Purina Petfood

The Pet Food Industry

The pet food industry has been around for many decades, and has moved through most of the stages of the international product life cycles already. The processes involved in producing pet food have become more and more standardized. There is no need for high-skilled labor or high-technology machinery in the process of manufacturing. As the international product life cycle suggests, the origins of the pet food industry are in advanced countries, mainly the United States of America. Contradictory to the international product life cycle, manufacturing of pet food has been slow to spread to other advanced countries and rather developed strongly in the USA. Manufacturing facilities do exist in European countries and elsewhere, but for a product that has reached maturity long ago the manufacturing network has not expanded as suggested by the international product life cycle. This is especially true with regard to the relocation of manufacturing to low-wage countries, of which few examples can be found, and even these are of very recent nature. Taken this into consideration we see a large potential value for Nestle Purina to expand manufacturing to developing nations. In this report we will lay out the benefits of choosing Vietnam as the location for a manufacturing facility. If you choose to manufacture in Vietnam, you would be the first to move pet food into the third stage of the international product life cycle, taking advantage of lower production costs. Such a move could prove vital in Nestle Purina’s quest to win back recently lost market share.

Target Market

Vietnam is located in Southeast Asia and shares boarders with Cambodia in the south-west, Laos in the west and China in the north. This location would make it a good candidate for the production of pet food for the relatively small Asian market, but your company has already set up a production facility in Tianjin, China to serve this market. For the proposed factory in Vietnam, we suggest focusing on the large pet food markets of Europe and North America. These two markets account for 77% of the pet food industries US$31 billion in sales . This puts their size into perspective, and leads us to believe they would serve as the best target market.

Taking a closer look at the Western European vs. the North American market and the opportunities within these markets quickly shows that the North American market is quite saturated. All the major pet food manufacturers have vast production networks throughout the United States of America. Mars Petcare even claims that 80 percent of the population lives within 250 miles of one of its 30 production facilities throughout the US. Your company’s situation is quite similar with over twenty production facilities in the US, accounting for a vast majority of your production. This is reflected in pet food import and export data for the US as well as the large western European nations.

As you can see in appendix 1 , the United States is ranked as the second biggest exporter of pet food in the world with the total value of exports exceeding US$780 million. In terms of imports on the other hand, the United States are only ranked eighths, with the total value of imports being below US$200 million. This makes the United States a net exporter of pet foods, by a surplus of over US$585 million, which corresponds with our earlier observation of the rather tight-knitted production network that exists in North America. In Europe on the other hand, pet food production facilities are far in between and difficult to locate. While we found