Shun NagaiToday’s pet food market is growing and diversifying at an unprecedented pace. Shifts in how consumers view pets, rising health awareness, and the spread of premium purchasing behavior have all driven steady growth in demand for high-quality, safe pet food.
Against this backdrop, many pet food companies are actively leveraging OEM manufacturing—outsourcing production to specialized manufacturers instead of operating their own plants. Europe, in particular, is widely recognized as a leading region for pet food, and its high quality standards and innovative development capabilities make it an attractive OEM production base for many businesses.
However, OEM manufacturing in Europe also comes with hidden, structural risks behind its appeal. These risks do not merely affect cost and delivery schedules; they can also influence business continuity, brand reputation, and even sustainability initiatives.
In this article, we take a deep dive into why European-origin OEM production can become a risk in overseas pet food manufacturing, focusing on four major perspectives:
Long Transportation Lead Times: Lost Time and Lost Opportunities
The distance problem and the nature of major shipping routes
Shipping pet food from Europe to Asia—especially to Japan—involves extremely long geographic distances, and most shipments rely on ocean freight. The primary route typically runs from the Mediterranean through the Suez Canal, across the Indian Ocean, and via the Strait of Malacca into Asia.
Even under normal conditions, this route often takes 50 to 60 days or more, and it is not unusual for transit to exceed 80–90 days. Compared with shipments from geographically closer regions such as Australia, New Zealand, or Thailand, lead times from Europe are significantly longer.
This extended transit time is more than a logistics delay—it affects the entire supply chain. In today’s market, where demand shifts rapidly, such long lead times make it difficult for companies to respond quickly to trends.
For example, when raw material prices spike unexpectedly or new regulations are introduced, businesses often need swift decisions and action. In those moments, physical distance becomes a major constraint.
Unpredictable delays and ripple effects
Long-distance ocean freight always carries the risk of sudden delays. One of the clearest examples is disruption related to the Suez Canal.
The 2021 Ever Given grounding had a severe impact on global supply chains. The canal blockage lasted for an extended period, causing vessels to be stranded and triggering widespread logistics disruption. And beyond large-scale incidents like that, delays can also occur due to canal congestion, weather-related navigation restrictions, or route changes driven by geopolitical tensions.
In addition, European ports can be affected by labor strikes or handling delays caused by labor shortages—risks that should not be underestimated. These disruptions do not simply push back delivery dates; they can seriously affect business operations.
For instance, if export products remain stuck at a European port, domestic distribution in the importing country can become unstable—leading to out-of-stock situations at retail, and lost sales opportunities. On top of that, delays can increase costs through additional storage fees and demurrage charges.
Direct impact on business management
Extended lead times and the ongoing risk of delays can directly worsen cash flow. The longer products take to arrive, the longer capital remains tied up, reducing the efficiency of working capital management. For small and mid-sized companies in particular, this capital lock-up can become a major burden on operations.
In a market where trends and consumer preferences change quickly, being unable to launch products at the right time creates significant opportunity loss. For example, even if a specific flavor or functional claim suddenly becomes popular, the shipping timeline from Europe can cause a company to miss the peak of demand.
Furthermore, unexpected stockouts reduce customer satisfaction and damage brand image, potentially leading to long-term customer churn. In a highly competitive pet food market, this can become a critical factor in losing market share.
High Transportation Costs: A Direct Pressure on Profit Margins
Higher freight rates and market structure
Ocean freight rates from Europe to Japan tend to be high—not only because of distance, but also due to carrier pricing and market structure on certain routes.
In routes where trade volumes are imbalanced, costs associated with repositioning empty containers can be added into freight rates. Depending on container demand patterns, Europe-to-Japan exports may face weaker container demand than the reverse direction, contributing to a higher perceived freight cost.
Additionally, if specific carriers hold a dominant position on a given route, competitive pressure may be limited, leading to persistently high rates.
Compared with other major pet food production regions such as Australia, New Zealand, or Thailand, these differences can become quite noticeable. Those regions often benefit from geographic proximity and, in some cases, more competitive freight conditions.
Fuel surcharges and geopolitical risk
Another major variable in logistics costs is the fuel surcharge—an additional charge used to pass fuel cost fluctuations on to shippers, which is heavily influenced by crude oil prices.
Instability in the Middle East, or changes in global oil supply, can affect marine fuel prices directly, which then raises fuel surcharges and increases total shipping costs.
In particular, when geopolitical risk intensifies around the Suez Canal or the Red Sea, vessels may be forced to reroute via the Cape of Good Hope. This significantly increases sailing distance and fuel consumption.
As a result, fuel surcharges can surge, and landed costs can rise far beyond initial estimates. These fluctuations are difficult to forecast, creating uncertainty in budgeting and pricing strategy.
Direct impact on profitability
High transportation costs directly reduce product margins. Even if the FOB price appears attractive, the landed cost under CIF terms can expand, forcing companies to raise final selling prices and potentially lose price competitiveness.
For example, if competitors source products from regions with lower logistics costs, a company importing from Europe may be placed at a disadvantage on price.
The pet food market is especially price-competitive, and consumers are sensitive not only to quality but also to affordability. If increased shipping costs are passed through into retail prices, sales may decline.
On the other hand, if pricing is kept unchanged, margins shrink—potentially limiting investment in R&D or marketing. Over time, this can weaken a company’s growth strategy and long-term competitiveness.
Longer Inventory Turnover: Lower Capital Efficiency and Higher Quality Risk
Larger safety stock and capital tied up
The longer the transportation lead time, the more safety stock is required to prevent stockouts. Safety stock functions as a buffer against unexpected shipping delays or sudden spikes in demand, but it also increases the amount of capital tied up in inventory.
For example, a company that could normally operate with one month of inventory may need to hold three months of stock if transit time is two months and additional buffer is required.
This increase in safety stock puts pressure on working capital. When a large portion of funds is locked in inventory, it can restrict the company’s ability to invest in growth opportunities—such as new product development, stronger marketing, or expansion into new markets.
Capital lock-up can also affect financial stability, becoming a significant management issue in businesses that prioritize cash flow.
Higher warehousing costs and greater management complexity
More safety stock naturally requires more storage space in Japan or the importing country, increasing warehousing costs. In addition to storage fees, companies must consider labor costs for inventory management, facility maintenance, and insurance. If pet food requires temperature and humidity control, costs rise even further.
As inventory volume increases, inventory management becomes more complex. Accurate tracking, inbound/outbound control, and cycle counts all require more effort and expense. This increases the risk of human error, which can lead to inventory discrepancies and, in the worst case, lost sales or disposal losses.
Higher risk of quality deterioration and weaker turnover
For products with expiration dates—like pet food—long inventory dwell time increases the risk of quality deterioration. As the time from production to consumer purchase lengthens, freshness and nutritional value may decline.
This can damage consumer trust and brand image, and in worst-case scenarios, may even contribute to health-related complaints.
These factors also worsen inventory turnover, a metric showing how efficiently inventory is sold over a period. Lower turnover indicates inventory is not being utilized effectively.
Poor turnover signals reduced operational efficiency and may influence how investors or financial institutions evaluate the business. Ultimately, it can erode competitiveness and weaken a company’s position in the market.
Higher CO₂ Emissions: Environmental Burden and Brand Risk
Increased environmental impact from long-distance transport
Long-distance shipping from Europe to Asia results in a much longer sailing distance than sourcing from closer production regions such as Australia, New Zealand, or Thailand.
Because fuel consumption is broadly proportional to distance traveled, CO₂ emissions from transportation increase accordingly. This can significantly raise the carbon footprint of the supply chain.
In recent years, reducing environmental burden has become more than a CSR activity—it is increasingly viewed as a core management issue tied to corporate survival and growth.
For many companies, reducing CO₂ emissions across the entire supply chain is an urgent priority. Long-distance logistics from Europe not only makes that goal harder to achieve, but can also raise questions about a company’s commitment to environmental responsibility.
A sustainability-focused market and customer expectations
Modern consumers care not only about product quality and price, but also about how products are made and distributed—meaning they pay attention to a company’s sustainability stance.
Environmentally conscious consumers tend to favor products with a smaller carbon footprint and companies with environmentally considerate supply chains.
On the corporate side, the expansion of ESG investing and increased demand for SDG-related efforts are accelerating the push for sustainable sourcing and carbon footprint reduction. In this environment, European-origin OEM production may be perceived as a disadvantage due to higher transport-related CO₂ emissions.
This can directly affect brand image and competitiveness. For instance, if competitors build supply chains with lower environmental impact, a company relying on European OEM may lose support among eco-conscious consumers.
Companies must also consider the possibility of stricter environmental policies in the future, such as carbon taxes or strengthened emissions trading systems. If such measures are introduced, supply chains with higher CO₂ emissions may face additional costs, further compressing profitability.
Conclusion: The Importance of Strategic OEM Partner Selection
In overseas OEM manufacturing for pet food, choosing a European supplier may appear attractive due to its high standards and strong brand image.
However, as discussed in this article, there are multiple structural risks—long transportation lead times, high logistics costs, increased inventory turnover days, and higher CO₂ emissions. These risks can seriously affect cash flow, margins, inventory management, and brand perception.
Today’s business environment is full of uncertainty. Geopolitical risk, economic volatility, and environmental issues continue to evolve. In such conditions, strengthening supply chain resilience and agility is essential for sustainable growth.
When considering overseas OEM manufacturing, it is critical to evaluate not only product quality and manufacturing cost, but also overall supply chain risk.
Companies should also look beyond Europe and consider alternatives such as Australia, New Zealand, and Thailand—regions that may offer advantages in shorter lead times, lower logistics cost, and reduced CO₂ emissions. Comparing regional characteristics, logistics infrastructure, trade agreements, and environmental regulations can lead to more balanced decision-making.
Ultimately, selecting the optimal OEM partner requires a multi-dimensional approach, including:
- End-to-end supply chain optimization: Evaluate total cost, including transport, inventory, and management—not just production cost.
- Risk diversification: Avoid overdependence on a single region or supplier by considering multiple manufacturing bases.
- Faster market response: Build a supply system that enables short lead times and agile delivery.
- Sustainability contribution: Develop a lower-impact supply chain and fulfill corporate social responsibility.
By considering these factors holistically and choosing an OEM partner aligned with the company’s business model and market strategy, pet food companies can strengthen competitiveness and support sustainable long-term growth.