Why Pet Startups Struggle In A Market Dominated By Mars And Chewy

Five years ago, launcing a pet startup felt like riding a wave of opportunity. Today that wave has crashed into a wall of corporate consolidations, locked contracts and shrinking shelf space.

To an outsider, the pet industry looks highly fragmented, with a mix of big-box retailers like Amazon, Chewy, and PetSmart alongside small, independent pet stores, vet clinics and brands.

But below the surface, acquisitions by major players have made it more difficult than ever for startups to gain a foothold.

Consolidation Is Reshaping the Industry

The wave of acquisitions has fundamentally changed the competitive landscape, making it harder for new entrants to scale. “Finding your way in this space is much more complicated than five years ago,” says Brett Furlong, CEO of pet transport company Starwood Pet.

“With so many acquisitions having been made and expecting high growth, there is a rush to find the unicorn in an increasingly crowded space,” Furlong says.

Insights shared at the Kisaco Pet Connect conference by Bruce Truman of BLT Technology and Innovation Group and Candise Goodwin of Outlier Advisors illustrate just how much industry consolidation is reshaping opportunities for innovation and competition.

Veterinary Care: A Tough Market for Innovation

Approximately 30% of veterinary practices are now owned by large corporations or private equity groups, with Banfield Pet Hospital and Mars-owned VCA Pet Hospitals leading the charge.

This consolidation often brings centralized procurement, reducing flexibility and limiting new product adoption. Consumers remain largely unaware of these affiliations, yet they experience the impact in the form of fewer choices and standardization of care.

Adding to the challenge, canine visits to veterinarians declined 3.3% in the year ending August 2024, according to Vetsource.

The hardest-hit sector? Veterinary pharmacies, as pet owners increasingly opt for mass-market retailers for their pet prescriptions. In a shrinking market, growth can only come from capturing competitors’ market share—an expensive and difficult path that often leads to cost-cutting rather than investment in new products.

Big Contracts and Consolidation are Choking Pet Tech and Food Startups

What was once a regional diagnostics and technology business has gone national, with industry giants like Mars, Zoetis, and IDEXX locking in long-term contracts with veterinary groups.

While these deals provide financial incentives to clinics, they create high barriers to entry for newcomers. Even faster, more cost-effective solutions struggle to break through when existing contracts restrict adoption.

The pharmaceutical sector has also experienced consolidation, with Elanco and Zoetis leading acquisitions.

Bob Rubin, CEO and Founder of pet business strategy advisor Breakaway Advisors, says that in the pet food space, “it’s super hard to get in unless you have something differentiated through innovation in the product itself and/or branding.”

Mars and General Mills dominate, making it increasingly difficult for new brands to secure retail shelf space or veterinary recommendations.

Why Innovation Is Failing In A Consolidated Pet Market

NeilsenIQ reports that mass merchants continue to gain market share at the expense of independent pet shops, further squeezing startup opportunities. Truman and Goodwin describe this challenge as a “broken rung of innovation,” where consolidated procurement and long-term exclusivity agreements prevent new entrants from gaining traction.

The cost of pet ownership has also skyrocketed—up 49% since 2020, according to the American Pet Products Association.

Rising prices are making consumers more cost-conscious, further dampening the growth of discretionary spending within the industry.

How Startups Can Still Succeed

Despite these challenges, opportunities remain for those who can carve out a highly specific niche. One of the things we’ve found in our mergers and acquisitions business is that so often the companies we sell have found a white space that was always there but no one else saw.

Sonya Petcavich, Founder and CEO of cat-sitting company Meowtel, says that to succeed, “you have to go especially niche in the pet industry” and be “the best there is within that segment.”

Petcavich says companies are focusing on “specific species and breeds” because owners “are looking for offerings that speak directly to them, rather than to a breed they can’t relate with.” Petcavich says that kind of specificity is an opportunity and just the kind of particularism we see when we sell companies.

Cecelia Carrera, Founder & CEO of wet cat food feeder BistroCat, emphasizes the importance of working with—not against—industry giants. Competing with the big players that have so many resources is not an ideal strategy, she explains.

Carrera says startups should look for “ways to complement their strengths.” BistroCat, for example, designs its cat feeder to serve major brands’ food products, which has helped open doors within the industry.

Rubin of Breakaway Advisors says that even after all the conslidation, “There are holes in the market and cat is a hot category right now” While premiumization in dog food has been happening since 2007, “premiumization of cat food is just starting in the last year or two.” He points out that Tiki Cat just sold to General Mills for over $1 billion so there is still a lot of excitement about that market.

Adaptability Is Key

The pet industry is undergoing a seismic shift, but for founders who understand where the market is moving and how to align themselves strategically, the opportunity is still enormous. The question for founders is: Can you find the white space and get your company in it before someone else does? Niche innovations and leveraging industry partnerships are a path to growth despite the mounting barriers to entry.