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          Introducing the Rize Pet Care UCITS ETF

          On April 5th, 2022, the Rize Pet Care UCITS ETF (PETZ) debuted on the London Stock Exchange. PETZ seeks to invest in companies that stand to benefit from the rise in ownership and humanisation of pets, the adoption of fresh and wholesome foods and diets for pets, growing demand for pet healthcare and veterinary products and services and the valuable contribution pets make to our overall mental health and well-being. This includes companies providing pet food, pet treats and pet consumables, companies operating pet retail businesses that primarily sell pet products and pet services online, companies involved in pet health-related products and services such as the supply and distribution of pet medicine, veterinary services and veterinary equipment and pet insurance companies that primarily provide pet health and life insurance products.

           

          Pet care is a secular growth story. The industry has been steadily expanding since 1994. It expanded not only during the Dot Com Bubble and the Global Financial Crisis but also during the Covid-19 pandemic and the accompanying recession. Expenditure in pet care is forecast to reach nearly $USD 110 billion for 2021. This compares to $USD 104 billion for 2020 and $USD 97 billion for 2019.[1] To top it off, there are now more pet owners around the world than ever before in human history.

           

          US pet care industry expenditure 1994-2021 (in $USD billions)

          Source: American Pet Products Association 2021

          The year-over-year increase in pet care spending owes itself to three key reasons:

          1. Higher household penetration rates for pet ownership
          2. The marginal propensity for Millennials and Gen Z pet owners to spend more on their furry companions than their elders
          3. Greater willingness by today’s pet parents to care for more than just one pet

          Today, roughly 67% of US households have pets, up from 56% in 1988, according to the American Pet Products Association (APPA).[2] In fact, there are more households today with pets than there are households with children![3]

          Two-thirds of US households have at least one pet

          Source: AlphaWise 2020, Morgan Stanley 2020

          And the demographics of pet ownership have changed too. Young people are now bringing pets into their homes in greater numbers and faster speeds. Millennials already account for 32% of pet parents and Gen Z consumers are very close behind and accelerating. Meanwhile, pet adoption by Baby Boomer (empty nester) continues to rise for reasons ranging from loyalty and companionship to safety and security.[4] Gen X consumers meanwhile currently account for 24% of pet owners.[5]

          Pet Ownership by Generation (% of Current Pet Owners)

          Gen Z 14 percent
          Millennial 32 percent
          Gen X 24 percent
          Baby Boomer 27 percent
          Builder 3 percent
          Source: American Pet Products Association 2021

           

          We are seeing an innate shift in our culture and society. As younger cohorts have entered adulthood, they have embraced the pet-loving and pet-owning lifestyles to a much greater extent than their parents. Dogs and cats are their preferred pets, with cats and freshwater fish coming in at second and third, respectively.

          Share of pet types owned in the U.S. in 2020, by generation

          Source: American Pet Products Association 2020

           

          Younger people are also spending more on their pets than previous generations. As part of this phenomenon, pet humanisation has become a recurring theme. According to a Euromonitor’s Voice of the Consumer survey, the number of respondents who considered their pets “beloved members of the family” continues to rise.

          Attitudes Towards Pets  (% of respondents)

          Source: Euromonitor’s Voice of the Consumer Survey 2021

           

          From clothing, grooming, premium food, treats and toys — we have developed a tendency to treat our pets more and more like our own children. And this has been very lucrative for pet care companies.

          Pet market revenues in the US from 2011 to 2021, by category (in $USD billions)

          Source: American Pet Products Association 2021

           

          And this trend is set to continue. According to Morgan Stanley, average annual household spending per-pet is anticipated to grow from to $USD 1,292 by 2025, compared to $USD 980 in 2020, and then by a further $USD 600 reaching $USD 1,909 per-pet per year by 2030.[6] This presents a highly optimistic outlook for pet care companies in the years ahead.

          Global snapshot of dog food

          Source: Euromonitor’s World Market for Pet Care May 2021

           

          Global snapshot of cat food

          Source: Euromonitor’s World Market for Pet Care May 2021

           

          Global snapshot of other food

          Source: Euromonitor’s World Market for Pet Care May 2021

           

          Global snapshot of pet products

          Source: Euromonitor’s World Market for Pet Care May 2021

           

          Related ETF

          PETZRize Pet Care UCITS ETF

           

          References

          [1] American Pet Products Association, “Pet Industry Market Size, Trends & Ownership Statistics, 2022. Available at: https://www.americanpetproducts.org/press_industrytrends.asp

          [2] Insurance Information Institute, “Facts + Statistics: Pet Ownership and Insurance”< 2022. Available at: https://www.iii.org/fact-statistic/facts-statistics-pet-ownership-and-insurance#:~:text=Seventy%20percent%20of%20U.S.%20households,and%2067%20percent%20in%202019

          [3] Post Gazette, “Pet Tales: Pets outnumbers children in U.S. households – and we’re spoiling them”, March 2022. Available at: https://www.post-gazette.com/pets/pet-tales/2019/04/19/Pet-Tales-AKC-American-Kennel-Club-pet-insurance-Labrador-retriever-pit-bull/stories/201904190009

          [4] American Pet Products Association, “Pet Industry Market Size, Trends & Ownership Statistics, 2022. Available at: https://www.americanpetproducts.org/press_industrytrends.asp

          [5] Ibid

          [6] Morgan Stanley, “Why Pets Could Be a Long-Tail Investment Trend”, April 2021. Available at: https://www.morganstanley.com/ideas/us-pets-investing-trend

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