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Economics: The United States’ Pet Food Industry

Words: 860
Paper Type: Research Paper
Subject: Economics

Introduction

The United States of America’s pet food industry is as old as the economy. Keeping pets is a culture among Americans families. It is necessary to review the market interaction between producers and consumers, supply and demand, and government intervention in this multibillion dollar industry.

Pet food industry sales were about 53 billion dollars in 2012 (Pet Industry Market Size & Ownership Statistics, 2013). Thus, his analytical treatise will focus on the United States’ pet food industry, market structure, consumer and producers, supply and demand, and government regulations.

Industrial Organization Model: The US Pet Food Industry

The industrial organization model for the pet food industry consists of the basic conditions (pet food manufacturers’ supply and pet food consumers’ demand), the pet food industry’s structure (behavior of the consumers and the industry), and the pet food industry’s performance. In the case of the United States’ pet food industry, growth rate, methods of purchase, and substitutes influence the consumer demand side (Bond, 2008).

On the other hand, pet food products durability, raw materials, and production efficiency influence the supply side. The elements that may influence the pet food industry structure are the number of producers or stores selling pet food, cost implications, and product differentiation (Dog Care Market, 2013).

Advertising and pricing influence the conduct aspect of the model. Employment and profitability influence the performance aspect.

Market Structure

In the US pet food industry, consumers have several options to choose from since stores provide a variety of pet foods products. Despite the presence of many pet food producers, the United States’ pet food industry operates as an oligopoly. The industry is dominated by a few pet food producers and retailers.

The companies which dominate this industry are the Mars Inc, Colgate-Palmolive, Procter & Gamble, Del Monte Foods, Nestlé SA, Agrolimen SA, Uni-Charm Corp, Nutriara Alimentos Ltda, Total Alimentos SA, and Nisshin Seifun Group (U.S. Pet Market Outlook 2009-2010, 2009). These companies control the fifty-three billion dollars industry. Nestle SA has the largest market control of 14% with the other companies sharing the rest of the market.

Suppliers and Producers

The main pet food providers are the Mars Inc, Colgate-Palmolive, Procter & Gamble, Del Monte Foods, Nestlé SA, Agrolimen SA, Uni-Charm Corp, Nutriara Alimentos Ltda, Total Alimentos SA, and Nisshin Seifun Group. The table below summarizes the performance of the top four pet food producers in the United States in terms of revenues for the year 2013.

Producer (Pet Food Producers) Operating Revenue in 2013 (Billions)
Nestle SA $11.6
Agrolimen SA $2.1
Uni-Charm Corp $1.95
Nutriara Alimentos Ltda $1.84

(Source: Self-generated)

The Nestle SA, which is the largest producer of pet food in the US, realized annual revenue of 11.6 billion dollars in 2013.

Reflectively, the performance of the above company can be attributed to the changing demand. The demand for pet food has been increasing dramatically, with the global population increase (U.S. Pet Market Outlook 2009-2010, 2009). The global population is increasing, and therefore, the number of people keeping pets is escalating as well.

Consumers

Consumers of the pet food industry in the US are pet owners who buy these food products for their pets. The customers buy pet food products regularly depending on quantity and pricing. All families are potential customers since pet ownership is a family culture in the United States of America (Pet Industry Market Size & Ownership Statistics, 2013).

Consumer Demand

Demand for pet food products is often influenced by prices and content. The rich nutrients and balanced diet make pet owners buy various types of pet foods in the US. Consumers in this industry have a demand for affordable and balanced food products for their pests. The companies have responded to this by producing a variety of pet food with different content (U.S. Pet Market Outlook 2009-2010, 2009).

International Comparison

The United States has the highest annual turnover of pet food sales. This can be attributed to the high population of pet owners and the presence of affordable pet food products. This is followed by the United Kingdom. The lowest annual sales of pet food are recorded in third world countries due to the low number of pets in these regions (Pet Food Market Outlook 2009-2010, 2010).

Government Regulation

The Food and Drug Administration regulates the pet food industry at the national level in the United States. The Association of American Feed Control officials evaluate the rules, policies, and regulations for the individual states regarding the pet food industry.

The Federal Trade Commission also plays a role in the regulation of the pet industry. Pet food for United States consumers must meet the standards of these institutions for the regulatory agencies to authorize their sale (U.S. Pet Market Outlook 2009-2010, 2009).

Conclusion

Pet food industry has grown to be a large business empire in the United States. It is evident that companies in this sector have to establish good products. The products are properly marketed to appeal to the consumers. Also, the US government has several regulatory agents to protect customers by putting in place strict rules and policies to control the activities of the suppliers.

References

Bond, J.T. (2008). Top 10 global pet food leaders. Retrieved from http://www.petfoodindustry.com/4004.html

Cattini, C. (2011). Dogs Dinners and Cat Cuisine. IFIS. Retrieved from http://www.ifis.org/resources/features/dogs-dinners-and-cat-cuisine/

Dog Care Market – Regional level to 2013. (2013). Retrieved from http://www.datamonitor.com/store/Product/pet_care_global_industry_guide?productid=ML00015-165

Pet Food Market Outlook 2009-2010: The New Value Equation. (2010). Retrieved from http://www.packagedfacts.com/Pet-Supplies-Care-2555064/

Pet Industry Market Size & Ownership Statistics. (2013). Retrieved from http://www.americanpetproducts.org/press_industrytrends.asp

U.S. Pet Market Outlook 2009-2010: Surviving and Thriving in Challenging Economic Times. (2009). Retrieved from http://www.packagedfacts.com/pet-outlook-surviving-2154192/