The coronavirus pandemic has taken a toll on the social life of people, confining them to their homes. While this led to several hardships, including bringing a feeling of loneliness, some people managed to stay optimistic, owing to pet adoptions. Be it four-legged and feathered friends or exotic companions; pets have brought a sense of comfort to many amid lockdowns and long stay-at-home mandates due to the pandemic. This has led to growing pet humanization, which is one of the emerging growth drivers in the pet industry.  

According to the ASPCA, one in five households adopted a cat or dog since the onset of the pandemic. This brought the current U.S. dog and cat population to 160 million, almost double what was reported a half-century ago. Apart from dogs, cats and fish, the adoption of small mammals, reptiles and amphibians are gaining traction. Per a report by Morgan Stanley, pet ownership is expected to grow 14% by 2030.

Among these, millennials, including university students, house-sharers, and single-person households, now form the largest section of pet parents. To impress the millennials, brands have been quick to respond to the post-coronavirus pet adoption trend by offering attractive solutions, such as new pet food deliveries and raw meat subscriptions, new apps and labs, trainers and behaviorists, groomers, and nutritionists.

It is no surprise that most of the purchases are now taking place online, as young pet owners are more accustomed to online shopping. As a result, online shopping for pet-related products grew 20% from the pre-pandemic times.

Pet spending has reached an all-time high, as pet owners want the best for their pets and are willing to spend lavishly. The pet food industry has seen surging demand and a shift to natural products with quality ingredients and better packaging. With increased focus on pet wellness and nutrition, start-ups are now bringing in new types of food, one of which is freeze-dried dog food, which has a longer shelf life. Other growing pet food niches are raw dog food and keto pet food. The pet food industry is currently valued at $110 billion in global sales on an annual basis. It is expected to reach $140 billion by 2026.

There has been a remarkable demand for veterinary care, leading to a national vet shortage. It has become next to impossible to get an appointment at a vet clinic. Even after extending hours, hiring more staff, and refusing new patients, vets complain of burnout and fatigue. Also, pet digital medical services are picking pace, although not many pet parents have started using these services, including veterinary telemedicine.

Despite a gradual return to the pre-pandemic life, people are not considering re-homing pets as they continue to cherish the role of pets in their lives. Notably, the majority of pet owners are incorporating pets into their lifestyles.

Given all these factors, we believe that the pandemic pet boom is likely to stay long after life returns to normal.

Key Gainers

Here we explore four companies, which have been bumping up investments to grab a share of the lucrative pet industry.

Image Source: Zacks Investment Research

Tractor Supply Company (TSCO Quick QuoteTSCO - Free Report) has been making efforts to become a one-stop-shop for pet owners. In doing so, it is now offering online pet prescriptions along with veterinary advice for dogs and cats on its app. The company expanded its self-serve pet wash service from 150 to 200 stores as well as opened 50 to 75 more pet wellness centers. It currently boasts one vet service in 1,600 stores as well as a mobile app that offers on-demand veterinary advice via call, chat or email.

The company also expanded its pet product line with the addition of the VICTOR Super Premium Pet Food (“VICTOR”) brand to its quality dog food range. This follows the introduction of VICTOR’s top-performing product, Hi-Pro Plus, last year. VICTOR Super Premium Pet Food is one of the best dry foods for dogs, providing a complete and balanced diet.

The Zacks Rank #2 (Buy) company has a trailing four-quarter earnings surprise of 22.8%, on average. The Zacks Consensus Estimate for Tractor Supply’s 2021 sales and earnings suggests growth of 19% and 23.9%, respectively, from the year-ago period’s reported figures. The consensus mark for 2021 earnings has advanced 1.6% in the past 60 days. The TSCO stock has surged 61% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Archer Daniels Midland Company (ADM Quick QuoteADM - Free Report) has entered the pet space by recently acquiring a majority stake in pet treat and supplement manufacturers — PetDine, Pedigree Ovens, The Pound Bakery and NutraDine (“P4”). The move is part of Archer Daniels’ strategy to transform via investments in high-growth categories such as pet nutrition. With the addition of the P4 companies, Archer Daniels will be able to offer customers a complete range of highly personalized pet treat and supplement products, including baked treats, semi-moist treats, long goods, blends, unique proteins, soft chews, liquids and powders across 15 countries.

Archer Daniels also announced the acquisition of the remaining 40% stake in China-based pet nutrition company Invivo Sanpo, which started as a joint venture between ADM and Tianjin Jinkangbao. The buyout will help introduce more premium pet nutrition brands in China. Other notable efforts to meet the growing demand are constructing production facilities, acquiring pet treat and food provider Crosswind and Neovia’s global pet nutrition business, and opening its animal nutrition technology center in Decatur.

Archer Daniels has a trailing four-quarter earnings surprise of 23.4%, on average. The Zacks Consensus Estimate for ADM’s 2021 sales and earnings suggests growth of 28.6% and 36.5%, respectively, from the year-ago period’s reported figures. The consensus mark for 2021 earnings has increased 1.2% in the past 60 days. This Zacks Rank #3 (Hold) stock has rallied 34.9% in the past year.

General Mills (GIS Quick QuoteGIS - Free Report) is progressing well with its plans to dominate the pet food arena. It recently acquired Tyson Foods’ (TSN Quick QuoteTSN - Free Report) pet treat business, which includes popular treats like Nudges, Top Chews and True Chews, to expand its footing in the space. Its Blue Buffalo brand has also emerged as one of the fastest-growing pet food brands. Being a manufacturer and marketer of wholesome natural pet food items, the Blue Buffalo brand continues to drive solid retail sales growth and market share gains.

The Zacks Rank #3 stock has a trailing four-quarter earnings surprise of 3.3%, on average. The Zacks Consensus Estimate for General Mills’ fiscal 2021 sales suggests growth of 3.6% from the year-ago period’s reported figures. The consensus mark for fiscal 2021 earnings has increased by a penny in the past 60 days. GIS has gained 15% in the past year.

Spectrum Brands (SPB Quick QuoteSPB - Free Report) has been gaining from growth in aquatic and companion animal categories, driven by its newly acquired Omega Sea, which is now part of its Global Pet Care portfolio of aquatic brands. The company has strengthened its leadership in the dog chews category via the acquisition of Armitage Pet Care. This will expand the chews business, as Armitage is a well-known grocery brand in the U.K. and offers products such as dog chews, cat chews, treats and toys. Cumulatively, the company’s pet segment remains poised for growth in 2021, backed by its pipeline of robust innovation and growth strategy.

Spectrum Brands has a trailing four-quarter earnings surprise of 83.1%, on average. The Zacks Consensus Estimate for SPB’s fiscal 2021 sales and earnings suggests growth of 15.3% and 54.2%, respectively, from the year-ago period’s reported figures. The consensus mark for fiscal 2021 earnings has increased 54.3% in the past 60 days. The Zacks Rank #3 stock has gained 29.8% in the past year.