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The Retired Investor: Pandemic Has Been Good to Pet Industry

By Bill SchmickiBerkshires columnist
Bill and Titus.
Sales are increasing wherever you look in the pet sector. Toys, beds, grooming products, leashes, day care, you name it; the pet industry is experiencing double-digit increases in revenue. Better yet, there are few signs that consumer spending in this area will slow down anytime soon.
 
As readers are aware, the retail sector has been one of the hardest hit as a result of the coronavirus pandemic. The pet care industry is an exception to that rule. In the past, I have written extensively about how recession-proof the pet industry can be.  In both the 2001 and 2008 recessions, pet care sales grew between 5-7 percent. Consumer spending on pets has grown 36 percent in the past 10 years (ending in 2017). Edge by Ascebtial, a market research firm, is expecting the overall industry to reach $281 billion in sales over the next three years.
 
The pandemic is only accelerating this growth. COVID-19 has made owning a pet that much more important to Americans, in my opinion. In the time of plague, I have found that aside from my wife and family, there is no greater comfort than the emotional attachment a pet offers. As it turns out, I am not alone. The initial stay-at-home, lock-down period in this country triggered many to seek the companionship of some kind of pet, usually a cat or dog. 
 
Adoption and fostering rates soared, in some cases, by more than 100-200 percent nationally, according to Pethealth Inc.  In New York City, application rates actually reached an unbelievable 1,000 percent. 
 
What many pet owners discovered was that one of the benefits of working from home was that it allowed them much more time to care for a pet properly (as opposed to locking them up in a cage/crate all day). Plus, let's face it, there is nothing better than to get off a high-pressured, Zoom call with a client, or a domineering boss, only to receive a big lick, an offered toy, or the release of walking one's dog in the woods or park. 
 
Naturally, these new-found members of the family sparked a wave of demand for pet-care products. Online sales of companies such as Amazon or Chewy exploded, while internet-based pet services of all kinds saw an enormous uptick. Sales of dog food lead the charge. The U.S. pet food market is predicted to grow to be a $13.3 billion market by 2023. In a recent example, Nestle, the Swiss-based food conglomerate, just reported nine-month earnings this week. It identified their Purina PetCare business as the number one leader in growth worldwide this year.
 
The pet industry is also working to identify and adapt to the latest industry trends to maintain their good fortunes. Proactive, healthy ingredients in pet food is a massive trend in the industry. Back in the day, when Titus, our chocolate Lab, was a puppy, I bought 50-pound bags of Purina dog chow on sale for $25 at Tractor Supply. Today, we are on automatic re-order of 26-pound bags of a protein-dense, grain-free, dry food for $63.67 every month from Chewy, plus we throw in a 12-can case of canned food for $48.28 (also nutritional). You do the math. Is it any wonder companies such as Chewy's have seen their stock price go through the roof?
 
Whether its vet bills, pet insurance, doggy day care, or pet grooming, the cost of owning that pet just continues to go up, but it doesn't stop us. More than half of all Americans own a pet and that was before the pandemic. 
 
There are also trends that are less than healthy. For example, over half of all U.S. pets are obese, due to overeating and inactivity. But that is still lower than two-thirds of their owners, who are either overweight or obese. COVID-19 may have an impact on that trend as well. 
 
More Americans, stir-crazy from sitting at home with little to do, are actually getting off the couch. They are putting on their sneakers, or hiking boots and exercising outdoors. Better yet, they are taking their pets with them.  
 
As a pet owner and outdoor enthusiast, I have long argued that pets, especially dogs, need exercise and stimulation, as do their owners. Letting our pets out to do their business in the backyard does not qualify on either count. So, it warms my heart to see so many pets walking alongside their owners enjoying the great outdoors, despite, or maybe because of, the pandemic.
 
Bill's forecasts and opinions are purely his own and do not necessarily represent the views of Onota Partners Inc. (OPI). None of his commentary is or should be considered investment advice. Direct your inquiries to Bill at 1-413-347-2401 or email him at bill@schmicksretiredinvestor.com.
 
Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of OPI, Inc. or a solicitation to become a client of OPI. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by OPI. Investments in securities are not insured, protected or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct. Investments in securities are not insured, protected or guaranteed and may result in loss of income and/or principal. This communication may include opinions and forward-looking statements, and we can give no assurance that such beliefs and expectations will prove to be correct.

 

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