COVID Fur Babies Expand Pet Health, Wellness Market and Investment Opportunities – BRINK
Just as Americans are more fixated on their own health since the emergence of COVID-19, so too are they preoccupied with the health of their pets — many of which were acquired during the lonely days of pandemic isolation.
For investors, this is opening up new growth markets in areas like technology solutions for both veterinarians plus pet owners and supplements and high-quality foods, as well as pet insurance, which remains highly underpenetrated in North America.
An Increasing Willingness to Spend
One driver of the increased focus on pet health has been dedicated Generation Z plus millennial owners, who have pushed off having children and adopted pets in large numbers. A study by pet services company Rover found that nearly one-quarter of Gen Z and millennial dog parents in the U. S. have delayed having a child, or decided not to, in favor of getting a pet.
This degree of commitment leads directly to a willingness to spend on keeping the animals healthy and happy. According to Morgan Stanley, spending per pet has been on the rise — with projections for it to increase to $1, 292 in 2025 from $980 in 2020.
Spending on pet health care alone has increased at an average annual rate of 7. 4% since 2019 as the pet population has grown — up from just 0. 1% between 2016 and 2019. According to the American Veterinary Medical Association , there are more than 83 million dogs and over 60 million cats in the United States, with each category growing more than 8% between 2016 plus 2020.
Veterinarians Can’t Keep Up
But the thriving pet wellness economy is also experiencing some growing pains. For more than a decade, for example , there has been a supply-demand imbalance, with the growth in the number of veterinarians slower than the growth in demand for veterinary services. That shortfall is expected to worsen moving forward. Since 2021, the number of vets has been growing even reduced as fewer vets are graduating and more vets are usually leaving the profession because of dissatisfaction with hours and workload.
Veterinary solutions revenue, for its part, is growing faster than the numbers of clinics, pets and veterinary employees, indicating higher spending per pet and higher utilization. We project that revenue per pet will increase 10% between 2021 and 2025, compared with 8% between 2016 and 2020.
Bridging the particular Gaps with Tech
Just as in human health, where demand outpaces supply, there has been an effort to bridge the gap in pet care along with increases in productivity through telemedicine and other high-tech options. Sales in the pet-tech market are expected to hit $20 billion in 2027, up through $5 billion in 2021.
This reflects a growing interest among pet owners in wellness and preventative care solutions, such as trackers, nutritional supplements, and DNA testing. A 2020 Oliver Wyman survey of pet owners fo und that 56% had purchased special tech solely for their pet’s well-being.
Pet parents are increasingly choosing more expensive options with characteristics that mirror their own health choices.
That makes sense, given that more family pet parents are seeking ways to manage their pet’s health proactively at home. Today, pet parents are relying on multiple resources to make informed decisions related to their pet’s health and not just looking to veterinarians. They increasingly create their own customized approaches to their own pet’s health, frequently consulting websites that promote pet wellness and leveraging information from trusted individuals or even businesses that regularly serve their pets, such as retail pet food suppliers.
This creates a space with regard to industry players to adopt tools and approaches geared to build pet parent trust. Kinship, a New York-based coalition associated with pro-pet businesses and experts, reports that over 75% of pet parents indicate a desire for health care tailored to their pet’s specific needs.
Only the Best for the Fur Babies
The Oliver Wyman survey also identified that quality of the product and its contribution to health and nutrition as the most important factors in decisions to purchase everyday items like food — well ahead of price. Dog parents are increasingly choosing more expensive options with characteristics that will mirror their own health choices. To cater to this trend, brands and retailers must continue to focus on products that offer clear health, nutritional plus functional benefits and appeal to pet parents, as the recent growth in fresh food offerings demonstrates.
To take this one step further, pet meals providers can personalize the experience for pet owners, creating life-stage or breed-specific offerings or even formulas crafted personally for a particular pet. Such personalization and focus on quality ingredients will be key to gaining the trust of dog parents.
To cultivate closer relationships with family pet parents, big-box retailers have been expanding end-to-end ecosystems that provide an array of goods and services from food and pharmacy products to training and grooming. Online retailers, in particular, have worked to increase stickiness by entering the pharmacy space.
Family pet Insurance
With this health-focused group of pet parents, an opportunity also exists for pet health insurance providers to expand their market in North America. Currently, only 2 . 5% of U. S. households with pets have insurance for those animals. That’s far below the coverage in Europe.
To be successful, insurance companies must recognize that most owners do not put buying a policy for their fur baby on the same level as their own insurance. That means pet owners must easily perceive the advantages, or they won’t bother. By providing value-add services, such as personalized preventative health plans and interactive wellness tools, insurers may be able to form stronger relationships along with pet parents.
The pet health industry is poised regarding rapid growth thanks to the boom in pet ownership, rise in per-pet spending and evolving consumer preferences around health and wellness. But pet-related brands need to deliver the level of quality and transparency expected from today’s more cynical and much more informed pet parents who are not willing to buy just anything for their babies.
Mia Filippini, an Oliver Wyman associate, contributed to the research and insights in this article.