Anatole France, who won the Nobel Prize for Literature in
1921, famously said, “Until one has loved an animal, a part of one’s soul
remains unawakened.” We know how true that is, because we do love our animals.
In Pet Population & Ownership Trends (November 2014), the market research
company Packaged Facts reported that about 55% of the U.S. adult population
(133 million people) has at least one pet. Dogs are our favorites. There are 45
million households with man’s best friend. Another 30 million or so of us own
(or are owned by) a cat. Then, there are the almost 7 million who love fish and
the 4 million who fly with the birds and even some 3.5 million who own a
reptile.
The American Pet Products Association (APPA) estimates that
U.S. pet industry spending will be about $60.59 billion this year. Most of
this, some $23.04 billion, will go toward food, of course. The vet will get
about one-quarter of that, or $15.73 billion. Another $14.39 billion will go
for over-the-counter medicines and supplies. Keeping our pets in a safe place
while we go away and grooming services will cost us another $5.24 billion, and
getting new pets will involve an investment of $2.19 billion. The industry has
grown at an annually compounded rate of 4.6% over the past five years, from
$48.35 billion at the end of 2010 to the 2015 estimate of $60.59 billion.
There are a number of factors underpinning this market
expansion. First, the industry has been successful in emphasizing the bond we
have with our pets. The typical American regards his dog or cat as a member of
the family. This has driven sales of top-end products. Second, many
upper-income households spend heavily on pet care products, such as toys and
other devices that cater to their pet’s mental well-being. Third, the
participation of upper-income households in the market has spurred the
development of the pet specialty channel, which caters to more esoteric
products. Finally, the recognition that pets, like us, need specialized health
care has given rise to a burgeoning market.
Despite favorable market conditions, opportunities to invest
in this lucrative industry are limited. Most companies in pet care and
supplies, save a few, are private. Apart from the big dogs like PetSmart, Inc
(NASDAQ: PETM) and Central Garden & Pet (NASDAQ: CENT), there’s very little
else on the big exchanges.
There is, however, an oasis in this desert of investment
opportunities. OurPet’s Company (OTCQX: OPCO) has been growing much faster than
the industry. Since 2010, it has recorded a compound annual growth rate of
about 6%. In 2011, it initiated a two-pronged branding strategy. The OurPet’s
brand is aimed at the pet aficionado, while the Pet Zone brand is designed for
the mass market. This strategy has, undoubtedly, paid off.
The management team is ambitious. In a recent interview,
they confessed their objective to double the size of the company. As part of
that initiative, they are investing heavily in distribution and marketing
infrastructure. Also, they plan to make the waste and odor category a more
significant part of OPCO’s business. Spearheading this thrust is the Smart
Scoop product line. OPCO’s strategic business plan calls for annual year over
year sales growth of 20% with targeted net income as a percentage of sales in
the 10% – 12% range. Looks like the guys at OPCO plan to make investors purr.
For more information, visit the company’s website at www.ourpets.com
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