Growth In The Pet Industry Is At A Turning Point

For the last decade, the pet industry has grown consistently. The pandemic, which decimated other businesses, only accelerated the growth in the pet business.

Now things are changing. While online sales are growing in the pet industry, stores are generating less pet-related revenue than in the past. That’s an important sign, not just about how online has become more important but how growth in the pet industry is no longer certain.

Other industries (like health/beauty, baby care and alcohol) are now growing in stores more than pet.

The hardest hit items are the most discretionary. Things like pet toys and higher-priced wet dog food are among the biggest decliners right now.

Why Is This Happening Now?

Consumers have been responding to inflation in pet products just as they have in other sectors. They are focused on sales, discounts, bargains and bundling to leverage their dollars. As much as they love their pets, they are concerned about the economy, inflation and job stability.

The pet industry exploded during the pandemic but after it ended, buyer’s remorse set in and the cost of owning a pet became more burdensome for many new pet owners. That's made it harder to increase prices, to get consumers to experiment with new products and made the most discretionary purchases less attractive.

There’s Still Opportunity

The shift doesn’t mean that the opportunity has gone away from the industry.

The biggest opportunity for growth in pet right now is in premium dog food that is fresh, frozen or freeze-dried.

Freeze-dried is used as a meal in itself or as a topper and it is well-suited to travel and particularly to remote work because it can travel without refrigeration and still provide very high quality food and protein. It’s also among the most expensive which increases overall industry sales.

You may be asking, how can the trend towards high-end, expensive food coexist with the trend towards bargains and discounts?

While many consumers are scrimping, others aren’t. Importantly, high-end households’ spending on pet grew by almost 7%. Items that are appropriate for households with higher incomes can continue to boom while other types of products languish and have to be sold off-price.

For those that can afford it, the humanization trend is still driving the desire to provide higher-quality food for their pets. Pet owners are trending towards a new set of priorities away from toys and towards nutrition as they evolve in how to care for their pets.

One surprising new opportunity in pet is in marketing. For almost all groups, reaching consumers now involves a hodgepodge of channels and no single mode dominates. But one age group gets a majority of its pet marketing information from just one channel. That group is Gen Z and the channel they get most of their pet marketing from is streaming on YouTube. YouTube is now the place for pet marketing to Gen Z consumers and nothing else comes close.

Pet Industry, Where Are You Going?

The pet industry has become accustomed to steady, consistent growth at high levels throughout the range of products and services being offered.

That's over.

There will still be growth but it will be more choppy and more selective. Certain product classes will grow. Others will shrink. Certain marketing channels will be an opportunity. Others not.

According to Nielsen IQ, the three fastest-growing categories both online and in stores are bedding accessories, pet medicine and flea/tick products. The three slowest or declining categories are pet housing, bowls and aquatic supplies.

Inevitably, the many companies that have been acquired in the pet industry are going to find future growth harder to come by than their acquirers anticipated when they were bought.

History says we are also less likely to see as many startups in the future as we have in the recent past. The challenges of growth attract fewer entrepreneurs.

There will be fewer success stories than in the last decade. The flip side is that those that make it will be more rare and more valuable when it’s time to sell the company.