Anatole France, who won the Nobel Prize for Literature in 1921, famously said, “Until one has loved an animal, a part of one’s soul remains unawakened.” We know how true that is, because we do love our animals. In Pet Population & Ownership Trends (November 2014), the market research company Packaged Facts reported that about 55% of the U.S. adult population (133 million people) has at least one pet. Dogs are our favorites. There are 45 million households with man’s best friend. Another 30 million or so of us own (or are owned by) a cat. Then, there are the almost 7 million who love fish and the 4 million who fly with the birds and even some 3.5 million who own a reptile.
The American Pet Products Association (APPA) estimates that U.S. pet industry spending will be about $60.59 billion this year. Most of this, some $23.04 billion, will go toward food, of course. The vet will get about one-quarter of that, or $15.73 billion. Another $14.39 billion will go for over-the-counter medicines and supplies. Keeping our pets in a safe place while we go away and grooming services will cost us another $5.24 billion, and getting new pets will involve an investment of $2.19 billion. The industry has grown at an annually compounded rate of 4.6% over the past five years, from $48.35 billion at the end of 2010 to the 2015 estimate of $60.59 billion.
There are a number of factors underpinning this market expansion. First, the industry has been successful in emphasizing the bond we have with our pets. The typical American regards his dog or cat as a member of the family. This has driven sales of top-end products. Second, many upper-income households spend heavily on pet care products, such as toys and other devices that cater to their pet’s mental well-being. Third, the participation of upper-income households in the market has spurred the development of the pet specialty channel, which caters to more esoteric products. Finally, the recognition that pets, like us, need specialized health care has given rise to a burgeoning market.
Despite favorable market conditions, opportunities to invest in this lucrative industry are limited. Most companies in pet care and supplies, save a few, are private. Apart from the big dogs like PetSmart, Inc (NASDAQ: PETM) and Central Garden & Pet (NASDAQ: CENT), there’s very little else on the big exchanges.
There is, however, an oasis in this desert of investment opportunities. OurPet’s Company (OTCQX: OPCO) has been growing much faster than the industry. Since 2010, it has recorded a compound annual growth rate of about 6%. In 2011, it initiated a two-pronged branding strategy. The OurPets brand is aimed at the pet aficionado, while the Pet Zone brand is designed for the mass market. This strategy has, undoubtedly, paid off.
The management team is ambitious. In a recent interview, they confessed their objective to double the size of the company. As part of that initiative, they are investing heavily in distribution and marketing infrastructure. Also, they plan to make the waste and odor category a more significant part of OPCO’s business. Spearheading this thrust is the Smart Scoop product line. OPCO’s strategic business plan calls for annual year over year sales growth of 20% with targeted net income as a percentage of sales in the 10% – 12% range. Looks like the guys at OPCO plan to make investors purr.
For more information, visit the company’s website at www.ourpets.com
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