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We call them our fur babies, we treat them like humans, and we don’t hesitate to spend money on them. The “humanization of pets” trend is real— and likely, many of us can relate. According to Packaged Facts, 56 percent of US households have pets. 40 percent of those households have dogs, which reflects an exponential rise in dog ownership over the past decade. In a normal year, Americans adopt 3.2 million shelter animals. That was before the pandemic, which didn’t stifle all industries like it did travel and entertainment. Far from it. As the world shifted into a COVID-19 driven lockdown, people looked to add pets to their lives. More than 3.3 million pets found homes in 2020, according to Petco. That represents an increase of 4 percent in 2020, translating to $4 billion in incremental annual demand, according to Packaged Facts. The pet industry is booming in the pandemic world. Here’s what investors should know. 

What Does the Pet Industry Include?

In 2019, Americans spent $95.7 billion on their pets. In 2020, it is estimated that Americans spent $99 billion, according to the American Pet Products Association. Taking care of pets requires pet food, treats, supplies, medicines, veterinary care, and services including boarding, grooming, insurance, training, pet sitting and walking.  According to Petco, the US pet care industry serves 72 million households. And while the US is home to many dog and cat lovers, pets include other animals, such as birds, lizards, fish, and hamsters, amongst others. 

Why Invest in the Pet Industry?

Even before the pandemic, pet ownership was on the rise. Part of that was driven by Baby Boomers, who control over 53 percentof the country's wealth. According to Packaged Facts, pet ownership among Baby Boomers increased from 50 percent to 54 percent between 2008 and 2018. This growth was in part attributed to Baby Boomers having more time at home, becoming empty nesters, etc.  Then the pandemic hit, and we all found ourselves with a lot more time at home.  And lots of us added pets to our families. This increased demand for pets spurred the pet industry.  In January 2021, Petco Health and Wellness hit the market with a bang, closing up more than 63 percent. In an interview with MarketWatch, Petco’s Chief Executive Ron Coughlin explained why: “People are home for COVID, they’re a little depressed, and they want that bundle of joy.” The pandemic has not only shown how resilient the pet industry is, but also how much our pets mean to us.  According to Rachael Silverman, a psychologist specializing in couple and family psychology, in an interview with TIME magazine, “With so much uncertainty and instability, animals provide people, especially children, with unconditional love, support, and comfort as well as serve as a distraction.”  These strong sentiments help to explain why, these days, the average pet lover won’t just settle for any pet products and services. They order subscription boxes to delight their pup, upgrade to organic foods, and shop specialty toys and treats. Hence, pet companies big, small, and creative are seeing increased consumer demand.  The Farmer’s Dog, for example, makes fresh and personalized meals for dogs. It raised $39 million in 2019, the largest Series B round for a pet startup.  Barkbox, a subscription service for dogs, merged with blank-check company Northern Star Acquisition Corp in December 2020. The deal reportedly valued BarkBox at $1.6 billion, and will result in BarkBox going public. Online retailer Chewy also saw enormous growth in 2020. The company’s active customers grew 39.8 percent year-over-year to 17.8 million and customer spending was up as well, growing 2.8 percent from a year ago and now averaging $363 per year. According to the 2017-2018 National Pet Owners Survey from the American Pet Products Association, 28 percent of dog owners surveyed indicated that they celebrate birthday parties for their dogs. We can take a wild guess that that number will be higher in 2021… and that means a lot of pet owners will be shelling out for dog birthday cake.  Pet expenses are here to stay once you add a pet to your family, and so it’s safe to say that with so much demand for pets this past year, the pet industry demands won’t be going away anytime soon. All of these pets purchased or adopted in 2020 will require care, vaccines, medicines, supplies, toys, and treats for years to come.   Perhaps not surprisingly, just like the world of health and wellness for humans, there are innovators in the pet health space, as well. The 2021 Purina Pet Care Innovation Prize Winners include Denver-based ClueJay, an online diagnostic platform for pets and their vets; Minnesota-based Kitty Sift, which offers a litter box made from 100 percent post-consumer recycled cardboard; A Pup Above, which makes fresh dog food with more protein; and Mella Pet Care, which tracks pet health. While not every year will be a pandemic year for pets, there is no arguing that people love their pets. There is a reason that pets are a $100B+ industry in the U.S. alone. [/vc_column_text]

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