Amazon is Chasing Chewy's Private Label Tail

For pet owners, the advantages of buying pet food (and supplies) online are obvious: value, selection, and convenience. Not surprisingly, the online pet industry has become a big business: over the past twelve months ecommerce sales of dog and cat food and snacks have risen 72% to $3.2 billion.

In online pet food, two retailers are way out in front: upstart Chewy (acquired in 2017 by PetSmart for $3.4 billion) and, of course, Amazon. Chewy and Amazon combined now capture 9 out of every 10 dollars spent on dog and cat food online, with each making up 45% of sales.

Both retailers recently unveiled their own private label pet food brands to leverage their dominance into greater profits. In early 2017, Chewy launched American Journey, a line of premium ‘whole food’ dog and cat foods. Amazon has sold its own pet supplies for years under its AmazonBasics label, this past summer they followed Chewy’s lead by launching Wag dry dog food (a nod to its acquisition of retail pioneer Quidsi a decade ago). These lower priced, premium ingredient private label brands compete on an uneven playing field since they receive free, significant promotion in prime web real-estate and are featured prominently in search results.

In the year and a half since launching, American Journey has generated over $53 million in sales, 2.1% of Chewy’s total sales over that time period. American Journey is clawing its way up the market share rankings across a host of categories, in particular dry dog food, where it was the 13th highest selling brand online in August with 2.6% market share. What’s more, American Journey is now the fifth highest selling brand of dry dog food on Chewy, trailing only Blue Buffalo, Taste of the Wild, Nutro, and Pro Plan.

American Journey’s rapid ecommerce gains have come at the expense of rivals. Most pet owners do not shop online to discover new pet food brands to try out at home. Case in point: 87% of the time consumers purchase pet food online, they consider no alternatives to the brand they purchased (registering zero product page views on competing brands). Pet owners appear focused on finding the brands they already know and trust.

While the rate of brand comparison shopping averages at just 13% across the dry dog food category (meaning shoppers consider rival brands only 13% of the time before making a purchase), comparison shopping among American Journey purchasers is higher than any other pet brand. 30% of American Journey dry dog food sales in August occurred after shoppers compared, but chose not to purchase rival brands. Blue Buffalo, Taste of the Wild, and Nutro are most highly considered by American Journey purchasers and have the most to lose when consumers switch to Chewy’s homegrown brand.

Wag’s launch, now in its fifth month, has thus far not kept pace with American Journey’s early growth. In August, Wag generated $345K in sales, compared to the $940K American Journey achieved at the same point post-launch. Amazon appears to be taking a wait-and-see approach with Wag and currently offers only a small number of dry dog food SKUs. Beyond pet food, however, Amazon has already disrupted the online pet supplies market. AmazonBasics pet supplies are now a $50 million business, with folding metal dog crates and pet training pads accounting for over half of the brand’s pet sales.

As this rivalry intensifies, expect Chewy and Amazon to mimic each other’s success as they battle for higher sales and market penetration. Amazon will certainly expand Wag beyond dry dog food, placing even greater pressure on the market as it begins to erode established brands’ dominance and leverage. Having quickly built American Journey into a leading pet food brand online, Chewy is now working to broaden the brand’s distribution via PetSmart (both online and in-store). Could Chewy next steal a page from Amazon’s playbook by launching its own line of private label pet crates and carriers?

If rival pet food and supply brands aren’t yet paying attention to Chewy and Amazon’s private label inroads and ambitions, they certainly should be.

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