MarketLine Analyst Insight

Pet business of the

future
A whole different breed
Malgorzata Kafel
Reference Code: MLAI0001-039

Publication Date: June 2016

WWW.MARKETLINE.COM
MARKETLINE. THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED

Self-driving to the future MLAI0001-039/Published 06/2016

© MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 1

OVERVIEW
Catalyst
With the increase in pet ownership and the change of approach towards pets, the $55bn a year pet industry shows no
signs of going to the dogs anytime soon. Pet pampering is becoming the norm, as pet owner spending has moved far
beyond simple food and grooming expenses to include innovative and specialized premium products. With technology
responding to promising market growth, the pet business of the future is becoming a whole different breed. This creates
significant opportunities for innovative, forward-thinking entrepreneurs able attract generous spending, pet-loving
customers.

Summary
The pet industry in the US is booming, approaching $60bn in revenue. Growth in the market is derived both from
increasing pet ownership as well as from increased spending per pet. If people have been willing to buy something for
themselves, they are likely to now buy it for pets. There are plenty of opportunities across various segments of the
industry, especially in the pet-related services segment which is growing at nearly twice the rate of the overall pet market.

People increasingly view their pets as part of the family and are willing to spend even during difficult economic times,
which is proven by the consistent market growth. There are already more households with dogs than with children in the
US, and this long-term expansion in the rate of pet ownership, expected to continue, is supporting the growing number of
pet-related businesses and the emergence of previously unheard-of offerings like pet play dates, or pet plastic surgery, to
name a few.

Pet pampering is becoming the norm, as pet owner spending has moved far beyond simple food and grooming expenses
to include innovative and specialized premium products. Innovative new startups offering new technology products are
getting increased attention from investors.

The changing approach towards pet ownership, combined with rising education and income levels, not only cause the
shift towards higher-end products but is also encouraging a wave of innovation, with many specialized premium products
and services incorporating sophisticated technologies. There are plenty of startup companies taking advantage of these
new trends and getting attention from investors. Future technologies promise to bring us even closer to our pets and to
make pets’ lives look more like human ones.

Self-driving to the future MLAI0001-039/Published 06/2016

© MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 2

TABLE OF CONTENTS
Overview ............................................................................................................................................................................. 2

Catalyst............................................................................................................................................................................ 2

Summary ......................................................................................................................................................................... 2

Pet industry is not going to the dogs ................................................................................................................................... 6

US pet industry will break $60bn in revenues in 2016 ..................................................................................................... 6

Change of approach to pet ownership is causing increase in pet spending .................................................................... 7

Technology responds to pet market needs ...................................................................................................................... 8

Analyst's Final Thoughts ................................................................................................................................................... 10

Appendix ........................................................................................................................................................................... 11

Further Reading ............................................................................................................................................................. 11

Ask the analyst .............................................................................................................................................................. 11

About MarketLine .......................................................................................................................................................... 11

Disclaimer ...................................................................................................................................................................... 11

Self-driving to the future MLAI0001-039/Published 06/2016

© MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 3

LIST OF TABLES
Table 1: US pet owners basic annual expenses, ($) ........................................................................................................... 8

Self-driving to the future MLAI0001-039/Published 06/2016

© MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 4

LIST OF FIGURES
Figure 1: Total US Pet Industry Expenditures ($bn) ............................................................................................................ 6

Figure 2: US Pet Industry Expenditures by category, 2015 ................................................................................................. 7

Figure 3: Innovative pet products ........................................................................................................................................ 9

Self-driving to the future MLAI0001-039/Published 06/2016

© MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 5

PET INDUSTRY IS NOT GOING TO THE DOGS
The pet industry in the US is booming, approaching $60bn in revenue. Growth in the market is derived both from
increasing pet ownership as well as from increased spending per pet. There are plenty of opportunities across various
segments of the industry, especially in the pet-related services segment which is growing at nearly twice the rate of the
overall pet market.

People increasingly view their pets as part of the family and are willing to spend even during difficult economic times,
which is proven by the consistent market growth. Also, in the US there are more households with dogs than with children.

Pet pampering is becoming the norm, as pet owner spending has moved far beyond simple food and grooming expenses
to include innovative and specialized premium products. Innovative new startups offering new technology products are
getting increased attention from investors.

US pet industry will break $60bn in revenues in 2016

According to the American Pet Products Association, the US pet spending market reached $55.8bn in 2015 and will
increase to $62.8bn this year.

Figure 1: Total US Pet Industry Expenditures ($bn)

SOURCE: www.americanpetproducts.org MARKETLINE

Food was the largest spending category in 2015, generating 38.7% of total spending on pets. JustFoodForDogs, which
launched in 2011, took advantage of this trend. It has raised about $2.6m in investment capital, to offer healthy dog food
alternatives. It retails on average about $30 more a month than a premium kibble dog food. The company also offers do-
it-yourself kits that cost $18 and include a recipe, packets of human-grade nutrients and an instruction video for making
about 30 pounds (lbs.) of food. Since late 2011, the company has made no less than 9,000 pounds of food a week, and it
now has commercial kitchens in Newport Beach, West Hollywood and Santa Monica. The company's founder, Shawn
Buckley, said he was confident that changes in the pet industry were just beginning.

Self-driving to the future MLAI0001-039/Published 06/2016

© MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 6

 Figure 2: US Pet Industry Expenditures by category, 2015

SOURCE: www.americanpetproducts.org MARKETLINE

Pet-related services grew at nearly twice the rate of the overall pet market and still have a rosy future. “Anything that’s a
service is going to continue to build,” says Donna Holick, co-owner of Whiskers Barkery, a two-location Sedona, Arizona-
based retailer that, in addition to toys and treats, offers by-the-hour drop-in pet sitting services for shoppers who do not
want to leave their pets in their cars.

There are also opportunities in dog boarding services, as proven by DogVacay, an Airbnb for dogs founded in 2012. The
site has more than 10,000 host families in the United States and Canada and has raised $22m in investment capital. The
average price is $28 a night, less than half what a typical kennel charges. DogVacay takes a 15% cut of the host’s fee
and provides insurance for both host and customer, along with round-the-clock support. Before listing on the site, hosts
go through a five-step vetting process. During the dog’s stay, the owner gets regular photo and video updates through
DogVacay’s mobile app.

Other growth areas Holick predicts include arranged pet play dates, specialized training and luxury spas that go beyond
everyday grooming salons by offering the same sort of tranquil atmosphere, well-tailored attendants and high-priced
services and products that spas for people do.

Those who are not interested in getting up close and personal with people's pets, can still participate in the industry by
selling health insurance for pets. According to APPA estimations, premiums for pet insurance grew to more than $750m
by 2015.

Change of approach to pet ownership is causing increase in

pet spending
There are now more than 80 million dogs owned in the United States, and a USA Today analysis of census data found
more households with a dog than with a child. A long-term expansion in the rate of pet ownership, up from 56% of US
households in 1988 to 68% in 2014, is supporting the growing number of pet-related businesses. This fast pace growth is
expected to continue.

Another reason for the robust pet spending is that people increasingly view their pets as part of their family, often it’s their
only family, or at least the only family living with them. This is quite a shift from the days when dogs slept in the garage
and ate table scraps. Such an approach makes them willing to spend money on their pets, even during difficult economic
times, as proven by consistent market growth. “That situation is fueling previously unheard-of offerings like pet plastic
surgery and grooming products from up-market people brands like Paul Mitchel”, says pet association president Doug

Self-driving to the future MLAI0001-039/Published 06/2016

© MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 7

Poindexter.

Vet visits cost pet owners the most; on average dog owners spend $786 and cat owners $594 annually, on surgical and
routine vet visits combined. Kennel boarding is another large and growing spending category.

Table 1: US pet owners basic annual expenses, ($)

Dogs Cats

Surgical Vet Visits 551 398

Routine Vet 235 196

Food 269 246

Food Treats 61 51

Kennel Boarding 333 130

Vitamins 62 33

Groomer/Grooming Aids 83 43

Toys 47 28
SOURCE: www.americanpetproducts.org MARKETLINE

The change in consumer behavior is most apparent among young professionals, who are waiting longer to marry and
have children, and empty-nesters, whose children have grown and left. “This trend is largely fueled by increasing
numbers of single-person households and seniors, two groups that often purchase pets for companionship, and these
populations will continue to grow in the coming years,” explains Doug Poindexter, president of the World Pet Association.

“There’s this desire to share something together, and that’s often a pet,” commented Laird Koldyke, the founder and
managing director of Winona Capital Management in Chicago.

These changing demographics are also driving a demand for new products and services. Older pet owners for example,
require clear explanations and plenty of personal attention. They also have different physical needs. “We searched high
and low for dog harnesses that don’t have any buckles yet are also secure," Holick explains, "because a lot of our aging
customers can’t pinch the clips.” Older pet owners can afford to spend more, and when it comes to their pets, they are
willing to.

Technology responds to pet market needs

The changing approach towards pet ownership, combined with rising education and income levels, not only cause the
shift towards higher-end products but is also encouraging a wave of innovation, with many products and services
incorporating sophisticated technologies.

With lifestyles becoming increasingly busy, pets are being left alone at home for longer hours, which opens the field for
innovative products that will keep them occupied and taken care of while their owners are not available to play. There are
numerous startup companies taking advantage of these new trends and getting attention from investors.

One example of pet market innovation is PetChatz, a form of multisensory Skyping, which enables pet owners to interact
with their dogs or cats when they cannot be with them. Anser Innovation, the manufacturer of PetChatz, raised
approximately $2.5 million from angel investors, proving their confidence in opportunities existing in pet product business.

Self-driving to the future MLAI0001-039/Published 06/2016

© MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 8

The device, equipped with a speaker, webcam, LCD screen, scent and treat dispensers, and sound and motion sensors,
can be flush-mounted over a power outlet. Through an app on a phone, tablet or computer, pet owners can use PetChatz
to summon their pets, see them, talk to them and dispense a treat and a scent. When dogs walk or bark near PetChatz
their owners are alerted through the app which reacts to motion or sound. It retails for $379.99.

Barkcode, which makes collar tags with smartphone-scannable QR codes to help reunite lost pets with their owners, last
year announced an NFC Touch Tag. The tag employs state-of-the-art near-field communication (the same technology
behind mobile wallets) to allow pet finders to simply touch a phone to the tag to retrieve owner contact information.

Figure 3: Innovative pet products

SOURCE: Companies Websites MARKETLINE

DogTV, a 24-hour television channel with content geared to dogs, especially those left alone during the day, is another
innovative pet service, which brings its owner more than $5 million in revenue. It was founded in 2012 in Tel Aviv and
quickly moved to Sunnyvale, California, riding the wave of its successful launch. The station was introduced nationwide
on DirectTV as a premium subscription channel that costs $5 a month. There is also a live-streaming app available for
dogs on the go. The content includes “psychoacoustic classical music” (a cross between classical and elevator music
that keeps dogs calm) and images of animals, especially other dogs, that the dogs find stimulating. The programming
also includes images and noises that can be stressful to dogs, like children and ringing doorbells. As explained by Gilad
Neumann, the company owner, “Exposing dogs gradually gets them used to those situations so they behave better in the
real world.”

Self-driving to the future MLAI0001-039/Published 06/2016

© MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 9

ANALYST'S FINAL THOUGHTS
Today’s pet industry is large, growing and beset by powerful currents of change that are attracting previously unseen
levels of innovation and creativity. With the increase in pet ownership and the change of approach towards pets, this $55-
billion-a-year industry shows no signs of going to the dogs anytime soon. Dog owners pamper their pets more than ever,
treating them to such indulgences as air-conditioned doghouses, craft beer (non-alcoholic) and video games. Future
technologies promise to bring us even closer to our pets and to make pets’ lives look more like human ones.

Dog walking, cat sitting and canine bakeries were all popular pet businesses last century, but the pet business of the
future is becoming a whole different breed. If people have been willing to buy something for themselves, they are likely to
now buy it for pets. That even includes technology. This creates significant opportunities for innovative, forward-thinking
entrepreneurs who are focusing on pet enrichment, luxurious pet hotels, all-natural pet foods and technology-enhanced
pet gadgets to attract pet-loving customers.

Self-driving to the future MLAI0001-039/Published 06/2016

© MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 10

APPENDIX
Further Reading
Country Analysis Report: United States, In-depth PESTLE Insights

United States - Pet Care Industry Profile

Uber Technologies Inc.: Calling a cab for the Taxi Industry?

Ask the analyst

We hope that the data and analysis in this brief will help you make informed and imaginative business decisions. If you
have any questions or further requirements, MarketLine's research team may be able to help you. The MarketLine
Research team can be contacted at ReachUs@MarketLine.com.

About MarketLine
At MarketLine, we deliver accurate, up-to-date insights on over 30,000 companies, 300 industries, and 215 countries, as
well as the latest news and financial deal information from within your market and across the globe.

Established in 1997 when the Internet was in its infancy, we recognized the need for a convenient and reliable data
service to help our clients understand local and global markets and the companies operating within them.

In today’s information-rich world, sifting fact from fiction to pick out what’s relevant and what’s up to date has become the
new ‘holy grail’ in business information provision.

Our 170 dedicated research professionals aggregate, analyze, and cross-check facts in line with our strict research
methodology, ensuring a constant stream of new and accurate information is added to MarketLine every day.

Disclaimer
All Rights Reserved.

No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means,
electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, MarketLine.

The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that
the findings, conclusions and recommendations that MarketLine delivers will be based on information gathered in good
faith from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such
MarketLine can accept no liability whatever for actions taken based on any information that may subsequently prove to
be incorrect.

Self-driving to the future MLAI0001-039/Published 06/2016

© MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 11

MarketLine | John Carpenter House, John Carpenter Street |
London, United Kingdom, EC4Y 0AN
T: +44(0)203 377 3042, F: +44 (0) 870 134 4371
E: REACHUS@MARKETLINE.COM
WWW.MARKETLINE.COM
Self-driving to the future MLAI0001-039/Published 06/2016

© MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED Page | 12