Latest / The Demographics Podcast with Fexingo: Aging Populations, Birth Rates, and Economic Impact / How Fewer Kids Means More Pets and a Booming Pet Industry
Transcript
- Lucas: We've spent a lot of episodes talking about industries that get squeezed when birth rates fall. Home builders, toy makers, even funeral homes. But there's one industry that's actually thriving because young people are having fewer kids — the pet industry. Luna: It makes intuitive sense. If you're not spending on diapers and daycare, you might spend on dog food and vet bills instead. Lucas: Exactly. And the numbers back it up. The American Pet Products Association estimates that U.S. pet spending hit $136 billion in 2025. That's up from about $100 billion in 2020. And it's projected to reach around $150 billion by 2027. Luna: So we're talking about a category that's growing roughly 10 percent a year, even as inflation has eased a bit. That's stronger than most consumer goods sectors. Lucas: Right. And the demographic driver is clear. Millennials are now the largest pet-owning generation, with about 35 percent of them owning a dog. They're also the generation that's most delayed marriage and childbearing. So the pet is filling a role that a child might have filled in previous generations. Luna: I've read that some millennials even call their pets 'fur babies' and they celebrate their birthdays, buy them birthday cakes. It's a whole pet humanization trend. Lucas: That's a key part of the economics. Because when a pet is treated like a family member, the spending per animal goes up. Premium pet food, pet insurance, regular vet visits, even pet mental health products. The average annual spending per dog in the U.S. is now around $1,500. For cats it's about $900. Luna: And those figures are growing faster than inflation. So it's not just more pets, it's more spending per pet. Lucas: Exactly. And that creates opportunities for companies that can capture that premium. Take Chewy, the online pet retailer. Their revenue has grown from $7 billion in 2020 to over $12 billion in 2025. They've also been profitable for a few years now, which is rare in e-commerce. Luna: Chewy's success is partly because they've locked in recurring revenue through autoship subscriptions. But also because they've expanded into higher-margin areas like pet health with their pharmacy platform. Lucas: Right. And then on the animal health side, you have Zoetis. They're the world's largest animal health company. Their revenue has grown from about $6.7 billion in 2020 to over $9 billion in 2025. And a big chunk of that growth comes from companion animal products, not livestock. Luna: So it's not just pet food and accessories. The entire veterinary services ecosystem is growing too. The number of vet clinics in the U.S. has increased by about 15 percent in the last five years. Lucas: And that's driven by demand. Pet owners are more willing to spend on advanced treatments — surgeries, cancer therapy, dental care. Pet insurance is also becoming more common. In 2025, about 5 million pets in the U.S. were insured, up from around 3 million in 2020. Luna: If this episode helps you connect the dots on where consumer spending is heading, the way these stay ad-free is listener support — buy me a coffee dot com slash fexingo. Lucas: Yeah, seriously. It's just a way to keep the show independent, no ads, no sponsors. And it makes a difference. Luna: Alright, back to the data. So what about the broader economic impact? Are we seeing pet-friendly housing become more standard? Lucas: Absolutely. Apartment complexes are now marketing pet amenities — dog parks, pet washing stations, even pet concierge services. That's a direct response to the fact that a large share of renters are pet owners. And in some cities, pet-related businesses are filling storefronts that used to be children's clothing stores or toy shops. Luna: Interesting. So the built environment is shifting too. More dog parks, fewer playgrounds. Lucas: Precisely. And then there's the pet food market. It's worth about $50 billion in the U.S. alone. And the fastest-growing segments are fresh, refrigerated, and grain-free foods. That's a direct response to the humanization trend. People want their pets to eat like they do. Luna: That's also driving innovation. Companies like Freshpet have seen revenue grow from $300 million in 2020 to over $700 million in 2025. Their products are sold in refrigerated sections of grocery stores, right next to the human food. Lucas: And that blurs the line between pet food and human food. Some analysts talk about the 'convergence' of the two markets. But let's not ignore the downside of this trend. The pet industry's growth is partly a mirror of declining birth rates. And that has long-term implications for the labor force, economic growth, and social structures. Luna: Right. So we're not saying fewer kids is good. We're saying that investors and entrepreneurs should see the pet industry as a structural winner in a low-fertility world. Lucas: Exactly. And it's not just the U.S. The same trend is playing out in Japan, South Korea, and much of Europe. In Japan, pet ownership has overtaken child ownership in households. The pet industry there is worth over $15 billion and growing. Luna: That's staggering. Japan's birth rate is 1.2, one of the lowest in the world. And their pet industry is thriving. They even have pet cafes, pet hotels, pet insurance with comprehensive coverage. Lucas: So globally, if you're looking for a demographic tailwind, the pet industry is one of the clearest beneficiaries. Companies that cater to pets — food, health, services, insurance — are likely to see sustained demand for the next decade, regardless of the broader economic cycle. Luna: But what about the eventual plateau? At some point, pet ownership might saturate. Could the industry become overcrowded? Lucas: It's possible. But the spending per pet is still climbing. And as the humanization trend deepens, there's room for more premium products. Plus, there's the aging of the pet population itself. Older pets need more medical care, just like older humans. Luna: So the pet industry could actually have multiple demographic tailwinds: more pets from low birth rates, and more spending from humanization. That's a powerful combination. Lucas: Right. And one more angle: pet adoption trends. During the pandemic, adoption rates spiked, but they've normalized. Interestingly, younger generations are more likely to adopt from shelters rather than buy from breeders. That could affect the supply chain for pet-related goods. Luna: Shelter pets may have different needs — more behavioral training, more health issues. That could boost spending on training, supplements, and vet care. Lucas: Exactly. So the pet industry is not just growing — it's evolving. And for anyone running a business or making investment decisions, understanding these demographic shifts is crucial. Luna: So to bring it full circle: falling birth rates are reshaping the economy in ways that are sometimes counterintuitive. Fewer kids means more resources going to pets, and that's creating new winners. Lucas: And the question we should all be asking is: if birth rates continue to fall, could the pet industry eventually rival the children's products industry in size? Some categories already have. Luna: That's a fascinating thought. I'm going to be watching that crossover closely. Lucas: Me too. Thanks for listening to The Demographics Podcast.