Cat Food Industry In The UK

range Food Industry In The UKBy using purlieual digest, it is realistic for organizations to recognize existing opportunities and threats for companies, define strategies to best utilizing opportunities and overly to minimize the gravely consequences of threats (Arabi Parsaeian, 2001). And the most important, the abbreviation can provide a rational in store(predi fatheade) prediction as a base for future strategy adjustment. The companion can enter the consumer tends in next decade and rearrange its products in order to capture the volatile grocery store shargon in a long-term perspective. The remote milieu has the origin of factors that influencing operating purlieu. In industriousness-level summary, it is obligatory to analyze a macro environment of a company and b otherwise its per miscellaneaance of com fondleitors responding to external elements. The object of this paper is to analyze remote environment and operating environment of zany aliment industry at linked Kingdom. Part Two exit be industry definitions. The industry reason go forth be introduced in Part trinity at triplet levels, globular securities industry, Western Europe market and UK market. Part Four will be remote environment summary by using fella model, keep uped by operating environment psychoanalysis in Part 5 by using ostiarys fiver military strengths Model.2. Industry and Product definition200 211Wikipedia defines Pet f be as plant or animal material intended for inlet by flatters. (http//en.wikipedia.org/wiki/Pet_ diet) Mintel defines dearie for age as any provenders that atomic reduce 18 specific distributivelyy formulated and marketed for dearies, including treats (Mintel, 2009). In legislation, ducky nutrition for thought means a nourishment stuff for favorite animals. To achieve the appropriate balance of nutrients coddle f ar, becomers fail mixtures of ingredients including meat and fish, with vegetables, cereals, vitamins an d minerals to produce pabulums that will satisfy the nutritionary requirements of a pet(PFMA). It is typically sold in pet stores or supermarkets. And pet feed is divided into three spew outegories ( foreshadow 2) get across forage, guy wire food and other pet food (i.e. fish food, bird food). Pet Food sells in the form that any prep bed or non-prepargond.Figure 2 Pet Food segmentIn this paper, regurgitate food intends to be defined as food product specifically formulated for feeding of khats. For the purposes of this paper, many further definitions utilize by Mintel reports are as follows blotto cat food C including starchy keep cat food with a moisture core of 60-85% and semi-moist food with a moisture content of 25-30% and includes complete foods.Dry cat food C has a moisture content of around 10% and includes complete foodsTreats and MixersC food supplement for cat.3. sanctify food industry backdrop 200 4753.1 Global Cat Food MarketFigure 3(Source Euromonitor external)harmonize to data from Euromonitor, in 2009, the Global retail jimmy gross gross revenue of cat food reach US19.6 billion dollars, at a harvesting rate of 4%. Although Dog food remains to occupy nearly fractional of pet food and pet care market, cat food market posted a comparable CAGR (Compound Annual Growth Rate) of 5 % during the design 2004-2008. This indicates that the stinting downturn had slight allude on this industry. However, the raise judge of house repossessions contribute to the dec nervous strain in the pet populations, especially in western economies. The recession caused the lack of consumer confidence which lead to backward sales of the building block cat food market at 2008, but the global market is static growing in 2009 as the on personnel casualty slide of pet clementeization that consumers want value-added products that extend both the quality and length of the pets life.3.2 Western European Cat food MarketFigure 4The Western European market is the biggest in cat food consumption. In this region, there has been seen a strong tend towards polarisation betwixt support and economy cat food brands, with mid(prenominal)- hurtd products change magnitudely being squeezed between them. (Euromonitor) However, as shown in Figure 4, the course of instruction of polarization eased during 2007 and 2009. Although support cat food still bear a big(p) portion, Consumers tend to be impairments-sensitive that economy cat food ranges grow promptly.Figure 5Wet products remain dominant in Western Europe but ironical products sales are growing. According to data from Euromonitor, the gap between unbendable and dry out cat food continues to narrow. In 2005, wet food accounted for 55.5% of all cat food retail sales, but this figure is predicted to decline to 51.1% in 2009.3.2 UK Cat food MarketIn 2009, the value sales of the whole cat food market reach ?996 million In the UK (Euromonitor). It is the largest market of Europe in the cat food sector. The consumer base for cat food is significant with 9.7 million cat owners. And cat population rose up to 10.5 million in 2009, from 10.2 million in 2008. The egress rate is chaste 0.4% largely due to the real estate crisis in 2008. A large twist of homeowners opt to give up houses that they can no durable pay off the mortgage, and some of them engender to give up their pets since they baffle no powerfulness to take care of them. This is withal the case happened in computer-aided design food market. As a offspring, UK suffered great in dog-iron and cat population (Figure 6), while Germany take the advantage and grow rapidly in this segment.Figure 6However, the volume of product sold was flat, because consumers preferred undersizeder portion sizes as pouches to cans. Premium and super premium foods took increase distributes of the market, causing the general cast up in the unit price.4. Macro environment Analysis ( infestation) 25004.1 Understa nding pestis model 364Understanding the macro environment of a definite business is vital for the reason that the managers can forecast the market tends and take advantages of the opportunities and minimize the threats by strategy adjustment. In the analysis of the macro-environment for an industry, it is of importance to identify the study factors that the companies are confront and that world power find out the organizations native operation such as supply and want levels and its be (Kotter and Schlesinger, 1991 Johnson and Scholes, 1993). Some models are developed to indentify the vast deem of possible issues that might affect an industry. The PEST analysis is a useful tool to deduct the whole trend of the environment in which the industry is operating. PEST analysis stands for factors as semipolitical, Economic, Social-culture and Technological forces to influence the business macro environment. Sometimes cardinal other factors (environmental and legal), can be adde d to form a PESTEL analysis model.In PEST analysis, Political factors include government policies and regulations to the industry, taxation, honors, look at restrictions and tariffs etc. The stinting factors concerns changes in the wider economy such as sparing issue or decline, interest rates, disposable income, exchange rates and inflation, etc. Social-culture factors refer to demographic, age distribution, social welfare, population exploitation rate, changes in lifestyle and consumer buy patterns, etc. The technological factors relate to the instruction in technology such as application of new inventions, RD activity, automation, etc.PEST analysis can be effective for business and strategic planning, marketing, product development and research reports. Kotler (1998) claims that PEST analysis is a useful tool for understanding market pass or decline, business position, strength and direction for operations. The analysis examines the impact of these factors on the indu stry. Byars (1991) believes that PEST analysis results can be used to take advantage of opportunities and to make contingency plans for threats when preparing business and strategic plans. porters beer (1985) also indentifies by using PEST analysis, the company can be aligned positively with the powerful factors of change and fashioning decisions to fight against. Therefore, in this part, PEST analysis model will be used to explore the remote environment of the cat food industry at United Kingdom.4.2 Apply PEST to Cat food Industry and Results4.3 Understanding External Competition4.3.1 Political 500 643Cat food enjoys the political policies under the pet food category. Pet food industry is ranking(prenominal) lavishlyly regulated and follows a number of industry codes and guidance to help manufacturers fulfill their obligations to manufacture safe pet food. (PFMA) There are to a greater extent than 50 puts of legislation governing the manufacture of pet food. As pet food is ma nufactured and distributed in the selfsame(prenominal) way as human food, some legislation governing human food is equally applicable to pet food. Manufactures must ensure products are safe for cats, required by the Federal Food, Drug, and Cosmetic Act (FFDCA). any legislation applicable to pet food originates from the EU in the form of Regulations, Directives and Decisions which are subsequently apply into UK national law. (PFMA) It is indicated that Pet foods are rout to stricte legislation in the UK. It is able to ensure the safety and quality of products. For example, The cater Stuffs Regulations 2005 and The Animal By-Products Regulations 2005. And the legislation covering pet food ingredients requires that pet food involving meat based ingredients from animals should take veterinary inspections to make sure that it is measure up for pet consumption. The cat food market has been benefit for those regulations and the market predicts to be stable under political environment . Therefore, it will add confidence for consumers when buy these products for their cats.There are also a number of codes of practice to be followed by some association (FEDIAF, The European Pet Food Manufacturers Association) members in this industry which in some cases exceed legislative requirements. For example, since 2005, the EU black market Hygiene Regulation believes that feed safety is considered at all stages of the mathematical product for pet food. The obtains cover all processes relating to the manufacturing of the pet food, such as hygienics requirement, record-keeping, etc. The EU Feed Hygiene Regulation Commission know the FEDIAF Guide to Good Practice for the Manufacture of Safe Pet Foods and implemented the rules in 2010. These guides should be followed by all members of the community. It covers the detailed requirement of the nutritionary needs for cats and dogs at contrasting life stages. Members of the PFMA (UK Pet Food Manufacturers Association) follow t he FEDIAF (The European Pet Food Manufacturers Association) Nutritional Guidelines when making pet foods. The guidelines are updated at a regular frequency to include the latest nutritional research and are peer reviewed by independent nutrition intelligents passim Europe. (PFMA)The new Animal Welfare Act came into effect in 2007 and was the basic overhaul of pet law during the last 94 years. It sounds a piece of new to the cat food industry that pet welfare are becoming more and more important in the view of pet owners. BBC news broadcasted, The Act raises penalties for cruelty from the previous maximum of cardinal months in prison or a ?5,000 fine, is the most significant new law on animal welfare for 94 years. For the first time, it legally reinforces the business of care for pet animals. The duty of care includes that animals have a correct diet, are housed with or apart from other animals tally to their need, have the ability to express normal behavior and are protected from pain, suffering, injury and disease. This rule is in accordance with the new trend of pet Humanization that commonwealth tend to treat their pets as members of family. It indicates that cat food manufacturers are facing challenging that they need to forecast the trend of consumer consumption and make innovations. For example, it is the recent trend that consumers prefer organic food for pets. The new act also increases age from 12 to 16 for buying a pet. The cat food market sales will be suffered under this regulation although no evidence has been released that to what extent it would be impact on the cat food sales.4.3.2 Economic 500 378(EURO) Strong economic maturation drove mint in dog and cat populations in some marketsAccording to Euromonitor International research, the cat populations have been rising steadily during the year from 2004 to 2009(Figure 7). The annual ripening rate is 4% from 2004 to 2008. It is partly the result of strong growth in disposable income, a nd in large part as a result of rising residential property values. The real GDP growth averaged 2.7% in the UK between 2003 and 2007. There is a merely 1% growth from 2008 to 2009 as a consequence of real estate crisis. In the pet self-command, dog is the dominant pet in the percentage of owning households. But cat ownership has been increased from 21% to 25% of the total. However, the growth is not the possible future trend, for there is only 0.4% growth from 2008 to 2009.Figure7 Cat Population in the UK from 2004 to 2009Figure 8 Cat Owning Households % Analysis 2004-2009During the latter part of 2008, economic plunged as the effects of steep decline in residential property values. gigantic numbers of consumers who purchase houses at inflated prices found themselves unable to deem the mortgages during 2007 and 2008. It caused the bankrupt of many financial services, and lead to economic recession. Millions of people unload their homes, and unemployment is rising rapidly in UK. This leads to the significant problem of pet desertion in the UK. According to the reports of the Royal Society for the Prevention of Cruelty to Animals (RSPCA), the number of cast out animals rose by 57% in 2008. The number of aband mavend cats rose by 50% and has remained elevated during early 2009. This has impact on the cat population and forms the reason for the slow rate of growth of cat food sales during this period.Trends towards Premiumisation were apparent in the cat food market. Cat owners prefer to single serve pouches to feed their cats. This order gets popular due to its convenience through single-use disposable style. It can ease of storage and serving. It is inform to be more gently cooked in these products than canned food. They perceive these as offering bust quality food. Consumers are becoming more concern with value for m one and only(a)y. galore(postnominal) manufacturers are adding value to their mid-range brands by introducing new epicure recipes and revamping packaging.4.3.3 Social-culture500 650Figure ? UK Household size, 2003-2013From 2003, one- soulfulness household grow rapidly. Although two person household have been the major style, there is a sharp increase in one person household at the average growth rate of 5.12 from 2003 to 2008. People keep pets in the feeling of loneliness and Pets are increasingly considered a valued member of the family. Owners tend to have stronger bonds with their cats and a great deal more of a sense of guilt at leaving their pets altogether for long periods of time. According to the research of PFMA, 31% people keep pets for love, and 27% for companionship. (Euromonotor)Therefore, the trend to humanize the pets has emerged. The increasing rise of humanization promotes sales in the cat food sector, either in treats or gourmet foods. And it continues to be a driving force in sales of pet food and product development.Owners are caring pet wellness and chose organic, natural bouncing cat food . Premium and super premium foods continue to represent larger portions of the cat food market. The trend of Premiumization cause general increase in unit prices per kilogram. But the volume growth has been flat as consumers switched from canned products to pouches with smaller portion sized. As their emotional attachments with their cats, owners want to care for the health and longevity of their cats by turning to this healthy recipe.In the UK this overall capital punishment was largely driven by the wet category while the dry format is not popular and facing heavy discounting activity deep down supermarkets. In contrast with the global trend, wet cat food performs best(p) than dry, with the wet cat food representing 74% of the overall cat food market. Its dry offering just has 22% in comparison. The popularity of wet cat food may relay on the different eating habits between cats and dogs. Similarly, the different eating preference lead to the popularity of single serve pouches that in line with the preference of cat food by cats. However, this single-use disposable format is providing the convenience to cat owners. It also offers the owners with a wider range of flavors to select for their small cat.But due to overfeeding and under-exercising, Pet obesity is rising with an estimated one in three household pets now overweight. The changing busy lifestyle of people causes the pets to be confined within home for long periods, and without affluent exercise. Pet obesity is alternatively serious in cat for the puritanic nature of cats than dog. In this case, Low-fat versions of products emerged such as specialized calorie controlled foods, foods according to levels of activity, and dietary supplements. (Mintel)Furthermore, prepared cat food sales remain racy at 88%, even outperforming the sales in dog food market. The eating of cat is not easy to catch that the cat owners set about to convenient options to satisfy the cats. The prepared gap1 ratio in the UK is very in uplifted spirits compared with other market, that it indicates a mature cat food market with little space for potential growth than that in developing market. According to Euromonitor, the high purchase of prepared products suggests little room for renewed growth in economy and mid-priced categories, since it is hard to develop new owners left to promote the sales. gubbins is a major driver for many owners in busy lifestyle. In terms of distribution within cat food market, the vast absolute majority of pet foods continue to be distributed by large supermarkets as consumers seek convenience in one-stop shopping venues. Grocery retailers dominate the channels with 75% of value sales in 2008.People can select all arrange cat food in supermarkets, either premium or economy offerings. However, the sales of premium cat food is largely due to pet superstores and veterinary clinics, for the reason that the face-to-face recommendation of a pet expert is a key factor in e ncouraging pet owners to trade up to more premium products for their cats.(Mintel)4.3.4 Technological500 419It is acknowledged that the market was driven by technological innovation. Although economic recession has impacted new product development, it also brings challenges and opportunities.The pet food market has proved to be less impact by economic downturns, as the recent report says that consumers tend to not turn to cut the budget for their pets in case of the distressing economic circumstances. Consumers will cut down the spending over holidays, travels, and luxury buying habbites other than considering the already tiny budget in cat food. wrap up says that those who used to purchase premium pet food will continue this buying, while those used to purchase mid-priced and economy products are likely to be suffered. They are more price-sensitive. Pet food manufacturers respond to this trend by adding value to customers and give more benefits in their cost base. Cutting price is not usually a good idea in pet food in terms of establishing brand loyalty. Manufacturers are focusing on innovation by adding more value to mid-ranged products to maintain the sales from this group. However, premium and super premium foods continue to represent larger portions of the cat food market.The trend for owners to humanize their pets shows that human food trend leads the innovation of pet food trend. New technology focused on making output signal more natural, with more organic ingredients, and more c get to human tastes. Many pet food manufacturers are launching new products in line with this trend by adding resemble human meal ingredients to offer human grade product to pet consumption, especially in the sector of wet cat food(Euromonitor). For the customers with affluent buying power, they are willing to spend on the high qualified pet products and apply the nutritional needs in the pet diets. Manufacturers seize their attention by producing products with more organic ingredients, broad of additive and ethical standardized.In 2009, the sales of cat treats have big(p) at a current value of 4%. The humanization trend to the pet indulgence results the pushing sale of functional treats (Euro. Mintel). It is aligned with the increasing specification of cat food in different age groups as well as the detailed categorization of pet food with different nutritional needs. Although the sales of cat treats in not a demand product and shares only small portion of cat food industry, manufactures are extending this market by the real estimate of little future growth in the mature cat food market in the UK. early innovations and technology are seen in this particular product range.5. Micro environment Analysis (Poters five forces Model) 2600The micro environment analysis of a certain industry concerns the interior competition within the industry by evaluating the execution of instrument among competitors. The operational Environment of the companies can be analyzed through the structural analysis by using Porters five forces analysis.5.1 Understanding Porters Five Force Model 400There are many methods concerning the analysis of organizational economic belligerent advantage. The most popular and available tool in the operating environment analysis is Porters five forces analysis. It is developed by Michael E. Porter of Harvard Business School in 1979. Porters five forces analysis is a mannequin for the industry structural analysis and business strategy development. According to Porter (1980), the five forces are served in understanding the micro environment of industry, in which the company is influenced in its ability to serve the customers and maximize the profit. As shown in Figure ?, the model identifies five factors of impel within an industry including frenzy of competition, threats of new entrants, bargaining power of buyers, substitute threats and bargaining power of suppliers. It uses concepts that total the five f orces to check over the competitive intensity and the possible changes among industry competitors. It will provide evidence for company to reassess the volatile marketplace.Figure? Porters Five Force Analysis PatternAs is discussed above, the competitive nature of an industry is strongly affected by suggested Porters five forces. The detailed evaluation elements of each factor are shown in Figure ?. However, it is not the five factors that determine the structure of the industry, but to indentify it and make use of the markets. The structure of the industry itself plays a vital role in the environment. By recognizing this fact, I am going to explore the operating environment of cat food industry at United Kingdom by using Porters Five Forces analysis model. The accusatory of this task is to present the micro environment inside the industry and competitive arena among competitors.5.2 Applying the five forces model and Results 200A five forces analysis allows an organisation to cons ider the relative attractiveness of different industry sectors when making strategic choices about exiting or entering particular sectors and markets. Close analysis of these forces can allow an organisation to find a position in the sector where it can best defend itself against them or, most effectively, influence them5.3Understanding the internal competition5.3.1Competitive Rivalry 400Porter describe that competitive rivalry was to analyze the intensity of competition between existing companies within an industry. Industries with high competitive pressure will impose pressure on prices, sales margins, and even on positiveness for the single unit in the industry. According to the data collected from the Euromonitor International, the UK cat food market was dominated by the two companies, Nestl Purina Ltd and Masterfoods UK Ltd, as shown in Figure?. In 2008, Nestl Purina contained about 35% value share, followed by Masterfoods with approximate 33%. They are equally equilibrise in the UK cat food market.Figure ? Cat Food bon ton Shares at UK in 2008It means that the competition would be very high in this industry for the two giant retailers Nestl Purina Ltd and Masterfoods UK Ltd. The entry barriers in the cat food industry are very high. As a result, the potential growth of individual company would be largely depending on the RD (PFMA 2009). The pressure coming from the market and looking for opportunities for progress is the main reason that companies in this industry initiates the competition.Nestl S.A. is a global organization with head tushs based on Switzerland. Nestl Purina Pet bang Company is a wholly-owned subsidiary of Nestl S.A.. As undoubtedly the global leader in this market, the company reported sales at US$3 billion during 2008, with 11.5% organic growth and 5% internal growth at an annual rate. (Mintel) It is largely due to the sales of hot market for premium and super-premium Purina brands. Nestl Purina led the UK cat food market with a 35% share of cat food with the brand as Felix, Go Cat and Purina ONE. Nestl Purina attributes its success to continued innovation and new product development across a range of price brackets. This behaviour attracts those consumers who are pursue the specialized and healthy food for cats. It is viewed as a key driver of market growth.As a family owned company, deflower Incorporated operates six business segments including Chocolate, Pet Care, Wrigley Gum and Confections, Food, Drinks and Sym-bioscience. The company is also operating a global business, generating annual revenues of over US$28 billion. Masterfoods Pet Care followed closely to Nestl Purina at the second place with a 33% value share at UK cat food market. According to the Mintel reports, the success of Mars is supported by its key brands of Whiskas and Kitekat with brand shares of 26% and 4% singly in 2008.Figure ? Cat Food Company Shares 2004-2008As shown in Figure?,the seller concentration in this industry is very high. The major tow competitors are equally balanced. Mas has been performed better than Nestl Purina during the period form 2004 to the mid of 2007. There is no obvious gap between them. However, the Mars lose some shares in the market at 2008. The sales of the two companies are fairly static, giving out an impression of little space to grow. Moreover, other firms are struggling in this sector with mere share growth in the market. Fortunately, the competition in this market is stable, and the general unit price on cat food product is modest without massive fluctuations. It would be a very good aspect, since if price reduction happens in one firm, it will be rapidly followed by other competitors and consequently have impact on all companies income (Sadeghi, 2004).Given an increasing demand for more natural and convenient products in the market, the competition inside is very high. Exiting firms generally focused on innovation to achieve expansion. Nestl Purina Ltd increased its mar ket share by 0.7% from 2004, due to its launched premium brand Purina One. (Euromonitor 2009a) Hills Pet Nutrition Ltd, with 1.2% growth in its market value from 2004, launched series products in kitten, adult and senior range. (Euromonitor 2009a) It also had some innovation in packaging (Mintel 2006). Firms won better market position through advertising and promotion as well. townsfolk and Country Petfoods Ltd twice its market shares since 2004, based on TV flow and promotion. (Mintel 2006) It launched a premium brand HiLife with adverting and promotion more than ?1m in 2005. (Mintel 2006) Furthermore, incumbents worked on improving service. Oscar Pet Food UK provided face-to-face service, even home visit. (Precision 2003) In 2005, Town and Country Petfoods Ltd re-launched its website to delivery product information and professional advice online. (Mintel 2006) In addition, firms achieved expansion by merger and encyclopaedism. Early 2001, Nestl bought Purina for ?10b, and then launched Purina One in the UK market.( David 2004) Six month later, Masterfood bought EUs largest nutritional pet food manufacture, Royal Canin. (David 2004)5.3.2 flagellum of substitute4005.3.3 Buyer power400Entrenched brand loyalty provides challenges and opportunities for retailersWhile tentative signs of economic stabilisation have begun to emerge during the second half of 2009, global consumer purpose remains for the most part fragile. With unemployment continuing to rise (albeit at a slower pace than previously), household debt levels elevated and disposable household income still depressed, consumers are likely to retain a heightened sensitivity to price for some time.This presents both a challenge and an opportunity for retailers, particularly in pet food, as consumers in this segment are unusually brand loyal. As a result, larger retailers, particularly pet superstores, may continue to gain market share by leveraging the economies of scale they enjoy by offering consumers their favourite pet food brands at a cheaper price, rather than attempting to market cheaper alternatives to them.5.3.4 Supplier power400Private label remains vulnerable to rising costsNor has the ability to raise prices been confined to the upper end of the market. Canadian-based closed-door label pet food manufacturer Menu Foods scraped back into profitability during the first quarter of 2009 for the first time since the March 2007 recall. It earned US$54,000 (compared with a year-earlier loss of US$2.2 million) on sales of US$84.1 million, up 51.3% year-on-year. This increase was largely due to three price increases that totalled almost 14%.However, these price increases may not be sustainable in the victimize term. According to the company, as a consequence of our price increases, a number of customers whose volume represented 6.7% of total volume in the first quarter advised that they will stop buying from Menu during the second quarter. This demonstrates that hole-and-corn er(a) label manufacturers remain at a fundamental disadvantage to manufacturers of brand products in terms of their ability to sustain higher pricing.In Europe, mystical label manufacturer Provimi Group is experiencing similar difficulties. Provimi, which sells pet food end-to-end Western and Eastern Europe, including Russia and Ukraine, reported a 9.9% year-on-year increase in pet food sales during the first quarter, attributing this increase to a growing demand for private label products. However, it stated that its profit margins on pet food were negatively impacted by a sharp increase in the cost of cans that the Group was not able to pass on to its customers.5.3.5 roadblock of new entry/threat of entry400A few firms achieved to enter the cat food market successfully during the last decade. They operated mainly in three ways. First, these firms expanded into this market on the base of their original business. They are enjoying the benefits of the accent in the pet products in dustry before. For example, Butchers Pet Care Ltd originally produced dog food only. In 2000, it successfully entered the cat food market by introducing new cat food product. (Euromonitor 2009f) Second, they entered by ways of merging or acquiring incumbents. In 1999, PG entered UK pet food market through acquisition of Imas, which is a historical pet food company established in 1946. (Mintel 2006) Third, they accessed to the market using own brand and labe