While investors globally are focused on the implications of a Trump Presidency, there is one niche industry that will continue to perform well, regardless of who is in the White House. That is the pet industry.
We particularly like the “pet humanisation” investment thesis, which is the global trend of treating pets like valued members of the family. An increasing percentage of the population are treating pets like humans these days, and that is driving a global spending boom.
The total number of pets worldwide has continued to grow, with the United States having the highest population of dogs and cats. In fact, 65 per cent of households in the US own one or more pets. The number of pet dogs and cats in the US has grown by almost 20 million between 2012 and 2015-2016 (see table below), while New Zealand, has the highest proportion of households with pets in the world, with some 68 per cent of New Zealand households owning a pet.
Why the pet surge?
Demographic trends are supporting the strong growth in pet numbers with both baby boomers and millennials being the fastest growing segments of owners. In general, the trend is to have smaller families with more room for pets. In addition, millennials are getting married later and are enjoying the companionship of a pet earlier. The ageing population is another driver of pet demand, as pets provide good company and many studies have revealed the health benefits of pet ownership.
What about pet spending?
The more affection we have for our pets, the more we spend – and we are spending more than ever on our pets. This spending boom on pets is reinforced by my personal experience as the owner of three dogs and two cats. As you can see from the chart below, US pet spending continues to grow, reaching a massive US$60 billion in 2015. Spending on pets in the US has grown over 6 per cent per year since 1994 – it even grew during the Global Financial Crises in 2008. It was recently reported on Stuff.co.nz that New Zealanders spent NZ$797 million on their dogs in 2015, slightly more than the NZ$747 million spent on cats in 2015. This is a global phenomenon, and one that could have an impact on the way you invest.
Conclusion
The Milford Global Fund has exposure to a number of companies that benefit from the trend of “pet humanisation”. These companies are involved in animal healthcare, which tends to account for roughly half of the total spend on pets each year. We prefer animal healthcare to human healthcare as it is less regulated and there is less competition, with only a few major players. The Global team is excited about the prospects for our “pet humanisation” companies having recently met with some of our holdings on a US research trip. The prospects are good, given the long-term tailwinds from increasing pet ownership, pet longevity (ageing pet population due to medical advances) and increased pet insurance, that encourages pet owners to proceed with more expensive pet treatments. Furthermore, large Emerging Market economies such as China and India offer huge potential, given the relatively small number of pets relative to their large populations. It is a matter of time before the trend in “pet humanisation” makes its way to these countries.
Stephen Johnston
Portfolio Manager
Disclaimer: This is intended to provide general information only. It does not take into account your investment needs or personal circumstances and so is not intended to be viewed as investment or financial advice. Should you require financial advice you should always speak to an Authorised Financial Adviser.