Americans are devoted to their pets. Millennials tend to think of themselves as pet parents rather than pet owners. It’s a shift in how people think animals share their lives. This devotion extends to purchasing the best pet foods for their furry companions. Pet food stocks have performed well in recent years.
Pet Food Stocks vs. Brands
Some of the most well-known pet food brands are not on this list of best pet food stocks. Indeed, brands such as Pedigree, Cesar, Royal Canin, Nutro and Whiskas are all owned by privately held Mars Inc. The family business has been in existence for 111 years. And he agrees to stay private.
Mars Petcare Inc. has long been the leading pet food company in the United States. In 2020, its annual revenue exceeded $18 billion.
Many of the best-known pet food brands are owned by Nestlé. For example, the Swiss conglomerate bought Ralston Purina in 2001. Most of Ralston Purina’s business now falls under Nestlé Purina PetCare Inc. These include Purina One, Alpo, Friskies, Beneful and many more. After Mars Petcare, it is the second largest pet food company in the world.
General Mills (NYSE: GIS) is another player in the pet food industry. Its products include premium quality Blue Buffalo. J. M. Smucker (NYSE: SJM) produces pet foods such as Meow Mix, Milk Bone and the Rachael Ray line. When trading shares of Nestlé, General Mills and JM Smucker, make your buy and sell decisions based on factors beyond the pet food market. Their inventory performance is more dependent on demand for their other products.
Most of the major pet food stocks focus on e-commerce, retailers, or pet related products and services rather than just pet food.
Best Pet Food Stocks
In 2017, pet retailer PetSmart acquired Chewy for $3.35 billion. At the time, it was the largest e-commerce transaction ever. The pandemic and the demand for pet food deliveries have helped Soft (NYSE: CHWY) grow significantly. In 2021, Chewy’s earnings were up 24.14% from 2020. Additionally, the stock peaked at $120 per share in February 2021. A year later, its price fell to 52, $63.
Chewy’s sales far exceed those of its major competitors. For example, this includes parent company PetSmart, as well as Petco and 1800petmeds. However, Chewy didn’t experience its first profitable quarter until the fourth quarter of 2020. That was after almost a decade in business. It still posted a net loss of $92.5 million for the year.
In addition to pet food and product sales, Chewy enjoys a robust prescription market. Veterinary practices certainly can’t match Chewy’s prescription drug prices. Likewise, more and more pet owners are turning to this e-commerce giant to get their prescriptions filled in the most economical way possible. Most importantly, the company is renowned for its top-notch customer service.
Freshpet’s (Nasdaq: FRPT) The “committed mission” is to improve the lives of cats and dogs around the world through the power of fresh, natural foods. For example, the company offers fresh foods that require refrigeration. He carefully sources ingredients from local vendors all the way to Freshpet Kitchens, where the food is produced.
In mid-February, the stock’s 52-week range was $80.08 to $186.98. The company’s 33.5% growth in 2021 marks the fifth consecutive year of accelerating net sales. CEO Billy Cyr notes in a press release to investors that, for 2022, the company was in a much improved position from a manufacturing perspective. Freshpet’s target market grew by 25% between 2019 and 2021. This represents an increase of 5 million households, from 20 million in 2019 to 25 million in 2021.
If there’s a product or service your pet needs, it’s probably Petco Health and Wellness (Nasdaq: WOOF) offers it. The company has been around for 55 years.
Petco sells pet food and supplies as well as a range of services. The latter includes grooming, obedience training, vaccination clinics and veterinary care. For example, customers can buy small animals and fish at many Petco locations. They can adopt dogs and cats through partnerships with shelters and rescue groups. In other words, Petco can provide everything your pet needs, as well as the pet.
Approximately 1,500 Petco stores are located in the United States and Mexico. About 10% of these stores include veterinary clinics. In January 2022, Petco announced a pilot program with home improvement giant Lowe’s to open Petco stores in select stores in Texas and North and South Carolina. Additionally, in February 2022, Petco announced that it would offer pet sitting, boarding, dog daycare, and dog walking services through a collaboration with Rover.
Petco’s 52-week range is $28.73-$17. In the third quarter of 2021, Petco had net sales of $1.4 billion, up 15% from a year earlier. The third marked the sixth consecutive quarter of double-digit growth.
Vet bills are expensive. In the event of a veterinary emergency, an uninsured pet owner may have to go into debt. In the worst case, they may consider euthanizing the animal. Trupanion (Nasdaq: TRUP) provides pet insurance for dogs and cats. It was the first veterinary insurance company to use the technology. This technology allows customers to have their veterinary bills paid directly to the supplier. What’s more, this means no reimbursements, as with many insurers, but bills paid in full less deductibles.
The VCA chain of veterinary hospitals, with more than 1,000 clinics nationwide, was acquired by Mars in 2017. Trupanion has long been VCA’s preferred provider of pet medical insurance.
Most pet insurance companies offer annual deductibles. However, Trupanion offers a “per condition” lifetime deductible. For example, the owner pays a deductible only when the animal develops a new condition. Customers can choose a range of franchises to suit their needs.
Trupanion is self-insured, as its policies are underwritten in the United States by American Pet Insurance Company. Trupanion acquired this company in 2007.
The number of households with pet insurance is relatively low. And veterinary costs are expected to continue to rise. More sophisticated procedures mean better results. However, this translates into significantly higher veterinary bills. In addition, the demand for veterinary medical insurance is expected to increase.
The 52-week range of Trupanion is $158.25-$69.74. In the third quarter of 2021, its total revenue was $181.7 million. This is a 40% increase from the third quarter of 2020. The total number of registered pets increased by 37% during the third quarter of 2020.
Gnawing pansies for pet food stocks
In 2020, 67% of American households had a pet. Just a year later, fueled by the pandemic, that number had risen to 70%. This represents approximately 90.5 million households.
As the pandemic winds down, the number of people adding pets to their homes has also slowed. However, pet food and related markets are important. They are expected to increase annually by 2.01% CAGR between 2022 and 2026. While average per capita incomes are not expected to exceed 2021 highs until 2025, pet food stocks are relatively resilient to the recession.
Jane Meggitt specializes in writing about personal finance. In addition to investing and planning for retirement, she writes about insurance, real estate, credit cards, estate planning and more. His work has appeared in dozens of publications, including Financial Advisor, Zack’s, SF Gate and Investor Junkie. A graduate of New York University, Jane lives on a small farm in New Jersey’s horse country.