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Pet Food Delivery’s Business Plan

Introduction

This business plan will provide details on launching the Pet Food Delivery business through dial orders or online, which is an extremely promising area in the United States today. Several global players admit that the consumption of their products continues to grow, which indicates a high demand for pet food. Our company will deal with distribution, not production, and the uniqueness of our offer for the buyer is that we provide services for fast and client-friendly targeted delivery of feed and other related products for animals. Given the high demand for these products, Pet Food Delivery will have a vast network of sales and delivery points. The investor will be the bank, which gave a favorable assessment of the development of the Pet Food Delivery business. In the context of the COVID-19 pandemic, increased demand for targeted products is expected as providing delivery services protects their customers from the threats of the virus and helps them observe the rules of social distancing or social isolation.

Industry and Market Analysis

Industry and market analysis usually includes evaluating the market size, market trends, market growth rate, opportunities, and profitability. SWOT factors and competitors’ impact analysis are also typically considered. Noteworthy, there has been significant growth in the pet food and other products market in recent years. In 2020, the volume of the pet food market was $ 30 billion (US pet food market 2021). According to experts’ forecasts, the expected market growth will be 5.2% in the next five years (US pet food market 2021). The latest report from IMARC shows a growing number of pet owners in the United States who care for their health and well-being and see them as family members (US pet food market 2021).

It is also essential to understand that the market has expanded rapidly over the past ten years. In 2020, owners spent $ 66.75 billion on pets, of which $ 31 billion was on food (Naish 2017). Corresponding data for 1996 are $ 21 billion and $ 7 billion, and for 2006 $ 38.5 billion and $ 12.8 billion; therefore, from 1996 to 2017, feed costs grew at a rate of $ billion per year (Naish 2017). In other words, given the growing pace of production, targeted delivery of pet foods is a promising direction for the business in the United States.

Distribution channels have diversified significantly over the past 20 years. Online purchases of pet food and other pet supplies continue to grow. From 2011 to 2015, the online market grew from $ 1.18 billion to $ 1.86 billion, up 58% (Hobbs 2019). Given the statistics on the overall market growth, it could have a stable trend over the following five years and reach $ 2.54 billion by 2021. Therefore, online sales and targeted feed delivery should meet significant demand among pet owners.

Social media and blogs are powerful marketing and feed advertising tools. According to experts, “the growth of social media penetration will drive the growth of the pet food market” shortly (Pet food market share, size, segmentation 2020). Blogs include pet grooming web pages with information on how to care for a pet, what to feed, and how often. Blogs and social media groups can also be sources of information on selecting the most suitable feed available on the market, including product quality, prices, composition, and types. These web-hubs can be an ideal way to communicate the value proposition that Pet Food Delivery offers, which does not require a significant investment. According to 2017-2018 statistics provided by the American Pet Products Association (APPA) National Pet Owner Survey, 50% of dog owners and 48% of cat owners have bought food and treats for their pets online (Pet food market share, size, segmentation 2020). Therefore, online shopping is becoming more and more popular among consumers, which explains the need for new offers in the online market.

Competitive analysis is a part of traditional industry and market analysis. It usually implies assessing the competition in the industry, including the potential of new entrants into the industry, power of suppliers, power of customers, and the threat of substitute products. There are also more traditional approaches focusing on the industry in general. The five biggest pet food producers in the US are Mars PetCare Inc., Nestlé Purina PetCare, Big Heart Pet Brands, Hill’s Pet Nutrition, and Diamond Pet Foods. These and other smaller companies are potential suppliers of products for our business, Pet Food Delivery, and these suppliers can have substantial bargaining power. However, given that PFD will have its laboratory to check the product quality, it can leverage the potential related risks. The power of customers is also rather serious, and to meet all the challenges, PFD will make a comprehensive customer analysis to meet their precise demands.

There is a reasonably high risk of new entrants in the industry, which will be met through a well-thought-out and targeted online marketing campaign. Noteworthy, many manufacturers such as Farmer’s, Bark Chef, and Just Right by Purina are building their online selling platforms as this allows them to conquer new markets without significant additional investment. Large retailers are also not missing out on the opportunities offered by online trading: Companies such as Chewy, Lowe’s, Home Depot, Harris Teeter, Petco, and PetSmart provide online services and targeted delivery as it helps drive sales; Amazon owns Wag.com, which offers similar benefits. According to experts, 7% of all pet food sales in the US in 2016 were online sales, and in the markets of Korea and China – 33% of all sales (Pet food market share, size, segmentation 2020). The advantage of online sales is convenience and customization, which is especially popular with millennials. For a merchant, profits from social media subscriptions can be an additional source of income.

The segmentation of the pet food market is divided into sales of goods and services by actors, including food for dogs, cats, and other animals such as birds, mammals, and aquatic animals, from a variety of ingredients including grains, oilseeds, and meat products. The market is categorized by type for dog food, including dry food, wet or canned food, snacks and treats; cat food, including dry food, wet or canned food, snacks and treats; food for other animals. Channel segmentation includes hypermarkets, specialized pet stores, and online stores. The market is also divided according to the source of the ingredients into animal feed, plant derivatives, and synthetic products (Pet food market share, size, segmentation 2020). In general, there is an increasing humanization of pets and a choice in favor of organic and natural products (US pet food market 2021). The dominant segment by type is dog food, followed by cat food, bird food, fish food, and small mammals and reptiles.

Customer Analysis and Value Proposition

Customer analysis is an essential component of a business plan as it defines the target customers, their needs, and how the supplied product meets the unique demands. Customer analysis includes an assessment of a behavioral profile and a demographic profile. In other words, the analysis provides for the evaluation of how the product fits with the buyer’s lifestyle and the demographic characteristics of the target customers. The behavioral analysis considers issues such as decision steps, information sources used, purchase schedule (impulsive or thoughtful), the reason for purchase, reason for purchase, frequency of purchases, quantity of the purchased items, the purpose of the purchased items, and time frame for making a decision.

Tsai (2019) conducted a study to determine how owners and their pets respond to different foods in terms of emotions and preferences. According to the results, the dogs predominantly preferred raw and cooked meat, with a taste for beef over chicken and pork. Other characteristics that particularly influenced dogs’ liking were meatiness, doneness, and aroma of cooked meat. The emotional reaction of the dogs and the owners was consistent since when receiving the treat, the dogs were excited, happy, and impatient, and the owners felt contentment, satisfaction, and happiness while observing the pets. The results of this research can be applied when writing promotional articles, when promoting a product on social networks, and when choosing products from suppliers.

Schleicher (2019) conducted a study to identify factors influencing the decision to purchase pet food. According to the results, the most important were the pet’s health, product quality, ingredients, and freshness. At the same time, 43.6% of buyers preferred to receive information about the product from the veterinary team; 24.6% of participants viewed Internet sources as a way to obtain information (Schleicher 2019). Remarkably, more than half of the respondents give equal or higher priority to buying healthy pet food over themselves. This study demonstrates the overriding importance of product quality and the marketing potential of internet sources in promoting a product to market.

Hobbs (2019) found unique characteristics in feed consumer preferences. These are indicators such as “natural, organic and many other attributes of premium products” associated with the “growing trend to humanize pets” (Hobbs 2019, p. 1). In this regard, companies began to consider this aspect of demand and connected differentiation according to color, texture, smell, and appearance of products. Equally important are the brand, designation of origin, and the image on the packaging (Hobbs 2019). The results of this study can be applied to form the assortment of an online Pet Food Delivery store based on the massive number of product options offered by suppliers.

Since potential buyers are knowledgeable and caring pet owners, PFD will pay particular attention to product quality and select suppliers based on this criterion. Moreover, an independent laboratory will be located in the central office, which will check the feed we sell for the presence of potentially hazardous and harmful substances for animals. This solution will allow us to issue our quality certificate, and customers will have a higher level of confidence in the products we sell. In addition, the availability of a laboratory equipped with all modern technologies will allow PFD to expand its supplier base since PFD will be able to work with market monopolists and small producers if their products meet quality requirements.

Operations and Management Plan

Operations and management plan is helpful to represent business workflows. Elements of this plan include business location, labor, premises, equipment, and processes; other important aspects are the responsibilities and tasks of the management team. PFD plans to locate warehouses in 10 states, preferably in areas with many pet owners, such as the most densely populated suburbs. The warehouses of the PFD online store will be equipped with driveways for couriers, including bicycles, motorcycles, and auto couriers.

Potential customers will also be able to visit the store and purchase goods on the spot, so the warehouses will be equipped with a small working area for sellers, who will also accept online and telephone orders. Stores and warehouses will provide an opportunity for product testing by offering product samples to boost sales. Branded bags and business cards will help improve PFD brand awareness. Each store will have a photo zone for visitors with their pets to post photos on social networks and receive bonuses in the form of gifts and discounts.

The store will be open to the public from 8 am to 8 pm and will accept online, and telephone orders from 8 am to 10 pm. At night, orders will be accepted by a live chat operator who will work remotely and serve several retail warehouses. Sellers will work in two shifts – from 8 am to 2 pm and from 3 pm to 10 pm. The day-to-day work of sellers will mainly consist of accepting and processing applications and preparing orders picked up by couriers every day at 14:00 and 18:00.

On Monday and Tuesday, the store will be closed as the volume of demand has not yet been determined and will have to match the cost of salaries of sellers. The work of sellers will be remotely monitored by a manager who will visit stores once a week to give recommendations, listen to complaints and suggestions, and collect revenue from direct sales. Clients will receive parcels contactless; communication with the delivery service will be carried out via automatic SMS of mobile operators or via chat to speed up the logistics process.

Financial Aspect

In case of unforeseen circumstances, this business plan provides a financial plan. This plan includes a list of priority resources, potential threats, and response strategies. Priority resources will consist of warehouses, including payments for maintaining the required temperature, salaries for half of the sellers and half of the couriers, including bicycle couriers, and couriers with their car, motorcycle, or moped. Priority products will include dog and cat food carefully selected from a wide range of suppliers to optimally match consumer tastes in quality, price, and other characteristics. The management team will consist of three people who will support the business in a crisis by revising the strategy.

Potential risks could include natural disasters, new competitors entering the market in selected supply areas, passive buyers, unexpected price increases by suppliers, and aggressive marketing campaigns by competitors. In case of natural disasters, the warehouses will be insured by the bank; in case of fierce competition, an active marketing campaign will be carried out in social networks with many incentives and cumulative bonuses. Shoppers’ passivity will be overcome through catchy outdoor and social media ads. When prices increase by suppliers, PFD will try to switch to lesser-known brands, given the possibility of quality assurance thanks to our laboratory. An aggressive marketing campaign by competitors will be met with neutrality since it will draw buyers’ attention to the target product.

Break-Even Predictions

Break-even analysis allows determining the number of sales required to cover the cost of running a business. This analysis requires data from different price levels corresponding to varying levels of demand. The result, therefore, largely depends on the level of demand, which also indicates trading opportunities. In other words, a break-even analysis allows figuring out how many units of a product need to be sold to cover fixed and variable costs. The break-even point determined as a result of the calculation is considered a measure of the safety factor.

The formula for the break-even analysis is as follows: Break-even quantity = Fixed cost / (Selling price per unit – Variable cost per unit). Fixed costs are understood as those costs that do not change when the product changes, for example, salaries, rent, and utilities. The unit sales price is the item’s retail price to the customer, and the variable unit cost is the cost to create a unit. Given that PFD will exclusively distribute finished goods and have no manufacturing capacity, the variable unit cost will be defined as the wholesale price assigned by the suppliers. Let us substitute the numbers: Break-even quantity = 10,000$ (salaries per month plus rent and utilities expenses) / (5$ – 3$), where 5$ and 3$ are the averaged prices for the units sold; therefore, Break-even quantity for PFD = 5,000$.

Sales Assumption

The sales assumption allows creating assumptions about how a product will sell and what characteristics and other factors will influence the buying decision in direct and indirect sales. In other words, this section introduces strategies for generating sales among the target audience. A marketing plan will be developed that will include advertising by creating blogs and social media groups, direct targeted advertising on social media, and outdoor advertising next to hypermarkets with an emphasis on the words “delivery,” “dial,” and “online” to attract early buyers. The brand will use the emotional traits of reliability and friendliness, as well as beauty and attractiveness. The brand will be advertised by developing an identity on branded packaging, courier uniforms, and social networks. The brand’s colors will include the entire rainbow palette to claim more attention and inclusiveness for a business that cares for the comfort of shoppers and offers services for all kinds of animals.

The communication strategy will use the tools of social media, outdoor advertising, and WOM. Sales tactics will be based on the studies of customer psychology. It will be focused on emotions associated with pet food by the purpose and emotions that customers experience when buying and using a product. The main distinguishing feature of the service will be comforting when communicating with customers; sellers will receive special training to distinguish between buyers and their preferences in the way they communicate. PFD will try to make every customer feel special and welcome in our store.

Conclusion

Thus, a business plan for Pet Food Delivery was presented. PFD is a potentially successful business and will quickly gain market share as it meets the critical customer’s demand for quality pet products accompanied by targeted delivery. A detailed market analysis will allow promoting the product more purposefully and quickly increasing sales to the required level. Business prosperity will be based on attention to the client’s immediate needs; in case of unforeseen circumstances, the management team will quickly revise the existing strategy and develop practical steps to overcome the crisis.

Reference List

Hobbs Jr, L., 2019. Analysis of customer perception of product attributes in pet food: implications for marketing and product strategy (Doctoral dissertation).

Naish, D. 2017. 15 largest pet food manufacturers in the US. Web.

Pet food market share, size, segmentation, trends, and opportunities. 2020. Web.

Schleicher, M., Cash, S.B. and Freeman, L.M., 2019. Determinants of pet food purchasing decisions. The Canadian Veterinary Journal, 60(6), p.644.

Tsai, W.L., 2019. Understanding pet food consumers with various sensory analysis methods (Doctoral dissertation).

US pet food market: industry trends, share, size, growth, opportunity, and forecast 2021-2026. Web.

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StudyKraken. (2022, November 10). Pet Food Delivery’s Business Plan. Retrieved from https://studykraken.com/pet-food-deliverys-business-plan/

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StudyKraken. (2022, November 10). Pet Food Delivery’s Business Plan. https://studykraken.com/pet-food-deliverys-business-plan/

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StudyKraken. "Pet Food Delivery’s Business Plan." November 10, 2022. https://studykraken.com/pet-food-deliverys-business-plan/.

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StudyKraken. 2022. "Pet Food Delivery’s Business Plan." November 10, 2022. https://studykraken.com/pet-food-deliverys-business-plan/.

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StudyKraken. (2022) 'Pet Food Delivery’s Business Plan'. 10 November.

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