Bright Future Forecast for Veterinary Services

Contrary to popular belief, the veterinary business isn’t stagnant according to IBISWorld.

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Originally published in the November 2014 issue of Veterinary Practice News

Who says the veterinary business is stagnant?

Not IBISWorld, an international industry research firm whose new report on U.S. veterinary services projects average revenue growth of 4.5 percent a year through 2019, more than double the expected rate of inflation.

A growing U.S. pet population, heightened interest in pet health insurance and client willingness to pay for specialized treatments are chief reasons for optimism despite a slump in how often individual animals show up at veterinary clinics.

Profits, as a share of revenue, won’t rise much above 12 percent in the veterinary services sector, IBISWorld reported, as consumers tighten their embrace of online and brick-and-mortar stores for ancillary products such as pet food and supplies.

On the inside, veterinary professionals can expect continued consolidation as corporate and private owners of multiple practices gobble up independent clinics and cut redundant administrative and marketing costs.

All in all, IBISWorld stated in its September report, the profession is, and will stay, healthy.

“The veterinary services industry remained resilient over the past five years largely due to many pet owners regarding their pet expenditures as vital, thereby boosting revenue,” the analysts noted.

Veterinary services, as defined by IBISWorld, comprise routine exams, surgical and nonsurgical procedures, laboratory services, and pet products sold in-clinic. Companies that provide veterinary services, such as VCA Antech Inc. and Idexx Laboratories Inc., were counted, while manufacturers of animal pharmaceuticals and medical supplies were excluded.

Total revenue in the veterinary services industry should total $33.9 billion this year and climb to $42.2 billion in 2019, according to IBISWorld.

Among other findings:

Veterinary Visits

The industry coalition Partners for Healthy Pets discovered in its 2014 update to the Bayer Veterinary Care Usage Study that pet owners are waiting longer to stop by a clinic. Just 84 percent of dog owners and 64 percent of cat owners visited in the previous 12 months.

IBISWorld agreed with the consensus that pet owners use the Internet more often as a diagnostic tool, and the research firm theorized that changes in vaccination frequency have made the need for visits less urgent.

“Overall, many small animal practitioners have moved to a three-year vaccination protocol, causing many cat and dog owners to refrain from veterinarian visits if their pets did not need to be vaccinated that year,” the report asserted.

Market Breakdown

Routine exams and nonsurgical procedures should each capture 25 percent shares of the $33.9 billion in revenue in 2014. The other half of the veterinary services pie will be split among pet food and product sales (20 percent), surgical procedures (15 percent) and laboratory services (15 percent).

Veterinarians can plan for an annual bump in surgical revenue, IBISWorld stated.

“Over the next five years, thanks to pets living longer, coupled with the advent of new medical technologies that enable veterinarians to address more pet ailments, this trend will spur pet owner demand for surgical procedures,” the report stated. “In particular, joint replacements, skin and bone grafts, and ligament repairs, among other surgical procedures, have become increasingly common.”

Veterinarians will continue to be squeezed on pet products, IBISWorld noted, because of Internet sellers and competition from pet stores, mass-market retailers and supermarkets.

A separate IBISWorld report, “Pet Stores in the U.S.,” declared that some specialty pet stores will add services such as grooming and boarding to stay competitive.

The report offered merchandising advice that pet retailers and veterinary clinics can use to spur products sales. These include the need for “eye-catching promotions and displays,” an experienced work force, and popular products offered at “different levels of price and quality.”

“Offering a wider variety of products will attract a larger customer base,” the research firm advised.

Sellers should be mindful of rising demand for all-natural or organic pet food and treats as well as high-end services.

“Sales of premium pet food, supplies and pet services … have driven up profitability [in the pet store sector] because they typically have higher markups,” IBISWorld stated.

Mergers Aplenty

The number of establishments operating in the veterinary services industry—43,367 in 2014— is expected to remain stable over the next five years, but the number of owners is on a slow but steady decline because of mergers.

“The fragmented industry is consolidating due to the purchasing, marketing and administrative cost advantages that can be realized by a large, multiple location, multidoctor veterinary provider,” IBISWorld reported.

“Additionally, multidoctor veterinary providers appeal to veterinarians due to the benefits and flexible work schedule that is typically not available to sole practitioners or single-site providers.”

The number of enterprises, or owners, is predicted to drop from 38,087 in 2014 to 37,169 in 2019 as consolidation intensifies.

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