Special Report: Private Label Pet Foods

Special Report

Private Label Pet Foods

Manufacturers of private label pet foods are still navigating the multitude of supply side logistical challenges that have emerged these 20 months after the onset of the pandemic, whether it’s ingredient and materials sourcing, labor shortages or some combination of both. Meanwhile, some consumers are coming around to the appeal and quality of private label brands and understanding that these products no longer mean a less expensive version of a name brand. In managing consumer demand on their end, some pet retailers have also indicated they’re bolstering their own private label offerings because there are fewer moving parts. It’s a win for all parties: retailers have more oversight and are less depending on third parties, and consumers can have confidence that if the retailers are willing to put their name on the packaging, they must be trustworthy and of excellent quality.

“Increased demand, product proliferation online and declining fill rates have also led us to more aggressively grow our private label offering,” said Chris Rowland, CEO of Pet Supplies Plus. “This allows us more control on the supply chain and to be less reliant on vendors that decide to move exclusivity away from the independent pet channel.”

Brannon Dixon, CEO of both the Feeders Supply and Chowhound Pet Supplies banners, said earlier this fall, “With private label, we’ve gone from zero to private label being one of our top gross profit producing brands. And we just launched our own dog food private label brand six weeks ago. We’ve got a list of categories and items we’re continuing to build. We’ve still got a bunch of stuff on the ocean, which is a logistics nightmare. New products coming in and we’ll continue to expand our private label.”

The popularity of private label can be traced directly to the changing public perception of this category. “Consumers no longer view private label as just a less expensive alternative; they’re looking at a private label as a standalone brand, with its own brand equity and nutritional philosophies that make products competitive against national brands,” said Heather Govea, Chief Commercial Officer for Alphia. “Private label is no longer just chicken and rice diets. Alphia is helping retailers move to more solutions-based diets (sensitive stomach, sensitive skin), giving their products the same consumer appeal and solution-based stories as national brands. We help our private label customers articulate nutritional platforms, obtain and design quality packaging, meet strict label requirements and even help distinguish claims that appeal to today’s consumer.”

Consequently, “We’ve seen tremendous amount of growth in these areas and we’re seeing private labels offer up some tough competition,” Govea said. “Private label has always been a fast follower but based on growth and consumer demand, we’re starting to see private label beginning to lead in these areas before the segments are fully established.”

And private label suppliers are clearly feeling the strain. “We haven’t spent any time on innovation. We’re just trying to get orders out the door,” said Scott Merrill, VP of Sales for Sunshine Mills. “So we’re cutting at a higher rate than we all would like to see, but our focus and our energy are all geared toward producing orders and getting as much out the door. And we’re just dealing with different headwinds, whether it be Covid or Covid in quarantine. Then you’ve got carrier issues and carrier delays. And then you have suppliers: if we order 10

trucks of chicken fat, we might only get eight. You can only produce with what ingredients you have in house. So that’s why we’ve stopped on innovation with own brands, and all the retailers are saying ‘get me what you can get me, as soon as you can get it to me.’ We’ve all done a bit of SKU rationalization, like ‘if I take this away, can “Pet care continues to be a great category to be in. For Red Collar, it all starts with our associates and an industry-leading quality and food safety and associate safety program. Building a sustainable, profitable and growth-oriented business will always been in our DNA at Red Collar. The industry-wide challenges we face today as manufacturing partners in pet care will pass. Having weathered the storm at Red Collar and built an even more resilient business through investing in our plants and people, we are well positioned to be the partner of choice for our customers and their pet parents.” —Chris Hamilton, CEO, Red Collar you add more production over here?’ and we’re like, ‘yes.’ So we’re doing those types of things right now. It’s very supply side-oriented, to the point I’m on a weekly rotation with my sales guys in the plant to pack out orders. That’s how focused we’re on it. It’s all hands of deck.” Govea said, “The industry is witnessing the most disrupted and unique marketplace anyone has seen since the inception of super premium pet food. We’re taking that challenge head-on by leveraging our national footprint and our scale to help our customers win in store.” Staying ahead of these complications remains top priority for Red Collar Pet Foods, said CEO Chris Hamilton. “Challenges from the pandemic will continue, so making sure we continue to build a culture that attracts and retains top talent across all our sites and headquarters is job No. 1 because our associates make all the difference,” he said. “Second, continuing to build deep partnerships with our suppliers has helped ensure we continue to be able to plan, source, make and deliver for our customers. And third, continuing to invest in the pet category and consumer insights and working with our partners to bring those insights to life will allow us to stay on and ahead of the trends in pet care.” That these suppliers have built and cultivated fruitful partnerships with their customers has helped all parties handle the difficulties this year with grace and understanding. “We’re just r Cont'd on Pg. 20

r From Pg. 18 having open conversations over what’s going on with our supply chain, what’s going on with our orders,” said Merrill. “If we push this order a day or two, then you can get more of it because the ingredients are coming in here. There’s certain policies and procedures we’ve got to complete before we can ship the order. We’re having open dialogue of what’s going on, and they’re flexible. They’re short on labor. Everyone is working together. Certain customers, we’re having weekly calls to go over orders, what’s going to or not get produced, so they’re aware of what’s going on in real time, or as close to real time as possible. The lines of communication have opened up dramatically to the point that we’re getting more transparency on forecasts, on orders and it’s not even so much promotional driven conversations. It’s just ‘what can you get me and can you get me most of this’ type conversations, and what’s the timing?”

Outside of product, sometimes the delays come from packaging, said Merrill. “If you run out of a bag or packaging or there’s a reprint, the printers are dealing with the same issues we are,” he said. “Plastics are being stuck at the ports, or paper is in short supply, cardboards is in short supply. Lead times went from reprint in eight weeks and we’re like 16 weeks on a reprint. Everyone’s gotten used to longer lead times and there’s some sort of dilemma; it’s a moving target on what the dilemma of the day is.”

Alphia, similarly, can rest on its combined experience of more than 70 years to reassure its partners in these uncertain times. “That foundation was built on trust, food safety and high-quality products,” said Govea. “Alphia has only been an organization for 18 months, but we’ve combined remarkable legacy organizations to create the best in the industry with the largest super premium manufacturing footprint to ensure what we deliver to a private label retailer has the same high-quality standards that other brands would have. Bringing scale and the ability to reach consumers across the country, we work to ensure we leverage our ability to innovate and procure unique and differentiated ingredients.”

When there is some breathing room, Hamilton shares what he’s noted in the category. “Premiumization, health through science, the explosive growth of treats, to name just three, are all trends that continue to grow and show no signs of stopping. At Red Collar Pet Foods, we have continued to invest in our capabilities, plants and associates to capitalize and stay ahead of these trends. We’ve invested in our national dry food network and can make all recipes including meat first premium and super premium recipes and diets, and as one of the largest treats partners in North America, we continue to invest in things like automation, packaging and ingredient dosing and blending to keep up with demand.”

Merrill said if there were an opportunity to refocus on innovation, “Once we get dug out of the hole then we can start talking about fun things like we want to bring in some additional wet foods,” he said. “And then we’ll work with our retailers when the category reviews come up to say ‘hey, here’s what we saw. Here’s what’s in the market, and then how do you develop some products around that.’ One of the things that I was working on and was very adamant about prior to all this constraint was dual proteins. We see a lot of dual proteins on the pet special-

ty side that we could generally move it over to owned brands. And then we’re leveraging from that all the efficiencies that we have in the plants and then it essentially equates to the price on the shelf for the customer. We’re just slowly navigating our way through this. We’re on the opposite side “Consumers no longer view private label as just a less expensive alternative; they’re looking at a private label as a standalone brand, with its own brand equity and nutritional philosophies that make products competitive against national brands. Private label is no longer just chicken and rice diets. Alphia is helping retailers move to more solutions-based diets (sensitive stomach, sensitive skin), giving their products the same consumer appeal and solution-based stories as national brands. We help our private label customers articulate nutritional platforms, obtain and design quality packaging, meet strict label requirements and even help distinguish claims that appeal to today’s consumer.” — Heather Govea, Chief Commercial Officer, Alphia of the pandemic but it sucked up so much material and product on the supply chain in the beginning, and now it’s rearing it’s ugly head on the back side. Even if everyone goes back to work tomorrow, we’re still six months digging ourselves out of the hole we’re in just to stay even, let alone get ahead.” But there’s much reason to remain optimistic, said Hamilton. “Red Collar has been on a tremendous growth trajectory both organically and through acquisition,” he said. “After opening for business in December 2018, we closed shortly after on our first acquisition. Early in 2019, we successfully acquired Hampshire Pet Products with the help of Arbor Investments, our ownership group, and we have never looked back. We’ve added capabilities that have helped us grow the topline despite all the challenges through the pandemic. As a trusted partners, we have what I believe is an enviable track record on quality, food safety and associate safety that sets us apart from competitors.” In essence, “Pet care continues to be a great category to be in,” Hamilton continued. “For Red Collar, it all starts with our associates and an industry-leading quality and food safety and associate safety program. Building a sustainable, profitable and growth-oriented business will always be in our DNA at Red Collar. The industry-wide challenges we face today as manufacturing partners in pet care will pass. Having weathered the storm at Red Collar and built an even more resilient business through investing in our plants and people, we are well positioned to be the partner of choice for our customers and their pet parents.”