Processed Product Spotlight: Pet Food

Despite slowing pet food sales in some large markets such as Japan, global pet food imports set a record in fiscal year (FY) 2012. Growing demand for high-value dog and cat food also resulted in a record value for U.S. pet food exports. Pet populations continue to grow around the world and particularly in developing countries. Global retail pet food sales are expected to reach another record in 2013 as the trend away from table scraps continues in developing markets while consumers in more advanced markets shift to specialty and health-centered pet foods. While Canada and Japan account for two-thirds of U.S. pet food exports, the outlook is bright in emerging markets such as Russia and the Philippines.

Global Trade Overview

Demand Spurs Increasing Global Trade

The international market for pet food (which for purposes of this report refers to dog and cat food, HS code 230910) is on the rise. Global imports in fiscal year (FY) 2012 reached a record $4.5 billion, which is more than double the level a decade ago. Much of the increase in the value of trade has been price driven, due to higher ingredient costs and greater demand for high-end specialty and health-centered product, but volumes have also grown since 2002. This increase in trade follows booming global demand for pet food, much of which is met by domestic production in the top consuming countries. Growing pet populations combined with prepared dog and cat food replacing table scraps, are driving rising consumption. 

Growth Focused in Developing Countries

The top four importers – Japan, United States, Canada, and the European Union (EU) – account for 58 percent of global imports. However, demand for imported pet food in these and other developed countries is growing more slowly than in emerging markets. As seen in the chart that follows, developing countries now account for 28 percent of pet food trade, up from 20 percent a decade ago. Developed countries such as the United States and those in Western Europe account for 59 percent of total retail sales in 2012, down from 69 percent five years ago. This falling share is the result of surging sales in developing countries.

U.S. Pet Food Exports Reach a Value Record in FY 2012

Developing countries are growing in importance for U.S. exports, though developed markets still account for a large majority of U.S. pet food shipments. Overall, U.S. pet food export value increased by 28 percent since 2007 to reach a record $1.3 billion in FY 2012. However, this growth trails that oftotal U.S. agricultural exports over the same period, which increased 65 percent. Furthermore, actual volume fell 18 percent, primarily due to decreased shipmentsto the top four markets of the EU, Canada, Japan, and Mexico. Some of the reasons for this restrained growth include strong off-shore production by U.S. companies, growing domestic production in foreign markets by local companies, the global economic slowdown, and growing trade policy issues. However, it is not just the United States that is experiencing falling export volumes to these top markets as total volume imports from all suppliers by Japan, Canada, and the EU fell significantly over the past five years(see market analysis section).Conversely, China, Venezuela, and the Philippines experienced the largest import volume increases since 2007. These trends indicate that while the value of shipments to our top markets is increasing, volume growth is focused in smaller developing markets.

California Leads in Export Growth

In FY 2012, California led all states in exports at $262 million, which accounted for 20 percent of all U.S. pet food shipments.Close behind was Kansas (home to Hills Pet Nutrition and Kibbles and Bits plants) at $249 million followed by Ohio at $89 million. Kansas and Ohio have seen a decrease in the value of exports over the past few years while shipments from California are more than double the total just two years ago. The impressive growth from California is due to surging shipments over the past couple of years to Japan, Australia, and Taiwan.

Export Competition Intensifies

U.S. pet food exports have increased an impressive 28 percent since 2007, but global pet food imports grew by 50 percent during the same period. As the global market for pet food has expanded, competition has intensified as seen by the declining U.S. market share. The United States remains the world’s largest exporter and accounted for 25 percent of global pet food exports in 2012, but is down from 30 percent just five years ago and 36 percent 10 years ago. Canada and Australia also experienced declining share during this period while market share increased for the EU, Thailand, and China.

Export growth by China has been particularly impressive, increasing from less than 1 percent of global exports ($11 million) a decade ago to 16 percent ($819 million) in 2012. Much of the Chinese export growth has been centered in the United States, Japan, and the EU.China is now the leading pet food exporterto the United States supplying nearly half of U.S. import market of $691 million.Chicken and jerky treats appear to be drivers behind this increase in Chinese exports to the United States. Meanwhile, Thai export growth, which reached $799 million in FY 2012, is focused in Japan, the United States, and the EU. The EU is the second largest exporter and dominates the markets in Eastern Europe, Russia, and the Ukraine.

Market Analysis

Global Pet Food Use Climbs

The global market for pet food is growing rapidly as pet populations around the world boom and demand for prepared dog and cat food replaces non-prepared food. The global pet food market is estimated by Euromonitor at $72 billion in retail sales in 2012, which is an increase of $17 billion from just five years ago. Much of the increase in global demand is due to a greater number of pets, even in developed markets such as Western Europe. Aging populations, where children have left home, are increasingly turning to pets for companionship. Likewise, a growing number of childless, single adults are opting for pet ownership.

These demographic changes have increased pet numbers with the dog and cat population in Western Europe up by five million over the past decade to 98 million, while in the United States the population grew 20 million over the past decade to 160 million dogs and cats. Pet populations in developing countries are booming as well. For example, Russia, Brazil, Mexico, and the Philippines are among the developing countries with the largest pet populations, which combined, account for about 22 percent of the estimated global population. Furthermore, the average combined increase over the past decade for these countries is 34 percent, which is far above global growth in the dog and cat population of 19 percent.

With growing pet populations, pet food demand is increasing as owners replace table scraps with processed pet food. Many pet owners already feeding prepared pet food are upgrading to highend foods. Increasingly, in developed markets people are attributing human eating habits to their pets, leading to fancier and higher-calorie pet meals. At the same time, pet obesity is spurring an increase in weight-loss meals. Sales of natural and organic pet foods are on the rise.

Growth Slows in Japan

Japan is the largest global importer of pet food at $827 million in FY 2012 and accounts for about one quarter of all U.S. pet food exports.Japan is also the second largest market, behind the United States, in pet food retail sales (see map that follows). Prior to 2008, pet ownership was on the rise, and in 2006 the number of pets outnumbered the number of children under 15 years old, according to the Japanese Ministry of Health, Labor, and Welfare. An increasing number of citizens were keeping pets for companionship and treating them as family members. Furthermore, retirement-age Japanese were increasingly turning to pets to replace their children who had moved out the home. The acceptance of pets in Japanese society was reflected in the fact that most condominiums in major cities permitted pets in residences.

A slow Japanese economy combined with the popularity of small breeds has restrained growth in the pet food market over the past several years. This trend is expected to continue. Pet ownership peaked in 2009, with 33 percent of households owning a dog or cat, but has been on the decline since then with dog and cat ownership in 2012 estimated by Euromonitor at less than 28 percent. Despite this trend, 2012 saw an increase in the number of cats, up 1.4 percent to just over 9.7 million. The pet food market is constrained by the growing popularity of small breed dogs. Food consumption per dog is also falling as the age of the dog population increases. With the human population also on the decline, significant increases in pet ownership are unlikely. However, looking forward, market opportunities are expected in pet food geared toward older dogs and cats for higher quality pet foods.Japan’s import volume has declined the last five years; however, the value of imports had been increasing until 2010, indicating that Japan is buying premium pet foods. Additionally, health and safety aspects of all food, including pet food, are becoming more important to Japanese consumers and provide opportunities.

Canada Remains Top U.S. Market

Canada accounted for about 40 percent of all U.S. pet food exports in FY 2012 and was the largest export market, ahead of Japan.Canada was also the third largest global pet food importer behind Japan and the United States at $572 million.Import growth has been impressive increasing $168 million since 2007, which is more than twice the growth rate of Japan over the same period. This has primarily benefited U.S. suppliers as the United States enjoys 94-percent market share in the Canadian pet food import market. Exports from China and Thailand are growing but market share for each supplier remains below three percent. 

According to the Pet Food Association of Canada, there are more than 12.5 million pets nationwide, mostly dogs and cats.Canadians consider their pets as part of the family and are concerned for their well being and the foods they eat. Euromonitor estimates that 87 percent of dog food and 96 percent of cat food is prepared. Pet food sales in Canada were up slightly in 2012 compared to 2011, mostly due to high commodity prices resulting in higher processed pet food prices. Modest growth in retail sales is expected over the next several years with Euromonitor forecasting annual increases of two percent through 2017. Much like Japan, the pet population in Canada is aging and this trend is supporting demand for health-centered foods. Natural, organic and functional pet foods remain in high demand among Canadian consumers who seek nutritious and quality products for their pets. However, slow economic growth and rising prices (along with price conscious consumers) should limit the continued growth of premium food products. Furthermore, older pets bring on higher veterinary care costs thus leaving less money for consumers to spend on premium pet foods.

Best Prospects

Both Emerging and Established Markets Hold Potential

Growth in total agricultural exports is increasingly focused in developing countries. However, for pet foods, both developed and developing markets hold potential. In developed countries much of future growth in exports could come from higher unit values of exports resulting from demand for higher value end product. This has been the case over the past several years and is likely to continue as consumers shift to even fancier foods. Meanwhile, in developing countries growing pet populations and a shift to processed pet food is expected to drive exports. Two developing markets that hold significant potential are Russia and the Philippines.

Russia Emerges as a Growth Market

Russia has the world’s second-largest pet population but until roughly 20 years ago all pets were fed home-made preparations. Therefore, the Russian pet food market is still developing, particularly in major cities. Imports from all global suppliers grew 17 percent from the previous year to reach a record $209 million in FY 2012, compared to less than $50 million just a decade ago. The EU dominates the market with a 78-percent share, followed by Canada at six percent. U.S. exports have plenty of room to grow with 2012 market share at just three percent.

Currently, U.S. product faces a 20 percent import duty but under the World Trade Organization (WTO) accession agreement this will fall to 10 percent by 2016. Along with the current relatively high duty, certification requirements are problematic and have reportedly been a major constraint to U.S. exports. Despite market access challenges and EU competition, U.S pet food has a favorable image in Russia, and importers believe U.S. shipments will increase in the near-term. Even though U.S. exports in 2012 reached only $5 million, Russia should be considered an important potential growth market due to the sheersize of Russian pet food demand, rapid growth in pet food use, and growing reliance on imports.

Exports to the Philippines Double Since 2009

U.S. pet food exports to the Philippines currently constitute only a small share of total U.S. exports, but the growth rate over the past several years has been impressive and the market holds significant potential. The United States exported $21 million in pet food to the Philippines in FY 2012, nearly doubling exports from three years ago. However, according to Philippine import statistics, overall imports of pet food from all countries dropped by almost 20 percent in FY 2012. Pet ownership is on the rise due to healthy economic growth and increases in pet adoptions. Feeding home food scraps is still prevalent in the Philippines but promotional efforts by pet food manufactures and the Pet Food Institute are resulting in increased prepared pet food consumption. It is estimated that 99 percent of dog and cat food consumption is table scraps. Tremendous room for growth exists since only six percent of households own a cat, and 35 percent own a dog. 

Along with imports, retail sales are also on the rise with cat food sales expected to grow by seven percent annually over the next five years and dog food by five percent annually, according to Euromonitor. While some increase in demand for high-value pet foodsis expected, most pet owners still opt for standard, low-priced pet foods.

Trade Barriers and Export Assistance

Applied Tariff for Dog and Cat Food (230910)

Import Requirements

For information on the most recent and detailed market access issues contact the in-country FAS office.