Pet ownership on the rise
In America, pet ownership has increased at an unparalleled rate; according to one estimate, 70% of homes, or nearly 90.5 million people, currently have a pet. According to data, the $100 billion pet economy will almost triple to $275 billion by 2030 as a result of an increase in new owners, favorable demographics, and, most crucially, higher per-pet spending.
Investors may already be able to see cash signs, but with this expansion has come more competition for consumer dollars. In order to challenge established industry giants, more startups are entering the market, but not all of them have what it takes. What then does a wise investor do with their money?
In our opinion, the next frontiers for growth in the pet industry are better-for-you (BFY) pet food and pet treats, disruptive healthcare models like telehealth and over-the-counter (OTC) medications, overall pet wellness, and more modern needs like gut health, anxiety, or supplemental nutrition. At Emil Capital Partners, we’ve spent years identifying, investing in, and supporting the next great consumer brands.
First of all, BFY is no longer limited to humans. Digital natives of all generations—especially millennials—are accustomed to spending hours online shopping for the highest-quality products for themselves as consumers, and they tend to spend more time online looking for better solutions for their dogs. As a result, they are increasingly supporting solutions that are specifically tailored to their needs as well as those of their pets: More than 50% of pet owners surveyed indicated that they would be willing to spend more for eco-friendly pet care items, including food, given that the global market for natural pet food is worth $22.8 billion. 60% of dog and cat owners questioned in the US expressed concern about the diet of their animals. According to a poll conducted in 2020, 41% of dog owners and 39% of cat owners respectively purchased premium pet food.
As an illustration, consider the rising appeal of gourmet fresh artisan pet food. With the help of technology and veterinary knowledge, a service like this enables consumers to customize recipes for their pets, ensuring that they receive the proper amount of food based on their pets’ weight, breed, age, activity level, and other factors.
Healthcare Models That Are Disruptive
Pet owners spent more than $32 billion on veterinary treatment and product sales in 2021, which shows how expensive vet costs have long been a problem for pet owners worldwide. The need for more options to maintain the health of furry family members, however, has been long-repressed and is now being met by more comprehensive and lifelong insurance policies. Additionally, we observe a wider range of clinical diagnostic instruments and more comprehensive veterinarian treatment regimens. In 2020, approximately 3.5 million animals in North America alone obtained private health insurance, paying more than $2 billion in premiums.
Leading merchants are stepping into the healthcare sector, making it abundantly evident that this is a sector with significant upside potential.
Startups, however, are also vying for loyal pet owners who take their pets’ health seriously and are seeing quick success in this pet economy. After raising a seed round in January 2022, Get Joy has already branched out into on-demand veterinary services in addition to food. PetFriendly, on the other hand, guarantees “human-proof” customized subscription boxes for nutrients and flea and tick treatment with unique packaging that features pictures of pets. A solid entry-level product is a good start, but creating retention among customers requires offering many products together with value-added services, information, or customization. Look for firms who are thinking beyond the first steps into the market here.
Modern Pet Wellness
Pets are now embracing human trends including gut health, mental health, immunity, oral care, skin care, and anti-aging through supplements and other goods. A $5 billion industry on its own, grooming parlors is now pet spas featuring animal-friendly mani-pedis, bodywork like massage, and more. However, for investors wary of capital-intensive retail expansion, there may be a more lucrative opportunity in pet health.
Let’s discuss dietary supplements. The market leader in this section of the pet economy is Zesty Paws, which was acquired for $610 million last year, offers treat-like items like chew sticks laced with hemp, and salmon oil to aid with skin, stress, and allergy concerns, as well as probiotics to improve intestinal health. It is the most popular “multi-condition pet supplement brand” in the US, and since 2020, its two-year CAGR has been a staggering 62%.
Instead, some companies are putting more of an emphasis on helping pets look their best with items like toothbrush wipes or other tooth-cleaning substitutes, techniques for getting rid of tear stains, and naturally derived ear-cleaning solutions. Due to its skin-clearing qualities, witch hazel, for instance, has long been a mainstay in human skin care. Now, it is a component of cleaning wipes for pets because of the sensitive skin around their eyes and ears. This demonstrates the ability of products like this to appeal to all parts of the pet market. It not only appeals to pet owners concerned with health but also to those whose pets frequently appear on social media and need to look their best.
It is more crucial than ever to provide goods or services that help customers in the real world and add actual value in today’s macroeconomic environment. Consumers increasingly demand the same standards for their pets as they do for themselves or other family members, according to the expanding pet market, which includes everything from food to health to well-being. The pet market is changing even more quickly due to the trends in consumer brands that we have been buying for years. Investors that are ready to put money toward new pet economy trends and goods may find their portfolios to contain some new best pals.
For More Economic News, Click Here.