The road to U.S. import and export Sheila Fitzgerald / Shutterstock.com

The United States pet market is quiet complex. David Weil gives us a basic guide to understanding U.S. import and export practices. Export from the U.S. Statistics The largest market for U.S. dog and cat food exports is North America – Canada and Mexico. Canada is by far the largest market, importing over $600 million (€546 million) in pet food from the U.S. in 2015. Japan imported just under $100 million (€89 million) in the same period. Australia was the third largest market at just over $81 million (€72 million) and Mexico followed at $67 million (€60 million). Surprisingly, New Zealand was the fifth largest market in 2015 importing over $38 million (€34 million). However, we can also look at the quality of food imported by each market. Per U.S. government statistics (BICO reports), the average (FAS) price of the pet food imported by Canada was $2.16 (€1.97) per kilo. Japan, Mexico, and New Zealand purchased relatively less expensive foods at $1.81 (€1.65), $1.65 (€1.50), and $1.92 (€1.75) per kilo respectively. On the other hand, Australia was importing much higher priced foods at an average of $2.89 (€2.63) per kilo. Stronger competition Yet all is not rosy for U.S. pet food exporters. The strong U.S. dollar is having a strong effect on U.S.



pet food exports and through July 2016, exports were down 1% as compared with the same period in 2015. Total exports in 2015 were down about 1.5% when compared to 2014. The strong dollar has given other countries opportunities to expand in existing markets and to enter new markets. The primary competition to U.S. pet food exporters is Canada in terms of perceived quality. Yet, in terms of total exports, Canada trails quite significantly as the U.S. exported $1,280 million (€1,166 million) in pet food while Canada exported ‘just’ $484 million (€441 million) in 2015. And it must be noted that over 60% of Canadian pet food exports are to the U.S. At the same time, Canada accounted for 47% of U.S. pet food exports. Categorizing food In the U.S., pet foods are generally divided into three categories: economy, premium, and super-premium. Unfortunately, there are no definitions for these categories. And we see more and more foods each year that would be considered ultra-premium or just simply crazy expensive. Yet the growth in grain-free and especially raw, freeze-dried, and dehydrated foods shows a real demand for these foods.

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United States

It is all about perceived value - marketing. In the U.S. market, many terms are bandied about including holistic, human-grade, natural, organic, ancestral, et cetera. Of all these adjectives, only ‘natural’ and ‘organic’ have legal definitions. The other terms are concepts developed by marketing departments. Premium vs. economy The majority of U.S. pet food exports would fall in the premium category. These are foods produced by the multinationals (Mars, Nestle/Purina, Colgate, and even Big Heart). However, a visit to specialty pet shops in Asia shows a strong presence of ‘super-premium’ American foods. The market for these foods in Europe is not yet so well developed, although they do better in Central European markets. Most countries can produce their own economy-quality foods. In addition, American multinationals produce their economy foods in many other nations in order to keep prices as low as possible (no import duties, lower transportation costs).

More than just formulas, what differentiates the various grades of pet foods is the quality of the ingredients. In this regard, North America is blessed with an abundance of high-quality raw materials, making North American ‘super-premium’ foods very much in demand in export markets. We are beginning to see a few European brands which are being produced with ingredients similar to, if not equivalent to, those in North America.

Import into the U.S. Import challenges So, what if you are looking to enter this vibrant market yourself? The U.S. pet market is enticing but quite complex. The fact is that most foreign companies that enter the market fail. In fact, most new-to-market American companies fail as well.

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U.S. dog & cat food exports

canada japan australia mexico new zealand

Top ten markets (2015)

2011

2012

2013

2014

120,844 81,356 67,134 38,139 35,668 34,544 34,353 30,699 23,629

120,844 86,676 49,753 35,051 35,306 30,301 39,041 27,692 26,039

88,588 60,538 31,976 29,194 27,323 19,678 33,616 25,691

74,323 36,781 26,136 25,064 24,201 17,946 31305 22,370

87,610 28,869 23,485 23,250 21,148 20,759 30,496 19,056

202,642

294,175

629,804

614,458

563,375

527,554 317,016

629,804

Values in thousands of U.S. dollars

hong kong south korea belgium/luxembourg taiwan philippines

2015

Source: U.S. Department of Agriculture, Foreign Agricultural Service, BICO Report



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The U.S. market operates like no other market in the world. What is working for you in other markets probably will not work in the U.S. Many companies make the same two mistakes that lead inevitably to failure: 1) not understanding the role of the distributor in the U.S. market and 2) not knowing how to price their products. The distributor You are used to working with distributors in other markets that act as your partner; helping you build your brand in their market. When you enter the American market you will find many ‘distributors’, but do not make the mistake of thinking that they will help you build your brand in their market. An American distributor is primarily a logistics company: you sell , they deliver. Without a sales force, brands wither and die a slow and painful death. A sales force can take several forms. A brand can hire a sales person or sales team. But the key is that any brand that wants to be successful in the U.S. pet market must take responsibility for their own sales. And, although the role of the distributor in the U.S.

is different, in most cases, distributors are essential to a brand’s success. We have noted that a number of companies enter the U.S. market with the idea that they can bypass the distributor and sell directly to major chains. But most chains do not maintain their own warehouses, or at best, they have small warehouses. The chains depend on distributors to deliver their orders directly to their various stores. Drop shipping a few cartons or bags directly to a store is quite expensive; the distributor’s truck is visiting that same store at least once each week. Price tag We have also observed that many brands fail in the U.S. not because they are too expensive but because they are not expensive enough. There are many hidden costs in the U.S. market that new-tomarket companies are not aware of. Some examples are Distributor Shows, which not only cost money to attend but it is also expected that vendors offer ‘show specials’. It is also a good idea to offer monthly specials. All of these activities need to be accounted for when calculating costs. see next page

Do’s

Don’ts

H H H H H H H H H H H H

• F  orget everything you thought you knew about entering a new market

• Confuse an American distributor with the other overseas distributors you work with

•  Study the U.S. market carefully before developing a plan

• Think you can ship directly to retailers in the U.S. and have no need for a distributor

• F  ind a consultancy that can lead you through the U.S. market labyrinth

• Forget that there are many ‘hidden’ costs in the U.S. market

• B  ecome familiar with U.S. labeling laws and other regulatory requirements

• Ignore the need for a sales force in one form or another

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United States

Proper labelling In terms of pet foods and treats, labelling laws in the U.S. are very complex. Each state has its own regulations. Your packaging must meet each and every state’s requirements. For this, you will need to hire a consultant familiar with these state regulations. This also means your current packaging is not appropriate for the U.S. market. There are also restrictions on what proteins can be brought into the U.S. so that you might have to either reformulate or have your food produced in North America. Another important key to success in the U.S. market is to offer something not currently available. For your product to go up on the shelf, someone else’s product is coming off. Retailers need a good reason to replace that other brand. Consumers should be able to easily recognize what makes your products different. Online sales Adding to all the complexity is internet sales. How you address this issue is critical as the internet offers many opportunities but also many challenges. Quite a number of brands do not offer their products for sale online except through the websites of bricksand-mortar retailers. This helps maintain price integrity and also makes the brand more attractive to the specialty retailer. At the same time, other brands use the internet to build sales and to show potential retailers how much demand there is for their products in their own neighbourhood.

Conclusion The U.S. is a powerful exporter of pet foods and remains so despite the strong dollar. The majority of U.S. pet food exports is comprised of premium brands produced by multinational companies. However, as consumers demand higher and higher quality foods for their dogs and cats, the market for super-premium and even the ‘crazy expensive’ foods continues to grow. There are also many opportunities for those looking to export to the U.S. pet market.To be successful, however, it is essential for any new-to-market company to do extensive research to determine how best to get their products to market and to ensure that their pricing includes all the costs unique to the U.S. market. There are a number of consulting companies that can help you develop and implement a plan created specifically for you. They can help by conducting an initial market study which can then be turned into a marketing plan. Such a plan must incorporate issues such as costing, pricing, logistics, government regulations, sales, and distribution. These consultants can then help you with the implementation of your program. American consumers are looking for new products. The key is learning how to navigate the U.S. market in order to ensure the best placement and promotion of your products in the U.S. market. Questions?

@GlobalPETSinfo

David Weil [email protected] theexportzoo.com



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