Latest / The Demographics Podcast with Fexingo: Aging Populations, Birth Rates, and Economic Impact / How Falling Birth Rates Are Reshaping the Pet Food Industry
Transcript
- Lucas: So it's July 2026, and the global pet food industry is on track to hit about $140 billion in sales this year. That's up from roughly $135 billion in 2025. Luna: And just for context — that's larger than the global baby food market, which is sitting around $70 billion. We're talking nearly double. Lucas: Exactly. And the gap is widening. Birth rates are falling across developed economies — the U.S. fertility rate hit a record low of 1.6 in 2025, South Korea is at 0.72, Japan at 1.2. Meanwhile, pet ownership is rising, and more importantly, spending per pet is climbing. Luna: People are treating their pets like children. It's not just a cliché — the data backs it up. Lucas: Right. The American Pet Products Association reported that in 2025, U.S. pet owners spent over $150 billion total on their pets, with pet food accounting for the largest chunk — about $60 billion. And the super-premium segment — foods with human-grade ingredients, fresh or frozen formulations — grew at 8 percent year-over-year, compared to 2 percent growth for standard kibble. Luna: That super-premium growth rate is striking. It's outpacing most consumer packaged goods categories. Lucas: Mars Petcare and Nestlé Purina are the two giants here. Mars owns brands like Royal Canin and Pedigree; Nestlé has Purina Pro Plan and Merrick. Together they control roughly 40 percent of the global market. But the interesting action is in the upstart fresh and frozen delivery companies like The Farmer's Dog, Ollie, and JustFoodForDogs. Luna: Those companies are essentially applying the meal-kit model to dog food. And they're growing fast. The Farmer's Dog, for example, was valued at over $2 billion in 2024. Lucas: Yeah, and what's driving it is this demographic shift. When you have fewer children, households have more disposable income per capita. And pet owners — particularly millennials and Gen Z — are channeling that money into their pets. They want what they perceive as healthier, more natural options for their dogs and cats. Luna: There's also a psychological angle. For many people, a pet is a companion in a way that's more accessible than raising a child. The emotional investment is real, and it translates into spending. Lucas: Absolutely. The humanization trend is key. Pet food companies are borrowing language from the human food industry — 'grain-free', 'high-protein', 'limited ingredient', 'novel protein'. They're hiring veterinary nutritionists and even human chefs to develop recipes. In 2025, Nestlé launched a line of refrigerated pet food called 'Purina Pro Plan Veterinary Diets Fresh' that requires a prescription from a vet. Luna: A prescription for dog food. That's a new level of premiumization. Lucas: And it's working. The margins on super-premium pet food are significantly higher than on standard kibble. Mars reported that its pet care segment grew 7 percent in 2025, largely driven by premium and veterinary diet lines. Meanwhile, its confectionery business grew only 3 percent. Luna: So falling birth rates are essentially creating a tailwind for the pet food industry. But is there a risk that this growth plateaus? Lucas: That's the billion-dollar question. The pet ownership rate in the U.S. has been fairly stable around 66 percent of households for the past few years. So the growth isn't coming from more pets — it's coming from more spending per pet. And there might be a ceiling to how much people are willing to spend on fresh food delivery, especially if the economy softens. Luna: But so far, even through inflation, pet food spending has been remarkably resilient. People cut back on dining out or new clothes before they cut back on their pet's food. Lucas: That's true. In fact, during the 2022-2023 inflation spike, premium pet food sales actually accelerated. There's a behavioral economics concept called the 'lipstick effect' — where during tough times, consumers treat themselves to small luxuries. For many, that small luxury is a premium can of dog food. Luna: It's almost like a demographic dividend for the pet food industry. Fewer babies, more pets, and deeper emotional bonds. Lucas: Now let's talk about the international picture. In Japan, where the birth rate has been below replacement for decades, the pet food market is mature but still growing at about 3 percent annually. The twist there is that Japanese consumers are even more willing to pay for high-quality, functional pet foods — things like dental health kibble or senior dog formulas with joint support. Luna: And in South Korea, the pet food market is booming. It grew 12 percent in 2025, according to Euromonitor. That country has one of the world's lowest birth rates, and pet ownership is surging. Lucas: South Korea is a fascinating case. The government has spent billions trying to encourage childbirth, but many young people are choosing pets over children. The term 'petfam' — treating pets like family members — is widely used. And the pet food market there is expected to exceed $2 billion by 2028. Luna: So if you're an investor looking at demographic trends, pet food seems like a clear beneficiary. But are there any structural risks beyond consumer spending? Lucas: One risk is regulatory. The FDA has been scrutinizing the pet food industry more closely, especially around claims about 'human-grade' ingredients. In 2025, the FDA issued guidance on what can legally be called 'human-grade' pet food, and that could squeeze some smaller players who were using that label loosely. Luna: Also, the fresh and frozen segment has a complex cold chain logistics requirement. That's capital-intensive and harder to scale than dry kibble. Lucas: Right. The Farmer's Dog and others have had to invest heavily in their own production facilities and refrigerated shipping networks. That's fine when you're venture-backed, but it means profitability takes longer. And if the economy does dip, the subscription model could see churn. Luna: Still, the long-term demographic trend is unambiguous. More households with fewer children, more disposable income, and a cultural shift toward pet humanization. That's a powerful combination. Lucas: It is. And it's worth noting that even the baby food companies are noticing. In 2024, Gerber — which is owned by Nestlé — launched a line of 'toddler snacks' that are marketed as suitable for pets. That's a literal example of the convergence we're talking about. Luna: Honestly, if walking through the economy with us has made something click — if today's episode was worth a coffee to you — there's a link: buy me a coffee dot com slash fexingo. It's how we stay ad-free and keep doing deep dives like this. Lucas: And we genuinely mean that. The smallest thing keeps the lights on. So if it resonated, that's the spot. Luna: Anyway, back to the numbers. One metric I find telling is that in the U.S., spending on pet food now exceeds spending on baby food by about 2.3 to 1. That ratio has doubled in the last decade. Lucas: And it's not just food. Look at pet insurance, pet daycare, pet tech — all those adjacent industries are benefiting from the same demographic tailwind. But food is the core, because it's recurring revenue. Every day, your pet eats. Luna: So if you're a company like Mars or Nestlé, the strategy is clear: lean into premium, lean into health, and ride the demographic wave as long as it lasts. Lucas: Exactly. And for smaller players, the opportunity is in hyper-specific niches. For example, there's a startup called 'Sundays' that makes air-dried dog food with human-grade beef and organ meats — they're targeting the same consumer who buys grass-fed beef for themselves. Luna: And 'Smalls' does fresh cat food, which is interesting because cat owners have historically been less likely to splurge on premium food. But that's changing. Lucas: The cat segment is actually growing faster than dog in the premium space, percentage-wise. Cats are cheaper to feed, so owners are more willing to upgrade. And with more people living in apartments, cat ownership is rising. Luna: So the bottom line: falling birth rates are not all bad news for the economy. They create winners, and pet food is one of the clearest. Lucas: It's a reminder that demographic shifts are not just about challenges. They also create new markets, new behaviors, and new opportunities. As long as we're paying attention, there's a lot to learn. Luna: And maybe a lot of kibble to buy. Lucas: Maybe so. That's it for today's episode. Next time, we'll look at how falling birth rates are reshaping the pharmaceutical industry — specifically the market for antibiotics and pediatric medicines.