Australia has one of the highest rates of household pet ownership in the world.

The RSPCA estimates 61 per cent of Australian households own pets and all up there are over 29 million pets across the country.

The most common domesticated animals in Australia are dogs and cats, with dogs present in approximately two in five homes (40 percent), and cats taking residence in over one in four (27 percent).

Behind this favoured pair, Australians are also partial to housing pet fish (11 percent), birds (8 percent) and reptiles (2.7 percent).

All this fluff, fur, feather and scale contributes to a booming pet care sector.

In 2019 alone, Australian households spent an estimated $13 billion on pet products and services, a jump of over 40 percent from 2013.

 

Why is pet spending on the rise?

The biggest single factor impacting pet expenditure is the changing perception of domestic animals.

With this increased humanisation comes higher spending on services and products tied to pet wellbeing, especially for those in middle and high income brackets.

In 2019, Australian households spent $13 billion on pet services and products.

There is also evidence to suggest pet adoption and spending increased during COVID-19 lockdowns.

For example insurer PetSure paid $17.3 million in benefits in April 2020 alone – 34 per cent more than April 2019 and adoption agency PetRescue reported adoptions doubled between March 2 and April 19 2020.

Pets offer their owners physical touch and companionship – otherwise tough amidst the pandemic.

Moreover, pet spending is expected to increase in the years ahead across many different categories. For instance pet food production is currently $2.6 billion per year and will reach $2.8 billion by 2026 according to market research firm IBISWorld.

These suggest bullish prospects for the sector going forward.

 

So what ASX stocks are in pet care?

Pet stocks can be broadly categorised into three groups: retail and veterinary services, therapeutics, and pet insurance and booking logistics.

Here’s a list of the ASX stocks involved in pet care…

Code Company Price %SixMth %Yr MktCap
KGN Kogan.Com Ltd 20.74 20 270 $2.3B
AHX Apiam Animal Health 0.61 24 31 $74.9M
CPH Creso Pharma Ltd 0.2 545 14 $187.9M
CP1 Cannpal Animal 0.18 44 13 $16.8M
IVC InvoCare Limited 11.53 12 -13 $1.7B
BKL Blackmores Limited 72.87 0 -18 $1.4B
AC8 Auscann Grp Hlgs Ltd 0.185 32 -38 $57.1M
CGB Cann Global Limited 0.0085 70 -50 $41.1M
1ST 1St Group Ltd 0.033 -11 -58 $14.0M

 

Petcare retail and veterinary services

The only veterinary retail player is Apiam Animal Health Limited (ASX:AHX).

AHX is the largest rural veterinary service provider, incorporating veterinary practices and veterinary wholesale, warehousing, logistics, and other ancillary services.

The company’s vet services extend beyond household pets to livestock – a market which it dominates.

In FY20, AHX recorded strong growth, with the company generating $118.4 million in revenues and a $64 million gross profit.

The growth has continued into FY21 with the company recording $29.6 million in revenue and $16.6 million gross profit in the first quarter – up 14 per cent and 21 per cent from the prior corresponding period.

In recent years there have been two other pet stocks in National Veterinary Care (ASX: NVL) and Greencross Limited (ASX: GXL) but both companies were taken over.

One recent entrant into pet services is funeral services provider InvoCare (ASX:IVC) which last November bought two pet cremation businesses.

 

Pet therapeutics

The pet therapeutics market is more of a wild west than the vet sector, home to several newer players and companies with half a paw in the door.

Cannpal Animal Therapeutics (ASX: CP1) is one small-cap focused on developing plant-based therapeutic products for pets targeting the endo-cannabinoid system.

Effectively pot for pet pain relief, this therapeutic offering was piggybacked off research front-run by Zelira Therapeutics (ASX:ZLD).

In February 2020, CP1 received ethics approval for phase 2A study of its CPAT-01 product, targeting pain and inflammation control in dogs suffering from osteoarthritis.

Cannpal is in the midst of being acquired by AusCann Group (ASX:AC8), however. Shareholders will get to vote on the $17.5 million takeover in early 2021.

Another pot stock targeting pets is Creso Pharma (ASX:CPH). Creso’s Anibidiol 8 formulation is designed to support the immune system and natural response of cats and dogs. It contains a mix of hemp oil, vitamins and Omega fatty acids.

One of the ASX’s largest cannabis companies, Ecofibre Limited (ASX: EOF), also has ambitions of expanding into the pet nutraceutical product market.

In a similar vein, prior to relisting as Cann Global (ASX:CGB), Queensland Bauxite (ASX:QBL) also had a brief foray into the pet therapeutics market.

One non-cannabis stock in the therapeutics space is Blackmores (ASX:BKL) which has a range of pet health products such as shampoos and anti-parasite tablets.

 

Pet insurance and booking logistics

The increased focus on pet wellbeing has also birthed a booming pet insurance and booking logistic market.

One stock in this trade is telehealth platform operator 1st Group (ASX:1ST). Its offerings includes a pet services platform called PetYeti which connects pet owners with vets.

Another is online retailer Kogan.com (ASX:KGN) which since 2016 has offered its own pet insurance.

All in all, the petcare industry provides a varied and fertile ground for investment.

With the market seeing positive signs amongst established and new players, underpinned by strong consumer indicators, pet stocks look to be the right tree for investors to bark up.