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Accessories for pets - a growing market.

Too few people are aware of the diverse and emerging opportunities in the steadily growing pet accessories market.

From dog baskets to cat litter, ferret toys to llama backpacks, turtle bowls to fishtanks, pet care videos to magnets - with over 12,000 items, the market for pet accessories is broad and growing. Raw materials for pet accessories are widely available; the vast majority are not high-technology items; and most producers are artisans or small businesses. Hence excellent opportunities abound for small and medium-sized businesses in developing countries. Awareness is the missing factor: the degree of export opportunities in this sector is not widely known by trade promotion organizations and other key trade institutions in developing countries.

The pet accessories market is about one quarter of the pet products industry. Pet food is the major market category, representing about multinational companies dominate the pet food market, hence 70% of the pet products industry. Unlike pet accessories, there are limited growth opportunities. There is also a pet health and care market.

Typical products supplied by developing countries are dog chews made from hide; collars, leads and harnesses for cats and dogs; made from leather; bird cages in wood or metal; plastic cage-fitting ornaments for birds and small animals; special roots and wood for reptile terrariums; and fish tank accessories such as shells, gravel and aquatic plants.

Good market prospects

The total market value for pet accessories is roughly US$10 billion. Two-thirds of the market for pet accessories and supplies is in North America and western Europe. Emerging markets include central and eastern Europe (especially the Russian Federation) and South America (especially Brazil). Japan, Australia and South Africa are other examples where the market is growing. Another market which is just beginning to emerge is China.

The overall global pattern is one of steady growth, although rates vary for different parts of the world. Population growth, more pets and better pet care are trends leading to continued and greater demand for pet accessories.

Regional markets in brief:

Western Europe. In 1996 the retail value of the European market for pet accessories was US$2.979 billion. In the European Union, the market is forecast to grow by 5.3% to US$3.137 billion (1996 dollar values). Around 144 million households exist in 17 European countries (15 European Union countries, plus Norway and Switzerland). Nearly half (69 million) keep at least one pet. Pets total 145 million, excluding ornamental fish.

North America. The biggest pet accessory market in North America is in the United States. The retail value of the US market for pet accessories was US$3.668 billion in 1996. Between 1996 and 2001, the US market is expected to grow by 8.5% to US$3.980 billion (1996 dollar values).

In 1994, the US had 255 million people and 98.4 million households. 58 million households about 59% - keep at least one pet. Pets total 149.1 million. Including fish, they total 248.1 million.

Central and eastern Europe. The largest market is the Russian Federation. The retail value of the Russian pet accessories market is around $125 million. Between 1997 and 2002, the market for pet accessories in the Russian Federation is forecast to triple to US$375 million (1997 dollars). In 1997, the Russian Federation had 147 million inhabitants and around 51 million households. (Several families may live in one household.)

Other countries with a growing pet accessories market include Poland ($30 million in 1997), Estonia, Latvia, Lithuania (over $10 million for the three Baltic republics), the Czech Republic ($4 to $5 million), Slovakia ($1.7 million), Hungary ($13 million) and the Ukraine ($10 million).

South America. The first South American pet trade fairs were held in Sao Paolo, Brazil in 1996 and 1997. There are over 20 million dogs and cats in Brazil, and Brazilians already spend $280 million for pet products including pet food, health and care products, and pet accessories. Argentina held a first (smaller) pet trade fair in 1997.

A fragmented market

Cottage industries. The pet accessories market is highly fragmented. It is supplied by a large number of businesses, many of which are small cottage or artisan industries. In the United States, for example, over 2000 companies supply the market with pet accessories.

Europe, the United States and Asia dominate production. Most pet accessories sold in North American and western Europe are produced in western Europe, the United States and (to a lesser degree) Asia, including Bangladesh, China, Indonesia, Japan, Philippines, Singapore, Sri Lanka and Thailand. West European countries also receive some products from central and eastern Europe, while North America receives some products from Central and South America.

On the whole, few supplies come from Africa, the Pacific, Central and South America. Almost all of the countries have suitable raw material and could supply pet accessories, but neither entrepreneurs nor government trade promotion agencies have taken effective steps to create awareness of export opportunities for pet accessories.

Little brand consciousness. Consumer brand consciousness is limited. In this respect, the pet accessory market is very different from the pet food market, where promotion by multinational pet food companies has created highly developed consumer brand consciousness. Multinationals are now also moving into the pet accessories market. In Europe, the number of multinationals marketing pan-European pet accessory brands is increasing. Major companies include Vitakraft, Hagen, Ferplast and Bogdahn Technik (Flexi brand). In the US, there are about 16 major suppliers. (A major supplier is defined as possessing 1% or more of national sales.) Examples include Hartz Mountain, Ralston Purina and First Brands.

Private labels increasing. There is also a trend towards private labelling. Private labelling occurs when a manufacturer packages an existing product with a client's label; when he produces new products for a client; or when he assists a retailer to develop a look, name and logo.

In the United States, the private label market is substantial: in hypermarkets, almost 25% of cat litter sales are private label products, almost 11% in supermarkets, and 5.7% in drug stores.

In Europe, pet product wholesalers, central purchasing organisations, franchise chains and pet retail chains (including pet supermarkets) and even grocery chains increasingly market pet accessories under their own label.

Pet accessory categories

Pet accessory categories are roughly grouped to match the types of pets people buy. In western Europe and the United States, over 12,000 Stock Keeping Units (SKUs) are classified as pet accessories, but these total over 54,000 when all product varieties are included. In the Russian Federation, 3,000-4,000 SKUs are currently available.

At retail level, these are classified as accessories for:

- Dogs;

- Cats;

- Grooming aids (dogs and cats);

- Other small animals;

- Amphibians, with 4100 species including toads and frogs; insects, such as ants and beetles; arachnids, such as scorpions and spiders; reptiles, with 6600 species including snakes, lizards, iguanas and turtles (sometimes this falls into the "other small animals" category in Europe);

- Cage birds, ornamental poultry (waterfowl, pheasants, etc.) and wild birds;

- Ornamental fish or "wet pets", including freshwater, saltwater and marine fish;

- Gifts and souvenirs for pets and owners.

In the US, the pet trade has a distinct category called "exotics" for pets such as pygmy goats, waltzing mice, pot-bellied pigs, miniature donkeys, flying squirrels, skunks and many others. In the Russian Federation, veterinarians report that they treat a wide variety of exotic pets, including snakes, lizards, iguanas, turtles, mice and monkeys. Accessories for these types of pets in the Russian Federation fall into the "small animals" category. In Europe, the small animals category includes "cavies": guinea pigs, hamsters, chinchillas, mice, rabbits, dwarf rabbits, ferrets and hermit crabs.

What do people buy most?

Cat litter is the leading pet accessories products group. In 1996 pan-European consumption was over 1,200,000 tons with an estimated retail value of US$400 million. US annual sales for cat litter are in the region of $100 million.

There are many types of cat litter. Clay-based (most popular) and lightweight litter are mostly produced by large manufacturers, due to the capital investment in mining and processing. Environmentally friendly export opportunities for small businesses in developing countries exist for wood-based litter (from wood shavings and sawdust), paper-based litter (from recycled paper) and fibre-based litter (dried grass, coconut fibre and other biodegradable materials). Opportunities lie first as suppliers of raw materials for cat litter, then as manufacturers under license from distributors.

Other popular cat products exist. For example, in the United States, 91% of owners have food dishes, 47% buy toys for their cats, and 30% own a scratching post.

Among dog owners in the United States, almost half buy toys, generally two to three times a year. Fifty-six percent have decorative collars, of which 16% are bought yearly and another 27% every one to two years. Nearly all dogs in the United States have leashes: 92% (mostly nylon).

In several central and east European countries, most dogs are large breeds, while in western Europe, dogs are getting smaller (and the number of cat owners is growing). Changes in popularity for different dog sizes and breeds will continue, driven by fashion, demographics, economic, and environmental factors.

Every person who keeps ornamental fish needs some accessories. There is a market for special aquarium gravel and rocks. In Europe, one-third of aquarium and fish tank owners buy aquarium plants and more than 300 different species of aquarium and pond plants are sold. In the United States, $35 per fish are spent on average each year for accessories, food and health care items.

Nearly all bird owners have a bird cage. In Europe, over 130 different models of bird cages are available in more than 270 different colours. In the United States, 97% of bird owners have cage accessories and 79% have toys for their birds.

In the United States, 41% of owners of small animals own exercise wheels, 36% buy wood chews or chew sticks, and 17% buy leads, leashes or harnesses. Reptile owners in the United States are also well equipped. Fifty-eight percent have cage furniture, and 49% have other accessories. Among turtle owners, 23% buy plastic habitats.

Presents for pets are common. Almost all pet owners buy gifts for their pets on their birthdays, religious holidays such as Christmas and Easter, or on impulse.

Prices: margins vary

Retail prices are influenced by factors such as raw material used, quality of workmanship, scale or size of production and country of origin.

Wholesale margins on pet accessories range from 10% to 25%. Retail pet shops have an average gross margin between 30% and 50%, to compensate for the relatively small volume purchases. Margins also depend on whether products are slow or fast moving. The margin for cat litter, for example, is at lower end of the scale, since it is perceived as a fast-moving commodity product.

In central and eastern Europe, the wholesale margin is 100% if the exporter does not grant credit terms. If accessories are bought on credit, the wholesale margin is 30% to 40%. Retail pet shops have gross margins ranging from 30% to 100%.

Regional market access

Most pet accessories do not fall under products codes headings of the Standard International Trade Classification or the Harmonised System. Exporters should contact customs authorities or importers for details about tariffs and duties for specific products.

For the European Union, exporters should be aware of European Union Directives and ISO 9000 elements. EU directives aim at a minimum safety level as well as free trade throughout the European Union. The ISO 9000 basis is to meet customer requirements and expectations. Imports originating in least developed countries are normally exempt from customs duties.

For North America, exporters may face a maze of different standards, but the situation may improve somewhat in the years ahead. There are over 400 standards-writing bodies in the United States alone. The American National Standards Institute has no direct role in setting standards, unlike equivalent organisations in Europe. Rather, it sets standards to which standard-setters are expected to conform. The 1994 North American Free Trade Agreement has given new urgency, however, to harmonising standards and encouraging closer relationships between the various organisations in the United States, Canada and Mexico.

In the Russian Federation, there are few non-tariff restrictions. Import tax ranges from 15% to 25%, according to the product.

Packaging and labelling

Packaging should protect goods from physical damage. Some items for retail sale require attractive, eye-catching; presentation packs. Products for sale in grocery and/or pet supermarkets may have to be bar-coded. In Europe, some of products may require blister-packs.

In the United States, two issues to note are safety and environmental labelling. Regarding safety, the Packaging and Labelling Act stipulates that packages distributed in US commerce must satisfy Federal Trade Commission (FTC) regulations. American tort liability standards state that manufacturers must warn buyers and expected users of a product's actual or potential dangerous character. This means labels and instructions must convey the dangerous consequences of use and misuse of a product to a "reasonably intelligent expected user". Regarding environmental labelling, the FTC (with support of the Environmental Protection Agency and the Office of Consumer Affairs) has issued guidelines to help reduce consumer confusion and prevent false or misleading use of environmental terms such as "recyclable", "degradable" and "environmentally friendly" in product labelling.

In the European Union, there is not yet any common European directive on packaging or packaging waste. This means that exporters to countries within the EU will have to deal with different national regulations. The simplest way to comply with national laws is to discuss this matter with the importer.

Russian law prescribes when and how products offered for sale in the Russian Federation must be labelled.

Trade channels

Suitable trade channel intermediaries for pet accessories are the many agents, importers and wholesalers that exist in each country.

Specialised retail outlets. These vary considerably according to region.

In western Europe, specialized retail shops account for 80% of the market share. There are around 21,000 retail pet shops in Europe, including a growing number of pet supermarkets and superstores. France, Germany, Italy, Spain and the United Kingdom each have about 3,000 pet shops. Pet shops stock a wide range of accessories, usually several hundred, while the number of articles in a pet supermarket could exceed 8,000. In some countries, grocery outlets only sell pre-packaged accessories around 50 items. Major pet accessory wholesalers stock 5,000 to 8,000 items.

Other specialised outlets in Europe include garden centres, Do-It-Yourself shops, shops selling hunting and fishing accessories, pet grooming parlours, seed and grain merchants, mail-order firms and catalogue (direct marketing) services. Still others include pet breeders, dog boarding kennels and catteries, veterinary practices which sell pet accessories, and the agricultural distribution network which includes merchants, farm stores and self-service shops.

In the United States, specialised retail outlets account for 42% of the market share. There are 18,000 speciality retailers, including pet shops, aquarium shops, grooming shops, feed stores, boarding kennels and catteries, veterinarians, pet superstores, and agricultural stores; garden, hardware and feed stores; stores specialising in horse supplies; and well over 150 retail-order businesses.

US pet superstores and chain stores have considerable purchasing power: a pet superstore may carry between 7,000 to 10,000 Stock Keeping Units (SKUs), while a typical pet shop may stock 3500 SKUs. Leading superstores (over 8,000 sq. ft. or 743 [m.sup.2]) and chain stores include: PetsMart Inc. (247 stores), Petco Animal Supplies (305 stores), and Petland Discounts (106 stores). The growing number of pet retail franchise operations include Petland, Pet Supplies "Plus" (105 stores), Pet Valu and Petland Inc. (148 stores).

In the Russian Federation, specialised retail outlets account for around 60% of all pet accessory sales. Outlets under this heading include: retail pet shops selling hunting and fishing/angling accessories pet grooming parlours; animal hospitals, clinics, veterinary practices; and open-air and semi-enclosed markets with market stalls.

The grocery channel and other non-specialised outlets. In the US, a dizzying number of non-specialised outlets offer pet accessories, claiming 58% of the market share. Few provide national coverage. There are 30,000 supermarkets, 500 club warehouse stores, 58,000 convenience stores, as well as 49,000 other stores that offer pet products.

In Europe, this channel has approximately 20% market share of all pet accessory sales, although in some countries its share is considerably higher. Other European outlets for pet accessories include discount stores, cash and carry stores, department and variety stores, and market and mobile traders. In many countries, petrol stations also sell pet accessories in their forecourt shops.

In the Russian Federation, supermarkets have 40% market share of all pet accessory sales. A special feature of Russian towns and cities are kiosks, characterised by long opening hours. Several kiosks are sometimes grouped together under one roof to form larger pavilions. There are also many open-air and semi-enclosed markets with market stalls. In time, the number of kiosks will decrease, as they develop into normal retail outlets.

A recent trend in Europe and the United States is "home shopping". Pet owners use their telephone, tv, the Internet or CD-ROM to view products at home, and then use a computer or telephone to order a product and have it delivered.

Sales promotion and commercial practices

Major trade fairs are a principal way to make initial contacts in this market. Major fairs are regularly held in the United States and Germany, France, the United Kingdom, Belgium and the Netherlands Smaller trade fairs exist in the Czech Republic and Poland. In the Russian Federation, trade fairs are increasing.

In every country there are pet shows (for dogs, cats, ornamental fish, cage birds, etc.), as well as pet grooming shows, where pet accessory manufacturers and distributors take trade stands. These events are mainly for the general public. Many pet accessory manufacturers, importers and distributors also display goods at other trade exhibitions such as garden trade fairs, flower trade fairs and leisure trade fairs.

National trade media (especially magazines and journals) are most effective for sales promotion in western Europe and the United States. In central and eastern Europe, there is no effective trade media yet, apart from consumer magazines for pet owners.

Exporters should provide potential buyers with leaflets, brochures or catalogues for visual representations and detailed specifications, of their products. In central and eastern Europe, sales material. is desirable in the relevant national language, although the number of importers able to read and speak a second language (usually English or German) is growing.

Import prices are generally quoted CIF or FOB. Payment is usually on a cash against document (CAD) basis. In Eastern Europe, most export-import transactions begin on a cash with order basis. After a reasonable confidence level has been established between the parties concerned, business is usually conducted on a CAD basis.

Major Trade Fairs

Trade fairs are the best way to make contacts in the pet accessories market. Those wishing to visit or exhibit products at trade fairs should contact trade fair organizers and request an information pack. Among major trade fairs in different countries, here are a few.

Expozoo BEPP 44 Avenue George V 75008 Paris, France Tel: 33 149 52 14 20 Fax: 33 149 52 14 40

Interzoo, Wirtschaftsgemeinschaft Zoologischerfachbetriebe GmbH PO Box 1420 63204 Langen, Germany Tel: 49 6103 91070 Fax: 49 6106 910733

Zoomark Vimax Srl Via Rezzonico 23 22100 Como, Italy Tel: 39 31 301 059 Fax: 39 31 301 418

Zoosphere (formerly ZOOINDUSTRY, held each September) LENEXPO Vasilievsky Island, Bolshoy Prospect 199 106 St. Petersburg, Russian Federation Tel: 7 812 594 6900 Fax: 7 812 530 8292

WWPSA Trade Show 406 S. First Avenue Arcadia, CA 91006-3829, U.S.A. Tel: 1 818 447 2222 Fax: 1 818 417 8350

Annual Pet Industry Christmas Show Annual Pet Industry Spring Trade Show H.H. Backer Associates Inc. 20 E. Jackson Blvd., Suite 200 Chicago, Illinois 60604, U.S.A. Tel: 1 312 663 4040 Fax: 1 312 663 5676

For more information, contact ITC for market briefs on accessories for pets and companion animals. These studies have detailed contacts for importers, distributors, trade fairs, Professional associations and leading trade media in the various regions, listed by country.

Frederick Marsh is an international marketing consultant in the United Kingdom who has carried out a number of technical cooperation assignments for ITC. This article is based on three market studies he recently carried out for ITC on accessories for pets and companion animals in the European Union, the United States, and Central and Eastern Europe.
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Author:Marsh, Frederick
Publication:International Trade Forum
Date:Jan 1, 1998
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