If you love your pet, you’re not alone. Pets are becoming an increasingly important part of people’s lives, which means the pet industry is booming. However, before investing, it is important to learn about the field. So, in this blog post, we’ll give you a complete guide to investing in pet stocks.
There is a wide range of options for investors who want to place their money in pet stocks in today’s market, from companies that provide pet food and supplies to those offering veterinary services and animal care. Here we provide an overview of some of the top pet companies on the market, so investors can decide which is the best fit for them.
What are pet stocks?
As more Americans become pet owners, the market for pet products and services is expected to increase. This article explains what you need to know about the growing pet industry. Pet stocks are the products and technologies of companies that support the pet industry.
The pet industry is a broad industry that consists of various subcategories such as pet food manufacturers, supply retailers, insurance providers, pet pharmaceuticals, diagnostics, and veterinary services. The competition within pet stocks is heating up as more companies are likely to go public. However, there are also some established pet companies to take into consideration.
Understanding the pet industry
The pet industry, also called ‘petconomy’ refers to the various activities associated with raising and owning companion animals.
In addition to toys, healthcare, and food, new pet-related market segments are emerging. These products and services include kindergarten, appliances, taxis, hotels, funeral arrangements, and theme parks.
There were approximately 393 million pets in the US alone between 2017 and 2018. The American Pet Association valued the total amount spent on pets in the US at over $72 billion. In 2018, the total amount of pets in Europe was more than 158 million, by an estimate. We can divide the expenses for these animals into various categories such as food, medicine, shelter, veterinary services, and animal purchase for the purpose of companionship.
The most common pet in the US was the dog, which approximately 63.4 million households owned, according to the 2019-2020 APPA National Pet Owners Survey. The cat is the second most popular animal after the dog, with 42.7 million Americans owning one. The third place went to a freshwater fish. According to the survey mentioned above, 11.5 million American households own at least one freshwater fish.
Furthermore, about 5.7 million households own a bird, 5.4 million households own a small rodent, and 4.5 million own a reptile. At the same time, the number of households owning a horse and a saltwater fish came down to 3.2 million.
How to invest in pet stocks
According to expectations, the pet industry will triple in size by 2030 due to a surge in new owners and favorable demographic trends. Although the pandemic has negatively affected humans, it has been a blessing for pets. Since people were home all day, their owners took time to treat their pets.
According to Morgan Stanley, the number of Americans who own pets has increased significantly during the pandemic. The demand for pet care has also remained resilient during the recession. In addition, the rise of the millennial generation and the formation of new households will likely drive the demand for pet care in the future.
A survey conducted by AlphaWise revealed that 66% of US households have at least one pet. Even more significantly, 69% of respondents agree that their pets are important and see them as family members. In addition, 37% claimed that they would pay for their pet’s medical expenses. Furthermore, Gen Z and Millennials are more likely to sustain the trend of increasing pet ownership. According to the same survey, 65% of GenZ/Millenial Americans plan on acquiring or adding a pet within the next five years.
The amount that Americans are willing to spend on their pets has remained stable. They are also less inclined to cut their pet spending even when their income drops. A survey conducted in October 2020 by the American Pet Products Alliance found that 66% of pet owners said their spending hasn’t changed in the past month.
Key pet stocks categories
We can divide pet care into various categories. The first category that comes to mind is usually food and treats. However, animal health is in line to be the biggest subsegment in the next decade. As technology has improved and veterinary services have become more sophisticated, it has become more important for pet owners to consult their veterinarians when purchasing food and treat products.
On the other hand, e-commerce is becoming more prevalent in the pet industry, and this loyalty to the vet can be problematic for e-commerce businesses that sell pet supplies.
Other exciting ways to invest in pet stocks are through the flourishing pet insurance industry and retailers with scale.
Here is a list of pet industry subcategories:
- Pet food companies
- Pet health companies
- Pet insurance companies
- Pet store companies
- Pet supply companies
The future of pet stocks
The global pet care market reached $232 billion in 2021. Expectantly, it will reach a total of $354 billion by 2027, with an estimated compounded annual growth rate of 6.1%. While the US and Western Europe are mature markets, they still have the potential to contribute to the global market’s growth.
Despite the slow growth of the retail pet market, the online pet market has gained significant popularity. The rise in pet ownership rates will likely create new opportunities for the industry. In addition, within the e-commerce sector, the customer preference for buying pet products online will predictably grow at a robust rate of 9.4%.
Whether it’s a rise in the number of households with pets or an increase in the number of pets, the expansion of the global pet market is expected to create new opportunities for businesses. Nevertheless, the highest potential for the pet industry is presumably online. The traditional model of the pet industry is no longer as relevant for consumers due to the emergence of new digital platforms. The digital disconnect between consumers and pet retailers presents an opportunity for e-commerce brands to capture market share.
As Baby Boomers are no longer the majority of pet owners, the industry has to evolve to meet the needs of today’s consumers – the Millenials. Therefore, pet companies can not ignore the importance of marketing in the digital space. According to a study conducted by eMarketer, most millennials are actively using social media, whereas less than 50% of Baby Boomers are actively on these platforms. Furthermore, the nature of consuming content on social media allows pet companies to fit into the realm of shareable content seamlessly.
As a response, pet companies should rise to the challenge and provide dual-channel retailing, improved cost controls, advanced home delivery, and faster fulfillment.
Some of the risks involved with investing in any company, including pet stocks
The competition will always be there for any sector that has rapid growth. The pet industry is no exception. However, the way we shop for pet supplies is changing as the pandemic caused a surge in e-commerce. With the rise of e-commerce, many businesses found themselves in a dilemma: they had to relocate, or they didn’t survive.
The future of the pet industry is still unclear, but it is clear that the rise of pet ownership has caused competition to increase.
Smaller and more affordable pet stocks may not be able to provide the same level of returns as established ones. On the other hand, well-established pet stocks may be too expensive to buy. Although all investments carry risk, those in fast-growing industries such as the pet industry usually tend to be more volatile.
Pet food stocks
Pet food is a recurring purchase, which means pet owners buy dog food regularly. This allows food companies to maintain a steady revenue stream and attract loyal customers. Despite the recession, the demand for pet food has remained stable. During the 2008 financial crisis, sales of pet food increased. This scenario repeated even in the early stages of the pandemic. In other words, pet owners are willing to spend on their furry friends even during times of financial difficulties.
Within the US, the pet food segment is responsible for most of the $30.9M revenue generated in 2020, including supplements and treats. According to expectations, premium pet food products will see higher demand due to the increasing popularity of organic and natural food products, which means operators could earn more from their sales.
An increasing number of consumers having access to online stores has also contributed to the steady growth of the pet food market.
Pet health stocks
The rise in pet ownership and spending on pets due to the COVID-19 pandemic has benefited the Animal Health industry. As the world went into lockdown due to the pandemic, pets became a source of comfort and distraction.
There has been an increase in the usage of diagnostic tests and medicines for pets, which boosted the revenues of animal-health companies. Animal health is undergoing transformational change. Pets are being treated with the best care and are getting adopted more.
According to a report by Grand View Research, the global animal health market will reach approximately $99.51 billion by 2028, at a robust 8.2% compound annual growth rate. The rise in the number of animal-related diseases globally has led to the creation of new opportunities for the animal health industry. Experts also attribute this to the increasing number of companies focusing on improving their product offerings, especially regarding food-borne diseases and controlling pathogen contamination risks.
Pet insurance stocks
Imagine that your pet suddenly requires expensive surgery due to an illness or injury. Unfortunately, this is a common scenario when it comes to pet ownership. Luckily, there’s a way to avoid this issue by purchasing pet insurance. It’s similar to a medical insurance policy that’s designed to cover the costs of treating a pet.
Pet insurance companies are flourishing and are creating opportunities for investors. However, before you decide to invest in insurance-related pet stocks, make sure that you thoroughly evaluate the company’s operations.
Here are some points worth considering:
- Cash position is a vital component of a company’s financial strength. Therefore, it’s important to make sure that it has the necessary resources to pay the legitimate claims of its customers.
- Some companies solely rely on pet insurance, while others generate a portion of their revenue from other sources. Therefore, it’s also important to understand how much revenue a company generates from other sources. This strategy helps evaluate the company’s long-term growth potential.
- The free cash flow is the amount of cash that a company has left after paying for its capital expenditures and operating costs. It’s a vital metric that a company should keep track of to avoid potential issues in the future. For example, a company that doesn’t generate stable free cash flow could be forced to liquidate its assets to cover its expenses.
Downfalls to investing in insurance-related pet stocks
- Declining pet ownership could also affect the profitability of certain insurance companies. For instance, the next economic crisis could make it difficult for many households to afford a pet.
- Since pet insurance companies base insurance policies on projections of expected medical costs, they can’t always predict how those costs will go. Medical costs could rise unexpectedly. As an example, a new virus could affect pets’ health, which could cause an unusually high number of claims.
- As more households become pet insurance customers, the competition in the market could increase. This could cause the profitability of pet insurers to decline as they would increase their marketing costs and possibly adjust prices to be more competitive.
However, pet insurance companies have good reasons to perform well over the long term despite the risks as the rise in pet ownership has become more prevalent globally.
In addition, the pet insurance markets are mainly unpenetrated. For example, in the U.S., less than 1% of pets are covered by insurance. At the same time, numbers aren’t much higher in the UK and Canada.
Pet store stocks
Petsmart and Petco are the largest retailers in the industry. Both chains hold a dominant position in the pet industry. According to the Pet Business’ Top 25 Retailers list, both chains added multiple stores in 2019.
Despite the increasing number of stores, the competition from online retailers and mass merchandisers remains fierce. According to a report by IBIS World, traditional brick-and-mortar stores have already established themselves as providers of high-quality food and services to their customers. However, pet companies with digital aptitudes are strongly progressing.
We can attribute the success of these companies to the advancements in technology that are driving change in the pet industry. As a result, the landscape of pet stocks is getting increasingly interesting for potential investors.
Pet supply stocks
Aside from food and pet care, the pet supply market also includes various products such as clothing, bowls, and carriers. These niched products are growing slowly but hold promising prospects. Experts believe the main focus point in this industry will be on trendy and multifunctional pet accessories.
According to expectations, the demand for pet parenting will drive the growth of the pet supply market. This trend involves providing products that cater to the pets’ needs.
Pet supply retailers face competition from mass merchandisers as well as from smaller establishments. The presence of regulations also leads to the expansion of the operations of smaller stores, which are usually not bound by the same laws.
Through the introduction of new products, online retailers can benefit from the steady growth of the pet supply industry. They can achieve this through the emergence of exclusive niche products and higher differentiation. This strategy will help pet supply retailers stand out from the crowd and position themselves as leaders in their industry. Similarly, investors should keep an eye on pet stocks with a diverse and differentiated portfolio.
Top pet stocks on the market
During the pandemic, the rise in pet ownership has led to a massive rally in the pet stocks landscape. Moreover, some fund managers believe it could still be an investment theme once the pandemic ends.
Take a look at our list of notable pet stocks on the market.
Elanco Animal Health
Elanco Animal Health is a US pharmaceutical company that produces vaccines and medicines for animals. It was previously a part of Eli Lilly and Company and is now the second-largest animal health firm globally.
History
- The company traces its origin back to the 1950s, when Eli Lilly introduced its first antibiotic in animal health.
- During the 1970s, the company expanded its operations by establishing 38 international affiliates and 17 production locations.
- After the 1980s, the company shifted its focus from plant sciences to animal health.
- In 2007, the company acquired Ivy Animal Health.
- In 2008, it partnered with Heifer to address food security issues in developing nations.
- In 2012, the company acquired ChemGen Corp. to develop enzymes for food-livestock absorption.
- In 2014, the company purchased the assets of the Lohmann Animal Health for an unknown sum and the Novartis Animal Health for over $5 billion.
- In 2018, Eli Lilly announced that it plans to separate its animal health division from the rest of the company through a stock-ticker symbol ELAN.
- In 2020, the company announced its new global headquarters in Indianapolis.
- In August 2021, Elanco acquired Kindred Biosciences, which would have enhanced its existing pipeline of products.
Company website: https://www.elanco.com/
Zoetis
Zoetis Inc. is a US-based company that’s the world’s largest producer of vaccines for pets and livestock. It was formerly a subsidiary of Pfizer, which became the world’s largest drugmaker. However, the company is now independent.
The company sells its products in more than 100 countries. Its operations outside the US accounted for about 50% of its total revenue. Following the spinoff in June 2013, the company became a part of the S&P 500.
In 2015, the company acquired Pharmaq for $765 million. Later on, in 2017, it acquired the Irish company Nexvet. Finally, in August 2021, the company agreed to purchase the Canadian company Jubirox.
Zoetis has a manufacturing network that includes 28 facilities in 11 countries. The company designed these sites to meet the safety requirements of the US Administration. In addition, many of the company’s R&D operations are housed at its manufacturing sites. This allows them to collaborate and develop new products faster.
The company has a headquarters in Parsippany, NJ, and up to ten thousand employees. Zoetis is publicly listed on The New York Stock Exchange with the symbol ZTS.
Company website: http://www.zoetis.com/
Idexx Laboratories
IDEXX Laboratories, Inc. is a multinational corporation that provides a broad range of products and services for the animal health industry. Since 1983, the company has been working to improve the lives of animals around the world. As of February 2020, it has approximately 9,200 employees. Headquartered in Westbrook, Maine, the company offers its products in over 175 countries worldwide.
It has three main divisions: the Companion Animal Group, the Water and Livestock, and Poultry and Dairy. The company also offers pet-side SNAP tests for various pet health diagnostics.
Water testing
The company’s Water segment offers a variety of microbiological products for detecting different types of bacteria in water. These include Colilert-18, Colilert, and Colisure.
Companion Animal Group
The company’s Animal Health group provides in-clinic laboratory equipment that pet owners use to monitor the conditions of their animals. The company’s laboratory equipment includes various products such as the ProCyte Dx Hematology Analyzer, Catalyst Dx Chemistry Analyzer, the LaserCyte Hematology Analyzer, and the Snap Pro analyzer.
Livestock and Poultry Diagnostics
The company’s Livestock and Poultry Diagnostic division carries out tests aimed at detecting different diseases in poultry and livestock. These include the Avian Influenza, Bovine Viral Diarrhoea Virus, and the Porcine reproductive and respiratory syndrome.
Idexx Laboratories is one of the pet stocks listed on the NASDAQ Stock Exchange with IDEXX.
Company website: https://www.idexx.com/
Trupanion
Trupanion is an insurance company that provides pet insurance in the US, Australia, Canada, and Puerto Rico. It’s managed by The American Pet Insurance Company.
In 1999, Rawlings founded Trupanion as a subsidiary of the Canadian pet insurance company Vetinsurance. In 2005, the company expanded its operations into the US after becoming the first North American company to offer its own underwriting.
Two years later, in 2007, the company raised $22 million funding from a group of investors, including a private equity firm and a reinsurer. In addition, the company secured Series B funding in 2008 and in 2011 Series C funding. Both were led by the Highland Consumer Fund.
Trupanion is also a founding member of the North American National Pet Health Insurance Association, which helps educate pet owners about the veterinary industry.
Trupanion’s headquarters is in Seattle, Washington, and employs up to 1000 employees. This pet stock is public with a listing on The Nasdaq Stock Exchange and the symbol TRUP.
Company website: http://trupanion.com
PetIQ
PetIQ was created to improve the lives of pets through the use of veterinarian-recommended products. The firm features a variety of over-the-counter and prescription medications for pets, pet treats, and various health & wellness products.
The company’s portfolio includes a variety of brands such as PetAction, Minties, and Advecta. They are also distributed through a network of retailers.
The company’s main manufacturing facilities are in Springville, Utah, Plano, Texas, and Daytona Beach, Florida, while the main headquarters are in Eagle, Idaho.
PetIQ is one of the publicly listed pet stocks available on The Nasdaq Stock Exchange with PETQ.
Company website: http://www.petiq.com
Petmed Express
PetMeds is an online pet pharmacy. It sells non-prescription and prescription drugs for pets. It only accepts the written prescriptions of licensed veterinarians. Its competitors include other retailers that sell pet medication.
The company was founded in 1996 and currently employs up to 200 people. With headquarters in Delray Beach, Florida, Petmed Express stocks are available on The Nasdaq Stock Exchange with the symbol PETS.
Company website: http://petmeds.com
Conclusion on pet stocks
Pet stocks are a booming industry, and many new companies have entered the market recently. However, as more dog food brands emerge, it can be challenging to keep up with all of the changes in this field. In this article, we explained the pet industry and looked at some of the prominent pet stocks on the market today.
With the help of this guide, we hope you can make wise investment decisions to get maximum returns. If you have any questions, feel free to add them as a comment below!
We encourage you to be aware of our disclaimer policy.
This article was last updated on January 17th, 2022.
