VAIL, Colo. — The pet food and treat industry is growing into a monster market in the US and globally. Processors from four different companies shed light on the operational challenges and opportunities that accompany this market, including food safety, sanitation, operational efficiency and product development.

Steve Berne, publisher of Pet Food Processing, moderated the pet food panel at the Bakery Equipment Manufacturers & Allieds (BEMA) 2019 Convention on Thursday, June 20, featuring four pet food manufacturers and their key operational concerns and confidences:

• Todd Dunlop, director of research and development, Hampshire Pet Products, LLC, Joplin, Missouri
• Luke Koele, VP of manufacturing, Stella & Chewy’s, Oak Creek, Wisconsin
• Rocky Kristek, VP of operations and supply chain, Three Dog Bakery, LLC, Kansas City, Missouri.
• Kurt Stricker, founder and owner, Pedigree Ovens, Inc., Harvard, Illinois

Berne kicked off the panel by providing some industry data and sharing his enthusiasm that BEMA is embracing a very robust and related sector of baked and processed foods, namely pet food and pet treats.

Food safety first

The panelists first discussed food safety concerns, including FSMA, sanitation, and other challenges that accompany the increasingly scrutinized industry, and how they overcome them.

“I believe that the pet industry has been more regulated than the food industry for at least the past 22 years,” Stricker suggested. “The FDA took over pet food seven or eight years ago, yet the states govern what you can call a product, what you can use in the ingredient panel, and how you describe an ingredient panel.”

Dunlop said Hampshire’s co-manufacturing operation must always be aware of potential risks when producing pet foods for its customers. “We have to do digestibility testing on all the formulations that we create,” he said. “We also have to do a lot of supplier verification to make sure that the ingredients we’re getting can pose no harm to the animal.”

Koele said food safety awareness among consumers has resulted in more closely monitored regulations for the pet food industry. His company, Stella & Chewy’s, produces raw-based pet diets and handles more raw meat products than most of the other panelists.

“We do something that’s very common in the meat industry – we will run two shifts and then we clean on the third shift every night,” he said. “Because there is more scrutiny and more testing and there’s been a lot more recalls, we do that for a lot of various reasons to ensure our pet food product is at the safest and highest quality possible.”

When Berne asked how the increase in SKUs has affected the panelists’ production lines, Koele said because Stella & Chewy’s products include a broad range of animal proteins from beef to chicken, duck, lamb, venison or pheasant, the washdown and sanitation at night is critical to have that break between SKUs.

Dunlop mentioned the importance of seamless sanitation. “We need equipment that we can change over very quickly that is cleanable. The pet food industry is trying to get water out of the cleaning, or the sanitation process, because it poses an additional risk from a Salmonella or E. Coli or Listeria standpoint,” he said.

Three Dog Bakery’s boutique dog treat business model allows the company to “control our own destiny”, Kristek explained, and remain in the niche bakery market instead of stretching production over a wide range of product formats.

“We do something that’s very common in the meat industry – we run two shifts and then we clean on the third shift every night,” Koele said.

Because Kristek’s unique operation attracts a specific consumer, its SKU proliferation concerns are more in line with developing clean label products, he said. “We’re certainly looking at all our labels and innovation to get that very clean-looking label that our consumers want and are demanding,” Kristek said.

Line isolation was mentioned as well, which ties in with food safety, SKU proliferation and process efficiencies. Stricker and Dunlop agreed that changeovers are crucial for food safety and product quality, but often come at an operational cost.

“Trying to keep things consistent on each line helps. Changeovers are important but they’re very costly,” Stricker said.

“One of the things that we have to do because of our unique situation is flush a lot of material through,” Dunlop explained. “Sometimes, that can take 8,000 to 10,000 lbs. of material to get our systems flushed.”

What keeps you up at night?

When asked about their biggest concerns and goals for improvement going forward, the four processors agreed that food safety remains top-of-mind.

“Although we have great programs in place, [food safety issues] can destroy a brand in one instance,” Kristek said. “So, food safety is always on my mind… and sometimes it keeps you up at night.” He also mentioned Three Dog Bakery is homed in on improving sales growth, customer service and capacity.

Dunlop answered by saying, “Definitely the food safety side, and premiumization – our customers are always asking to reduce ingredients in the formulation, going from 15 ingredients down to five in some cases.”

"Food safety is always on my mind… and sometimes it keeps you up at night," Kristek said.

Koele also mentioned raw material supply being a challenge for Stella & Chewy’s operation because the company utilizes specific types of animal proteins for its pet foods. “We run into challenges because all our beef needs to be grass-fed beef, all of our chicken needs to be cage-free chicken, so the supply of that creates challenges.”

Stricker commented on labor challenges, specifically on the lack of younger employees interested in becoming the next generation of pet food processors. “We all agree on food safety as being one of the critical points and supplier controls and availability of supplies… but I think one of my biggest concerns is getting young people into the business and training them, and building up some leadership for the future,” he said.

The art of scaling up

For some processors, scaling up means outsourcing production capabilities to grow your brand. For others, it means investing in-house.

Stella & Chewy’s recently installed its own baking production line after producing it through a co-manufacturer for the first nine months. Koele said the addition was another way the company could maintain full control over its product quality and offerings. Bringing the baking line in-house also helped the company schedule more efficiently and increase its margins, Koele said.

“Typically, our model has been, for new products, we’ll start with co-packers, and then as it continues to grow, we will evaluate whether we have the skill set and the abilities to bring it in-house,” Koele explained.

“For us, it’s all about maximizing the amount of revenue per square foot,” Dunlop said.

For Three Dog Bakery’s more niche operation, expanding its facility or building a new facility has been discussed, but Kristek said the company isn’t ready to take the plunge. “Right now, we’re leaning towards utilizing more co-manufacturers who do things that we don’t do well,” he said.

Dunlop said Hampshire Pet Products built its own small batch line in 2010 that can produce 1,000-lb. runs very easily for test runs in a quick-to-market approach. “For us, it’s all about maximizing the amount of revenue per square foot,” he added.

Stricker suggested the ability to scale up is also supported by innovating high margin products, such as pet treats, and experience developing those new products. “R&D and innovation has come back in our lap; we have a lot of brand owners that are asking for help and deciding what new markets you might want to go into, how to change their formulas to be more of a modern product,” he said.

Dear suppliers

Toward the end of the panel discussion, each processor pointed out a few key areas where equipment suppliers might help pet food processors solve some of the operational challenges they are facing.

Dunlop said technology and automation are key to achieving flexibility and efficiency at Hampshire.

Kristek mentioned return on investment is a crucial determining factor in implementing new processes at Three Dog Bakery. “Everything in my world pretty much has to be within a 12 month return on investment,” he said.

“Having a relationship with ingredient suppliers and having relationships with equipment people is very important to keep building lines that are driving innovation and getting more humanized inside the market," Stricker said.

Koele said sanitary design for meat industry equipment was a key area for innovation for Stella & Chewy’s operation.

Stricker highlighted the overall importance of supplier relationships, saying, “Having a relationship with ingredient suppliers and having relationships with equipment people is very important to keep building lines that are driving innovation and getting more humanized inside the market.”

Any questions?

The pet food panel ended with a Q&A session with the audience, where processors briefly discussed the global influence of pet food trends, traceability, allergens and pathogens, the CBD pet treat market and other overarching industry topics.

When asked if growth of the pet food market is limited to the North American region, each panelist acknowledged the proliferation of this industry is on a global scale, even if their company does not choose to operate internationally.

“We just started shipping to Korea in the last three months,” Koele said. “We are going to start shipping our finished goods products to Australia and New Zealand in the next month or two. And then we’re also starting to look at the European market. So, I think the premium market for pet food globally is going to continue internationally.”

Stricker added that the Chinese, Korean and Malaysian markets are contributing to the growth of US-made pet foods. “They want to have the US name for the manufacturer just because they trust our quality and controls,” he explained.

Dunlop said Hampshire Pet Products, as a co-manufacturer, manufactures for companies that currently export to 15 countries.

Kristek, however, does not see global expansion in the business model for Three Dog Bakery. “Our biggest growth will be in the US and in Canada,” he said. “We’re more focused on the US. We stay focused in our boundaries and focus on doing a good job.”

Find more articles related to pet food and treats on the Pet Food Processing landing page.