We’re halfway through the year, and it’s the right time to look at the upcoming big bets in the Animal Health sector. I have been in the sector for nearly 10 years leading Veterinarians, Scientists, AI experts, Imaging leaders, and Product Managers (both Commercial and Technical), and in all my years in Animal Health, we’ve never been closer to a drastic moment of major market disruption as we are right now. Corporations, across the board, are consolidating both hospitals and services providers. While this has led to an uptick in corporate investments into tech and infrastructure, it also gives smaller organizations the opportunity to be more agile and nimble.
As for investment strategies, bigger firms will continue to consolidate while smaller start-ups will adapt addressing underserved markets. With that said, it’s been a tumultuous year thus far: revenues are less than expected and the veterinary clinics have seen fewer customers[1] as testing and visit costs continue to rise.[2]However, the tide is about to turn. The Covid dog population is 12-18 months away from entering into the senior phase of their lives, something that will usher in the need for more frequent clinical visits and increased testing. Overwhelmingly, pet-parents see their pets as integral parts of the family, and continue to spend the money (thus making sacrifices in other places) on their animals. So, in short, the light at the end of the tunnel is indeed the sun and not an oncoming train.
What are the big bets that major players should make in the industry? How do the major animal health providers ready the products/features for the overwhelming amount of volume and demand stemming from the 69 million pet-owning American households? How do we reach the suspected 78% of animal owners who aren’t compliant with wellness exams but will come rushing in at the last minute to care for their pets?[3]
The Four Big Bets.
- Learning from “23 and Me” I am going to avoid the easy softball that is the interconnectivity of data systems overlayed with AI intending to provide the best service for Veterinarians and Pet Owners. That’s too easy. The data I am referring to here is the issue that has popped up at Embark, Wisdom and BasePaws. These three DNA companies hold swaths of data that would identify treatment needs for aging dogs (and dogs of all ages). Their issues, however, are somewhat self-imposed. All three are marketed as a one-time, “learn about your dog’s genetics” service. In reality, they are much more than that. These companies must reorient their branding not as a one time service, but as a continuous one that can study canine genetics over a pet’s lifetime. They can learn from the positioning of 23 and Me, and move from a ‘capex’ model to a ‘razor/razor-blade model’ that drives steady revenue through recurring customers.
- Zoetis purchases a PIMS Zoetis is rumored to be rethinking its investment into Diagnostics. These are just whispers and no one has the knowledge to confirm the rumors except for those within the company. So, with that in mind, let’s assume that they decide to remain in the game. Like I mentioned before, the increase in testing frequency is only 12-18 months away and with Zoetis’ new Hematology analyzer, established Chemistry analyzer, and the IMAGYST; Zoetis is primed for the IHD market. The corporatization of clinics is only increasing. Thus, corporations will only further seek control at all levels of the value chain. IDEXX already owns several PIMS (Neo, ezyVet, DVMAX, Cornerstone and Animana), and Antech has easyVet in the EU. Across the board Corporates are hitching their wagons to the PIMS of their choice. Rhapsody = Chewy, Vetspire = Thrive, Woofware = VCA, PetWare/Voyager = Banfield, Navetor = Patterson, Modern Animal = Claude. Logically, it seems that Zoetis will jump into the game of the full-service providers. This would enable a full suite solution, ensuring the connectivity of the data from Ref Lab/IHD into the medical record, while also providing the Veterinarian a one-stop shop of support.
- Chewy continues to dominate with the Pet-Parent The focus is on the customer. Chewy has completely figured out how to mobilize their 20 million+ customer base, and are reaping the rewards. Their online marketing continues to go viral with customer-care stories, and an increased focus on the growing millennial population has paid off. “We are continuously rolling out enhancements to our on-site and in-app experiences to ensure we are providing an even more enjoyable and convenient shopping journey for pet parents,” said CEO Sumit Singh.[4] The Chewy+ paid membership program, which offers perks such as free returns and 24/7 customer service has also been a success.
- Insurance becoming easier Speaking of corporates, Independence Pet Holding is leaning into the insurance business. IPH has recently acquired Spot, ASPCA, AKC Pet Insurance, Pets + US and Pumpkin. If they can achieve the following, IPH will dominate the insurance market for years to come: 1) Provide for a seemingly affordable rate. 2) Ensure that Pet-Parents are given a credit card to tap into their insurance (think HSA). 3) provide coverage for the services that should be covered. No. 1 and No. 3 are obvious, but why tie a credit card to the animal HSA? It would eliminate the need for pet owners to pay twice. They currently need to make two separate payments, one to the HSA account and again to the Veterinarian; this would streamline that. This also eliminates the hassle of submitting payments for reimbursement, and would eliminate the additional uncertainty of the approval process. The good news is the aggregation of these insurance companies enables a smoother road ahead. With the upcoming expenses for pet-parents as their pets enter their senior years, the need for insurance becomes increasingly paramount.
Those are the big bets I see coming. I suspect significant investments will pour back into the market as the Covid pet population ages and the demand for services and real-time data heightens. Nothing is guaranteed, but in the end, if these bets become reality, they will result in better services for our pets. When accomplished on a global scale, that’s a win for everyone.
What do you think? What am I wrong about and what have I missed?Next year we’ll look back and see the hits and misses but, in the meantime, enjoy the second half of 2026.
[1] https://www.dvm360.com/view/veterinary-visits-decline-as-clients-face-rising-costs-data-reveals
[2] https://www.usatoday.com/story/news/nation/2024/04/16/vet-pet-care-cost-rising/73098326007/
[3] Page 12, https://www.idexx.com/media/filer_public/55/c4/55c4a4f0-21a1-4181-9fec-ebebbdb1627b/2024-08-15-idexx-investor-day.pdf
[4] https://www.customerexperiencedive.com/news/chewy-updated-experiences-active-customers-membership-q3/734780/
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