Shifting Sands in Veterinary Industry Trends

Making sense of the latest industry trends and how they affect the role of a DSR.

Animal health has been one of the best performing U.S. markets over the past decade. Driven by the human-animal bond, the appetite for new products and technology, and premium food and treats, the period of growth seemed limitless. Fueled by the low cost of money, large amounts of capital flowed into the animal health market, even as we worked our way through the pandemic, which started as a serious downturn in the second quarter of 2020 but became a roaring bull for the two years that followed.

We have all become accustomed to a market that performs well, as have investors, even in downturns. The standard refrain is the animal health industry is recession resilient, with growth numbers down or flat when other markets are down significantly. Today, while the economy seems to be performing decently, inflation coupled with future uncertainty has clouded the outlook, with consumers and businesses moving forward cautiously. This has affected our industry, and we see it across all segments of animal health.

Look at the significant changes in some of the industry’s largest companies, with recent layoffs, lower budgets, and potential changes in business models. While we have been fortunate to attract large amounts of capital over the past decade, investors and shareholders expect a decent return on their investment. If they don’t get it, changes are made, something we haven’t dealt with on a large scale in recent years.

Large veterinary practices are feeling it too. As the cost of capital has risen, the acquisition of veterinary practices is down by approximately two-thirds from 2022, and the EBITDA multiples, which peaked at over 20X in some cases, are back down to more normal levels, generally in the single digits. At this point in the cycle, operational excellence has become the primary focus of most large multi-location practices, so they can produce the return on investment expected by their investors. It is no longer practice acquisition, although we may see more large-scale consolidation in the future.

The future outlook for animal health is still very positive. So, what’s the best path forward for DSRs in a rapidly changing environment? Keep learning so you can continue to meet the needs of your customers. Provide them with information on pet owners’ changing preferences, keep them up to date on new products and promotions, suggest products and services that help them operate more efficiently, and always treat their business like it’s your business, doing what’s best for them.

Image credit: istockphoto.com/BRO Vector