The success of any growing business depends on a wide variety of factors, but few decisions can impact a company’s prospects for growth more than choosing the right industry or market niche in which to operate. In a recent article on Entrepreneur.com, Christina Baldassarre outlined the benefits of one of the most intriguing market sectors for investors on the hunt for long-term plays with huge upside – the pet industry.
There are plenty of distinguishers to keep in mind when studying an industry’s viability. Is it recession-proof? Is it predictable? Is it experiencing consistent growth? When it comes to the pet industry, the answers to these questions are overwhelmingly positive. In the Entrepreneur.com article, the author studied the effects of the recent recession on the pet industry by taking an in-depth look at Google Trends for the search terms ‘dog toys’ and ‘cat toys’ over the past decade. Interest in both phrases maintained a consistent pattern throughout the 10-year period, with searches spiking toward the holiday season each year.
Overall, industry statistics support Google’s (NASDAQ: GOOG, GOOGL) data. Over the past 20 years, the domestic pet market has more than tripled in size, growing from $17 billion in 1994 to just over $60 billion this year, according to the American Pet Products Association. Among these expenditures, just over 25 percent were attributed to veterinary care, leaving nearly three-quarters of the total pet industry divided amongst retailers and service businesses. For companies operating in this space, there’s plenty of room for financial growth. Most retail businesses seek margins of approximately 60 percent or more, but some of the most popular pet toys and bones offer margins in excess of 70 percent.
With an expansive and consistent market and an educated customer base, it’s surprising to find that the pet industry is comparatively sparse when it comes to pure plays. Currently, the industry is extremely fragmented, with hundreds of small, relatively unknown brands jostling for a piece of the growing pie. However, one company, OurPet’s Company (OTCQX: OPCO), has been building a strong presence in the market for nearly two decades.
OPCO’s business model centers on marketing products designed to satisfy the mental and physical health, safety and comfort of pets around the world. The company is already a significant player in domestic sales of bowls/feeders; cat and dog toys and accessories; and feline waste management solutions. OPCO’s distribution network includes agreements with some of the most recognizable retail brands in the world – including PetSmart, Kroger (NYSE: KR), Walmart (NYSE: WMT) and Amazon (NASDAQ: AMZN).
With a growing foothold in the third largest consumer market in the country and an expanding portfolio of more than 1,500 SKU’s and 225 patents, OPCO represents an intriguing investment option that a contributor to Seeking Alpha recently referred to as “one of the only non-retail pure pet plays left in the industry.” As the company makes efforts to increase its brand awareness by targeting dedicated shelf space in retail stores, it could be primed to continue building on its past growth while promoting strong, sustainable returns for shareholders.
For more information, visit the company’s website at www.ourpets.com
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