Mass Market Consumers Remain Elusive in South African Pet Care

South Africa may be by far the largest pet care market in the Middle East and Africa, but it remains undeveloped in comparison with many other emerging markets, particularly Latin American ones. While affluent consumers represent a lucrative niche segment for premium brands, the economy segment remains largely undeveloped, with less affluent owners still overwhelmingly feeding their pets table scraps/leftovers.

Is owning a dog un-African?

During December 2012, South African President Jacob Zuma courted controversy by arguing that South Africans should not have pet dogs. He maintained that spending money on buying a dog, taking it to the vet and walking it “belonged to white culture and was not the African way.”

Predictably, these comments were widely discussed on social media in South Africa. “Zuma comments cause canine chaos” one newspaper headline read. One user tweeted: “Zuma says owning dogs is un-African. Unlike those old African traditions of driving German cars, wearing Italian suits and drinking Irish whiskey.” Another wrote: “Zuma needs a history check, as the Africanis breed of dog has been the companion of Southern Africa’s San Bushmen since 800AD.”

A number of people tweeted an old photograph of former president Nelson Mandela with a canine companion. Commenting on the website www.iol.co.za, one dog lover said: “I’m black & I love my dog. He’s part of my family. We’ve always had dogs in my family. Can’t imagine life without them.”

Dog and cat owners remain very much in the minority

In spite of such comments as this, pet ownership is not particularly popular in South Africa. In 2012, 20% of households owned a dog, a figure that has been fairly stable over recent years. 10% had a cat. A fall in the number of large dogs has been largely compensated for by an increase in the number of medium-sized (9-23kg) and small dogs (<9kg). Urbanisation has been a factor in this. Moreover, small dogs are increasingly popular as pets among young women, who now tend to marry and have children later. These types of dogs (Chihuahuas, for example) are also more likely to be indulged than their larger counterparts.

Prepared food slowly gaining ground

Most dogs are not fed prepared food, but this is gradually changing. The proportion of calories consumed by pet dogs accounted for by prepared products rose from 24% to 27% between 2007 and 2012. However, cats tend to be much more pampered (and are much more likely to be perceived as companion animals, or even ersatz family members) than dogs, many of which are still regarded in overwhelmingly functional terms (as guard dogs, for example) by their owners. The proportion of calories consumed by pet cats accounted for by prepared products rose from 65% to 67% between 2007 and 2012.

Value sales rise, but remain modest by international standards

This has helped to drive steady growth in pet care sales over recent years: Having fallen sharply (by 4%) in 2008 due to a combination of rising prices and weak economic growth, constant value pet care sales stabilised in 2009 and have expanded by at least 3% per annum since then. By 2012, the market was worth US$668 million. It is by far the largest pet care market in the Middle East and Africa, but is smaller than those of Austria (value sales of US$691 million in 2012), Poland (US$723 million) and Venezuela (US$756 million). In constant terms, per pet spending in South Africa was still below its 2007 peak (US$41.50) in 2012 (US$39.50). This compared to 2012 figures of US$18.60 in Morocco, US$50.50 in Saudi Arabia and US$70.90 in Venezuela.

Premium dog and cat food a lucrative niche

One of the most salient features of the South African pet care market is the importance of premium products. This reflects the fact that South Africa is home to the most unequal societies in the world in terms of income distribution. It had a Gini Index of 63.6 in 2012 (where zero equals “perfect equality” and 100 “perfect inequality”), compared with scores of 51.5 in Brazil and 42.1 in Russia. Almost half (47.8%) of South African households had an annual disposable income (at purchasing power parity) of no more than US$10,000 in 2012. While many South Africans continue to live hand-to-mouth, a small, but growing, black middle class has emerged in the nearly two decades since the abolition of the Apartheid system. These consumers are the main drivers of growth in the pet care market.

Value sales of premium dog and cat food were worth just over US$200 million in 2012, accounting for well over a third of overall dog and cat food value sales. Moreover, the premium segment significantly outperformed both the economy and mid-priced segments during the period 2007-2012, increasing by 7% in real terms. Over the same period, real value sales of mid-priced dog and cat food grew by just 3% (to US$307 million), while those of economy products declined by 11% (to US$67.1 million). Colgate-Palmolive and Mars are by far the most popular manufacturers of premium dog and cat food, accounting for 33% and 31% of value sales, respectively, in 2011.

Affluent consumers who purchase premium pet food are also the main buyers of pet products, with value sales outperforming the wider pet care market, recording a real CAGR increase of 3% between 2007 and 2012. Sales of pet products were worth US$44.2 million in 2012, having proved virtually recession proof during 2008 and 2009.

Economy segment plagued by poor quality products

Economy pet food does not have a good reputation amongst South African consumers. A number of unregulated ““rogue” manufacturers operate at the bottom of the market, selling cheap, poor-quality products. These offerings frequently do not comply with regulatory requirements, lacking essential vitamins and minerals, for example. In one case investigated by trade association the Pet Food Industry Association of South Africa (PFI), a pet food brand with a label stating that it contained a minimum of 21% protein was found to contain just 12%.

In April 2011, at least 70 dogs died after eating contaminated pet food, leading some consumers to take more account of quality when making pet food purchases, even in the economy segment. Stricter labelling requirements and more frequent product testing have helped to improve regulations, benefitting larger manufacturers.

Partly as a result of such scandals, small manufacturers (those with a market share of less than 0.1%) are steadily losing share, with Nestlé the main beneficiary: The share of economy dog and cat food sales accounted for by small manufacturers fell from 29% to 24% between 2007 and 2011, while Nestlé’s increased from 36% to 39%. Private label products are also growing in popularity, accounting for 16% of value sales in the economy segment during 2011.

Modest growth likely

The South African pet care market is forecast to exhibit a real CAGR increase of 2% during the period 2012-2017 to US$744 million. This will mainly be driven by owners swapping table scraps/leftovers for economy and mid-priced prepared products and some affluent consumers trading up to super-premium brands, such as organic or all-natural products. The relatively small size of the country’s middle class will remain the main impediment to more rapid growth.