4 Pet Industry
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Contxto – You may think a deep-dive into pet startups—pettech—in Latin America might be a bit on the niche side. But, consider this:
What if I told you that I didn’t want to have kids because I just don’t like them? You’d probably think…
What if I told you I am 100 percent, hands down not a cat person? Well, then…
The psychology behind people’s love of animals is a well-established field. But, the evolution of our society towards the pampering and humanization of animals is a newer and more fascinating phenomenon. It has created massive economies all of its own.
Indeed, this past February Contxto’s database added a filter for “pets”. (Note that there is no filter for “childcare” or “babytech”.)
However, beyond the microeconomics behind pet-centered startups, there is actually a deeper rabbit-hole to fall into. It is one that explains major macro-trends across the entire Latin American ecosystem and which can—and perhaps should—be understood through this one sector: Pettech.
Pets, tech, and the post-modern Latin American economy
People often disparage Millenials and Gen Z for being patently immature. Instead of growing up, they are increasingly choosing to spend their time and money on avocado toast, particularly, on their pets.
The simple conclusion is often that incoming generations suffer from some sort of Peter Pan syndrome derived from cancel culture or whatever is hate-trending on Twitter this week.
I’m not here to debate whether we are a generation of grown-up babies. Rather, I’d prefer to argue that there is a structural, rather than moral, explanation to this trend.
And this isn’t some “First World problem”. Latam is especially ahead of the curve. According to GfK Insights, as cited by Modern Cat:
Pet ownership is highest in Latin America, with 80 percent of the online population in both Argentina and Mexico owning a pet, together with three quarters (75 percent) in Brazil. The next biggest pet countries are Russia [at] 73 percent and the US at 70 percent.
So, I’m not only here to tell you that this trend towards a pet-centric society is not just illustrative of the latest evolution of our society. Rather, I am saying that this one, relatively new sector, is the logical conclusion of many distinct but intermingled structural shifts that converge upon it.
Follow me down the rabbit hole of pettech in Latin America.
Pettech: The Latin American trendsetter
Eurmonitor states that Brazil is one of the top five pet care markets in the world. Other countries in the region are not far behind.
The entirety of Latin America has experienced impressive growth despite the economic stagnation of the past few years. Or perhaps, it is not “despite” but rather “because of” economic troubles.
Indeed, the mollycoddling of pets is often seen to be a middle- to upper-class phenomenon. However, the truth is complicated by broader issues in Latin American society as a whole—to the almost sinister benefit of pet startups.
But seriously, look at how well this sector is doing. The results of the pettech boom are hard to miss:
Pet goods startup Zee.Dog had closed US$18.8 million last July. Over in Colombia, LAIKA closed a seed round for US$5 million to strengthen its foothold in Mexico.
Back in Brazil, Petlove has raised US$48 million with SoftBank and then closed funds—it’s unknown for how much—with L Catterton in June.
Meanwhile, Petz—a Brazilian retail chain of pet stores and e-commerce platform—has been planning an IPO (which it had to postpone due to Covid).
Even Justin Mateen, co-Founder of Tinder, invested in LAIKA back in 2019. Perhaps a bit on the nose in society seen to be replacing human with animal relationships, but you get the point.
I saw sustained exponential growth that caught my attention, and when I met its founders, I didn’t hesitate to invest.
Justin Mateen, co-Founder of Tinder
E-commerce and its revolution after Covid-19
Covid-19 and social isolation have made our non-contagious, animal companions essential company during months of lockdown. Yet, the pandemic has particularly benefited pettech, as opposed to general pet shops.
This is due to the exponential growth of e-commerce which has, in turn, come with its own success-born challenges.
Users are increasingly finding that they want curated online shopping experiences. Not the algorithmic Walmart that is Amazon or Mercado Libre. One-stop everything-shops can present too many options on a single, catch-all site to handle mentally or, indeed, to trust.
Specialist e-commerces have thus swooped in to bridge this gap in customer experience.
Colombian pettech, LAIKA, has an omnichannel platform that contains over 4,000 items. Yet, it is limited exclusively to pet-related goods, from pet food, training, grooming, or at-home veterinary services. Imagine these thousands of items being “less stuff” to choose from and you get an idea of how overwhelming overchoice can be on bigger sites.
Trust is also a key factor that pettechs try so hone in on as a competitive advantage.
Pet startups try to build relationships, not only between animal owners, but the owners of the pet and pet-supply shops. Petlove opted to use part of its US$48 million SoftBank investment, raised at the beginning of the pandemic, to help small pet shops survive.
It is a trust-based model emerging across all verticals, as titanic scaleups are felt to lord over their users and suppliers.
In last-mile delivery, we see the likes of Justo building this sort of trust with restaurateurs. In finance, we see how neo- and open banking are driven by democratization and trust-building, as well as big profits.
It is all part of a trend that pettech has been ahead of for a while.
Deeper structural issues benefitting pettech
The crisis of social isolation is just the latest test to the world’s status quo. Deeper structural issues are also important driving forces behind the rise of pettech. They are felt more keenly in Latin America than anywhere else.
Take the ramifications of the reconcentration of city centers across the world.
The unaffordable combination of urban lifestyles and garden ownership means that leaving your pet at home is often no longer an option. The rise of dog parks and pet-friendly restaurants has quickly ensued to cater to this new pet-owning, apartment living demographic.
However, kit is needed to take your dog out. Beyond the standard leash, a whole market for doggy prams and foldable drinking bowls has arisen all sold by pettech startups.
Yet, this phenomenon is accented in Latin America. But why?
Cost of living and pet startups in Latin America
Latin America’s combination of massive inequality and high rates of urbanization has created a perfect storm for pettech.
The region has the highest rates of pet ownership in the world. It is thanks to a melange of factors seemingly unrelated to keeping an animal at home:
- There’s the instability of the informal/gig economy;
- A saturated educational system forcing the region’s population into overpriced private education when people do decide to have children; and,
- The impossibility of buying a home in this, the most urbanized region on Earth, where urban real estate is snapped up as an investment by the wealthy.
This last trend can be easily measured when comparing the region’s under 40’s desire to own a home with actual homeownership rates. Indeed, in Mexico alone, ownership has slumped from 79 percent in 2000 to 59 percent in 2019.
The end result is that an aspirational middle-class is stuck with a good chunk of disposable income that will often never be enough to afford a place of one’s own or to consider having children, even if they want to.
Instead of unreachable capital goods, they seek to invest in “experiences”—travel, food, animal companionship—and more affordable consumer goods—often in the form of tech.
A pettech boom is thus born.
It can, in fact, be seen cropping up—sure in big urban markets as one would expect—but specifically in the crowded cities with notably high costs of living when calculated at purchasing power parity.
Startups for animal rights
Some trends that have helped the rise of pettech go even deeper than a “simple” reaction to the socio-economics of Latin American urban living.
Beyond the condescension regarding younger folks’ humanization of animals is actually a rather revolutionary idea:
That animals, though not human, have a detectable form of personhood. This isn’t a hippie conception of animals as people. Rather it is an ongoing legal debate, again with Latin America at the forefront.
Back in 2015, a 33-year-old orangutan was awarded “non-human” personhood rights in a landmark court decision in Argentina.
Thus, the debate is not so much whether animals get rights as persons under the law, but which ones. You can see how this thinking quickly extends to the realm of domesticated animals with personalities we witness daily.
Again, Latin America stands out for the deplorable conditions of its stray kitties and pooches. Mexico’s stray dog population stands as the region’s largest at 1.2 million.
Companies, and especially quick-to-pivot startups both big and small, have been swift in getting on board with the animal rights movement. Pettech of course features heavily.
In Mexico City, startup Petsy teamed up with Uber to launch a UberPuppies on-Demand service. The drive (pun intended) looked to bring dogs from shelters to the homes and offices of those who want to spend time with them.
Beyond the feel-good aspect of puppies and cuddles galore, the publicity stunt was meant to increase not only rates of adoption, but concomitantly, the pet-owning market that Petsy catered to.
The marketing ploy is made all the more obvious due to the fact that the charitable puppy drive was very much limited to the trendiest (read hipster) or most upscale neighborhoods in Mexico City.
Pet vs PET
Animal rights lead naturally towards a broader conception of sustainability. This is where the slowest moving but most important structural change is ocurring.
It is a shift that will even trump the fluctuations of the jobs and real estate market and yet it is to be tapped fully by pet-centered companies. Pettech’s final frontier is sustainability.
Startups are increasingly not only required to be economically or technologically disruptive; they are also meant to be socially and culturally healing. Luckily for profit-seeking pettechs, their business model coincides perfectly with more woke generations’ expectations and aspirations.
However, it is important to qualify what these expectations actually mean. There are many dangerous conceptions of sustainability that pettech could potentially ride to make a quick buck.
The most worrying is the idea that human overpopulation is the main driver of the world’s current ecological disaster. This Malthusian proposition ignores a clear fact: That 10 percent of the population produces 50 percent of the world’s pollution.
Yet, this logic often quickly devolves into dangerous forms of classism, racism, xenophobia, and their correspondingly disastrous policies that already haunt Latam.
One does worry about someday seeing pettech ads fostering this line of thinking in order to boost pet ownership (and sales) numbers.
An ecosystem of ecological concern
Fortunately, other non-pettech Latin American startups are pushing people to realize that the problem is rather to be found in our patterns of consumption; no in how many people there are on the planet.
We discussed this when exploring how Chilean foodtech, Live Green Co, owed its meteoric rise not thanks to its plant-based products but to massive culture shifts prioritizing sustainable consumption as a corporate “must-have”.
Even better, these companies are getting their due credit across the globe and thus set up a precedent for pettech to follow suit.
Fusing animal rights and sustainable fashion is Peruvian vegan leather startup, Le Qara. It was among the finalists at MIT’s US$100,000 Entrepreneurship Competition earlier this year.
Similarly, Desserto’s cactus-based leather from Mexico was a hit when it was presented last October in the Feria Lineappelle, a major leather fair held in Milan.
Meanwhile, Chilean startup, Algramo, has taken its native country as well as New York City by storm in its fight against single-use plastic.
In our increasingly environmentally conscious world, for startups, it is no longer solely about innovation in technology for tech’s sake; it is about how that tech provides a net positive impact beyond its own profit motive and vertical.
Pettech is, as of yet, not at the vanguard of this environmental trend. But I have no doubt that it will be lapping it up sooner rather than later.
-AG
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