Pet Industry Long-Term Growth & Demand to Continue
As the humanization of pets continues, marketplace dynamics will continue to shift, and demand will continue to surge for premium products, services and technology.
Over the past two decades, the pet industry has experienced significant growth and evolution in the United States. Pets are seen by consumers as significant companions, and as the humanization of pets continues, marketplace dynamics will continue to shift, and demand will continue to surge for premium products, services and technology.
Industry Overview
Approximately 94 million American households own a pet, representing about 71% of all U.S. households. This is a significant increase from 1988 when only 56% of households owned a pet.i While most Americans own a dog or a cat, fish, birds, reptiles and small rodents are often purchased as well.
During the onset of the COVID-19 pandemic, pet ownership grew sharply between 2020 and 2021. Over 11 million households in the U.S. got pets during the pandemic1 , and the industry subsequently ramped up supply to meet demand, but long lead times with ongoing supply chain disruptions led to delays in production. By the time the increased pet inventory came through, demand had returned to normalized levels leaving a glut of inventory on the market. As the pandemic eased, the market for pets slowed as well, largely because of pulled-forward demand.
Despite this temporary dislocation in supply and demand, the pet business is generally quite large with total U.S. sales surpassing $152 billion in 2024.ii The pet industry has seen constant growth over the last two decades and is nominally affected by financial downturns. The U.S. pet care market is also expected to grow with a projected compound annual growth rate (CAGR) of 4.8% from 2023 to 2030.iii
Humanization of Pets Driving Long-Term Growth
The trend of humanizing pets, in which owners increasingly treat their animals as members of the family, has been steadily gaining momentum. This shift has implications across the pet industry, influencing everything from product creation, retailer participation, pet health care and an increasing number of manufacturers entering the pet channel.
97% of pet owners consider their pets a member of the family with 51% of pet owners believing that their pets are their children. This sentiment is more prevalent among all women, single men and couples without children. Dog owners are more inclined to believe this over cat owners.
The humanization trend has had a profound effect on spending in the pet industry. Pet owners are increasingly willing to spend a much larger portion of their disposable income on their animals. This can be seen in both the quality and quantity of products purchased and the diversity of offerings in retail. U.S. consumers are purchasing increasingly higher quality and more premium pet products. Pet foods, specifically, are trending increasingly more premium, including gourmet food and treats with ingredients on par with the highest quality human foods available. These premium ingredients such as all natural, organic, raw diets, meat first, grain free, refrigerated and freeze dried are now widely available.
Further mimicking human trends, pet owners are embracing technology in the care of their pets. GPS collars and wearable fitness trackers have been employed to monitor the activity and general health of both cats and dogs. Pet cameras, microchip pet doors, automatic feeders, interactive pet toys, DNA tests and automated cat litter boxes are just a few examples of the innovation in the pet industry.
Healthcare and service options are also expanding in the U.S. pet market. More pet owners are opting to purchase pet insurance, including customizable coverage. Owners can typically select from various coverage options, including those that cover accidents, illnesses, and preventive care like vaccinations and routine checkups. Mobile dog grooming services, dog walking organizations and doggie daycare facilities are also frequently utilized by pet owners.
Changing Retail Landscape
U.S. retailers have drastically expanded the breadth of pet offerings over the past two decades. Historically, there was a hard delineation between retail offerings with grocery and mass retailers offering a limited assortment of lower-priced products and traditional pet stores offering a wider and more premium assortment. Now, pet consumers can purchase a wide variety of products from independent pet retailers, pet superstores, traditional and natural grocers, mass marketers, dollar stores, warehouse clubs, ecommerce retailers and extreme discounters.
Ecommerce has become a major force, driving market growth, influencing consumer behavior and requiring businesses to adapt to the changing landscape. Like most consumer product categories, ecommerce is significantly affecting the pet business and reshaping how pet owners shop for products and services. Online sales are growing with pet food and supplies among the top e-commerce categories. This shift is fueled by the convenience and accessibility of online shopping.
Brick-and-mortar pet stores are facing pressure from ecommerce as well as expanded premium offerings at grocery, mass market and warehouse club retailers. Pet stores are attempting to adapt by improving their online offerings, inventory management, customer experience and offering more services. There has been considerable consolidation amongst independent pet retailers, veterinarians, and the distributors that serve them.
Recently, one of the largest pet distributors in the U.S. faced economic challenges and industry pressure given the current underlying conditions. As a result, this distributor was part of a distressed acquisition by a competitor as part of an industry consolidation play.
Given the state of the market, we expect continued fall out and consolidations within the pet industry in the next six to 12 months in all sectors, including manufacturing, distribution, retail, veterinary services and ecommerce, driven by the aftereffects of the pandemic when consumers purchased and adopted more pets and splurged on pet supplies and services. The current consolidation in the distribution channel is the beginning of a trend that will reverberate across the industry.
Outlook
Over the long run, the U.S. pet industry will continue as an engine of growth for retailers, distributors and service providers for years to come. In the short term, however, the glut of inventory from pandemic-driven excess purchases by manufacturers, distributors and retailers is an opportunity that will work through the marketplace. While pet food and treats remain the largest spending category, pet services, especially veterinarian care, are expected to be a major driver of growth.
Despite economic fluctuations, pet owners are largely maintaining their spending habits with 77% reporting the economy hasn’t affected their pet ownership. Considerable challenges in the brick-and-mortar and pet specialty retailers will continue to fuel consolidation and store closures, but as the humanization of pets continues, there is no slowdown in industry growth for the foreseeable future.
Implications for Lenders
The pandemic-era pet boom may have subsided, but pet ownership and growth in the U.S. remains positive. Once the marketplace works through the glut of excess product and consumers begin to bring new pets once again into their homes, retail demand will rebound. Lenders who invest in digital platforms will be better positioned to serve growing ecommerce retailers and extreme discounters. Additionally, those with the ability to structure flexible deals and understand the nuances of mergers and acquisitions will be essential in this high-demand market.
As asset experts in the pet space, Gordon Brothers can be a key partner in future transactions, consolidations, and winddowns in the industry. Our firm can assist lenders in taking a deeper look at pet industry portfolios to review changing values or over exposure. To learn more, reach out to one of our experts or contact us.