Page 3: Taking a strategic direction
In 1996 Dalgety put into effect a major strategic decision by focusing a key part of its activities on European petfoods. An important move in this direction was for the company to divest itself of its Golden Wonder and Homepride food businesses in order to acquire Quaker European Petfoods. In addition a rights issue was created to enable shareholders to put more capital into the business, which would as a result have the potential to yield much higher profit levels.
Spillers and Quaker have much to offer each other. Spillers was a major player in the UK but lacked a good continental presence, whilst Quaker had a well developed European operation. This provided the opportunity to convert two medium-sized businesses into one good strong company, capable of playing a leading role in an industry which had considerable growth potential.
The potential of the market
By creating a truly European branded business, Spillers is able to take advantage of a market which is currently growing at 2.5-3% per annum. In many of these European markets, there are clear demographic and lifestyle changes feeding the growth in petfoods. In order to meet this growth, Spillers is embarking on new product development programmes, and is well placed to capitalise on the growth potential of the European petfood markets.
Spiller’s flagship brand “Felix” gives us an insight into how it is possible to maximise the benefits of European branding. The current Felix concept was conceived in 1989 in the UK, by creating a mischievous cat with whom pet owners would readily identify. The range was extended to seven varieties with an emphasis on high quality cat food. Felix was used in national newspaper advertising for three years before appearing on the television in the early 1990s.
Five years later Felix has surpassed any of the original predictions made. The brand is repeatedly found in the UK’s list of top ten fastest growing brands, and its value. Its original range of “Chunks in Jelly” has been extended to include an even greater number of varieties, and has been joined by “Special Cuts Chunks in Gravy” in a variety of sizes, dry cat food Felix Mix and a number of premium products including a junior product for kittens.
Since 1988 Felix has achieved an increase in UK market share from 6% to over 25%. This performance is doubly impressive considering most other brands remained static or lost market share. There is strong potential for this performance to be repeated in other European markets. Felix has now come to play an increasingly important part in European Union markets, so that in 1996 it had around 14% of the market. The growth in market share in seven selected European Union countries is shown in the chart below.
Felix, as a concept, has Europe-wide relevance to cat owners and thus provides the focus for Spillers’ European branding. However, Spillers has also been intelligent enough to create a marketing and production package tailored to the “differences” which exist depending on local conditions, traditions, cultures and preferences. The key to this has been to trust in the understanding that exists in local management structures. By learning from the experiences of other countries and combining that knowledge with localised insight into the pet food market, Felix will replicate its success throughout the Continent.