01.01.06
Case Study: Old Mother Hubbard (OMH)
Business Description: Old Mother Hubbard (OMH) is a nationally distributed, privately-held and family run provider of branded gourmet, all-natural pet foods, supplements and treats.
Theme: A long standing company can find excellent growth by remaining true to its vision and market position by focusing on what makes it unique rather than following the path of others.
Background: OMH, which has roots dating back almost 80 years, has been a leader in the pet food industry. The company has two flagship brands, the Old Mother Hubbard line of baked dog biscuits and gourmet treats, and the Wellness brand of dog food, cat food, treats and supplements. The company’s vision is to provide wholesome, natural nutrition for pets by emphasizing food as the foundation for overall health and wellbeing. The OMH team formulates recipes that consist only of 100% whole foods and 100% human grade ingredients. The original brand, Old Mother Hubbard, focuses on products that address specific health needs like fresh breath, weight, overall diet, digestion and even tartar control, while the newest brand, Wellness, which was introduced in 1999, is a food-based line. The Wellness product line was developed through collaboration with veterinarians, nutritionists, animal lovers and pet owners to create a unique product line that raises the industry standard for natural pet nutrition. OMH has implemented a quality program that is one of the strictest and most limiting on supply of ingredients for all competitors, and all production is handled through two key supply partnerships, one on each coast of the U.S.
Situation Assessment: Today, a majority of U.S. households have over 130 million dogs and cats and these pet owners support a $13 billion pet food market. The market has three key categories: (1) Economy/Value is driven by the FDM-oriented brands, which target the value-shoppers. It’s about a $9 billion category and is growing in the 2-3% annual range. (2) The premium category has two segments: (a) Engineered/Science-based products that typically focus on “adding” in nutrition to a product formula to meet a specific level and represents about three-quarters of this category, and (b) Natural, which is more focused on ensuring that the selection of ingredients has the necessary nutritional content. The entire category is valued at about $3 billion, with the Engineered/Science-based segment growing at 6-7% per year, while the Natural segment, which is valued around $700 million, is growing at 15-20%. (3) The final category is Prescription, which is primarily distributed through veterinarians. Natural is the fastest growing area in all of pet nutrition and this is the primary focus area for OMH. The Natural segment represents nearly 6% of the overall market. From a growth perspective, the entire category is adding about $600-900 thousand in sales volume per year, with the Natural segment alone representing about $70-100 thousand of that growth (it represents about 12% of overall market growth).
Opportunities: OMH has demonstrated a connection to the market, which has created very heavy demand for its products. It competes in the fastest growing segment and is positioned as a leader that is continually raising the bar on the nutrition profile and wholesomeness of its products. It is common for most rapidly growing companies to experience organizational strain in meeting the requirements of the market, so it is critical to both service the needs of current customers, while seeking new customers. A key success factor in the pet food market is to effectively manage the channels of distribution, as channel conflicts are a real and pressing problem. This market cannot be exploited by simply getting one’s product out “everywhere and anywhere.” Channel selection and operation is of high strategic value. Both OMH brands are equally present in all outlets, but collectively they can be found exclusively at independent pet stores, pet superstores and natural health food stores in North America.
Lessons Learned: (1) OMH has a great story, but it requires time and knowledgeable messengers. It’s not possible to do all this communication alone, so OMH recognizes that its needs to partner with independent and natural retail stores to have “conversations in the aisles” to educate consumers (pet parents). It also needs to build a network of “disciples” through veterinarians, breeders and groomers to carry its message to target consumers. (2) OMH’s growth will con-
tinue by bringing new consumers to the natural segment, not just the premium segment. OMH’s challenge is to enlighten consumers initially seeking to “engineer better health” to the fact that better nutrition through food is the first step, followed by addressing specific health concerns. (3) Although the lure of being a mass marketed brand attracts many companies, OMH validates the belief that very strong, sustainable businesses can be built and remain in “niche” markets. OMH has shown loyalty to its channels and its product positioning, and this is has been a source of growth, not
hindrance.