In our human nature, we may be divided on various topics like politics, sports, religion, etc but we all agree on one thing; we do love our dogs! Our cats, too, plus a few other companion species. We’ve made pets part of the family.
More importantly, demand for pets is surging and strangely enough, household’s demographics has been slowly shifting – more people are preferring having pets than children!
Furthermore, a study conducted by the US Disease Control Centre shows that pets can lower blood pressure and provide several other health benefits for people with anxiety or suffering from dementia.
These are just some examples as to why pet demand is increasing, which in turn increases human expenditure in different forms into this industry... so what do the numbers say?
Pet industry is booming!
The U.S. pet industry surpassed $70 billion in total expenditures in 2017 (see bar chart below), and is expected to climb to $73 billion by the end of 2018. Globally, almost $150 billion is spent annually on companion pets!
68% of U.S. households have at least one pet, eclipsing the number of homes with children. Figures show that 85 million households have a companion dog or cat vs 42 million households with a child under 25 years of age. (see further statistics below).
Furthermore, just last year, packaged foods in the U.S. grew 1.2%, while retail pet foods grew more than three times as fast, according to the research firm Euromonitor.
In addition, the rise of millennial pet owners should translate to higher per capita expenses as the trend towards pet ownership, particularly among this younger demographic, increasingly precedes the decision to have children.
How can we gain from this trend?
Economies across the globe are still growing however we know that sometime or another, we will have another recession and people will start to control their spending. As an investor, you want to have your money in places whereby expenditure will not falter. No matter how tough life might get, human beings will not stop from caring for their pets.
A New York Times article also described the increasingly exaggerated ways in which some Americans care for their animal companions. You can now take your dog to a spa for massage and hot oil treatments, get him a personal chef, and maybe cosmetic surgery.
While these excesses will diminish in the next recession, the number of pets won’t. Nor will their owners’ commitment to them.
In other words, basic pet care is a consumer staple like food and electricity. And unlike some other staple categories, as we have already seen, it’s rapidly growing.
This really sounds like a very good investment opportunity… but finding the right prospects is not easy.
What are the investments available?
Many large companies are already seeing an opportunity and are consolidating their portfolio by acquiring companies in this sought after industry.
Human food manufacturers’ big names like General Mills and JM Smucker recently acquired pet food subsidiaries. Other huge brands like Mars (owns Pedigree Foods and Royal Canin), Nestle (owns Purina) and Colgate-Palmolive (owns Hill Science Diet).
Investors can of course gain pet food and wellbeing exposure through these companies, but these won't have as much pet industry exposure as a pure play in pet companies.
We will look at specific investment opportunities over the next couple of days! Stay tuned….