• May 11, 2023

Pet Parents and Investors are Gobbling up Pet Startups: Mentor Niti Patel Explains why

Pet Parents and Investors are Gobbling up Pet Startups: Mentor Niti Patel Explains why

Pet Parents and Investors are Gobbling up Pet Startups: Mentor Niti Patel Explains why 700 500 Michelle Breyer

When SKU announced it was launching our Petcare Track in fall ’23, we were thrilled by the overwhelming response from both founders of emerging brands as well as industry leaders

The timing is ideal for an accelerator for pet startups with skyrocketing consumer demand and growing investor interest.Like such categories as beverages and beauty, challenger brands are driving innovation and excitement. From raw pet food to cutting-edge dog crates, a growing percentage of shelf space is occupied by challenger brands.

It’s a large and growing industry. Revenues for the U.S. pet market increased every year in the last decade, growing from $50 billion in 2011, sales are expected to be close to $150 billion this year, according to the American Pet Products Association. And that growth rate is expected to continue, with 66 percent of U.S. households owning at least one pet. That’s up from 56 percent in 1988,

SKU already has experience with pet startups. Alumni include such petcare brands as A Pup Above, Dog Threads, Homescape Pets and Springer Pets -companies that make everything from dog water bottles to pet supplements.

SKU’s upcoming pet track will previde curriculum to meet the specific needs of pet companies as well as guidance from hand-picked teams of mentors with industry expertise.

One of those mentors is Niti Patel, a principal with Danneen & Co. She is passionate about the pet industry. She shared her perspective on the prospects of the industry and the key role that challenger brands will have in its growth.

Pampering their Fur Babies

SKU: There is so much buzz about the pet industry. Over what period of time have you seen it really take off.

Niti: The pet care industry has been steadily growing in value for an extended period of time, driven primarily by the humanization of pets. People are no longer pet owners, but “pet parents” and treat their pets as a member of their family. For many of them, this means ensuring that they are buying high-quality food and petcare items to ensure health and longevity for this beloved member of the family.

Covid-19 was the biggest driver of growth, with almost a 10 point increase in the number of households adopting a pet (I’ve seen higher numbers, but the studies I have done were closer to the 10ish range).

With new pet adoptions, along with existing Pet Parents spending more time at home and looking for ways to keep their pets entertained and comfortable.

SKU: What are some of the most exciting types of products you’re seeing in the category?

Niti: I’m seeing it across almost every single category, including consumables like food, treats, toys, feeders, collars and more. Dogs are the most valuable category, with cats coming in a distant second. With the dog category being so valuable, you can see a rush of newcomers entering in the space, primarily focused on premium food, treats and toys.

Fetching top dollar

SKU: What has the investment climate been from pet brands?

Niti: PE firms are gobbling up pet care brands, they all want to build a ‘pet platform’ as it is an industry that is not going away anytime soon and will continue to increase in value. Even with some fears of a recession, people will not compromise on quality for their beloved four-legged friends.

One food/treat transaction I was involved in had to do with the unique expertise and capability in freeze-dried manufacturing. The company’s brands were almost secondary. In another, the brand was a well-known e-commerce pet bed company that had no brick & mortar presence. A third was a large pet company that was strong in brick & mortar. – particularly in mass – which was a unique strength.

Key investment criteria

SKU: What are the specific criteria that PE firms looking for in pet brands?

Niti: Overall, PE firms look for companies that have a strong foundation and the potential for growth. Some of the key criteria evaluated include:

  • Market size and growth potential: PE companies want to invest in markets that are large and growing – they especially like consumable categories, due to more predictable, ongoing revenue
  • Strong brand and customer loyalty: companies with established brands and a loyal customer base – they don’t have to be a big brand, but if they are fast growing with a loyal base, PEs will invest more to drive growth as strong brands command a significant premium at sale.
  • Scalability and operational efficiency: PE firms typically want to invest in companies that can scale their operations and generate profits as they grow. In the pet care industry, this often involves investing in new product development, expanding distribution channels, and improving operational efficiency.
  • Experienced management team: PE firms often want to work with experienced management teams that have a track record of success in the pet care industry. This can help ensure that the company is well-positioned for growth and able to effectively execute on its strategic plan.
  • Attractive financial metrics: Finally, PE firms typically look for companies with strong financial metrics, including revenue growth, profitability, and a healthy balance sheet. In the pet care industry, these metrics are key indicators of the company’s long-term potential and help determine the acquisition price.

On the scent

SKU: Can you share any success stories in the category?

Niki: One that comes to mind is Playology – a premium dog toy brand that is one of the few standouts in a cluttered, fragmented category. It was founded in 2017 by dog lovers Adam and Lendy Beatty. They went from 0 to tens of millions in a very short amount of time.

As pet parents, they noticed a lack of premium toys designed to engage a dog’s natural instincts, developing a patented scent technology that embeds all-natural scents directly into the material of the toy at a microscopic level to engage a dog’s sense of smell.

The brand is innovative, creating their products based on insights into dog behavior. A quiz helps owners select the ideal toy for their dog, whether that be a Squeaky Chew Ball or a Puppy Sensory Snail.

(Niti currently serve as a fractional CMO for Logical Brands, the parent company for Playology)

About Niti Patel

Niti Patel

Pet Passionista (and a life-long cat lover) Niti has more than 20 years of expertise in brand strategy and management, consumer insights and innovation built from running global and regional businesses at P&G, Coca-Cola and Kimberly Clark. She transitioned that experience to drive profitable growth at smaller, more nimble organizations, from start-ups to privately held PE and owner-led organizations

Have been immersed in the pet category for the past four years, as steady growth supercharged during the pandemic. As an advisor and operator for Private Equity, supported the build out of a multi-billion-dollar pet platform, from commercial diligence at acquisition, to crafting data-based brand strategy, innovation maps and managing brand portfolios post-purchase to drive double-digit growth across multiple companies and categories.

She currently serve as a fractional CMO for Logical Brands, with a portfolio of products Playology.