Americans love two things: Pets and making money.
The amount of love people have for their pets reached a milestone in 2020. According to the American Pet Products Association (APPA), the U.S. pet market broke industry-wide sales records, reaching US$103.6 billion for 2020. This marks a 6.7% increase from US$97.1 billion in 2019.
“We have reached a critical milestone, generating $103.6 billion in sales,” said Steve King, president and CEO of APPA. “We are bullish for the coming year, projecting growth of 5.8% — well above the historical average of 3% to 4%. This past year presented a host of challenges that resulted in consumers across the country turning to their pets for comfort and companionship. Interestingly, the product trends we are seeing in the pet care community mirror those of consumers — a desire for a healthier lifestyle, increased focus on fitness, turning to supplements for improved well-being, and technology playing a larger role in everyday life.”
Supply chain disruptions and shortages not only affected pet food and supplies during the early months of the pandemic, but also pet shelters; adoptions rates skyrocketed as people used their newfound free-time staying and working at home to add a furry friend to their family.
New pets within the small animal, reptile, and fish categories rose by 30%, staying strong as the panic-buying of March-June 2020 subsided.
As far as making money, any pet owner may be enticed to follow the advice of famed value investor Peter Lynch: “Invest in what you know.”
Pet food companies such as Chewy ($CHWY), Trupanion ($TRUP), and Pro Shares Pet Care ETF ($PAWZ) are already providing investors safe and sound exposure to the pet sector, setting the tone for what may be a promising market in the years to come.
If you are one of the 85 million pet-owning households, it may be a good sign to diversify your portfolio into this booming market.
The Pet Market is Growing Fast
As far as pet love goes, in the U.S., US$42 billion of 2020’s record sales were spent on pet food and treats, which represents a 7.2% increase year-over-year.
US$31.4 billion was spent on vet care and product sales, producing a 7.2% increase from the previous year.
Over-the-counter meds, pet supplies, and live animals rung up US$22.1 billion worth of sales, amounting to a whopping 15.1% increase from 2019.
The remaining US$8.1 billion was spent on pet-related services such as grooming and dog walking. Believe it or not, this figure decreased 21.4% from 2019, which is largely attributed to pandemic-related restrictions and lockdowns keeping people at their homes. However, services such as these are expected to bounce back as the economy recovers with the ever-growing pet market.
2021 is projected to continue this period of accelerated growth, as APPA’s estimate of US$109.6 billion in expenditure across all pet categories displays a 5.8% increase from 2020.
APPA’s findings also include the following:
- 47% of pet owners increased the frequency of pet products purchased online,
- 30% of pet owners increased their spending on pets and pet supplies, and
- Pet specialty stores and independent retailers all experienced a growth in revenue.
According to research by Morgan Stanley, this ~US$100 billion market is set to almost triple by 2030, representing a compounded annual growth rate (CAGR) of 11.45%.
This is huge news for those enthusiastic about the investment potential of the pet industry within the stock market.
The pandemic effect regarding more people working from home and the rise of freelancing was more than a temporary measure. As you may have discovered in our written piece regarding the Future of Work, the future of the employment landscape is rapidly changing, and people aren’t necessarily lining up to get back into the office.
[/fusion_text][fusion_text rule_style=”default” hide_on_mobile=”small-visibility,medium-visibility,large-visibility” animation_direction=”left” animation_speed=”0.3″]
Pet Ownership, Pet Spending,
Pet ownership will continue to grow as the pandemic-inspired changes on everyday life has modifying how we humans do our jobs. When an industry shows resilient sales during a worldwide pandemic, we pay attention. Not only did vet care and pet accessory spending remain strong, but pet ownership as a growth trend surged up nearly 200%!
Did you know? 65% of people in the U.S. aged 18 to 34 years old plan to own a pet (or an additional pet) within the next 5 years.
The total increase in pet ownership is projected to be 14% by 2030.
That means in addition to the high growth witnessed in pet spending today, an entire 14% more people will own pets. These owners will need to pay for the pets adoption, pet care, accessories, insurance, food… the costs add up.
Allow us to demonstrate how significant a 14% increase in pet ownership is.
The average person spends about $5,000-$20,000 on their pet dog in its lifetime, which has an average life expectancy of 12 years.
Working with the average annual spend of $980, this equates to about $11,760 in total ownership spending for a pet’s life expectancy.
If 85 million households own pets, and this number increases by the projected 14%, that adds 11,900,000 new pet owners to the marketplace. This increases pet spending by US$11,662,000,000 over the next decade.
No wonder the industry is poised to nearly triple in 10 years, and investors have been watching.
“We think the U.S. pet industry has reached an inflection point, taking topline compound annual growth rates to 8%, vs, 3% for the last decade,” says Simeon Gutman, equity analyst overing hardline retail for Morgan Stanley Research.
According to a survey by AlphaWise,
- 66% of U.S. households have at least 1 pet
- 69% of respondents “strongly agree” their pets are important members of the family
- 37% of pet owners would take on debt to pay for their pet’s medical expenses
- 29% of pet owners would put a pet’s needs before their own
What is even more intriguing is the younger pet owners get, the more they seem to be spending on their pets. As of 2020, the average household spends $980 per pet annually. Morgan Stanley estimates that this will increase to $1,292 by 2025 and $1,909 by 2030.
In October of 2020, APPA conducted a study on pet spending during the pandemic and found that 66% of the respondents claimed their spending had not changed. 72% stated that they would not try to alter their spending on pet food, regardless of their financial situation.
Nothing like a defensive industry that is on the brink of a massive growth period.
Purrfect Opportunities for Investors to Capitalize
If ~US$6 billion is being added to the total spending of the pet market in 2021, does that mean the opportunity to invest is growing too?
Pet Food
Manufacturers have had to adapt to the growing need for organic pet food products, which became a byproduct of increasing consumer awareness. Natural products have taken the spotlight from synthetic products, which pets used to be fed regularly. This has proved to be one of the main sources driving the growth of the global pet market.
The global pet food market expects to grow at a CAGR of 4.5% from 2019 to 2025. Valued at US$83 billion in 2018, that would put the 2025 market at a valuation of a whopping US$112.9 billion.
The growing demand for premium food is driving the pet food market to unprecedented growth during this forecast period. Dry pet food has always been the most convenient option for pets given its lack of need for refrigeration, easy storage, and less messy compared to wet food. The new wave of premium, health-forward, dry pet food products is carving a niche in the demand for kibble.
Wild Earth, a company that produces plant-based organic pet food (including their signature kibble) successfully raised a US$23 million funding round, with investors among the likes of Mark Cuban, as it looks to move into cell-based meat products.
There are several prominent pet food companies on the market today to keep your eye on.
Chewy ($CHWY) – US$27.36 billion
Founded by Ryan Cohen, current chairman of GameStop ($GME), Chewy was originally known as “Mr. Chewy” when it was conceived in 2011.
The e-commerce pet food retailer hired employees and executives from Amazon, PetSmart, Whole Foods, and Wayfair. By 2017, the company grew to US$2 billion in annual revenue and 51% of ecommerce pet food sales in the U.S.
This prompted PetSmart ($PETM) to purchase the company for a staggering US$3.35 billion, the largest e-commerce acquisition at the time. Chewy went on to create Chewy Pharmacy, an online pharmacy providing prescription medications for pets in conjunction with in-house veterinarians.
52-week low: $55.81
52-week high: $120.00
Today (October 21, 2021): $65.50
Freshpet ($FRPT) – US$6.7 billion
Freshpet is a pet food company specializing in cat and dog food that is marketed as fresh, and required refrigeration upon the point of sale. Founded in 2006, The company was offered a US$2.1 million grant from the Texas Enterprise Fund to build a plant in Ennis, Texas.
Brands under the Freshpet umbrella include Freshpet Select, Vital, Nature’s Fresh, Dog Joy, and Dognation.
52-week low: $113.41
52-week high: $186.98
Today (October 21, 2021): $154.51
Petco Health & Wellness ($WOOF) – US$7.16 billion
Petco Health & Wellness owns and operates a plethora of pet stores. They offer dogs, cats, birds, fish, reptiles, and other types of animals.
What sets $WOOF apart is the pet health & wellness, training, adoption, and veterinary services they provide, making them a one-stop shop for pet owners.
52-week low: $17.86
52-week high: $31.08
Today (October 21, 2021): $23.56
The Original BARK Company ($BARK) – US$1.13 billion
The Original BARK Company is a leading global omnichannel canine brand that operates both on a direct-to-consumer level, as well as commerce. They provide products, services, and even content for dogs through monthly subscription models.
52-week low: $6.07
52-week high: $19.54
Today (October 21, 2021): $6.61
Did you know? An omnichannel marketing strategy allows teams to meet their consumers where they are, with the right message, at the right time. Through omnichannel marketing, organizations can deliver a unified customer experience that acknowledges the previous touchpoints along the customer journey.
Pet Health
According to APPA, people in the U.S. spent US$72.56 billion in their pets in 2019; US$10 billion of this was on prescription drugs for animals alone.
The global animal health market size was valued at US$45.4 billion in 2020 and is expected to grow at a compound annual growth rate (CAGR) of 9.0% from 2021 to 2028, leading to a projected market size of nearly US$83 billion.
The growing trend of pet ownership and companion animals is fueling growth for the pet health sector. Medicines for companion animals is readily available as this segment of the market is projected to take up 60% of the market share. Companion animals are living longer than ever in today’s world.
The product segment of the animal healthcare market consists of pharmaceuticals (US$29 billion in market value alone in 2018), veterinary services, and medical devices.
Online veterinary services have been rapidly growing in availability and popularity. There is a wide array of services available for pets today, not to mention a strong geographical network of veterinary distributors that provide extensive product portfolios to veterinary clinics (online and storefront) and hospitals.
There are a few innovative investment opportunities in the market today that provide exposure to this growing sector.
PetIQ ($PETQ) – US$733.4 million
PetIQ manufactures and distributes health and wellness products for dogs and cats. Operating in the U.S., the company offers a variety of services, including pet prescription medications, over-the-counter flea and tick preventives, treats, and wellness supplements.
52-week low: $23.52
52-week high: $46.00
Today (October 21, 2021): $25.00
Zomedica Corp ($ZOM) – US$499.5 million
Zomedica Corp. Is a veterinary health company that engages in the discovery, development, and commercialization of pharmaceutics for the growing companion pet market. By focusing on the unmet needs of clinical veterinarians, Zomedica helps propel pet ownership rates by making life easier for our furry little companions in every way it can.
52-week low: $0.063
52-week high: $2.91
Today (October 21, 2021): $0.511
And for those looking to stay diversified among the booming market of pets in all facets of the industry can simply look to PAWZ.
ProShares Pet Care ETF ($PAWZ) is allowing anybody with a brokerage account the ability to capitalize on their passion for pets by simply deploying funds into this bundle of pet market opportunities.
$PAWZ seems like the most straight-forward (and arguably safest) way to capture to proliferation of pet ownership and emerging trends within this diverse omni market.
52-week low: $60.00
52-week high: $84.20
Today (October 21, 2021): $83.08
The Pawsibilities Are Remarkable
It may seem strange we are talking extensively about pets and the stock market. However, when you think about it, we all love our pets, and need I say we all love money?
We most certainly would not be here if we didn’t love the stock market.
From the fast-growing recession-resilient market of pet food to the untapped opportunities in pet telemedicine, the potential of this industry is impressive.
Not to mention there has been increasing interest in pet insurance, which leaves plenty of room to innovate within the online veterinary market.
Among the rising trend of pet expenditures, medical care is high up on the list. As pet ownership continues to grow, many vets and emergency animal care centers have seen spiking volumes of patients (or should we say pawtients) and are having difficulty handling this.
Veterinary diagnostics are growing at 9% year-over-year. This is because according to APPA, millennials take their pets to the vet 25% more than boomers. Not only are households taking on more pets, but millennials are more active in their pet’s health status and the advancements of technology within the diagnostic and pet care industry are unprecedented.
One can only expect an abundance of capital to enter this space, which is fueling a market poised to be worth a quarter-trillion dollars in a decade.