Recall ruptures brand propositions – opens doors to new players

We love our furry pals, all 163 million of them. We have so fully anthropomorphized these wet-nosed relationships that the business of pet related products is now larger than the annual US sales of movies, video games and recorded music combined.

The entire industry is expected to gross $52 billion within the next two years. And in 2007, pet food alone will account for $16.1 billion. The amazing growth trajectory is evidence of the love and appreciation we have for our companion animals – opening our wallets ever wider for better nutrition, extraordinary medical treatments, toys, designer clothes – and now from luxe retailer Neiman Marcus, high-end doggy perfumes.

But wait. Last March a massive recall affecting more than 5,800 different products including a wide collection (over 100) of the best-known and respected premium brands such as Hill’s Science Diet and Iams, sends consumers and the industry reeling. Perhaps most revealing of all was the discovery that a Canadian supplier, Menu Foods, was the single source manufacturer of these pet foods for all the various brands involved. A toxic ingredient in wheat gluten from China was the culprit that killed a number of animals and sickened others.

According to one branding expert, Barry Silverstein, in a seminal overview of the crisis implications, “Pet owners were left with a nagging question: What is the value of purchasing a particular brand, if virtually every brand is being manufactured by the same source? The recall revealed a dirty little secret in pet food…a large number of dog and cat food brands, even premium brands, are essentially comprised of the same ingredients (hence the recall’s broad brush impact) and produced by the same source. Such a massive recall not only shakes a consumer’s confidence in a preferred brand, but in every brand in the tainted category.”

And the consumer response??

Run, do not walk, to the local specialty retailer to purchase the boutique natural and organic brands at the very high end of the category. For the most part these brands were not involved in the recall. A seismic shift could be underway in the pet food business as the definition of what constitutes a healthy diet is re-defined. Part of the recall aftermath was a deluge of posts from pet bloggers, web sites and some smaller manufacturers to circulate exact definitions of what the ingredient names on pet food labels really mean.

To say the least every horrible rumor about garbage proteins and not-so-appetizing sources of ingredients from rendering plants and elsewhere was put under the spotlight. The dramatic recasting of nutrition information demonstrated that these natural pet food companies employ ingredients more closely resembling a human quality whole food diet. Also that quality and quantity of the protein sources are what separates the wheat from the chaff so to speak in animal diets. Knowledge, as they say, can be powerful.

The outcome?

In our estimation this event signals another example, rightly or wrongly, of trust busting conditions that weaken fragile brand propositions. Whether you accept assertions that food formulations are proprietary, in the end the Menu Foods debacle showcased something no one expected – that all of these brands didn’t make their own food and that one organization in fact produced them all. Ouch. The trailing communication about pet food ingredient definitions may have deepened the damage by showing what was once thought to be premium food may be less so by virtue of the lower quality protein sources as well as emphasis on cheaper carbohydrate ingredients – certainly when compared with the more expensive natural brands.

Consumers are showing no fear of paying the higher organic brand prices – we surmise because they see the added value and believe their pet is worth it. We interviewed veterinarians, pet food nutrition experts, specialty retailers, even pet bloggers to get a fix on the landscape – what did we find? General agreement that a higher quality protein diet and more whole food ingredients, even new raw frozen diets, indeed may impact the overall health, disposition and well-being of pets. Outside expert authentication that further strengthens the emotional pay-off consumers might secure from trading up.

Is a paradigm shift in the making?

According to Packaged Facts, a significant chunk of the category may be up for grabs. “Billions in pet food retail sales may be in play as consumers consider switching brands…recent surveys show the number of pet owners who say they are open to switching ranges from 8% to 27%.” That translates to anywhere from $1.3 to $4.3 billion of category revenue.

This is dramatic demonstration yet again of what happens when trust and reputation take a hit. Brands in virtually every category would be well-advised to conduct a “risk assessment” of potential leaks in the reputation boat and to determine areas of vulnerability based on competitive conditions, supply chain issues, R&D or other external sources of potential trouble. Your brand proposition may be your greatest asset. Once fractured, it isn’t easy to mend.

On the upside while one door closes a bit, another opens. For organic and natural brands the time to step up and seriously begin cultivating brand equity and start a conversation directly with consumers is now. Our own firm is on the hunt for a relationship because we see the marketing opportunity that arises in a dynamic environment like this. Inside the glass house that is today’s marketing world truth, credibility and authenticity in everything that is said and done will either build or detract from the over-arching need to create and protect the trust between brand and consumer.