Summary
August 8th is International Cat Day, a day in celebration of our beloved furry feline friends. Whether you love them or hate them, they continue to leave their mark on our history, and with a booming pet economy they could impact your investment portfolio too.
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The onset of Covid-19 saw a rise in the numbers of pets being purchased or adopted. Pets have provided protection, comfort, love and companionship through these unprecedented times. But the rise in pet ownership hasn’t been limited to the Covid-19 outbreak. This is a trend that has been growing for years. According to PFMA’s Pet Population 2020 report 41% of households in the UK have a pet.1 More broadly throughout Europe, 85 million households have at least one pet.2 And according to the 2019-2020 APPA National Pet Owners Survey, 67% of U.S. households own a pet.3 With a large proportion of us now owning pets, and furthermore regarding our pets as family members, this opens up a wide market of different goods and services for our pets. The pet economy is a multi-billion dollar market globally which is expected to grow to USD 202.6 billion by 2025.4
But first, famous cats
Egypt
While many animals were worshipped by the Ancient Egyptians, no species was more so than the cat. Many Ancient Egyptian deities were depicted with cat-like heads. The Egyptians believed cats were powerful and magical creatures, with the ability to bring good luck to the people who looked after them. Out of respect for our feline friends, wealthy families dressed them in jewels, fed them a diet fit for royalty and when they died they were mummified. In 450 BCE laws against cat killing were strengthened with the death penalty imposed for such a heinous crime.5
Entertainment
Although never named in the Bond movies, the beautiful white Persian owned by one infamous villain, Blofeld, captured the hearts and imaginations of the global audience. Such was the recognition of the role, that a ‘Mr Bigglesworth’ was included in the Austin Powers parodies that followed. In one of the most famous movies of all time, Breakfast at Tiffany’s, we were introduced to a cat called ‘Cat’, ‘a poor slob without a name’ as Holly Golightly put it. But don’t be fooled, this cool cat, real name Orangey, was a celebrity in his own right. He was one of the most highly demanded feline actors of his day, with a career spanning 15 years.6
Social media
Cats are tearing it up on social media. Between influencers using their cats to gain more followers and owners setting up individual accounts for their cats there is no end to the social delights of our little friends. Take Instagram for an example, ‘Cats of Instagram’ has a striking 11.6m followers. Another, Nala CatTM, has 4.3m followers. Using #catsofinstagram delivers 139m posts with #cats displaying 106m posts.7 When the famous ‘Grumpy Cat’ died in mid-2019 it made national news headlines around the world.8 It appears that our appetites are insatiable, we just cannot get enough of cats.
The Pet food marketIn Europe, it is estimated that the annual turnover of pet food products is EUR 21 billion with an annual growth rate of the pet food industry of 2.6%.9 With a population of roughly 106m cats in Europe, that is a lot of hungry little mouths to feed. The way in which we feed our pets has changed. No longer do scraps from the table and leftovers suffice. With a wider variety of dietary options available these days for humans, so there is a revolution in the pet food industry. With the change from pet owner to ‘pet parent’ the nutritional requirements and quality of the ingredients in the food we feed our pets has improved. As information around the health and hygiene of pets is more easily accessible, people in general are expecting more. Healthier and fresher food is in demand. In response, pet food manufacturers have introduced an array of produce, for example: specific to the breed or size, to combat allergies or sensitivities, organic and plant based or single serve containers to keep food fresher. While more companies are entering the pet food market, the global market itself is dominated by a few large multinational players. These players however can benefit from their substantial marketing and innovation resources to create new recipes, brands and packaging that will appeal to this new wave of pet owners.10 TreatsAn increasingly important mainstay has also been the treat segment. The cat owner who likes to snack shares this tendency with their pet. There are treats to reduce fur in the gastrointestinal tract, treats for whiter teeth and better breath, the list goes on. Sometimes the excuse to give a treat can seem compelling, but no matter what reason there is for the treat unfortunately they often contain sugar. Obesity is now not only a growing problem for the human population but is also prolific amongst domestic cats.11 This can result in an increase in medicine and veterinary expenditure which, for some, can become unmanageable without pet insurance |
Pet InsuranceWith the escalating medical expenses and extended lifespan of pets, pet owners are gradually turning to pet insurance to alleviate the cost pressure. The concept is growing more popular in some markets than others but it has huge growth potential. The pet insurance sector is ripe for expansion as there are increasing marketing efforts and education on the topic. As of January 2020 the global pet insurance market was expected to grow at a CAGR of over 20% during the period 2019-202512 |
Smart TechnologyAnimal owners love to lavish gifts on their pets. With digital technology enhancing all of our lives, it is no surprise that our pets are also becoming digitally enabled. To ensure they are safe, entertained and getting enough exercise, technology is increasingly being used. For those wishing to be more connected with their pets throughout the day, there are pet cameras. Smart feeders help to keep our pets fed when we are absent from home. Pet wearables help us to know our pets’ location and keep track of their activity and health. Cat recognition devices, allowing only your cat through the cat flap in your home, are being employed (face recognition for cats!). The market for smart technology for pets is expected to reach USD 1 billion over the coming years.13 |
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When it is time to say goodbyeWhile times have moved on from Ancient Egypt even today the trend towards a ceremonial farewell to one’s pet is increasing. Palliative care for terminally ill animals, pet cemeteries, cremations and grief counselling for relatives are all available. |
There is no limit to the possibilities for pet expenditure. In the U.S. alone, almost USD 70 billion was spent on pets in 2018. Companies from a wide range of industries are benefiting from this. From animal feed manufacturers to insurance companies.
We do not abandon family members when times get hard and the economy is in decline, neither do we abandon our pets. It has even been suggested that some people would cut back on their personal expenditure sooner than their expenditure on their pet.14 In this way the companies behind pet goods and services are well positioned to benefit over the longer term.
Allianz Pet and Animal Wellbeing
The Allianz Pet and Animal Wellbeing strategy focuses on the opportunities within the growing pet economy investing
exclusively in companies that provide products or services for pets and other animals. The fund invests in global equity
markets, across a diverse range of sectors (pet food manufacturers, animal insurers, e-commerce, pharmaceuticals/
biotech/ healthcare) with a focus on small and mid-cap companies.
High degree of purity
The changing demographic and social landscape is one of the macro (or mega) trends shaping our economic future, from a growing middle class and aging society to shifting millennial attitudes. The Allianz Pet and Wellbeing strategy provides investors with a way to access this megatrend with a high degree of purity.Pet economy: robust growth, crisis resistant
Studies show that the momentum of the global growth of the pet-related goods and services market is set to continue. In our view this market is largely crisis-proof: pets are a part of the family, and as such they are guaranteed a high level of care regardless of the state of the economy.Experts in thematic investing
Allianz Global Investors has extensive experience in thematic investments. Our in-house research division, Grassroots Research®, and as our global investment platform help us to identify new trends. Investors enjoy exposure to innovative young companies as well as established providers.*
Sources:
1 https://www.pfma.org.uk/pet-population-2020
2
https://www.fediaf.org/images/FEDIAF_Annual_Report_2020_cor.pdf
3 https://www.americanpetproducts.org/press_industrytrends.asp
4 https://www.grandviewresearch.com/press-release/global-pet-care-market
5
https://www.historyextra.com/period/ancient-egypt/why-were-cats-so-important-in-ancient-egypt/
6
https://www.imdb.com/name/nm1248838/bio?ref_=nm_ov_bio_sm
7
Data taken as at 30/07/2020
8
https://www.bbc.co.uk/news/world-us-canada-48308638
9
https://www.fediaf.org/who-we-are/european-statistics.html
10 https://www.mordorintelligence.com/industry-reports/global-pet-food-market-industry
11 https://www.vet.cornell.edu/departments-centers-and-institutes/cornell-feline-health-center/health-information/feline-health-topics/obesity
12 https://www.prnewswire.com/news-releases/the-global-pet-insurance-market-is-expected-to-grow-at-a-cagr-of-over-20-during-the-period-20192025-300989532.html
13 https://www.forbes.com/sites/pamdanziger/2019/01/30/pets-are-going-digital-brands-pioneering-in-the-565m-market-for-smart-pet-products/#315301d074b5
14 https://www.marketwatch.com/story/a-recession-proof-industry-you-can-count-on-pet-care-2019-07-02
* Grassroots Research® is a division of Allianz Global Investors that 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.
Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors might not get back the full amount invested. The views and opinions expressed herein, which are subject to change without notice, are those of the issuer companies at the time of publication. The data used is derived from various sources, and assumed to be correct and reliable at the time of publication. The conditions of any underlying offer or contract that may have been, or will be, made or concluded, shall prevail. The Management Company may decide to terminate the arrangements made for the marketing of its collective investment undertakings in accordance with applicable de-notification regulation. The duplication, publication, or transmission of the contents, irrespective of the form, is not permitted; except for the case of explicit permission by Allianz Global Investors GmbH.
For investors in Europe (excluding Switzerland)
This is a marketing communication issued by Allianz Global Investors GmbH, www.allianzgi.com, an investment company with limited liability, incorporated in Germany, with its registered office at Bockenheimer Landstrasse 42-44, 60323 Frankfurt/M, registered with the local court Frankfurt/M under HRB 9340, authorised by Bundesanstalt für Finanzdienstleistungsaufsicht (www.bafin.de).
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For investors in Switzerland
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