Our Total Addressable Market is all pet owning households in the US, and 87 million homes in the US have pets. This would be our TAM given that it is the broadest demographic of people who would be interested in our line of products: pet food. The pet food market in terms of revenue is $58.1 billion. Average price of a single unit is approximately $40, so approximately 1.4 billion units are sold.
The people who would need or can use the product are people specifically looking for a higher standard of nutrition, health, and sustainability for their pets, especially owners who are in the following categories:
- Pet Owners Who Value Quality,
- Health-Conscious Pet Owners,
- Eco-Friendly Consumers,
- Informed and Engaged Pet Owners,
- Pet Owners Seeking Personalized Nutrition
Given this is a higher-end product, we have narrowed down the Served Available Market (SAM) to pet owners in households that earn a higher income than the average pet owner.
According to a Forbes article, 63% of pet owners said inflation and current market prices are making it more difficult to pay for vet bills. If we assume most pet-owning households are thinking similarly on costs for pet food, this leaves 37% of pet owning households willing to spend more on higher-quality pet food. This means, for the 87 million homes, approximately 32.2 million households could be interested in our product. If the average pet owning household spends $442 a year on pet food, and the cat owner spends $329, so taking a weighted average of those favoring dog ownership, we get approximately $397 per pet owning household. This would also mean that the market would be $12.8 billion if they all bought the product. And using the average price of pet food we used for the TAM of $40, this is about 320 million units sold.
For our SOM, we have considered factors like brand awareness, marketing, product pricing, and competition. So our SOM would be taking into account that the largest pet food companies have market shares of 8% – 29%. Also considering similarly branded, smaller pet food companies such as The Honest Kitchen and The Farmer’s Dog, which have market shares of 0.9% and 0.3% respectively, we can assume a pet food company with more higher-end and sustainable products like ours would be able to reach a 0.5% market share. 0.5% of our SAM is 161,000 households, and an estimated annual revenue of $63.52 million at a company peak. This would mean that approximately 1.6 million units are sold annually.
Sources:
https://www.forbes.com/advisor/pet-insurance/pet-ownership-statistics/
https://www.petfoodindustry.com/pet-food-market/article/15469584/5-pet-foods-brands-lead-us-market-share-purina-tops
https://www.statista.com/statistics/250851/basic-annual-expenses-for-dog-and-cat-owners-in-the-us/#:~:text=Spending%20on%20pets%20per%20year%20in%20the%20U.S.%202020%2C%20by%20species&text=Surveyed%20dog%20owners%20in%20the,food%20on%20an%20annual%20basis.
