The markets for packaged foods in Bulgaria and Romania witnessed turbulent times over the last 5 years and all players on the market, both producers and retailers, had to restructure their operations, in order to adapt to the new realities. Nothing similar is happening in the sector of pet foods market, however. The volume sales are growing healthily by some 6-7% in 2011, and the competition in both countries is growing. Many new brands are being introduced on both markets each year, fuelled by the growing pet humanization trend and the appearance of larger retailers, who popularize the packaged pet foods to a wider audience of pet owners.

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In both countries the weakest performance was recorded by the mid-priced segment of the market. Premium products were largely untouched by the market, as consumers were still trying to buy the best for their pets. On other hand new consumers who only recently started purchasing prepared pet foods instead of feeding their pets with table scrapes, tended to purchase more economy and private label products. Thus the scissors in unit prices opened more and the mid-priced segment of the market lagged behind.

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The sales of pet foods however did not pass the crisis untouched. The double digit growth witnessed prior to 2008 is already a mirage, and the volume sales had dropped down to 2-3% in the peak of the crisis in 2009. This slow down however was healthier for the industry, as it forced many of the producers to focus more on the quality of the products they offer and to improve their portfolio. Many companies attempted to promote their products more actively because of the crisis, which will surely result in longer term increase of their market shares.

The market players in both countries are similar – Mars and Nestle remain clear market leaders, while other multinationals like Hills are aggressively increasing their shares. Many smaller producers who were flooding the market with larger quantities of lower quality products now had to restructure their business and improve their practices, in order to remain competitive in the new situation. Some of them repositioned themselves as producers of private label products for the growing number of discounter chains and large super and hypermarkets. Others were simply left out of the market, leaving more space for the more established producers to expand their operations.

There is noticeable presence of other Eastern European producers of pet foods bot in the Bulgarian and the Romanian markets. Producers especially form countries such as Hungary and Poland are benefiting from the still relatively low prices for production in their home countries, and are successfully competing with the local market players. Those producers have joined European Union a bit earlier than Bulgaria and Romania and had additional time to adapt their production practices to the EU standards, which proved to be a definite advantage against the products of the small local producers on the Balkans.

The trends moving ahead the pet foods market growth were similar to the trends, which were driving up the sales of human foods in the period before the global financial crisis. The health trend is one of the most visible ones. Many old brands get re-launched with improved formulas, which offer healthier foods for the consumer’s pets. Diet formulas, which conform with the pet’s age are also growing popular. There are also formulas for city animals that do not “sport” enough or for pets form rural areas, which rarely sleep under their owner’s roof. The fortified foods for pets are also growing in popularity, together with the pet owners understanding of what is good for their pet’s health.

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One trend, unique for the pet foods market, is the growing humanization of the pets and the consequent increase of the usage of packaged pet foods, instead of table scraps. Although the penetration of prepared foods in both Romania and Bulgaria remains rather small (varying between 9% and 15% for the different types of pets in the two Balkan countries), the percent is steadily growing year on year. This is especially visible in more urban areas, where consumers have higher access to prepared pet foods and are more educated on the potential advantages of such foods over scrapes.

The distribution network changes over the last five years had also played important role in the good performance of the market. One visible trend in Romania was the appearance of pet superstores, a format which proved very successful in larger urban areas around Bucharest. There are no pet superstores in Bulgaria, but the county also benefited from the expansion of the large big box retailers. Many of the modern retail chains who compete in the country, like Lidl, Kaufland, Carrefour or Billa have special pet foods sections in which they actively promote the various pet foods categories. Specialized pet stores and vet clinics remain important channel, especially for the pet foods form the premium segment, which are usually purchased after a professional advice from a pet store owner or a veterinary.

The pet foods sales differ from the sales of packaged foods for human production by one more factor – price. The packaged foods market witnessed increased interest towards economy products and decline of the sales of gourmet and premium brands. The Romanian consumers purchasing pet foods, however, are gradually searching for more premium and super premium products form established international producers, in line with their increased interest towards healthier foods. The only effect of the crisis was felt in the pack sizes – people with decreasing purchasing power would purchase smaller packs of pet foods, rather than trade down to cheaper versions.

The situation in Bulgaria is somewhat different. Consumers started purchasing cheap products, while also trading down to smaller market sizes and started to actively search for price promotions, presents on the point of sales, etc. One of the reasons for this is the fact, that Bulgarian consumers are less informed about the importance of the food quality on the health of their pets and the lower level of pet humanization. Another reason is that Bulgarians increasingly shop for pet foods in discount oriented hypermarket chains like Kaufland or hard discounter chains like Lidl, who are offering products mainly form the economy segment.

The sales for dog and cat foods do not differ significantly in terms of growth, neither in Romania nor in Bulgaria. The slow performer in both countries proves to be the Other pet food category. This category is facing bigger difficulties because the owners of rodents, birds and fishes are less aware of the advantages of prepared food for their pets over the home prepared foods, and are less keen to pay the higher prices for such foods in times of crisis. Instead, majority of bird and rodent owners tend to feed their pets with fresh seeds and leafs, which sometimes are not suitable for the nutritional needs of the animals.

The future sales of pet foods in Bulgaria and Romania are looking brighter than the present. The volume sales in both Bulgaria and Romania are expected to grow by a compound annual growth rate of 7% until 2017. The retail value sales are expected to grow at slightly lower rate, with effectively will result in decline of the average prices paid for pet foods in both countries. However, the news are not as grim for the premium and super premium product – consumers are still expected to express high interest in such products and their constant value sales would grow by 7% per year in Bulgaria and by 16% per year in Romania over the next five years.

The main drivers for the growth in future are expected to remain similar to the ones witnessed over the past five years. More pet owners would start purchasing prepared foods for their pets, and more of the owners who are already doing so ,would start purchasing higher quality and healthier foods. The percent of prepared foods used to cover the nutritional needs of the pets is expected to grow by additional 5% over the coming 5 years. The outcome – more happy and healthy pets and better perspectives for the producers of pet foods.

Ivan Uzunov,

Euromonitor International