Animal well-being: thriving dogs and cats as a megatrend

Animal well-being thus has solid growth rates, even if they are not as high as those for artificial intelligence, electromobility, or robotics. But this megatrend has a different advantage: It is less affected by economic ups and downs than many other areas. The market for everything having to do with animal well-being – especially for pets – has become so attractive that there are quite a few companies that are entirely dedicated to this segment. In the field of veterinary medicine, these are often companies that were spun off from major pharmaceutical companies. This makes it possible for investors to participate directly in this trend.

Excellent supplement to more cyclical megatrends

It goes without saying that people are unlikely to let their pets starve if the family budget is a bit tighter during an economic downturn. During a downward economic cycle, visits to restaurants decrease and lower-cost foods are in demand. This also happens with pets, but the price differences are significantly lower. Because the prices between the different providers of pet food are not nearly as different as those for food and health products for people. And the risk of expiring patents is not as great as in the field of human medicine because there is a smaller number of companies in the market, and brand loyalty is relatively high in veterinary medicine.

Intersection of multiple megatrends

But the stability and the relatively constant growth in the pet sector is also fuelled by other sources. In fact, several different megatrends come together here. One of them is increasing urbanisation and the associated, relatively abrupt alienation from nature. This is intensified by the increasing digitalisation and virtualisation of our lives. For many people, this awakens a desire to re-establish a connection to the type of environment that shaped human civilization for millennia. Living together with pets is one way to do this.

Demographics providing a boost

Demographic trends are also playing a role here. Pets are increasingly becoming family substitutes, friends, life companions, and even „therapeutic partners", for example for many singles, nuclear families, and widowed persons. In the process, they are increasingly being humanised and cared for and treated accordingly. The fact is that more and more people are willing to spend more and more money for their pets and to cut back on other costs if need be. This trend can also be seen in the Emerging Markets, where spending on pets is increasing as incomes are growing.

Boom in the pandemic, then decline

The number of pets in households rose steeply during the pandemic. This was very good for the share prices of companies in this field. Once the pandemic came to an end, the pet boom also declined rapidly, which hurt the corresponding shares. But this trend seems to have bottomed out.

The fund exhibits elevated volatility, meaning that unit prices can move significantly higher or lower in short periods of time, and it is not possible to rule out loss of capital.

Sources:
Handelsblatt, https://www.handelszeitung.ch/musterportfolios/borsennews/haustiere-sind-big-business
Financial Times, https://www.ft.com/content/91b14818-9e99-4c6b-afc5-cec71da05391