The punter Andy Davis
Animal spirits
Do you know how much peanut butter for dogs costs? Gram for gram, five times as much as Whole Earth smooth, an upmarket brand meant for their owners. Admittedly, the canine version comes in a pressurised canister, so you can squirt it into a hollow chew toy. Still, in a world of cutthroat price competition, that’s some premium.
I discovered the existence of super-high-end peanut butter soon after the arrival of Basil, our black Labrador puppy. We are in good company as new dog owners, it seems—according to the Pet Food Manufacturers’ Association, well over three million UK households have acquired a pet since the start of the pandemic, lifting the total by nearly a quarter.
If the price of peanut butter is any guide, the pet products business stands on robust foundations. Shareholders in Pets at Home, the biggest UK-listed specialist in this market, would probably concur. This store chain recently reported that comparable sales in the first quarter of its current financial year were almost 30 per cent higher than in the same months of 2019, before Covid caused a surge in pet ownership among house-bound people craving companionship.
Back then, its shares were trading at around 140p. They recently touched 500p, propelled by what the company calls “the prevailing trends of pet renewal, humanisation and premiumisation.” In terms of their rating, shares in Pets at Home are trading at a similar multiple of earnings to Burberry, the luxury goods house, and at almost twice the rating of a more obvious comparator like Tesco—a supermarket for humans.
This says it all. Surveys from the US show that 95 per cent of owners regard their pet as part of the family, and the majority would be prepared to cut back discretionary spending on themselves to preserve their animal’s standard of living. Perhaps we should think of pet retailers as more like luxury goods companies than purveyors of everyday staples, because owners are likely to be similarly price-insensitive when shopping for their pets as when buying premium brands for themselves.
The gradual rollback of working from home could take the shine off the “pet economy”—but I doubt it. These companies have an extremely powerful force working in their favour: the unconditional love that we feel for our animal companions.