As millennials put pets first, investors find opportunity


November 17, 2021


November 17, 2021


November 17, 2021

More than 18 months after pandemic lockdowns triggered a wave of pet adoptions, the frenzy has eased, vets are exhausted, but the industry’s prospects remain brighter than ever.

Adoptions have drifted back to pre-Covid-19 levels observers say, but the pandemic has accelerated trends that were already under way. Millennials have dived into pet ownership in a big way, with an enthusiasm matched only by their spending habits. They are now the single largest pet-owning cohort in the U.S., followed by their baby boom parents, according to the American Pet Products Association.

Millennials in particular, but all groups, are paying what it takes for tests and treatments, upscale pet clothing and premium food. Ecommerce is second nature for millennials as is their comfort with technology. So, Fitbit-type pet collars have become popular to track heart rates, pulses and blood pressure. Owners can monitor them with a smartphone app.

For investors, the expanding industry is worth a look. It has a US $100 billion a year annual value, according to the APPA. At that size, it is larger than U.S. wireless telecom sector, says Scott Helfstein, head of thematic investing at Bethesda Md.-based ProShares Group ETFs.

“I love these statistics,” says Mr Helfstein, reeling off several. “There are more US households with pets than with children. Morgan Stanley found that 70 per cent of owners view their pet as a family member. Another 79 per cent said a change in their financial circumstances would not impact ownership.”

It adds up to a growing business. ProShares has US $67 billion in assets, including the ProShares Pet Care ETF (BATS: PAWZ)  with US $396 million in assets. PAWZ is the only pet focused ETF in North America.  Pet pharma and diagnostic companies are the largest component, followed by pet foods and consumables and vet services.

Observers say  the most significant broad-based trend is a change in the way people view their pets. They are seen as part of the family deserving the same health and welfare considerations as everyone else.


Scott Helfstein is head of thematic investing at ProShares ETFs. Supplied Photo.

Dr. Ian Sandler, chief executive of Greywolf Animal Health Inc., a Toronto company providing pharma products to veterinary clinics, agrees that millennials are a growing presence and attitudes have changed. He says the pandemic has left vets exhausted by the high demand just as it made the job harder to do – as it did with the hospital system.

Dr. Sandler, who speaks on behalf of the Canadian Veterinary Medical Association, said millennials are outspending other groups by four or five to one.

“Many of them may not be getting married, or having kids, and view their dogs or cats as surrogate children,” he says. “So, the relationship between pet and human is very strong in that generation.”

Diagnostic tools have expanded and there is a broader array of tests for things like heart, liver and kidney function and thyroid and enzyme imbalances. The use of medical imaging and wearable devices is also growing. The latter uses advanced software to monitor to bodily functions. Owners are warned of changes and medications can be adapted. Vets can aggregate the data to build profiles of symptoms and treatments.

“At the clinic level, this is super helpful,” Dr. Sandler said.

New-Jersey-based Zoetis Inc., (NYSE:ZTS) the largest pure animal pharma company, has made four diagnostic acquisitions since 2018. Zoetis makes medicines and vaccines for companion animals as well as livestock and was spun off by Pfizer Inc. in 2013. It has annual revenues of about US$7.4 billion.

Zoetis is the largest single holding in the Proshares ETF at 10 per cent. It is also a 5 per cent holding in the Harvest Portfolios Group Ltd. Healthcare Leaders Income ETF (TSX:HHL).

Paul MacDonald, chief investment officer of Oakville, Ont.-based Harvest, says the acquisitions have broadened Zoetis’ offering and helped solidify its place as the pet pharma leader.

He says it has a pipeline of drugs in development. An example of its dominance is the newly launched Simparica Trio. It is the only product for dogs that combines tick, flea and worms protection in one monthly chewable.

Zoetis’ earnings have been exceptionally strong. Its shares have responded and are up 30 per cent year-to-date pushing its price-to earnings (PE) ratio to a lofty 46.


Paul MacDonald is Chief Investment Officer at Harvest Portfolios Group. Credit: Harvest Portfolios Group

Elanco Animal Health Inc. (ELAN-N), which was spun off from Eli Lilly & Co. in 2019, is the second-largest pet pharma company after Zoetis. Its performance has been less consistent, Mr. Macdonald says.

Merck & Co. Inc. (MRK-N) operates its animal health business as a division within the larger company. It is doing well. In the latest quarter, animal health sales grew 6 per cent to US.$1.4 billion. It generates about 11 per cent of Merck’s overall revenue. Both Merck and Elanco are in the ProShares ETF.

Mr. MacDonald and Mr. Helfstein agree that pet drugs and treatments have higher margins for the drug makers than human drugs do. There is less competition, so fewer choices, including generics. There are also fewer regulatory hurdles which means the drugs are cheaper to develop.

Another growth area is pet insurance as the cost of treatments rise. The Ontario Veterinary Medical Association estimates the average annual cost of a puppy is $4,659 a year, which does not include the cost of the pet. It estimates the annual cost for a fully grown dog is $3,724.

As Mr. Helfstein notes: “There’s no Medicaid for pets.”

Adam Mayers is a contributor to the Toronto Globe & Mail’s Globe Advisor and a Contributing Editor to the Internet Wealth Builder investment advisory. Reprinted with permission from

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