Morgan Stanley
  • Research
  • Nov 2, 2022

Puppy Love Boosts Pet Care Industry

With 5 million more pets in the U.S. since the pandemic began, Morgan Stanley predicts 8% annual growth in the pet industry by 2030.

If it seems as though everyone you know added a family member with fur, feathers or fins during the pandemic, the data show that you’re right:  There are currently five million more pets in the U.S. than there were in 2019, with about 4% more households now including pets, according to Morgan Stanley Research and findings by its proprietary survey and data arm  AlphaWise. The third AlphaWise survey of pet owners in June, which included approximately 2,500 adults in the U.S., shows that “fur babies” have found a permanent place in the hearts, and spending habits, of consumers across the country and world.

That is good news for the pet industry, and there's more growth to come: Morgan Stanley predicts an 8% compound annual growth rate for the industry by 2030, which is one of the largest rates of return in any retail segment. That forecast is in line with estimates from spring 2021, based on the October 2020 survey, and we still expect pet services to lead that growth. However, analysts have lifted the longer-term estimates for pet products spending.

On the household level, Morgan Stanley predicts spending to increase to $1,320 per pet by 2025, while reaching $1,897 by 2030. That compares with the previous outlook for per-pet spending of $1,292 by 2025 and $1,909 by 2030.

“An outcome in line with this expectation would increase total spending in the industry by 134% over the next decade, from $118 billion in 2019 to $277 billion by 2030,” says Simeon Gutman, an equity analyst covering hardline, broadline and food retail at Morgan Stanley.

The Millennial Pet Owner

Younger Americans fueled the pandemic pet craze, with 18- to 34-year-old respondents accounting for 32% of those who got their most recent pet in the past six months. These owners tend to spend more than other age groups on food, treats and care for their pets.

“As Millennials become homeowners, delay having children and increasingly have smaller families, they tend to spend more on their pets than older pet owners do, especially on premium food and services,” says Gutman. “The increase in ownership during the pandemic was driven primarily by this cohort, and they are likely to accelerate the trends toward treating pets like humans and providing premium care. As a result, the COVID benefit to the pet industry likely has a long tail.”

In 2022, pet ownership increased the most among 18- to 34-year-old respondents. (Data as of June 2022)

Spending on pets has not only increased by 11% over the course of the pandemic; it's also considered to be “increasingly inelastic.” So, even when animal owners cut other parts of their budgets, their pet care routine often remains. Shoppers will clip coupons, compare prices at various stores and stock up during sales to make sure their non-human companions have their favorite foods and treats. Some may even take on debt to help pay for medical costs.

“Americans are increasingly attached to their pets, which is clearly shown in survey results, and thus pet spending is a priority,” Gutman says. “Consumers are less willing to cut pet spending even when real personal disposable income declines.”

Pet Investment Only Set to Increase

As families increasingly bring animal friends into the fold—whether it's a show-ready Pomeranian pup or a school of tropical fish in a saltwater aquarium—they lean on veterinarian recommendations for food and other supplies.

Vets remain “at the center of the pet care ecosystem,” and pet parents are “very compliant with routine vet visits, even emerging from the pandemic,” Gutman says.

“In 2022, 69% of pet owners had visited the vet at least once in the past 6 months. Nearly 60% of pet owners went to the vet one to three times during the period, which was surprisingly consistent with our 2020 survey” according to Gutman.

In addition, the vet's office is the No. 1 destination for the fulfillment of pet prescriptions, with nearly a third of respondents saying they get their pets' meds straight from the vet. And that's not an insignificant number: 72% of pet owners expect to use prescription medications for their pets for the next 6 months.

Overall, pet spending is set to keep growing throughout the 2020s.

  • About 34% of respondents expect to increase their spending on pet food in the next six months, while 32% predict they will plunk down more money for their pet's health.
  •  Pet services is expected to have the highest growth of any segment of the pet industry, with spending now predicted to rise 143% by 2030 to $118 billion, versus our previous outlook for $127 billion for pet services by 2030.
  • Pet insurance is also a strong growth area, registering nearly 26% in annual growth between 2017 and 2021, with a 21.5% increase of pets coming under insurance in the same time period—and no signs of slowing.
  • Products, including treats and fresh-from-the-fridge meals made without preservatives, is the biggest industry segment. Spending is predicted to increase 128% over the next decade from $70 billion in 2019 to $158 billion in 2030, compared with an estimate for $151 billion by 2030 based on the previous survey.
  • Innovation in products that add convenience and compliance with treatment protocols—such as solutions that tackle multiple issues, like medications for fleas, ticks and heartworm—could further expand the market.

Wellness and preventive diagnostic testing for pets is still in its nascent stages, but is expected to expand. This is a long-term growth opportunity, says Gutman, one that will grow at a more measured pace in the near- to medium-term, given that the development of preventive care protocols, vet training and pet owner education around the importance of preventative pet care will take time.

“On the whole, the pet category remains an attractive and defensive investment across both food and products, as well as vets, insurance and other services, making investment in the pet sector relatively low-risk,” says Gutman.