Summary
February means Valentine’s Day. Those who find the task of buying an “acceptable” gift for their loved one stressful might find it amusing to learn that certain members of our family receive gifts without knowledge or expectation of the Valentine’s Day tradition. Our pets, as a vital part of our social life and important members of our families, have come to benefit from this celebration as well.
- The number of pets per household has increased substantially in recent years
- The 'humanisation of pets' trend is positively impacting spend
- Spending on pets has been rising consistently over many years
- An estimated USD 1.2 billion will be spent on pets in the US on Valentine's Day
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Pet parents predicted to spend significantly for Valentine's Day (and any other day!)
The adoption of pets has been on the rise for a number of years and received an extra boost during the pandemic. At a basic level this means that there is a greater number of pets per household than ever before. Furthermore, household spending per pet has also been rising consistently for many years. This spending increase has been driven by the ever-closer bonds between pet owners and pets leading to what has been called the “humanisation” effect– the trend to treat pets as fully fledged members of the family. Although some normalisation of pet adoption rates has occurred over recent months, the underlying spending trend remains intact and is continuing from now elevated levels.
Spending levels are predicted to rise
The pet economy is growing significantly thanks to the megatrend Demographic and Social change. Older generations, Millennials and families alike appreciate the health benefits, companionship and unconditional love that pets bring to the mix. As such, pets do not lose out when it comes to special occasions such as Birthdays or Valentine's Day.
The National Retail Federation and Prosper Insights & Analytics predicts that in the US, pet owners will spend USD 1.2 billion on Valentine’s gifts for their pets this year, up from 20211. In a recent survey, the website “finder”, an independent comparison platform and information service, even concluded that Americans would spend a whopping USD 2.1 billion on gifts for their dogs and cats on Valentine's Day - doubling what they spent last year2. On average that implies spending levels of approximately USD 31 per dog or USD 27 per cat, just for the occasion.
The possible ways to spend on pets are wide ranging, from simple snacks and toys to high end equipment such as a medical dog basket or training tools that aim to improve agility or mantrailing skills (training an animal to follow a human scent trail). Chewy, the leading e-tailer of pet supplies in the US, has a dedicated Valentine’s Day category under the headline “Make furry hearts flutter with toys, treats, gifts & more”. The bestselling product is the “Goody Box – Valentine’s Dog Toys & Treats”, costing USD 24.99 (was USD 39.74!). The box “comes with three treats and four toys your pup will surely love” including items like the “Valentine Heart Ice Cream Plush Squeaky Dog Toy” and “Pet Greens Tasty Lamb Semi-Moist Li'l Dog Treats”. Unfortunately, those that havent managed to get their hands on the goody box as yet will be disappointed - it has now sold out! However, it should probably be mentioned that there is also a cat version of the Valentine’s box as well as many other products. At the time of writing, the whole category of Valentine’s Day pet supplies at Chewy returned an extraordinary 347 results3.
The 'humanisation' effect confirmed by respondents of our survey
Whilst this might be seen as anecdotal evidence, it still provides a powerful illustration of one of the main drivers of the pet economy. Pet owners are happy to spend on their pets and companies are more than willing to serve their needs, creating new needs as they go.
We have recently confirmed the humanisation trend with findings in a Grassroots Research® survey4. Asking more than 1,500 owners of dogs or cats in Germany, Italy and France, more than half of all respondents confirmed that they celebrate their pet’s birthday every year. That celebration will likely involve some spending on extra treats just like for Valentine’s Day. More than 90% of the pet owners surveyed declare their pet an “important member of the family”.
At the same time, close to 50% of these pet owners confirmed that they were paying a premium price for pet food to improve their pet’s nutrition. Close to 40% stated that they don’t pay a premium yet but would consider paying for premium food. Today pet parents can choose from a wide variety of food and snacks to cater all specific dietary needs and preferences of their four-legged friends.
The future of the pet economy looks bright
The pet economy has become big business and growth is likely to continue as the spending propensity has already become highest amongst Millennials who have become a large group of pet owners over the recent years. They are still early into their careers and will become more affluent. At the same time companies will continue to come up with new products and services around pets further propelling the pet economy.
Allianz Pet and Animal Wellbeing5
Allianz Pet and Animal Wellbeing is a pure thematic investment strategy with an exclusive focus on the global pet market. Driven by the megatrend of Demographic & Social Change, we invest in companies across the globe that are directly participating in and benefiting from the pet economy.
Pet economy: robust growth, crisis resistant
- Robust growth: 5.2% CAGR6
- Broadly considered a recession-proof market as pets are part of the family and as such are guaranteed food and medical care regardless of the state of the economy
High degree of purity
- Around 30 stocks, mostly pure plays
- Investing globally
- Mostly small- and mid-caps, with some diversification into large caps
- Investing in pharmaceuticals, healthcare, insurance, food and many other areas benefitting from the pet economy
Experts in thematic investing
- Extensive experience in managing thematic investments
- Integration of Allianz Global Investors' research platform including Investment Chatter and Grassroots Research®4 , helping to identify new trends
- Exposure to innovative young companies as well as established providers
1 NRF & Prosper Insights & Analytics January 2022 Survey
2 https://www.finder.com/how-much-do-americans-spend-on-their-pets-on-valentines-day
3 https://www.chewy.com/b/valentines-day-shop-2701
4 Source: AllianzGI/Grassroots Research®, October 2021. Survey amongst 1,524 respondents in Italy, France and Germany who own dogs, cats, or both. The Grassroots Research® division of Allianz Global Investors commissions investigative market research for asset-management professionals. Research data used to generate Grassroots Research® reports are received from independent, third-party contractors who supply research that, as far as permissible by applicable laws and regulations, may be paid for by commissions generated by trades executed on behalf of clients.
5 A performance of the strategy is not guaranteed and losses remain possible. This is for guidance only and not indicative of
any future allocation.
6 Source: Trupanion/APPA US Pet Industry Spending Figures & Future Outlook. Expenditures include food, supplies/OTC medication,
vet care, live animal purchases and grooming and boarding. As of May 2018.
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