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Viewing report
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Pet Accessories and Insurance Market Assessment
Key Note Publications Ltd, Jan 1999
The UK market for Pet Accessories and Insurance was worth an estimated £296m in 1999, with the market having grown by 36% since 1995. Much of this growth has been generated from the pet insurance sector, with the rate of growth in sales of pet accessories having been somewhat slower. The decline in dog ownership might have been expected to have an adverse effect on both markets over the last few years, as dog owners are the key purchasers of both accessories and insurance. In the last 10 years there have been significant changes in lifestyles, which led to a trend for lower maintenance pets such as cats, small animals and fish. This has caused cat ownership levels to rise, largely at the expense of dogs. However, the rise in levels of personal disposable income (PDI) and greater consumer confidence, coupled with the rapid expansion of pet superstores, has meant that growth in the market has been maintained despite this factor.
The UK Pet Accessories and Insurance market is driven not only by factors such as pet ownership levels and trends in the type of pets owned, but also by general
socio-demographic factors. The decline in the number of children aged under 10, plus the increase in working women and a trend towards single person households has helped to accelerate the move away from dog ownership towards other types of animal. With many adults also opting not to have children at all, they are often choosing to have pets instead and may be more likely to spend heavily on these pets. (See separate Market Assessment report, The Dinky Market.)
The Pet Accessories and Pet Insurance sectors form two distinct parts of the wider pet products and services market, which was worth approximately £3bn in 1999. The Pet Accessories market is the larger of the two sectors, worth £170m in 1999. The market has grown by 20% in value since 1995, with growth restricted, as already mentioned, by the decline in dog ownership. The accessories market is split into several key sectors: pet toys, grooming/hygiene equipment, pet restraints, pet housing/bedding, feeding equipment and miscellaneous accessories.
Pet toys accounted for a third of all pet accessory sales by value in 1999, boosted by the trend towards more premium-priced toys. The market was worth £56m in 1999, up by 51% since 1995. The next largest sector is that of pet housing and bedding, worth £37m, accounting for 22% of sales with a 23% increase in sales since 1995. Sales of pet restraints have fallen since 1995 by 12%, in line with the decline in dog ownership, to stand at £28m. This sector now accounts for 17% of pet accessory sales. Pet grooming and hygiene equipment is of a similar size, worth £27m in 1999 and has remained static in value terms since 1995. Pet feeding equipment (11%) and miscellaneous accessories - including cat flaps (11%), take the remaining share of sales, with both sectors growing strongly since 1995.
The retail distribution of pet accessories is heavily biased towards the specialist pet trade and in particular towards pet superstores. In 1999, specialist pet shops accounted for 61% of sales of pet accessories while the next largest retailer, the grocery multiple, accounts for only 16%. A key trend in the pet products market in the last five years has been the development and growth of the pet superstore. The Petsmart chain is the largest in the UK since taking over Pet City in 1996, with around 95 stores around the country in 1999. Other pet superstore chains include the
Northern-based Pets at Home with 50 stores and Jolleys with a chain of 21 stores located mainly in the East and South. The advantage of pet superstores for pet accessory sales is obvious as their larger shop floor space allows them to stock and display a much wider range of types of accessory than smaller High Street pet shops. They also offer a one-stop shopping destination for the purchase of pet food and small pets such as birds, fish and small mammals, but not for cats or dogs. Most of the pet superstore chains do not sell cats or dogs as they do not want to be seen to be encouraging impulse purchasing and prefer to show a responsible approach to pet ownership.
Trends in pet ownership have been towards smaller, lower maintenance pets such as cats, small mammals and fish, but pet owners are still tending to spend more on the pets that they do own. Even though dog ownership has declined, those that still own dogs are also tending to spend more to ensure that their pets are well cared for and kept occupied when they are away from home. The pet accessories market is likely to remain very competitive and fragmented, with a large number of companies likely to remain in what is a very diverse market. This means that the barriers to entry should remain relatively low for new companies attempting to break into the market. At present there are only around four brands with significant market shares across the whole sector, with the leading suppliers including Armitage Pet Products, Pedigree Masterfoods, Ancol Pet Products, Sincair Pet Accessories, Rolf C Hagen, and Hi-Craft. The combined share of these companies for all accessories is, however, only 43%, so they in no way totally dominate the market at present.
The total Pet Accessories market is forecast to reach £196m by 2003, representing growth of 15% over 1999. The fastest growing sector within this is likely to continue to be in sales of pet toys and of pet housing/bedding and pet carriers. Sales of accessories via pet superstores and also by direct sales, either mail order or increasingly through the Internet, are likely to increase significantly over the next five years.
The Pet Insurance market has grown much more strongly, although this is partly due to the rapidly increasing cost of insurance premiums for pet owners. Penetration of pet insurance is still relatively low, standing at 9% according to Market Assessment's consumer research. The total market was worth £126m in 1999, an increase of 68% since 1995, whereas the total number of policy holders has risen more slowly by 21% to just over 1.1 million in 1999. The decline in dog ownership has definitely not helped this sector in that sense, as many cat owners still perceive pet insurance to be too expensive and/or a waste of money. Dog insurance policies accounted for three-quarters of the market by value and 60% by volume in 1999, although insurers are attempting to target cat owners more now in recognition of the changing nature of pet ownership.
The Pet Insurance sector in the last five years has been characterised by a rapid growth in the number of policies available and the number of companies involved in the market. In response to criticisms that policy premiums were too high, there are now a number of products marketed as low cost insurance policies, and some insurance products are targeted at elderly pet owners and also have lower premiums. That said, the leading suppliers of pet insurance policies retain a large share of the market, with the leader Petplan accounting for 43% of the market by volume in 1999, a slight increase of two percentage points since 1997. This is partly because the major companies often underwrite or administer the insurance policies that are marketed by third parties, such as the supermarkets (Tesco's and Sainsbury's) and the banks/building societies (including the Woolwich and Nationwide). Other leading providers of pet insurance policies include Pet Protect, DBI and Jardine's.
The pet insurance market is becoming more accessible to consumers with an increasing number of products being sold direct over the counter to customers in pet superstores, for example, or available through supermarkets such as Tesco's and Sainsbury's. Traditionally, a high proportion of pet insurance policies have been sold via veterinary surgeries, as it is clearly in their interests to ensure that any treatments they provide for their clients will be paid for promptly. There is a higher level of main media advertising in the pet insurance market, with negligible amounts for pet accessories by comparison. In the year to June 1999, for example, total above the line spend stood at £2.6m, with market leaders by far the largest spenders with a budget of £2.3m for its general and equine insurance policies (mainly for its general policies). Other advertisers in 1999 included Direct Line and Equine and Livestock Insurance (who underwrite the Pet Choice insurance policies).
In terms of prospects for the Pet Insurance market, it is likely that growth will remain strong over the next five years, as the market continues to become more competitive as new products are launched and other companies enter the market. As such, Market Assessment predicts that the market will grow by 31% over the next five years to reach £165m. The steady rise in veterinary costs will ensure that premiums continue to increase ahead of the rate of inflation. This may be counteracted, to a certain extent, by a more competitive market place, which should also ensure that there is a steady increase in the total number of policyholders as well.
Exclusive consumer research commissioned by Market Assessment in September 1999 has shown the attitudes consumers have towards pet accessories and pet insurance, and also examines their purchasing patterns. The survey showed that 59% of respondents did not own a pet, in other words 41% were owners of some kind of household pet. In terms of attitudes towards pet accessory retailers, a third of respondents think it important that pet accessory retailers are able to offer expert advice and a wide range of products in store. This might suggest a preference for the pet superstore, but further research shows little difference in preferences for type of retailers, with a fifth of respondents tending to shop in a pet superstore, but the same proportion preferring a High Street pet shop or vet's surgery. Only slightly fewer (19%) prefer to buy accessories in a supermarket, but only 7% had or plan to buy through mail order or the Internet, although this proportion is likely to rise as electronic commerce (e-commerce) becomes more commonplace. With regard to frequency of purchasing, 29% of respondents buy products such as pet beds or feeding equipment regularly, ie once every 1-2 years, while 22% buy items such as toys more frequently, at least once or twice a year. The same proportion only buy pet accessories when absolutely necessary, ie when a product breaks or is lost or worn out. Just under one in ten believe that they spend more on their pets now than they did a few years ago.
In terms of attitudes to pet insurance, there are still a lot of negative attitudes present, with 18% of respondents considering it to be too expensive and/or a waste of money. Only 9% currently have pet insurance, but on a more positive note a further 8% are considering taking out pet insurance in the future.
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