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February 2021
Pandemic Tailwinds for the Pet Care Industry

The pet care industry has been growing steadily for decades, supported by greater pet ownership and the "humanization" of pets.

While the pandemic—with its social distancing and stay-at-home orders—negatively impacted many other industries, they may have also reinforced trends supporting the long-term growth of the pet care industry.

PET CARE WAS BOLSTERED BY A "PUPPY BOOM" IN 2021
  • 85 million households have pets–while just 33 million have children–representing nearly 70% of U.S. households.1
  • 72% of pet owners agreed pets reduce stress and increase their sense of wellbeing.2
  • The pandemic has accelerated pet adoption and fostering, resulting in a 60% year-over-year increase in 1Q20.3


Charting Pet Care’s Current Potential


1
More Pet Owners:

Pet ownership was on the rise well before the pandemic. In the United States, pre-pandemic, 37 million millennials owned pets, and many have fur babies before or in place of children. Additionally, between 2008 and 2018, pet adoption rates among baby boomers grew 5%.


The pandemic seems to have accelerated these trends. 2020 saw a "puppy boom" in the United States, as pets old and new provided us with close companionship and improved well-being during the isolation of the pandemic.2,3 Animal shelters reported significant increases in foster and adoption applications, and in some cases were left vacant for the first time. In fact, many people who already own pets are planning to add more.



2
More Pets Means More Spending:

The humanization of pets and our desire to make them happy had already led to substantially increased spending. From 2013 through 2018, Americans’ pet spending increased by 50% while annual income only increased 23%, and global pet industry sales are forecast to grow from $190 billion in 2018 to $270 billion by 2025.


During the pandemic, nearly half of pet owners report having maintained their spending level and more than one-third increased their spending to keep their pets happy and healthy.5




3
Pet Care Is Boosting Bottom Lines:

While many industries have been negatively impacted by pandemic-related headwinds, pet care companies, as a whole, have benefited from the increased attention on pets. Chewy, Freshpet, Nestle and Zoetis are just a few of the major companies that have cited long-term trends supportive of the pet care industry in their recent earnings releases.


As measured by the FactSet Pet Care Index, pet care businesses generated impressive earnings growth in the third quarter while the broader market saw a contraction in profits.



The Upshot—Pet Care Index Outperformed the S&P 500 Amid the Pandemic:

The pandemic may have accelerated the long-term growth trends of the pet care industry. But its performance during last year's recessionary environment has provided yet another powerful example of the industry’s resilience during periods of economic stress. The FactSet Pet Care Index actually outperformed the S&P 500 by an impressive 44% in 2020.



As of December 31, 2020. PAWZ expense ratio is 0.50%. Performance quoted represents past performance and does not guarantee future results. Investment return and principal value will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained at ProShares.com. Index returns are for illustrative purposes only and do not represent fund performance. Index performance returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged, and one cannot invest directly in an index.



1APPA 2019-2020 National Pet Owners Survey; Bureau of Labor Statistics Data

2APPA COVID-19 Pulse Study Volume 1

3Jefferies 2020 Global Consumer Virtual Conference—Bloomberg Transcript, June 23, 2020

4LendingTree commissioned Qualtrics to conduct an online survey of 2,011 Americans, which included 1,378 pet owners. The survey was fielded September 4 to 11, 2020.

5LendingTree commissioned Qualtrics to conduct an online survey of 2,011 Americans, which included 1,378 pet owners. The survey was fielded September 4 to 11, 2020.




How Investors Can Invest in Pet Care

Investors looking for industries that have shown resilience during recessionary periods may want to consider ProShares Pet Care ETF (PAWZ), which tracks the FactSet Pet Care Index.

The first ETF focused on the pet care industry and gives investors the opportunity to gain broad exposure to public companies in the global pet care industry—companies that stand to potentially benefit from the proliferation of pet ownership and the emerging trends affecting how we care for our pets.

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As of 12/31/20: PAWZ has allocations to Chewy 9.85%, Freshpet 10.00%, Nestle 4.36% and Zoetis 9.67%. Holdings are subject to change.

This is not intended to be investment advice.

Any forward-looking statements herein are based on expectations of ProShare Advisors LLC at this time. ProShare Advisors LLC undertakes no duty to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Investing is currently subject to additional risks and uncertainties related to COVID-19, including general economic, market and business conditions; changes in laws or regulations or other actions made by governmental authorities or regulatory bodies; and world economic and political developments.

There is no guarantee any ProShares ETF will achieve its investment objective.

Investing involves risk, including the possible loss of principal. PAWZ is non-diversified and entails certain risks, including imperfect benchmark correlation and market price variance, that may decrease performance. Please see their summary and full prospectuses for a more complete description of risks.

The fund is subject to the risks faced by companies in the pet care industry. Although the pet care industry has historically seen steady growth and has been resilient to economic downturns, these trends may not continue or may reverse. Consumer tastes and preferences are difficult to forecast. Changing consumer preferences could have a negative impact on the revenue streams of companies in the pet care industry. Many companies in the pet care industry are small, independent producers and retailers.

Investments in smaller companies typically exhibit higher volatility. Smaller company stocks also may trade at greater spreads or lower trading volumes, and may be less liquid than stocks of larger companies.

The fund concentrates its investments in certain sectors. Narrowly focused investments typically exhibit higher volatility.

The "FactSet Pet Care Index" and "FactSet" are trademarks of FactSet Research Systems Inc. and have been licensed for use by ProShares. ProShares have not been passed on by these entities or their affiliates as to their legality or suitability. ProShares based on the FactSet Pet Care Index are not sponsored, endorsed, sold, or promoted by FactSet Research Systems Inc., and it makes no representation regarding the advisability of investing in ProShares. THIS ENTITY AND ITS AFFILIATES MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO PROSHARES. FactSet Research Systems Inc. does not guarantee the accuracy and/or the completeness of the FactSet Pet Care Index or any data included therein, and FactSet Research Systems Inc. shall have no liability for any errors, omissions, or interruptions therein.

Carefully consider the investment objectives, risks, charges and expenses of ProShares before investing. This and other information can be found in their summary and full prospectuses. Read them carefully before investing.

ProShares are distributed by SEI Investments Distribution Co., which is not affiliated with the funds' advisor or sponsor.

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