The challenges of launching brands in the pet channel

So, you are thinking of launching a new brand

into the pet channel? Where do you go for help? What challenges are you likely to face? Sean Kelly is a consultant with decades of experience in supply chain and operations and Susan McKay runs a specialist PR and marketing agency for pet and vet. They discuss how suppliers can negotiate the diffi cult journey to market.

What events have formed the current trading environment?

When it comes to understanding what is needed now, it helps to understand formative events in the past. The market has been through a turbulent time since Covid-19 fi rst reared its head back in March of 2020.

Pet product purchases, along with many other retail categories, saw the initial panic buy uplift as consumers invariably looked to make sure they were not left short. Pet foods disappeared off shelf very quickly, particularly the internationally recognised, staple entry-level brands. Owners were then faced with the dilemma of changing brand and upgrading, as the better-best category sales pull through, albeit strong, was nothing like the volumes the entry level ranges were struggling to keep up with.

Pet accessory and treat suppliers were also subjected to the same crazy spikes in demand, not only due to the same panic buying patterns but also due to the additional numbers of companion pets coming into the market. Consumers were working from home and/or furloughed and the benefi ts of pet companionship were never clearer. Pets were being treated more often, with higher quality treats, and owners were spending more time trawling the web in search of higher quality products.

Suppliers who were able to match the step up in demand were able to experience a strong trading period. Some suppliers though were left behind as the challenges of far eastern supply from the manufacturers, coupled with the limited availability and spiralling import container charges, put pressure on pricing, particularly on entry level price points and for bulk product.

As availability improved and demand settled in line with the increased pet levels, the world got back to some semblance of normality. Since then, some manufacturers/ brand owners have had real diffi culty in forecasting ongoing demand and managing supply chain stock levels. Many manufacturers have reverted to 2019 sales numbers and built forecasted increase on what was the norm three years ago. Some have vasty over estimated and in some cases, there is still signifi cant commitment to stock that will need to work through the chain.

What are the key challenges in the current market?

The pet product market is currently highly saturated across most categories. As a result, there is a general reluctance from the market to take on new products or new suppliers. Those stores who have performed strongly over the last two years may have what they feel is a very strong established offering across categories and ‘if it’s not broken, then why fi x it?’ Those stores who did not trade particularly well are likely to be far more cautious due to turbulent trading and present fi nancial uncertainty. That makes life very diffi cult for new entrants and brands trying to establish a retail foothold. The opportunity will also vary according to the product type and it’s important to ask an expert or gain some insights from market research as to where a product might most comfortably sit. A product with good gifting credentials will, for instance, be attractive to garden centres or high street independents in higher income areas where there is a demand for luxuries and indulgencies rather than affordable staples. Starting small and independent

Independent pet stores perform at vastly different levels, driven by demographics, store space, understanding and selection of product mix, and quality of staff and staff engagement. At one end of the scale, there is a vast number of independent stores out there who rely on a loyal customer base who like to shop from a tiered offering across all categories. These stores have a base mix of products and as such are likely to be reserved and reluctant to take on too many new lines. The buying patterns of the smaller stores is to purchase the majority of their range through a preferred wholesaler and where turnover allows, to have one or more additional wholesalers to help manage supply. If volume sales permit, there are of course opportunities to take product directly from brand owners/ manufacturers but credit terms, convenience, and minimum order quantities are likely to be key in the decision making. If your brand model offers suffi cient margin structure, there might be scope to sell through a wholesaler’s network or an e-commerce platform. There are a good number out there who can offer sales and marketing support to help get your brand established with the trade. This will generally cover the mechanics of amplifi cation, so the supplier will still have to plan the strategy and develop and produce brand collateral such as point of sale materials. Any trade campaign will also need to be supported with consumer marketing to drive footfall into stores and improve retailer confi dence.

Many brands entering the market however will be looking to manage their own sales, marketing, and distribution. For some, budgets will be tight because of the initial investment in product and this can be a false economy. Even the greatest product in existence can fall fl at if no one knows about it.

A clear strategy on how to approach the smaller independents is essential. The time involved in looking to follow up contact and leads for such a large number of stores can be vastly disproportionate to the potential returns. Each pitch has to be compelling with a focus on return on investment and details of the marketing campaign supporting the launch. A blanket approach will result in many rejections.

The win comes from targeting exciting, engaging retailer stores who follow trends on feeding, natural treating, accessory, and pet interaction and so on. These stores have a good eye for the next strong product line and see the benefi t of continually looking to strengthen their range offering. Size and profi tability often offers them the freedom to take calculated risks on stocking untried products and they will also look to the data and a professional presentation detailing the opportunity to mitigate any risk. The diffi culty here, as always, is identifying the right stores for the right product. There is no one ‘go-to’ database out there and those who have compiled the contact details are not going to part with this valuable data.

Scaling up with chains

The chains have evolved to have very similar, well performing, tried and tested, brands across key categories. The differences lie mainly in own label foods, treats, and accessories within the larger chains. The ‘second-tier’ 20 – 50 store chains support the same brands and have very similar store layout, fl ow, and brand blocking, and sell a strong mix of good, better, best across the main categories.

Pets Corner and Pets at Home differ further still as their own label offering commands a signifi cantly higher percentage of their range offering than others.

The challenges here differ noticeably from other retailers. The larger chains will have multiple buyers responsible for set categories. They must work to clear structured schedules of which categories they will review and timelines for product introduction. If you miss the timing on a seasonal product range, you may have to wait for the following season. Stores are ranged/planogramed and merchandised precisely and there is very little opportunity for product introduction outside of the category reviews.

The key challenges here are to fi nd the opportunity to connect with the right buyers, to have a product that is of interest and will add difference to established product portfolios, to gauge timing around seasonality and category reviews, have the margin and price structure that will fi t the expectations of the retail chains and have the resource to support with brand merchandising and staff training, in store consumer awareness days, etc. There’s no doubt this is a signifi cant investment and it’s important to make the most of the opportunity when it arises. Marketing campaigns and support

If you are to launch your products into what has already been described as a saturated market, then how are you going to ensure that you get noticed? There are two hurdles to jump here, not only are you looking to convince your retail customers that they can improve their product ranging and increase their turnover by listing your brand, but you also need to be clear on how your brand will appeal to the end customer.

Advertising, digital campaigns, and infl uencer marketing can all quickly soak up the budget and have to be timed correctly so that there are outlets where customers can be directed to buy. Testing before scaling up is often forgotten in the midst of the excitement of a dynamic campaign but when budgets are stretched, it is imperative to maximise

return on investment. Digital offers lots of opportunity to get results quickly and to adapt the strategy. Local marketing campaigns can also be useful to support the retailers who are fi rst to stock.

POS and in-store advertising can be expensive but can, if implemented well, be the difference between success and failure. Let us not forget, for example, that there are very few consumers out there who are able to recognise more than a small handful of pet accessory brands. How are you planning to make sure that you make the POS and merchandising of the brand impactful, that the retailer is going to want the display in their stores, and that the consumer is going to be enticed to engage?

As a new brand, you might also need to invest in free standing or counter-top displays to enable conversations to take place away from current fi xtures and to prove to the retailer that a product works for them before they remove another brand to make shelf space in a competitive category. Packaging needs to stand out and clearly communicate the unique selling points, especially in stores where there is little in the way of active selling from staff. Predict to build on success

You are a start-up brand, so how are you going to forecast stock and ensure that you can guarantee supply?

Forecasting through a time of change is a real challenge as we’ve already seen. The internationally recognised accessory brands and big volume players reacted quickly to increase production during Covid–19, yet in some cases even they now have issues with overstocks within the supply chain. Many brand owners have reverted to 2019 sales fi gures as a base for their forecasting models. Covid-19 is still having a direct infl uence on supply, with China still challenged by the long-term impact of lockdown and political turmoil.

No matter how you look to forecast, you will need to be able to fl ex with demand while managing fi nances. The key is to manage expectations and look for a business model where you can fl ex with growth. New brand checklist

● Understand your product’s point of difference and maximise its potential ● Where do you sit on good, better, best? (Are you competing on price, quality, performance?) ● Understand the direct competition within the category ● Decide on your target customers (wholesale, e-commerce, independents, chains, online) ● Have a clear pricing structure for each channel ● Set a marketing budget and plan (POS, advertising, shows) ● Have a clear sales and marketing approach for each channel

Building brand success

Brand success is very likely to be reliant on winning listings across multiple customer sizes and you should therefore identify the best approach for getting your brand in front of each group.

The larger stores/chains stores should form part of your contact strategy and, outside of working with the wholesalers and ecommerce platforms, the best way to get product data in front of these target accounts is to look to exhibit at the recognised trade shows, appoint a good marketing team/partner, and to use pet industry publications.

Give thought also as to what is likely to happen to products within the good, better, best, and even super premium categories as we enter the uncertainty of recession. Will consumers be forced to reduce their frequency of treat and accessory purchases for example? Will they buy a cheaper treat/toy or the same brand less frequently? How will super premium be affected? Where does your brand sit?

Forecasting, reacting, and adapting plans is an important aspect of your launch and often relies on access to data insights from across the pet industry and experience and that can be diffi cult to do unless you are already well connected across the pet trade.

For those who get all of this right, the rewards are signifi cant. We are operating in a dynamic and growing market sector that is, at least to some degree, ‘recessionproof.’ Forging ahead with confi dence in the face of an economic downturn isn’t easy but it also means that there may be less competition while others hesitate and wait for better times. There is no time like the present.

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