By Nat Rubio-Licht
Monday, May 24, 2021
LA Business Journal

Owners are increasingly giving their dogs and cats the luxury treatment, which is leading to strong growth for the pet care industry and opportunities for several startups in Los Angeles.

Ruhell Amin, sector lead for global retail at Playa Vista-based independent advisory firm William O’Neil and Co., attributes the industry’s growth to premiumization and humanization.

Premiumization is the concept of brands appealing to consumers by emphasizing quality and exclusivity, according to Amin, while humanization is the idea that many pet owners have begun thinking of their pets as family members.

In the United States, the pet care market reached $96 billion in sales in 2020, up from $74 billion in 2014, according to Santa Ana-based ecommerce growth agency Common Thread Collective.

That growth has given rise to a wave of pet care-focused startups in L.A. in recent years, with businesses that are dialed into areas such as veterinary services, grooming, products and training.

The popularity of pet care startups even led to the creation of Leap Venture Studio. The Mid-City-based accelerator — founded by animal welfare nonprofit Michelson Found Animals Foundation Inc., pet technology company Kinship and investment firm R/GA Ventures — has funded more than 25 startups since launching in 2018.

“At the end of each year’s cohort, we look at each other and try to figure out if we’re going to do (Leap Venture Studio) again the following year,” said Brett Yates, chief executive of Michelson Found Animals Foundation. “There was zero doubt from any of us this year about it. The space is really rich.”

Many L.A.-based pet care companies are technology-centered or direct-to-consumer merchants, categories that Amin said has helped drive the pet industry’s boom.

According to Amin, pet care ecommerce sales grew from 4% of the industry’s revenue in 2014 to 27% of its revenue in 2020.

The pandemic increased the use of online shopping in the space even further, he said, adding that ecommerce is expected to account for 35% of the pet care market by 2024.

“I think if there are going to be new entrants into the space, invariably they’re going to have to have some sort of online presence because that’s where the growth really is in the industry,” Amin said.

Though the U.S. economy shrank 4% during the pandemic, spending on pet care products and services has surged. According to Common Thread Collective, pet product revenue grew 63% amid the pandemic.

This mirrors the recession of 2008, Amin said, when spending on pet products rose 12% despite decreased consumer spending overall.

Pet care products are considered a necessity, making the industry resilient because of regular and frequent consumer purchases, Amin said.

“The pet industry is generally one of the most resilient categories during an economic downturn because of the nature of the pet-parent relationship,” Amin said.

Pet adoptions in Los Angeles skyrocketed at the start of the pandemic. In March 2020, the Los Angeles Department of Animal Services found homes or foster homes for 2,232 pets, which is more than a quarter of all animals that were adopted in the first half of 2020, according to the department’s mid-year report. Amin said this trend could “positively affect” the industry.

Leap Venture’s Yates said Los Angeles is an “incubator area” for companies in the pet care space, which is why Leap Venture Studio moved from Portland, Ore., to Los Angeles after its first year.

“Of all the cities where we’re starting to see the startups come through the pet space, Los Angeles is the strongest of them,” Yates said.

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