| Pets: Rising Ownership and Willingness to Spend Drive Opportunities for Innovation |
by Adam Lebovitz, Slow MBA Intern
To say that everything has changed with COVID-19 is an understatement. Speculation around systemic shifts in how we work, how we socialize and dine, how we consume and how we spend have populated the internet as Americans have sheltered-in-place. Over 50% of the world's population has experienced some version of social distancing or restricted movement, and products that enable remote connectivity have flourished, while those dependent on IRL experiences have suffered.
In a world where many of us haven't seen our best friends in well-over a month and families have begun to bicker, we've also seen people turn to man's best friend as a source of companionship. By late March, New York City was running out of dogs to foster and the pet industry had exploded (for instance, Chewy's (NYSE: CHWY) stock up nearly ~60% this year).
Pet ownership had already been on the rise, up 56% since 1988, with more households now having pets than children. The global pet care market was estimated at $131.7B in 2016, and estimates project the market to top $250B by 2025. Growth has been driven by an increase in aging owners (40% of those 70+ own pets), millennial owners (who are waiting longer to have children; now 7 in 10 own a pet), and an increase in multi-pet, multicultural and Hispanic households with pets. Even if the majority COVID foster households don't convert to permanent pet owners, industry growth was projected before the pandemic and can be expected to continue after.
Via American Pet Products Association
Opportunities are magnified by increased humanization of pets -- treating and spending on them as a true member of the family. As Sophie Bakalar, founder of Slow's portfolio company Fable, has noted, Americans love spending on pets because it's both a selfless and selfish endeavor; we get to feel good about making another being's life better, while indulging in luxury ourselves. As owners continue to perceive their pets as members of the family and younger owners view pet ownership as a training ground for raising children (82% of millenials believing that to be the case), growing willingness to pay can be expected.
Perhaps most interestingly, pet spending is recession-proof. Between 2007 and 2011, the share of American households spending on pets varied by less than 1%. And while people spent markedly less at restaurants during the recession, spending on pet food increased. By 2011, American households spent more on their pets annually than they spent on alcohol ($456), mens and boys clothing ($404), or reading materials ($115).
So where does this spending go? Broadly speaking, we can slice the pet industry into Consumer and Healthcare segments, subsequently dividing the market from there. Consumer categories include products such as BarkBox* (subscription box of dog toys and treats) and Fable* (leashes, beds, bowls, crates, etc.), services like Wag!* (on-demand dog walking/services) and DogDrop (next-gen doggy daycare), food like The Farmer's Dog (human-grade dog food) and Butternut Box (UK, DTC fresh dog food) and technology like Whistle* (health tracker and GPS) and Fi (activity tracker). And while there has been ample investment and innovation in the space, there remains room to grow.
So with a growing customer base and sentiment shifts that should further expand willingness to pay, excitement around opportunities in the pet industry is well-founded. But where do they actually exist? Recent years have seen money pour into pet insurance, innovation in DTC pet food and a reimagination of the veterinary care experience, looking to capitalize on marco-tailwinds. A few areas we're interested in? The continued expansion of pet food, products and services targeted at non-dog companion animals, pet health and wellness, digital veterinary care, pet happiness and pet services. We'll dive into many of these topics at the conference this Thursday…until then, be well.
*: indicates Slow portfolio company
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