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Paws for Thought

Published on 09/09/2021

Since the start of the pandemic, pet ownership has gone through the roof. There have been many news stories detailing the fates of these pandemic puppies, both good and bad, but what does this rise in pet ownership mean for all the associated companies and their stock prices?

A total of 3.2 million households in the UK have acquired a pet since the start of the pandemic according to the Pet Food Manufacturers' Association. This brings the UK to a staggering 17 million homes now owning at least one pet. Of the 34 million pets in the UK, 12 million of these are dogs.

Anyone who owns or has owned a dog knows that they are not just a pet, they are part of the family. We treat them like kings and queens, they sleep in our beds, they have trips to the groomers, specialist food, toys and top-class healthcare. They come with us to offices, parties, long weekends away, and when they cannot come with us, they have dog walkers, daycare and kennels to go to.

The largest dog walking business in the U.S., Rover Group, Inc. (NASDAQ: ROVR) went public in February of this year via SPAC merger. At the time the company was valued at $1.35 billion, and the majority of the company’s revenue comes from overnight care. Stock price has peaked in recent days from around $9 to almost $14.

Nutrition is a huge part of a dog's wellbeing and the dog food industry has radically changed in recent years. More and more, owners are looking to understand the ingredients being fed to their beloved pets. Grain and gluten-free, hypoallergenic and even custom made to order food can now be delivered by subscription. These options cost more, and it’s a cost owners are willing to pay.

Take American pet food company FreshPet (NASDAQ: FRPT) whose products are marketed as fresh and need to be kept refrigerated at the point of sale. Then there’s Chewy Inc (NYSE: CHWY) who, alongside the branded tins and kibble, also cover special diets for every nutritional need.

But it’s not just walkies and treats our furry friends need, there are the toys, beds and sundry items: poo bags, training leads, harnesses, clothing. Dogs come in all shapes and sizes from six feet on their hind legs, to six inches.

Pets At Home (LON: PETS) has seen steady growth in its stock price since 2019, with a huge month-on-month increase since the pandemic began. Then you have Etsy (NASDAQ: ETSY) which, despite a dip at the end of April have seen similar fortunes. Etsy is a treasure trove of pet items, providing custom made gifts, clothing and treats. Competing on this stage is also Amazon (NASDAQ: AMZN), a leader in pet tech.

And there is Barkbox - Original BARK Co (NYSE: BARK) - an omnichannel pet company that went public in June this year in a SPAC deal with Northern Star. The deal valued Bark at $1.6 billion and covers four key areas of dog ownership, namely play, food, health and home.

Trips to the vet are a must for all dogs, and they don’t come cheap. To insure a dog depends on myriad factors, from breed, age and location. Costs rise and fall, and for some owners, it’s not a priority, but for others - especially this author whose dog recently had an accident requiring a large amount of medical care - it’s a must. It’s the usual providers who are writing the premiums, but there are new entrants to the market all the time. In early 2021, Petco Health and Wellness Company (NASDAQ: WOOF) went public raising over $800 million.

One of the largest companies in the pet insurance space is Trupanion Inc (NASDAQ: TRUP). Its European competitor IVC Evidensia - which is part-owned by Nestlé - completed a €3.5 billion private funding round in February this year. IVC was one of the companies expected to launch an IPO in London later this year, with a valuation at €12-15 billion, however, reports are saying that an IPO is off the cards in the short term.

Medication for dogs are often human-grade, and veterinary drug companies are everywhere. Dechra Pharmaceuticals (LON: DPH), a veterinary drug company, have seen their shares rise more than 50% this year, putting them into the FTSE 100 for the first time. Their U.S. counterparts Zoetis (NYSE: ZTS) which sells vaccines, parasiticides, diagnostics and other products for pets and farm animals spun out from Pfizer Inc (NYSE: PFE) in 2013, creating one of the largest publicly traded animal pharmaceutical companies.

The tasks our ancestors bred dogs for many not be our beloved four-legged friend's main focus anymore, but as it turns out, alongside love and companionship, they can bring us investment ideas. There’s a science to being right, and a tummy to be rubbed.

Disclaimer: This blog is for information and educational purposes only. It is not intended to be investment advice and should not be relied upon by users in making (or refraining from making) any specific investment, purchase, sale or other decisions.

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