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Review of Pet Food Category – Identifying high value opportunity spaces for Australian red meat industry (insights2innovation)

Project start date: 14 April 2019
Project end date: 26 December 2019
Publication date: 10 September 2019
Project status: In progress
Livestock species: Sheep, Goat, Lamb, Grassfed cattle, Grainfed cattle
Relevant regions: National
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​The pet food category is rapidly shifting due to changes in consumer expectations and global trends. This project identified new opportunities for the red meat industry to capture value currently lost to multinational pet food manufacturers.

Results show an opportunity to move from standard by-products margins of $0.09/kg to a value-added product of $3.95/kg for retail, and $7.20/kg for B2C. These results are based on modelling that would require further validation and in-market testing in a second stage investigation of value chains.

Globally, the pet food market is projected to reach a value of US$128.4 billion by 2024, growing at a rate of 4.5% during 2019-2024. The Australian market size is also expected to grow from US$2.4 billion to US$2.8 at 4.6% annually through to 2023.

Consumer trends specifically highlight the demand for raw and fresh pet food products that consist of real ingredients and are free of preservatives and synthetics. This presents an opportunity for the red meat industry to develop new business models and value propositions for value-added by products and low value cuts.

Consumer interviews and focus groups conducted during this project found support for premium raw and fresh pet food. Currently, there is a small market for premium raw and fresh pet food (1-3% of the Australian pet food market). However, we conservatively suggest that this market could increase to 10%. This is assuming red meat companies position themselves to supply products with the appropriate value propositions for consumers. The premium Australian red meat brand could also be leveraged for export markets given the global interest in raw and fresh pet food.

Australian start-up companies (e.g. with business models that are faster, cheaper and simpler than the big incumbent (e.g. Mars) pet food manufacturers are already moving to niche customer segments for raw and fresh. They are also addressing additional value propositions for customers, like human-grade kitchens and recyclable packaging.

The project adopted a design-led innovation methodology to better understand the pet category problem space and to develop solutions that might work for industry. The process provided a structure for the project and ensured that outputs are consumer-driven and sufficiently robust for the commercial context. Project phases included:

  • market review of trends and reports;
  • consumer insights through interviews and focus groups;
  • value proposition development;
  • financial modelling of opportunities and business model scoping; and
  • an industry workshop.

The red meat industry will benefit from the findings of this exploratory research by designing and testing new business models that aim to capture new value, based on the opportunities identified. Companies with a willingness to build rapid prototypes and de-risk new ventures will benefit most from this project.

A further investigation of domestic and export markets will involve R&D throughout the full value chain, including the validation of producer supply, processing innovation, branding, sales channels, markets and consumers testing.

More information

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Primary researcher: Greenleaf Enterprises Pty Ltd