While walking around Sydney’s Centennial Park over the weekend I was struck by a large brutish-looking bulldog wearing a disposable nappy. This bizarre sight was another insight into the economics of the exploding pet industry.
The rise of the pooch (and to a lesser extent the feline) as a growing profit stream isn’t new. But its extension into new product areas is staggering.
Under a new executive regime, vitamin wellness company Blackmores has called out two focus growth areas – people’s mental health and pet vitamin supplements.
And the latter could be a goldmine if Blackmores can put it off.
The “size of the prize” (the addressable market in Australia and Asia ) is $7.6 billion, according to Blackmores. It expects the pet business to deliver a compound annual growth rate of 9 per cent over the next four years to $100 million and the pet supplement business in China is expected to double over that period to reach $350 million.g
Of course the caveats for China growth are twofold. The first is that COVID doesn’t get in the way and the second is that diplomatic tensions between our two nations don’t extend to the imposition of trade restrictions on pet pills.
For Blackmores, making further inroads into pet health (and people’s mental wellness) are not the only two moves it is making. It is undertaking a board and asset refurbishment program – starting with the retirement from the board of its major shareholder Marcus Blackmore.
On Tuesday Blackmores announced the sale of its Global Therapeutics business for an enterprise value of $27 million – one it acquired in 2016 but is no longer considered ‘core’ and last year contributed about $3 million in net profit.
Blackmores’ sharper tilt towards mental wellbeing is understandable given the extent to which COVID has further highlighted a mental health pandemic. This focus (strangely) dovetails into the pet business given domestic animals are increasingly being recognised as positive for mental health.
But the pet division’s revenue drive relies on consumers being happy to spend, for example, $20 on wellness and vitality chews or $60 on puppy calm chews.
It’s a concept that would have been considered absurd 10 years ago by just about everyone. (As a child growing up in the country our pet labrador lived outside, was thrown a bone each day and foraged for his own ‘treats’.)
But the world has moved on and pets have become part of the family and with this the cost of pet products has become parallel-priced or often more expensive. A 2.5kg bag of dog chow at the local supermarket cost around $20 compared with, say, $24 for a 10 kg bag of rice (for human consumption).
The cost of dog treats is even more extreme. It’s hard to find even a small bag of kangaroo kibble for less than $5, but it’s easy to buy a KitKat or a packet of chips for half that amount.
A casual visit to my local doggy daycare centre will lighten the wallet by $66 per day and dog walking generally costs around $20 per day and $40 on weekends. (After picking up the dog from daycare the owner is provided with a report card on the puppy’s eating, its toilet breaks and whether it played well with others.)
Dogs that regularly frequent the same park now have BFFs, they have birthday parties along with dog cakes. The owners – who increasingly give their canines human names like Barbara and Kevin – are referred to as pet “parents” rather than owners.
The cost of our cocker spaniel’s hair cut sets us back $90 – more than twice that charged by the barber for my husband’s short back and sides. If you shop for pup’s clothes at ‘Dogue’ you can pay around $80 for a fetching Llama jumper.
I haven’t even touched on the really expensive aspects of pet ownership – the vet bills of which many are not covered by pet insurance.
(A couple of months ago the aforementioned cocker sniffed out a couple of panadol and a visit to the 24-hour vet hospital was a $1000 painful experience for the “parents” and dog.)
Thus the economics of supplying the pet market have improved to such a degree that it is not surprising Blackmores can excite investors with the prospect of tapping into the rich pooch profit vein.
Source: Thanks smh.com