation. Meanwhile Weber Grill is creating Family Grill Packs, available through DoorDash delivery or takeout.

E-commerce transactions are likely to increase dramatically in the coming weeks, as people increasingly stay put, under guidance from the Center for Disease Control and state/local governments and departments of health. Emergent forecasts these behavioral moves will likely represent a lasting change that will usher in a new era of online food shopping and meal acquisition from a variety of sources. Removing friction from online search, menu-building, transactions and delivery will be vital as this story unfolds.

Marketing in the midst of uncertainty

It is important that brands approach marketing by leaning in with empathy and deeper meaning, working to be useful and helpful in this unprecedented environment. The question marketing teams should be asking: how can we help families cope with the stresses they are facing, the lifestyle upheaval of home-bound living, and the requirement of cooking and preparing virtually every meal?

This is the opportunity to be a partner and valued voice, helping consumers with these challenges rather than focusing on product feature/benefit selling. Before you is an opportunity to build lasting relationships that positions the brand with higher purpose, as a more human and approachable, trusted guide and resource.

Positive indicators

Businesses in food, beverage, pet, cleaning, health aids, and home-related categories are likely to prosper in the current situation, along with e-commerce platforms and delivery services.

We will get through this together. Brands will emerge on the other side as more enlightened, authentic and trustworthy businesses truly making a difference in customers’ lives.

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Your next moves to retain trust and reputation

Right now, your consumers are worried, bewildered, concerned and uncertain about what shoes might drop next. They are being sent home from the office, schools are shutting, sports and entertainment events are gone, Spring break vacations are upended, and the future impacts of the pandemic are hard to predict.

We know you equally have concerns and are working hard to address any uncertainties. We’re with you and know your heart is in the right place.

This is a significant moment on the continuum where brand trust and reputation can be secured or injured. What you do next will matter, and it’s important to note that communication may be one of the most important assets at your disposal.

• Honest, transparent messaging breeds trust and feeds patience, while silence will fuel uncertainty and dilute confidence.

Number one: communicate early and often

This is not the time to be quiet. If you make or sell a consumable product, especially food, beverages or pet food, people are worried about what comes next. Here’s what they want to know, right now.

For CPG

1. Is there anything going on in your supply chain that will negatively impact the availability of your products? You may not have all the answers but it’s better to communicate current status than to stay silent. What you don’t know you state as such.
2. What’s happening in your manufacturing, whether that be your own facilities or co-packers, with respect to employee activity, plant hygiene, and mitigation plans should people be sent home?
3. What are your standards, methods, procedures on maintaining vigilance over ingredient integrity and safety, and testing for same through the product creation process?
4. How can they get your products and services online? We know that feels like a ‘water is wet’ type question but it’s important and should be addressed in these conditions.

For retailers

1. Are you able you keep customers apprised of out-of-stocks and shelf replenishment schedules?
2. Can your pharmacy experts set aside scheduled time for by-phone consultations or online Q&A’s?
3. Are you signaling home delivery wait times when capacity is stretched?
4. What are your food handling an on-premise hygiene policies and procedures to help avoid any contamination?

The message matters

Your voice in this moment will impact the outcome. It’s important to avoid corporate speak, industry jargon and complex, “inside baseball” forms of messaging that only an employee can unravel.

A human, approachable voice including information that is presented with clarity and transparency will resonate with those you wish to reach. People routinely ignore dense, complex, analytical-style messages. Simple is better.

This is not the time for grand standing, self-promotional and brand-anthem style outreach that attempts to pass over the reality of what’s happening. Instead, empathy and care for the health and wellbeing of your users should ring through everything you release or post.

Next steps

• Publish updates and trust-enhancing content at your web site and in your social channels on a weekly basis. More often if you have new news to share.
• Keep it simple and straightforward.
• Encourage dialogue and conversation at your social sites to invite questions from fans and followers.
• As the situation changes, keep your stakeholders informed.
• Be generous of spirit and look for “surprise and delight” opportunities and stories for users and channel customers. Celebrate helpfulness, acts of kindness, and ‘we’re all in this together’ kinds of inspirational unity.

Navigation leads to reputation

Your efforts to be accessible, approachable and honest here will lead to respect and confidence among the stakeholders that matter to the future of your business. Both internal and external audiences will benefit greatly from your efforts to keep them apprised of what’s going on.

As always should you need help navigating these uncharted waters, we’re here to support you with guidance, messaging, copy, media and anything else you might need.

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Being relevant and valued in the moment of need

The New Yorker published a story chronicling China’s historic crackdown on the movement of people in public places in an effort to control spread of the virus. An interesting outcome is that home (quarantine) cooking is on a rapid rise especially among younger Chinese consumers who previously were much more likely to outsource their meals.

As massive numbers of people must stay home, turn on the stove and make their own food, popular Chinese social channels such as Douyin and Weibo are turning into online quarantine-driven cookbooks with recipes, journals and menu suggestions. Home grocery delivery is equally impacted. People are ordering the ingredients used that will help hone their cooking skills while they also discover the benefits of greater control over flavors, ingredients and preparations.

This event has disrupted normal food consumption habits and required many with limited cooking skills to seek support, inspiration, comradery and cooking tips to weather this lifestyle altering storm. This may have long-lasting impacts on food making and buying behaviors.

Home and hearth offer stability in an uncertain world

We’ve written before about the skyrocketing growth in online ordering through delivery apps like GrubHub and Doordash. This growth is connected to the consumer’s desire for convenience but driven in part by a sense of greater safety and control at home in a world that appears to grow less friendly and out of control by the day. Online everything allows the consumer to shop and also to eat easily without having to venture outside the household sanctuary. This is a powerful motivator that may only accelerate in the face of COVID-19.

The need for help – an opportunity in the making

Food retailers and brands are facing an extraordinary moment when behaviors and offers could coalesce to help consumers realize new home-based food consumption habits and even culinary ambitions. Of course, there will be a need to prepare for a potential onslaught of online ordering that could tax delivery services.

However, and importantly, there is an enormous opportunity here for retail, food brands and meal kit providers to be of help to consumers in gearing up for home cooking realities and adventures. Conditions like the potential of a pandemic are unusual and may create behavior shifts that will continue beyond the end of the crisis.

• Here it is simply stated: how can you help the consumer with a rapid rise in home cooking occasions and a parallel need to know more about creating menus, meal preparation techniques, ingredients, food storage and safe handling, and sharing their experiences and ideas with others in your brand communities?

Now is the time to step up with tools and resources designed to enable these at-home eating experiences while positioning your banner and brand as a go-to, empathetic voice and valued resource.

Home cooking tool time

Some recommendations on the path forward:

• Publish download-able menus tied to special offers and connected to shopping lists.
• Serve as guide by providing instruction via online video on cooking skills and techniques – especially for vegetable dish preparations that aren’t as well understood.
• Inspire the home cook by bringing chef techniques and voices to the table on cooking hacks and layering flavors.
• Enable social sharing of meal ideas and preparations among your shopper community.
• If ever there was an Instagram moment, this is it. Your social pages can be a helpful, informative and inspiration resource for novice home cooks.
• Answer common food preparation and storage questions like, should you refrigerate berries or should you avoid storing apples near bananas. Shelf life questions will likely be common.
• Communicate early and often on food delivery conditions, wait times and manage those expectations.
• Get creative: food retailers can offer online meet ups and interactive webinars that will help families manage at-home events and dinner parties (social channel broadcast opportunity).
• In short, become a resource and not just a product source.

Emergent believes this return to the kitchen is likely to have a lasting impact on the growth of e-commerce grocery ordering, and a long term upswing in home cooking.

If you’re wondering how to navigate this rapidly changing environment, we can help.

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The hot ticket networking experience at Groceryshop

In a food industry now preoccupied with algorithms and digital platforms, it’s remarkable when reminded that personal, human connections still inform the beginning of most successful business relationships.

Nowhere was that shown in greater relief than on Monday night at the recent Groceryshop convention. An “A” list of food retail executives gathered at the sold-out Friends of the Future reception to network with key industry players – many of whom are working feverishly to help solve the transformational changes now unfolding in the food and beverage world.

• Groceryshop has firmly established itself as the leading food industry conference centered on the digital race to answer upheaval in how families select and shop for food. No surprise much of the conference agenda in 2019 showcased emerging technologies in e-commerce, food delivery, digital marketing, supply chain management and robotics.

Yet the Friends event served as a potent reminder that business, whether between advisers and suppliers in the food business, or with consumers themselves, is driven by the high-touch resonance of conversations between people.

“Friends is exactly that, an opportunity to truly connect on a personal level and get better acquainted. It’s in the moment when we talk and look each other in the eye that we find common ground, mutual interest, and most of all trust,” said Bill Kies, President of Kies Consulting and executive producer of the Friends of the Future event.

In its second season, Friends of the Future promised an informal atmosphere of exceptional food and beverage as grist to facilitate relationship building between food retail business leaders and decision makers. No other agenda except sharing experiences and ideas.

The event’s top sponsors including Accenture, Nielsen, Inmar and Shipt, helped press the call to action, with 250 executives gathering at The Venetian’s Yardbird restaurant, closed down to accommodate the crowd. Nearly 40 food retail companies were represented, evidence of an industry in transition while facing the rise of e-commerce challenges and new competition from the ascending restaurant food delivery business. Other event sponsors included Planalytics, ShopperKit, Label Insight, FlyBuy and the Food Marketing Institute.

“It was an amazing evening,” Kies reported, “friendships were initiated, and solutions explored among retailers looking to navigate an increasingly complex business environment.” Kies promised a return for Goceryshop in 2020 with an added dimension: the event will expand to include CPG food executives alongside the legacy list of food retail leaders.

For more information contact Bill Kies – [email protected]

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