Pet Sector Update – March 2026

Targeted Functional Consumables and Pet Pharmacy Evolution Drives Positive Pet Sector M&A Outlook

The Pet sector has seen an uptick of merger and acquisition (M&A) activity through year-to-date (YTD) 2026, as transactions delayed in 2025 have started to materialize and buyer appetite has experienced a healthy rebound. Deal activity in 2026 has centered around the Food, Services, and Vet & Health segments, signaling strength across key pillars of the Pet market. Resilient pet owner demand for products that bolster the health and longevity of their companions has continued to support expansion in the Pet Consumables market. Meanwhile, regulatory shifts in the Pet Pharmacy landscape have created a more scalable operating environment, supporting expectations for gradual growth, increased deal flow, and new roll up activity across the segment. Capstone anticipates deal momentum will continue to build throughout 2026, driven by healthy M&A appetite across the Services, Vet & Health, and Products segments, as well as ongoing innovations in functional pet food and treats.

As pet humanization drives premiumization, the Pet sector continues to experience a shift from the rapid, pandemic-era deal frenzy to a more strategic, selective approach where quality, profitable assets still command premium valuations.

Tom ElliottManaging Director, Capstone Partners

Shift Towards Functional Food and Treats Supports Pet Sector Growth

Consumer preferences for value-added ingredients with dedicated health benefits have continued to drive growth and innovation in the Pet Food segment despite broader financial strain stemming from inflation. Pet owners have consistently leaned towards non-discretionary spending for their animals, even as consumers have become increasingly price sensitive. This trend has remained even as the mixed macroeconomic backdrop persists into 2026. Only 27% of consumers surveyed plan to spend less on pet food and supplies in the next twelve months, representing robust demand stability compared to other categories such as Apparel, Shoes & Accessories, where 74% plan to cut spending and Home Goods where 68% plan to reduce expenditures, according to a July 2025 L.E.K. Consulting Survey Report.¹ This sentiment—coupled with pet owners’ increased transfer of human health and wellness trends to their pets—has reinforced demand for raw, frozen, and freshly cooked pet food formats, despite premium pricing compared to mass market kibble. Freeze-dried and dehydrated food offerings have also seen meaningful tailwinds stemming from the superior nutritional profiles of raw food formulations and the convenience and shelf stability of kibble.

After several years of sustained growth and expanding mainstream adoption of raw, frozen, and fresh formats, veterinary (vet)-backed food and functional pet treats targeting specific therapeutic solutions have emerged as the latest burgeoning pocket of the market. The functional products assist with a variety of physiological health markers such as joint, digestive, and skin or coat health. Vet-backed offerings with targeted health benefits have gained traction among pet owners prioritizing their companions’ longevity and preventative care programs—sometimes even serving as a proxy for routine vet visits. Of note, vet care prices accelerated 7.4% year-over-year (YOY), outpacing both pet food (+1.4% YOY) and general pet product (+0.2% YOY) prices materially in January 2026, according to the Bureau of Labor Statistics.² January’s price spread growth reflects an ongoing trend whereby vet care costs have grown an average of 6.5% more than pet food prices in each month since October 2023 and 6.6% more than general pet product prices per month in the past three years. The increased financial strain from elevated vet care costs has further buoyed pet owner demand for health-focused diets with targeted physiological benefits. Of note, 77% of dog owners and 83% of cat owners cited pet food as the most important product for the health and wellness of their pet, ranking it above flea and tick prevention medication, heartworm medicine, treats, and vitamins and supplements, according to a September 2025 article from Pet Food Processing.³ Although some middle- and lower-income households have exhibited trade down behavior into more price competitive healthy options, high-income pet owners have remained avid consumers of pricier, vet-backed, functional food and treats.

Many Pet sector operators have begun adjusting product lines, investing in innovation, and shifting brand messaging to address the heightened consumer focus on value and health. Freshpet (Nasdaq:FRPT) launched its Complete Nutrition bag product—a fresh chicken dog food product with an optimized protein and fiber ratio for gut health—with new multipacks and bundles at select retailers in late 2025. The launch was intended to help encourage consumer adoption of the premium product as the choppy operating environment has muted trade up behavior from consumers. Freshpet’s offering provides a less expensive entry point into its Complete Nutrition line. Also of note, Chewy (NYSE:CHWY) launched a new private label line of minimally processed fresh dog food under the name Get Real in September 2025. The product was created by certified pet nutritionists and boasts human-grade recipes made with 10 or fewer ingredients, including select vitamins and supplements, according to a press release.⁴ Chewy cited growing demand for fresh dog food as the motivation behind the product’s development. Chewy’s choice to provide a new private label offering expands lower cost options at retailers compared to national brands. These two product launches emphasize rising pet owner demand for value-added, vet-backed food products at competitive price points. Earlier in the year, Elanco Animal Health (NYSE:ELAN) launched Pet Protect, a comprehensive line of vet-formulated, science-backed supplements in February 2025. The product suite spans joint health, multivitamins, Omega-3, calming, allergy and immune support, and digestive function products. Taken together, these developments from three major Pet sector participants have underscored unrelenting consumer demand for vet-backed, targeted, functional food and treats—a trend expected to continue to evolve with innovation throughout 2026.

Improved Regulatory Clarity Uplifts Pharmacy Segment Growth Outlook

The Pet Pharmacy segment boasts significant runway and will likely see elevated acquisition activity due to the shifting regulatory landscape following the Food and Drug Administration’s (FDA) April 2023 enforcement of Guidance for Industry (GFI) #256. Titled “Compounding Animal Drugs from Bulk Drug Substances,” GFI #256 encourages vets, state-licensed pharmacies, and federal facilities to prioritize using FDA-approved and patient-specific prescription drugs over custom-made (compound) medications from bulk in-house substances. Moreover, the guidance outlines specific conditions under which the FDA will permit both patient-specific and office-stock compounding. Prior to the enforcement of GFI #256, office stock existed in a gray area, where compounding from bulk drug ingredients for nonpatient-specific stocking was technically unapproved and violated the Federal Food, Drug, and Cosmetic (FD&C) Act but enforcement was inconsistent and unclear. “All drugs that are compounded from bulk drug substances are unapproved drugs, and that has always been the case,” Dr. Amber McCoig, Senior Veterinary Medical Officer, US FDA Center for Veterinary Medicine said in a December 2022 Veterinary Practice News article.⁵ “Through this guidance, we will be able to allow enforcement discretion. We think veterinarians need those unapproved drugs, yet the drugs don’t go through the FDA’s premarket approval process. We don’t know their safety and efficacy. We also don’t have post-market information where we get adverse events reports, and we don’t know anything about the manufacturing of these products. So, this is our way of helping to make these drugs available when they are needed, but still trying to have people use the approved products when possible because that’s the safest way.” As part of the guidance, the FDA will maintain lists of bulk drug substances and allow pharmacies to nominate bulk drugs for inclusion, categorizing them as either FDA-approved, under review, or not listed. Compounding pharmacies that adopt the guidance may require vets to comply with these lists, which wouldn’t limit medication availability but could require vets to write patient prescriptions and provide rationale for non-listed substances. While not allowing for easy, unrestricted mass production of compounds, the guidance has offered improved visibility for office stock, providing vet clinics with more predicable revenue mix and increased efficiency.

Notably, for pet pharmacy M&A, this regulatory visibility makes scaling operations—whether through clinic expansion, geographic growth, or increased prescription volume—more feasible. Smaller compounding pharmacies may merge operations to expand quality and compliance system infrastructure, positioning them as more compelling targets for strategic acquirers or private equity (PE) investors. Companies that can stock and distribute FDA-approved bulk substances and compounded formulations will likely experience outsized M&A interest from larger animal health players and vet service groups seeking to acquire distribution or compounding assets to vertically integrate their supply chains, especially for niche treatments. Capstone has identified the Pet Pharmacy space as a key area to monitor as scale has become more readily financeable and GFI #256 has facilitated greater access to institutional capital, platform strategies, and consolidation in the space.

Pet Sector M&A Exhibits Strength in 2026, Delayed 2025 Deals Trickle In

Pet sector deal volume has accelerated YOY in YTD 2026, likely stemming from a carry-over from Q4 2025 deals that failed to close before year-end. However, the strong start to 2026 dealmaking signifies a welcome change from the prior four years of annually contracting M&A volume. The sector has tallied 18 announced or completed transactions in YTD 2026 compared to eight in the prior year period. The Vet & Health (nine deals), Food (six deals), and Services (three deals) segments have comprised the entirety of Pet sector acquisition targets to date while the Products and Retail/Distribution segments have yet to record a transaction. Capstone expects activity will continue to strengthen in the Vet & Health and Services segments after softer dealmaking in 2025 while the Food, Products, and Retail/Distribution segments build off healthy transaction volumes from the prior year.

Strategic buyer activity has climbed to 10 transactions in YTD 2026 compared to just three in YTD 2025, with private strategic acquisitions accounting for all 10 deals to date. While public strategic M&A has slowed through YTD, recent attitudes from Central Garden & Pet (Nasdaq:CENT) and Vimian (OM:VIMIAN)—among others—has pointed to an optimistic 2026 for public dealmaking. “We’re encouraged. We’re seeing more [M&A] activity. I would say we’re involved in several discussions right now. We feel quite good. We’re actually seeing more pet activity, which is quite nice…we’re feeling quite good about things and we think it’s going to continue to pick up. At least that’s what all the indications are right now,” noted Nicholas Lahanas, CEO of Central Garden & Pet, in the company’s Q1 2026 earnings call.⁶ Moreover, Vimian has expressed that M&A pricing has remained stable YOY and pipelines are strong moving into 2026. “We see an increased M&A momentum…we’re also confident about the building [of] our pipeline going into 2026, where we see Vimian being a good and interesting platform for entrepreneurs within animal heath to join…we now have four active verticals looking at interesting bolt-on and platform acquisitions,” mentioned Alireza Tajbakhsh, CEO of Vimian, in its Q4 2025 earnings call.⁷ Public strategic dealmaking will likely accelerate in 2026, as three years of muted acquisition activity has engendered both the financial capacity and operational imperative for these operators to reengage in M&A.

PE buyer activity has ticked higher YOY with three platform deals and five add-on transactions in YTD 2026 compared to a total of five deals in YTD 2025—all of which were add-ons. Financial sponsor activity is expected to further strengthen throughout 2026 and 2027 as limited partner (LP) demand for liquidity has remained a key pressure on fund managers. Financial sponsors formed 66 platforms between 2019 and 2022. These portfolio companies have reached or moved beyond prime harvest years (vested for four or five years), indicating an aging inventory of PE-backed assets in the Pet sector. Notably, sponsors have only exited nine investments through M&A in the 2023-YTD 2026 period, five (55.6%) of which were sponsor-to-sponsor transactions. A more engaged public buyer cohort should uplift PE exits as this monetization avenue was relatively dormant between 2023 and 2025. Capstone anticipates a stronger pipeline of PE-backed assets to come to market in 2026 due to the fundamental structure of fund lifecycles, LP demand for distributions, and an improving exit environment.

Healthy and Vet-Backed Consumables Garner Robust Acquisition Attention

Strategic repositioning in the Pet Food segment has continued to prop up M&A activity among high-quality consumables businesses targeting animal health and wellness. Acquirers across the Pet sector have focused expansion efforts on this pocket of the market to diversify portfolios and gain exposure to higher purchase frequency items and resilient pet health-related tailwinds amid a more muted growth environment. While consumption patterns across different income cohorts have changed, brands balancing premiumization, value, and functional consumables are anticipated to see persistent acquisition attention and strong valuations in 2026. Select transactions underscoring the strength of better-for-you pet food and treats acquisition activity are outlined below.

• Nasta Pet Food Acquires First Mate Pet Food (February 2026, Undisclosed) – Nasta Pet Food acquired First Mate Pet Food in February 2026 (undisclosed). Nasta Pet Food functions as a France-based food group specializing in ultra-premium pet nutrition. As part of the acquisition, Nasta Pet Food has refinanced its operations via a senior unitranche facility of ~$138.8 million provided by H.I.G. WhiteHorse, according to a press release.⁸ Founded in 2016, the company has experienced double-digit growth in its Forza10, Natural Code, and Bab’in brands and boasts capacity to produce 34,000 metric tons of dry food and 2,000 tons of wet food annually. First Mate Pet Foods operates as a Canadian independent premium pet food manufacturer and focuses on limited ingredient diet formulas across dry and wet pet food. The deal represents a key milestone for Nasta Pet Food’s international expansion and strengthens its commercial and manufacturing capabilities in North America. The transaction adds 20,000 metric tons of dry food capacity and triples Nasta Pet Food’s wet food capacity, yielding a combined entity expected to generate ~$235.6 million in annual revenue.
• Agrolimen Acquires Ollie Pet (February 2026, $600 Million) – In February 2026, Spanish consumer goods company, Agrolimen, acquired subscription-based fresh human-grade dog food brand Ollie Pets for an enterprise value exceeding $600 million. U.S.-based Ollie offers personalized formulations accomplished through customer-provided pet information, complete with vet-recommended meal plans, free vet support, and key health marker screenings in its mobile application. Additionally, the company operates a national cold-chain distribution infrastructure and will continue to operate as an independent brand under Agrolimen’s ownership. The acquirer’s ambitions to strengthen its presence in the U.S. market served as a key deal rationale. “Ollie was built on a simple but ambitious belief: that transforming what dogs eat can transform their lives. As pet parents across the U.S. push for higher standards in nutrition, the transaction allows us to scale our mission faster and further than ever before,” noted Nick Stafford, CEO of Ollie, in a press release.⁹

• Vet Custom Label Acquires Myristol Joint-Support Brand (December 2025, Undisclosed) – Vet Custom Label acquired joint-support supplement brand Myristol for an undisclosed sum in December 2025. Vet Custom Label operates as a contract manufacturer of nutraceutical products for vet hospitals and animal health brands with full-service private label solutions. Myristol—founded by Gayle Trotter, DVM—offers joint supplements for dogs, cats, rabbits, and horses. Gayle Trotter will continue to assist in formulation development, quality assurance, and technical advice to continue the brand’s evidence-based approach to joint health in performance and companion animals. The deal bolsters Vet Custom Label’s market presence for equine and companion products and advances the company’s goal of providing vet professionals with high-quality, evidence-based supplements.

Health and wellness trends have continued to shape the Pet sector, driving demand for high-quality, vet-backed consumables despite persistent pressure on consumer spending. Pet owners’ designation of pet expenditures as a non-discretionary category will likely support resilient demand in the sector, though trade down behavior among middle- and lower-income households has shifted spending patterns and focused consumable formulations towards value and efficacy. In 2026 and 2027, the Pet Pharmacy segment may see gradual increases in M&A activity as the regulatory landscape continues to offer new growth opportunities previously constrained by a lack of clear FDA enforcement around office stock. Overall, Capstone expects renewed public company appetite, and an influx of PE exits to support Pet sector dealmaking as the year progresses.

To discuss functional food and treat product evolution, the shifting landscape in the Pet Pharmacy segment, provide an update on your business, or learn about Capstone’s wide range of advisory services and Pet sector knowledge, please contact us.

Andrew Woolston, Associate, was the lead Market Intelligence contributor to this article.

Endnotes

1. E.K Consulting, “U.S. Consumers Say They’re Bearing the Cost of Tariffs, Paying Above-Acceptable Prices and Trading Down to Cope, According to L.E.K. Consulting Survey, https://www.lek.com/press/us-consumers-say-theyre-bearing-cost-tariffs-paying-above-acceptable-prices-and-trading-down, accessed February 25, 2026.

2. U.S. Bureau of Labor Statistics, “Consumer Price Index Supplemental Files,” https://www.bls.gov/cpi/tables/supplemental-files/home.htm, accessed February 23, 2026.

3. Pet Food Processing, “How Health-First Choices Drive Pet Food Market Growth,” https://www.petfoodprocessing.net/articles/19634-how-health-first-choices-drive-pet-food-market-growth, accessed February 25, 2026.

4. Chewy, “Chewy Launches Get Real, A New Healthy Fresh Food for Dogs,” https://investor.chewy.com/news-and-events/news/news-details/2025/Chewy-Launches-Get-Real-A-New-Healthy-Fresh-Food-for-Dogs/default.aspx, accessed February 23, 2026.

5. Veterinary Practice News, “FDA Updates Compounding Guidelines for Vets,” https://www.veterinarypracticenews.com/fda-updates-compounding-guidelines-for-vets/, accessed March 12, 2026.

6. Central Garden & Pet, “Q1 Fiscal 2026 Earnings Conference Call,” https://ir.central.com/news-events/ir-calendar/detail/10733/q1-fiscal-2026-earnings-conference-call, accessed February 23, 2026.

7. Yahoo Finance, “Vimian Group AB (VIMIAN.ST) Q4 FY2025 Earnings Call Transcript,” https://finance.yahoo.com/quote/VIMIAN.ST/earnings/VIMIAN.ST-Q4-2025-earnings_call-376202.html, accessed February 23, 2026.

8. Business Wire, “Nasta Pet Food Announces the Acquisition of FirstMate Pet Foods and Accelerates its Development in North America,” https://www.businesswire.com/news/home/20260217004348/en/Nasta-Pet-Food-Announces-the-Acquisition-of-FirstMate-Pet-Foods-and-Accelerates-Its-Development-in-North-America, accessed February 23, 2026.

9. Pet Food Industry, “Argolimen Acquires Fresh Dog Food Brand Ollie,” https://www.petfoodindustry.com/news-newsletters/pet-food-news/news/15816547/agrolimen-acquires-fresh-dog-food-brand-ollie, accessed February 23, 2026.