Overview of the market of services for pets

Обзор рынка услуг для домашних животных

This market is predicted to grow steady. Its size was estimated at 216 billion US dollars in 2020., and expected, that it will reach $350 billion in 2027 at an average annual growth rate 6,1%.

According to research, for 2019 approx. 25% women in the United States were not going to have children. But for today 65% young people aged from 18 to 34 Years plan to purchase a pet in the next five years.

Two-thirds of families in the U.S. have already owned animals., 69% of them fully agree that, that the pet is an important member of the family. In Russia, according to VTsIOM, this number is 68% families. Once the number of animal fans is growing, the market for feed for them and veterinary services is also growing..

The market of services is divided into surgery, diagnostic tests and visualization, physical health monitoring. North America now dominates this market and is committed to maintaining this position in the future..

Share of pet owners in the U.S.

Millennials 35%
Generation X 32%
Baby boomers 27%
71+ 6%

35%

Growth Drivers

Increase in the cost of keeping animals. In Russia, from 2019 to 2020, the monthly amount, which owners spend on their pets, grew from 1500 to 2000 Р. Spending on pet supplies in the U.S. also accelerated growth..

COVID-19 has turned people's lives up to life, but for pets it was a golden time.: they've never received as much attention from their owners., who were forced to stay at home.

According to experts of the housing strategy morgan Stanley, the number of pets in the U.S. has more than doubled during the pandemic. That being said, spending on everything from veterinary care to pet accessories has proven resilient even during the recession.. Most of the money went to feed and treatment. It turned out, that consumers are less inclined to cut back on pet spending, even when personal income declines.

Обзор рынка услуг для домашних животных

Spending on pets in the US, billion dollars

2019 2020
Feed 36,9 38,9
Accessories 19,2 19,8
Veterinary 29,3 30,2
Other 10,3 10,7
Total 95,7 99

2019
2020

Growth of the pet insurance market. Demand is growing, including for a sadder reason. The incidence of diabetes is increasing among pets, Cancer, problems with the kidneys and spine regularly appear. Outbreaks of diseases among livestock can lead to an epidemic and seriously disrupt the process of feed production. Therefore, owners are becoming more aware of the diseases of their pets and are more likely to turn to veterinarians..

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The more expensive such consultations and medications become, the more people prefer to insure their pet. Only u 1% Pets in the US have health insurance compared to 30% in Sweden, 25% in the UK and 5% in France. So this market still has room to grow., according to forecasts - more than 12% until 2028.

Such insurance policies cover accidents, illness and cost of hospitalization with treatment. When most people stayed home during the pandemic, they began to notice the health problems of their pets, which were previously ignored. At the same time, telemedicine services for animals received wide demand..

Owners have a convenient opportunity to get advice through the application, and doctors to track the condition of furry patients without direct contact. Veterinary telemedicine is another growing market segment with growth rates 19% on the horizon until 2028.

Обзор рынка услуг для домашних животных

Обзор рынка услуг для домашних животных

What can hinder the growth of the segment

Lack of qualified personnel. Despite the fact that veterinarians are an important part of society, there has always been a shortage of them in world markets.. The main reasons were low salaries and low interest in work on the part of young people..

Every year in the United States, only about 3 thousand students graduate from veterinary school, although the market needs several times more. During the pandemic, the number of people working around the world has declined, including fewer veterinarians. As a result, animal hospitals are now overwhelmed., and the reception has to wait 5-6 weeks. It's not just the speed of medical care that suffers, but also its quality.

Given that, that this problem was formed before the pandemic, it will not be solved soon. To find this solution, training needs to be increased, increasing interest in the profession. Sure, it will take a lot of time..

Decline in the level of income of the population. When your pocket is empty, then in the bowl is not dense. If the standard of living and incomes of the population begins to fall against the background of a new wave of the crisis, pets will also suffer. An amendment should be made here. A survey of pet owners in the US showed, what 72% of respondents will not change the cost of pets regardless of their finances. At the same time, the global crises of 2008 and 2020 did not affect the growth of these expenses..

The conclusion suggests itself.. The market for services for animals is a promising segment by all forecasts, and millennials and the younger generation Z will stimulate this trend.. He doesn't have any particular problems., is he, like many markets, depends on the general standard of living of the population.

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Overview of companies on the market

In this section we will analyze the shares of large players, traded on the St. Petersburg Stock Exchange and available to the average investor. This is Chewy, Freshpet, PetlQ.

The market is divided between large players and smaller retail stores.. The beneficiaries are Petsmart and Petco, which account for almost half of the market. According to the WSJ, 80% the growth of this segment in the United States in recent years has been driven by a trend towards the consumption of more expensive feeds.

Owners began to pay more to companies, which offer premium food and pet services. Therefore, such giants debuted in this segment., as Amazon and Walmart. Amazon offered consumers its own brand WAG. Under this brand, the company produces dry food, Exclusively for Prime subscription members. This example showed other companies, how important e-commerce is to the development of success. Therefore, competitors also hurriedly switched to this model..

Company's market share of services for animals in the United States by revenue

Petco 16%
Petsmart 33,7%
Others 51,3%

16%

Financial performance of companies, billion dollars

Capitalization P / S Average revenue growth for 5 years
Chewy 3,19 3,19 51,3%
PetlQ 0,79 0,79 30,55%
Freshpet 16,26 16,26 22,4%

Chewy. Company, which sells various products for pets on its own website, and through 17 U.S. Retail Outlets. Founded in 2011, it has now become one of the leading players in the field of e-commerce in the United States. In 2017, Chewy was acquired by PetSmart for $3.35 billion.. Two years later, the company sped out and went public..

The business model is based on increased attention to customers. To expand the consumer audience, the company puts prices lower, than competitors, and regular customers connect to the autoship subscription. Except for the sale of goods for animals, Chewy in October 2020 launched a telemedicine service called Connect With a Vet.. While these two services are free.

Here's how the company reported for the second fiscal quarter:

  • net loss of USD 16.7 million, including reimbursement costs, stock-based;
  • $2.16 billion in revenue is a plus 27,1% for the year, but less by $10 million, than analysts predicted;
  • adjusted EBITDA was $23.3 million versus a consensus of $34.8 million;
  • number of active customers amounted to 20.1 million active customers, What's on 21% more compared to the same period last year. Analysts had expected 20.4 million active customers.

The company is interested in the growing online segment and the demand for telemedicine. However, now it is unprofitable.: too high costs to attract customers.

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Freshpet. The company manufactures and sells exclusively dog and cat food and treats in the USA, Canada and the United Kingdom. Feeds are produced under the Freshpet brands, Dognation and Dog Joy. Sells its products through two channels: through online stores – mass and club, as well as through retail trade. Revenue for 2020 by segment was $272 million and $46.78 million, respectively..

Latest financial results:

  • net loss of USD 7.5 million compared to the prior year's net profit of USD 0.2 million;
  • revenue $108.62 million — plus 35,8% compared to last year, $2.57 million more, what analysts expected;
  • net sales increased by 35,8% — up to 108.6 million dollars;
  • Freshpet benefits from, that many owners prefer expensive and natural food for their animals.

PetIQ. It is a company that produces medicines and provides services for pets. It develops its own patented products, and distributes third-party drugs. The company provides services through more than 60 thousand retail outlets and on its website. PetIQ can also be found in community clinics and wellness centers in 41 U.S. State, there she conducts diagnostic tests, vaccination and prescription drugs.

The company's presentation states, that the growth potential of the market for medicines and services for animals is estimated at $ 10 billion.

In the report for the last quarter of 2021, the company did not reach the forecast values. Earnings per share were 0,63 $ - The forecast was 0,73 $. And revenue - $ 271 million, down 33.6 million, what analysts expected.

PetIQ can be attractive due to its own production base of veterinary drugs, for which the demand will inevitably grow.

Conclusion

The pandemic has provided an opportunity for many unprofitable companies to increase their revenues. As a result, their capitalization has grown several times.. Now, when life begins to return to the pre-Covid order, the value of these companies is overvalued.

Revenue growth is slowing, and stocks start to fall — for example,, Chewy since the beginning of the year fell by 30%. However, this does not mean, that the veterinary market has turned around. Quite the opposite., forecasts confirm, that it will continue to grow.

the main thing, as always, be choosy in choosing companies. Since all the above issuers are still in the growth stage, they incur large operating costs to attract and retain customers due to low markups and a large number of services.

Therefore, in the reports for 2021, you should definitely pay attention to the following indicators.:

  1. Dynamics of customer base growth.
  2. Average revenue per customer.
  3. Dynamics of revenue growth and net profit.
  4. Forecast for 2022.
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