Cascadia published its analysis in “Pet Industry Overview Spring 2022.”
Despite revenue growth, adjusted earnings for these dogs, cats and other pet food makers in the Cascadia Index in 2021 fell 0.4%. Compare that to adjusted earnings growth of 68.9% in 2020. Revenue growth in the second half of 2021 did not lead to profitability due to the lag between higher input costs and the transmission of these increased prices to customers. If this situation continues, Cascadia analysts predict an inflationary cycle for pet food.
I want a free update of daily news from the pet food industry.
The Russo-Ukrainian war and adverse weather conditions in South America contributed to high price indices for wheat, coarse grains and oils, according to Cascadia analysts. The FAO Food Price Index set this record in March 2022, up 17.1% from the previous month.
Hidden Threats to Strong Pet Food Growth for Spring 2022
The US pet food industry continues to grow above the epidemic-fueled rise in pet ownership and the premium, but some industry analysts have warned that the good news may mask weaknesses in the pet and cat food markets among others. Analysts at Cascadia Capital have noted the astonishing growth of the pet food industry through the ongoing pandemic. However, they note how the impact of the disease on society can distort the market, making long-term forecasts complicated.
The pet food industry’s overall consumer spending recovered in 2021, but the dearth of appropriate comparisons may distort the meaning of growth ratios. Besides, the 2021 Pet Food and Processing Market performance data was boosted by new pet acquisitions that were not converted annually or reached a point where the data could shift from allowing short-term accounts versus long-term accounts. Those new pandemic pets and increased purchases of premium pet food, especially among wealthier Americans, served as a bulwark against financial caution and anxiety among lower-income groups in early 2022. These financial concerns may be less focused on the immediate effects of the pandemic now.
Pandemic and pet financial fear
Economic concerns about the pandemic appear to be fading among US pet owners, while other concerns are surfacing. Compared to Generation X and the new generation of baby boomers, younger pet owners are more concerned that they may need to spend less on pet food and treats in 2022 or change to a cheaper brand. In a survey conducted by the American Pet Products Association (APPA) in November 2021, clear differences arose between generations related to economic issues. Since the beginning of the pandemic, APPA has conducted a survey of pet owners in the United States on how COVID-19 is affecting pet ownership. The percentage of Millennials and Generation Z who are concerned about the impact of finances on pet expenses rose in the latest survey.
Age-related differences remained, but APPA analysts found in a February 2022 survey that pet owners’ financial concerns have returned to levels last seen in late 2020. Even among younger pet owners, financial concerns have influenced pet food purchasing decisions. lower than during the beginning of the epidemic or the omicron eruption. Of the 2,052 pet owners in the survey, some reported that they could find favorite brands in stores. However, economic concerns still swirled around nearly half of the survey respondents. APPA shared these survey results in Volume VI of the “COVID-19 Pulse Study: Pet Ownership During the Pandemic.” When a pandemic becomes endemic, pet owners transition into another new normal of inflation and war.
While pet food price inflation appears reasonable compared to other products, Cascadia analysts have pointed out how the cumulative effect of inflation during the pandemic may be a concern. While inflation in the pet category was 4.1% in 2021, the rate was 9.5% during the 24-month period ending in February 2022. Increases in commodity prices in the latter half of 2021 were transmitted to consumers, driving up food price inflation pets in february 2022.
While overall growth for the pet food industry remains strong in 2022, Cascadia Capital analysts note that the growing problems with inflation, commodity costs and economic concerns for pet owners are not directly related to the pandemic.