20 December 2021 - The COVID-19 pandemic has negatively impacted the animal feed and nutrition industries; however, some sectors have not suffered in the same way. One of the sectors that has benefitted massively from the pandemic-related lockdowns is the pet food sector.
With record global pet ownership (in part as a response to regional lockdowns), it is no wonder there has been a surge in pet food-related M&A in the last two years, with vast sums of money being poured into the burgeoning sector.
One such animal nutrition company hoping to capitalise on the booming pet market is ADM, who since 2017 has been building a portfolio of pet foods, premixes and treats to capture its share of the global market.
To find out what has prompted such large investment and the plans the company has for the future of its pet division, Feedinfo spoke to Jorge Martinez Carrillo, President of ADM’s newly created Pet Solutions division.
“ADM has been active in the pet solutions market since the acquisition of Crosswind Industries in the US in 2017, and since the acquisition of Neovia in 2019 for €1.54 billion,” Carrillo told us.
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In September of this year, ADM paid approximately $600 million to acquire a 75% stake in PetDine, Pedigree Ovens, The Pound Bakery and NutraDine (referred to as P4 Group), whose collective focus surrounds private label pet treats and supplements. The acquisition “triggered the creation of the Pet Food Solutions business unit, to increase attention and focus resources on this growing market,” Carrillo confirmed. |
Jorge Martinez Carrillo President of Pet Solutions, ADM |
Fast Growing Market
ADM’s own research predicts annual global sales of pet food will total $110 billion by year's end, and are forecast to grow to $140 billion by 2026 – with pet treats expecting even greater growth.
“The global market trend for pet food, treats and solutions is showing excellent growth and growth potential,” Carrillo said.
“Especially the treats business, it is the fastest growing market in the Pet Solutions division globally,” he continued. Adding that increasingly “pet owners are looking to ‘functional treats’ now. Consumers want to know how they can meet the different needs of their pets through other mediums than just food.” This is a factor that Carrillo attributes to the continuing “humanisation and premiumisation of the pet food market.”
That is where the acquisition of PetDine et al comes into play, Carrillo told us: “The P4 companies bring a lot of knowledge and capabilities in this area to the ADM portfolio.”
For now, ADM is focussed on integrating that business with its own, but in time Carrillo expects ADM to expand the products from P4 across the rest of its business (not just in North America).
Latin American Growth
Outside of North America, ADM’s pet business has shown “strong and steady growth in Latin America, especially in Mexico and Brazil,” and Carrillo expects the latest acquisition to support that.
In Mexico, Carrillo told us ADM has “captured good market share and are now well positioned in the retail channel," adding that his company is the number two pet products retailer in Mexico.
As a result, demand is outpacing the company’s capacity in Mexico, which has led to capacity investments at plants in Guadalajara, Morelos and Texcoco totalling $30 million.
“We needed to invest in new capacity. We're going to do so in Guadalajara with a new line. We currently import our wet food line out of France, but the aim is to produce wet food domestically in Mexico, so we're investing in Texcoco on the new wet food plant as well,” Carrillo confirmed.
“It's all about catching up with the growth that we're experiencing in Mexico and the region in Central America,” he said.
But it isn’t only Mexico where ADM’s pet offerings are showing strong potential, with sales of premium brands (such as Equilibrio) and growing exports out of Brazil both supporting strong growth. “Brazil is a big market, the second largest pet food market in the world. We have a strong presence there, but we're working on increasing our market share in the Brazilian pet food market,” Carrillo confirmed.
Europe & Asia
Much like in the Americas, ADM’s focus is on growing its Pet Solutions business in every region of the globe, especially in key markets such as China, which is expected to outpace global pet food growth in the next 4-5 years, and Vietnam.
“China is a big priority. We have a small operation out in China that we bought as part of the Nevoia deal,” he said. The Chinese market is seeing an uptake in premium pet brands, such as ADM’s Equilibrio, which Carrillo told us is currently being exported from Latin America. “Hopefully in the short term, we're going to start producing Equilibrio locally in China as well,” he added.
Pressed on other upcoming plant expansions in Asia and Europe Carrillo told us: “We're going to keep on growing through our 12 manufacturing sites and exports in Europe and Asia and as soon as we get the right scale, we shall take the decision to install capacity there as well.”
Humanisation & Alternative Ingredients
Recent years have shown an increase in alternative proteins and plant-based ingredients for human food, as a greater global focus on sustainability has led to an increase in flexitarianism and ‘natural’ products. However, this trend is not confined to human nutrition.
Carrillo told Feedinfo that ADM has seen a huge interest in alternative ingredients and has been able to draw on the success of its Human Health and Wellness division’s portfolio of products to support Pet Solutions.
“The market is seeing more premium products, so all that pantry that we have from the human nutrition sector can be brought into the pet business. When we talk about health and wellness, that includes probiotics, prebiotics, post-biotics, enzymes, flavours, you name it. So we have all of that in ADM’s arsenal already.”
And, ADM’s own research is supporting this decision, as research found that global pet food launches of “all natural” products increased 41% between 2016-2020.
But it doesn’t just stop there. “Definitely we're working on insects, we’re working on alternative proteins, we’re working on natural ingredients. All the trends that are happening today in the market, we're looking into them,” Carrillo commented.
