Pets: They are an Investment

March 31, 2022 By Rasti Nikolic, FPQP® | Associate Financial Planner
Two dogs and cat. West Financial Services.

We Americans love our pets and are spending more and more money on their care and wellbeing. Based on the May 2021 ASPCA1  survey, 23 million American households acquired a pet during the COVID-19 pandemic. Concerns about potential challenges of pet ownership as people’s lives return to normal, post-pandemic have not yet reached a critical level, according to the survey. However, companies in the pet care industry, including those offering services and products from pet walking/sitting to custom food and medications, are experiencing growth.

Many pet owners see themselves as parents and they are spending more and more on pet health care insurance, high-tech devices for training, and even designer clothes. Long-term trends suggest that the pet care industry will continue to grow. Consider the following three factors if you are thinking you might want to invest in this area.

  1. Increased Ownership — as I mentioned above, pet ownership in the U.S. is wide and growing. The annual American Pet Products Association (APPA) National Pet Owners survey discovered that millennials now reflect the largest segment, at 32 percent of U.S. pet ownership2. Boomers and Gen X follow, at 27 percent and 24 percent, respectively. Gen Z is also represented with 14 percent of U.S. pet ownership  In terms of spending related to ownership, a LendingTree survey shows that Gen Z pet owners spend approximately $1,885 per year on their pet, compared to millennials ($1,195), baby boomers ($926), and Gen X ($1,100)3. From this data, it appears that millennials and Gen Z may shape this industry with their spending. 
  2. Prioritizing Pet Health — health care costs are the biggest expense for pet owners, and companies that provide these services and products within the pet industry have experienced outsized growth. Trupanion, a medical insurance provider for pets, announced their Q4 2021 results during a conference call on February 16th. While total revenue increased by 39 percent over 2020, and subscription business revenue increased by 28 percent, the company reported higher net losses due to increasing stock-based compensation and higher acquisition costs4. This combination of factors shows growth and consolidation in the industry.
  3. The Petrepreneur — there’s a wave of innovation and research in the pet food industry, as demand for more human-grade quality in the food we provide for our pets continues to rise. Over the last two years, the market witnessed over 110 new launches in dog treats alone, followed by cat treats and wet cat food5. Mars and Nestle lead the global pet care industry due to their dominance in both developed and emerging markets. However, local companies are challenging in select markets and newcomers such as Rover6 and Bark7, may also start to have a larger global presence.

In looking at investment opportunities, we often lean into the Warren Buffet advice of buying what you know. We love our pets and know from experience how much we are spending on their care. While you could research and purchase stocks that have a presence in that market, and you may be surprised by how broadly you can apply that filter, you may also be able to find broad exposure to companies participating in the global pet-care industry through a targeted ETF. 

If you want to learn more, please reach out to one of the team members at West Financial Services — we are here for you!

Meet Rasti Nikolic, FPQP® | Associate Financial Planner »

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