Cashing In on a Perfect Storm of Positive Trends
Packaged Facts expects 2016 to be another solid year for the pet industry, with sales closing in on $100 billion by 2020.
In 1986, I wrote my first market report for Packaged Facts; in 2003, sizing up all things pet became my bread and butter as a market analyst. During this time I’ve seen many other consumer packaged goods categories ebb and flow with the economy, level off on a natural march from inception to maturation or surge, stumble and tumble. By contrast, the U.S. pet industry remains a singular performer, turning in respectable gains year after year. Not once have I seen it “go negative”—no mean feat for any business, much less one boasting the longevity, size and scope of pet.
Last year was no exception. During 2015, U.S. sales of pet products and services rose 4.5 percent to $77.07 billion, an increase of more than $3 billion over 2014 sales, according to Packaged Facts’ U.S. Pet Market Outlook 2016-2017. Growth was universal across all four categories, led by the smallest, nonmedical pet services, up 6.2 percent to $7.88 billion. Veterinary services, the industry’s second-largest category, rose 6 percent to $23.84 billion, and in third place, pet supplies grew 4.7 percent to $15.18 billion. Even the largest category—pet food—turned in respectable growth, advancing 2.7 percent to $30.16 billion.
In 2009, when the first edition of Packaged Facts’ annual U.S. Pet Market Outlook appeared, I estimated the overall market size at $53.7 billion. In doing so, I undervalued the size of the pet food category in particular, newer and better data shows. Still, even half of the $22.4 billion increase between then and now would be extraordinary for a market of this size and vintage.
To what might we attribute this success? A reasonably apt two-word explanation might be “untapped potential.” Marketers always had some awareness of the fondness we harbor for our pets, but only about a decade ago did they begin to comprehend its depth and spin that fondness into gold. It’s no coincidence that, in rifling through my virtual files, two buzzwords in the pet industry—humanization and premiumization—first appeared in reports written in 2006. (I’d like to take credit for coining them, but I’m quite sure I merely adopted them.) Nor is it by chance that humanization and premiumization often are uttered in the same breath, as the human/animal bond aspect of the former enables the conversion of pet owners to higher-priced fare that is the latter. Together, these trends opened the floodgate to potential that continues to pay off, with an almost perfect storm of other factors kicking in.
Among these are additional facets of the humanization trend, including the adaptation (or wholesale imitation) of human ingredients, packaging, styles and technologies into pet products, from limited-ingredient treats to complex medications. All the while, PetSmart and Petco continued to expand, even as a host of other channels—pretty much all of them—began adding pet products. This greatly facilitated acquiring said products, including via the Internet, which in particular makes it possible for pet owners to obtain items they might otherwise pass on.
Demographics, too, have been favorable, with singles and empty-nest boomers increasingly viewing their pets as surrogate kids, and the aging population helping to drive a boom in pet services, including grooming, boarding and training. Along the way, the media did its part, exploiting pet appeal in television commercials (even for nonpet products) and pet-themed programs. As a result, in something of a self-fulfilling prophecy, the market attracted unprecedented numbers of investors and entrepreneurs.
With most of these trends still in force, the outlook is good. Packaged Facts expects 2016 to be another solid year, with sales closing in on $100 billion by 2020. Perhaps most important for the foreseeable future is the seemingly perennial ability of the human/animal bond to drive pet owners to splurge on products and services running the gamut from life-or-death to ludicrously pampering. Much as computers always have been there for them, millennials know only a world where treating pets like fully entitled family members is normal, if not expected … and expensive.
David Lummis is the lead pet-market analyst for Packaged Facts, a division of MarketResearch.com. He contributed to Packaged Facts’ report referenced here, U.S. Pet Market Outlook, 2016-2017 (April 2016).