Gwynne

Pet Food 5 forces

 * Bargaining power of buyers- **

Pet owners have an emotional bond with their cat or dog and as such they want the very best for them. Pet owners are willing to spend top dollar for their pets nutrition. Pet owners are demanding healthy food for their dogs and cats. They are also demanding food to be organic. These organic formulas mean a higher margin for the pet food producers. Pet food sales are expected to rise 4.1% from 2010. Science Diet operates in this high margin sector. They have a higher willingness to pay because their product is organic. Bargaining power of buyers for Colgate Palmolive in their pet food sector is low.


 * Bargaining power of suppliers-**

As a result of the pet food division operating in the organic pet food sector, the bargaining power of suppliers are higher. They are dealing with farmers who are also supplying several other markets. The corn industry has also been volatile due to its use in alternative fuel. Labor wages are expected to increase by .9% and are 4.8% of revenue. The pet food industry is also heavily regulated by the federal government. Proctor & Gamble had to a pet food recall and loss 1% of business in 2007 due to regulations.


 * Threats of entrants-**

This industry requires high capital and large investments in Plant, machinery, technology and mechanization's. There is high brand loyalty because of the pet owners emotional attachment to their cats and dogs. The established firms will aggressively defend its market. They can afford to sell their product at a discount. There is a high willingness to pay in the organic pet food market and as such new entrants will eye the market. Threats of entrants is high as a result.


 * Rivalry-**

Rivalry in the industry is high. The pet food distributors are trying to gain that valuable shelf space at the store. Hills only sells to veterinarians and pet food stores. They do not have to deal with the competition at box stores and supermarkets. There are economies of scale in this industry. There are is low cost per unit. This industry is growing.


 * Threat of substitutes-**

Pet owners can not produce their own quality pet food for the canine or feline. They could possibly downgrade to a lower quality food. A type of food that isn't organic and as a result less expensive. Threat of substitutes is medium. The consumer who is buying this type of food is very educated about what type of ingredients are in their pets food. They value their pets health more than the higher cost to pay.

From Hoovers:

In late 2004 Colgate-Palmolive implemented a four-year restructuring plan. Its three primary objectives were to increase profit, reallocate resources to promising growth areas, and leverage global market efficiencies. It implemented the plan by reducing its global workforce by some 12%, closing about 25 of its 78 factories, and focusing on core units. Colgate-Palmolive also built new state-of-the-art plants to produce toothpaste in the US and Poland. The company believed that its savings, estimated at $500 million altogether, would allow it to fund investments in its key businesses, as well as provide for new product development. By selling its North American laundry detergent brands in 2005, Colgate-Palmolive began focusing on the high-margin pearly whites (with bite) of its portfolio -- oral care and pet care. The company's purchase of natural oral-care products maker Tom's of Maine in 2006 marked its effort to target the natural niche. It bought some 84% of the firm for about $100 million. Colgate-Palmolive in early 2010 sold off its Code 10 brand, which boasted about a 10% market share. Indian consumer goods maker Marico acquired the Malaysian hair-styling name; the move was intended to allow Colgate-Palmolive to focus on its oral, personal, and pet care businesses.