2016 U.S. TOTAL PET SPENDING $67.29B…DOWN ↓$0.46B

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In 2016 Total Pet Spending in the U.S. was $67.29B, a $0.46B (0.7%) decrease from 2015. This was a marked contrast from the Total “Relevant” Retail Market (+3.6%) and the Top 100 U.S. retailers (+4.2%). However, the story gets a bit complex. In 2015, a $5.4B increase in Pet Food Spending, which came from a significant share of H/H’s upgrading to more premium products, drove a 5.3% total industry increase. However, to help pay for the increase, consumers cut back on Pet Supplies and Veterinary spending, -$2.6B. In 2016, consumers began value shopping for their expensive food and reduced Food spending by $2.99B. They spent most, but not all, of this “saved” money in other Industry segments.

  • A big $2.99B (-10.1%) cut back on Food
  • A 0.94B (+6.3%) comeback in Supplies
  • A $1.01B (+5.9%) turnaround in Veterinary
  • A business as usual $0.58 (+9.3%) gain in Services

Let’s see how these numbers blend together starting at the household level. In any given week, 27.1 Million U.S. Households (1/5) spend money on their Pets – food, supplies, services, veterinary or any combination.

In 2016, the average U.S. Household (pet & non-pet) spent a total of $519.57 on their Pets. This was a 1.6% decrease from the $528.17 spent in 2015. However, this doesn’t “add up” to a 0.7% decrease in Total Pet Spending. With additional data provided from the US BLS, here is what happened.

  • 0.9% more H/H’s
  • Spent 5.6% less $
  • 3.6% more often

If 65% of U.S. H/H’s are pet parents, then their annual H/H Total Pet Spending is $799.34. Let’s look at the recent history of Total Pet Spending. The rolling chart below provides a good overview. (Note: All numbers in this report come from or are calculated by using data from the US BLS Consumer Expenditure Surveys – The 2016 Total includes Veterinary Numbers from the Interview survey, rather than the Diary survey due to high variation)

  • In 2015, the Food upgrade began early and continued all year. The cut backs on Vet & Supplies spending happened immediately and were most noticeable in the first half while Food Spending was still building.
  • In 2016, we have almost the opposite scenario. The consumers began value shopping for food and this behavior became widespread by yearend. Veterinary spending saw the biggest spending lift in the first half while the more discretionary Supplies Segment didn’t “catch on” until later in the Year.
    • 2016: 1st Half ↑$0.55B;
    • 2016: 2nd Half ↓$1.01B

Let’s look at some Demographics. First, 2016 Total Pet Spending by Income Group. The chart has these highlights:

  • If outlined in green, sales were up in 2016
  • If outlined in red, sales were down in 2016
  • If highlighted in green, sales were up from 2014
  • If highlighted in pink, sales were down from 2014

  • < $70K – (63.0% of U.S. H/Hs); H/H Pet Spending: $346.68, (-3.7%);
    • Total Pet $ : $28.39B, ↓$1.45B (-4.8%) from…
      • Food ↓$2.05B
      • Supplies ↑$0.49B
      • Services ↑$0.40B
      • Veterinary ↓$0.29B 
    • A significant portion of this price sensitive group chose to upgrade their Pet Food in 2015. In 2016 they value shopped for food and some may even have backed away from the upgrade. Strong inflation is always an issue in their Veterinary spending. However, they did use a  portion of their food savings on Supplies & Services.
  • >$70K – (37.0% of U.S. H/Hs); H/H Pet Spending: $816.00, (–2.3%);
    • Total Pet $: $38.9B, ↑$0.99B (+2.6%) from…
      • Food ↓$0.94B
      • Supplies ↑$0.46B
      • Services ↑$0.18B
      • Veterinary ↑$1.29B
    • This group is growing, up 4.8% in 2016. This is significant because although they spent less per H/H, their total Pet Spending $ went up. They do have higher incomes, but they still value shopped for Pet Food. They also spent the savings and more on other industry products and services. This group is obviously very important as it represents 37% of U.S. H/H’s but accounts for 57.8% of the Pet Industry’s total revenue.
  • < $30K – (31.1% of U.S. H/Hs); H/H Pet Spending: $260.12, (-5.5%);
    • Total Pet $: $10.3B, ↓$1.02B (-9.0%) from…
      • Food ↓$0.45B
      • Supplies ↑$0.18B
      • Services ↓$0.01B
      • Veterinary ↓$0.73B
    • Two significant subsets in this group are H/Hs just getting started along with retirees. They saved money on food and spent it on Supplies. Service spending was unchanged. However, there was a huge drop in Veterinary Spending, largely from the older group. The strong inflation in this category affects lower incomes.
  • $30>$70K – (31.9% of U.S. H/Hs); H/H Pet Spending: $427.85, (-3.4%);
    • Total Pet $: $18.1B, ↓$0.43B (-2.3%) from…
      • Food ↓$1.60B
      • Supplies ↑$0.31B
      • Services ↑$0.41B
      • Veterinary ↑$0.44B
    • This low to middle income group is by necessity price sensitive but is also committed to their pets. They saved a lot of $ on Food but spent most of this money in the other segments.
  • $70>$99K – (14.0% of U.S. H/Hs); H/H Pet Spending: $617.43, (+3.0%);
    • Total Pet $: $11.5B, ↑$0.73B (+6.7%) from…
      • Food ↑$0.35B
      • Supplies ↑$0.48B
      • Services ↓$0.08B
      • Veterinary ↓$0.03B
    • This upper middle income group upgraded their Food and spent even more on Supplies. Spending in both of the Service Segments was basically unchanged. Their focus in 2016 was Pet Products.
  • $100K>$149K– (12.5% of U.S. H/Hs); H/H Pet Spend: $736.62, (-14.4%);
    • Total Pet $: $11.7B, ↓$1.46B (-11.1%) from…
      • Food ↓$1.08B
      • Supplies ↓$0.30B
      • Services ↓$0.08B
      • Veterinary ↓$0.01B
    • In 2015, this group was the Star of the income groups. In 2016, they had the worst performance with decreased spending in every segment. It is another indication that price/value matters to virtually everyone.
  • $150K> – (10.5% of U.S. H/Hs); H/H Pet Spending: $1184.71, (+2.4%);
    • Total Pet $: $15.7B, ↑$1.72B (+12.3%) from…
      • Food ↓$0.22B
      • Supplies ↑$0.28B
      • Services ↑$0.34B
      • Veterinary ↑$1.33B
    • Even these wealthiest Americans saved money on Food but they spent significantly more in all the other segments. Without the spending increase in 2016 from this group…
      • Veterinary spending would have been down -$0.32B, not up $1.01B
      • Total Pet Industry spending would have been down -$2.18B (-3.2%), not just -$0.46B (-0.7%)

Income Recap – There is a growing price sensitivity across America. In 2016, this was demonstrated by consumers across almost all income groups value shopping for Pet Food. This had a huge impact on Total Pet Spending.

Only 2 income groups increased their Pet Spending in 2016. The $70>99K group upgraded their Pet Food and increased their spending on Supplies. No other income group did that – a strong commitment. The Over $150K group saved money on Food but had a huge increase in the other segments – especially Veterinary!

Since 2014, the $30>99K income group – middle America, spent less, especially on Vet Services. The <$30K group, often the youngest and oldest H/Hs, increased their spending in all but Supplies. The $100K> group also had increases in all segments but Supplies. However, the big “heroes” are the $150K> group. In fact, without the $3.1B increase in spending by this highest income group, the Total Spending for the whole Pet Industry would have been down -$0.13B from 2014.

Next let’s look at the 2016 Total Pet Spending by Age Group

  • <25 – (5.6% of U.S. H/Hs); H/H Pet Spending: $237.28, (+13.7%);
    • Total Pet $: $1.86B, ↑$0.18B (+10.5%) from…
      • Food ↓$0.005B
      • Supplies ↑$0.04B
      • Services ↑$0.02B
      • Veterinary ↑$0.13B
    • These young Millennials upgraded their Food in 2015. Now they are expanding their commitment.
  • 25-34 – (16.1% of U.S. H/Hs); H/H Pet Spending: $420.02, (+9.5%);
    • Total Pet $: $8.89B, ↑$0.66B (+8.0%) from…
      • Food ↑$0.71B
      • Supplies ↓$0.56B
      • Services ↓$0.03B
      • Veterinary ↑$0.55B
    • These oldest Millennials are back on board with upgraded Food. Spending on Supplies suffered. However, they also demonstrated their commitment to their pets’ health with a big increase in Veterinary spending.
  • 35-44 – (16.6% of U.S. H/Hs); H/H Pet Spending: $512.67, (+9.7%);
    • Total Pet $: $10.95B, ↑$1.03B (+10.4%) from…
      • Food ↓$0.22B
      • Supplies ↑$0.69B
      • Services ↓$0.29B
      • Veterinary ↑$0.86B
    • This group has the largest families and is in the middle of building their careers. This makes them very sensitive to value. Pet spending had been declining. In 2016, they value shopped for food but markedly increased their spending on Veterinary and Supplies. This lifted them to the biggest increase of any group.
  • 45-54 – (18.6% of U.S. H/Hs); H/H Pet Spending: $620.10, (-3.9%);
    • Total Pet $: $14.88B, ↓$0.43B (-2.8%) from…
      • Food ↓$0.41B
      • Supplies ↑$0.19B
      • Services ↑$0.03B
      • Veterinary ↓$0.24
    • This age group has the highest income and a $1B spending increase in 2015.  In 2016, they value shopped for food and cut back on Vet spending. They spent more on Supplies but not enough to make up the difference.
  • 55-64 – (19.0% of U.S. H/Hs); H/H Pet Spending: $714.51, (-6.4%);
    • Total Pet $: $17.37B, ↓$1.23B (-6.6%) from…
      • Food ↓$2.61B
      • Supplies ↓$0.01B
      • Services ↑$0.66B
      • Veterinary ↑$0.72B
    • These Baby Boomers spent an extra $5B to upgrade their Food in 2015. Spending in the other segments paid a big part of the price – down $2.5B. In 2016, they looked for and got the best price on Food and that Spending fell by 26%. They then used about half of this saved Food money to get back on track with Veterinary Services and to radically increase their use of Pet Services.
  • 65-74 – (14.0% of U.S. H/Hs); H/H Pet Spending: $552.89, (-9.7%);
    • Total Pet $: $9.88B, ↓$0.41B (-3.9%) from…
      • Food ↓$0.80B
      • Supplies ↑$0.36B
      • Services ↑$0.29B
      • Veterinary ↓$0.25B
    • Many in this group are retired and about half are Baby Boomers. Like many other groups, they upgraded their Pet Food in 2015 but radically reduced this spending in 2016. They spent most of this saved money on Supplies and needed Pet Services. However, they are very price sensitive so they cut back on the rapidly inflating Veterinary Services.
  • 75> – (10.0% of U.S. H/Hs); H/H Pet Spending: $266.61, (-10.4%);
    • Total Pet $: $3.46B, ↓$0.27B (-7.2%) from…
      • Food ↑$0.34B
      • Supplies ↑$0.23B
      • Services ↓$0.09B
      • Veterinary ↓$0.75B
    • These committed oldest Pet Parents upgraded their Food and increased their Supplies spending. They paid for this by radically reducing their Veterinary spending. There was little change in frequency. They just spent less.

Age Group Recap: In 2016, the <45 groups increased their spending by $1.87B. Most of this lift came from a $1.54B increase in Vet Spending. These younger H/H’s got onboard with the healthcare aspect of Pet Parenting. The 45> H/H’s spent $2.33B less overall. There were ups and downs by segment for each older age subgroup. However, the totals for 45> were: Food, Down -$3.51B; Veterinary, Down -$0.52B; Services had a big lift +$0.89B and Supplies went Up +$0.57B.

Since 2014, only the Service Segment had an increase in all groups. Veterinary spending fell in the older groups while it gained in importance with the younger Households. In terms of products – Food and Supplies, value shopping came to the forefront. Consumers looked for higher quality at the best price. The 25>34 year olds were the only group with decreased spending from 2014. Their drop came only in Food & Supplies. They are the best “connected” of any group. It’s possible that the decrease came because they were ahead of the curve in value shopping, especially on the internet.

Take a look at some Key Demographic “Movers” for 2016. It should give you a better picture of the situation.

Summary: In building my research database, I gathered Pet Spending information for 12 demographic categories with over 80 specific segments. Nothing, including the Pet Industry, is simple anymore. Total Pet Spending was down -$0.46B (-0.7%), but only one of the 80+ individual demographic segments had a decrease in all Industry segments – the $100>149K income group. (last year’s best performer) There were 3 segments that had across the board spending increases: H/H’s that lived in Central Cities, H/H’s with 2 or more unmarried adults and no children and H/H’s where the highest education level was an Associates’ Degree. These are certainly not the demographic stereotypes of the “ideal” U.S. Pet H/H’s. However, their increases along with the increased spending by Renters, 4 people H/H’s, 2 earner H/H’s and in fact, the whole Under 45 group, reinforced the “youthful” nature of the best pet spending performances in 2016.

On the downside, the biggest decreases came from groups that are the usual Pet Spending Winners – suburban & rural H/H’s, College Grads, Married couples only or those with a child over 18 and even the 55>64 year old “Boomers”.

2016 was definitely “different” in Pet Spending Behavior. The Key factor was the huge drop in Pet Food Spending – a $2.99B decrease after a record shattering $5.4B increase in 2015. The 2015 increase came from a big share of H/H’s opting to upgrade the quality of their Pet Food. However, the 2016 spending drop didn’t primarily come from these consumers reneging on this commitment. It came from them seriously shopping for the best price – in a store or on the internet. This value shopping phenomenon appears to have caught on across virtually all income groups and will undoubtedly affect the future spending behavior across all industry segments, not just products. The Service Segments, especially Veterinary, have been strongly inflating. Price matters and it can and will affect which services are purchased and/or the frequency.

There is also no doubt that strong spending trends, up or down, in one segment affect the spending in others. Whether or not this is a conscious decision by Pet Parents is not known. However, the correlation is there – time after time.

I will wrap this up by saying that there appears to be only one “sure” demographic bet in Total Pet spending. The households with incomes over $200K (5.6%) will continue to increase their spending on their Pet Children.


 

2016 U.S. VETERINARY SERVICES SPENDING $18.12B…UP ↑$1.01B

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Veterinary Services is the second largest segment in the Pet Industry. A high inflation rate, over 3.5%, has put spending on a rollercoaster ride with today’s more price sensitive consumers. In 2016, spending was $18.12B – Up -$1.01B (+5.9%) from 2015. In this report, we’ll take a closer look at the demographic drivers of the increase. (Note: All 2016 numbers in this report come from or are calculated by using data from the US BLS Consumer Expenditure Interview Survey, rather than their Diary report. The low frequency of Consumers’ Veterinary Visits generated an exceptionally high variation on the data collected by the Diary method so I chose to use the data from their Interview survey. This seems to be a more logical and accurate way to track Veterinary Service Expenditures.)

Let’s get started. Veterinary Spending per H/H in 2016 was $139.84, up from $133.4 in 2015. (Note: A 2016 Pet H/H (65%) Spent $215.14) More specifically, the increase in total spending came as a result of:

  • 0.9% more H/H’s
  • Spending 1.2% more $
  • …3.8% more often

We’ll need to take a closer look. But first, the chart below gives an overview of recent Veterinary Spending.

After the precipitous drop in the first half of 2015, spending began to climb until it flattened out in the second half of 2016. The 2015 Food spending upgrade and then the subsequent savings accrued by value shopping both affected the availability of funds for spending on Veterinary Services. Now, let’s look at Veterinary spending by some specific demographics. First, here is a chart by Income Group with these highlights:

  • If outlined in green, sales were up in 2016
  • If outlined in red, sales were down in 2016
  • If highlighted in green, sales were up from 2014
  • If highlighted in pink, sales were down from 2014

Observations

At first glance, the increases from 2015 and even from 2014 seem to be driven solely by the higher incomes, over $70K, which is not unexpected with the high inflation rate. Although when you look closer, the story becomes more complex.

  • Over $150K (10.5% of H/H’s) – $5.18B, Up $1.33B (+34.6%) This highest income group is definitely the biggest driver as Veterinary Prices continue to inflate at a high rate.
  • $70K>150K (26.5% of H/H’s) – $6.22B, Down -$0.04B (-0.6%) The spending is essentially flat in this mid to upper income group, although it is trending downward.
  • $30K>70K (31.9% of H/H’s) – $4.27B, Up $0.45B (+11.6%) This is one bright spot in the below average income group. Among other demographics, it includes a number of younger H/H’s.
  • Under $30K (31.1% of H/H’s) – $2.44B, Down -$0.73B (-23.0%) Obviously, this group is price sensitive and includes many retirees who spent heavily in 2015, then pulled back in 2016.

Now, here is Veterinary Spending by Age Group

Observations

It is immediately obvious that in 2016 the younger generations stepped up in terms of Veterinary Spending.

  • <25 (5.6% of H/Hs) – $56.77 per H/H – $0.41B – Up $0.12B (+45.1%) This youngest group is beginning to recognize that being a Pet Parent is more than just buying Food and toys.
  • 25>34 (16.1% of H/Hs) – $105.67 per H/H – $2.21B -Up $0.55B (+33.1%) These Millennials committed both to upgrading their Pet Food and spending more on regular Veterinary care. They have a long way to go but they are on the right track.
    • 0.7% fewer H/Hs
    • Spent 31.3% more $
    • …2.0% more often
  • 35>44 (16.6% of H/H’s) – $143.51 per H/H – $3.08B – Up $0.86B (+38.5%) This group is under tremendous financial pressure as their human family responsibilities are peaking. They valued shopped for premium food but used the saved money and more to get the products and Veterinary care that their pet children needed. In fact, they exceeded the National Average on Veterinary spending per household for the first time since 2010.
    • 0.3% fewer H/Hs
    • Spent 24.1% more $
    • …11.9% more often
  • 45>54 (18.6% of H/Hs) – $169.48 per H/H – $4.08B – Down -$0.24B (-5.6%) This group has the highest income but they too value shopped for premium Pet Food. In Veterinary Services, they did not cut back on frequency. They just spent slightly less.
    • 0.8% fewer H/Hs
    • Spent 5.3% less $
    • …0.5% more often
  • 55>64 (19.0% of H/Hs) – $191.38 per H/H – $4.72B – Up $0.72B (+18.0%) This group is all Baby Boomers and until 2015 was the leader in Veterinary Spending. In 2015 they spent an extra $5B to upgrade their Pet Food and Veterinary Spending was severely reduced. In 2016, they didn’t get back to 2014 levels, but they regained the lead in Veterinary spending by sharply increasing the frequency of their clinic visits.
    • 2.3% more H/Hs
    • Spent 0.4% more $
    • …14.9% more often
  • 65>74 (14.0% of H/Hs) – $146.93 per H/H – $2.67B – Down -$0.26B (-8.6%) This group is very price sensitive. As Veterinary prices continue to inflate, they continue to cut back on both the amount spent and frequency of visits.
    • 5.0% more H/Hs
    • Spent 4.7% less $
    • …8.6% less often
  • 75> (10.0% of H/Hs) – $72.97 per H/H – $0.95B – Down -$0.75B (-44.1%) In 2015 this group of oldest Pet Parents made a commitment to their pets with a $1B increase in Veterinary Spending. Spending on Food was radically reduced. In 2016, they chose to upgrade their Pet Food and Veterinary Spending suffered. They have a strong commitment to their pets but not enough money to “go around”
    • 3.1% more H/Hs
    • Spent 44.0% less $
    • …3.3% less often

Now, let’s take a look at some other key demographic “movers” behind the 2016 Veterinary Spending increase.

Summary

With a high inflation rate, there is no doubt that higher income will always be a driver in this industry segment. However, we have seen many instances when a particular demographic group’s commitment to their Pets’ welfare overcomes financial pressures and they just spend the money. In 2015 it was the oldest consumers, the 75+ group. In 2016 it was the younger groups. Millennials and Gen Xers made the commitment to their Pet children and sharply increased their frequency of visits to Vet Clinics and the amount that they spent.

Because age is a major factor in this year’s lift in spending, you will see the impact across a variety of demographic measures. The younger crew is more likely to have a large number of  households living in the central city, renting their homes, with 4+ people and all their kids being under 18. All these demographics showed a significant increase in Veterinary Spending in 2016.

The over $200K group again made a significant contribution to the increase but it was even more important that all the adults in the household worked. All wage and salary earners and 2 earner households both made a greater positive impact on Veterinary spending than even the highest income group.

On the downside, the over 65, retired group cut back on Veterinary spending as they moved to upgrade their food. It was not all down for the older Americans in 2016 as the 55>64 yrs old households staged a significant comeback after the big drop in 2015, which came as a result of their Food upgrade.

It becomes increasingly obvious that the spending in all the Pet Industry segments is interrelated. A major spending trend in any one segment can and does, affect the others. In 2016 the most important spending behavior trend in the Veterinary Segment was the younger groups’ demonstration of a significant increase in commitment to Veterinary Services. This bodes well for the future.

2016 U.S. PET SERVICES SPENDING $6.84B…UP ↑$0.58B

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Non-Vet Pet Services is the smallest industry segment but it continues to grow and 2016 was another good year. Spending reached $6.84B, a 0.58B (9.3%) increase over 2015. However, you will see that, like the other Segments, consumer spending behavior is becoming increasingly more complex. (Note: All numbers in this report come from or are calculated by using data from the US BLS Consumer Expenditure Surveys)

Pet Services Spending per H/H in 2016 was $52.77, up from $48.70 in 2015. (Note: A 2016 Pet H/H (65%) Spent $81.18) More specifically, the increase in total spending came as a result of:

  • 0.9% more households
  • Spending 6.8% more $
  • 1.5% more often

The following chart gives a visual overview of recent spending on Pet Services.

The growth has been consistent since 2013 but the pattern changed in 2016. In 2014 & 2015, the strongest lift in spending occurred in the second half. In 2016, virtually all the growth came in the first 6 months as the second half was essentially “flat”. While prices didn’t drop, the inflation rate slowed markedly at mid-yr 2016. Price may be becoming more of a factor in this segment. Now let’s look at some specific spending demographics. First, by income group.

  • If outlined in green, sales were up in 2016
  • If outlined in red, sales were down in 2016
  • If highlighted in green, sales were up from 2014
  • If highlighted in pink, sales were down from 2014

As you can see, the 2016 increase is being driven by 2 disparate groups – H/H’s just below the average income of $74K and the upper tier, those making over $150K per year. All incomes, except the $70>100K group, have increased spending on Services since 2014.

  • $30>70K (31.9% of H/H’s) – $36.92 per H/H – $1.52B, Up $0.41B (+37.5%) – This group reduced food spending by $1.6B. It appears that they spent some of that savings on “needed” pet services and generated 70% of the total segment’s increase.
  • $150K> (10.5% of H/H’s) – $184.62 per H/H – $2.51B, Up $0.33B (+15.4%) – Income has always been important because convenience is a big driver in this the segment and convenience costs money. In fact, the 23% of U.S. H/H’s that have an income of $100K> account for 53% of total Services’ spending. It gets even more pronounced as the over $200K group (5.6% of H/H’s) spend 24% of Services $.
  • $70>100K (14.0% of H/H’s) – $50.22 per H/H – $0.91B, Down -$0.08B (-8.0%) – This group spent significantly more on Pet Products in 2016 and the spending on both of the Service segments suffered. They also have the only decrease in Services spending from 2014 which reflects the overall Pet spending behavior of these value shoppers.
  • <30K (31.1% of H/H’s) – $18.78 per H/H – $0.76B, Down $0.01B (-1.3%) – The Services spending by this segment has grown since 2014 so the need is there. However, they generally don’t have the money to spare.

Now, let’s look at spending by Age Group.

The Age demographic reflects a more definite spending pattern than Income. Older Americans, especially those from 55>74, strongly increased spending on Services. The younger groups, particularly the 35>44 Gen Xers cut back. It should be noted that as the Baby Boomers age, the number of H/H’s over age 55 is growing. While the number under age 54 is currently shrinking. There are fewer Gen Xers. The Millennials have greater numbers but they are slower in establishing independent financial households than any group since 1880.

  • 55>64 (19.0% of H/H’s) $76.69 per H/H – $1.89B – Up $0.66B (+54.0%) They spent $2.6B less on food in 2016 but used some of those savings to spend significantly more on Services. In fact, this group, which is all Baby Boomers, moved into the #1 spot in Services’ spending. They did it with 3% more H/H’s spending 35.7% more on Pet Services 11.0% more often.
  • 65>74 (14.0% of H/H’s) – $65.35 per H/H – $1.17B – Up $0.28B (+32.2%). The need for Pet services by this group is growing as they age but they are just entering retirement, which impacts their ability to pay. In 2016 they also reduced their spending on Pet Food which freed up money to spend more on both Services and Supplies.
  • 45>54 (18.6% of H/H’s) – $68.91 per H/H – $1.66B – Up $0.03B (+1.9%) This group has the highest income and for years has been the leader in Pet Services spending. Like many demographics, they spent less on Food in 2016. However, they did not use the savings to spend significantly more on Services.
  • 35>44 (16.6% of H/H’s) – $42.00 per H/H – $0.9B – Down -$0.3B (-24.6%) The most significant drop in Services spending came from this group. In 2015 they were in a battle for 2nd place in Pet Services Spending. After 2016, they were just barely holding on to 4th place. Their Services’ spending behavior really showed an “across the board” decrease in spending and frequency. The group is slightly smaller -0.3%. They spent 14.7% less money and did it 11.4% less often.
  • 25>34 (16.1% of H/H’s) – $41.97 per H/H – $0.88B – Down – $0.03B (-3.8%) Interestingly enough, the Pet Services Spending of these Millennials almost exactly matched that of the older 35>44 Gen Xers – In 2016, this group upgraded their Pet Food however the negative impact on Services spending was relatively small.
  • <25 (5.6% of H/H’s) – $13.69 per H/H – $0.1B – Up $0.02B – (+19.1%) Pet Services is of minimal importance to these youngest Pet Parents but their spending has remained relatively consistent.
  • 75> (10.0% of H/H’s) – $18.43 per H/H – $0.24B – Down -$0.09B (-16.5%) Taking care of our pets as we reach an advanced age is more difficult so Services can be important. However, money also becomes an issue. In 2016 this group chose to spend more on Food and Supplies

Finally, let’s take a look some other key demographic “movers” behind the 2016 Pet Services Spending increase.

Summary

Although some consumers definitely “need” the assistance of Pet Services, the spending in this segment is generally viewed as more discretionary than in any other. Convenience is often the key driver. Since convenience usually costs more money, income can make a significant difference in spending behavior. In 2016, households with incomes above $100k (20.5%) accounted for 53.3% of all Pet Services spending. This is up from 43.6% back in 2013 so the trend is actually becoming more pronounced. Not only current spending, but also the growth in the Services segment, is being driven by the over $100K households. Spending on Pet Services has increased $1.56B since 2013 and 86% of this gain came from the over $100K households.

With that being said, in 2016 there was also a window of growth in the lower middle income group, $30>69K. The effect of this can be seen in the small growth by a whole variety of demographic segments – married couples only, married couples with children of any age – as long as there were 4 or less in the total household, center city dwellers and those with an associates’ degree.

Age is also a big factor. The age groups from 45>74 are the only ones that spent more than the national average on Pet Services in 2016. They make up 51.6% of H/Hs and spent 69% of the total Services $, up from 63% in 2013. They also accounted for an incredible 90% of the Services’ spending increase since 2013. It should be noted that age and income go hand in hand with most of this group. The 45>54 group has the highest income and 55>64 ranks third. However, there is also an increasing need for Services in the 65>74 group, but with significantly reduced income. The 55>64 year old Baby Boomers saved some money in 2016 by value shopping for premium Pet Food. They spent some of this savings on additional services. The 65>74 group, with a growing number of boomers, did the same. You can see the impact of this older group in the increased spending by retirees, Homeowners with no mortgage and the 30>69K income group.

Service spending is driven both by convenience and need. The prices have been inflating at a 2.5% annual rate. With much of the spending coming from higher incomes, there has been little impact on spending. However, we have seen that price has become a major factor in the buying decisions made by virtually all Americans. In 2016 this could have finally impacted Services. While spending for those making over $200K went up $0.31B in 2016, the spending fell for the mid to upper income group making $70>149K per year. Also, the inflation rate fell to 1.5% in the second half of 2016 and has dropped even further to 1% in 2017. This is generally an indication of competitive pressure. Pet Services is the only Industry segment that has shown increased spending every year since 2011, with an average annual growth rate of 9.4%. We’ll see what 2017 brings.