Man’s best friend could become an investment portfolio’s best performer as ProShares is set to debut its ProShares Pet Care ETF (PAWZ) on Tuesday, Nov. 6 — the first ETF of its kind to cater to the pet care industry that boasted sales of $132 billion in 2016.
“It’s the first pet care ETF,” Steve Cohen, Managing Director of ProShares, told ETF Trends. “We’re excited about it because we think that while pets are great companions, they are also big business.”
The pet care industry is poised for even further growth as data collated from Grand View Research and other pet industry trends show that sales could reach upwards of $203 billion by the year 2025–a growth of 54% in less than 10 years. That type of exponential growth can only garner more interest, which has been evident in more than 80 mergers and acquisitions over the past 12 months within the pet care industry.
That trend can only intensify as the number of pet owners increasing will feed into the sales growth. According to data from the American Pet Products Association (APPA), roughly 68% of U.S. households currently have pets, which represents an increase of 56% since 1988.
“That’s the story–a real emerging opportunity to take advantage of this dynamic industry,” Cohen said.
Furthermore, that growth is not relegated to the United States as similar growth is taking place on a global scale. According to the latest figure from the Department of Agriculture, the cost to raise a child is $233,610–as such, this could explain the next trend that Cohen identifies.
“Pet ownership is growing significantly,” said Cohen. “The Baby Boomers are replacing kids with pets and millennials are adopting pets at record numbers, so these two generations are really driving that ownership increase.”
While the data is brimming with numbers to support growth in the pet care industry, the emotional aspect cannot be understated. A recent Harris Poll reports that 95% of owners consider their pets part of their respective families, and as such, they will spare no expense in ensuring that their pets lead healthy lives.
As such, that emotional bind leads to an influx of revenue for premium-quality foods, state-of-the-art health care, insurance policies, luxury services and more.
“You combine ownership of pets with the way people take care of their pets these days–they will do everything, such as buy dog food that’s as good as the quality of food they eat to state-of-the-art healthcare,” said Cohen.
Fund Uses Selective Screener
In terms of the strategy focus of the fund, PAWZ will provide investors with the opportunity to gain broad exposure to public companies in the global pet care industry. These include companies that stand to potentially benefit from the proliferation of pet ownership, and the aforementioned trends that substantiate the lengths pet owners go to in order to take care of their animal companions.
PAWZ accomplishes this by locating opportunities with companies that offer broad-ranging products and services. Furthermore, this includes subindustries that support pet owners and the evolving ways in which they provide for their pets.
“We’re identifying companies that are extremely involved in the pet care industry and stand to benefit from people’s passion for their pets,” said Cohen.
Screening for these particular opportunities will take place through the filter of the FactSet Pet Care Index, which is comprised of 24 companies that provide exposure to potential growth within the pet care industry.
Eligibility for the index means meeting certain criteria:
- The company’s principal revenue source is from one of eight FactSet Revere Business Industry Classification subindustries—“RBICS subindustries” for short; or
- The company generates at least $1 billion in annual revenue from at least one of the eight RBICS subindustries; or
- The company’s principal business is identified by FactSet as being pet care related, but for which an appropriate RBICS subindustry has not yet been created (e.g., pet insurance).
Furthermore, the index will tap into eight FactSet pet care subindustries, including pet food manufacturing, veterinary services, veterinary pharmaceuticals, pet supplies manufacturing, internet pet/supply retail, veterinary product distributors, pet supply stores, and veterinary diagnostics.
Economic Resilience
As long as animals and humans can coexist, PAWZ’ resilience should stand the test of time regardless of the economic landscape.
“That industry has twice the percentage growth of GDP since 2007,” said Cohen. “It’s not just a U.S. trend; it’s a global trend.
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