U.S. Pet Spending: Single Pet Parents – Does Gender Matter?

/in /by

The subject of this report is Single American Consumer Units (H/H’s) – 1 adult, no children or other adults. Most of our discussions on Pet Spending have focused on the various demographics segments that have 2 or more people, with or without children. There is good reason for this as they spend 80% of all Pet Dollars. However, we shouldn’t overlook the singles segment. Currently they represent 11.6% of the total U.S. population. However they are 29.5% of all Independent Financial Units (CU’s) and account for 20% of Total Pet Spending. With 29.5% of CU’s and “only”20% of Pet Spending they are not as productive as many segments. However the Total Pet Spending in 2015 by U.S. Singles was more than…

  • The total of all Hispanic, African Americans & Asians
  • The entire Millennial Generation.
    • Single Women alone spent more than Millennials
  • The whole Northeast Region of the U.S.
  • Everyone earning between $100K and $150 K
  • And almost equal to all CU’s with incomes over $150K

I think that they deserve a closer look. But before we get started, I want to give credit to the US BLS. All the numbers were taken from or calculated from data in their Annual Consumer Expenditure Survey and a special report on singles spending by gender. To get a valid sample size for single men and women, they combined the data from 2014 and 2015. In order to compare these numbers to overall national data for the same period I calculated the average spending for 2014-2015. Let’s first look how singles are dispersed across society by age group.

  • Two peaks at either end of the age spectrum with the low point at 35>44, which is prime time for marriage & family.
  • Note that single men outnumber women up to age 55 then things change radically. Longevity may be a factor.
  • Actually the percent of single men remains rather stable after age 25 – ranging from 10 to 15%.
  • The 51% number in the small <25 group is a bit deceptive. The bulk of singles are in the older groups. 53% of all singles are over 55 (63% of women). Over 45, the numbers jump to 66% of all singles.(58% of Men; 74% of Women)

Now let’s get to know a little more about their characteristics, starting with homeownership and employment.

  • Homeownership – (82.6% of all U.S. Pet Spending comes from Homeowners)
    • Singles are much less likely to be a homeowner.
    • Women have a higher percentage – over 50%.
    • Homeownership increases with age maxing at 65>
    • Only 3% of singles under 25 own a home.
  • Earning Income – (83.1% of U.S. Pet Spending is done by “earners”)
    • 40% of all singles don’t earn money.
    • Single men are 40% more likely to be an earner.

Speaking of earning, let’s look at income and spending.

We’ll compare Singles to the National Avg in Income, Spending, Pet Spending and Pet Share of Total $pending

In the first chart we saw that Singles were significantly below par in the percentage of homeownership and “earners”. This usually results in decreased Pet Spending. Here’s how they compare on income and spending.

  • Income – The average income of Singles is 50% of the National Average, about $34.5K
    • At $39.4K Men make 30% more than Women at $30K
    • While this seems challenging, consider the fact that all CU’s with an income of less than $70K make up 64.2% of the U.S. total. Their average income is $32.2K, but they still manage to spend 44% of all Pet $ and 49% of Pet Food.
  • Total Spending – Annually, Single Men and Women spend about the same amount of money, which is high considering their income. This situation is especially pronounced among Single Women who make 30% less.
  • Pet Spending – As you can see, Pets are important to Singles. To be more precise, Pets are extremely important to Single Women. They make 56% less than average. Overall they spend 41% less than average. However, when it comes to their Pets, their spending is basically on par with the total Nation. Amazing! Single Men spend less than 40% of what Single Women spend on their pets. This disparity is so great that it undoubtedly indicates that far fewer Single Men actually have a pet.
  • Pet Spending as a Share of Total Spending – 1% has become the benchmark for performance. Pet Spending first reached 1% of Total Spending in 2008. Since then it has remained at or near this level. In 2014-15, the time covered by the data in this report, Pet Spending was 0.95% of Total Spending.
    • Total Singles – At 1.07% they are in the elite “Top 25” of the 85 demographic segments that I monitor, but as usual the story gets more complex when you drill deeper.
    • Single Women – At 1.5% they are in line for the Silver medal. Only truly Rural CU’s with a population less than 2500 and located outside of a Metropolitan Area beat them – with 1.65%.
    • Single Men – At 0.6% this is the flip side. Only 5 Segments are lower, including – Hispanics, African Americans, Asians, the members of the Greatest Generation (Born before 1929) and CU’s where the oldest child is under 6.

Now we’ll “Show you the Money” as we compare Avg CU Pet Spending to Single CU’s for every age group.

Observations

Total Singles – Overall, the pattern of CU spending generally mirrors that of the National trend. Spending starts to grow in the 25>34 age group, builds to a peak at 55>64 then falls off after 65. One thing to note is the huge spending increase for Singles between age groups 25>34 and 35>44 – 50%. The National increase is only 18%. Singles acquire pets a little later than the general population.

Single Men – This pattern is markedly different. Spending triples when they reach the 25>34 age group as they are acquiring pets. However, their spending peak comes early at age 35>44. From 45>64 their spending falls off a little bit, but it is basically static. When they reach 65, spending drops 25%. The stability in the spending from 35>65 indicates that there are few new pet households but those who have pets are committed to their pets. Also, the spending drop at age 65 is less precipitous for Single Men than the overall national numbers.

Single Women – Spending takes off in the in the 25>34 age group and essentially matches the national average by age 35>44. However, it continues to accelerate after age 45 and peaks at 55>64 at a rate that is 20% above the national average. Remember, their income is still under $40K and less than half of the national average. The 50% drop after age 65 suggests that there is a significant decrease in Pet households.

Final Thoughts

Single Pet Parents are a significant segment in the Pet Industry both in size and in spending. Here are the totals:

  • 2015 Total Pet Spending for Singles was $13.45B – a 6.7% increase, despite a 1.1% drop in the number of CU’s
    • This was better than the overall industry increase of 5.3% which included a 1.1% increase in CU’s.
  • Based upon the US BLS special report on singles,
    • Single Women accounted for $9.95B (74% the total)
    • Single Men Accounted for $3.50B (26% of the total)

That’s an incredible difference, considering that these groups are close to the same size – Women – 52% of CU’s; Men – 48%. We have found that gender definitely does matter in terms of Pet Spending by Single consumers.

Let’s consider the experience of Pet Parenting for Singles. It’s an enormous responsibility for anyone. However, if you are single, then all the responsibilities, big and small, “belong” to you, unless you choose to hire someone to help. By the way, that does happen. $1.64B (26%) of all 2015 Pet Services Spending was by Singles.

Singles are very interested in any product or service that makes going “solo” as a Pet Parent significantly better or easier. With relatively low income, price will always matter. However, they will spend more for a product that is significantly functionally better.

In terms of reaching this group, there appear to be 3 major opportunities/challenges:

  1. Opportunity – Overall, the spending commitment to their Pet Children by Single Women is high but it actually increases significantly as they age. Remember, 1.5% of their Total Spending is on their Pets. However, the 45>54 age group spent 1.9% and the 55>64 group spent 2.4%. That last number is truly amazing and it’s not just %. The money is there – $3.4B – about the same as the spending for all single men. Make sure that older single Women have everything they need or want for their pets. Be especially cognizant about the Pet Parenting difficulties that arise as singles move into old age.
  2. Challenge – The main issue with single Men as Pet Parents seems to be getting them to participate. Pets seem to be a more natural addition to the household for women than men. Getting single men started when they are young and as they reach middle age is the challenge. Through HABRI, we have an amazing amount of scientific evidence documenting the benefits of Pets. This is further magnified by the companionship that pets provide for singles. We need to put on our marketing thinking caps and find ways to get the message across to this group.
  3. Income – With lower income, money will always be an issue for singles. There is also a high percentage of older adults in the group, both men and women, so some sort of Senior Discount makes sense. We need to keep singles spending and encourage transaction building. Overall, Singles didn’t participate to any great extent in the 2015 movement to upgrade to super premium food. Price was undoubtedly a major factor in that decision.

That wraps it up for this report. The Single Pet Parents demographic group definitely deserved a closer look and we certainly answered the question regarding Pet Spending and gender. Currently, it does matter and if it’s a contest, women win in a runaway.

U.S. Pet Industry $ales in 2016: $66.75B – Taking a closer look!

/in /by

According to the numbers from the American Pet Products Association (APPA), the total U.S. Pet Industry increased $6.47B (10.7%) in 2016. This was spectacular to say the least. However, about $4B came from a data reporting adjustment to Food $ales based upon information from the US BLS which indicated that previous years Food numbers were too conservative. What is most important is that this year’s numbers more accurately reflect the true strength of the industry, especially in the largest and critically important Food Segment. Even factoring in “Petflation”, the increase in the amount of goods and services sold was 9.2% and 85.9% of the industry’s growth was “real”. Less than 15% came from price increases.

In this post we’ll take a closer look at the performance of the total market and importantly, the individual segments. The report will cover 2016 but also put this year’s numbers into perspective for the period from 2009 to 2016, the time since the great recession.

Here are the details for 2016. Some key data is highlighted:

OBSERVATIONS

  • Two consecutive years of deflation in the Food segment ended in 2016 with a reasonable CPI increase of 0.2%.
  • Sale of Live Pets fell slightly for the third consecutive year, which is a concern.
  • The Supply segment came up short of projected numbers but prices were flat so 97% of the growth was real.
  • The Service segment hit their projected sales number but the inflation rate was relatively high so only 67.3% of the increase was real, down from 77.5% in 2015
  • The Veterinary Segment also reached the projected number but the continuing high inflation rate resulted in Pet Parents actually buying less in terms of the amount of veterinary services for the second consecutive year.
  • The Total Pet Market – up 10.73%…was primarily driven both by the performance and the reporting adjustment in the Food segment. The Food and Supplies segments, with minimal price increases pushed the real growth up to 85.9% – outstanding. The high inflation rate in the Vet Segment continues to depress consumer sales, affecting the entire industry’s numbers.

The Chart below may make it easier to compare the situation in the individual Segments

Now let’s take a look at the performance of the individual segments from 2009 through 2016 starting with Food.

OBSERVATIONS

  • The adjustment to more accurately reflect the current sales of Pet Food made quite a difference in the average numbers for the period from 2009 to 2016
    • 7.02% Annual Growth Rate
    • Low average inflation – 0.82%
    • 6.15% CPI adjusted Growth Rate: 88% of the growth since 2009 has been “real” – That’s Outstanding!
  • In the 7 years since 2009…
    • 3 were deflationary (-0.6%) Average
    • 4 were inflationary (1.9%) Average

Both deflation and strong inflation can be concerning. We have only had 4 deflationary years in Food (2000 was the other). 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 was a welcome break and brought a big positive response from the consumer and adjusted growth exceeded retail sales.

The years from 2011 to 2013 brought CPI increases in the 2+% range. This was a bit too high and dropped the percentage of real growth below 50%. In 2014-15, prices fell so the consumer paid less but “real” growth improved. The big concern with deflation is the impact on the supply and distribution channels and ultimately on the consumer… thru reduced choices. In 2016, prices moved into a healthier range. In the future, a positive inflation rate for Food that stays at or below 1% should produce the best results.

Here’s what the period from 2009 to 2016 looks like on a graph:

2017 Retail Food sales are projected to increase 5.2% to $29.69B. This seems very reasonable. In the chart you also see the big lift caused by the adjustment. It’s important to remember that the 2016 numbers are more accurate. If the APPA were to adjust the numbers from earlier years it would likely just straighten the growth line’s path to the top. It’s also a little too early to project the Pet Food CPI for 2017. February prices are up 0.1% from December and up 0.17% from a year ago. This is on track for a desirable low increase in the CPI.

Let’s turn next to Pets & Supplies.

OBSERVATIONS

  • Deflation
    • Cumulative
      • Prices are 4.87% below 2009 (and still about equal to what they were in April 2008)
      • Falling at an annual rate of -0.71%
    • Short Term – Stopped with very minor CPI increases in both 2015 and 2016
  • Retail Sales – When deflation ended, the retail growth rate slowed as this category is now very price sensitive.
  • Over the whole period, the Consumer bought more…and paid less!
    • Retail Sales annual growth rate is 4.24%
    • Price Adjusted annual growth rate is 4.99% – 18% 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 (over 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 and 2016 brought another pricing pause, similar to 2010. Overall Retail growth slowed to 2.5% and adjusted growth dropped from 4.6% in 2014 to 2.4% in 2016.The good news for the sellers is that this growth was 99% real and more profitable.

Here’s the graph:

In 2017 Pets & Pet Supplies are projected to increase only 0.8% to $16.94 B. This reflects an expected $100M decrease in Live Animal Purchases and minimal growth in Supplies (1.5%). Many categories in the Supply segment have become commoditized and commodities are very price sensitive. February 2017 prices are down 0.9% from December and 0.7% from a year ago. If this continues, it could spur increased spending. However, innovation is the only real cure. Consumers will spend more for products that make Pet Parenting easier or better.

Now onto the Service Segments – First, NonVet Services.

OBSERVATIONS

  • Growth
    • Annual Retail Growth rate 8.00% – The highest in the industry
    • Annual Inflation rate – a little high at 2.42% but appears to be slowing.
    • Years of inflation may be catching up to this segment as the spending increase in 2016 was about half of the increase in 2015.
    • 68.1% “real” growth – 75+% should be their target.

There are no big negatives regarding this segment. However, it is largely driven by discretionary spending so the consumers’ spending power is a big factor. That’s why years of relatively strong inflation could result in a consumer “push back” at some point. However, it has grown strongly and consistently in the improving economy since the recession, especially since 2011. In 2015 the growth even reached double digits at 11.8% but slowed to a more normal 6.5% in 2016. The impact on the industry is limited as it is by far the smallest segment, only accounting for 8.6% of total Pet Industry Sales…but that’s better than 7.4% back in 2009.

Here’s how the sales look on a graph:

2017 sales are projected to be $6.11B, up 6.1%. This increase is down a bit from last year’s 6.5% and 25% below the segment’s average annual growth rate. In regard to inflation, prices are up 0.2% since December and 1.4% from a year ago. Inflation is still ongoing in this segment. The big question is how much? If it stays near or below 2% then their real growth would be about the same as 2016 – 66%. Since price is increasingly a factor in spending, we’ll periodically update the CPI status for all segments during 2017.

Veterinary Services generate 23.9% of Total Pet Industry $ales.

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

OBSERVATIONS

  • Retail Growth
    • Sales are Up 32.5% since 2009
    • Annual growth rate 4.10%
  • Inflation is the problem
    • Annual average CPI increase 3.59%
  • Price increases account for 88.1% of Retail growth!
  • “Real Sales”
    • Consumers actually bought less in vet services in 2011, 2012, 2015 and 2016. They just paid more.
    • Sales have been stagnant since 2009 – average annual growth rate 0.49%
    • Even worse, 2016 “real” sales were about equal to 2010 (actually a little less). Consumers bought the same “amount” of Veterinary Services. They just paid almost $4B 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. Some NonPet Retailers are offering “no appointment” clinic days in their stores where Consumers can bring their pets for vaccinations and other procedures at radically discounted prices. 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:

Veterinary Services are projected to reach $16.62 B in 2016, up 4.2%.That seems a bit high considering recent performance. Inflation continues unabated as the CPI in February is already up 1.2% since December and 2.5% from a year ago. If the Veterinary Segment can hit the projected Sales number then they will likely avoid a third consecutive year with a decrease in services. However price increases would probably still account for 80+% of the increase in sales.

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

OBSERVATIONS

  • Retail Sales in 2016 ↑46.6% since 2009; Annual growth rate 5.62%
  • Inflation: Only 10.57% since 2009; 1.45% annual CPI increase.
  • “Real” Sales are 73.2% of the Total increase with an annual growth rate of 4.11%

The great Total Pet Retail numbers are a big reason why so many people are attracted to the industry. They look even better with the APPA’s adjustment in Food reporting to get a more accurate number, but the retail numbers are consistently good across all segments. However, as I’ve said so often, you need to look a little deeper into “petflation” and the actual amount of goods and services being sold. In recent years we have been struggling with deflation in Food and Supplies and inflation in the Veterinary Segment.

  • Deflation in the Supplies Segment has now paused for 2 consecutive years. Commoditization, channel migration, consumer value shopping and lack of innovation had created extreme competitive pressure which deflated prices. Consumers were buying more… but paying less. Recent small increases in the CPI have slowed the growth of retail sales slightly. We’ll see if deflation begins again or if this segment has truly reached a turning point.
  • After 2 years of deflation in the Food segment, prices rose slightly in 2016. However, the big news is the significant consumer move to Super Premium foods, which offer superior nutritional benefits at a higher price.
  • The Veterinary segment has the opposite pricing problem. Years of inflation have caught up. Consumers bought less in 4 of the last 7 yrs. 88% of growth is from price increases and 2016 “real” sales are slightly below 2010.

Here’s the graph of Total Pet Sales since 2009:

In 2017 the Total Industry is expected to increase 3.9% to $69.36B. This could be a little low if the Super Premium Food trend continues and expands and Supplies bounce back with improved growth. In terms of CPI Inflation, the 2016 rate of 1.39% seems to be a reasonable estimate. Recent years have seen real sales growth at about 3%. Combined with the CPI this would produce a Total Industry Increase of 4.4% to $69.7B. We’ll just have to wait and see what happens.

One last thought – Always look beneath the surface in your business numbers. The headlines may not tell the whole story!