Royal Canin - Trading on Its Pedigree

Premium dog- and cat-food maker Royal Canin is considered a pioneer in the industry in fostering a more sophisticated appreciation of nutritional needs. Professor of Organisational Behaviour Jean-Claude Thoenig and Senior Affiliate Professor of Marketing Charles Waldman consider the firm's development and future prospects, a highly innovative company that has prospered in large part through scorning conventional industry wisdom. But the global industry is becoming ever more dominated by major multinationals. What is Royal Canin's "scalability" in terms of new markets -areas they have already found challenging?

by Jean-Claude Thoenig,Charles Waldman
Last Updated: 23 Jul 2013

For some, specialised dog- and cat food-maker Royal Canin has earned the unofficial label of the "L'Oréal of Pets". Considered pioneers in fostering a more sophisticated appreciation of animal nutrition needs throughout the industry, the company began as a vision of a country veterinarian from southeastern France in the late 60s. Growing rapidly in the following decades, the firm had a commercial presence in 70 countries by the early 90s. Despite its remarkable expansion, Royal Canin maintained a distinctive hirearchical structure. But can the strategies that have served it so well in the past be readily applied towards future growth?

Professor of Organisational Behaviour Jean-Claude Thoenig and Senior Affiliate Professor of Marketing Charles Waldman consider the development and future prospects of Royal Canin, a highly innovative company that has prospered in large part through scorning conventional industry wisdom. The authors consider the "scalability" of Royal Canin's business model - namely, how and to what extent could the company's "religion" as expounded by its charismatic leader, create worthy new disciples?

The current decade has witnessed increasing dominance of the pet food market by major multinationals. Nestlé's 2001 acquisition of Ralston Purina put the Mars Group in the #2 spot internationally. The latter responded by buying Royal Canin the following year. The Mars Group decided to establish two seperate, specialised pet food divisions. Masterfoods make mass retailed products. Royal Canin are responsible for far more technically elaborate, high-end foods, distributed only through veterinarians and specialised outlets. The parent firm has been reluctant to inhibit Royal Canin's operational strategies by dictating retailing or other major operational demands - so far.

The case details Mars's efforts to internationalise a medium-sized firm by attempting to leverage Royal Canin's proven expertise in R&D and decades spent earning a reputation for having "genuine respect for the pet". The firm had even invented a new profession. "Cynotechicians" are sales representatives with expert knowledge of dogs who confer with professional breeders. (Royal Canin is actively considering recruiting "felinotechnicians", as well, although its cat food division remains far smaller.)

Royal Canin continued to upgrade and diversify its extensive product range further during the late 90s and early 2000's. The high value-added products have proven very profitable. Mars has sought to avoid any chance of disrupting the internal workings of one of its star subsidiaries; only three managers from Masterfoods and Royal Canin are entitled to regular contact between the two firms.

Thoenig and Waldman describe the value and principles - as well as the unorthodox hierarchical structure - that have kept morale high and staff turnover exceedingly low. Turnover at the French plants is less than one percent. The country remains Royal Canin's most successful market, by far. Its products there are distributed via 15 centres, whose roles go far beyond standard concepts of logistics.

Other markets have, however, shown themselves to be considerably harder to crack. Success in Germany has demanded the patient and methodical construction of a brand respected by dog breeders, and distributed, as in France via a specialised network. But penetration of the vast US nutitional petfood market has to date generally been beset by various degrees of miscommunication and ill luck.

The case posits the essential question of whether a very successful leader in a quite specific market niche can hope to find other markets as receptive, particularly in an intensifyingly hostile global environment. Should Royal Canin endeavour to maintain its growth and its reputation for quality if, as is quite likely, its main rivals come to view such specialised, focussed and technically elaborate products as increasingly "mainstream"?

INSEAD 2003

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