Pet Industry Trends for 2006

From The “Small Business Trends” Blog — Pet Industry Trends for 2006

By Anita Campbell on December 8, 2005

Editor’s Note: Welcome to the 2006 trends forecast for the pet-related industries, a special guest post by Laura Bennett, CEO of Embrace Pet Insurance. You might wonder why we would focus on pet industry trends, of all things. Simple: Pets are a huge business in the United States and some other Western countries where owners coddle their pets. (President and Mrs. Bush even feature their pets in the White House Christmas card and decorations. ) Although a number of large players have a foothold in the market — especially in the pet food category — it is also an industry in which startups and small businesses proliferate. Themes that stand out in this particular forecast include: luxury and discretionary expenditures, pet health care, and industry consolidation and alliances. Keep reading for the 2006 pet industry trends:

The 2006 economics for small businesses will be affected by an unabated increase in pet-related spending, focusing on improving pet health and trading up to quality for pet accessories and food. Goods and services trends include:

1. Growth in unique pet goods.

The American Pet Products Manufacturers’ Association (APPMA) estimates that pet goods and medicines spending will grow 8.6% to reach $8.8 billion in 2005 (out of a total of $35.9 billion in overall pet industry expenditures). Much of the growth will come from newer pet items such as pet deli snacks, toys, luxury items, and convenience accessories such as programmable feeding and watering stations, warming mats, and self-cleaning litter boxes. High-end specialty pet stores will thrive despite competition from the big box stores as passionate pet owners look for selection, style, and a unique shopping experience.

2. Growth in pet services such as grooming, boarding, pet photography, dog walking, and pet sitting.

More than $2.4 billion dollars will be spent on pet services in 2005 according to the APPMA, which will continue to grow at around 5% for 2006. More pet owners will pay for these services as it is becoming socially unacceptable in some areas to leave your dog alone during the day or your cat alone for the weekend.

3. Growing interest in pet health care.

This includes non-invasive surgeries, human medical devices and services being applied to pets, super-premium foods aimed at specific ailments, and alternative therapies, such as acupuncture, massage, and behavioral therapies. High end diagnostics, such as MRIs, will become more widely available for pets, with the price dropping accordingly. Online veterinary pharmaceuticals will become more main stream. Pet lovers want, and are demanding, the same treatment options for their pets as they can get for themselves.

4. Continued steady increase in pet insurance, with at least 2 new players arriving on the scene in 2006.

The estimated 2005 market size is approximately $160 million, and is estimated to continue to grow by 25% to reach $200 million in 2006, according to the 2005 Packaged Facts “Pet Insurance in North America: The Market and Trends in the U.S. and Canada” report. We also predict that at least one of the established companies will be acquired in 2006, possibly by a large insurance company trying to get into the pet insurance arena. More and more employers will offer pet insurance as a voluntary benefit and some of the larger pet insurance companies will start mass media advertising, increasing overall consumer awareness.

5. More pet-friendly environments.

These environments pop up in places such as hotels (Starwood and Loews), restaurants (the Flying Fig in Cleveland, Ohio), and shopping centers (Stony Point Fashion Park in Richmond, Virginia) causing pet lovers to steer their business to where their pets are welcomed.

The business environment will start to become more challenging as a multitude of new players enter the market. Savvy small businesses will take advantage of change to successfully place themselves uniquely in the market. Trends here include:

6. Increased competition from larger players.

Larger companies are beginning to recognize the economic potential of the pet industry. Target and Walmart are both expanding their pet selection and using pets in their advertising. Petco and PetsMart continue to grow rapidly, projecting to open over 160 stores between them in 2006, according to spokespeople quoted in the NY Times article “Wild Demand, and Competition, for New Pet Products” (Jonathan Grater, November 16, 2005.)

7. Large companies interact with small businesses behind the scenes, via monetary investment and/or marketing alliances.

Pet food companies may be the leaders here, but watch out for other active giants including banks, ATM companies, and large insurance companies.

8. Industry consolidation with larger players buying promising, smaller players.

Not only the more obvious pet-related giants, such as Purina, Hills, and but also other more surprising companies such as paper product giant Kimberly Clark which is very interested in expanding its revenue stream into the supermarket pet aisle.

9. Increased online sophistication from new pet-related businesses in ecommerce, design, and usability.

Traditionally, small business sites have been set up by pet lovers with little thought on design, target audience, and content. Newer players, such as Urbanhound and WagginTails, are beginning to be more sophisticated in design and ecommerce, reaching their target audience via web-site usability, SEO, paid search, and word of mouth.

10. More meaningful pet-related blogs.

Blogs, written by both corporate players and evangelists, will become more prevalent, more widely read, and will have a significant influence on driving traffic and sales to smaller niche players.

And one final bonus trend that indicates the sentiment of the pet-related customer…

11. Pet adoptions continue to grow.

Pet adoptions grow as the adoption network becomes more sophisticated, structured, and effective. Meanwhile, the number of American Kennel Club (AKC) pedigree dog registrations will continue to drop (over 18% from 2000 to 2004 according to the AKC) as pet lovers look to rescue those in need rather than buying purebred dogs and cats.

About the author: Laura Bennett is the CEO of Embrace Pet Insurance. Over her career working in the insurance industry in Dublin, Ireland, and Toronto, Canada, she eventually landed in the United States where along with Alex Krooglik, the two of them founded Embrace Pet Insurance to combine their love of pets, the desire for entrepreneurship, and Laura’s expertise in the insurance industry. Laura also writes a blog on pet-related issues, the Embrace Pet Insurance blog.

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