Why the pet industry is recession proof
IIt is rare to find a sector that offers both growth and defense in times of recession. But that’s exactly what pet stocks offer, because people need to feed their pets regardless of the economic situation.
In this episode of Upgrade or Topgrade, Fool.com contributors Jeremy Bowman and Parkev Tatevosian join Million acres editor Deidre Woollard to discuss the special nature of the pet industry and why it is attractive right now.
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Deidre Woollard: Absoutely. I want to go ahead and run the poll to give people a chance to vote on which of these companies they like the most. I think there is so much to be said here about how we think about the future of pet care. First question. Do we think the pet boom is going to change in any way? Will Gen Z Hate Pets? I do not think so. I feel that the overall addressable market in terms of people with pets is strong. I think what can be interesting and what worries me as a potential headwind is short term sourcing and logistics. I think it affects all businesses. I’m not that worried about it. In the long term, is there going to be an inflation problem? Will this reduce pet expenses? Expenses for your pet are mandatory. How much you spend is up to you, and I think that can change. All of these companies have talked about having to raise their prices a little bit because of some of the pressures they are under. In the short term, I don’t think that’s a big deal. In the long term, maybe, depending on how the next year unfolds. What are you thinking about?
Parkev Tatevosian: Do you want to start, Jeremy? I will follow.
Jérémy Bowman: Well, sure, yeah. I mean, I think something interesting about the pet industry, I think it was Freshpet (NASDAQ: FRPT) or one of those companies said that, but it was one of the few industries that during the financial crisis kept increasing its spending, which in my opinion is a bit surprising. You might think that during an economic crisis people would cut back on spending on their pets, but in reality that didn’t happen. This shows that it is a recession proof industry. I think that goes with this trend towards the humanization of pets. People are going to spend on them even if maybe they are pinching dollars elsewhere. I think this is definitely a good sign of long term growth.
Tatevosian: Yeah, I agree with you, Jeremy, that pet spending isn’t really discretionary. You have to buy food for them, you have to buy medicine for them. Then maybe on the outskirts of spending, like for toys or maybe to replace their bed as often as you would, the prices start to go up. I don’t think the core spending is going to go down that much, but maybe on the periphery, those crazy spending that you mentioned earlier, maybe they go down a bit.
Oldest boy : Maybe a little less dog costumes? [laughs]
Tatevosian: Yes. Maybe your dog becomes Spider Man for two years in a row, [laughs] most of the time.
Deidre Woollard has no position in the stocks mentioned. Jeremy Bowman has no position in the stocks mentioned. Parkev Tatevosian has no position in the mentioned stocks. The Motley Fool owns shares and recommends Freshpet. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.