They probably have more important issues to deal with. Keep in mind that there are many languages for english speakers, and then even more for other speakers to learn the same languages. There are probably way more bugs in total than any of us encounter, because they have to deal with all of the bugs from all of the programs... We just have to be patient and hope they fix it at some point! :)
If you have issues with the plural possessive being graded incorrectly in this sentence, or are being shown a possessive without the required apostrophe as a recommended answer, please take a screenshot and make a thread about it in the Troubleshooting forum and/or report it as a bug.
Remember to make it clear that this is a recurring issue affecting all plural possessives, and not just a case of a missing accepted translation.
We made the developers aware of this issue over a year ago, but new features keep getting priority over bug fixes. Perhaps a little more user attention in channels they actually read might do the trick.
Agreed, it's a very awkward translation. I assume it's because originally, Duolingo was having a lot of [technical] problems with apostrophes (read all the posts here). This translation may have been a way to avoid those problems. Most English speakers would say "It is the cats' food".
In English we would likely just say "It is cat food", such that "cat" becomes an adjective. I suppose it would be correct to say "It is cats' food", but that would be less common. I am just learning Norwegian here, so I'm no expert, but Google Translate suggests that you can similarly form an adjective by using "kattemat". So "Det er kattemat" is equivalent to "It is cat food". I'm not so sure about the equivalent of "It is cats' food". I like your idea of "Det er katters mat". Maybe a native speaker can help out?
kattenes = the cats' (plural possessive)
kattens = the cat's (singular possessive)
'Food of the cats' is not a typical form in modern English (not incorrect, just old-fashioned) - as someone observed elsewhere in the thread, I assume they changed it due to the problems Duo used to have with recognising apostrophes.