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21 March 2017

Best in Show 

There truly seems to be no end to the lengths we will go – and amounts we will spend – on our pets.

From shelling out on a normal visit to the vet to going to the pet spa – offering reiki, massages, pedicures and acupuncture – we are spending more on our animal companions than ever before. Pet owners can book musical therapy for their dog, order treats that contain marijuana-derived cannabidiol (good for arthritis or anxiety) and even buy a rubber tongue that imitates the lick of a mother cat.

Consequently, investors have been seizing opportunities to tap into this expanding market, where M&A activity has picked up over recent years.

For instance, Mars Inc. – owner of global food brands as varied as Mars bars and Uncle Ben’s rice, which also owns pet food brands Whiskas and Pedigree – has expanded into the flourishing veterinary hospital industry. The food production giant recently paid $7.7 billion for VCA, North America’s largest network of over 600 small veterinary hospitals.

Mars’s move into animal clinics reflects the industry’s evolution. Purchasing trends are increasingly influenced by younger generations who care deeply about the health and wellness of their animal companions.

We spend most on pet food. Reflecting rising prices and an increased demand for premium and natural products, pet food alone is a $75 billion industry, up more than 20% since 2011. Two-thirds of those sales come from the US ($24 billion) and Europe ($20 billion).

In fact, the US alone spent $60 billion on pet care in 2015, more than double 2004 levels. The average American dog owner spends $1,641 on their four-legged friend each year, while a pet cat costs a little less, at $1,125 per annum.

Not only is the pet industry currently seeing significant growth, it has also proven to be recession-proof. Meanwhile, although the bulk of spending on our pets occurs in Europe and North America, many other countries are experiencing explosive growth, most notably China.

By 2019, dog food sales are forecast to nearly triple in China, while the pet industry as a whole is expected to grow by more than 50%. With increased disposable income, China is fast-becoming a pet-loving nation – one coal baron paid a record $1.5 million for a rare Tibetan Mastiff in 2013.