Manufacturing in the Pet Industry: Challenges and Opportunities in a Shifting Trade Climate

Despite that volatility, there are real opportunities for pet product manufacturers, suppliers, and brand owners who approach this moment with a long-term, data-driven lens.

Reshoring Isn't a Silver Bullet - Capacity and Labor Are Real Constraints

In our recent Trade Talks discussion, APPA's trade experts emphasized a hard reality: simply 'bringing manufacturing back to the U.S.' is not as straightforward as it sounds. For many pet categories, the barriers are structural, not just financial.
From the manufacturing side, Rebecca highlighted that it is highly category-specific:
 

• Heavy industrial policies and incentives may support sectors like automotive, pharma, or semiconductors, but plush toys, soft goods, and many pet accessories do not neatly fit into those buckets.
   
  
  

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• Even with higher landed costs on imported goods, the U.S. often lacks the specialized facilities and skilled labor needed to produce certain pet SKUs at scale.
   

As a result, most APPA members are not executing a clean 'all-in' reshoring move. Instead, they are:
 

• Working with existing overseas partners to shift portions of production to alternative countries where it's feasible.
   
• Keeping some volume in current locations and absorbing higher costs while watching how policy evolves.
   
• Moving cautiously, recognizing that building a new factory or onboarding a new country is a multi-year process, not a quick flip of a switch.
   

For pet companies, the operational takeaway is clear: manufacturing strategy must balance tariff exposure with the realities of global capacity, lead times, and labor availability. A diversified, multi-country sourcing model is often more realistic than a complete reshoring play.

Demand Tailwinds: Strong Pet Ownership and More Complex, Premium Expectations

The good news: underlying demand for pet products remains a major tailwind.
 

APPA's 2025 State of the Industry Report shows that Gen Z and younger Millennial pet owners are driving new pet acquisition, even while acknowledging economic pressure. Many say the emotional and lifestyle benefits of pets outweigh financial concerns, and Gen Z was the most likely generation to bring home a new pet.
 

That has several implications for manufacturers and suppliers:
 

• Product bundling and upsizing: New pet parents and multi-pet households create demand for value packs, subscription offerings, and larger formats for food, litter, and consumables.
   
  
  
• Customization and niche SKUs: Multi-pet homes and 'pet as family' mindsets support more specialized products like modular beds, enrichment toys for different play styles, and solutions tailored to specific lifestyles or pet personalities.
   
• Higher SKU complexity for suppliers and distributors: To serve these expectations, supply chains must handle more SKUs, smaller batch runs, and nuanced demand forecasting by generation, household type, and channel.
   

On top of that, trends like pet-friendly workplaces are opening new commercial channels, office-ready pet products, B2B bundles, and corporate gifting and wellness programs that treat pets as part of the employee experience.
 

Taken together, this means that manufacturing decisions are not being made in a vacuum of cost alone. They must also support:
 

• Higher product differentiation,
• Faster innovation cycles, and
• Omnichannel distribution that spans retail, e-commerce, and emerging B2B use cases.

New Policy 'Carrots': Expensing Rules Can Help Fund Modern Capacity

While trade policy has introduced complexity, tax policy is simultaneously creating new incentives to invest in U.S.- based production.
 

According to TaxFoundation.org Under the One Big Beautiful Bill Act (OBBBA) and related tax changes, manufacturers can now take advantage of significantly more generous expensing rules:
 

• Full and immediate expensing for eligible manufacturing structures and production facilities. This a shift from the traditional 39-year depreciation schedule for industrial buildings.
   
• Extended and restored 100% bonus depreciation for machinery and equipment used in qualified production activities.
   

For pet companies that do have the capacity and capital to invest domestically, whether in manufacturing their own products, building co-packing infrastructure, or partnering with U.S. converters and contract manufacturers, these rules can:
 

1. Lower the effective cost of building or upgrading facilities
2. Improve near-term cash flow by front-loading deductions
3. Make long-term investments in automation, quality, and agility more financially viable.
    

However, these incentives are time-bound and complex. They require careful planning around:
 

• When construction begins and when assets are placed in service
• Whether the facility qualifies as a 'production' structure rather than an office or administrative site
  
• Coordination with broader corporate tax, financing, and capital allocation strategies.
   

For APPA members, this is a moment to put tax, finance, operations, and supply-chain leaders in the same room and ask:
'If we ever wanted to build or expand capacity closer to home, is now the optimal window to do it?'

A Practical Playbook for APPA Members

In this environment, the most resilient pet companies are:
 

Running scenario-based sourcing plans
Modeling different combinations of countries, partners, and product mixes rather than betting on a single 'all-in' location.
 

Aligning manufacturing with demand trends
Designing capacity and capabilities around Gen Z, multi-pet households, and workplace pet trends not just historical volume patterns.
 

Leveraging incentives, not chasing them
Treating tax and policy incentives (like expensing) as accelerators of sound business strategy, not as the sole driver of plant decisions.

Building flexibility into contracts and product design
Shorter contract terms, modular product architectures, and more interchangeable materials and packaging can all help companies pivot as conditions change.
 

Manufacturing in today's pet industry is not about finding a single 'right' answer. It is about designing a resilient system, one that can adapt to shifting trade rules, leverage new investment incentives, and still deliver the innovation, value, and quality today's pet families expect.

 

Source: APPA