Nestlé has acquired the London-based premium dog and cat food brand Lily's Kitchen as it bulks up in pet food, its fastest-growing product category.
Purina PetCare posted 7.0% organic growth and sales of CHF13.622 billion (€12.89 billion) in 2019, outpacing Nestlé's other categories.
Most of Lily's Kitchen's products are in the so-called premium segment, which grew at a double-digit rate for Nestlé last year.
Premium Pet Food Market
Nestlé, which has seen some pet owners stockpiling due to the coronavirus, wants to boost its Purina PetCare division's presence in the premium pet food market, saying it has lacked scale there, in particular in Great Britain.
"We undertrade in this segment," Bernard Meunier, head of Purina PetCare in Europe, Middle East and North Africa (EMENA), told Reuters. "In the UK we are not really present in premium pet food."
About 50% of the UK's 66 million people own a pet, with 10 million dogs and 11 million cats, or roughly one for every four adults, according to PDSA, a UK vet charity.
Meunier said the petcare portfolio in the EMENA region was now in good shape and the focus would be on growing it organically.
Nestlé gave no purchase price.
Lily's Kitchen, founded in 2008 by a dog owner seeking food for her sick canine, has £85 million (€96.19 million) in sales at 6,000 stores in 30 countries, the Swiss company said, adding it will be run as a stand-alone business from London.
Among other products, it sells grass-fed lamb dog food for £69 (€78.09) for a 12-kilogram bag, the Lily's Kitchen web site said, and a 19-pack of chicken-based kitten food for £16.24 (€18.38).
"Looks like an interesting piece of business and hits all of the right notes regarding consumer preferences for natural on top of fast pet-care category growth," Kepler Cheuvreux analyst Jon Cox said.
Impact Of Coronavirus
"Nestlé is maintaining its dividend, there is a buyback and I expect guidance to be more or less maintained for the year," Cox added. "I can’t think of many other companies in which to ride out the corona storm."
Meunier said it was too early to assess the coronavirus's impact on pet food, but that all its factories were running.
"We see some stockpiling from consumers for their pets, as well," Meunier he said. "We don't expect this to have a lasting impact."