Executive Summary
The pet, vet and animal health ecosystem remains structurally resilient in 2026, supported by strong underlying pet ownership and continued prioritization of pet health and wellness spending. However, the industry has entered a more selective growth phase following the pandemic-era surge.
Across segments, demand remains durable but is increasingly shaped by affordability constraints, rising veterinary costs, and consumer value sensitivity. This has shifted growth and investment toward health-oriented products, technology-enabled services, and scalable platforms.
M&A activity, which softened through 2023–2024, has begun to rebound in 2026, particularly in animal health, functional consumables, and veterinary services — though buyers remain more selective and disciplined than during the pandemic-era peak.
1. Pet Consumer Products
The U.S. pet, vet and animal health industry totaled approximately $158 billion in 2025 (projected $165 billion in 2026). Within this, pet-related consumer products — defined here to include food/treats, supplies, OTC medicines, and durables, but excluding vet care and other services — accounted for approximately $103 billion, comprised of: food and treats at $68.3 billion; supplies and OTC medicines at $34.4 billion; and durables (beds, bowls, leashes, toys, accessories) at approximately $8.4 billion, with some definitional overlap across categories. The overall industry grew approximately 3.7% in 2025, with food/treats growing at approximately 3% while durables remained flat to slightly negative, continuing a post-COVID reversion trend. The industry is projected to grow approximately 4.4% in 2026, with roughly half of that attributable to inflation.
The U.S. pet population provides a large and stable demand base, with over 71 million households owning dogs (53% of U.S. households, up from 51% in 2024) and 53 million owning cats (39% of U.S. households, up 5% year-over-year). In total, approximately 95 million U.S. households — roughly 71% — owned a pet as of 2025. The U.S. represents the world’s largest single pet market; globally, the total market across food, products, and select services categories is approximately $320–350 billion, or roughly 2x the U.S. market.
Growth in 2026 is increasingly concentrated in premium and functional consumables. Cat ownership and spending continue to outpace dogs on a growth rate basis — in part because cats are less expensive to maintain and, in a return-to-work environment, are more independent and require less daily attention.
Pet owners continue to prioritize health and longevity, driving demand for fresh, raw, and functional food and treat formats. Supplement growth is a standout, particularly in cats (+27.9% to $53.1 million in 2025) and dogs (+9.2% to $633 million) — both reflecting the broader pet humanization trend toward preventative and functional nutrition, though the cat figure should be understood in the context of a still-developing category off a smaller base.
Despite broader economic pressures, pet spending remains relatively resilient but increasingly value-sensitive. Approximately 22% of pet owners reported spending less on their pets in 2025, a 10% increase from 2024, leading to a bifurcation between premiumization at the high end — where numerous previously high-flying brands have seen growth and profitability compress — and value-oriented innovation.
Durable products such as leashes, bowls, and accessories have endured several challenging “reversion to the mean” years following a strong COVID-induced run-up. They remain stable but are less central to current growth and M&A activity compared to consumables, partly because many of the larger, active strategic acquirers of prior years are largely on the sidelines.
M&A activity in pet consumer products softened considerably from 2022 through 2024 but has begun to recover in 2026 YTD, with deal activity centered on food, services, and health segments. Strategic buyers and private equity continue to prioritize scalable, health-focused brands with defensible recurring revenue. Notable late 2025-2026 transactions include the acquisition of Ollie — a fresh, human-grade dog food subscription brand — by Spanish conglomerate Agrolimen (announced February 6, 2026; reported valuation $600M+ per industry press), and Brutus Bone Broth.
2. Veterinary Services
The U.S. veterinary services industry generated in excess of $40.0 billion in revenue in 2026, comprising over 34,000 practices per U.S. Census Bureau data — where “practices” reflects unique clinic entities — or approximately 57,900 veterinary service establishments under a broader definition that includes multi-location groups, mobile units, urgent care, and specialty sites. Average practice revenue varies significantly by practice type, geography, and ownership structure.
While long-term demand drivers remain strong — including pet humanization and increasing medical sophistication — near-term growth dynamics are mixed. Historically, the industry grew at approximately 5% annually; that rate has moderated materially. In 2025, veterinary practices saw revenue increases of approximately 2.5% even as client visit volumes declined approximately 3%, continuing a multi-year trend in which price increases — not volume — have been the primary driver of revenue growth.
Veterinary care costs accelerated 7.4% year-over-year as of January 2026, materially outpacing pet food inflation (+1.4%) and general pet product prices (+0.2%). This affordability gap is leading some pet owners to delay or forgo care, particularly for perceived discretionary wellness visits — a dynamic pressuring visit volumes across the industry.
This dynamic has accelerated the emergence of alternative care models, including urgent care clinics and telemedicine, which offer more accessible and cost-effective options. It has also increased interest in veterinary staffing and workforce solutions that extend care delivery beyond the traditional DVM-centric model — a meaningful investment theme given the structural undersupply of veterinarians.
On the workforce side, the supply of veterinarians remains a structural constraint, though estimates of the shortfall vary widely depending on methodology. Studies using demand-based models project a net shortage of approximately 15,000–24,000 veterinarians by 2030 even after accounting for new graduates, with total additional demand estimated by some analyses at 41,000–55,000. Irrespective of the exact shortfall, the profession’s unemployment rate of approximately 0.5% and persistent difficulty attracting and retaining vets, particularly in rural and underserved markets, make workforce constraints a durable structural theme regardless of which projection prevails.
M&A activity remains active but considerably more selective compared to the pandemic-era peak. Approximately 1,550 independent practice acquisitions occurred in 2021 at the height of consolidation activity; that declined approximately 77% to roughly 350 transactions in 2024. Activity has since recovered modestly, with deal structures becoming more nuanced as buyers prioritize high-quality assets with strong operational metrics, regional density, demonstrated ability to attract and retain veterinarians, and exposure to growth subsegments such as specialty care and urgent care.
Chewy’s recently announced acquisition of Modern Animal highlights many of the themes discussed here.
3. Animal Health
The animal health segment — including pharmaceuticals, pet pharmacy, diagnostics, and supplements — is currently one of the most attractive areas of the pet ecosystem. The global animal health market was valued at approximately $68.7 billion in 2025 and is projected to reach $156 billion by 2033, growing at an 11% CAGR. Within this, the companion animal pharmaceuticals market — the most relevant subset for the U.S. pet industry — was approximately $16.2 billion in 2025, growing at a 5.9% CAGR.
Supplements remain a particularly hot area within animal health. From a definitional perspective they are oftentimes categorized under consumer pet products given many are sold OTC, through similar channels and don’t require vet involvement. That said, to the extent they are vet formulated, sold through clinics or prescription adjacent and are targeting specific therapeutics areas (joint, GI etc) and supported by strong, science based evidence, they would more appropriately fall under animal health.
Growth across the segment is driven by increasing demand for preventative care, targeted treatments, and vet-backed health solutions. Rising veterinary costs are encouraging pet owners to invest more in preventative and at-home health products, supporting demand for supplements and therapeutic diets as a lower-cost complement or alternative to clinic-based care.
Regulatory developments such as FDC GFI #256, while imposing more regulatory burden on pet pharmacies, will also likely spur more consolidation driven M&A activity.
4. Other Areas
Several adjacent areas represent a hybridization of the above three sectors and are attracting increasing investor interest:
- Pet services such as doggie daycare and boarding, which are increasingly the focus of PE consolidation platforms;
- Mobile and tech-enabled veterinary services, which can extend care delivery without requiring a DVM on-site for every interaction — a meaningful theme given the structural vet shortage discussed above; and
- Pet insurance, estimated at approximately $4.7 billion in gross written premiums (GWP) in the U.S. in 2024, growing at approximately 13–19% annually, representing approximately 3.9% penetration of the total U.S. pet population (5.5% for dogs; 2.0% for cats), covering approximately 6.4 million insured pets at year-end 2024. The segment remains somewhat perennially “about to close the gap” between the U.S. and leading Western European markets, where the U.K. stands at approximately 25–33% of pets insured (per the PDSA and Association of British Insurers data) and Sweden approaches approximately 50% — suggesting meaningful structural runway as U.S. awareness and product sophistication continue to develop.
Conclusion
In summary, the pet industry in 2026 is characterized by resilient demand but increasingly selective growth. The headline $158 billion U.S. market (2025 actuals, projected $165 billion in 2026) masks meaningful divergence across sub-segments: animal health and functional consumables are the strongest-performing areas, benefiting from structural demand tailwinds and favorable investment dynamics; veterinary services remain fundamentally attractive but face near-term headwinds related to affordability, access, and visit volume softness; and pet products continue to bifurcate between premium health-oriented consumables and a challenged durables category.
Sources: APPA, IBISWorld, AVMA, BLS, Grand View Research, Mordor Intelligence, NAPHIA, PitchBook, and company/industry publications.
By: Craig Lawson
Managing Director
Craig Lawson, MD, leads HPC’s pet/vet/animal health practice. Mr. Lawson has active relationships with senior level management at the most active strategic acquirers across the globe. He maintains regular contact with financial buyers who have existing investments in pet/vet/animal health companies and or who have a high degree of interest in making new investments in the space.
Experience:
- 25+ years of investment banking experience
- Former founder & managing director of investment bank MHT Partners (acquired by Cowen in 2020)
- Advised on 75+ M&A transactions and numerous capital raises
- Previously also with Harris Williams, BAML, Bear Stearns, and Fidelity Investments
Education:
- B.A. in Economics and History from Tufts University
- M.B.A., (Wharton)
- C.F.A. designation
