TAM:
Our goal for FurFuel is to pursue global expansion with our existing product line of food. Since we are entering into an existing market with a niche segmentation as healthy, sustainably/ethically-sourced food for pets, we seek to address only markets where the population spends high amounts on their pets. We define the ‘global market’ as only countries with the highest-pet-spending amounts, namely United States, Britain, France, Switzerland, Germany, Italy, Japan, Spain, South Korea, Singapore, South Africa, China, India. We define only these countries as what we call the ‘global market.’ In total, these countries’ annual spending on pet food, our primary product offering, totals $120.87 billion in 2023 with an expected increase to $193.65 billion by 2032. Thus, our TAM is upwards of $121 billion. In support of our assessment and viability of this market, the market is growing: in China, pet ownership has grown by 113% in the last decade, and in the US, the total pet food/snack expenditure is expected to grow from $40 billion in 2022 to more than $50 billion by the end of 2024. We believe we can reach this market due to existing low penetration rates and fragmentation of the market: in Europe, the pet market exhibits an 8% rate of penetration; in China, the penetration rate of pet food products is less than 20%; in the US, 30+% of the pet-food market remains fragmented by private or small labels and another 21% segmented by minor brands. (WC: 248)
SOM: Our serviceable obtainable market (SOM) is constrained by 3 variables: (i) quality (premium) (ii) types of pet food (dog and cat) and (iii) geography (the US market). To calculate this market, we will use the following formula: SOM = Annual food spending per household with dogs and cats x U.S. households who own these pets x percentage of U.S. households that buy premium pet food x our short term market share.
The average annual food spending per household with dogs and cats is $321. Additionally, 66% of U.S. households (86.9 million homes) own a pet. Premium pet food in the U.S. accounts for at least 5% of the national pet food market, which translates to a total premium dog and cat pet food market of at least to $1.4 billion. Considering that we will generate $65 million in revenue in 2024 and have a nationwide footprint with various marketing channels yet to be fully leveraged, we believe we can achieve a 25% market share in the next 2 to 3 years. This is supported by the fact that much of the market is dominated by few key competitors. These are Mars Incorporated, Nestle S.A., The J.M. Smucker Company, Colgate-Palmolive Company, and General Mills, Inc, who own around 60% of the global market.10 Given this, the market has space for different companies to grow and makes 25% market share achievable. Overall, this would imply a SOM of $350 million.
SAM:
For our intermediate expansion plan, we have chosen to take our existing product line that services North America and expand it into the foreign market of China. This decision is following our market research of the pet food industry in China, which has been expected to grow at an annual growth rate of 20%, representing a huge potential customer base with increasing demand. Even more importantly, it was found that the market penetration rate for the pet food industry is below 20%, meaning that we have a chance to dominate this underserved market, in contrast to the oversaturation of luxury pet care brands that currently hold stakes in the United States with 90% market penetration. Our market-entry plan is as follows:
- Conduct market research to determine our marketing strategy
- Attain all required certificates and government regulations
- Create partnerships and distribution factories within the country to deliver great initial product
Sources:
- https://www.economist.com/graphic-detail/2020/02/11/which-country-spends-the-most-on-its-pets
- https://www.fortunebusinessinsights.com/industry-reports/pet-food-market-100554
- https://healthforanimals.org/reports/pet-care-report/global-trends-in-the-pet-population/#:~:text=Why%20is%20pet%20ownership%20on,the%20height%20of%20the%20pandemic.
- https://www.bloomberg.com/company/press/global-pet-industry-to-grow-to-500-billion-by-2030-bloomberg-intelligence-finds/
- https://china.acclime.com/news-insights/pet-food-industry/#:~:text=In%20the%20past%20few%20years,China%20is%20less%20than%2020%25.
- https://www.petfoodindustry.com/pet-food-market/article/15469584/5-pet-foods-brands-lead-us-market-share-purina-tops
- https://www.forbes.com/advisor/pet-insurance/pet-ownership-statistics/
- https://www.forbes.com/advisor/pet-insurance/pet-ownership-statistics/
- https://angle.ankura.com/post/102j84u/premium-pet-food-industry-snapshot#:~:text=Premium%20pet%20food%20grew%20to,reach%20%243.2B%20in%202030.
- 10 https://www.fortunebusinessinsights.com/industry-reports/pet-food-market-100554#
