NZ petfood exports on a roll
Overseas Fidos and Fifis are getting a taste for New Zealand petfood, with export sales increasing at 9 per cent a year.
Petfood has emerged as one of the six best "emerging growth opportunity" sectors of the New Zealand food and beverage industry, in a report released by the Ministry of Business, Innovation and Employment.
Retail analyst Tim Morris of Coriolis Research, the company which prepared the report, said the latest figures (2012) showed total petfood export sales were worth $300 million a year. He forecast this could rise to more than $500m in the near future.
At present petfood comprises 1.4 per cent of food and beverage products, which make up 56 per cent of all New Zealand exports.
Of the $300m export sales, $70m is in the highest value, retail product form.
The remainder is either meat and bone meal or seafood meal, which is processed by companies overseas into retail form.
"Some time ago we asked the question: what could be the next wine industry?
"Twenty-five categories came out of that and petfood was identified as one of the potential stars," Morris said.
"For a long time petfood has been seen as the unwanted redhead child by the food industry but big global companies are involved and for them it's very profitable," he said.
Globally, people spend US$67 billion (NZ$78b) on dog and cat food.
Manufacturing companies include Mars, Nestle and Colgate. Mars, with Royal Canin, Pedigree and Whiskas among its brands, is a private company which has by far the world's largest market share of 31 per cent or US$16.2b in sales per year. Morris said New Zealand was in a relatively unusual position of being a meat-based petfood industry, as opposed to grain-based. This meant it could develop products for developed markets "where the money is".
"We are never going to be a global low-cost provider."
At present, New Zealand's biggest retail petfood markets are Australia, the United States, Japan, Taiwan and Canada, but the report points out New Zealand is missing out on making money in countries heavily reliant on imports, such as Germany, Britain, Italy, France, Belgium and the Netherlands.
Germany is the world's leading importer, buying US$857m a year but New Zealand sells only $1m worth of retail-ready petfood into that market.
Calvin Smith, chief executive of K9Natural which is based in Christchurch and was set up in 2006, said his company was on track for 50 per cent growth for the coming year, mostly in the "star" markets of the US and Japan, although it sold well in New Zealand too.
About 75 per cent of the product is exported. K9 employs upwards of 30 people, including demonstrators overseas.
"Ours is the most natural petfood in the world.
"It's 85 per cent meat, 10 per cent vegetables, and 5 per cent mussels or seafood extracts with no additives or preservatives.
"It comes either frozen or freeze dried, the latter an advantage for exporting because it's so light," Smith said.
All the ingredients are New Zealand-based and good quality.
"We are lucky to have a plentiful supply of raw material, which is all graded for human consumption. It's not fillet steak but a dog doesn't differentiate over the type of meat it's eating."
Smith sees a growing trend towards natural, freeze-dried food.
Three years ago K9Natural was the only company featuring freeze-dried at an Orlando conference but this year there are 10 in the market. K9's products do not come cheap but they are aimed at what Smith describes as "pet parents" - people who see a dog as part of the family, or as a replacement for children. "I often like to say that the daily cost of feeding an average-size dog with our product is the price of a Starbucks cappuccino," Smith said.
The main constraint to growth is the cost of marketing. A serious marketing campaign in the US could cost $50m "which we just don't have", so the company has embraced a combination of social media marketing and sophisticated and persuasive videos.
New player in the market Addiction Foods launched in 2012 and already has turnover close to $10m a year.
Owned by Singaporean interests, with manufacturing based in Te Puke, chief executive Jerel Kwek said growth had been 30 per cent a year.
The fledgling company now employs 40 people.
Addiction Foods' dry dog and cat food is made from an intriguing mix of ingredients - possum, duck, hoki, eel, buffalo, venison, lamb, seaweed, cranberries, blueberries, apples and apricots.
‘The company was founded by a veterinarian and clinical nutritionist who saw thousands of disease-stricken cats and dogs plagued with skin and gastrointestinal conditions caused by allergies to beef, chicken, lamb and artificial additives. So he developed a range of ultra-premium dog and cat food that contained no byproducts, fillers or preservatives, Kwek said.
The US, Japan, Canada and Singapore are Addiction Foods' top markets. Its products are sold in 3000 retail outlets.
In Tauranga, Ziwipeak produce the only air-dried petfood in the country. Chief executive Geoff Morgan said it was a complete food, as opposed to a treat, and the drying process took out two-thirds of the moisture content.
"Ninety-seven per cent of our output is exported, with our biggest market the US which takes two-thirds of our products. Of the 20,000 independent pet stores in the US, our products are in 1200 of them. Amazon approached us last year because they want to get into the petfood business. Because it's air dried, our food is very light and relatively inexpensive to transport," Morgan said.
The company attempted to replicate the natural diet of a wild dog or cat. Most of the products were venison-based, although lamb, hoki and mussels were also used, he said.
"When a carnivore like a dog captures an animal, it immediately eats the organs because they provide the most value. It then moves on to the meat and bones.
"So what we do is mix up everything in the same proportion as a wild animal might eat," he said. Ziwipeak employs 34 fulltime staff in Tauranga and six in the US. Its turnover is more than $15m a year and up until now has been growing at close to 40 per cent a year. "We could grow more, we are running the plant 24/7. We are hoping to double output in the next few years," Morgan said.
Feilding-based company Biophive exports 95 per cent of its products - chiefly venison, lamb, and beef chew treats, and supplements created from deer velvet and mussels. Its chief markets are the US, Germany, Japan and Australia, and it reports a turnover of $10m.