As buyers and sellers navigate the fast-growing European pet food industry, Lincoln’s experts offer several considerations to note.

Although platforms are being established, the subsector remains highly fragmented with a large number of early-stage companies ripe for consolidation. As buyers and sellers navigate the fast-growing industry, there are several considerations to note:

• D2C sales channels set brands apart: Across Europe, digital sales in the pet food market comprise roughly 15% of sales. In the minimally processed, raw or gently cooked category, online share of sales is typically much higher. As investors evaluate opportunities, a strong direct-to-consumer pattern with a sticky customer base can materially enhance the success of a brand.
• Co-manufacturing strategy is less relevant: A number of more mainstream brands rely on co-manufacturers, outsourcing their manufacturing process to a partner and avoiding owning their own factories. This approach allows brands to scale quickly and without raising additional capital needed to self-manufacture. However, minimally processed pet foods are more complex and require an extra level of care in the manufacturing process. There is an element of risk involved in manufacturing from live bacteria in chilled food (previously gently cooked) and raw food. Brands must employ specialists that understand high-care manufacturing and ensure health risks are mitigated.
• Local nature of minimally processed brands adds advantage: While mainstream pet food brands have fallen victim to supply chain shortages and delays in recent months, minimally processed food brands are generally domestically focused businesses. Self-manufactured strategies and the ability to source ingredients locally, guarantees safe and clean processes and delivery to the customer in a timely fashion, which is a major advantage.
• Customer loyalty remains key: Investors are tracking targets that deliver rapid growth, and this is often fuelled by a sticky customer base. Many investors will look to conduct cohort analyses to measure the loyalty to a brand among consumers as well as the longevity of a cohort’s allegiance to a brand. Brands with these long-standing customer relationships and recurring revenue streams attract investor capital.