Pet Food Processors Fight Inflation with Waste Reduction

In August 2022, pet food inflation in the U.S. reached a new high, rising 13.1% year over year (YOY) from 2021. In the next month, pet food prices jumped 14% YOY, according to U.S. government data compiled and analyzed by pet business professor John Gibbons . Pet food inflation then hit 15% YOY in October and rose yet again in November 2022, reaching 15.7% YOY.

Factors that are driving pet food inflation are pandemic-related disruptions in supply chains, an unsteady economy, and Russia’s invasion of Ukraine. Other impactors are labor shortages, constricted supplies of materials and ingredients, and the relentless inflation of prices for packaging materials and ingredients.

Dana Brooks, president and CEO of the Pet Food Institute (PFI), states that “from packaging, through processing and onto the shelf, I can’t really tell you a part [of the pet food process] that isn’t challenged or complicated.”

According to PFI, ingredient costs have risen 8% to 20% in 2022, especially with big price hikes for corn and soybean derivatives, the two main ingredients in many dog and cat food formulations.

“Aluminum and silver aluminum tariffs that were imposed even prior to the pandemic are also creating challenges in sourcing the cans,” Brooks adds.

Impacts to the Consumer

Last year, NielsenIQ surveyed pet owners about their pet food purchasing decisions. Nearly two-thirds of respondents indicated that, even if prices continue to rise, they do not plan or desire to “trade down” to lower-priced foods. Despite this statistic, a recent survey of 1,000 pet owners found that over the past 12 months 50% were forced to buy cheaper types of pet food due to rising costs. These seemingly ever increasing costs are forcing pet owners to make decisions they rather wouldn’t, but with the unrelenting cost escalators, are left with no choice.

Other key findings from the survey are:

• 55% of respondents indicated they had canceled their pet food subscriptions on Chewy.com, Amazon.com, and other websites
• 73% of pet owners believe a food pantry for pets would be helpful to them during the current period of inflation
• Nearly 25% of respondents considered giving their pets away or surrendering them to a shelter due to rising costs in food and other expenses

What Pet Food Manufacturers Can Do

With pet food manufacturers facing a barrage of significant cost increases, especially for raw materials and food ingredients, it is becoming extremely difficult for many of them to stay competitive and earn a profitable margin.

One way to control manufacturing costs is to reduce material waste and make food processing more efficient, ideally passing some of these savings on to the consumer. Technologies that can improve the efficiency in food processing plants include “smart” equipment, artificial intelligence, cloud-based data analytics, predictive maintenance, automation, and robotics. Considering that raw materials represent 60% to 80% of a pet food producer’s operating costs, wasting food ingredients through inefficient manufacturing is particularly damaging to the bottom line. One cost-reduction strategy that is especially effective in recovering “wasted” wet food ingredients from pipelines is a process of liquid product recovery called “pigging.”

“Pigging systems recover residual liquid from process pipelines,” states HPS, a leader in pigging technology. “It is a way for pet food manufacturers to improve the efficiency, productivity, profitability, and the competitiveness of their processing operations. We use a retrieval tool to recover perfectly usable but residual pet food left in pipelines during processing. Pigging systems recover up to 99.5% of residual product from pipelines.”

Eliminating the waste of high-cost ingredients is especially important for wet-food products that have some of the highest inflation rates—for example, 22% YOY for wet dog food and 18.8% for wet cat food (October-November 2022).

The reclaimed food ingredients can then be packaged, used, stored, or sold just like other products. “Therefore, pigging systems are a quick and easy way to increase yields and significantly reduce wastage of expensive, usable pet food,” adds HPS.

In general, pet food inflation tends to follow human food inflation trends. An encouraging sign is that, with U.S. inflation falling from about 9% in the summer of 2022 to 6.5% in December, pet food inflation will hopefully soon follow with pet food prices stabilizing in a more affordable range.