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Wishbone Pet Products

Market Analysis Summary

The primary market for Wishbone Pet Products is dog owners. A study sponsored by the Pet Food Institute (PFI) confirmed that the number of pet dogs and cats in the U.S. has reached an all-time high. In 2000, there were 59 million pet dogs. The percentage of households owning dogs remained constant at approximately 37%. PFI began tracking the population of pet dogs and cats in the U.S. in 1981. Since that time, the number of pet dogs has grown by more than 5 million. Spending on pet products is also increasing, from $5.2 billion in 2000 to a projected $6.9 billion in 2005, according to the Business Communications Company Pet Industry study.

4.1 Market Segmentation

The pet product market is most easily segmented by age, as spending on pet products varies significantly with age. Older householders are the biggest spenders on pets. Married couples without children at home, most of them empty nesters, spend 30 percent more than the average household on pets. The best customers of the pet industry (the households that spend the most on pet products and services) are married couples with adult children at home. These “crowded” nesters spend 45 percent more than the average household on pets. Those aged 55 to 64 spend 26 percent more than average. Spending on pets is below average among householders aged 65 or older and also among those under age 35. Married couples with preschoolers spend less than the average household on pets, as do single parents and people who live alone. The following tables provide a demographic profile of dog owners and growth projections for this market.

Demographic Profile of Dog Owners:

Gender %   Marital Status %   Region %
Male 34   Married 62   Northeast 15
Female 66   Unmarried couple 3   Midwest 26
  Single, never married 17   South 37
Age %   Divorced/separated 9   West 23
18 – 24 9   Widowed 6
25 – 29 8   Refused 3   Education %
30 – 34 11   8th grade or less 2
35 – 39 12   Children Under %   Some high school 5
40 – 49 26   18 in Household   High school graduate 33
50 – 64 20   Yes 39   Some college 27
65 or older 13   No 60   College graduate 23
Refused 1   Refused 1   Graduate study 8
  Refused 2
Race %   Total Family Income %
White 85   Less than $20,000 10   Use the Internet %
Black 6   $20,000 – $34,999 14   Yes 55
Asian 1   $35,000 – $49,999 21   No 43
Hispanic 5   $50,000 – $74,999 19   Refused 2
Other 1   $75,000 – $99,999 8
Refused 2   $100,000 + 7   Internet Usage %
  Refused 21   Once a day or more 62
Hispanic Origin %   Mean (000’s_ 53.4   At least once per week 28
Yes 7   Median (000’s) 46.6   At least once per month 7
No 91   Less than once per month 3
Refused 2   Varies too much to say 0
  Don’t know/Refused 0
Market Analysis
Year 1 Year 2 Year 3 Year 4 Year 5
Potential Customers Growth CAGR
Age 34 and under 0% 6,581,339 6,583,569 6,585,066 6,637,228 6,726,652 0.55%
Age 35 – 44 0% 6,853,963 6,768,024 6,684,963 6,561,209 6,419,631 -1.62%
Age 45 – 54 0% 7,026,073 7,177,077 7,318,521 7,432,621 7,518,721 1.71%
Age 55 – 64 0% 4,992,798 5,199,186 5,406,877 5,616,124 5,776,934 3.71%
Age 65 and older 0% 6,847,697 6,917,743 6,999,165 7,101,496 7,266,916 1.50%
Total 1.07% 32,301,870 32,645,598 32,994,591 33,348,678 33,708,854 1.07%

4.2 Target Market Segment Strategy

While Fetch™ is affordable and useful for all dog owners, our focus will be on middle-aged female baby boomers. This group represents the largest and most affluent segment of the pet product market in general and of dog owners in particular. This focus will primarily manifest itself in the type of marketing and advertising techniques we employ.

Market Trends
The market for pet products has been growing rapidly with demographics driving the demand for pet supplies. Aging baby boomers are filling their empty nests with pets, while the number of households with children from 5 to 15, the core pet market, keeps climbing. A large category of current pet owners can be considered “pet enthusiasts,” as characterized by the leading wholesaler PetSmart. PetSmart CEO Philip Francis calls pets “an affordable luxury,” sales of which have not been dented by weakening consumer confidence. These consumers are “passionately committed to their pets” and regard their pet like “a family member.” The strong commitment of these owners for their pets is shown by some of the 1998 statistics provided by the American Pet Association. These statistics show how millions of owners treat their pets much like their own children or other family members by buying them gifts, celebrating their birthdays or displaying their pictures. This commitment is especially strong for dog owners. More than half of all U.S. dog owners say they are more attached to their pets than to at least one other human being, and from 4-13 million say they are as attached to their dogs as they are to their best friend (13 million), children (6 million), or spouse (4 million).

Market Needs
Dog owners consider cleaning up after their dog a major challenge. Unfortunately, currently available products offer dog owners little help as they are generally cumbersome to carry, crudely designed and manufactured, difficult to operate, and difficult to keep clean. Dog owners will welcome a product that can effectively address these problems.

Market Growth
Demographic trends are positive for the pet industry. With many older couples turning to pets for companionship, and with the older population expanding with baby boomers, spending on pets is likely to rise. According to the U.S. Census, in 2000, baby boomers accounted for 35% of the dog owning population. By 2008 they will account for 40% of the dog owning population.

4.3 Industry Analysis

According to the APPMA, the market for pet products and services was $23 billion in 1998, $27 billion in 2000, and $29 billion in 2001. By 2005, the industry is expected to grow even more to $33.5 billion, according to a study by Business Communications Company on The Pet Industry. Significantly, the most rapidly growing market segment is pet supplies, which represents 5.5% of the market. These supplies include dog and cat toys, collars and leashes, pet waste clean-up products, cages and habitats, and books. The pet product market, while massive, is highly fragmented at both the retail and wholesale level. This fragmentation provides an opportunity for new companies and products to compete and thrive.

Industry Participants
While the superstores and discount stores account for over 50% of U.S. pet supply sales volume, many other retailers sell pet supplies. Among these other retailers are supermarkets, discount stores, other mass merchandisers, specialty pet stores, direct mail houses, Internet retailers, and veterinarians. In addition to being fragmented, pet product retailers cater to different demographics. Nationwide outlets such as Three Dog Bakery tend to carry “high end” products while supermarket-style stores like Pet Supplies Plus tend to carry lower price products. This differentiation makes it difficult for a single manufacturer to dominate the market and leaves niche markets open.

Distribution Patterns
The pet product supply chain is as fragmented as the retail market. There are hundreds of pet product distributors with both regional and national coverage. While many pet stores buy primarily from these distributors, others buy directly from manufacturers. In addition, catalog sales and Internet sales comprise a significant portion of the market.

Buying Patterns
Due to the healthy expanding economy of the 1990s, American pet owners have been able to “lavish unprecedented spending on their pets.” Since these owners often consider companion animals such as dogs and cats as members of their family, companies have capitalized on this emotional bond. For instance, Funda Alp, a spokesperson for the American Pet Products Association stated that “love does translate into dollars.” A study by Sloan Trends & Solutions in 1998 found that the average household with pets spent about $350 on their pets in 1998. These expenditures are expected to grow at an average rate of 4.4%/year during the next five year period.