The performance of cat litter saleshas varied greatly around the world in 2002: while growth in the US remained strong since 1998, sales slowed in Japan; meanwhile in Germany – the world’s third largest market – constant value sales contracted by 1% in 2002, and almost 7% since 1998.
Demand centres around mature markets
Cat litter is a well-established productin the mature markets of Western Europe, North America and Japan. While a large cat population is the ultimate prerequisite for high value sales of cat litter, other factors also impact demand. In countries with high disposable incomes, and where pet food is a well-established concept, demand for cat litter is comparatively strong.
Urbanisation and the concomitant rise in the number of house-cats also drive demand for cat litter in many countries. The top five in value terms – US, Japan, Germany, UK and France – exhibit these characteristics to varying degrees.
The US has by far the largest cat population, which compensates for the fact that the country lags somewhat in terms of urbanisation. Germany on the other hand has a smaller number of cats, but is, next to the UK, a heavily urbanised country (about 89% of households in the UK and Germany live in urban areas). All five markets are characterised by high levels of personal disposable income, ranking among the top twenty countries worldwide.
Product innovation boosts growth in the US
The US which accounts for about 45% of world cat litter sales, witnessed the introduction of superior-quality products such as clumping and silica gel (crystal) litters, which ensured that cat litter continued to achieve strong growth. Premium-priced silica litters, such as Nestlé Purina’s Tidy Cats Crystals, offer better absorption and odour control than conventional cat litter.
Clumping litter, the most common format in the US, is easily scoopable and more convenient to use than traditional products. Furthermore it requires more frequent purchasing, contributing to overall sales growth. Clorox recently introduced Scoop Away Plus Crystals, a product which combines clumping and crystal litters into one product. Innovative product development also kept private labels at bay: The share held by private label products was 16% in 2001, considerably lower than the 28% share held by private label in Western Europe.
To US consumers, product functionality has been and continues to be more appealing than low prices. Consequently, added-value products ensured consistently strong year-on-year growth rates in the US: between 1998 and 2002, cat litter sales grew by over 24%, which translated into an actual increase of nearly US$240 million.
A commodity in Western Europe
In Western Europe cat litter performed less positively. It is relatively well established in the major markets, which made the product more appealing to retailers, and consequentlyin several Western European markets, manufacturers of branded cat litter products face fierce competition from private label, which undermine value growth through low prices.
In Germany, private label accounted for nearly 30% of value sales in 2001, an increase of almost one percentage point on the previous year. Similarly, private label cat litter held a share of over 30% in the UK, an almost three percentage point gain on 2000. In these markets, cat litter has reached commodity status, and product innovation such as scented litters have so far failed to significantly boost value growth. As a result, cat litter value sales in constant 2002 prices rose only marginally in the UK, while they declined by nearly 7% in Germany over the 1998-2002 period.
Falling prices undermine growth in Japan
Price pressure is also the main factor behind sales declines in Japan. While volume sales increased because of greater usage levels of cat litter, price competition between manufacturers and retailers led to a fall in unit prices in the country.
A decline in the cat population since 2001 has undoubtedly also had a negative impact on value sales of cat litter. Among the major markets for cat litter, the outlook for Japan is gloomy, with compound annual growthof –0.4% expected until 2007.
A luxury in emerging markets
While cat litter faces commoditisation and price pressure in developed markets, manufacturers must overcome a different challenge in order to boost growth in emerging markets: its luxury status.
Cat owners in emerging markets such as Russia continue to use non-expensive alternative products such as newspaper or sand, and in rural areas cat litter is not used at all. Various factors should however ensure that cat litter will be more widely used in coming years, such as rising disposable incomes and increased urbanisation.
China for instance has relatively strong potential: urbanisation, rising disposable incomes, and not to forget a vast cat population –the second largest globally – are all factors which facilitate acceptance and thus sales growth of this ultimately non-essential product. Cat litter value sales have in fact increased by nearly 60% since 1998, and have reached a level that is now comparable to sales in more developed pet products markets such as Sweden or Spain.
Two-fold challenge to manufacturers
Manufacturers thus face different challenges depending on the degree of national development: while it is necessary to overcome the commodity status of cat litter and competition from private label in mature Western European markets, cat owners in emerging pet products markets must also be convinced of the benefits of using such a product.
In Western Europe, a focus on superior quality products such as has happened in the US should enable manufacturers to stave off the private label threat and to boost value growth. In emerging markets however, the focus will need to be on offering low-priced products and on promoting the advantages cat litter has over ‘home-made’ alternatives.