The Global Pet Industry
Puppies, kittens, and Instagram dogs are all adorable. Americans are increasingly spending money on their pets.
Cats are also vacationing in luxury at Morris Animal Inn.
The inn has luxurious lodgings, including condominiums and cat suites with plush mattresses and flat-screen televisions.
This and other pet meals are created using human-grade ingredients. That's become the industry norm for the new fresh dog food craze.
USA Expenditure on Pets
In 2018, the United States spent $72 billion on pets. Around $3 billion higher than the previous year. You can see how quickly the industry has grown if you look at the statistics since 1994. The rise of the pet sector shows no signs of slowing down. According to one estimate, the number of dogs and cats in the United States may grow faster than the human population. People are even purchasing pet insurance to assist pay for medical operations and extend the lives of their dogs. Here's how America's fondness for pets grew into a multibillion-dollar industry.
Pets are popular among Americans - but not just in the US! In Asia too! For example, the Hong Kong pets space is booming.
In 2022, roughly two out of every three homes in the United States had a pet. Dogs and cats are the most popular companion animals in American households. Birds and horses are ranked third and fourth, respectively.
The number of cats and dogs in the United States is expected to expand at a greater rate than the US population. The human-pet interaction has altered dramatically over the last 30 years, bringing humans and animals closer together than ever before. Years ago, we didn't have the same level of understanding of animal welfare as we do now. So, for example, what people used to do with their animals that were widely acceptable may include things like tethering your dog outdoors to a dog house. We now see that tying a dog out there isn't really the best idea for a variety of reasons, not the least of which is that there are weather concerns and the dog isn't receiving adequate social connection. We're coming to learn that these are sociable creatures who want to spend time with humans, thanks to our increased understanding of animal welfare. Nancy Gee was her name.
She and Rebecca Douglas produced a report in 2017 concluding that the interaction between people and animals in the United Kingdom has gotten more intense and responsible since the late twentieth century. People are starting to think of their dogs as family members, not necessarily as people. Recognizing that they are more than simply an animal and that they are a vital member of the family, etc. And I'm not saying it hasn't been done before. But I believe it is now much more widespread and acceptable. People used to only spend money on their dogs when the economy was doing well. However, when pets become more like family members, pet owners are more inclined to provide for their pets' needs during difficult times.
This phenomenon is referred to as "pet humanization" by industry professionals. And here's who's behind the wheel.
Demographics have a role in the pet industry's recent expansion. You have the aging generation, the empty nesters, who are adopting more and more pets as a result of their lack of children. But there are also the millennials, who are postponing the birth of children and keeping more pets. And then you combined the two. In the United States today, seven out of ten homes have pets, which is more than double the number of children. Humans are expanding their horizons beyond basic food and medical care. We've started treating our dogs like we would ourselves. In order to do this, pet owners are purchasing luxuries such as premium pet food, daily vitamins, electronic devices, apparel, and even matching streetwear.
At BBC, they ran an informal poll to see how much individuals spend on their dogs. Bubba is my name. He's an eight-year-old pit bull that adores napping and is adored by our entire family. We spend roughly $1700 a year on him. His monthly allergy medication is the most expensive thing we buy for him. That works up to roughly $100 every month. For his allergies, he needs special food, which costs around $60.
Every two months, we spend roughly $45 on her litter, hay, and food in general. The cost of our other pets is a little higher. It costs roughly $110 each month to feed my two dogs. It costs $60 every two months to groom them. They're both taking medication from the veterinarian. So it'll cost you $45 every month. I'd think the total cost of their vet bills for the year is around $800. Chewy is his name.
In 2018, the typical American household spent $662 on their pets. Although this is a minor dip from 2017, it still indicates significant progress since 2013. Investors are desperate for a means to profit from the increasing trend. Exchange-traded funds, a group of equities related to one index or, in this case, one industry, have been one method to get a pulse on the business. PAWZ, a ProShares ETF that follows public firms in the pet market, is available.
The FactSet Pet Care Index is followed by our ETF. These firms, for example, increased their earnings by 12% in the second quarter.
And we all know that earnings growth is difficult to come by in the current atmosphere. As a result, it's affecting the bottom lines of these businesses. Pet health care accounts for little under two-thirds of the ETF, with the remainder, made up of pet supplies and retail, as well as, of course, pet food. And it's not unexpected that a significant portion of this is in the pet health care industry, since that's where much of the opportunity in pet care lies.
Pets are becoming older and need more and more medical attention, and people are treating their pets as part of the family. So there's a huge investment there, as well as a huge potential. And, as far as I'm concerned, there is no Medicaid for dogs. There's a real chance to generate money there that isn't influenced or impacted by government policies and actions. Dave Westenberg is someone you should get to know. He's a Guggenheim analyst who authored 138-page research on the pet market for investors. It looks ahead to 2024 to see where the future of pet care will take us.
After the recession of 2009, when everyone was striving to find growth, the business became appealing to investors, he argues. "A six percent growth rate with recession resilience is a favorable profile for enterprises, particularly in the post-great recessionary environment," he adds. The animal health sector's stock has increased in value. In comparison, the S&P 500 returned 48 percent to investors during the same time period. Veterinary services account for a significant portion of pet expenses. In 2018, the average cost of a pet in the United States was $662.
Vet costs accounted for a little over a third of the total. Veterinary expenditure is driven by three key factors. One is the price, which is connected with GDP, and the total increase in pet growth, which is one to two percent. Then there's service intensity, which is essentially about the veterinary business becoming better businesses, which has roughly equaled the 6% growth phenomenon.
Pet Medical Treatment
Pet medical treatment is becoming increasingly sophisticated. C.T. scans, transplants, dentistry, and chemotherapy are increasingly available for pets. Owners desire that they live longer, healthier lives.
And, as vet expenses mount, more people are opting for pet insurance instead of paying for operations out of cash. Currently, less than 1% of pets in the United States are insured. That number, though, is projected to climb. In Sweden, for example, 30% of dogs are covered by insurance. By 2024, the pet insurance market in the United Kingdom might be worth two billion pounds. Employers are increasingly providing pet insurance coverage as a benefit.
This urban environment is also home to the largest insurance markets. Access to veterinary, acupuncture, oncology and dermatological services are all linked to the urban environment. All of these services are quite costly. As a result, everything is interwoven. Customers that desire to visit this type of establishment will also be those who purchase insurance. More visits to the veterinarian, along with the burgeoning pet insurance business, might result in an increase in veterinary positions. According to the Bureau of Labor Statistics, by adding to the economy, the economy will grow.
This is a 19% increase since 2016.
As investors pour money into pet companies, it's easy to lose sight of what the fundamental causes driving the industry's expansion to imply for our pets. It's part of a broader trend of animal rights and protection that dates back decades.
It indicates that their lives are improving and becoming longer. When you look at the history of animal welfare agreements, you'll notice that it was mostly in the realm of protected animals.
So organizations like the RSPCA date back to that time, and there were animal protection groups that grew significantly in the late 20th and early 21st centuries.
And I believe this is due to two factors, one of which is that animals may be given a greater position. But, I believe, it is partly because of the culture we currently live in that it must be more regulated. So many of the rules addressed in that study are regulating them to make them fit in with human civilization as well, not only for the welfare of the animals. Animal shelters are increasingly euthanizing fewer pets.
One out of every four dogs in the United States lived on the street in the 1960s. Advocacy initiatives urged dog owners to be more responsible by sterilizing, microchipping, and licensing their pets with their local governments in order to solve the national issue. In February of this year, Congress presented a law dubbed the 'Welfare of Our Friends Act,' also known as the Wolf Act.
It would cancel the licenses of dog breeders who broke the rules. Twenty-nineteen congressmen submitted a measure in January that would make animal abuse a federal felony. PACT, or the Preventing Animal Cruelty and Torture Act, goes beyond an Obama-era animal cruelty statute by making deliberate, crushing, burning, drowning, suffocating, and impaling of an animal a direct violation.
Preventing Animal Cruelty and Torture Act
President Biden signed the bipartisan bill into law in late November 2021 after it was unanimously passed by Congress. While greater ownership and government control have improved the level of living for pets, it is possible that this is not what evolution intended. Pet ownership guidelines, according to experts who research companion animals, maybe for the benefit of humans rather than the animals.
Fortunately, the notion of responsible pet ownership is poorly defined, to begin with. When we discuss what it means to be a decent pet owner, many people will suggest that we must give good food. Housing must be provided. We must ensure that our creatures are pain-free. On those three points,
I believe the majority of people will agree. But, if you get into the nitty-gritty of what it takes to be a good pet owner, do you really need to take your dog or cat to the vet once a year? Is that sufficient? Some people may not believe they are required to do so.
That's all there is to it. You give them their injections and that's it. You simply let them live their lives. What we're witnessing, I believe, is a wide range of viewpoints on what constitutes proper pet ownership.
Regardless of pet parenting preferences, the pet market continues to grow. Take a look at all the Instagram profiles dedicated to dogs and cats.
Wall Street, too, wants to join in the fun.