The COVID-19 pandemic has had a profound impact on the global economy. The main result is unprecedented economic downturn, with greater global GDP decline than during the Great Financial Crisis in 2009. Much like then, pet care has proven to be a recession-proof industry during COVID-19. Income elasticities are very low in pet care – pet owners tend to cut back their spending on themselves before cutting spending on their pets. 2020 was a record year for pet care, and in 2021 the industry continued to perform well, still showing strong growth.
This record performance can first be explained by the boom in the pet population, especially in Western markets. In Europe, the growth of the dog and cat population in 2020 was more than double its historic CAGR. Social isolation and work from home arrangements prompted many Europeans to adopt a companion animal. The higher demand for pets spilled over into 2021, during which the pet population swelled further.
Nevertheless, the pet industry’s historic performance has to be taken with a grain of salt. Supply chain disruption was another symptom that hit most fmcg industries – food and pet food in particular. Increased demand due to the stockpiling effect early on, and the leap in growth of the pet population in the longer-term, contributed to higher costs. This creates some false positives in evaluating the record-breaking value growth of pet care during and post-pandemic.
However, population growth was not the only reason for the industry’s record value increase. The performance of the premium price segment also greatly contributed to growth. Despite economic downturn, pet owners overall did not trade down, and the premium price segment outperformed pre-pandemic levels in both 2020 and 2021.
The surge in the premium price segment is a part of a wider European trend – price polarisation. The mid-priced segment is hollowing out, as economy brands become better quality and the line between the two segments blurs. Private label has also enjoyed success, slightly outperforming branded products. This is also connected to price polarisation – notable private label sales reside within the economy segment, and some in the premium segment, but very little in the mid-priced segment.
Spending more time at home also meant more bonding time with pets, which strengthened the pet humanisation trend, and in turn, meant higher spending per pet. The clearest outcome here was many more occasions to treat pets, thus, treats was by far the leading segment in terms of growth in 2020 and 2021.
Both Eastern and Western Europeans sought functionality in their pets’ nutrition, slightly more so during the pandemic than previously. According to Euromonitor International’s Product Claims and Positioning data, European pet owners were particularly interested in functional claims such as ‘good source of vitamins’, ‘antioxidants’, ‘immune system health’, and ‘good source of omega 3s’. Clearly, concerned owners wanted to strengthen their pets’ health as much as their own in uncertain times.
Sustainability: Challenges and opportunities
The sustainability trend is one of the hotter topics in the pet care industry – there is ever-growing interest in and demand for sustainable products, and as such, it provides a vast bedrock for innovation. However, growing interest in sustainability directly opposes several ongoing trends in pet care.
One such trend is the demand for meat-rich, ancestral diet pet food, which moves the industry in the opposite direction from sustainability. Many pet owners demand human-grade meat as the main ingredient, and many brands use such claims as their main competitive advantage. This trend is unlikely to disappear any time soon; however, given the significant carbon footprint of meat production, over 30% of respondents in Euromonitor International’s Lifestyles Survey in Europe reported that they were reducing meat consumption for environmental reasons during the pandemic.
Another trend in opposition to sustainability has to do with packaging. Pet care, being the fastest growing fmcg industry globally, generates more and more packaging waste. However, the more alarming issue here is elements of the pet humanisation trend, such as the shift to smaller pack sizes and the overwhelming use of single-portion pouches. Plastic pouches and containers that cannot be recycled are gaining share against recyclable types of packaging, such as paper or metal.
Despite these challenges, there seems to be strong motivation amongst pet owners to follow the sustainability trend. According to Euromonitor International’s Lifestyles Survey, European pet owners reported strong green attitudes and activities even during the pandemic. Most European pet owners were very concerned with climate change and their own environmental footprint. They were also more likely to purchase sustainably-produced items and purpose-driven brands. Clearly, there is plenty of motivation among consumers for sustainability to thrive in pet care.
Innovate, adapt, overcome
Ultimately, sustainability, and the broader pet care industry, show resilience and promise through the motivations of consumers. Nonetheless, there are obstacles to overcome. On a broader level, pet care is doing well in terms of growth in the pet population and consumers wholeheartedly buying into the pet humanisation trend, which pushes them to opt for the best products for their beloved companions. This is evident in the growth of premium food and treats. However, consumer pockets are not infinite, and therefore the supply chain needs to become fail-proof so that prices do not increase to the level that income elasticities are affected. One way to adapt and overcome this is to regionalise production. Similarly in terms of the sustainability trend, consumer motivations are there, and so are solutions to the evident tensions.