Buyers Make a Beeline for Pet Food and Pet Care

At the beginning of this year, Mars Inc., a candy behemoth associated with brands like M&Ms and Snickers, expanded its existing pet care business with the acquisition of animal-hospital chain VCA Inc. The value of the deal was approximately $7.7 billion. Mars, which already owned pet food brands such as Royal Canin, Whiskas and Pedigree at the time, added VCA to its portfolio of veterinary services businesses which included Banfield, BluePearl and Pet Partners.

According to a recent report by APPA (American Pet Products Association), consumers’ expenditure within the pet-care industry over the last two decades has shown year on year growth. In fact, this industry is one of the few which has consistently been able to sustain the impact of economic volatility over the years. Often referred to as ‘recession-proof’, the pet care market is growing steadily, even as millennials surpass previous generations in terms of pet ownership. APPA has reported that 68% of U.S. households currently own and care for a pet — which adds up to over 84 million homes.

Zion Market Research, analysed the pet food market in the United States, and reported that the U.S pet food market is expected to grow at a CAGR of 3.36% between 2017 and 2022. The market revenue of $24.60 billion in 2016 is expected to grow to $30.01 billion by 2022. The pet food market is still only a fraction of the rapidly expanding pet care industry, which also includes healthcare services, especially veterinary services. New entrants in the market include brands which offer natural or organic pet food, and brands with niche, premium offerings such as pet spas. APPA has reported that the overall industry, which witnessed spends of about $66.75 billion in 2016 in the United States alone, is estimated to further grow to $69.36 in 2017.

This is perhaps why a recent Capstone Partners’ report on deal activity in pet and animal care has noted robust deal activity in the sector through the third quarter of 2016, continuing into 2017. The report also observed that private equity firms continue to be significant buyers and investors in the sector, with private equity accounting for about one third of the deal activity in pet care in 2016. Recent private equity deals include Spectrum Brands Holdings’ purchase of PetMatrix, and L Catterton’s investment in a Colorado-based pet food brand.

Significant growth in pet-related retail and services markets has translated into high levels of interest from the strategic buyer as well. For current financial buyers, this could imply that future months will present opportune moments to exit. Needless to say, this development is positively shaping the market for robust deal activity in the near future.

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Image source: Pixabay

By Prachi P