Post’s billion-dollar pet food business sees shoppers flock to value brands

Shopping for pet food has started looking more like shopping for human food lately: As prices rise, eyeballs go down — to bargain brands on the bottom shelves.

Pet food prices have jumped 23% over the past three years, causing some pet owners to “trade down” to lower-cost kibble. That’s a stark reversal from the recent trend of consumers shelling out for the top-shelf products to feed Fido.

Post Consumer Brands was braced for this dynamic when it paid $1.2 billion to get into the pet food business a year ago, just as prices were peaking. The Lakeville-based company behind Honey Bunches of Oats and Malt-O-Meal bought pet brands that range from budget to high-end, so company leaders could shrug off the ongoing inflation.

Pets need to eat something, after all.

“We have a variety of price points throughout our portfolio of products, and we are well positioned to support pet owners as they strive to provide their pets with the best nutrition while staying within their budget,” said Michael Greenwell, chief commercial officer for the pet business at Post Consumer Brands.

Post Holdings, the parent company of Post Consumer Brands, struck a deal with Smucker in early 2023 to acquire Rachael Ray Nutrish, 9 Lives, Nature’s Recipe, Gravy Train, Kibbles ‘N Bits and Pounce cat treats.

So far Nutrish and Nature’s Recipe, the “premium” brands, need a little extra advertising help. Meanwhile, the main issue with the lower-cost brands is making sure enough is being made to meet surging demand.

Over its first year filling dog and cat bowls, Post’s pet food sales reached $1.5 billion — and that’s without nearly a month of revenue, since the deal closed in late April last year, and without changing much in how the business operated.

Now Post is ready to beef up its lineup with new packaging, products and advertising campaigns to fully own its position as the country’s third-largest branded pet food manufacturer.

“We have a lot to be excited about in the coming year from a marketing standpoint,” Greenwell said. “A lot of people love the 9 Lives Morris the Cat [mascot] or the Kibbles ‘N Bits jingle, and we are excited to bring some of these iconic campaigns back.”

Two competing trends are defining the pet food shelf at the moment: humanization — or treating pets like family and spending more for higher-quality ingredients — and inflation.

Post bought a California-based pet food manufacturer, Perfection Pet Foods, for $235 million last fall to add to its manufacturing sites in Kansas and Pennsylvania. Perfection makes store brand pet food and manufactures for other brands.

Like with cereal, Post’s pet food business benefits both from top-shelf sales and value shoppers.

Nutrish and Nature’s Recipe were expected to lose customers to inflation, meanwhile.

“We baked it into our assumptions that there would be a trade down, and it has been occurring, and we expect it to continue,” Post Holdings CEO Robert Vitale told analysts earlier this month. “We see that as more of a marketing issue and positioning the brands to make sure the consumers are clear on the value proposition.”

General Mills, which owns the high-end Blue Buffalo pet food brand, is in a similar situation of getting “back to being very clear about why we think our pet food is worth paying a bit more for,” as the Golden Valley-based company’s top pet executive Jon Nudi said recently.

Long-term, Greenwell says the humanization trend will continue, swinging the pendulum from budget-buying back to broader spending on ingredients and quality.

Americans spent more than $64 billion on pet food last year, and this year’s spending should grow about 4%, according to the American Pet Products Association. Pet food sales rose 7% between 2022 and 2023, meanwhile.

As with human food, pandemic buying snarled supply chains, and the price of everything to make pet food — ingredients, labor, packaging and transportation — jumped. While pet food prices have leveled out over the past year, consumers are still getting used to the new baseline.

“Inflation is cumulative,” writes John Gibbons on his blog, Pet Business Professor, and predicted the “trading down” will continue.

Those following Post tend to like what they’ve seen so far from the pet food segment.

“Cereal and pet food appear well situated for current consumer behavior shifts as these brands skew toward more mainstream or value positioning,” wrote Barclays analyst Andrew Lazar. “We continue to appreciate the balance of Post’s portfolio across categories, price points and channels.”