The Pet Industry Has Plenty of Lives Left

For many people, pets are more than just animals: They’re part of the family. The increasing importance of pets in their owners’ lives is expected to drive steady growth in the pet sector for years to come, according to Morgan Stanley Research.

“American pet ownership experienced a pandemic boom as a surge of people added a family member with fur, feathers or fins during COVID,” says Simeon Gutman, Morgan Stanley’s Retail Analyst. “While the percentage of households adding pets has receded somewhat from its 2020 peak, growth in new households among those most likely to spend more on pets, combined with increased spending on areas such as veterinary care, should compensate for the drop in ownership.”

Spending growth in the pet industry could reach 7% annually by 2030, after below-average growth of 2.5% projected in 2024 and 3.9% in 2025. “That’s a whisker below the previous Morgan Stanley survey of pet owners in 2022, but still outpaces nearly all retail subsegments and is one of the largest rates of return of any retail sector,” says Gutman.

Per the latest survey results, annual household spending on pets is predicted to reach $1,445 per animal by 2026 and $1,733 by 2030. That translates into a 113% increase in total industry spending to $261 billion by 2030, compared with $122 billion in 2019. 

Generational shifts will increasingly factor into growth, as 34% of respondents—particularly those aged 18 to 34—said they intend to get a pet compared with 28% in 2022. These owners tend to spend more than other age groups on their pets, especially on premium food and services, and are more likely to put their pet’s preferences before price.

Among spending categories, pet services such as animal health are expected to be the main driver of growth, more than doubling to $112 billion in 2030 from $48 billion in 2019 and outpacing growth in pet consumables, the largest spending category.

Vet services, in particular, will likely experience a surge in demand over the next decade. This year's survey, conducted among 2,300 consumers in March and April 2024, found that 80% of pet owners had visited the vet at least once in the past six months, while nearly two-thirds visited one to three times, up four percentage points from the 2022 survey.  And respondents said they relied on vet recommendations when buying pet food and treats, which make up about 44% of all pet spending, totaling $147 billion in 2023.

“Taken with our survey results, we can infer that vets directly influenced up to $12 billion of that spend and up to $26 billion indirectly on pet care above and beyond what pet owners spent on animal health,” says Gutman.

That said, fewer respondents said they counted on a vet’s referral compared with the previous survey as the younger generation increasingly turns to social media and personal networks for information.

Meanwhile, the rise of standalone animal health companies has spurred innovation, which could add as much as 3% to market growth in such areas as monoclonal antibodies, vaccines and other injectable treatments. Enhanced diagnostic capabilities, AI and expanded point-of-care services should boost the use of a wider range of products and services within the animal health sector, while elevating the levels of care.

 "Animal health is perhaps the most important segment of U.S. pet care for investors to focus on over the next decade," says Gutman.

While 80% of pet owners prefer to shop in stores, online buying of pet food and other supplies continues to rise, with nearly 70% of respondents reporting buying via the internet in the past six months, up 9 points from the 2022 survey.

“The feedback we saw from pet owners reflects generational trends in e-commerce across retail segments, and we expect this shift to be persistent,” Gutman says.

Survey results indicated a new leader in the age-old feline vs. canine battle that may also help explain the pet industry’s moderated growth. While pet ownership has stayed fairly consistent at 69% compared with the previous survey, cat owners increased while dog owners declined. Dogs tend to require more resources, care and maintenance than cats, which also took the top spot among preferences for future pets.

“Overall, owners will continue to prioritize their pets, viewing them as an important part of their lives," says Gutman. “So while growth catalyzed by the desire for animal companionship during the pandemic has pulled back, the pet industry should remain among the most dynamic within retail in the coming years.”

 

For deeper insights and analysis, ask your Morgan Stanley Representative or Financial Advisor for the full report, “The Petriarchy Strikes Back…by the End of 2025,” (June 13, 2024).