Last week, PetCo blew expectations out of the water by raising over $864 million in their IPO, and their share prices are continuing to rise even this week.
This news, along with a recent pet acquisition by a member of the Four Minute team, got me wondering how the pet industry has been doing in light of the pandemic, and why investors seem to be so excited about it.
📰 In the Headlines
🌊 The Blue Wave Crashes In
Joe Biden will be Inaugurated as the 46th President of the United States Tomorrow
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- The Security Measures Being Put In Place Across The Nation
- Some Fun Inauguration History and Facts
💉 Operation Warp Speed
COVID-19 Vaccine Rollouts Continue Across the Globe
- Washington Asks Starbucks For Help With Vaccine Distribution
- Can the Pfizer and Moderna Vaccines Beat the New Coronavirus Strains?
- France, Once a Vaccine Champion, Is Now Becoming Skeptical
☎️ On the Line
Many Investors Will Be Paying Close Attention as Companies Announce Their Holiday Earnings
- Netflix; How Is The Streaming Giant Doing in the Face of Growing Competition?
- Goldman Sachs Hit Way Above Estimates
- Procter & Gamble; How This Pandemic Darling Performed Over The Holidays
🐾 Howdy Pawtner
While there have been many sad stories and hardships throughout the pandemic, one group has been seeing a happy outcome are the puppies. According to the ASPCA, pet adoption rates spiked over 85% when the first shelter-in-place orders were announced.
Not only are we welcoming more pooches into our homes, but we are spending more to make them comfortable. In 2020, US households spent about $99 billion on caring for their pets, over 120% growth from the $45 billion we spent on them in 2010. Let’s take a look at what is driving this pawsome growth:
🦴 New Eats & Treats
Despite the mockery from SNL parodies, our love of wholesome foods have trickled down into how we shop for our pets. Surveys have found that 61% of US pet owners choose to pay more for premium foods that target their pets’ dietary needs. That’s probably why large consumer goods brands are acquiring ‘premium’ pet food companies, and spending on pet food Instagram & Facebook ads are at an all-time high.
There is also a lot of new tech & gadgets designed to make pet owners' lives easier. GPS pet collars, pet cameras, smart feeders, and even doggie DNA tests have captured the millennials love of high tech toys. As the amount of products available and pet ownership increase, it's estimated that the global market for ‘pet tech’ will be worth over $20 billion by 2025.
🏥 Pet Insurance
Besides food, the other major expense around pet ownership is healthcare and veterinary needs. Like human healthcare, these costs add up quickly and often come out of nowhere, surveys have shown that 20% of all US pet owners have had to take on debt in order to pay for vet costs.
Enter pet insurance. It's a fairly new industry, with only 2.1% of US pets currently covered by any form of insurance, but that number is quickly increasing. How much? About 15% per year over the past 5 years. Pet insurance companies like Trupanion and Healthypaws have responded to this by expanding the types of policies they offer, creating more options for anxious pet owners.
👩🏽💻 Pets.com Was Ahead of Their Time
The pandemic has been great for E-commerce, and the pet industry is no exception. The
the majority of younger pet owners (77%) prefer to shop online for all of their pet supplies, rather than doing their shopping in-person at the pet store.
In fact, by 2023, eCommerce is expected to make up 26% of the total pet market, double its current share. This is good news for online pet retailers like Chewy.com and BarkBox, which is set to IPO later this year.
The pet industry is rapidly growing. If pet ownership and spending continue to rise at their current rates, there are a lot of ways for you to profit off of America’s love of pets.
Currently, my favorite is the pet-centered ETF PAWZ, which has been significantly outperforming the market this past year. If these trends continue, we will probably see consistent returns for the next 2-5 years.
I’ll also be keeping an eye on BarkBox, a monthly subscription box filled with dog treats & toys, and their upcoming IPO in March or April of this year. A lot can happen in just a few months, so we will keep an eye on the pet market and give an update as it comes closer.
Word of the Day
(adj.) In business and finance, the term 'Scalability' or 'Scale' refers to a businesses ability to grow or increase production without increasing costs and necessary resources. This term has become more widely used in the Tech era, as technology and automation make it easier for companies to serve more people with fewer resources.
The term comes from economies of scale, wherein certain companies are able to reduce their production costs and increase profitability as they grow larger and produce more.
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