Surge in Pet Ownership Boosts Lesser-Known Stock Amid Declining Birth Rates

🗝️ Key Points

• In the United States, the trend of having fewer children and more pets is contributing to the success of a relatively obscure company.
• This shift in family dynamics is propelling growth for businesses in the pet industry.Oil-Dri Corporation of America (ODC, Financial), known for its clay-based products.
• Last year, the company's shares doubled, reaching an all-time high in March.

In the United States, the trend of having fewer children and more pets is contributing to the success of a relatively obscure company. This shift in family dynamics is propelling growth for businesses in the pet industry.

Oil-Dri Corporation of America (ODC, Financial), known for its clay-based products including cat litter, has experienced a significant increase in its stock value. Last year, the company’s shares doubled, reaching an all-time high in March. Oil-Dri, headquartered in Chicago, reports that its cat litter sales are growing annually by approximately 3.5% to 4%, outpacing the growth rate of the U.S. population.

Research from IBISWorld and the U.S. Census Bureau reveals that the number of dogs and cats in American households is more than double the number of children under 18. Despite inflation impacting consumer spending and leading to an increase in pets being surrendered to shelters, demand for pet products remains strong. Oil-Dri, Which manufactures Cat’s Pride and Jonny Cat brands, as well as various private label products, benefits from this trend. According to Dan Jaffee, Oil-Dri’s Chairman and CEO, even as consumers look for more affordable options, the company’s private label offerings stand to gain.

NIQ data, previously known as Nielsen, shows nearly a 10% increase in cat litter sales at U.S. retail stores in the year ending March 23, totaling about $2.9 billion. This rise is attributed to both price increases and higher sales volumes.

The number of pets in the U.S. has been steadily climbing since the mid-1990s, with the COVID-19 pandemic further accelerating pet adoptions. Currently, there are approximately 192.3 million cats and dogs in the country, a 5.8% increase from 2019, and significantly more than the 73.5 million children under 18. Jaffee notes that for many Americans, pets are becoming akin to children, Fitting more easily into their lifestyles.

Oil-Dri attributes its success to the use of calcium bentonite clay in its litter products, a material it mines and processes across the United States. The company’s recent financial reports highlight that cat litter sales have contributed to a 4% increase in net sales from the previous year. With a market valuation around $500 million, Oil-Dri’s stock has surged 74% over the past year, outperforming the Russell 2000 Index’s 18% increase in the same timeframe.

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