Puppy love proves to be big business

People might be tightening their spending on themselves as the recession drags on, but it appears that pets are still enjoying some serious pampering.

Smart buyers are capitalising on this trend and moving in on acquisitions. The movement has already begun at the top end of business, with firms like Colgate-Palmolive pondering a sale of the Hill's brand and Proctor and Gamble dangling the Iams brand before investors.

With the pet food market showing an annual compound growth rate of between three and four per cent, according to Bernstein Research, the industry has been growing at twice the rate of personal care and home care.

It appears that this growth is being motivated by trends that are somewhat similar to those seen in human products during more affluent times, Eileen Khoo, analyst at Morgan Stanley, told the FT, companies are repackaging items to include ultra-premium and organic varieties, as well as 'single serve' portions: “It's just like your tin of tuna, but they charge more because it's for your cat”.

Another factor that is driving growth is a global move among pet owners to go from a small pet to a much larger breed or animal, which obviously eats a whole lot more pet food, thus pushing up demand for the products concerned. Expanding middle classes within emerging markets such as Brazil are also drip feeding into the growing market for pet foods and other related products.

The big names are taking up huge swathes of the international market, with research implying price tags in the billions of dollars for the potential disposals at Hills and Iams. However, the profits are filtering their way down to smaller acquisitions as new niches within the market start to spring up, particularly within local specialist markets.

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