During a recent Question Period in the House of Commons, MP Ryan Williams spoke about a significant rise in pet food when asking the Prime Minister about the increasing cost of living. Like most industries the price to produce goods has gone up since the pandemic. For pet food, this includes raw materials, processing, staffing, machinery and transport. In Canada, manufacturers must also take into consideration the regulations and the demand for more environmentally sustainable packaging. These are struggles well known to companies in every sector, but beyond this there are specific reasons pet food has increased at a higher rate than human food.
The Government of Canada does not charge GST on non-prepared groceries, whereas they do tax pet food. The difference is that pet food is a prepared item. Because it goes through a manufacturing process, it will always be more expensive. Drilling down further, ingredients make up 80 percent of the cost of pet food. Take, for example, the war in Ukraine. Not only have there been significant delays in delivery, but there are also obstacles all along the chain that impact cost. For grain to be exported for pet food it needs to be dried first. Energy is needed to run the machines that dry the grain. Because of the war, the availability of energy sources was compromised and causing the cost to rise. The recent drought in western Canada is another great example. The year’s harvest was reportedly cut in half. Coupling this with increasing freight costs and the result has been doubling in price for pulse crops. The projection of the impact of climate change on pet food will become clearer as reports on this year’s fall harvest become available.
When you compare the grocery market that has only a few major players to the pet food market which has many manufacturers, the landscape is much more competitive. The result of this is animal food companies maintain smaller margins so they can remain competitive. The bulk cost of pet food is in the overhead and profit margins are much smaller than those found in the grocery sector. Add to this, the 10 -15 years prior to the pandemic there was no significant increase in the cost of pet food, post pandemic producers now have no choice but to raise prices.
Sustainability in packaging is another major topic right now. Consider this, a company packaging single ingredient items sold in a grocery store. As pet food is a multi-ingredient, prepared item, containers must adhere to different standards to keep the food viable. Previously, plastic packaging did the trick, however times have changed, and consumers are rightfully demanding more sustainable options. Pet food producers are all over this, researching technology and materials that effectively wrap their products, but also meet the demand for packaging that does not harm the environment. This is a massive shift which involves many new operational changes, which, again, may very well be adding to the bottom line.
With over half the population of Canada caring for pets, engaged manufacturers are working to maintain a fine balance between keeping their operations healthy and ensuring what they produce is affordable. For our part, Pets Canada efforts to lobby the government of Canada have just begun. We are continuing to pushing for a GST exemption and insisting pet food become classified as an essential good. It is critical that pet food remain accessible, and we are working ways to make that happen.