Ruh-roh.
With scores of new pet parents created during the pandemic as households have sought out added companionship, it would appear that one type of pet food is now in short supply. Wet food found in cans may be hard to come by for a few months, explained Chewy CEO Sumit Singh.
"Wet food is a really popular category within pet food and it makes up roughly 20% or 30% of the category. What's happening is a high quality problem to have actually. Three or four manufacturers produce wet canned food in the United States and they were running high utilization levels given the secular trends in pets and the demand arrived, and shot the capacity constraints. So as a result, you have an imbalance and a bit of a shortage," Singh told Yahoo Finance Live.
Singh continued, "The shortage is at the industrywide level, so like isolated out of stocks. We are working very closely with these manufacturers and vendors to be able to course correct. It's going to take a few months before new capacity comes online, but ultimately there should be new capacity released into the marketplace and the situation should go back to normal. We are being hyper vigilant on this right now, and so far we are not seeing material loss of demand and momentum as a result of this."
Strong demand for wet pet food isn't an isolated event, the entire pet food industry is coming off a banner 2020. The gains not only reflect new pet ownership amidst the health crisis, but also pre-existing owners trading up to healthier pet foods, analysts told Yahoo Finance.
Pet food and treat sales surged 9.7% to $42 billion last year, according to a new report from the American Pet Products Association.
"This past year presented a host of challenges that resulted in consumers across the country turning to their pets for comfort and companionship. Interestingly, the product trends we are seeing in the pet care community mirror those of consumers — a desire for a healthier lifestyle, increased focus on fitness, turning to supplements for improved well-being, and technology playing a larger role in everyday life,” said APPA President and CEO Steve King.
As for Chewy, the spotty inventory of wet canned food didn't slow its fourth quarter one single bit.
The online pet products seller said after the close of trading on Thursday that fourth quarter sales surged 51% year-over-year to $2.04 billion. The company posted its first quarterly profit ever — earnings per share of 5 cents topped analyst estimates for a 10 cents a share loss. Singh says Chewy saw strong demand for pet food, pet supplies and new health offerings.
Shares of Chewy skyrocketed 15% on Wednesday's session. Chewy's ticker page was the No. 1 most visited on the Yahoo Finance platform.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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