Will pandemic take bite out of pet business?
Industry considered ‘recession-proof’ faces new challenges but has ways to capitalize
PHILADELPHIA — Animal shelters and rescue organizations across the country are reporting unprecedented surges in pet fostering and adoption, as families suddenly have more time on their hands and the lonely seek companionship amid life in coronavirus quarantine.
That’s consistent with trends dating to the Great Recession and the Sept. 11, 2001, terrorist attacks, after which rates of dog ownership increased. The $95 billion pet industry emerged from the 2008 financial crisis in a relatively strong position and strengthened its reputation as recession resistant.
But the coronavirus pandemic poses a new challenge.
“Many pet service providers are mom-and-pops whose businesses might not survive the crises,” the market research firm Packaged Facts said in a report last month.
Pet owners who are now working from home are less likely to hire dog walkers. Many groomers and dog day care centers have temporarily closed as part of the broad shutdowns of businesses. Pet boarders are losing business from travel restrictions. Total U.S. retail sales of pet products and services will drop 17 percent this year, according to projections by Packaged Facts, compared with the 5 percent growth anticipated before the outbreak.
Pet businesses are adjusting, and some may even be wellpositioned to capitalize on an increasingly health-conscious public.
Consider the Philadelphiabased start-up Because Animals. The company sells supplements for dogs and cats that it says promote “coat, immune, and digestive wellness,” powered by probiotics, omega 3 and omega 6 fatty acids, and organic ingredients such as pumpkin powder and blueberries. Another product: organic dog cookies with B vitamins. (Some skeptics say the benefits of these kinds of products remain unproven.)
Through the first week of April, the company’s online sales had already exceeded its total for March, said co-founder and chief revenue officer Joshua Errett. He expects April sales to double from last month.
Errett attributed that to consumer stockpiling amid coronavirus-related uncertainty, as well as a “search for something healthier.” There’s long been a demand for high-quality products among “super premium customers,” in retail parlance, and Errett said more consumers were now giving a closer look at pet food’s possible health benefits.
Most of the growth came from sales on Amazon. “I have to chalk that up to consumers entering the online space who don’t normally shop there and seeing a wide world of other pet products — other than what’s in grocery stores,” Errett said.
Indeed, the pandemic may well accelerate the growth of e-commerce in pet product retail. E-commerce accounted for 22 percent of sales in 2019, according to Packaged Facts, a share that is projected to grow to 31 percent by 2024. E-commerce growth in the industry has been supercharged by the success of Chewy, the online pet food marketplace that went public last year. Chewy’s stock price jumped almost 27 percent in March, even as the broader S&P 500 index dropped 13 percent.
Because Animals is backed by venture capital funding; it isn’t wholly dependent on sales to remain in business.
“I used to say to investors, pet food is recession-proof as an industry. It might actually be true,” Errett said. “Seeing the world come crumbling. Nothing is going to break the love you feel for your cat or your dog. You’re not going to let anything come in the way of that, be it a pandemic or recession or whatever it may be.”
Businesses that focus on pet health are likely to do well amid the pandemic, said David Lummis, a pet market analyst for Packaged Facts.
But Lummis questioned how long these businesses — many of them relatively new with just a handful of employees — would be able to “weather the economic storm.”
While pet food is the most resilient part of the industry, non-medical services such as training, grooming, and pet sitting are most vulnerable in a downturn. Packaged Facts projects that sales in this area will drop nearly in half from $10.3 billion in 2019 to $5.5 billion this year.
The greatest hope for the industry is that growing rates of pet ownership will translate into more business later.
“There seems to be something about economic and emotional trauma that causes a spike in pet ownership,” Lummis said. “I think it’s going to be even more pronounced this time.”