The flotation or sale of UK pet superstore chain Pets at Home is reportedly under consideration by owner KKR, the US-based private equity firm. What are the strengths and weaknesses that potential suitors should consider?
Pet Humanisation Trumps Recession
The UK pet care market has been remarkably resilient in recent years, exhibiting a real compound annual growth rate (CAGR) of 2.4% over 2008-2013, to US$6.6 billion. This came against the backdrop of a steep decline in economic activity, followed by prolonged stagnation (economic output remains below its pre-recession peak), with a dose of inflation (which peaked at 4.5% in 2011) mixed in. The Office for National Statistics estimates that real average hourly earnings fell by 8.5% between 2009 and 2012.
Pet humanisation (owners treating their pets like family members) has been the main driver of this growth. One regularly finds stories of fantastically indulged pets in the tabloids, while surveys repeatedly illustrate the depth and breadth of the pet humanisation phenomenon. For example, a study of dog owners that was conducted by website VoucherCodesPro.co.uk during summer 2013 found that owners spent an average of £276 (US$453) on dog food, £240 on dog treats, £180 on grooming, £106 on kennels/pet sitters, £251 on veterinary fees/insurance and £156 on accessories every year.