Free Essay: Animal Food Manufacturing Industry Analysis

In this regard, there is ShibaChows Group that has expressed the urge and desire to enter the animal food manufacturing industry. The company, specifically, will be manufacturing animal food for pets. Doiley's consultation has been hired by the company to conduct some research in the food industry as a whole, alongside the possible geographical areas in which it will expand. Following the expert analysis and advice, the organization will enter the market using Doiley's consultation: which has an entity established under ShibaChows Group.

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It can be established that the animal food manufacturing industry "deals with making food for livestock, pets included." (IBIS, 2019). It is in the niche of pet food manufacturing that ShibaChows Group would like to expand in. The manufacturing process of pet food makes use of remnants from human food processing, including wheat, sugar, cone, and sunflowers. Pet foods are sold majorly to upper and middle-class families in the country (Koppel et al. 2014). For the past nine years, there has been a rise in pet food production in the industry, with more companies joining in at an average rate of 6% per annum, and the employees increase at an average rate of 16% per annum.

The pet food market in the United States of America was recorded to be worth about $24.6 billion in the year 2016. The industry was projected to grow by about &5 billion by 20222, reaching a market value of approximately $30 billion. The industry is growing courtesy to the fact that almost every household owns a pet in the country, concerning pet food brands, they are currently at 67 in number similar to the number of manufacturers in the sector (IBIS, 2019). The growth goes parallel to the expected compound annual growth rate of 3.36% (Koppel et al. 2015). Therefore, it is evident that the industry is mammoth, favoring the entry of ShibaChows Group to form part of the expected growth in the sector. New entrants like ShibaChows Group will likely have the opportunity to introduce new brands or differentiate the existing ones and register ballooning performances, revenues, and growth.

The industry managed to experience a drastic fall in revenue, growth, and profit margins in the recent past following the economic lockdown as a result of the looming threat of coronavirus. The reduction occurred due to a sudden fall in demand for pet foods from wholesalers, retailers, and mainstream farmers, which has led to a drastic fall in pet animal food prices. The effects of the economic lockdown in the recent two months have seen the loss of about $800 million in revenues (Butcher & Svensson, 2016). The looming Covid 19 threat has, thus, seen a lowering in the production of pet food by a margin of 35% in the last two months. Such can also be attributed to the scarcity of raw materials used in food manufacturing as a result of the economic lockdown.

Similarly, the industry's revenue has experienced a drastic decline since January. Industry's revenue has reduced by 32% in a region of the past 32 and a half months. Some of the sources of the industry revenues that have seen its reduction due to the looming economic lockdown affecting the world are the income earned from the sale of pet food into the consumers within the country, totaling to approximately $26 billion annually and the revenue earned from the export of pet foods to other countries amounting to $16 billion annually. However, the outlook in the next five years, following the end of economic lockdown, forecasts a possibility of the growth in industrial revenues. IBIS (2019) states that the industry is expected to grow an annualized 3.7%, which is approximately $3 billion (Aldrich & Koppel, 2015). Industrial growth is expected as a result of an improved economic condition in the country, which will expand the middle class in American society and region. Therefore, more homesteads will be able to afford pet food alongside their daily needs. Consequently, the demand for meat will increase the demand for animal foods, thus increasing the revenue of the industry.

In the recent past, stretching to as far as eight years, most of the companies in the industry have registered steady growth in the pet food manufacturing sector amidst the fluctuating growth behavior of some other firms within the industry. They are majorly the new entrants (Egilmez et al., 2014). It is a result of a combination of various factors: One, the new entrants have technologically advanced machines that can manufacture pet foods as soon as the client places their orders. Besides, there has been a reduction in the overall storage and inventory management costs due to immediate sales registered in the company (Silbergeld, Graham & Price, 2008). New entrants' model of advertisement also targets modern farmers, thus using cost-effective marketing such as social media where many people can be reached at minimal effort and resources used. Finally, most of the new entrants are packaging the foods upon the customers' request. Therefore, this means that the customers can collect the food using their recycled bags or using other means such as an open truck. Such is evident that pet food manufacturing is price sensitive and responds positively to dynamic business models (Kazemzadeh, 1996).

References

Aldrich, G. C., & Koppel, K. (2015). Pet food palatability evaluation: a review of standard assay techniques and interpretation of results with a primary focus on limitations. Animals, 5(1), 43-55. https://www.mdpi.com/2076-2615/5/1/43

Butcher, C., & Svensson, I. (2016). Manufacturing dissent: Modernization and the onset of major nonviolent resistance campaigns. Journal of Conflict Resolution, 60(2), 311-339.

Egilmez, G., Kucukvar, M., Tatari, O., & Bhutta, M. K. S. (2014). Supply chain sustainability assessment of the US food manufacturing sectors: A lifecycle-based frontier approach. Resources, Conservation and Recycling, 82, 8-20.

IBIS World, (2019). Farm Animal Food Production Industry in the US - Market Research Report. Retrieved from: https://www.ibisworld.com/united-states/market-research-reports/farm-animal-food-production-industry/

Kazemzadeh, M. (1996). US Patent No. 5,587,193. Washington, DC: US Patent and Trademark Office.

Koppel, K., Gibson, M., Alavi, S., & Aldrich, G. (2014). The effects of the cooking process and meat inclusion on pet food flavor and texture characteristics. Animals, 4(2), 254-271. https://www.mdpi.com/2076-2615/4/2/254

Koppel, K., Monti, M., Gibson, M., Alavi, S., Donfrancesco, B. D., & Carciofi, A. C. (2015). The effects of fiber inclusion on pet food sensory characteristics and palatability. Animals, 5(1), 110-125. https://www.mdpi.com/2076-2615/5/1/110

Silbergeld, E. K., Graham, J., & Price, L. B. (2008). Industrial food animal production, antimicrobial resistance, and human health. Annu. Rev. Public Health, 29, 151-169.