Animal Feed Market

Threat of New Entrants

Economies of Scale: Animal feed business is highly competitive and huge. Major key players have their prominent presence, especially in China, and the US which makes the market of these regions dominated by these players. The initial investments in the animal feed market are high including the raw material costs, certification cost, and approval from the regulating bodies. Also, the revenues are high considering to rising population of livestock in various regions. Production costs of animal feed are identified to be moderate to high because of high investment in production equipment, skilled labor inputs, maintenance cost, and safety testing & certification. However, with the increasing production of animal feed, the average variable production cost decreases of the animal feed.

Availability of raw material: The ingredients required to produce animal feed are available from agricultural farmers. However, their availability varies from season to season and region to region. Also, animal feed market is dominated by established players in the market and to enter the market; new players need to invest hugely in creating their brand identity through strategies such as high R&D investments and by creating product differentiation. However, increasing demand makes the market look lucrative encouraging the players to invest.

Hence, the threat of new entrants to the animal feed market is moderate-high.

Bargaining Power of Suppliers

Suppliers for animal feed are the producers, distributors, importers and independent suppliers. Due to the availability of high count of competitors in a region, the suppliers have low to moderate bargaining power. In addition, the low switching cost tends to lower the supplier’s power.

The uniqueness of suppliers: Bargaining power of suppliers is a crucial factor in the animal feed industry and determines the strength of the company. Key players who are the suppliers (majorly) maintain a strong relationship with the consumers due to its immense buying power, also focused on strong business relations to maintain the end-product quality. The suppliers are unique in terms of sourcing, supplier relationship and product functionality creating product differentiation and uniqueness of suppliers.

Supplier Concentration: There is a strong supplier power concentration in all the regions due to the overall significant demand for animal feed. Key market players are dedicated towards development in production techniques, innovation and others.

Suppliers control over prices: The bargaining power of suppliers is moderate since the supplier group is widely spread across the regions in the market and are well-equipped to face the uncertainties and have decent control over the prices.

Therefore, the bargaining power of suppliers is moderate.

Threat of Substitutes

Availability of substitutes & ease of substitution: Although there is no potential replacement available for essential animal feed, which promotes livestock growth, the animal feed can be substitutes among themselves. For instance, the controversy over the use of antibiotics as an additive in the animal feed has encouraged the manufacturers to increase the production capacity of acidifiers as potential replacements. However, the animal feed has low chances to be replaced.

The threat of substitute in animal feed market is low.

Bargaining Power of Buyers

The bargaining power of buyers is directly proportional to economic development. The bargaining power includes the pressure consumers exert on businesses to procure higher quality products, better customer service, and lower prices.

Number of customers: The number of consumers of animal feed in the global market is high. Application of animal feed to feed the livestock and promote healthy function of the livestock have raised their demand on a global level. Increasing livestock population will ensure escalation in demand for animal feed.

Switching cost of consumers: The presence of large industrial players in the global animal feed market has attracted a huge consumer base. Due to a large number of existing manufacturers in the market, the switching cost of consumer falls. Furthermore, the presence of many varieties among the product range tends to decrease the switching cost. The consumers are well-educated about the product and, they no longer have brand loyalty, which determines the bargaining power of buyers which depends on these two major factors.

The bargaining power of buyers is moderate in the global animal feed market.

Internal Rivalry

Number of competitors: The animal feed industry is marked by the high intensity of the rivalry. The established market players in the animal feed industry indulge in a fierce rivalry where the market players are targeting their competitors in terms of quality and price, thus making the industry competitive and reducing profit potential for the existing firms.

The capacity of competitors: Market players in the animal feed industry have high production capacity and focus on strategic investments in R&D. However, the application of animal feed and the number of end users is increasing from last few years. The end-user of animal feed are the livestock producers and farmers who support the further growth of this market.

The animal feed market has many competitors. This market is significantly growing, and manufacturers want to increase the production volume of high-quality animal feed. Market players want to fight for greater market share, but the presence of small-scale suppliers from various countries are impacting on the scope of the key players in the market.

Hence, the internal rivalry in the animal feed market is high.