Market and Competitive Overview

Menu estimates that it has the leading market share of both the United States and Canadian private-label wet pet food market. Menu's multi-plant manufacturing capacity, its ability to serve its customers on a national basis and its expansive product offering (in terms of category, size and container) are, in management's view, Menu's principle competitive advantages.

Competition in the private-label wet pet food market is limited to a number of local or regional manufacturers and a few large national brand manufacturers that also produce private-label products. Menu believes that the local or regional manufacturers have lower sales than it does and do not produce as full a range of wet pet food products or container sizes and several tend to focus on the non-premium (or secondary) segment of the market which is in decline. Menu believes that it would require significant capital investments and research and development expenditures for any of these companies to compete effectively with it for national retail customers, as those customers generally require a supplier to provide a wide variety of products on a national basis. Menu does, however, consider these local and regional manufacturers as a competitive factor in servicing the growing dollar and discount retailers as well as regional and national retailers who wish to purchase a limited product variety for their private-label or allocate shelf space to regional "price" brands.

A limited number of national brand manufacturers also offer private-label wet pet food products, in particular Del Monte Foods Company. Menu believes that Del Monte does not currently have a commitment to the private-label wet pet food market (or have limited their private-label offering to select customers) and, in some cases, lack the manufacturing capability or capacity to produce the same assortment of containers and recipes as it does. Other branded product manufacturers, such as Mars, Incorporated have to date chosen not to produce wet private-label products. For new participants to enter the wet pet food market, Menu estimates that, based upon its actual capital expenditures, the capital cost required to become a meaningful competitor, with the product range and quality offered by Menu, is $70 to $100 million for a single greenfield facility.