2015 Top 100 U.S. Retailers; $+4.9% 134,800 Stores with Pet Products…plus the internet!

The U.S. Retail market reached $5.3 Trillion in 2015 from all sources – Supercenters, Restaurants, Online retailers, even Pet Stores. This year’s increase of $118B was less than 2014’s $196B and was driven down by a 19% drop in total Gas Station revenue. (Data courtesy of the Census Bureau’s Monthly Retail Trade report)

In this post we will try to narrow the focus to the top 100 Retailers in the U.S. Market – the headliners. These 100 companies account for 38% of the total retail market! How did they perform in 2015 vs 2014…and of course, which ones sell Pet Products? Remember, according to the 2012 Economic Census, over 2/3 of the Pet Products in the U.S. are sold outside of Pet Stores. The Top 100 group accounts for a huge share of these sales. This report is crammed with data, but we’ll try to break it into smaller pieces with regular observations. All of the base data on the Top 100 comes from Kantar Research and was published by the National Retail Federation (NRF).

Let’s start with an overview:

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Observations

  • The Total Market grew $118.5B in 2014 – Up 2.3%
    • The Top 100 grew $94.6B and the growth rate of 4.9% far exceeded the overall market.
    • The Top 100 accounts for 37.6% of the total market.
  • Let’s pare it down a bit. If you take out Auto, Restaurant and Gas Station sales, the “target” retail market for our industry is $3.2 Trillion. – about 60% of the total market.
    • Removing the Restaurant & Gas Station sales from the Top 100 numbers – at $1.84T they are still 34.5% of the Total U.S. Market and…
    • 57.8% of the $3.2 Trillion target market.

The Top 100 is obviously critically important, and as expected it’s outperforming the overall market. We need to remember that this “Top 100 club” is in fact a contest. Every year companies drop out and new ones replace them. This can be the result of mergers, acquisitions or simply slumping sales. Changes of note in 2015:

  • 6 companies on the 2014 list were “combined” into 3 in 2015 – Albertsons + Safeway = Albertsons; Dollar Tree acquired Family Dollar Stores; Aldi & Trader Joe’s are now combined under Aldi.
  • We also lost 2 old friends from the list – Dell sales continued to decline, but A&P shut down after 156 years.
  • 3 Major Gas Stations made the list. Fuel sales are only counted in their numbers when they are less than 50% of Total Revenue. Obviously, the gas price drop had a far reaching impact.

Now let’s start “drilling down” on the Top 100. Here’s a summary of Regular and Online Retailers versus the bundled total for Restaurants & Gas Stations

Top100-15-2

Observations

  • Biggest note may be that the Regular Retailers have 58% of the stores but account for 92% of the business.
  • 90% of the $ growth is coming from Regular & Online Retailers, but their percentage growth is lagging behind restaurants at 6.4% (a big turnaround from 2014 when restaurants were only up 2%)
    • +4.8% increase in $ales – $84.7B (Last year it was +$81.5B)
    • +2.8% in stores – Slowed markedly from 2014 (+6.9%) but better performance in store.

Now that we have an overview of the Top 100, let’s take a look at the “targeted” retailer segment. There are 82 total companies. How many are buying and selling Pet Products? This will reinforce how Pets have become an integral part of the American Household and how fierce that the competition for the Pet Parents’ $ has become.

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  • Of 82 possible companies, 67 are selling some mixture of Pet Products in stores and/or online.
    • Their Total Retail Sales of all products is $1.7 Trillion which is…
      • 93% of the total business for Regular & Online Retailers in the Top 100
      • 32% of the Entire $5.3 Trillion U.S. Retail market – from 67 Companies who are in tune with America and all sell pet products – amazing!
    • 134,802 Stores (75%) are stocking and selling pet products on the retail shelf – 6300 more than 2014
    • Online only is another Story –
      • Amazon & QVC account for $13.9B of the $14.7B “online only” increase.
      • Many Traditional Retailers who only sell Pet Products online are closing stores and losing ground in the total Retail “race”. Perhaps, they are slightly “out of tune” with America.

The Business for retailers selling pet products remains strong. We also should remember that these store count totals are only for the Top 100 and include only 1 Pet Chain and 1 Farm Store Chain, as they were the only companies to make the list. Pet Products are sold in thousands of other retail outlets – 20,000 more grocery stores, 10,000 more pet stores, 16,000 Vet Clinics plus…. A reasonable estimate would be 200,000 outlets selling pet products.

In the next segment we will look at the detailed list of the top 100. We’ll sort it by retail channel with subtotals in key columns. We’ll then break it into smaller sections for comments. At the end of the post there will be a download link for an Excel file with the data. This will allow you to sort it as you choose…by rank, alpha, pet/nonpet…it’s your call.

I have not done a lot of highlighting however:

  • Pet Columns ’15 & ‘14 – a “1” with an orange highlight indicates that products are only sold online
  • Rank Columns – Change in rank from 2014: (Remember 6 from 2014’s list were consolidated into 3 in 2015)
    • Up 5-6 spots = Lt Blue; Up 7 or more = Dk Green
    • Down 5-6 Spots = Yellow; Down 7 or more = Dk Pink

Let’s get started. Remember online sales are included in the sales of all companies.

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Observations

  • Drug is still strong. However, acquisitions are a big factor. Awaiting approval is a Walgreens and Rite Aid merger, which would create a $100B company and move Walgreens to #3 on the Top 100 list.
  • The Traditional Department store segment overall continues its decline. There are a few exceptions in some “high end” stores. However for most, the trend is down.
    • Sears (includes Kmart) and Macy’s are the 2 big “red flags” and more store closings are planned.
    • Although many carry a few pet items, generally online, they have never embraced Pet – strange.
  • Convenience is still a key “driver” for Americans so convenience stores are doing well. However, much of the growth in the Top 100 is coming from acquisitions.
  • Military Commissary sales are falling despite additional locations.
  • The Auto Parts Stores are a mixed bag, with all chains opening new stores. Only Advance is underperforming in sales. With the ever increasing focus on the Pet Travel product category, it is somewhat surprising that everyone’s offering of Pet items is so sparse – A possible opportunity?
  • The Apparel retailers are showing surprising strength, especially from value outlets. The three chains that carry pet products are contributing more than half of both the total sales…and the total increase.

Top100-15-5

Observations

  • Headline: Amazon sales are only up 94.7% in 3 years!
    • The Phone People – especially Verizon and Apple, continue their extraordinary growth.
    • QVC also made a big move – jumping up 15 places to #55 on the list.
    • Barnes & Noble and Toys R Us continue to decline. Barnes & Noble may drop off the list in 2016.
  • Signet Jewelry got on the list in 2014 by acquiring Zales. This year…sales are down 5.5%
  • Mass Merchants’ growth percentage is subpar, but all companies are up and a $14.8B increase is impressive.
    • Wal-Mart is the “big dog” and their 2.8% increase in 2015 is slightly above recent years. Sales in SuperCenters continue to grow but “regular” Discount Department Stores are losing market share. This impacts the overall business in both Wal-Mart and Target.
    • Target sales are up – barely. Their annual growth rate since 2012 is only 0.6%.
    • Clubs continue to have the highest growth rate. Both Costco and BJ’s are up 17% since 2012.
    • This is a huge Market segment for Pet Products and we’re seeing growth from all the “players”.
  • Home Improvement/Hardware is showing continued strong growth – especially Home Depot and Lowe’s.
  • Home Goods sales growth slowed in 2015 but all companies had increases.
  • Tractor Supply’s growth slowed in 2015, +7%, down from +12.7% in 2014. Annual growth rate is still 10.1%.

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Observations

  • Supermarkets – $376B in Sales; 18 Companies; Over 16,000 stores; All Selling Pet Products. This is another important group for the Pet Industry. With the highest frequency of consumer visits of any channel, the competition is fierce. We have seen a series of mergers and acquisitions as companies try to strengthen themselves for the daily battle. We saw A & P cease operations after 156 years in business. From 1915 to 1965 they were the largest retailer of any kind in the United States. In a changing environment, you must adapt to survive.
    • Although the total increase is below average, all but one are showing increases. Last year, 5 were down.
    • Mergers and the loss of A&P dropped the companies from 21 to 18, but store count is only down 280.
  • Small Format Value Stores: Overall this segment does more business than Traditional Department Stores.
    • Dollar Tree’s acquisition of Family Dollar Stores seems to be working.
    • Dollar General is performing best, up 7.7% with an average annual increase rate of 8.3% since 2012.
    • Only Big Lots performance is subpar. However, they are up slightly after 2 years of declining numbers.
    • This segment is growing in numbers and popularity. They are committed to Pet Products and their focus on value appeals to today’s ever more price conscious consumers.
  • PetSmart – Although PetSmart’s growth is only 3.2%, it is better than last year’s 2.4%
  • Office Supply Stores – Mergers, store closings – a lot of turmoil. The increase is a bit of a surprise.
  • Sporting Goods – Some turmoil in this category as Sports Authority faded in 2015. (Closing in 2016) However:
    • Dick’s continued to expand both in store count and sales – up 6.5%
    • Academy is a newcomer to the Top 100 list, entering strongly at #88, after a 16.9% sales increase.

Restaurants & Gas Stations and the Grand Total

Top100-15-7

Restaurant & Gas Station Observations

Although restaurants & gas stations aren’t relevant in terms of Pet Products Sales, they are relevant in our daily lives. Most of these restaurants are fast food…plus coffee shops. Also, remember that when fuel sales at Gas Stations are more than 50% of the total, they are not counted in qualifying for a Top 100 sales

  • Last year Restaurants had a 2% increase, pulling the Top 100 down. This year’s 6.4% is just the opposite.
  • Kudos to Burger King for a big comeback after a bad 2014 and to Starbucks for continued strong growth

Wrapping it up!

Retailers earn their spot in the Top 100 by producing big numbers so it’s not surprising that their overall performance was strong, +4.9% compared to +2.3% for Total U.S. Retail.

Pet Products are an important part of the success of the Top 100. Sixty-seven companies on the list sell Pet Food and/or Supplies. Their Total sales exceed $1.7T in 134,800 stores and online. Obviously, this is a hugely important group to our industry whether you are a manufacturer trying to capitalize on their consumer appeal or a retailer trying to succeed in a very competitive marketplace. Do the math. If we take out PetSmart’s $6B and the remaining companies generate only 1% of their sales from Pet, we’re looking at $17B in Pet Products sales from only 66 sources…and 1% is low for this group.

The Top 100 is also evolving, just as we are seeing in the Pet Industry. Acquisitions, mergers, everyone is trying to find a formula for success in a highly competitive environment. To survive and prosper you must adapt.

We’ll wrap up this report with a few “Funtastic Facts” about the performance of the 2015 Top 100:

  1. The Top 10 Retailers accounted for 51% of all Top 100 Sales and 48% of the increase.
  2. The Top 10 Brick ‘n Mortar Retailers plus Amazon accounted for 20% of the sales of the ENTIRE U.S. RETAIL MARKET.
  3. The 5 Retailers with the biggest sales gains accounted for 33% of the net increase for TOTAL U.S. RETAIL.

Now, I suggest that you take a closer look at the Top 100 Excel file, find your own “funtastic facts” and see what is relevant to your business.

[button link=”https://secureservercdn.net/198.71.233.110/pmu.d8a.myftpupload.com/wp-content/uploads/2016/08/Top100-US-Retlrs15-14-Ranked.xlsx” type=”icon” newwindow=”no”] Download 2015 Top 100 U.S. Retailers List(Excel)[/button]

Global Pet Expo & SuperZoo 2016 – Compared from the attendees’ point of view!

Both shows are all about Pets so there are shared features but there are also definite differences. In this report we’ll compare the two shows in terms of exhibitor type and product offerings – the attendees’ view.

The history and focus of SuperZoo is the independent pet retailer. It always has been. If you remember the old days in Long Beach, you appreciate the great job that the WPA has done in building this “retailer” show from a regional event to a national “happening”. The influx of attendees from other major retail channels and foreign countries is largely due to the spectacular growth and allure of the U.S. Pet Industry. People from around the U.S. and around the world are interested in what’s happening…right now, in the U.S. Pet Market.

Global Pet Expo obviously is the foundation of the entire U.S. Pet Industry and quite frankly, the World of Pet, so it is aptly named. It has only been in recent years that independent pet retailers were invited to attend. The show has also developed such a large international following in attendees and exhibitors because of the spectacular success of the U.S. Pet industry. Everyone wants a “piece of the action” or to emulate the success in their own country…or both! It is the “major leagues” and the show of the U.S. Pet Industry.

While both shows are the “best” at what they do, they are evolving and in many ways moving towards one another. With 200,000 outlets in the U.S. and the internet selling pet products, the number of independent pet stores is not growing. SuperZoo sought to broaden their reach by appealing to the fast growing service segments, especially groomers and also welcomed all retail channels to their party.

With corporate consolidation a way of life in the U.S., GPE welcomed the independent pet stores into the GPE fold and further enhanced their international mix. This significantly increased the participation at the show, in both attendees and exhibitors. GPE is “the” Pet Party. If you’re anybody in the U.S. Pet Industry or want to be…then you better be in Orlando!

Now, let’s take a look at some specific comparisons. The first chart is about exhibitor booth count and special themed floor sections. Both shows have 5 “themes”. You will immediately note the similarities and differences. 3 – Shared; 1 – Similar; 1 – Completely different.

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Observations

  • SuperZoo has more exhibitor listings. However, much of the difference is due to policy. SuperZoo guidelines allow large corporations and even some smaller folks to list their brands/divisions separately because they once were separate companies. This adds almost 40 to the SZ exhibitor total. This seems to be a good idea and benefits the attendees. Consolidations have bundled many companies/brands under 1 corporate banner. However, the retailer still strongly relates to the originals. Doing it this way helps the attendees find familiar “faces” at a huge show. Since all roads lead to the corporate booth, it also helps the exhibitors. Of Note:
    • 650 exhibitors did both shows.
    • 550 are at SZ, but didn’t do GPE.
    • 500 exhibited at GPE but passed on SuperZoo
    • The Total Pet Exhibitor “Universe” for 2016 was 1700 companies
  • SuperZoo was larger in terms of exhibitor booth count, but GPE had 36% more occupied booth space – 90,000 sq ft
    • GPE: 335,000 sq ft; SZ: 245,000 sq ft.
  • The 10×10’ booth was the most popular size at both shows but GPE had only 400 of this size while SZ had 600 booths that were less than 200 sq ft. The GPE had a significantly higher percentage of larger booths. The “average” booth size was:
    • SuperZoo – 200 sq ft (20×10).
    • GPE – 300 sq ft (30×10) GPE booths are 50% larger on average.
  • “Themed” sections have become more popular at both shows, but especially at SuperZoo where, for the first time they represented more than half of the total number of booths. As both shows have gotten so large, the themed sections may help the attendees in “general” product/exhibitor category searches. However, many exhibitors on the open floor have products which would fit into a “themed” section so an attendee shouldn’t limit their efforts to only “themed” sections.
  • Two of the “themes” reflect a major difference in the shows. SZ has a special Groomers Court, which shows their emphasis on this Service segment of the industry. Grooming is also often a major element of a Pet Retailer’s business and SZ is “the” show for retail pet stores. On the other hand, GPE has a special International Section which reflects the “Global” appeal of this show. However, this doesn’t tell the whole story as 20+% of GPE exhibitors are from outside the U.S.

Now, let’s compare the shows by exhibitor “type”, including the type of products by animal.

SZ-GPE16-2

Observations

  • You immediately see the impact of SuperZoo’s target audience – Pet Retail Stores. SZ has:
    • Three times as many Pet Distributors – 30 vs 11 at GPE
    • 50% more exhibitors in the gift/general merchandise category
    • Four times as many Business service exhibitors – 125 vs 30. Although it should be noted that some of these exhibitors’ efforts are also directed towards manufacturers.
  • While the gift and business service exhibitor products have a pet “theme” or are designed to help a pet business, they are “human” products and not designed to help in the care of our companion animals. The large number of these type exhibitors at SZ contributes to a lower percentage of exhibitors with actual “pet” products.
  • Dogs and Cats are the “royalty” at both shows, but as always, Dogs “rule”. The exhibitor count at both shows is remarkably close.
  • The big difference comes in the “specialty” animals – Fish, Birds, Reptiles, Small Animals and Horses. Except for Equine, GPE has 30 to 60% more exhibitors with products focused on these pets. This seems a bit surprising as pet retailers are a major consumer source of both products and live animals for these “specialty” pets…and SZ’s focus is Pet Retailers.

Next we’ll look closer at Dog and Cat. The top 10 product categories in terms of number of exhibitors are the same for both shows. There are just a couple of differences in rankings.

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Observations

  • SuperZoo has 46 more exhibitors offering Meds/Supplements, moving it into the #3 spot and challenging Collars & Leads for #2. This is not totally surprising as there is an incredible surge in this category, with new vendors arriving almost daily. I’m sure that GPE will reflect this trend by show time in 2017.
  • With SuperZoo’s commitment to the Groomer’s segment, the higher ranking of Grooming Tools is to be expected.
  • Clothes, Costumes ranking higher at GPE is a bit of a surprise with SZ’s long time commitment and the popularity of “Rodeo Drive”. However, when you look closer, the difference is only 8 exhibitors. The strength of this category at both shows is a reflection of one aspect of the “humanization” of our companion animals.
  • Dog and Cats are the royalty of the Pet Industry. Although the shows have a slightly different focus, the top 10 categories are the same. To be successful the shows still must ultimately reflect the needs of the true industry “drivers” – the consumers.

Next is a chart comparing the 2 shows in 32 Dog & Cat Product Categories. Categories with more than a 2% difference in share of booths are highlighted.

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  • Both shows have an overwhelming commitment to dog and cat products – as they should. The category numbers for both shows are generally very close. The biggest differences, in Meds/Supplements and Grooming Tools, showed up in our discussion of the “Top 10” and reflect a current “red hot” trend, which is growing daily as well as the emphasis on Groomers at SuperZoo.

Summary

Although there is a “core” group of attendees at both shows, the shows do have a slightly different focus, which they clearly state – upfront. SuperZoo is “The National Show for Pet Retailers” and GPE is “Global” Pet Expo. This affects both the type of exhibitors and the audience that attends. Because Pet Retailers are the largest share of their audience, SZ booths have a higher number of distributors as well as exhibitors with business services, gift products, or items relating to grooming services.

Global Pet Expo – the name says it all. Exhibitors and attendees flock to Orlando from around the world.

Both shows are filled with people trying to get a bigger share of the consumers’ Pet Spending $. Over 650 “key” pet companies do both shows. This means that every pet product category is extremely well represented in Las Vegas and Orlando. However, new products, new companies and new ideas happen almost every day in the Pet Industry. Over 1000 of the total exhibitors only did one of the shows! This is why, despite their differences, both shows draw attendees from every retail channel and from around the world.

Global Pet Expo is only 7 months away. See you in Orlando!

SuperZoo 2016 is ready to “Launch” – It’s huge! Where is it headed?

SuperZoo was recently named one of the 50 fastest growing trade shows in America by Trade Show Executive Magazine. In August, you’ll see why. In response to industry demand, the WPA re-structured and increased the size of the show. The result: 200 more exhibitors (+20%). In this post we’ll take a look at the type of exhibitors and product categories that rushed to fill that space.

But before we get started, let’s very briefly address the questions that always come up.

GPE & SuperZoo – What’s the difference? Why do both?

SuperZoo’s “roots” are that of a regional pet show. This history and their focus on the Grooming Service segment generates a higher percentage of pet retailers in attendance. One result of this is that there are more distributors and business service exhibitors. The GPE is the trade show foundation of the U.S. Pet Industry so it has always been the “must go to” show and has developed a larger International representation.

However, you should always remember that pet products are sold in over 200,000 retail outlets in the U.S. and… the internet. This means that both shows have attendees from every retail channel and exhibitors and attendees from around the world.

Logistically: The average GPE Booth is 50% bigger than SZ. The 10’x10’ is the most popular size booth at both shows. However, it is a much higher percentage of the total at SZ.

Average SZ Booth is 20’x10’        Average GPE Booth is 30’x10’

Why do both? Our industry is constantly evolving and a lot can happen in 4+ months. Also, consider this. In 2016, 620 Exhibitors are doing both shows. However:

  • 520+ Exhibitors at SuperZoo weren’t at GPE
  • 486 Exhibitors at GPE aren’t doing SuperZoo

With over 1700 total exhibitors and more than 41,000 in combined attendance….both shows are clearly a “must”.

Now, let’s take a closer look at SuperZoo to see where the huge influx of exhibitors “landed”. The 2016 show has 5 distinct Themed, Floor Sections – down from 6 last year, (no separate Equine) Here’s a comparison:

SZ2016-Compare-1

  • The special sections absorbed most of the growth and for the first time exceed 50% of the booths.
  • Natural is the hottest “classification” in U.S. Consumer products. The Pet Industry is no exception.
  • The expanded space also has allowed more 1st timers to attend.
  • Critter Alley/Aquatic also grew significantly although this may just be exhibitors opting to move from the regular floor space to the special section.
  • The Grooming Service Segment is a major priority and its growth rate exceeded the average.
  • Rodeo Drive is the second largest section but remained stable in booth count and fell in share.

One thing to remember is that there are plenty of exhibitors in the “open” floor space with products that would fit into these designated special sections. Perhaps, there was no room or they have a more diverse product line and don’t want to be limited by a narrow classification or….even more likely, they got a higher traffic location. Let’s look at the exhibitors by type, including animal.

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  • The increase in Business Services is incredible. It should be noted that while the bulk of these are aimed at retailers and groomers, there are some whose focus includes manufacturers.
  • Increases in distributors and Gift/Gen Mdse also reflects the high number of retailers in attendance.
  • Dogs and Cats are the animal royalty, with an exceptionally high percentage increase in cat products.
  • All other animal types were down or about even in exhibitor count and universally down in share.

Let’s take a closer look at the “royalty”. Here are the top 10 Dog and/or Cat Categories at SuperZoo 2016.

SZ2016-Compare-3

  • Treats remain #1 and are growing even more widespread across exhibitors.
  • Meds/Supplements had the largest percentage increase and is pushing Collars & Leads for the #2 spot. It should be remembered that many new Supplements are in the form of treats, driving the growth of both categories. Meds/Supp is also a big factor in the increase in Cat Products.
  • Grooming Tools moved up 3 spots due to the strong and increasing appeal of SuperZoo to Groomers.
  • Shampoos sneaked into the top 10. (Groomers again). Carriers/Crates fell from #9 to a tie for #10.

Overall you can see that the industry recognizes the importance of SuperZoo to pet retailers and the fast growing Grooming Segment with the increase in exhibitors relating to these businesses. In terms of products, the growth is all in Dog & Cat. Treats continue to maintain their remarkable run and the growth in Meds/Supplements is nothing short of spectacular. On the downside, apparel may have peaked.

Finally, there are categories outside the Top 10 that are also making significant positive moves. A few that come to mind are:

  • Wipes (Many are medicinal)
  • Training Pads
  • Monitoring Devices.

The chart below details the specifics for all 32 of the Dog/Cat product categories that I defined for SuperSearch. Of note: All the data inputs for this report and the SuperSearch tool were derived from reviewing the SuperZoo online exhibitor product listings AND then validated by visits to over 1100 websites and numerous separate internet searches. They’re not 100% accurate, but pretty close.

[box]NOTE: The SuperZoo 2016 SuperSearch Exhibitor Visit Planner has been updated as of 7/31.  

CLICK HERE TO GO TO THE SITE TO DOWNLOAD THE UPDATED TOOL! 

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Now, back to our chart. Changes of special note from 2015 are highlighted. Which categories are of interest to your business?

TAKE A LOOK, MAKE YOUR PLANS AND….SEE YOU IN VEGAS!

SZ2016-Compare-4

 

 

SuperZoo 2016 Will Have 200+ More Exhibitors! – What’s Your Plan?

Every SuperZoo in recent years has had a long, unfilled waiting list of companies who wanted to showcase their products at “The National Show for Pet Retailers”, but couldn’t… not enough space. In 2016 this was rectified. The Floorplan was re-structured and increased. The result: over 200 additional exhibitors, a 20% increase. However, “more exhibitors” is far from the whole story. Consider these 2016 SuperZoo facts:

  • 1189 exhibitor booths as of 7/11…up from 990 in 2015…plus a few more to be finalized!
  • 245,000+ sq ft of exhibitor booths (Plus a 20,000 sq ft New Product Showcase – over 700 new items)
  • Over 25,000 attendees with more than 12,000 buyers.
  • SuperZoo University: Seminars on Retail, Grooming and Animal Health – 80 separate sessions/topics
  • Over 4 miles of aisles – just to walk the exhibit floor

Whew! This show is huge. The show floor is open for 22 hours so…..

Let’s…“Do the Math!”

 If you don’t attend any seminars, visit the New Product Showcase, stop to chat with anyone in the aisles or for food, a drink or to go to the bathroom and maintain a walking speed of 2.5 mph…

[box]…you can spend… 62 SECONDS …with each exhibitor.

Perhaps you need a plan?

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As we all know, there are a lot of distractions in Vegas. However, the primary purpose for attending  SuperZoo  or any industry event must be to improve your business.

With a higher concentration of Pet retailer attendees and a commitment to groomers, there are subtle differences between SuperZoo and GPE.  But make no mistake. SuperZoo has attendees from every major retail channel and attracts both exhibitors and attendees from around the globe. Both SuperZoo and GPE are “must do” events for anyone who wants to maintain and increase their Pet Business. This year’s spectacular growth in exhibitors is a tribute to the WPA, the SuperZoo staff…and the U.S. Pet Industry.

Despite the variety of offerings to fill an attendee’s time, SuperZoo is still primarily about Pet Products – Food, treats and a vast array of Supply categories.

  • New Products are a critical element in helping to turn around the current deflation in Food and Supplies so of course, you must take the time to visit the new product area.
  • Knowledge is power so you should also sign up for any relevant classes.
  • Sometimes it’s not what you know, but who you know that matters most. This makes networking with other industry professionals a priority.
  • “Leave no stone unturned” in your quest for success. This means you need to walk the whole show.

SuperZoo and GPE are both about gathering information and making decisions to improve your business – whether they are made on the spot or put on your “must do” list.

Every business can always improve in terms of products. If you are a retailer, what sections of your store are not doing as well as you hoped and need a “facelift” or conversely, what areas are growing and need products to fill additional space? Category managers for distributors and retail chains may only be interested in targeted visits to exhibitors relevant to their “categories”. Representatives may be looking for new manufacturers…in specific product categories. Manufacturers could be looking to find distributors to handle their products or just looking to “check out” the competition. In regard to products, there is always something to see…for everyone!

So you’re definitely going to be at SZ 2016, how do you make the most of your time on the show floor?

In 2014, I designed a “tool” in Excel ,The SuperSearch Exhibitor Visit Planner to make your time on the show floor more productive. It was well received so I have updated it for every show since. “Updated” doesn’t just refer to the exhibitor list but also to the product category offerings for every exhibitor. I reviewed every exhibitor profile on the show site, but I also visited over 1100 websites and conducted numerous online searches to “validate” these offerings. It is not 100% accurate. However, it is close.

What does the SuperSearch do?…It searches for and produces a list of Exhibitors by product categories.

  • From the simplest…”just give me a list that I can look at on my phone or tablet quickly in either Booth # order or alphabetically”
  • To the most complex…”can do a simultaneous search for multiple specific product categories, allowing me to personally narrow down the initial results and see the “final” alphabetically or by booth number.

The SZ SuperSearch Exhibitor Visit Planner does both…and more…and does it quickly! Here’s what it looks like. It looks complex but is truly quite simple…Of course, you will print results in “landscape” – easier to read!

SuperSearchSZ2

  1. In the Top section, you “design” your searches.
    • Enter a “Y” in the exhibitor search column. It turns green to indicate an “active” search
    • Enter a “1” the desired category
      1. NEW FEATURE: The corresponding cells for affected exhibitors will also turn green. This makes your final list easier to work. At each booth, you’ll know what you’re looking for!
      2. If you want to search separately for several categories, use multiple rows (multiple search results are combined into 1 list for efficiency)
      3. If you want the results to be “and”…for example, exhibitors that carry, treats, toys and beds, put a “1” in all three…in the same row. Only those with all 3 will show up.
      4. Note: If you enter something other than a “1”, the cell turns red to indicate an error
  2. Now, click on “Execute” search and it happens
  3. You can then view the results alphabetically or in booth # order by clicking on a button.

Pretty simple, don’t you think? Plus, you can personally narrow the search results by using the “U pick ‘em” feature. And of course there is also a button to clear your search criteria so you can easily begin a new search.

Ready to Start Planning?

There is a download link provided for the SuperZoo 2016 Super Search tool as well as one for the instructions. Please print out and read the instructions before you start to “play”. Yes, the instructions are 4 pages long. But before you get “turned off” about their length, take a look at some of the instructions that you have around the house…vacuum cleaner – 11 pgs; coffee maker – 21 pgs; cell phone…a novel!  After you see what the Super Search can do, your searches may grow more complex. The instructions will help you to be more efficient from the start… Note: SZ 2016 SuperSearch has been updated based on info as of 7/31/16. Exhibitor additions/changes from the 7/11 to the 7/19 version have a pink highlighted booth number. The changes from 7/19 to 7/22 are highlighted in blue. Lost 4, gained 1 (orange) since 7/22. Hopefully, this is final. 

Plan your work! Work your plan!

You will be more productive and more successful!

Download Now…And Get Started!

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(To save the PDF to your computer Right Click the download link and select “Save Link As…”)

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(For the Excel file to work on your computer, be sure to enable macros/editing)

BUYING PET PRODUCTS? – PRICE MATTERS!: “PETFLATION” UPDATE AND MORE!

Since the great recession, price has become perhaps THE critical factor in the buying behavior of U.S. Consumers. In our recent reviews of Consumer Pet Spending we saw that inflation and deflation can affect retail spending. However, there is not a universal rule. Price changes, up or down can have a different impact on the different Pet Industry Segments. Deflation can spur spending in a “discretionary” segment but retard it in a “need” segment. Moderate inflation is normal and expected by consumers. However, when it gets out of hand, it can negatively affect sales.

In this report we’ll update the changes in the CPI (from the USBLS) since December, both for total Pet and the individual segments.  However, before we get to that, let’s do some “pricing” groundwork. We’ll take a look at some relevant facts from a study on The Shopping Habits of American Women done by Blackhawk Engagement Solutions and presented in a webinar by Retailing Today.

First, what matters most in the shopping decision?

CPI-6-16Update2

Obviously, price matters most in today’s world. However when you consider Price + Quality = Value, then Value is also twice as important as brand – a big change from pre-recession days.

If Price is so important, then how does the shopper compare prices? With 71% of shoppers owning and using a smartphone daily, it’s not surprising that retail websites and other online sources, like Amazon and Google are usually the first choices. However, preference does vary by product category.

Here’s how consumers price shop for pet products. You may be surprised by what is #1.

CPI-6-16Update3

For Pet Products, the # 1 place for checking prices is…in the retail store.  The study covered a variety of product categories including clothing, furniture, sporting goods, toys and more. Only 2 categories had retail stores as the consumer’s first choice – Pet Products and Grocery. Grocery is certainly not surprising, with fresh food being such an important share of the category’s business.

The preference for “in store” price checking doesn’t say that you don’t need an effective web presence (with a store pickup option) or that shoppers don’t use their smartphones to price check pet products when they are standing in the retail aisles. Perhaps, it just “speaks to” the personal nature of our relationship with our companion animals.

Retail price and “value” are more important than ever in the consumer products business and the Pet Industry is no exception. Let’s see what has happened with the Pet Consumer Price Indices since last December.

This chart shows the change from December 2015 to May 2016 and how the average for the first five months of 2016 compares to the same period last year.

CPI-6-16Update4

Observations

  • Veterinary – Prices in this segment are up over 4% vs the same period last year. This is exceptionally high but in fact, the inflation may still be accelerating. With a 2.2% increase just since December, it could reach 5% by yearend. One result of the prolonged high inflation rate is a reduction in the amount of Veterinary Services across a broad spectrum of demographic groups. There is a plus side…for the Supply segment, as there has been exceptional consumer demand for OTC treatments, meds and supplements.
  • Pet Services – Although not as high as the Veterinary Segment, Pet Services pricing has been inflating over a prolonged period. So far there have been no major consequences in terms of consumer spending. The chart above shows that the inflation rate is starting to slow down, especially since December.
  • Pet Supplies – Supply pricing is up 1.9% since December. This is a bit deceptive as the pricing is still recovering from the biggest drop in history last Oct-Nov. YTD prices are slightly below a year ago.
  • Pet Food – Food prices have been gradually recovering from their record drop in Jul-Aug and are up slightly since December. However, they are below the same period in 2015. We’ll have to see which of these 2 opposing factors has the most impact on the consumer.
  • Total Pet – Both increases are moderate, although somewhat higher than recent history. The 1.4% increase since December is unusual because it reflects increased prices in every segment. The 1.3% increase versus a year ago is more in tune with recent activity because it comes from decreases in both Food & Supplies which were overcome by increases in the Services…especially Veterinary.

To understand and appreciate what is happening, you need to see it. Take a look at the monthly flow.

CPI-6-16Update5

Veterinary shows an unbroken string of increases and is even accelerating. The increase in the Service segment has clearly moderated beginning in September of last year. The product segments are on rollercoaster(s). Look at those record drops in the second half of 2015…but both Food & Supplies seem to be slowly recovering.

One last chart: This is simply a snapshot in time. May 2016 vs 1, 2 and 3 years ago

CPI-6-16Update6

Vet Services: Up about 4% per yr & increasing

Pet Services: Increasing about 2.3% per year but moderating.

Food & Supplies: Deflation slowing – Moving towards “Flat”

Total Pet: Being pushed up ”” by services while products move to flat “↔”

Pricing in the Summer and Fall of 2015 was very volatile with record CPI drops in Products. We’ll see what 2016 brings.

 

PET INDUSTRY $ALES IN 2015: $60.3B – TAKING A CLOSER LOOK

According to the numbers from the APPA, the total U.S. Pet Industry increased $2.24B (3.86%) in 2015. This was not quite the projected 4.4% increase and slightly less than recent years. If you factor in “Petflation”, the increase in the amount of goods and services sold was 2.86%. However, this means that 74.1% of the industry’s growth was “real”. Only 25.9% came from price increases. This is less than last year’s 83% real growth…but still very good.

In this post we’ll take a closer look at the performance of the total market and importantly, the individual segments. We’ll see which segments are “driving” or “retarding” the industry’s growth. The report will cover 2015 and also put this year’s numbers into perspective for the period from 2009 to 2015, the time since the great recession.

Here are the details for 2015. Some key data is highlighted:

Pet$-2015-1

Key Observations

  • The ongoing deflation in the Food segment got markedly worse in 2015 (-1.03%).
    • Good News – The consumer actually bought even more product at the deflated prices.
    • Bad News – The deflation increases the competitive pressure on manufacturers, distributors and retailers.
  • The Supply segment came within 1% of hitting the projected retail number and…prices were flat (a pause in the deflationary spiral) so 99% of the growth was real!
  • The Service segment exceeded projected sales and while inflation was relatively high, 78% of the increase was real.
  • The Veterinary Segment retail increase was only 55% of the projection and the high inflation rate resulted in Pet Parents actually buying less in terms of the amount of veterinary services in 2015!
  • The Total Pet Market performance – up 3.9%…with 74% % of this being “real” looks pretty good. However, the high inflation rate in the Vet Segment has reached the point where it is depressing consumer sales, affecting the entire industry’s numbers. Food prices have been deflating for 2 consecutive years. Time for a change in these segments.

The Chart below may make it easier to visualize the situation…especially in the Vet & Food Segments

Pet$-2015-2

Now let’s take a look at the performance of the individual segments from 2009 to 2015 starting with Food!Pet$-2015-3

OBSERVATIONS

  • When you look at the cumulative Pet Food Sales since 2009, it looks pretty good.
    • 4.64% Annual Growth Rate
    • Low average inflation – 1.02%
    • 68% CPI adjusted Growth Rate: 79% of the growth since 2009 has been “real”.
  • In the 6 years since 2009…
    • 3 were deflationary (-0.6%) Average
    • 3 were inflationary (2.5%) Average

The deflationary years are the most concerning. We have only had 4 deflationary years in Food (2000 was the other) and now we’ve had 2 in a row. The 2010 deflation came after a combined 20% Food CPI increase from 2007 to 2009 – in the heart of the recession and real growth ceased. The decrease in 2010 brought a positive response from the consumer – adjusted growth exceeded retail sales.

The years from 2011 to 2013 brought CPI increases in the 2+% range. The increases dropped the percentage of real growth below 50%. In 2014 & 2015, prices fell so the consumer paid less but the actual growth rate improved. The big concern with deflation is the impact on the supply and distribution channels and ultimately on the consumer… thru reduced choices.

Here’s what it looks like on a graph:

Pet$-2015-4

2016 Retail Food sales are projected to increase 4.2% to $24.01B. This may be a little high. The 3.5% range seems more likely unless we have a turnaround in pricing. I haven’t projected the CPI for this segment or others. It’s a little too early, especially with the volatility in Food and Supplies. Recently, the December and January Pet Food CPIs were up. February and March were down. Remember prices were pretty stable for the first half of 2015…then we had the biggest drop in history. If prices can stabilize or even turn up 0.5% in 2016, then the 4.2% increase in revenue becomes more likely.

Let’s turn next to Pets & Supplies.

Pet$-2015-5

OBSERVATIONS

  • DEFLATION
    • Prices are 4.94% below 2009 (and about equal to what they were in April 2008)
    • Falling at an annual rate of -0.84%
  • Consumer is still buying more
    • Retail Sales annual growth rate is 4.53%
    • Price Adjusted annual growth rate is 5.42% – 20% higher than the retail rate

In Supplies the first deflationary year was 2010. However, we should remember that inflation has generally not been a big issue in this segment. From 1997 to 2004 Pet Supplies increased in prices at an annual rate of under 0.5%. Then in 2005 and continuing through 2009, the CPI increased an average of 2.75% per year. This doesn’t sound like much but remember it was 5 times the rate of the previous 7 years and 2 of the biggest increases (+3.0%) came in 2008 and 2009, in the heart of the recession. The consumer reacted – and bought less.

Prices fell 1.7% in 2010 and the consumer bought more. The prices briefly stabilized in 2011 and then began moving downward. The consumer’s reaction was to buy more. 2015 brought another pricing pause, almost exactly equal to 2010. Overall Retail growth slowed slightly to 3.1% and adjusted growth dropped from 4.6% to 3.1%. The good news for the sellers is that this growth was 99% real and more profitable, exactly the same consumer reaction as in 2011.

Here’s the graph:

Pet$-2015-6

In 2016 Pet Supplies are projected to increase 4.2% to $17.09 B. That seems a bit high. 3.5% may be closer. In 2015 there was some indication that this segment might be truly pulling out of the deflationary spiral. However, a record CPI drop in the second half produced a year similar to 2011. Remember, 3 years of deflation followed that year. However, January through March of 2016 have seen moderate monthly increases in the Supply CPI. I’ll update you throughout the year.

Now onto the Service Segments – First, NonVet Services.

Pet$-2015-7

OBSERVATIONS

  • Growth
    • Annual Growth rate 8.26% – Amazing!
    • Inflation – a little high at 2.48%, but doesn’t seem to be significantly slowing consumer purchasing
    • 68.3% “real” growth
  • If price increases continue or accelerate, eventually the consumer will “push back”, but it hasn’t happened yet. Right now, a 2.5% inflation rate seems to be acceptable to the consumer.

There are no real negatives regarding this segment. It is growing strongly and consistently, especially since 2011. Last year the growth even reached double digits at 11.8%. However, it is a small segment, only accounting for 9.0% of the total market…but that’s better than 8.3% in 2014.

Here’s how the sales look on a graph:

Pet$-2015-8

2015 sales are projected to be $5.73 B, a 5.9% increase. This may even be a bit low. Based upon recent history 7-8% seems more likely. In regard to inflation rate, the average annual rate of 2.5% seems like a reasonable estimate for 2016. This would produce a “real” growth rate of 3.4% (42.4% of growth from price increases). The 2016 adjusted sales would be $4.83B.

The final individual segment is Veterinary Services. This segment accounts for over 25% of the Total Pet Market.

Let’s take a closer look at the Veterinary Service Segment.

Pet$-2015-9

OBSERVATIONS

  • Retail Growth
    • Up 28.1% since 2009
    • Annual growth rate 4.21%
  • Inflation is the problem
    • Annual average CPI increase 3.58%
  • Price increases account for 85.6% of Veterinary Retail growth!
  • “Real Sales”
    • Consumers actually bought less in vet services in 2011, 2012 and 2015. They just paid more.
    • Sales have been stagnant since 2009 – average annual growth rate 0.6%
    • Even worse, 2015 sales were about equal to 2010. Consumers bought the same “amount”. They just paid almost $3B more,

Regular veterinary visits are generally viewed as a “need” not a “want”. The high inflation rate over the years finally generated a consumer response in 2011…they cut back on veterinary services. Consumers have turned to OTC medicines, supplements, treatments and home testing whenever possible. Pet Health Insurance is growing and there may be fundamental changes in Veterinary Clinics – more chains and groups. Major medical procedures and emergency care will always be needed but it seems steps should be taken to make regular veterinary care more affordable.

Here’s the graph of sales since 2009:

Pet$-2015-10

Veterinary Services are expected to hit $15.92 B in 2016, a 3.2% increase. If that happens, we will probably have another decrease in the amount of services. Prices are already up 1.7% from December and we’re only through April.

Now in our final section we’ll go back to the total pet market.

Pet$-2015-11

OBSERVATIONS

  • Retail Growth expected to reach $62.75B in 2016
    • ↑32.4% since 2009; Annual growth rate 4.79%
  • Inflation: Only 9.1% since 2009; 1.45% annual CPI increase.
  • “Real” Sales are 68.6% of Total Cumulative increase – a 3.28% annual growth rate.

The great Total Pet numbers are a big reason why so many people are attracted to the Pet Industry. The retail numbers are also consistently good across the segments. However, as I’ve said so often, when you look a little deeper into “petflation” and the actual amount of goods and services sold, you find that the total industry numbers are generated by two undesirable situations that tend to counteract each other when the numbers are combined. Specifically:

  • Deflation in the Supplies Segment, which has paused after 5 yrs. We’ll see if it begins again or if we have reached a turning point. Commoditization, channel migration, consumer value shopping and lack of innovation have created extreme competitive pressure. Consumers have been buying more… but paying less.
  • We now have had 2 consecutive years of deflation in the Food segment, including an all-time record monthly price drop in July of 2015. This is a big concern in the industry’s largest category. What will 2016 bring?
  • The Veterinary segment has the exact opposite problem. Years of inflation have caught up. Consumers bought less in 3 of the last 6 yrs. 85% of growth is from price increases and 2015 “real” sales are equal to 2010.

Pet$-2015-12

In 2016 the Total Industry is expected to increase 4.1% to $62.75B. If the deflation and inflation both improve, we could see an inflation rate of perhaps 1.25%. This would generate a “real” increase of 2.85% and 2016 adjusted sales of $56.9B in the chart above. Bottom Line: We need moderation in the CPI trends for Pet Food and Veterinary Services.

Finally, always look beneath the surface in your business numbers. The headlines may not tell the whole story!

 

U.S. TOTAL PET SPENDING $63.4B…UP $2.6B: MID-YEAR UPDATE

In a reversal of the normal flow, we first looked at the performance of each of the 4 Pet Industry Segments in the Consumer Spending Survey conducted by the USBLS. We saw a definite disparity between the segments, both in the overall performance and in the demographics of consumer spending behavior. Now let’s put these different parts together to get the Industry Total covering the period 7/1/2014 to 6/30/2015.

Total Pet Spending is now $63.38 B. Let’s put that into perspective with recent history.

TotMid15-1

After strong growth in 2014, spending in the first half of 2015 was down. Let’s compare like time frames:

  • 2014 vs 2013: Sales up $6.6B (+11.4%)
    • By Half Year vs previous year: Jan>Jun 14 up $3.05B; July>Dec 14 up $3.52B
  • Mid-Year 2015 vs Mid-Year 2014: Sales up $2.6B (+4.2%)
    • By Half Year vs previous year: July>Dec 14 up $3.52B; Jan>Jun 15 down $0.94B

Now, let’s look at the numbers by Industry Segment:

TotMid15-2

Observations

  • Food is driving the entire increase…with a little help from Services.
  • It’s not a 12 month issue…Total Sales were up $6.6B in 2014 and the Jul>Dec 14 $ are included in both the annual and mid-year reports. Let’s look closer.

In this chart we look at $ change by segment overall and by 6 month time periods.

TotMid15-3

Observations – Does Price Matter?

  • July to December of 2014 was a “dream” half year. All 4 segments were up…3 for about a $ Billion each.
  • January to June of 2015 brought a different story. Retail pricing is likely a factor:
    • Supply Prices were up versus a year ago…sales fell $1 Billion.
    • Food Prices were up…slightly for the entire 12 months which countered the recent deflation and contributed to the huge increase. Notice the different behavior in these 2 product segments.
    • Services saw their growth slow in the first half of 2015 as inflation reached 3.2%.
    • Veterinary Services had a precipitous, inflation driven drop in virtually all age and income demographic groups. Only the Over 65 and Under 25 age groups and the Under $30K income group showed increases. Note: 65> and <25 make up a big portion of the Under $30K group.

Total Pet Spending increased $2.58B in the 12 months ending June 30, 2015 versus the same period a year earlier. Two segments were up and two were down. In the next chart we’ll “Show you the money”! We’ll identify the specific segments within each demographic category with the biggest gain or loss in Total Pet $pending.

TotMid15-4

  • Income Winner – Over $100K. Money does matter. These high income households, 21% of the total number, generated 137% of the Total Pet Spending increase…so the remaining 79% of U.S. H/H’s were down a total of $.95B. Although even the over $100K group had a drop in Veterinary Spending, -$0.2B.
    • Income LoserMiddle Income America – The $50>$80K group had a $0.4B increase in Food but spending fell in every other segment, including a -$2.9B drop in Veterinary.
  • Age Winner – The 65>74 group, primarily aging “Boomers”, spent 1.29% of their total H/H expenditures on their pets and had increased spending in every segment.
    • Age LoserThe 45>54 age group has the highest income, but their spending still decreased slightly in every segment except Services which was up $0.2B.
  • Occupation Winner – Self Employed had a spending increase in every segment but Supplies, which was down$0.2B. Most of their increase was due to a $1.2B increase in Veterinary spending.
    • Occupation LoserManagers and Professional increased spending in 3 segments, including a $1B increase in Food. However, this was not enough to overcome a -$3.7B drop in Veterinary spending.
  • Race/Ethnic Winner – The White, not Hispanic group generated 192% of the Industry’s total increase but even they were down -$0.3B in Supplies.
    • Race/EthnicAfrican-Americans actually had increased spending in Supplies and Services but decreases in Food and especially Veterinary, -$1.3B pushed them negative. Hispanic and Asian Groups were also down in Total Pet Spending by -$1B.
  • Education Winner – The group with Less than a College Degree had the largest Total increase, including even a $0.1B increase in Veterinary spending. Although their spending on Supplies was down -$0.2B.
    • Education Loser – The Advanced Degree group was the only education level with a decrease in Total Pet Spending and it was only -$0.05B. Pet Parenting crosses every level of Education.
  • H/H Size Winner – 2 People only was the big winner with increases in everything but Services. Although every H/H size of 2 or more people had an increase in Total Pet spending.
    • H/H Size Loser – 1 Person H/H Spending was driven down by decreases in Supplies and Veterinary.
  • H/H Composition Winner – With increases in all segments, Married Couple Only H/H’s had the biggest gain.
    • H/H Composition Loser – Single and All/Other Households – No surprise here.
  • Region Winner – Midwest: A big increase in Food and Services; Flat in Vet and down -$0.5B in Supplies.
    • Region LoserWest had increases in 3 Segments but a -$2.3B drop in Veterinary made the difference.
  • Area Type Winner – Rural areas with <2500 Population and not within a Metropolitan Area are surprisingly the biggest winner with increases in every segment but Supplies, which was down -$0.2B. Never fear, The Urban areas outside the Central City are also up $1B, despite a -$1.1B decrease in Veterinary spending.
    • Area Type LoserA decrease of $1.1B in Veterinary Spending made the Central City negative…slightly.
  • Housing Tenure Winner – Homeowners without a mortgage is a bit unexpected. They are down slightly in Supplies and Services – a total of only -$0.06B. Food & Veterinary are up an incredible $3.6B.
    • Housing Tenure LoserAnother surprise. Homeowners with Mortgages were up $1.9B in Food and Services but down -$0.1B in Supplies and -$3.1B in Veterinary. Even Renters were up $0.4B overall.

Comments

Without the spectacular performance by Pet Food, this would be a completely different report. Food was the positive “Driver” across almost all demographic segments. Some of the winners and losers were the “usual suspects” – High income and White, not Hispanic were big gainers. Central City and Singles lost ground. However, there were some groups that are new to the chart. Among the winners were the 65>74 age group, 2 person H/H’s, Married Couple Only and Homeowners without a mortgage. Actually these 4 groups all reflect many demographic characteristics of older Baby Boomer H/H’s. The under 25 group also had a good showing and are also more likely to be 2 person households. Unusual losers were Homeowners with mortgages and Mgrs/Professionals. In September, we’ll see how the second half of 2015 matches up against the “dream” second half of 2014.

 

U.S. TOTAL PET SERVICES SPENDING (Vet & Pet) – $20.85B

The spending on Total Pet Services in the U.S. is $20.85B. This is down -$1.15B (-5.2%) from a year ago. These figures are based upon data published in the USBLS Mid-year Update of their Consumer Expenditure Survey. As we saw in the Pet Products update, the story is complex. We will take a closer look at each of the two Service Segments – Veterinary and Pet (Non-Veterinary). Let’s start with the good news.

Pet Services Spending $5.86B – Up $0.54B (10.1%)

This chart should put that number in perspective with recent history:

1-Serv1

Flat…then trending up. This chart gives a good overview. Let’s do some direct comparisons of like time periods.

  • 2014 vs 2013: Sales up $0.39B (+7.4%)
    • By Half Year vs previous year: Jan>Jun 14 up $0.04B; July>Dec 14 up $0.35B
  • Mid Yr 2015 vs Mid Yr 2014: Sales up $0.54B (+10.1%)
    • By Half Year vs previous year: July>Dec 14 up $0.35B; Jan>Jun 15 up $0.19B
  • We have seen extreme price sensitivity in the Supply segment but thus far Services have been relatively immune. However, it should be noted that the CPI in Jan>Jun 2014 was up over 3.2% from 2013 and sales flattened out. The CPI increase from July 2014 through June 2015 dropped below 2.5% and sales increased. Perhaps 2.5% is the limit?

Let’s take a look at the Services spending numbers by Age Group:

2-Serv2

Age Group Observations

  • There is no clear pattern here. The “Boomers” and the “Millennials are contributing to the growth. The younger Gen X group shows the only decline. The number of 35>44 year old households was essentially equal. Their annual H/H spending on Pet services fell 3.6%…but only $1.80 per H/H. Let’s look at Income.

3-Serv3

Income Observations

  • With the $30>$70K group showing the only decrease, and the under $30K showing an increase, it appears that income is a factor, but it’s not “clear cut”. Time to pull out the “master database” and look deeper.
  • Driving the increase, we find the “usual suspects” – college educated, managers or professionals, who live in an “urban” setting, own their own home (with a mortgage) and make over $100K per year. We also need to include the over 65 crew, who make less money but have an increased need for pet services.
  • Now let’s look at who makes $30>$70K. On the decrease side we find a whole group of occupations – technical & clerical workers, operators & laborers, construction workers & mechanics. The drop is actually by far the greatest in households of 2 or more people with one earner (-0.34B). It’s also focused on incomes ranging from $50K>$80K, not the low end. There is not a hypersensitivity to price but these groups are definitely watching their budgets.

Non-Vet Pet Services Comment

Pet Service Spending can be a convenience or as in the case of aging Pet Parents, a growing need. The bulk of the spending in this segment is discretionary. Therefore Income is a big factor. In fact 34.9% of the H/H’s, those over $70K in income, account for 68.1% of the spending. Moreover, the over $120K income group, 14.4% of H/H’s spend 37.4% of Total Pet Services $.

Although prices have increased in this segment considerably above the national CPI average for years, thus far the consumer demand has been largely unaffected. This could be because the bulk of the business is coming from high income groups and the increases were relatively insignificant in terms of their overall spending. However, we saw a significantly smaller increase in spending in the first half of 2015, when prices increased by more than 3% for the first time in 3 years. We also saw a decrease in spending from $50K>$80K income group in the Mid-year numbers. These could be anomalies or it could be that the increasingly price conscious U.S. consumers were sending a first message. “There are limits.”

NOW ON TO THE VETERINARY SEGMENT!

U.S. VETERINARY SERVICES SPENDING $14.98B – Down $-1.69B (-10.1%)

Veterinary Spending turned sharply downward in the first half of 2015, after a huge increase in 2014. This chart should help put these trends into perspective.

4-Serv-1Vet

A rapid climb that slowed, then a steep drop. Let’s compare like time periods.

  • 2014 vs 2013: Sales up $3.03B (+20.8%) Incredible!
    • By Half Year vs previous year: Jan>Jun 14 up $2.12B; July>Dec 14 up $0.91B
  • Mid Yr 2015 vs Mid Yr 2014: Sales down $1.69B (-10.1%)
    • By Half Year vs previous year: July>Dec 14 up $0.91B; Jan>Jun 15 down $2.60B

The prices of Veterinary Services have been increasing at an extraordinary annual rate – 5% since 1997. This has recently slowed, but is still 3.5% since the recession. Inflation has affected the spending of most lower income groups. The big spending increase in 2014 came primarily from two demographics – over $120K H/H income and the 55>74 age group. The Jan>Jun 2015 drop was huge -$2.6B. Let’s look a little deeper. First, by Age Group

5-Serv-2Vet

Age Group Observations

  • It is apparent that the mid-year spending decrease was widespread across U.S. H/H’s. Every age group from 25 to 64 spent less – a Total of -$3.58B. This group includes over 90M H/H’s, 70.6% of the U.S. total.
  • The over 65 group had a substantial increase, $1.51B, with more than half, $0.8B coming from Retirees.
  • There is also good news from under 25 group. Their spending was up $0.38B. Remember, they had a 30% increase in Food spending. These numbers indicate that more in this group are becoming pet parents.

Let’s take a look at Veterinary Spending by Income Group

6-Serv-3Vet

Income Observations

  • The drop is evident in every income level over $30K…even the $120K> group. This includes 86M H/H’s – 67.2% of the U.S. total.
  • The < $30K group is surprisingly showing an increase of $0.83B. This is primarily driven by Retirees and the under 25 age group, who together had a $1.1B increase.

Veterinary Services Comment

We generally consider most Veterinary expenditures as “need” rather than discretionary spending. Regular Veterinary care for their companion animals is a responsibility of Pet Parents. However, non-emergency services may be becoming more discretionary to the consumer. The extraordinarily increases in Veterinary prices over a number of years has caused many of the lower income groups to delay or even forgo services. This was evident in 2014 when an overall $3B increase included a $1B drop from H/H’s with income less than $50K.

Households with incomes over $70K (34.9%) account for 57.8% of Veterinary Spending. However, there are other patterns in Veterinary Spending. The over 65 and under 25 age groups have generally lower incomes but are both showing significant increases in Veterinary Spending. The older group is generally more aware of the importance of their own medical care and this translates into increased awareness of the importance of Veterinary Care for their companion animals. In the Under 25 group the increased spending comes from new “pet parents”

Overall Pet Services Comment

It appears that we have 2 opposite trends in the overall Services group. Pet Services spending, which has generally been considered discretionary and very dependent on income, is showing increased spending based upon “need” with the aging of the huge group of Baby Boomer Pet parents. Veterinary Services, at least the non-emergency portion, which has been considered “need” spending is moving to a more discretionary nature due to years of extraordinarily high inflation and the increasing price consciousness of U.S. consumers.

U.S. PET SUPPLIES SPENDING $15.85B: MID-YEAR UPDATE

The USBLS just released their Mid-Year Update of the Consumer Expenditure Survey covering the period 7/1/2014 to 6/30/2015. As you remember from an earlier post, Pet Food had a great year $26.7B…up $3.8B, but what about the other “Pet Products Partner”…Pet Supplies? Pet Products account for 67.1% of Total Pet $. What happened in the Supplies segment?

This most recent report shows Pet Supplies Annual spending at $15.85 B, down slightly from a year ago (-$80M). The first chart will help put this decline into perspective with recent history.

4-PetSupplies1

The rolling 12 month totals gives a good overview of the recent up and down trend in Pet Supplies Spending. However, for the best comparison, we should look at like time frames:

  • 2014 vs 2013: Sales up $2.04B (+13.6%)
    • By Half Year vs previous year: Jan>Jun 14 up $.97B; July>Dec 14 up $1.07B
  • Mid Yr 2015 vs Mid Yr 2014: Sales down -$0.08B (-0.5%) – basically flat.
    • H/H’s increased by 1.4M (1.1%), but Supplies Spending per H/H actually decreased -1.5%
    • By Half Year vs previous year: July>Dec 14 up $1.07B; Jan>Jun 15 down -$1.14B
  • Prices in the both halves of 2014 were down 1% from 2013. This drove the spending increase in 2014.
  • Prices rose 0.4% in the first half of 2015 vs the same period in 2014…and spending dropped -$1.14B. This pattern of spending hypersensitivity to price may indicate Supplies is truly becoming commoditized.
  • Prices fell -0.3% in Jul>Dec 2015. However, prices were up 1% until the record -2+% drop in November. We’ll have to wait until September to find out if the big price drop in the peak season was enough to pull out an increase or at least a flat year.

Let’s take a closer look at the latest numbers. Here’s what they look like by age group:

5-PetSupplies2Rev

Age Group Observations

  • Supplies’spending is down slightly in every age group from 25 to 54, 52% of U.S. H/H’s. The $.7B increase in the spending of the 55>74 group (primarily Boomers) is the only thing keeping supplies’ $ close to even.
  • The H/H Supplies spending for the 75> decreased -5% but the number of H/H’s increased by 600,000, +5% so spending was flat. This is a lot better than their 58% drop in Food spending.
  • The <25 group increased slightly, which is better than a drop but nothing like their 30% increase in Food $.

Does money matter? Here’s a look at Pet Supplies Spending by Major Income Groups:

6-PetSupplies3

Income Group Observations

  • The over $70K group now accounts for more than 55% of Pet Supplies spending. Last year it was 53%. Remember they are only 34.8% of U.S. Households.
  • It’s pretty simple. Only the over $120K income group is showing an increase (13.9%). The <25 & >75 age groups are helping to keep the low income <$30K close to even

The look at Supplies Spending by Income Group seems to validate our observation of extreme price sensitivity in this segment. Let’s take a look at this on these two correlating charts.

7-PetSupplies4

Pet Supplies Comment

This is a small sample. More research is needed and like almost everything we look at, I’m sure that the situation is more complex than it appears on the surface. However, this segment has been deflating since 2009 and this is a strong indication that a growing number of categories in the supply segment are becoming commodities. A recent report by Blackhawk Engagement Solutions of U.S. women’s shopping behavior found price (75%) as the #1 factor in purchase decisions, followed by quality (55%) and brand (31%). It appears that the Pet Supply segment is reflecting these National trends.

Pet Products (Food & Supplies) Observation

Inflation and deflation have the opposite effects on Food & Supplies. Slight inflation generates more Food Spending. If prices fall, people just spend less. On the other hand, Supplies have become so commoditized, that even small price increases seem to depress spending. On Supplies, Consumer’s want a deal! It is definitely a complicated situation!

NOTE : I have consolidated this report with the earlier one on Food into a PET PRODUCTS SPENDING UPDATE. If you would like an electronic copy, just send an e-mail request.

HISPANIC PET SPENDING DOWN -$1.0B : MID-YEAR UPDATE

Cinco De Mayo seems like an appropriate time to do a brief update on Pet Spending by U.S. Hispanic Households. I wish there were better news to report but we’ll drill deeper to see what is causing this steep drop. The numbers  in this report are computed from data in the Consumer Expenditure Survey conducted by the USBLS.

Hispanic households are growing in number and influence in the U.S.  They increased by 1,000,004 (6.3%) over the previous year, far exceeding the overall U.S. growth of 1.1%. As of 6/30/15 they numbered  16,910,000. That is 13.2% of all U.S. H/H’s.

Additionally, while their H/H Income (79%) and Spending (85%) are below the U.S. average, both increased slightly faster than the average household. Financially, they are slowly gaining ground. However, Hispanic H/H’s only spend 0.5% of their total expenditures on Pets, compared to the U.S. average of 0.9%. Now, let’s take a look at their recent history of Pet Spending.

This chart should give an overview of Total Pet Spending since 2013. Remember , when making direct comparisons using a rolling chart, it is best to use similar time frames. Ex: 2014 vs 2013.

Hispanic1

Any way you look at it, a change of 1 year brought a big drop in spending. Let’s use the same type of chart to get an overview of the Hispanic spending in the individual industry segments.

Hispanic2

Comments by Segment on Rolling Time Periods

  • Pet Food – The dip in Mid 2014 mirrors what we saw in the overall Food market. However, the Total market made a big comeback in the second half of 2014 to end up 4.8% for the year. The Hispanic Market did not quite make it back to even. The Total Market saw explosive growth in Jan>June ending up 16.6% at mid-year 2015. The Hispanic Market was up, but only 6% and still below 2013 annual numbers.
  • Veterinary – This is THE reason for the huge drop in Hispanic Pet Spending. Down to less than 1/3 of 2013 spending, the continued strong inflation rate in this segment seems to have had precipitous consequences in the Hispanic demographic.
  • Services – A very small part of overall Hispanic Pet Spending, annually this segment continues to trend downward. Although Jan>June 2015 was up 30M from the same period in 2014.
  • Supplies – This segment shows steady growth across all time periods, without the dip that we saw in the Jan>Jun 2015 numbers in the total market. It’s possible that the spectacular drop in veterinary spending has helped fuel this increase as Hispanic Pet Parents turn more to OTC meds and treatments.

Now let’s take a look at the Hispanic Spending in the Mid-Year Report by Industry segment. This chart compares the latest Mid-Year numbers versus the same period a year earlier.

Hispanic3

Comments

  • There may be other factors. However, the Service segments, especially veterinary, certainly appear to reflect the consequences of continued high inflation.
  • The Supplies Segment is up $200M (17.1%) and is certainly the bright spot in the Hispanic Demographic. H/H spending on Supplies increased 10% and the number of H/H’s increased 6% to generate this increase.
  • Food is still down from 2013 and 2014 year end numbers, but it is up slightly from the same period a year ago – $100M (6.0%). However, consider this. H/H spending on Pet Food was up 4.4% and the number of H/H’s was up 6.3%. If the percentage of Pet H/H’s remained the same and they spent 4.4% more per H/H then Pet Food Spending would be up 11%. Based upon this, the 6% increase in Pet Spending is basically little or no real progress.
  • Let’s hope that the Veterinary spending trauma is over and that spending in all the segments turns up again. The Hispanic demographic is an important and growing segment in the overall U.S. market and should be for the Pet Industry too.