Why Pet Circle’s new $75 million investment is a bet on how much Australians love their furry friends

Last week, Australian unicorn Pet Circle announced that it was in the final stages of closing a $75 million funding round — a massive raise by 2023 standards.

CEO Mike Frizell has pointed to cultural changes, as well as a rise in premium pet food as key reasons for the company’s increased growth and success.

Launching as Paws For Life back in 2011, the business has changed significantly since. Besides changing its name to Pet Circle, the company has grown exponentially.

Just three years after opening its e-commerce doors it won SmartCompany‘s Smart50 awards. It went on to secure several funding rounds, including the $125 million Series C that saw it reach unicorn status in 2021.

Pet Circle’s latest raise is particularly significant considering the current economic climate and challenging VC landscape in Australia. The first half of 2023 hasn’t seen as much cash being splashed, which has resulted in businesses like :Different having to bring in administrators and Milkrun closing up shop (before selling the name to Woolworths).

But Pet Circle is faring much better. According to the company, it saw $308.8 million in sales in 2022 and it has significantly increased its product offering to 13,500 SKUs: the largest offering of online pet products in Australia.

Macro trends have created a booming pet industry

Frizell says that this success has been due to the coalescence of several macro trends that have emerged over the past few years.

“The pandemic was the clear driver in the rapid acceleration of pet ownership. However, there has also been a key cultural change, especially amongst Millennials, with more pet parents viewing their pets as family members or as almost as part of themselves,” Frizell said in an email to SmartCompany.

“This humanisation trend has resulted in a shift towards products that are specifically suited to their animal or breed.”

Frizell also pointed to an uptick in demand for premium products in pet food and treats. In a way, this has coincided with the rise in popularity of natural and sustainable food and ingredients from consumers for their own food and beverages.

According to Frizell, Pet Circle’s premium pet food sales increased 24% year-on-year. It has also seen a rise in awareness around breed-specific conditions and how certain food can help with their health concerns.

“Pet parents [are] shifting into science-based and natural food as a way to ensure the best health outlook for their furry family,” Frizell said.

“The rise of natural-based brands with more sustainable manufacturing and transparent ingredient listing, also speaks to the shift in more premium food, as customers become more aware of the impact of their buying choices. Our mission is to continually help educate pet parents, through our channels and our Vet Squad, to create a better life for their furry friends.”

Pet Circle moves into the pet insurance space

The last few years have also seen a rise in pet insurance operators, ranging from traditional insurance firms HCF to retailers like Woolworths and Pet Barn.

Statistics from Finder’s Consumer Sentiment Tracker show that 15% of Australian pet owners currently have pet insurance, with a an additional 10% planning on taking out a policy in the future.

Further statistics show that one in five Australian pet owners have taken a pet to the vet three or more times in the past 12 months.

The rise of Australian pet insurance culminated at the end of June, with ASIC placing 38 interim stop orders across 67 pet insurance products issued by The Hollard Insurance Company Pty Ltd and PetSure Australia.

This affected products being sold by Woolworths, RSPCA, Petbarn, Guide Dogs, Medibank, Bupa and HCF.

“ASIC made the interim orders to protect consumers from acquiring pet insurance products that may not be consistent with their objectives, financial situation or needs,” a statement read.

The interim stop order was originally meant to last for 21 days but was rolled back within 24 hours.

Back in May Pet Circle became the latest Australian company to also offer pet insurance. Frizell said that the company will always aim to be upfront and transparent with its products.

“As part of our quote tool, our Product Disclosure Statement and our Target Market Determination, as well as on the phone with our Pet Care Team, we educate our customers to ensure they are aware that in the event of a claim, in most cases will require the funds up front whilst the claim is being assessed and that in the event of an approved claim we will reimburse costs,” Frizell said.

“We also offer to complete a pre-existing condition assessment upfront during the cooling off period of the purchase to ensure the customer is aware of illnesses that may have occurred prior to the policy which won’t be covered, so there are fewer surprises at claim time.”

Frizell also said that its policy is customisable and simple for customers to understand.

“We are one of the few pet insurance policies on the market that don’t have sneaky sub-limits on payouts on accidents and illness, so pet parents can claim up to their annual limit.”

But Pet Circle isn’t stopping here — it has its eyes on the future and other pet markets it can push into with the fresh cash injection.

“With this investment we will be looking to grow our Pet Circle Insurance offering that we recently launched and consider moving into new verticals that solve other problems for pet parents like pet pharmacy,” Frizell said.