If recent merger and acquisition (M&A) activity is any indication, pet food is ending 2020—an exceedingly difficult year by most measures—on a positive note, at least from a market perspective.
WellPet, the 12th largest pet food company globally according to the Top Pet Food Companies Database, was just acquired by Clearlake Capital Group, announced on November 18. Just two weeks before, Health & Happiness Group Holdings (H&H Group), headquartered in Hong Kong, announced it was buying Solid Gold Pet, tied (with Stella & Chewy’s) for the 65th largest pet food company worldwide.
What makes the deals noteworthy is that for both new owners, this appears to be their first foray into pet food—another sign of the market’s strength. “We believe the current market tailwinds, enduring increase in pet ownership and pet humanization dynamics offer a unique opportunity to meaningfully invest behind the company and accelerate WellPet’s near- and long-term growth objectives to serve pet parents in the best possible ways,” said José E. Feliciano, co-founder and managing partner of Clearlake.
That’s investment/corporate-speak for, “We’re jumping on the pet food bandwagon.”
Another link between these two deals is that both acquiring companies currently operate in human food and/or health and wellness. With Clearlake, that’s with several snack brands; with H&H Group, it’s with baby care plus vitamins and supplements for adults.
This follows a clear pattern developing for the past several years, as human food conglomerates—think General Mills, Smucker—plus smaller players see the ongoing growth, and potential for more, in the pet food sector, and probably also the already established links between the human and pet spaces. Those “pet humanization dynamics,” as Feliciano of Clearlake put it.
One could argue that the multinational giants, Mars and Nestlé, paved the way decades ago with their development of the top two pet food businesses globally, which they continue to grow through acquisitions, product development and more.
The M&A news follows significant activity earlier in the year. In addition, recent reports showed publicly traded pet food companies outperforming the S&P 500 market index in the first half of 2020 by 30%, according to Cascadia Capital, which in turn follows the firm’s pet index outperforming the overall market index by 203% over the past five years.
On the other end of the spectrum comes anecdotal evidence of startups continuing to explore and enter the pet food market throughout the world. For example, several participants in the Petfood Essentials CONNECT•ED online course on pet food production and safety have identified themselves as new to the industry. Many are from outside of North America, a sign of pet food’s expanding development.
No doubt, 2020 has presented significant challenges to every person, country, industry and business around the globe, and it’s not as if flipping the calendar to 2021 on January 1 will magically melt away all the issues and problems. But it’s comforting to know that pet food will enter the new year with some wind in its sails.