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News Link • Business/ Commerce

Why Procter & Gamble Is Dropping Out of Dog Food

•, By Justin Bachman
The company is selling its three major pet food brands to Mars, the leader in the $74.5 billion global pet food market, for $2.9 billion. The deal unlocks cash the company can use to fuel research and development in markets closer to P&G’s core businesses or to return to shareholders. It does not include P&G’s pet-food business in Europe, which it is working to sell separately.

While pet food is becoming a higher-margin business—marked by exorbitant spending by affluent animal lovers in mature markets—the kind of innovations required to command $6 per pound prices in the domain of upscale dog and cat chow do not come cheap. “It’s not a low-cost business,” says Deborah Aitken, an analyst with Bloomberg Industries. “It’s seen as quite a staple category and it’s driven by innovation and research. A lot of the innovation for human foods is also pushed across the house to the pet care food.”

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