More Fur Babies Means Pet Food Is Booming for Century-Old Trader

(Bloomberg) -- A 128-year-old U.S. grains trader is turning to pet food to profit from the $95 billion market, opening a new factory in the Midwest just as dog and cat adoptions skyrocket during the pandemic.

Scoular Co., better known for supplying everything from corn to sorghum, will open its first freeze-dried pet-food ingredient factory in Nebraska next month, said Amy Patterson, general manager for the firm’s Petsource unit. That will be one of the first sites in the U.S. dedicated solely to the pet-food industry.

Petsource is looking to capitalize as animal lovers across America increasingly project their personal tastes onto their cats and dogs, generating a boom for the pet-food industry that now offers everything from regular kibble to grain-freed food to freeze-dried proteins. The opening also comes at a time when Americans staying at home due to the pandemic have emptied animal shelters from New York to Chicago.

“We now see new pet owners enter the market, with increased adoptions, or folks delaying their families and bringing pets to the home before kids,” Patterson said in a video interview, citing people’s desire to treat their pets like a family member. “We tend to buy more toys, feed them ingredients that we would feel comfortable feeding ourselves.”

Freeze-dried products were originally used in military ready-to-eat meals, space travel and camping food as the process removes moisture, allowing it longer shelf life with less of an impact on taste than normal dehydration. In recent years, it’s been used more and more for snacks like freeze-dried yogurt bites, with the trend spilling over into pet food.

Not Alone

Scoular is not alone in tapping the market for pet food. Archer-Daniels-Midland Co., one of the largest agricultural commodity traders, has also invested in the lucrative business after margins for crop trading were squeezed in recent years and a lack of volatility curbed profits.

Global sales of dog and cat food are estimated at $94.6 billion this year, and forecast to grow to $98.4 billion next year, according to data from consumer researcher Euromonitor International Ltd. A quick scan through a pet store or online retailers reveals a bag of freeze-dried pet treats can easily cost $20 or $30.

The supply chain for freeze-dried pet-food ingredients is complex, with customers in many cases having to go through several steps in different facilities to get a finished product. The new Scoular factory will be a one-stop shop, developing, procuring, freeze-drying and even packaging for its clients in retail-sized bags, said Jon Heussner, operations director for Petsource.

Scoular’s 105,000-square-foot facility in Seward will employ 50 people by the time it opens, and as it grows that number will expand to 100, Patterson said. The company’s focus on protein is likely to benefit from both a trend toward grain-free food as well as the demand for more natural fare that’s led many brands to market products as containing meats that animals would normally eat in the wild.

“Just like in the human-food industry -- trends for more healthy and nutritious and cleaner labels -- the pet food industry is going along the same lines,” Heussner said. “You watch TV and you see in the commercials, it’s all pure proteins, not a lot of artificial ingredients, and it’s kind of the same thing.”

©2020 Bloomberg L.P.