July 14, 2016

The Answer to Shrinking Retail Margins? Pet Food

Kenneth Goodgame has an enviable perspective on small retail merchandising. As senior vice president of True Value Hardware, maintaining profitability margins was job one. Like many, he’s seen margins shrink due to online and big-box competition. He’s found it necessary to dig deeper to find profitable categories for the smaller merchant.

His latest answer? Pet food.

According to one of Goodgame’s recent blog posts, premium pet food is one category the smaller merchant needs to consider in their battle preserve and extend margins.

At one time, most people considered pet food a commodity. The dominant brands sold large bags of undifferentiated food at paper-thin margins. However, over the last ten years, it seems pet owners have taken their four-legged friends’ health and welfare (not to mention tastebuds) far more seriously.

Goodgame cites research claiming that premium pet foods now account for 50% of pet food advertising print space. The price point for premium foods is in the $39-$49 range for a twenty-pound bag. Some brands are able to demand $49 for a ten pound bag alone.

This is good news for the small merchant. Pet food accounts for over 60% of pet item floor space. By its very nature is a recurring purchase. Discerning pet owners have been pushing the category towards even greater specialization and quality, and they’re willing to pay for it – again and again.

Kenneth Goodgame‘s experience in small retail is extensive. Before his stint at True Value from 2013 to 2015, he was merchandising manager for Ace Hardware. He brought the Craftsman tool concession to Ace, adding a considerable boost to the bottom line by incorporating a high-profile brand previously available only at Sears. He knows the key to continued growth in small retail is in brand and quality, rather than any attempt to beat Wal-Mart or Costco at what they do best.

Goodgame foresees the next great frontier in pet food will be freshness: It looks like refrigerated cabinets full of fresh pet food will be coming to the small retail world soon.