Pet industry may provide recession protection for investors

Deniza Cristian 26/08/2022 | 14:06

For investors, pet owners or not, the pet industry might be an industry worth monitoring in these troubled times. The pet care market is growing steadily at a rate of over 6% per year. Globally, it has grown from 216 billion dollars in 2020 to 232 billion dollars in 2021.

Market commentary by eToro analyst for Romania, Bogdan Maioreanu

 

If this estimated compounded annual growth rate remains steady, it will push that figure to 350 billion dollars by 2027. Globally the industry grew with almost 70% in the last decade outpacing the global economy that has expanded closer to 40%. The pet care industry soared even through the 2007 financial crisis and grew since with twice the growth rate of the US GDP, making it a possible candidate for a recession proof investment portfolio.

Pet ownership is on an ascending trend. Among EU countries, Romania has the highest percentage of households with pet cats (48%) and dogs (45%). As of 2021, 46% of all European Union households (90 million homes) owned at least one pet, compared with 38% (88 million households) in 2020. There are roughly 113.6 million pet cats throughout Europe, making it the number one household pet on the continent, followed by close to 93 million dogs. But recently increased costs of living  are starting to push some pet owners to abandon them.

In the United States around 70% of households own a pet today. Thirty years ago the figure was just 56%. The demographics of pet owners is changing in time leading to changes in purchasing behavior. A survey found that in the US 32% of pet owners are Millennials, 24% are Generation X and 27% are baby boomers. As humans we tend to humanize our pets too, make them family members and to increase spending on them. Therefore it is not a surprise that in a statistics concerning the online sales of consumer packaged goods the pet supplies and pet food and number two and number three after vitamins. For comparison coffee is less popular being in fifth place. The US pet care market is split between food 36%, veterinarian care 27%, supplies 23%, grooming 10% and animal purchases 4%.

A large number of publicly traded companies are benefiting from these trends, like the pet food companies, online retailers, pet health specialists and lately pet insurance companies. Some of these leading companies are Merck (MRK), a pharmaceuticals company with a large variety of vaccine and veterinary drugs, Metlife (MET), a large insurance company also offering pet insurance, Chewy (CHWY) an online store that delivers a large variety of products for the pets and their owners, General Mills (GIS) a producer of pet food, Archer Daniel Midland Co (ADM) a leading company in global nutrition, Covetrus (CVET) a global animal health technology and services company and Petco (WOOF) a health and wellness company dedicated to pets and their owners. To help investors gain exposure in the pet industry, eToro developed a thematic Pet Smart Portfolio aimed at long term investors, that offers a balanced exposure to a wide range of leading companies, including the ones above, companies addressing the needs of the pets and pets owners.

A recent scientific study found that the type of pet you own or you are exposed to might influence your investment behavior. The study showed that dog owners are prone to take more investment risks than cat owners. In the study, 145 owners of either a cat or a dog received an imaginary 2,000 dollars and were asked to invest any portion of it in either a risky stock fund or a more conservative mutual fund. Dog owners, who made up 53% of participants, were significantly more likely to invest in stocks and also put more money at risk than cat owners. In another study by the same researchers, they found that exposure to pictures of dogs led participants to be more likely to invest more money in stocks.

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Deniza Cristian | 29/11/2022 | 10:17

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