While some industries have proven to be vulnerable to the recent economic downturn and record inflation, pet health care is not one of them.
“If you look at animal health historically, it has proven to be recession resistant," Wetteny Joseph, chief financial officer of Zoetis (ZTS), a global animal health company, said on Yahoo Finance Live (video above). “The demographics of pet ownership have trended towards millennials and Gen Z, and they place a higher premium on the health of their pets.”
Strong demand for animal health care products can be attributed to the increase in demand for pets during the COVID-19 pandemic.
According to a 2021 survey from the American Pet Products Association (APPA), the percentage of U.S. households that had pets increased in 2020 from 67% to an all-time high of 70% as more Americans sought out comforting companionship during the lockdown period.
Furthermore, pet owners who took the survey also stated that they spent more on their pets now than they did before the onset of COVID-19. An estimated $123.6 billion was spent on pets in 2021, with $34.3 billion used towards veterinary care.
"Despite the broader uncertainty in the economic environment, pet spending and the prioritization on pet health remains very strong," Joseph said. "And the underlying fundamentals of the industry remain strong."
'We don't see any signs of slowing down'
For Zoetis, an essential aspect of the company's business model is its medications being recommended by veterinarians.
The company reported a strong quarter, with 8% operational growth in revenue and 9% in adjusted net income, "driven by a companion animal portfolio," Joseph said, while the companion animal business grew 14% operationally on a global level.
“Puppies and kittens need to go see the vet,” he said. “That created a really high watermark, if you will, if you go back in the first half of last year. But as we tracked visits to the clinic over a number of years, the visits in the second quarter were the fourth-highest of visits that we have on record. So it's just a matter of [comparison]."
Although visits to the vet are down roughly 1.3% year-over-year, revenue is up 6.4% in that same time, according to the American Veterinary Medical Association (AVMA), meaning that when pet owners are taking their furry friends to the vet, they're willing to spend money, even as millions of Americans have started to pull back on spending in other consumer categories.
According to Joseph, that's indicative of a "much higher correlation" to how Zoetis performs due to the innovation it brings to the market.
"Given more pets and higher prioritization on the health of pets, we expect that to continue to remain robust," he said, adding: "We don't see any signs of slowing down."
Ethan is a writer for Yahoo Finance.