by Marc Raybin
April 5, 2016

The Health Food Craze PE is Missing

Animal wellness and healthcare continues to gain traction from investors.

People treating their pets like children is not a new phenomenon, but the humanization of pets by feeding them better foods, getting them better healthcare, and even paying attention to details like probiotic health, has historically been overlooked by private equity investors. That could be changing.

The Halifax Group at The Newseum on October 23, 2014. Photos © Garrett Hubbard of GH Studios. Images licensed to The Halifax Group for internal use in perpetuity.
Brent Williams, The Halifax Group

“This is a segment of the healthcare economy where you can get above-average growth,” explains Brent Williams, a managing director from The Halifax Group who heads the firm’s Dallas office. “Humanization is a long-running trend that seems to have accelerated in the last five to 10 years. This is a huge industry.”

Trends in animal health foods mirror those in human health foods. Pet owners are buying more organic and hormone-free foods these days than ever before. Trends include higher-quality protein sources, probiotics, and gluten-free foods. Think Whole Foods, but for dogs, cats, and other domestic companion pets, as well as for zoo, livestock, and production animals.

“This is most apparent in the mid- to high-end foods, which are primarily sold in the independent retail channel,” says Williams—an area in which Halifax is familiar. The firm is invested in Animal Supply Co., a leading distributor of pet food and supplies to independent companies.

In a recent report FOX News highlighted just how large of a market premium pet food has become. The news piece pointed to the $13.7B Americans spent on high-end pet food in 2014 as evidence of a growing segment. Healthier types of food, such as organic, sell better than mid-range and regular food combined, with predicted growth over the next few years, indicating a potentially strong investment opportunity.Screen Shot 2016-04-05 at 10.14.47 AM

Williams points out that the market is responding to this fast-emerging trend in a number of ways. He says high-end health foods for animals is the fastest-growing portion of the market, and food manufacturers continue to launch new products to meet consumer demand.

To be sure, The Halifax Group does have a larger focus on wellness and overall healthcare for humans, but given the relative dearth of private equity attention paid to animal health, the firm has been able to leverage its experience. Williams says the firm will continue to pursue investments in animal health. “This is an area in which we want to put capital to work for the right opportunities.”

Animal health and wellness has historically been overshadowed by human healthcare for PE investments. That’s about to change.

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