One of the greatest parts of my life is my miniature dachshund, Blue. She is with me from the start to the end of each day, and I would do anything for her and her health — except over-feed her treats, of course.
And I’m not alone. 68% of US households have at least one pet, according to the American Pet Products Association (APPA). That amounts to 84.6 million households, up 6.2% from 79.7 million in 2015. And those households consider their companions as members of the family.
Even in this economically challenged time, pet parents are not skimping on food or care, with Harris Polls reporting that 68% of owners are making no cutbacks when it comes to their pets, particularly their dogs.
During the stay-at-home and remote work conditions, pets are in strong demand. Dog breeders and animal shelters are seeing a drop in incoming pets, and demand for adoptions is up big.
This comes as economic distress rises in many households, with recent initial jobless claims rising again. The most recent weekly data showed in excess of 884,000 newly unemployed, joining millions more with continuing claims.
Yet, the spending on pets in the US continues to rise. According to the APPA, spending for 2020 is projected to come in at $99 billion, up from $94 billion in 2019 and $90 billion in 2018, representing a climb of 9.4% in just two years.
Some of the major breakouts of that spending, as tracked by Nielsen (NLSN) as well as APPA and the American Veterinary Medical Association (AVMA), include food at $38 billion, supplies near $20 billion, veterinary care at $30 billion as well as other spending on things like grooming near $11 billion.
And at the vet, one of the most dreaded places on the planet for most dogs, the average spending for procedures for dogs comes in at $426 and routine care at $212. This adds up over any given year. The American Society for the Prevention of Animal Cruelty (ASPCA) estimates that the average annual cost of caring for a dog is $1,843.
Love & Money
Simply put, the pet care market is a big growth sector that shows resiliency even during some of the most challenging economic times.
FactSet Pet Care, S&P 500 & S&P Health Care Indexes Total Returns – Chart Source: Bloomberg
FactSet Research Systems (FRS) is a global economic and financial data company. It has composed and maintains its Pet Care Index, which tracks the leading companies in the pet care market. Its index has returned 117% over the past five years, which is way better than the basic S&P 500 Index and the S&P Health Care Index total returns for the same time period.
And it gets even better for 2020. The Pet Care Index has returned around 30% year to date, which dwarfs the S&P 500’s return of around 13%.
Despite the continued outperformance, the average price-to-sales ratio of the Pet Care Index is under 2.25 times, which is a discount to the price to sales ratio of the more tech-heavy S&P 500’s 2.41.
This means that while pets rule the market and the economy, the companies serving them and their parents are still values.
Some of the leading companies include Nestlé (OTC:NSRGY), one of the leading pet food and pet product companies in the world.
Its pet care products, which make up around 15% of overall sales, are up by over 5% in the most recent reported quarter alone.
If you’re looking for a way to capitalize on people’s consistent pet-related spending, Nestlé (NSRGY) is definitely a buy.
Neil George was once an all-star bond trader, but now he works morning and night to steer readers away from traps — and into safe, top-performing income investments. Neil’s new income program is a cash-generating machine…one that can help you collect $208 every day the market’s open. Neil does not have any holdings in the securities mentioned above.