THE PETCARE INDUSTRY OFFERS ATTRACTIVE  LONG TERM FUNDAMENTALS

The pet care industry continues to experience secular growth both in scale and the revenue it generates per pet. The former is driven not only by a growing population but also the higher rates of pet ownership amongst younger generations. The latter is a symptom of the increasing secular shift to “pet humanisation,” the phenomena of considering pets, and their dietary, medical, and other needs, as on par in importance with the human members of a family.

As per capita wealth increases across the developed world, people’s attitude to domestic animals changes. Nestle’s head of pet-food operations in Latin America, Carlos Romano, recently commented that the animal instinct kicks in when household incomes exceed $5,000 a year 1. Pets are moving from sleeping in the backyard and eating scraps from the table to having heated beds and specifically made nutritious pet food. According to a 2015 Harris poll, nearly all American pet owners (95%, up 4% from 2012 and 7% since the question was first asked in 2007) consider their pets to be members of the family.

The developing world is spending more on pets than ever before. The American Pet Products Association estimates expenditure on pet food, products, and services has been growing at a compound annual growth rate (CAGR) of +6% since 1998 3. Notably growth was uninterrupted during the Global Financial Crisis (GFC), reflecting the increasing priority pets have within households. Americans will spend ~$75billion on petcare in 2019, representing a +4% increase from 2018. As the chart below details, since 1960 consumer spending on pets in the USA has grown at a notably high rate.

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