By all measures the pet industry is booming. Data recently released by the American Pet Products Association (APPA) indicates that money spent on pets in 2012 topped $50 billion. That is a huge number to be sure, and it reflects a tripling in size of the pet economy since 1994, when spending was a mere $17 billion. More interesting perhaps, is evidence that spending on America’s furry and feathered friends continued to increase right through the recent recession. Industry totals show an increase in spending from $41.2 billion in 2007 to $48.35 billion in 2010.
Such a significant increase in sales through that period, a time when many were scaling back home budgets and pinching pennies, is indicative that the pet industry is changing in profound ways.
Recent analysis of the increase seems to point to baby boomers being the driving factor behind such robust numbers. That sector of the population tends to have more disposable income than their younger counterparts and as the boomers near retirement age many find themselves as empty-nesters as well. Such cultural shifts have led many boomers to adopting pets, which then become surrogate children. As is the case with most new children, these pet-children are being pampered. New trends in the pet industry include luxury grooming; high-quality, more nutritional health food; and increased use of over the counter medicines, vitamins and dietary supplements.
The APPA breaks down the industry numbers into five categories: Live animal purchases; grooming and boarding; supplies and over-the-counter medicine; veterinary care; and food. All categories have grown and are predicted to grow into 2014.
The growth is seen as an opportunity for small businesses too. There are currently only two major players in the pet supply industry and those are PetSmart and Petco. Industry statistics show they duke it out for only 50 percent of the market. That leaves half the market available to smaller, more specialized retailers and service providers. These businesses stand to see profound growth in the future as they capitalize on the sometimes outlandish trends in the pet business.
What follows is a look at the five categories in the industry and the factors that are driving growth in each.
5 Live Animal Purchases
Annual Spending: $2.23 Billion
There can’t be growth in the pet industry if people don’t buy pets. While animal purchases make up the smallest category in terms of dollars spent in the overall industry — in 2013 people spent a $2.23 billion — acquiring new animals is the motor that drives the rest of the business. Although small in comparison to the other categories, more people are buying animals. Some statistics indicate that more people are buying more animals, meaning more homes are welcoming more than a single dog or single cat under the roof than ever before.
Again, this has a lot to do with the “empty-nest” effect and baby boomers filling the void of grown kids who have flown the coop with animals, often dogs. But young couples and families are also buying pets at increased rates although the reasons why may be a little harder to pin down.
One theory is that people are becoming more aware of research suggesting that owning pets makes us healthier. Recent studies have shown that pet ownership, having an affectionate, four-legged companion, can help relieve stress and lower blood pressure. Others within the industry speculate that increased divorce rates could be driving pet sales. Perhaps younger, newly divorced people are purchasing companions at higher rates than before, especially in light of the recent health data. Whatever the cause, pet purchases are continuing to grow at a 4 percent clip per year.
4 Pet Services: Grooming And Boarding
Annual Spending: $4.41 Billion
Having a pet may be great fun, but keeping the amount of pet fur in one’s house to a minimum can be a real hassle. On top of that, taking a pet on a romantic getaway or a weeks-long trip to Europe is not always an option. This next category on the list deals with the businesses that help pet owners deal with their pets. Money spent for grooming and boarding pets in 2013 nearly doubled the amount that was spent on new animals, coming in at $4.41 billion.
That pet grooming and boarding is a $4 billion-plus industry should hardly come as a surprise. Nearly everyone is aware of where to find these services near their home. In fact with the proliferation of such businesses in the recent past, it may come as a surprise that boarding and grooming only take up roughly 8 percent of the money people spend on their pets.
The grooming industry is certainly in a growth phase, and with that growth comes increased competition. Those competitors are seeking to distinguish themselves from one another. In so doing groomers have taken to lavishing human-like spa treatments on pets, particularly dogs. The services included at some of these facilities include hand-scissor shearing and “peticures”; a category that includes a panoply of services from holistic massage to aromatherapy.
Boarding is booming too, with niche industries like luxury cat boarding popping up all over the country. Such high-end boarding offers private cat studios with a human-like bed and a variety of toys for one’s favorite feline. Such a studio can cost $25 per day. That is compared to traditional cat boarding, which usually runs under $10 per day, proving that people are willing to drop big dollars for their furry friends.
What is most remarkable is that these trends began catching peoples’ eye in 2009, in the heart of the U.S. recession, and have grown ever since. The boarding and grooming category is up $1.05 billion over the last four years.
3 Supplies And Over-The-Counter Medicine
Annual Spending: $13.14 Billion
Cat litter, toys, vitamins and supplements are all part of welcoming a pet into one’s home. As more families take that step, the pet supply business chugs right along. In 2013 this category came in at $13.14 billion. Again, the surprising thing here may be that the number isn’t higher. As cities and small towns begin to set aside land for off-leash dog parks and more people fill those parks by visiting with their pets, it becomes apparent just how much people are spending on accessories for their animals. Toys, frisbees, balls, car carriers, car seat belts, and even strollers for small breeds all fit into this category.
Doting parents not only provide toys and play things. They are also concerned about health. Over the counter medicine rounds out this category and includes items like supplements for promoting the health and long-life of pets. Numbers are a bit harder to find for this subcategory, but evidence suggests that the business continues to expand. In 2010 the animal supplement category added $80 million in sales to top $1.6 billion total. Those are big dollars, signaling big concern for pet health.
2 Veterinary Care
Annual Spending: $14.37 Billion
That concern is showing up in the category devoted to veterinary care as well. Doctors and healthcare, in general, are expensive for humans and the same seems to be true for animals. Americans spent $14.37 billion on veterinary care in 2013. Of course it is easy to tie those numbers to increased pet ownership, but other trends in pet healthcare suggest that more factors might be at play.
First, consider the doting parent phenomenon. Just as pet-parents plunk down dough for supplements and vitamins it stands to reason that such concern over health leads to more vet visits. Vets are still underpaid compared to family doctors, and it is estimated that a starting vet will only make about $45,000 in their first year. So it can’t be argued that they are inflating prices. It likely has do with increased vigilance of the pet owner and increased concern pet health.
Such spending has given rise to insurance products aimed at pet owners to deal with pet health emergencies and emerging diseases that we are becoming aware of as our four-legged friends live longer. Expect this industry to grow as well. The projected number for 2014 is $15.25 billion.
Annual Spending: $21.57 Billion
Ask any parent and they are likely to tell you their child is eating them out “house and home.” The same seems to be holding true for pet owners. Pet food expenditures top the pet spending categories in 2013 with a whopping $21.57 billion. That is almost 39 percent of all spending that people shell out for their pets.
Again, it is to be expected. Increased ownership leads to increased food expenditures, but driving these numbers is the same thing behind all the others. Pet owners shower their pets with quality products to enhance their life and longevity. Whether it is the baby boomer, empty-nesters or the young couple with the Christmas puppy, people are making sure those pets get high-quality food.
The days of buying dog food as an after-thought at the supermarket are over. Pet food stores are cropping up all over the country and providing high-end foods to pet owners. When one calculates that high-grade dog food can cost over $60 a month it is obvious how the pet food market takes up such a big chunk of overall pet spending. Pet food expenditures are expected to increase by over $1 billion next year.
If all of those projections are correct, 2014 will be a $58.51 billion dollar year for the world of pets. That is real growth that has chugged along right through a down economy; an economy that is now slowly recovering. That makes the pet industry look like a pretty strong business to be in. As discretionary income increases, people will likely shower Fido with more toys and better food. It is difficult, if not impossible, to find one negative projection for the pet business right now.