As any other one, the pet food industry too has been racked by inflation. This is mostly due to fuel and energy cost and unfortunately, the not so good news is that we can expect to see continued price increases on nutritional pet products.
If commentaries, indicators and financial statistics read the same way, our economy is in dire straits in 2008. The bursting real estate bubble and now our government with its astronomical bailout of financial institutions who got a little too greedy and failed to use sound business practices are just another very clear indication that things are everything but rosy. There are other numerous areas of concern, like the low value of the US dollar in the global market, oil prices never seen as this high before and an inflationary spiral like we have not seen it for 30 years. At the beginning of the summer we hit a consumer confidence level of 50, the lowest reading in 16 years. Houston, we got a problem.
As oil prices rise and the dollar looses on value, inflation across all consumer goods sold is way out of balance. Many manufacturers in all categories are levying with two price increases a year by now.
What is the impact on pet food? This category, the core of the pet industry, too has been racked by inflation mostly due to fuel and energy costs. Fuel is important in different ways: It delivers the ingredients to the plants, it drives the food producing plants, it contributes to packaging cost since most packaging components these days are poly bags and last, every bag of kibble and every case of cans has to be shipped from the manufacturer to the distributor, from there to the retailer and from there, like if it is an online store, to the pet owner.
At the same time, the price of raw ingredients has gone through the roof as well over the last couple years. Corn, for example, is up 35%. Predictions are that due to the flooding in the Midwest part of the country it will rise even more. It is (unfortunately) a principle protein source for many brands and also being fed to chicken, which in turn are a primary protein source in natural , holistic and organic brands. Corn prices furthermore impact the prices of soybeans, barley and oats. All this results in the fact that most pet food manufacturers, regardless of their size, are struggling to only keep up with these inflationary pressures, let alone to stay ahead of them.
To the pet owner it simply means sticker shock. Premium pet foods, once around $40 a bag are now easily pushing the mid-fifty mark for a large bag. Add tax, and voila, here you are at a whopping 60 Bucks for a bag of dog food. By the way, you know how they always try to figure out what is more expensive than gas, like the Starbucks deal, etc.? Ironically, the numbers I just gave you mean that food per gallon runs around $4.60.
To finish off with more bad news: It’s going to be quite a while before we can see the light at the end of the tunnel. The Food Institute reports that “inflation is a major force … the next three years.” As one independent pet food sales manager put it: “Indeed, we are all over the proverbial barrel if this inflation continues.” All I really hope for is that all pet owners still will be able to feed their animals healthy quality food rather than cheap fillers. It is my wish that they make educated buying decisions and understand that “cheap” usually stands for “after all, not so cheap” and “unhealthy, disease promoting junk and garbage”. Because if the dog gets sick, it’s going to get really expensive.