Pet Parents Power Related Industries Through the Recession

By IBISWorld Analyst Josh McBee

In a word, stability has defined the pet sector since 2007. Of the four pet-related industries currently in the IBISWorld collection, all are expected to post significant annualized gains during the five years to 2012. Collectively, revenue from pet stores, groomers and boarders, veterinarians and sales from online suppliers is expected to total $51.6 billion in 2012. For comparison, the entire Wedding Services industry (IBISWorld report NN006), which includes related food and drinks, venue rentals, photography, flowers and all the other trappings, only totals an estimated $49.4 billion in 2012.

The pet industries share two external drivers that are crucial to understanding revenue movements. First, the American Pet Products Manufacturers Association’s annual ownership survey measures the number of cats and dogs owned as pets, indicating each industry’s potential market. The second shared driver, per capita disposable income, indicates consumers’ ability to spend on discretionary items as measured by the Bureau of Economic Analysis.

The financial meltdown and subsequent recession of 2009 snapped a 17-year streak of positive growth indisposable incomes. Millions of Americans lost their jobs or were unable to join the workforce for the first time. Here’s the rub: Even as disposable incomes dipped an unprecedented 3.2% in 2009, the number of cats and dogs as pets grew 3.6%. In fact, three of the four pet-related industries posted solid growth in 2009. So what’s driving countercyclical growth in pet-related industries during the five-year period?

Raining cats and dogs

The sheer volume of pet ownership provides the first key to understanding recent trends in the pet sector. Economic prosperity in the mid-2000s encouraged more households to adopt cats and dogs. In 2012, about 62.0% of US households (72.9 million homes) own a pet compared to just 56.0% in 1988. In the past decade, the number of cats and dogs owned aspets has grown at an annualized rate of 3.0%, from 137 million in 2002 to anexpected 184 million in 2012.

High adoption rates from 2003 to 2005 have created a holdover effect in that cats and dogs purchased or rescued in those years have continued to support demand for pet-related goods and services through 2009’s recession-addled economy. As a result, pet store revenue grew at an annualized rate of 2.8% (IBISWorld report 45391). Unlike car maintenance or home repairs, the needs of household pets often trump spending on other discretionary items and cannot be delayed. Which brings us to the next factor supporting countercyclical demand: pet parents.

Pet parents

While pet ownership had been growing on its own prior to the recession, the resulting decrease in per capita disposable incomes made households think twice about starting a family. Infact, the number of births fell consistently from 2008 to 2010, according to data from the National Center for Health Statistics. In this way, pet ownership has served as an alternative to parenthood for some couples.  

Over the past decade, so-called “pet parents,” or pet enthusiasts who treat pets as family members, have become more common. During the economic downturn, when consumers of all income levels tightened their belts, pet parents cut back on their personal discretionary spending before scaling down spending for their pets. Consequently, revenue growth slowed during the recession but maintained its overall positive trend.

With Fido and Fluffy now substituting for Johnnie and Jill, some pets are receiving the kind of economic attention traditionally reserved for children. Besides maintaining spending, pet parents often purchase a greater range of high-value services, especially with regard to pet grooming, training and boarding (IBISWorld report 81291). In response, pet groomers are increasingly providing massages and house calls, while pet boarders have introduced deluxe hotel suites equipped with TVs, music, training services and wading pools, among other amenities. As aresult, the average price for pet boarding has increased, and the industry’s revenue has grown at an annualized rate of 4.1%, the highest growth in the pet sector.

Convenience is king

Rising pet ownership has also caused online sales of pet food and supplies (IBISWorld report OD5086) to grow despite the recession. Given the industry’s online nature, growth across the e-commerce sector ingeneral has played a role in sustaining returns as well. Specifically, demand for premium pet foods and online animal pharmaceutical sales have increased during the past five years, even though online sales of such items declined marginally as consumer spending fell in 2009. The ability to compare prices, shop from home and glean advice from  instructional videos and other web content only enhances the allure of finding relatively cheaper pet supplies online when compared to brick-and-mortar outlets.

Growth set to continue

IBISWorld forecasts the current demand for pets to grow through 2017. Ongoing improvements in per capita disposable incomes will enable more people to afford pets and related services during the period. Areas of potential growth include pet food production, pet breeding activities and even companies providing pet insurance and performing pet funerals.

To download full research reports for the industries discussed in this article, click on the report titles below.

Veterinary Services, Pet Stores, Pet Grooming & Boarding, Online Pet Food & Pet Supply Sales, Wedding Services 

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