27 April 2021 - The pet food industry in the US saw a lot of M&A activity in Q4 2020, as well as high levels of investment activity across the sector. In Q4 2020, Feedinfo estimates that at least 8 major investments or purchases were completed, at a total cost approaching USD 2 billion. Continued investment in new facilities suggests that there is plenty of demand.
That trend continued in Q1 2021 as companies continue to build on the increase in pet ownership and the rise in ecommerce sales for cat and dog food products. Increasingly, across all US pet owners, animals are being viewed as members of the family, and are treated as such with premium pet food and treats.
One company which was involved in a few multi-million-dollar expansion announcements in the past month is Royal Canin North America, a subsidiary of global conglomerate Mars, Inc. Royal Canin was founded in 1968 and purchased by Mars, Inc in 2001.
In late-March, the firm announced plans to invest $390 million in a new pet food facility in Lewisburg, Ohio, to support increasing demand for its products.
The site, which is already home to the company's Pet Health Nutrition Centre, will also be home to a new 450,000 square-foot facility to manufacture the company's health and nutrition lines for both cats and dogs. Construction is scheduled to begin next month and is expected to be completed in the second half of 2023. It is understood that when complete the facility 224 new jobs will be created.
And only a week prior, Royal Canin North America announced it was expanding its manufacturing facility in Lebanon, Tennessee, in a $200 million investment.
The 108,000 square foot expansion includes the addition a new production facility in which there will be five additional production lines, doubling the plants current capacity. The expansion works in fact began in 2019 but they are due to be completed it 2022. The expansion may lead to the creation of more than 90 new jobs.
Again, the expansion will help Royal Canin North America meet increased demand for function-focused pet nutrition seen before, during and after the COVID-19 pandemic.
And let’s not forget that parent company Mars Petcare is also investing USD 145 million to expand its manufacturing facility in Fort Smith, Arkansas.
The expansion will add more than 200,000 square feet of additional space, which will allow the company to add two additional production lines, which are expected to increase production capacity by 40%. Works on the site are expected to be completed in 2022, and an additional 120 full-time roles may be created.
We turned the mic to Cecile Coutens, President, Royal Canin North America, who gave us a bit of extra background for this sudden and significant ramping-up of production capacities.
Driving these expansion projects are the aforementioned trends such as the increase in pet ownership by US consumers during COVID-19 (i.e. the US saw a tremendous uptick in fosters and adoptions throughout the pandemic), premiumisation and younger pet parents.
“Trends in pet parenting have shifted with the new generations getting married and having children later. As such, these consumers adopt pets earlier and treat them like their children. They are willing to invest in these smaller species – namely cats and smaller dogs – to provide for them. This includes and will continue to include a heavy emphasis on tailored nutrition for their pets as well as investments in their health care and other services,” Coutens said.
However, the President of Royal Canin North America said that the pet food manufacturers are currently struggling to meet demand, despite round-the-clock efforts across North America.
“There is no indication that this trend will change, as it has been on a rapid upward trajectory for the past several years,” she said. “The trends have all accelerated this demand with no signals that it will slow down. We are confident that veterinarians, breeders, and pet owners will continue to want what is best for the cats and dogs in their care.”
“Royal Canin North America is experiencing unprecedented growth and is planning not only for our current state but to better be able to serve the cats and dogs in our care in the future. We are pleased to expand our operations in communities where we are already present, adding new capabilities and new jobs to both Lebanon and Lewisburg,” Coutens added.
Despite this unprecedented growth Royal Canin North America will continue to benefit from being under Mars, Inc. ownership and synergies when it comes to long-term planning and readiness to expand manufacturing footprint in its large network of facilities.
“While these expansions [Lebanon and Lewisburg] have been in our long-term plans for several years, the need has rapidly increased our demand and requires more production capabilities to meet this demand,” she commented. “As a family-owned business, we think in generations and this allows us to make long-term investments in research, innovation and capacity expansions like the ones we recently made in Lebanon and new factory in Lewisburg.”
“In addition to sharing talent across the business segments, we are also able to benefit from insights and data gathered across the variety of our businesses to gain a better understanding of pets and pet parents, helping us to build stronger plans to enhance our impact on pet health,” Coutens added.
Royal Canin North America and Mars Petcare aren’t the only market leaders expanding in the US at the moment. In the past few months, for example, Simmons Foods announced plans for a multimillion-dollar expansion in Siloam Springs, Arkansas, Stella & Chewy's announced plans to expand operations at its Oak Creek site in Milwaukee, Wisconsin, and Red Collar Pet Foods said it would add an 85,000 square feet of warehouse space to its manufacturing plant in Clinton, Oklahoma.
Asked about this competition and what may look like a busy expansion race going on now, Coutens responded by saying that the pet food market is quite diverse, and what makes it so unique are the different approaches businesses take when providing cat and dog nutrition, adding that she is confident that Royal Canin North America’s own set of commitments and philosophies are reasons contributing to the company’s ongoing growth.
“The entire industry is growing as more cats and dogs are adopted, and that allows pet owners to select the diet that is recommended for their unique pet,” she commented, alluding to the fact that pet diets have never been as tailored and personalised as they are now, and that each manufacturer has something different to offer.
And asked why these pet food multinational expansions are taking place on US soil rather than in other markets where production costs and subsequent imports may be more cost-efficient, Coutens said that there is some sort of a consensus among market suppliers (and this is especially true for Royal Canin North America) that companies continue to produce pet food products globally in markets nearest to the end user.
“That strategy has not changed as a result of COVID-19, and the rapid increase in demand in the United States and Canada have allowed us to increase our capacity across North America,” she said.