Pet ownership surged during the pandemic as more people worked from home, and total spend on pet food and treats continued to demonstrate resilience even as inflation rose. Those spending habits aren’t likely change soon, as an American Pet Products Association (APPA) study found that about two-thirds of pet food shoppers have no plans to alter their pet-related buying habits even if the economy declines.
It all adds up to an attractive sector for investors and a great time for owners of pet food and treats businesses to think about selling the company.
A look at the market trends driving consumer behavior in this sector and the key players involved in pet food M&A reveals why investors are so hot on these businesses and who is most likely to take notice of your pet food or treats company.
Consumer Behavior Drives Strong Growth
The pet sector as a whole has performed well of late, but the pet food and treats category has enjoyed particularly strong growth. Globally, the pet food market is forecast to expand at a compound annual growth rate (CAGR) of 11.1% over the next four years, while the US market is expected to grow even faster, with an anticipated CAGR of 23.71% from 2022 to 2027.
An already healthy pet food sector saw a spike in demand as the pandemic lockdowns proved an ideal time to bring home and train a new companion. Even after COVID restrictions eased, consumers demonstrated their strong inclination to spend heavily on their pets, driving solid revenue growth that’s proven immune to economic uncertainty.
One reason this sector has demonstrated such staying power is that pet owners are happy to pay a premium for healthy options for the companions they view as part of the family, often seeking foods that have features and functionality similar to their own human food. They’re especially interested in pet foods that are organic, non-GMO, vegan, kosher, free from artificial colors or preservatives, or made with functional ingredients like probiotics.
To meet these expectations, companies are investing in manufacturing techniques and other innovations to deliver the super-premium options today’s pet owners demand, including:
- Raw or fresh foods
- Novel wet-food formats such as stews and purees
- Freeze-dried foods
- Innovative proteins like kangaroo and bison
- Human-grade meats
- Plant- or fish-based foods
Investors are Taking Notice
With pet owners willing to pay a premium for healthy foods, and pet food appearing to be a protected area of spending, this sector is experiencing exceptionally strong growth. That’s captured investor attention over the last several years, with the pet category posting M&A records in 2021 and deal momentum still strong in 2023.
Despite macroeconomic pressures, private equity (PE) groups have significant dry power to deploy and many large strategic acquirers have healthy balance sheets, fueling both to take a close look at pet food businesses. Many solid targets remain available, both branded companies and co-manufacturers. As PE groups continue to roll up specialty companies and strategics continue to expand their product lines and capabilities through acquisition, this once-fragmented market is likely to consolidate further.
While the US market for pet food businesses remains strong, cross-border transactions are especially hot. Even for US businesses that prefer to maintain domestic manufacturing facilities for tighter quality and production control, access to large international markets can prove a major growth opportunity and valuation booster.
Who’s Likely to Buy a Pet Food Business?
For A+ pet food and treats companies with strong fundamentals and a compelling value proposition, good deals are still possible even with capital more expensive than it has been for a decade.
PE groups accounted for 80% of the pet food deals over the past three years, so a financial buyer is the most likely candidate to purchase a pet food or treats company. There are several dozen highly active financial investors in this sector, including those that recently made major acquisitions and investments, such as:
- Alpine Investors, which continues to build its Antelope platform of pet products
- Arbor Investments, which sold a portion of its Red Collar Pet Foods portfolio to Colgate-Palmolive
- KKR, which bought the New Zealand-based Natural Pet Food Group
- CapVest’s Inspired Pet Nutrition, which purchased Pet Foods UK, a super-premium pet food and treats company
- L Catterton, which made an investment in Partner Pet, a premium freeze-dried pet food company based in China
Strategic acquirers also remain active in this sector, both in the US and globally. Some of the most notable recent deals include:
- Post Holdings’ acquisition of multiple established pet food brands—including 9Lives® and Kibbles ‘n Bits®—from The J.M. Smucker Co.
- Mars Petcare’s purchase of Champion Petfoods, a move designed to complement a portfolio that includes brands like PEDIGREE®
- ADM acquiring a 75% stake in four premier pet food treats and supplements companies: PetDine, Pedigree Ovens, The Pound Bakery, and NutraDine
- Voff Premium Pet Foods’ purchase of Nova Dog Chews, expanding its reach in Europe
- Assisi Pet Care’s acquisition of award-winning brand Pet Munchies Holdings
Trust Forbes to Help Sell Your Pet Food or Treats Business
A+ pet food and treats businesses will find that it’s a good time to take the company to market—and Forbes Partners can guide you to an exceptional outcome.
The Forbes team has deep expertise in the pet food market and a keen understanding of the buyers that find this sector appealing. As the exclusive advisors to four leading pet treat and supplement companies—PetDine, Pedigree Ovens, The Pound Bakery, and NutraDine—we guided a sale to a strategic acquirer in a deal that valued the four entities at $600 million. That’s one of many exceptional outcomes we’ve achieved in the consumer products and services sector, leveraging our insights on the challenges consumer businesses face and the trends shaping their industries.
When you’re ready to sell your pet food business, trust the Forbes team to exceed your expectations for an exceptional outcome. Talk with a Forbes investment banker to learn how we can help.