Tuesday, June 1, 2010

Natura Loyalists Are Nervous

Announced last month, the sale of Natura Pet Products to Procter & Gamble Co. is expected to be finalized later this month. P&G will buy six of Natura brands, including Innova, Evo, California Natural, Healthwise, Mother Nature and Karma, which hold the high-end position of holistic and grain-free food for healthier pets.

Based on sales of more than $100 million, the purchase price is estimated to be in the range of $450-$500 million.

However, look beyond the price tag and this story is very interesting.

Natura retailers have many concerns. They worry that P&G will change the food's formula as they did with the Iams and Eukanbua brands, eventually cheapening the product. P&G doesn't deny adjusting the formula, but say they never sacrificed quality in the process. Unfortunately, the consumer perception differs after both brands suffered a major product recall in 2007.

Furthermore, independent retailers are concerned that P&G will demand distribution of the Natura brands in larger chains like Petsmart and possibly Walmart, who can sell the mix significantly cheaper.

Since the announcement of the deal, independent retailers have been fighting back through social media.

Pets in the City, a St. Louis store, recently tweeted "After the announcement that P&G bought Natura Pet, our sales have dropped 75%. We are successfully switching many pets to other foods!"

A willingness to drop the products from their store is very telling because in many cases a significant percent of sales coming from Natura products.

Unfortunately, P&G cannot disclose its plans for the Natura brands until the sale is completed.

I'm very curious to follow those plans. What will the addition of six premium brands do to P&G's current pet product portfolio? Will it hurt their existing brands?

Further, as a mass marketer, if they push Natura to the masses, then how can it remain "high-end?" That current brand position will undoubtedly weaken.

The independent high-end retailer plays a major role in keeping that position strong.

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