Animal Health in a Slowing World: Why the Sector Holds Its Ground

The world economy is still growing, but more slowly. The IMF expects global GDP growth of around 3% in 2025, with a similar pace in 2026. Inflation is cooling, though not yet back to pre-pandemic norms, and interest rates are starting to edge down rather than up.

Food prices are mixed: the FAO Food Price Index rose in July 2025, led by increases in meat and vegetable oils, while cereal prices eased. Labour markets remain relatively strong, though unemployment has crept up slightly across developed economies. Trade tensions and tariffs are still key risks.

This environment is challenging for many consumer industries, but animal health has historically been more resilient.

Why animal health copes with a downturn better

1. People rarely cut back on essential pet care

Pet ownership is “sticky” spending. In the US, pet industry sales reached $152 billion in 2024 and are projected at $157 billion in 2025. Surveys show that even in tougher times, owners prioritise food, preventive care, and treatment for their pets.

2. Core services are inelastic

Urgent veterinary care, parasite control, and chronic medications are relatively unaffected by price rises. While elective procedures can be postponed, day-to-day healthcare is harder to cut. In the 2008–09 recession, many practices saw flat rather than falling revenues.

3. Insurance and payment plans cushion the blow

Pet insurance is growing quickly, with UK penetration estimated at around one in four pets, helping owners spread costs and maintain treatment uptake. Many clinics also offer wellness plans or instalment payments.

4. Farm-animal health is tied to productivity

In emerging markets, a slowdown can reduce demand for meat, but in developed markets producers still invest in vaccines, parasite control, and reproductive health to protect yields and profitability.

How the sector adjusts

1. Focus on essentials

Manufacturers and clinics prioritise products and services with clear outcomes. Preventatives, vaccines, and chronic care lead, while elective add-ons slow. For example, Zoetis and Elanco both reported strong organic growth in 2025, driven mainly by core pet health products.

2. Flexible pricing and product tiers

Companies protect margins through measured price increases and offering different price points, from premium brands to generics or multi-pack formats.

3. Financing and subscription models

Wellness plans, monthly subscriptions, and third-party credit help keep treatment acceptance high, even for higher-value procedures.

4. Managing supply chain volatility

Farm-animal health spend remains steady when feed and energy costs are volatile, because preventive health protects output.

5. Navigating regulation and consolidation

In the UK, the Competition and Markets Authority is investigating veterinary pricing and transparency, which may influence business models but won’t erase demand.

The limits of resilience

Animal health is resistant, not recession-proof. Practices can feel pressure when prices outpace wages, and farm-animal markets in developing countries are sensitive to income drops. Still, the sector consistently performs better than most consumer categories during downturns.

Outlook

With modest growth and easing inflation likely into 2026, the base case is for animal health to outperform the broader economy again. Pet health will lead the way, backed by high owner commitment and rising insurance coverage. Farm-animal spending will track producer margins but remain anchored in productivity needs.

While the macro climate is far from ideal, animal health’s unique blend of necessity, emotional connection, and measurable ROI gives it a level of stability that many other sectors can only envy.