Pet food market rides out economic storm
For an indication of how the pet food market has soared in recent years, look no further than the story of Lily’s Kitchen. Established just 12 years ago in founder Henrietta Morrison’s kitchen in London, today it is a major pet food brand offering its natural recipes for dogs and cats across 6,000 stores in 30 countries.
Earlier this year, industry giant Nestlé Purina PetCare acquired Lily’s from US private equity group L Catterton (itself a major investor in the pet food sector) to support the company’s continued global expansion. In fact, the company recently expanded into the Middle East and Asia. The deal demonstrated three key points:
- The ever-greater humanisation of pets continues to drive growth in premium products that can offer fresh and natural recipes for our four-legged friends
- Both traditional food makers and leading private equity players continue to see huge attraction in investing in pet food companies. If you take just trade buyers, the likes of General Mills, JM Smucker, Mars and Cargill have all been very active in the sector
- The sector is remarkably recession proof
The latter point is of course particularly salient as the world fights COVID-19. Before the pandemic struck, the pet food market was already one of the fastest-growing segments in the food industry with the market forecast* to grow to €111bn (£102bn) by 2024 from just €73bn (£67bn) in 2018.
the market is forecast* to grow to €111bn by 2024
However, with hundreds of millions of employees across the world continuing to work from home, growth in pet ownership is soaring. For instance, in the UK more than two million people have bought a pet since lockdown began, with particularly strong demand from younger people. This should come as no surprise as millennials already make up more than a third of pet owners.
Routes to market
What is also notable is the way in which consumers are buying their pet food, with the pandemic further accelerating the huge shift towards e-commerce.
For example, take a look at the performance this year of Chewy, a US one-stop-shop for pet food and products. Its second quarter sales were €1.4bn ($1.7bn), up 47% year on year, and subscription-based sales accounted for more than two thirds of total net sales.
Indeed, the company says it has gained and retained more customers due to the pandemic. As Chief Executive Sumit Singh says: “In recent months it has become clear that the retail industry in general, and e-commerce in particular, is going through a period of transformative change. Growth curves that were supposed to play out over years have been compressed into quarters and even months.”
- US consumer group Spectrum Brands has bought UK-based pet treat and toys specialist Armitage Pet Care for €152m (£140m). Spectrum has bought the producer of Good Boy and Meowee from private equity investor Rutland Partners
- Clearwater International advised the shareholders of Hollings Ltd, a supplier of natural dog treats on its sale to Assis Pet Care Ltd, an animal care services provider
- Butternut Box, a fresh food delivery brand for dogs, received an investment from the European fund of L Catterton. L Catterton has been a major investor in the pet food and pet care categories, with current and past investments including Ainsworth, Iandloveandyou, Inspired Pet Nutrition, Just Food For Dogs, PetVet Care Centers, Nature's Variety and Wellness Pet Food
- Nestlé Purina acquired Lily’s Kitchen from L Catterton
- Piper Private Equity sold its stake in natural dog food brand Forthglade to IK Investment Partners. Piper first invested in the business in 2015
- Nestlé Purina PetCare acquired a minority stake in Independent Vetcare Group International IVC Group, Europe’s largest veterinary services group with a network of more than 1,100 vet clinics and hospitals across ten countries. Through the partnership, Nestlé Purina will strengthen its collaboration with scientists, veterinarians and pet care professionals to help deliver advanced pet food solutions
- Made-to-order dog food company JustFoodForDogs closed a $68bn funding round with L Catterton to expand into new markets and conduct nutritional research of its products
- Pet food manufacturer Pets Choice acquired Rufus Foods, which offers a range of foods for dogs and cats. Pets Choice also acquired Bob Martin UK later in the year
- NVM Private Equity invested in Pure Pet Food, a producer of natural pet food products
- The Farmer’s Dog, a subscription company that makes fresh and personalised meals for dogs, raised $39m in a funding round led by Insight Venture Partners
- Clearwater International advised Partner in Pet Food, Europe’s largest producers of private label wet and dry per food on its tertiary buy-out by Cinven
- General Mills acquired Blue Buffalo Pet Products for $8bn. Blue Buffalo makes natural foods and treats for dogs and cats under the BLUE brand
- J. M. Smucker acquired dog food maker Ainsworth Pet Nutrition from L Catterton
- Cargill acquired St.Marys, a producer of private label and co-manufactured pet foods
- Clearwater International advised the shareholders of Kennelpak on the sale to SME Investor Enact, managed by private equity firm Endless LLP. Kennelpak is a leading supplier of pet food and products with its own retail chain under the Kennelgate brand
- Clearwater International advised Sofiprotéol on its envisaged alliance with LDC in order to strengthen their respective positions in animal nutrition and productions, and in the poultry sector
Other PE deals
- Armitage Pet Care was backed by Rutland Partners since 2017 until its latest transaction in 2020
- MPM Products majority owned by ECI Partners since 2016 (it was reported in 2019 that ECI had appointed advisers to find a buyer)