• by Tanya Gazdik , October 1, 2007

Thousands of pets became ill and even died earlier this year as a result of melamine-tainted food ingredients that were sourced from China and resulted in a massive pet food recall. Although the events were tragic, the upside is that pet owners everywhere are paying closer attention to the ingredients and manufacturing of the food they feed their four-legged friends.

Consumers were already interested in natural and organic food, and the recall accelerated that interest, says David Lummis, senior pet market analyst for Packaged Facts. The company predicts that the combination of factors will propel the market for natural pet products from $1.3 billion in 2007 to $2.5 billion by 2012, according to "Natural, Organic and Eco-Friendly Pet Products in the U.S.," a new report from Packaged Facts.

The report shows tracked sales of natural pet food through supermarkets, drugstores, and mass merchandisers surging in 2006, rising more than 200% to reach $29 million. Sales exploded during the first two quarters of 2007, however--nearly tripling to $82 million and further showing the impact of changing consumer perceptions in the wake of the recalls. Packaged Facts expects to see full-year 2007 tracked sales of natural pet food at approximately $180 million--more than a 500% jump over 2006 sales.

Now in its second edition, the report examines new product trends, offers competitive profiles of industry leaders and looks at consumer trends and behaviors. Compared to the first edition, which came out in 2005, the most important shift is that all of the top five U.S. marketers of pet food are now directly involved in the natural segment, Lummis says.

As of 2005, only two of the top marketers--Del Monte and Science Diet--offered natural brands, and both of these were restricted to the pet specialty channel. Since then, the other three of the top five marketers - Nestlé Purina, Mars and Iams (Procter & Gamble)--have entered the natural field, all offering products in both the pet specialty and mass-market channels.

"It's really amazing how quickly the mass-market sales of natural food have taken off," Lummis tells Marketing Daily. The next trend as consumers become more knowledgeable is not only a demand for "natural" but for "organic," he says.

While any manufacturer can slap the word "natural" on a package, not all of it is organic. Disagreement about what qualifies as "organic" led to the creation during 2005 of an Organic Pet Food Task Force, which has proposed labeling standards that organic manufacturers would have to meet beyond the existing requirements that apply to all pet foods. Currently under review by a committee of the USDA's National Organic Standards Board, the new standards could go into effect by 2008, and their emergence will help to clarify and legitimize organic pet food in the minds of consumers.

In addition to health concerns, another factor driving the interest in natural products includes environmental concerns, Lummis says. Within the pet products market, eco-friendly and other sustainability trends can be seen across all categories, and Packaged Facts believes that "going green" will emerge as a top market trend within the next few years.

The surge in natural sales isn't limited to pet food. Accounting for approximately one-fifth of 2007 sales, natural pet care products--such as toys, cat litter and clothing made of natural ingredients--registered a 19% compound annual growth rate (CAGR) from 2003 to 2007, and are forecasted to turn in a 10% CAGR from 2007 to 2012, bringing sales to $458 million.

Although pet specialty outlets are still the primary venue for natural and organic products, these products are becoming available in more mass-market outlets, where growing demand represents big opportunities for natural and organic marketers, Lummis says.