As investors look for signs of cooling inflation, there is one discretionary purchase that is firmly in deflation: pets.
Prices for our furry friends have plummeted over the last year as demand has waned as people return to offices and rising costs are hitting wallets. The pandemic pet boom is over.
While the drops in energy prices and freight costs can be celebrated, the dog deflation exacts a heavy price. 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 looking to buy or adopt an animal, demand for pets in the UK is back to its pre-COVID level.
In April and May 2020 there were over 400 buyers per pet advertised. As of November 2022, there were around 80 vying for each listing. Even though 2023 is 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 cats and dogs on the platform.
As supply has continued to grow, although there are signs that it is now leveling off, the imbalance is weighing on prices.
The average price of dogs in the UK fell 28% between January and November 2022, compared to the same period a year earlier. 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 UK was £876 before the outbreak. It rose to £2,200 in March 2021 and is just over £1,000 today.
To go back to an earlier comparison I made, both cats and dogs continue to outperform Bitcoin, which fell 63% between January and November 2022. And while the price of a Japanese Shiba Inu, represented in the Dogecoin cryptocurrency, has fallen up 51% over the period, it is currently the most expensive breed in the UK.
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.
Shelters are already seeing more unwanted animals. In 2019, 22% of UK rescue centers were at full capacity. That rose to 33% in 2021 and 42% last year. Shelters are preparing for the abandonment of more dogs, cats and rabbits.
In fact, nearly 1 in 10 owners are considering giving up their pet, according to a survey of 2,500 Pets4Homes users. Some 18% of owners are already going into debt to pay for the care of their animals, while a quarter cannot afford to take them to the vet.
It’s no surprise that shares of Britain’s Pets at Home Group have lost a third of their value since their peak in September 2021. It’s a similar picture at Chewy, which has seen its shares fall by two-thirds from its peak. in February 2021. Private capital is also betting heavily on veterinary care.
However, despite the fact that the furry bottom fell off the pet market, this is not the whole story. Two thirds of UK households now have a pet. Although some people are separating from them, for many more families, they are valued members of the household. In fact, while 38% of owners said they had switched to cheaper feed, 80% said they would cut back on takeout, alcohol, festivities, haircuts and TV subscriptions to keep their animals , according to the Pets4Homes survey.
Pets are a lifelong commitment for a cat, dog or guinea pig, one that requires many years of spending. That means an animal annuity, if you will, for companies like Pets at Home, Chewy and also Nestlé, given that pet products make up around 20% of the consumer giant’s sales. If inflation in the broader economy falls later this year, the pressure on the British eases and employment remains strong, hopefully the worst effects of the bursting of the Boston Terrier bubble can be avoided.
The huge post-COVID shift in spending habits, from sweatpants to smart suits, from fixing up houses to booking sunny vacations, changed the consumer landscape. But a Peloton bike gathering dust in the corner is one thing, shelters struggling to deal 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 of Bloomberg LP and its owners.
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