(Reuters) - Wal-Mart Stores Inc (>> Wal-Mart Stores, Inc.) on Tuesday announced its own "ultra premium" dog food, putting the largest discount chain into more direct competition with specialty chains such as PetSmart Inc (>> PetSmart, Inc.) and Petco .

The new brand, Pure Balance, is making its debut as the ultra-premium part of the dry dog food business grows at a faster rate that the value category, Wal-Mart said.

Pure Balance, to be sold at Walmart stores in the United States, is an expansion on Wal-Mart's Ol' Roy brand, which was named after one of founder Sam Walton's hunting dogs.

U.S. spending on pet food is expected to rise roughly 3 percent to $20.46 billion in 2012, according to the American Pet Products Association. Overall spending on pets is expected to increase about 3.7 percent to $52.87 billion this year, the group said.

The industry has seen rapid growth in recent years. A decade ago, Americans spent just $29.5 billion on their pets.

Walmart stores already sell some higher-end dog food such as Nestle SA's (>> Nestle SA) Purina ONE and Procter & Gamble Co's (>> The Procter & Gamble Company) Iams. Some other premium brands, such as Colgate-Palmolive Co's (>> Colgate-Palmolive Company) Hill's Science Diet, are sold at specialty chains such as PetSmart and Petco or through veterinarians.

Walmart is already a big dog food outlet, selling enough each year to fill an Olympic-sized swimming pool 2,050 times, it said.

A 30-pound bag of Pure Balance will be priced at $31.88 for the chicken and brown rice variety and $39.88 for the lamb and brown rice flavor. Smaller 5-pound and 15-pound bags will also be sold.

Pet food prices vary widely depending on the type of food, package size and store location.

On Tuesday, a 29-pound bag of Iams ProActive Health Lamb & Rice dog food was priced at $29.98 on Walmart's website. A 21-pound bag of Hill's Science Diet Ideal Balance Grain Free Chicken & Potato Dinner food for adult dogs was selling for $44.99 on PetSmart's site.

Pure Balance features no chicken by-products, no soy, wheat or corn additives, no artificial colors and no preservatives, Wal-Mart said. The products will start appearing on the shelves of more than 2,900 Walmart stores over the next few weeks.

(Reporting by Jessica Wohl in Chicago; Editing by Richard Chang)

By Jessica Wohl