Americans’ fondness for their pets translates into a lucrative industry. In 2024, U.S. households collectively shelled out nearly $40 billion solely on veterinary care and pet medications, positioning it as the second-largest segment of pet expenditures following food and treats. Projections indicate that the overall pet market is set to hit $173 billion by 2027, with veterinary care expected to surge as many pets adopted during the pandemic era enter their senior years, necessitating increased medical attention.
A team at Bank of America Research, headed by senior analyst Curtis Nagle, delved into the strategies of the online retailer and discerned a transformation into a different breed of company. Chewy, which evolved from the brainchild of GameStop CEO Ryan Cohen, has transcended its origins as an online pet food vendor to become a publicly traded entity with a market capitalization of $16 billion and a customer base exceeding 20 million. Alongside its growth, Chewy has emerged as the largest online pet pharmacy in the U.S., amassing $1.1 billion in annual sales and a 7% market share. Despite this, Nagle’s team estimates that only a fraction of Chewy’s patrons utilize these pharmacy services, suggesting untapped potential. Should the penetration rate climb to 40%, Chewy could unlock an extra $750 million in sales, particularly as pets age and necessitate more medications.
The ASPCA approximates that Americans welcomed 23 million pets into their homes during the pandemic, and BofA highlights that these animals are now entering middle age, propelling the demand for frequent vet consultations, medications, and specialized care. The bank anticipates the pet health sector to expand by 4% annually, with a probable acceleration in 2026 and 2027 as the “COVID cohort” of pets matures.
Chewy’s latest endeavor, Chewy Vet Care (CVC), which encompasses veterinary clinics, has embarked on a promising trajectory. The initial 11 clinics have garnered an average rating of 4.8 out of 5 stars from over 1,000 Google reviews, with customers lauding the modern facilities, transparent pricing, and seamless integration with Chewy’s online ecosystem. Early data conveyed to BofA Research by management is described as “promising,” with the CVCs surpassing expectations in customer engagement and acquisition.
Chewy has the potential to rapidly expand its vet hospitals, with BofA foreseeing significant growth potential. By allocating 15% of its capital expenditure to vet clinics, BofA analysts predict that the CVCs could generate $335 million in revenue by 2030, boasting 20% EBITDA margins, which would augment current Wall Street estimates by 4%.
With 17 fulfillment centers nationwide, Chewy asserts its ability to deliver to 80% of the population overnight and close to 100% within two days. Despite having fewer pharmacy fulfillment centers, Chewy maintains a broad national presence
Key players in the veterinary health industry include Mars Veterinary Health, National Veterinary Associates, SVP & MVP, Thrive Pet Healthcare, and Petco, with a combined total of over 2,000 locations in the U.S. to approximately 300. This indicates that Chewy is only beginning to make its mark. By expanding into vet care and pharmacy services, Chewy is strategically positioning itself to capitalize on the growing pet health market. As Chewy grows its clinics and increases its pharmacy offerings, projections suggest it could generate over $1 billion in additional revenue. Chewy declined to provide a comment for this feature. This article leveraged generative AI to assist in the initial draft, with subsequent verification of information by an editor before publication. The original version of this story appeared on Fortune.com.
