The rise of artificial intelligence is disrupting how consumers find pest-control services, adding a new layer of complexity to an already challenging US market for Rentokil Initial, the FTSE 100 hygiene and pest-control group.
As consumers increasingly turn to AI-powered search tools rather than traditional Google searches to find local providers, the importance of brand recognition, customer reviews and local content is rising sharply.
Bob Dold, chief executive of Rose Pest Solutions, told Jefferies on an expert call that changes to Google's algorithm had already disrupted inbound lead generation before AI search arrived to complicate matters further.
Smaller operators with strong local reputations could benefit from the shift, Jefferies said, while larger players like Rentokil have deeper resources to respond but risk losing some of their existing online traffic in the process.
There is a longer-term opportunity too. AI could help consumers diagnose straightforward pest problems themselves, but Dold expects professional treatment to remain the preferred option for complex or recurring infestations, potentially converting DIY experimenters into paying customers over time.
The digital upheaval sits alongside more immediate pressures. Cost-of-living headwinds are prompting some households to defer treatments they consider non-essential, while a subdued housing market is reducing another key source of demand.
Pricing power has softened, with increases above 6% now triggering customer resistance and cancellations. Rises of 3% to 4% remain achievable, but the era of pushing through larger hikes appears to be over for now.
Despite the challenges, Jefferies maintained its buy rating on Rentokil with a 370p price target, implying around 17% upside from the current share price of 315.9p.
The broker flagged integration risks from Rentokil's acquisition of US pest-control giant Terminix and uncertainty around North American margins as the key risks to watch.
