The supply and transportation problems of pet food and products stemming from the pandemic are expected to continue through 2021 and into early 2022, said Steve King, president and CEO of the American Pet Products Association (APPA), even as the US pet care market has experienced notable growth that will also continue this year.
Presentation of a “state of the industry” during Digital access to the Global Pet Expo (GPE) 2021King explained the reasons for the disruptions, starting with the increasing and changing consumer demand for pet food and other products. After the initial spike in sales in March 2020, as pet owners stocked up during pandemic lockdowns, King co-host Celeste Powers, president of the Association of Pet Industry Distributors, called this “emotional storage” – there has been an inevitable decline. But then pet food and care sales rebounded as owners practiced “thoughtful storage” later in 2020 and more people added pets to their households.
As a result, the latest data from the APPA on the total US pet market showed 6.7% growth in 2020, reaching US $ 103 billion for the year – the first time sales exceed US $ 100 billion, King noted. One of the growth drivers was pet food, which grew 9.7% to US $ 42 billion.
Much of the growth has also come from e-commerce. In separate presentations from GPE, David Sprinkle, publisher and research director at Packaged Facts, said e-commerce accounts for 30% of the overall US pet care market, up from 24% in 2019. Specific to pet food pets, Brad Boldridge, neighborhood manager of pet retail Nielsen, said pet owners in the United States spent 46% more on pet food online in 2020 compared to 2019.
Increased demand and supply chains disrupted by the pandemic
While the news is positive, this healthy growth, especially in e-commerce, has had a significant impact on pet industry supply chains, Powers and King said, leading to product and product shortages. raw materials that continue today. Initially, makers of domestic products struggled to scale up or move production quickly enough, according to King. “The production forecast is based on the historical ebb and flow of business over the year, and COVID has really disrupted those patterns. “
In this regard, manufacturers have also had to change worker safety protocols due to the pandemic and plan for worker absences due to illness or quarantine. They have also faced labor shortages and increased competition for production workers from fast-growing companies like Amazon, a challenge that persists into 2021.
One-time shortages of raw materials, from pet food ingredients to resins for some sustainable pet care products to some packaging materials, such as aluminum cans for wet pet food, are occurring. are produced and continue now. These shortages have increased costs; King cited data from the National Association of Manufacturers (NAM) according to which raw material costs have increased at the fastest rate since 2008.
From an international market perspective, the same demand surges in the United States have occurred around the world, resulting in a shortage of imported products and raw materials. Factors involved in international shipping, also drastically affected by the pandemic, have made the situation much worse, King said. The challenges include:
- Shortages of land transport equipment;
- Fewer ships and containers available;
- Soaring container prices from $ 3,200 to $ 3,500 before COVID to $ 9,000 to $ 10,000 today;
- Traffic jams at ports on the west coast of the United States, causing significant delays in the unloading of products from ships to trucks, with delivery times to retailers doubling from 60 to 120 days.
Disruptions, cost increases expected to continue
These supply chain disruptions are expected to continue through 2021 and the first part of 2022, King said. Using data from NAM again, he indicated that the backlog is the largest since 2004. “Inflation in the freight sector will also continue to be a problem, so costs will continue to be high throughout. through the summer (2021), then we’ll probably start to see some easing in the fourth quarter, ”King said. “So the crux of the production is that the fill rates have been affected considerably and are not expected to improve in the short term. “
This means that client allocations continue; at best, manufacturers are able to fulfill around 70-75% of the orders they receive, King said, and that is expected to last until the first part of 2022. In addition, rising raw material costs and shipping is likely to be passed on to retailers and ultimately consumers soon.