Where To Put Your Money? Recession-Proof Pet Industry

Investing in recession proof businesses amid Covid-9 Corona Virus Dexil Friendly Dog Collars

As COVID-19 extends far beyond China, the drastic measures taken by governments to keep people home are already decimating businesses, and the International Monetary Fund (IMF) is predicting a global recession this year. No sector or company is entirely immune to downturns, but some perform quite better than others. If you get spooked by the specter of a looming recession, you better stop thinking about high-volatility equities like penny stocks. Most of them, including blue-chip stocks, usually take a nosedive during periods of recession. Luckily, there’s a great deal of recession-proof investments that can reduce risk and enable you to emerge from the storm unscathed.  But what is the best investment option if a recession is looming around the corner? The greatest way to defend against losses is in one unsung investment: pets and pet care stocks.

The world is increasingly getting obsessed with pets. Its ownership is going up, spending is on the rise, and it has been shown that we still spend more on pets even during a recession. So, even if you’re the uncommon person that does not like cats or dogs, there’s an important investment point here

Pet ownership, spending on the increase

Recent research revealed that Australia has one of the highest pet ownership rates in the world, with more than 62% of households owning at least one pet. The majority of pets are dogs- at 38% while 29% own cats.  According to the Animal Medicines Australia, Aussies spend a staggering $12.2 billion on their pets every year. It is estimated that an average dog costs a household $1475 a year in food, veterinary services, etc.., translating to $13,000 in the course of its lifetime. On the other hand, cat owners spend $1029 every year. When it comes to insuring the 4-legged or feathered friends, pet owners splash an estimated $450 million, notwithstanding the surrounding economic situation.

Increasing love for pets for companionship & as family

Owning a pet is Australia’s way of life, no doubt. Scientific research has shown that having a pet has far-reaching benefits on both the mental and physical wellbeing, instilling love and responsibility, as well as encouraging social interactions. Two-thirds of Aussie households with pets regard their furred companions as part of their families. Also, Australia has more homes with a cat or dog than with a child.

Pets provide countless benefits to humans, with comfort and companionship being the most important benefits. In the US, household formation is just above the all-time lows, according to Yardeni research. This is because millennials born between 1980 and 2000 are marrying later. Australia’s statistics are not any different. In 1970, Australia’s average marriage rate stood at 9.6 marriages per 1000 people. Four decades later, the average marriage rate has halved to 4.6 marriages per 1000 people. Also, in 2017 the average marriage age increased from 21 years to 30.1 years for women and 23 to 32 years for Australian men meaning that more millennials are seeking companionship from pets until they marry. This is evident in recent studies that have shown that millennials aged between 18 and 34 years have an average ownership rate of 70%, making them the largest pet-owning cohort in Australia.

Share of pet ownership by age as of 2016 (Source: Statista)

Growth and more growth

As Aussies spend more on their pets, more entrepreneurs are launching small niche businesses to meet the growing demand. From bespoke food plans to pet-friendly hotels, wearable tech, and pet-sitting services, the pet care industry is undoubtedly booming. Leading the way is healthy pet foods, which has witnessed exponential growth in recent years. The gap between pets and humans is narrowing down, and the industry is getting more dynamic. Product innovation is also rising, driven by new business models, pet humanization trend, and internet retailing.According to the Deputy General Manager for Small Business Nicole McCormack, Australian Pet shops are increasingly getting creative. New lines of products and services aimed at pampering pets are emerging by the day: “Australian pet spending continues to rise, and as a result, we’re seeing more entrepreneurs launch niche small businesses to cater to the growing demand.” As pet owners continue to take a pro-active approach on the health and wellness of their furry and feathered friends, spending is set to rise even higher. 

A little splash of luxury

There’s no doubt that the traditional hotel chains are under pressure. However, pet hotels, such as Pet Resorts Australia and The Pets Hotels, are growing. Many luxury hotels across Australia can now host your four-legged friends. Similarly, the pet hotel industry in the US is booming as Americans up to their spending on destination vacation for cats and dogs. In 2017, for instance, Americans spent $6 billion on grooming and boarding alone causing a windfall for pet-luxury focused hotels like D Pet Hotels

And when a recession hits?

As pets become pretty ingrained in people’s lives, owners will keep skimping on other things before cutting back on supplies or resorting to cheaper food. Pet owners may skip regular pet grooming, but not skip the animals’ medication. In the US, for example, pet care spending registered an impressive growth of 29% during the 2001 recession and 17% growth during the 2008-09 recession- 3 times the US’s GDP growth over the same time. Data suggest that pets are not affected by outside factors, including economic fluctuations, meaning they even thrive during economic downturns. These points to a recession-proof industry whose cash flow and sales keep growing no matter the economic situation.

Humanisation and premiumisation will continue to define the future of pet care. The relationship between humans and their pets will only increase. Consequently, the boundaries between what is traditionally considered human food and comfort will narrow down. Even so, the economy will weaken into recession at some point. And when things get tough, millions of Australians will not sacrifice caring for their furry friends. The ever-growing pet food and medication industry is strong evidence of a resilient market segment that the real drivers behind it-pet lovers- aren’t willing to sacrifice.

 

 

 


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