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Concerns about soaring gas prices walloping consumer wallets and leading to a recession may be overblown, especially if you look through the prism of the pet products market.
By all accounts, the industry — which has seen a major lift as households adopted pets during the pandemic — continues to see strong demand. Pet food sales for the trailing four-weeks ended Feb. 26 (the latest available) surged 12.7%, according to the latest data from Nielsen. Dog and cat food sales rose 12.3% and 15.8%, respectively.
Sales of pet supplies rose a solid 6.9%, led by cat litter and pet toys.
“I’m no economist. It’s my job to be prepared if there is a recession. We start from the history. And the history is that the pet industry has been one of the most resilient of any industry,” Petco CEO Ron Coughlin said on a new episode of Yahoo Finance Presents.
Here are a few other signs the pet spending boom that began during the COVID-19 is very much alive and well.
Petco crushes its quarter
The pet products retailer reported earlier in March that fourth quarter sales rose 13% from a year ago. Adjusted operating profits increased 16%. The company notched its seventh straight quarter of double-digit percentage sales growth.
Coughlin says consumers aren’t balking at higher merchandise prices in part driven by inflationary pressures on manufacturers.
“If you go back to the Great Recession, there was almost no impact to the pet industry. People really don’t change their practices in the industry. That said, it’s our job to make sure that we have offers for customers in a recessionary environment. That’s why things like Vital Care can help. We have mega bags and other solutions for them. But the pet industry has been relatively resilient to any macros,” added Coughlin.
Blue Buffalo for Sparky?
One of the strongest businesses for cereal giant General Mills in its most recent quarter wasn’t Honey Nut Cheerios, it was its Blue Buffalo pet food business.
The company said Wednesday sales in its pet food business skyrocketed 30% from a year ago. Adjusted operating profits for the division was 8% year-over-year.
“We anticipate the category [pet food] will continue to perform well, and we think that our segment will continue to perform quite well. And even through the last recession, which was a long time ago, one of the things before we even bought Blue Buffalo, we looked at how the category performed during a recession, and it turns out it performs very well. The last thing you want to do in tough times is sub-optimize what you’re going to give your pet. And I would tell you that on top of that, the predominant trend in pet food now, and I think will be going forward, is the humanization of pet food. And we’re clearly very well positioned in that area given that we’re the number one natural pet food in the pet category by a long, long way,” General Mills CEO Jeff Harmening said on an earnings call.
General Mills purchased Blue Buffalo for $8 billion in 2018.
Fresh food for Fido
Fresh pet food maker Freshpet is coming off a strong quarter of its own.
Sales in the most recent quarter rose 37.1%, accelerating from the 33.5% pace seen in all of 2021.
Demand has been so strong for fresh pet food, Freshpet continues to have difficulty keeping shelves stocked.
“And the biggest challenge we’ve had is we’ve had periods where we are completely out of stock on cat food. We’re completely out of stock on bags or completely out of stock on rolls,” explained Freshpet COO Scott Morris on an earnings call. “Now what I can tell you is when those products come back in stock, the growth rate is extraordinary and it’s explosive. So when we finally get all of our products in, I think we’re going to have a really, really significant explosion in our penetration.”