The Long Tail of Pet Care Spending

During the pandemic, one in five U.S. households acquired a new pet.[1] For some, working from home provided the flexibility, time and attention to help their pet acclimate to their new surroundings. For others, a new pet was a welcome distraction from the day-to-day monotony of life in semi-lockdown. As offices reopen, many of these new pets may experience being home alone for the first time. That will create new challenges for owners, but also new opportunities for companies in the pet care industry. From dog-walking service Rover, to BARK’s monthly BarkBoxes, to Zoetis’s anti-anxiety medications, there are a range of pet care businesses ready to meet the post-pandemic needs of pet parents.

Pet Care Spending Has Increased

Over the past decade, pet care spending has grown to over $100 billion in the United States. Today’s pet owners are not just buying food and toys but are splurging on a bevy of premium products and services – including designer clothes, high-tech monitoring devices and platinum health care insurance plans. Many see themselves as parents, not just owners, and increasingly treat companion animals as members of the family. Long-term trends and survey data suggest that pet care spending may continue to grow, even during these uncertain times.

According to a COVID-19 survey of more than 2000 consumers, the American Pet Products Association (APPA) found that 71% of participants said they had no plans to curtail their pet care purchases due to the economy and 30% reported that they had spent more on their pet in the past month compared to the previous period.[2]

What’s behind the continued surge in spending? And what gives us reason to believe it can be sustained even after the pandemic recedes? Consider these three factors.

1. Pet Ownership Has Increased

Pet ownership growth tripled during the pandemic, when compared to the average growth rate over the previous decade.[3] The APPA survey found that 26% of Gen Z and 24% of Millennials had adopted a new pet due to COVID-19. For these cohorts, the spending data suggests that pets are increasingly serving as “practice children” or even taking the place of them. Gen Z reportedly spent $1,885 per year on their pet, compared to Baby Boomers and Gen X, who spent just $926 and $1,100, respectively.[4]

The behaviors of Millennials and Gen Z may shape the pet care industry for years, especially as they form new households and continue to dote on their pets. Consider this: in the U.S., the number of households with children under 18 has steadily decreased; conversely, the number of households with pets has grown. As a result, the demand for pet care-related products and services may grow at faster rate than the demand serving the consumer more broadly.

2. Owners Are Prioritizing Pet Health

Health care is generally the biggest expense for pet owners, and there are several signs that spending in this category may continue to increase. Companies that focus on keeping our pets healthy, such as Idexx Laboratories and Merck & Co., are developing new diagnostics, medicines and other treatments designed to improve our pets’ life expectancy as well as their quality of life. The American Veterinary Medical Association reported that in 2020 owners spent more money per veterinary visit in previous years, seeking higher-value products and services.[5] Additionally, the number of pets with health insurance increased from 18% in 2019 to 27% in 2020, according to Morgan Stanley’s 2021 survey. Trupanion, one of the largest medical insurance companies for cats and dogs, indicated that revenue from its subscription business had increased by 28% year over year in its November 2021 quarterly earnings release.

3. The Rise of the Petrepreneur

The pet care industry is undergoing a wave of research and innovation, and there are a number of companies – both large and small – poised to benefit from both the proliferation of pet ownership and advances in the ways we care for our pets. Since 2020, at least six companies that focus on pet care have gone public and are included in the FactSet Pet Care Index. Some of these newer additions include Rover, an online marketplace that offers both pet sitting and dog walking services, and BARK, which aims to support the lifelong relationships their customers build with their dogs and offers a subscription-based BarkBox. In addition to these newer entrants to the FactSet Pet Care Index, some of the more established firms include those researching and developing new products to keep our pets healthy. Veterinary pharmaceuticals and veterinary diagnostic companies make up 24% and 13% of the index, respectively.  Altogether, those businesses that focus on pet health care represent 58% of the Index.[6] An important consideration given that health care can be the largest expense for pet parents and that the four-legged friends adopted during the recent pandemic “puppy boom” may require additional spending on health care as they grow older.

How Investors Can Access the Pet Care Industry

PAWZ is the first ETF that allows investors to capitalize on people’s passions for their pets. PAWZ gives investors the opportunity to gain broad exposure to public companies in the global pet care industry – companies that stand to potentially benefit from the proliferation of pet ownership and the emerging trends affecting how we care for our pets. PAWZ tracks the FactSet Pet Care Index.

1 ASPCA, “New ASPCA Survey Shows Overwhelming Majority of Dogs and Cats Acquired During the Pandemic Are Still in Their Homes,” May 2021 

2 APPA, “COVID-19 Pulse Study: Pet Ownership During the Pandemic”, Volume 5, January 2022 

3 Source: Morgan Stanley report, “Welcome to the Petriarchy,” March 2021

4 LendingTree Survey, September 2021 

5 American Veterinary Medical Association, “Are We in a Veterinary Workforce Crisis?” September 2021

6 Allocation to pet health care as of 12/31/2021