As investors look for signs of cooling inflation, there is one discretionary purchase that is firmly in deflation: pets.
Prices of our furry friends have slumped over the past year as demand has fallen with people returning to offices and rising costs pinching wallets. The pandemic pet boom is well and truly over.
While declines in energy prices and freight costs might be celebrated, doggy deflation takes a grave toll. Sadly, fewer people are bringing home new animals, and many may even be forced to give up their pets.
According to a new report from Pets4Homes, a digital platform that connects breeders and shelters with those seeking to purchase or adopt an animal, U.K. demand for pets has reverted to its pre-COVID level.
In April and May 2020, there were more than 400 buyers per advertised pet. In November 2022, there were around 80 competing for each listing. Despite 2023 being the year of the rabbit, the popularity of cute bunnies is declining from a record high in 2021. There are also fewer people searching for dogs and cats on the platform.
Because supply has continued to grow — although there are signs it is now stabilizing — the imbalance is weighing on prices.
The average price of dogs in the U.K. fell by 28% between January and November 2022, compared with the year earlier period. The 20 most popular cat breeds cost 32% less. Dog prices, however, remain slightly above pre-pandemic levels. The average cost of a dog or puppy in the U.K. was £876 before the outbreak. It rose to £2,200 in March 2021, and is just over £1,000 today.
To go back to a previous comparison I made, both dogs and cats are still outperforming Bitcoin, which fell 63% between January and November 2022. And although the price of a Japanese Shiba Inu, pictured on the Dogecoin cryptocurrency, has fallen 51% over the period, it is currently the U.K.’s most expensive breed.
But pets are not inanimate stores of value. They provided comfort and companionship during the pandemic. Having to give them up now will be painful.
Already, shelters are seeing more unwanted animals. In 2019, 22% of U.K. rescue centers were at full capacity. That increased to 33% in 2021 and 42% last year. Shelters are bracing for more dogs, cats and rabbits to be abandoned.
Indeed, nearly 1 in 10 owners are considering giving up their pet, according to a survey of 2,500 of Pets4Homes users. Some 18% of owners are already falling into debt to pay for their animals’ care, while a quarter can’t afford to take them to the vet.
No wonder shares in Britain’s Pets at Home Group have lost a third of their value since their high in September 2021. It’s a similar picture at Chewy, which has seen its shares fall by two-thirds since its peak in February 2021. Private equity is also betting big on veterinary care.
Despite the furry bottom falling out of the pet market, though, this isn’t the whole story. Two-thirds of U.K. households now own a pet. Although some people are parting with them, to many more families, they are valued household members. In fact, although 38% of owners said they had switched to cheaper food, 80% said they would cut back on takeaways, alcohol, holidays, haircuts and TV subscriptions to provide for their animals, according to the Pets4Homes survey.
Pets are a commitment for a cat, dog or guinea pig’s lifetime — one that requires spending over many years. That means an animal annuity, if you will, for companies such as Pets at Home, Chewy, and also Nestle, given that pet products account for about 20% of the consumer giant’s sales. If inflation in the broader economy falls later this year, the squeeze on Brits eases, and employment stays strong, hopefully the worst effects of the bursting of the Boston terrier bubble may be avoided.
The great post-COVID rotation in spending habits — from sweatpants to smart suits, from sprucing up homes to booking sunny vacations — upended the consumer landscape. But a Peloton bike gathering dust in the corner is one thing, shelters struggling to cope with unwanted dogs, cats and rabbits are quite another.
Andrea Felsted is a Bloomberg Opinion columnist covering consumer goods and the retail industry. Previously, she was a reporter for the Financial Times. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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