Archive for year: 2019

Total Pet Spending in the U.S. reached $78.60B in 2018, a $1.47B (1.9%) increase from 2017. These figures and others in this report are calculated from data in the annual Consumer Expenditure Survey conducted by the US BLS. 2018 was a much more sedate year for the industry after the spectacular lift in 2017. However, it was only calm on the surface. When you look at each segment there was a certain amount of turmoil. The FDA warning on grain free dog food, the new tariffs on supplies and increased inflation in Veterinary all had a negative impact on spending in the second half. The good news was a record surge in Services Spending. 2018 also saw a $6.5B drop in spending by the Baby Boomers. Fortunately, other groups, especially the younger ones, stepped up. The situation certainly deserves a closer look.

The first question is, “Who is spending most of the $78+ billion dollars?” There are of course multiple answers. We will look at Total Pet Spending in terms of 10 demographic categories. In each category we will identify the group that is responsible for most of the overall spending. Our target number was to find demographic segments in each category that account for 60% or more of the total. To get the finalists, we started with the biggest spending segment then bundled related groups until we reached at least 60%.

Knowing the specific group within each demographic category that was responsible for generating the bulk of Total Pet $ is the first step in our analysis. Next, we will drill even deeper to show the best and worst performing demographic segments and finally, the segments that generated the biggest dollar gains or losses in 2018.

In the chart that follows, the demographic categories appear in ranked order by Total Pet market share from highest to lowest. We also included their share of total CU’s (Financially Independent Consumer Units) and their performance rating. Performance is their share of market vs their share of CU’s. This is an  important number, not just for measuring the impact of a particular demographic group, but also in measuring the importance of the whole demographic category in Spending. These are all large groups with a high market share. A performance score over 120% means that this demographic measure is extremely important in generating increased Pet Spending. I have highlighted the 6 groups with 120+% performance. (I rounded up for the 35>64 age group).

The groups are the same as in 2017, but some rankings have changed. Everyone Works and Education gained in share ranking and performance. Suburban gained share but not rank. The performance of the other 7 groups fell, indicating more balanced spending. Homeowners, All Wage & Salaried, Married Couples and 35>64 yr olds fell in share ranking.

1. Race/Ethnic – White, not Hispanic (86.3%) This is the 2^nd largest group and accounts for the vast majority of Pet Spending. Their performance rating fell slightly to 125%. This category now officially ranks #5 in terms of importance in Pet Spending demographic characteristics but they are in a virtual tie for 3rd place with 2 other groups. Although this demographic, along with age, are 2 areas in which the consumers have no control. Spending disparities are enhanced by differences in other areas like Income, CU Composition and homeownership. There are also apparently cultural differences which impact Pet Spending. Asian Americans are first in income, education and spending but last in Pet Spending as a percentage of total spending – 0.33% vs a national average of 0.98%.
2. # in CU – 2+ people (80.9%) It just takes two. Singles still have the lowest performance of any group, but they gained ground in 2018. This gain along with a drop in spending by 2 person CU’s caused the overall performance of 2+ CUs to drop to 114.7%. However, 4 person CUs also gained so only singles and 5+ person CU perform under 100%.
3. Housing – Homeowners (79.8%) Controlling your “own space” has long been a key to larger pet families and more pet spending. However, 2018 was a good year for renters. Homeowners had the biggest drop in both share and performance. Their 125.7% performance dropped them to 3rd place in terms of importance for increased pet spending. The homeownership rate for Millennials is substantially lower than previous generations when they were the same age but it is increasing. We also saw an impact from more older Americans “downsizing”.
4. Income – Over $50K (74.9%) Although Pet Parenting is common in all income groups, money does matter. With a performance rating of 138.9%, CU income is the single most important factor in increased Pet Spending. Their performance decreased from 141.6% in 2017. This was driven by a spending drop in the $50>99K range, along with a strong lift from those earning $30>49K.
5. Education – Associates Degree or Higher (69.5%) Income generally increases with education level and so does Pet spending. Education can also be a key factor in recognizing the value in product improvements, like super premium foods. In 2018 this higher educated group spent $4.9B more on their pets and moved up from 7^rd to 5^th in share of pet spending. This move also reflects the spending lift by the younger groups as they are generally more educated than Boomers+. At the same time High School Grads with some College substantially decreased their Pet spending so the performance of the Associates Degree and More group moved up from 120.1% to 127.5% – from 6th to 2nd place. This moves Education back to the forefront in terms of importance in Pet Spending.
6. Occupation – All Wage & Salary Earners (64.4%) – Pet ownership is widespread across all segments in this group. After a big lift In 2017, the blue-collar workers radically cut back their pet spending, especially on Food. All Wage & Salary Earners’ performance fell to 105.4%, by far the lowest of any group. It remains below 110% because there is still a big spending (and income) disparity within the group and the self-employed also had a great year!
7. # Earners – “Everyone Works” (63.8%) This is a composite of CU’s, regardless of size, where all adults are employed. This group’s ranking in share of overall pet spending jumped from 9^th to 7^th. Their performance increased from 108.2% to 110.3%. Younger CUs have more earners. You see one sign of their increased 2018 Pet $ right here.
8. Age – 35>64 (63.2%) This group’s share of spending fell from 6^th to 8^th because the 55>64 yr olds spent $4B less. The 35>54 group couldn’t quite make it up. The 65+ and under 35 groups also had a good year which pushed the 35>64 yr old’s performance down from 123.2% to 119.5%. However, they are still ranked 6th in overall importance.
9. CU Composition – Married Couples (62.2%) With or without children, two people, committed to each other, is an ideal situation for Pet Parenting. In 2018, primarily due to a drop in spending by married couples only CU’s, this group fell from 8^th to 9^th in share of spending. A big spending lift by singles also contributed to a decrease in performance from 128.1% to 125.2%. which dropped them from 3rd to 4th in importance.
10. Area – Suburban (61.0%) Homeownership is high and they have the “space” for pets. Their share of pet spending increased from 59.8%. Their performance also increased from 107.6 to 110.0%. The gain in share and performance was due to a great year for Suburbs over 2500 pop. All areas under 2500, both rural and suburban had a bad year. Rural areas were down $3.23B which drove Suburban performance up, despite a $2.7B increase by Center Cities.

Total Pet Spending is a sum of the spending in all four industry segments. The “big demographic spenders” listed above are determined by the total pet numbers. Although the share of spending and performance of these groups may vary between segments, every one of them generates a minimum of 58.2% of the spending in every segment. As we analyze individual segments, some of the groups will change to better reflect where most of the business is coming from.

The group performance is a very important measure. Any group that exceeds 120% indicates an increased concentration of the business which makes it easier for marketing to target the big spenders. Although Income over $50K is the clear winner, there are other strong performers. The high performance in 6 groups also indicates the presence of segments within these categories that are seriously underperforming. These can be identified and targeted for improvement.

Now, let’s drill deeper and look at 2018’s best and worst performing segments in each demographic category.

Most of the best and worst performers are just who we would expect and there are only 5 that are different from 2017. Changes from 2017 are “boxed”. We should note:

• Income is very important, which is shown by the 221.5% performance. All income groups over $70K have 100+% performance. However, there was also radically improved performance from the $30>49K group.
• Generation – Baby Boomers fell from the top spot for the first time since… However, the Gen Xers stepped up.
• Age – It was a youth movement. The 45>54 yr olds took over the lead from the 55>64 yr old Boomers and the under 25 group escaped the bottom to be replaced by the oldest Americans.
• Occupation – After a 1 year break, the high income Self-Employed Group moved back to the top.
• CU Composition – Although the performance of Married Couple Only fell, they are the winner for a 3rd consecutive year. Married w/children improved performance, but the big news is Singles moved up and out of the loser spot.

Except for the move from Boomers to GenX, there was little change in the “players”, so most expected winners are still doing well. In the next section we’ll look at the segments who literally made the biggest difference in spending in 2018.

We’ll “Show you the money”! This chart details the biggest $ changes in spending from 2017.

Now we will truly see the difference between 2018 and 2017. There are 24 Winners and Losers. 2 Losers and 1 Winner are repeats but 13 segments (54%) actually switched from the biggest increase to the biggest decrease or vice versa.

• Generation – The Boomer Bust had a widespread impact and the negatives were often incredibly big numbers.
  • Winner – Gen X – Pet Spending: $25.15B; Up $3.81B (+17.9%)
    • 2017: Baby Boomers
  • Loser – Baby Boomers – Pet Spending: $29.61B; Down -$6.48B (-18.0%)
    • 2017: Silent Generation
  • Comment – It took the contribution of many segments to generate overall positive numbers for 2018.
• Housing – Homeowners w/Mtge, the biggest segment in this category, won for the first time since 2014.
  • Winner – Homeowner w/Mtge – Pet Spending: $42.92B; Up $3.29B (+8.3%)
    • 2017: Homeowner w/o Mtge
  • Loser – Homeowner w/o Mtge– Pet Spending: $19.81B; Down -$3.37B (-14.6%)
    • 2017: Homeowner w/Mtge
  • Comment – Winner and loser flipped. W/O Mtge group was driven down by older workers with paid off homes.
• Area Type – Central City led the way in the movement to Urbanize Total Pet Spending – another flip.
  • Winner – Central City – Pet Spending: $23.59B; Up $2.66B (+12.7%)
    • 2017: Rural
  • Loser – Rural – Pet Spending: $7.05B; Down -$2.99B (-29.8%)
    • 2017: Central City
  • Comment – Areas under 2500 population – down -$3.23B. Areas over 2500 – up $4.7B.
• Education – HS Grads with some College gave back 88% of their 2017 gain and flipped from winner to loser.
  • Winner – BA/BS Degree – Pet Spending: $25.13B; Up $2.63B (+11.7%)
    • 2017: HS Grad w/some College
  • Loser – HS Grad w/some College – Pet Spending: $12.99B; Down -$3.47B (-21.1%)
    • 2017: Assoc. Degree
  • Comment – The BA/BS group led the way but groups with at least an Associate degree were up $4.87B. Higher Education, which generally generates higher income, has moved back up in importance in Total Pet Spending.
• Age – The 55>64 yr olds flipped again, but this time it was from winner to loser.
  • Winner – 35>44 yrs – Pet Spending: $14.46B; Up $2.31B (+19.0%)
    • 2017: 55>64 yrs
  • Loser – 55>64 yrs – Pet Spending: $17.50B; Down $3.95B (-18.4%)
    • 2017: <25 yrs
  • Comment: The 55>64 yr olds stood alone as every other age group increased their Total Pet spending.
• Income – No repeats or flips here but the over $150K group was up $3.12B
  • Winner – $150 to $199K – Pet Spending: $9.12B; Up $1.96B (+27.4%)
    • 2017: $100 to $149K
  • Loser – Under $30K – Pet Spending: $9.47B; Down -$1.44B (-13.2%)
    • 2017: $30 to $39K
  • Comment – Although the increase was definitely skewed towards higher incomes, it was a roller coaster ride. Over $100K – Up $3.45B; $50>99K – Down -$1.54B; $30>49K – Up $1.0B; Under $30K – Down -$1.44B
• Occupation – Another dual flip between the winner and the loser and we’re back to a more “expected” outcome.
  • Winner –– Self-Employed – Pet Spending: $7.24B; Up $1.83B (+33.8%)
    • 2017: Blue Collar Workers
  • Loser – Blue-Collar Workers – Pet Spending: $11.84B; Down -$2.77B (-18.9%)
    • 2017: Self-Employed
  • Comment – In 2017 Blue-Collar workers were the big movers. In 2018 they gave back 64% of their gain. In 2018 Self-employed workers gained 4% in CUs and 28% in Income and spent some of the extra $ on their pets.
• CU Composition – Married Couples only, the perennially best performing segment, flipped from winner to loser.
  • Winner –– Singles – $14.99; Up $1.64B (+12.2%)
    • 2017: Married, Couple Only
  • Loser – Married, Couple Only – $24.58B; Down -$1.72B (-6.5%)
    • 2017: Married Oldest Child <6
  • Comment – In 2018 there were 2 choices for increased pet spending. You needed to be single or a married couple with children of any age. Every other CU composition segment spent less.
• # in CU – This dual winner/loser flip is mind blowing and likely unprecedented.
  • Winner – 1 Person – Pet Spending: $14.99B; Up $1.64B (+12.2%)
    • 2017: 2 People
  • Loser – 2 People – Pet Spending: $33.36B; Down -$1.96B (-5.6%)
    • 2017: 1 Person
  • Comment: In a “normal” year 2 people is the magic number. In 2018 the rules changed. 1, 3 or 4 person CUs spent more. 2 and 5+ person CUs spent less. I guess this shows that married couples are “limited” to 2 children.
• Region – The Midwest held on to the winners spot in 2018.
  • Winner – Midwest – Pet Spending: $17.76B; Up $1.32B (+8.0%)
    • 2017: Midwest
  • Loser – Northeast – Pet Spending: $13.85B; Down -$0.97B (-6.6%)
    • 2017: West
  • Comment – Only the Northeast spent less. The other regions had a combined increase of $2.44B.
• # Earners – 1 Earner, 2+ CUs went from Winner to Loser. More earners usually means more income and spending.
  • Winner – 2 Earners – Pet Spending: $31.13B; Up $0.89B (+2.9%)
    • 2017: 1 Earner, 2+ CU
  • Loser – 1 Earner, 2+ CU – Pet Spending: $16.82B; Down -$1.23B (-6.8%)
    • 2017: No Earner, Single
  • Comment – CUs where everyone works were up $2.34B. Apparently the only situation that the # of earners didn’t matter in 2018 was for Singles – No Earner, Up $0.85B; 1 Earner, Up $0.79B.
• Race/Ethnic – Same Winner & Loser. White, Not Hispanics account for 86% of Pet $, but only 48% of the increase.
  • Winner – White, Not Hispanic – Pet Spending: $67.86B; Up $0.71B (+1.1%)
    • 2017: White, Not Hispanic
  • Loser – Asian American – Pet Spending: $1.51B; Down -$0.11B (-6.9%)
    • 2017: Asian American
  • Comment – Only Asian Americans spent less. Hispanics and African Americans spent a total of $0.86B more.

We’ve now seen the best overall performers and the “winners” and “losers” in terms of increase/decrease in Total Pet Spending $ for 12 Demographic Categories. Not every good performer can be a winner but some of these “hidden” segments should be recognized for their outstanding performance. They don’t win an award, but they deserve….

HONORABLE MENTION

Let’s start with the Millennials. The Gen Xers were the best performers and had the biggest increase, but the Millennials were not far behind with a $3.4B increase. You also see the impact of this youth “movement” in other honorees. The Under 25 group is officially getting in the Pet Parenting game with a 41% spending increase. Married with Children CUs had a $2.4B spending increase but the biggest lift, +45%, came from those with the youngest children and probably younger parents. Homeowners, with and without mortgages had a net spending drop of -$0.08B. Without Renters, the industry would have had no increase in Total Pet $. Renters are also more likely to be younger but there is also a growing number of downsizing older Americans in this segment.

College Grads get all the accolades. However, in 2018 the Associates Degree group was up $1.75B (+22.4%) with 111% performance. In Occupation, it is all about Managers or Self-Employed. The regular white collar workers had a $1.64B increase with 103% performance. Without the contribution of these 2 groups, 2018 Total Pet Spending was down.

Summary

Pet spending increased $12.8B (19.9%) from 2014 to 2017. It was primarily driven by the movement to upgrade to Super Premium Food, but it did not come easy. Value shopping, especially on the internet, and trading $ between segments created turmoil in the industry. Furthermore, 77% of the increase came in 2017. That brings us to 2018.

In 2018, the spending increase was minor, $1.47B (1.9%). This bland increase included a $2.3B drop Pet Food and a $2B record increase in Services. There were also outside factors at work. The FDA warning regarding grain free dog food and added tariffs to Supplies depressed spending in the second half of the year. However, the biggest change was a $6.5B drop in spending by the Baby Boomers. Fortunately, the other groups, especially the younger ones, stepped up to keep things positive but there were some changes in the spending demographics. The demographic groups responsible for most of Total Pet Spending were the same as those in 2017. However, there were changes in their spending share rankings. More Earners and Higher Education moved up in rank and performance, while 35>64 yr olds, Married Couples and Wage/Salary earners fell in rank. In fact, the performance of 7 groups fell indicating more balanced spending.

In terms of performance, the most influential demographic big spending groups remained at 6. However, Income now stands alone at the top with the other 5 clearly on a lower tier. Knowing the demographic segments in these categories allows industry participants to more effectively target their best customers and… those most in need of improvement.

The most significant change in the best and worst performing individual demographic segments was Gen Xers replacing Boomers at the top. The biggest changes occurred in $ and there was turmoil. 13 segments (54%) switched from Winner to Loser or vice versa. Overall, the youth movement was probably the key spending trend in 2018 and is reflected in the increased spending by a number of segments – not just age groups, including Center City, renters, singles and married couples with children. As always, to get to the heart of the matter and to more actionable data you must “drill down”. This will become even more apparent as we turn our analysis to the individual industry segments.

But before we go…The “Ultimate” Total Pet Spending Consumer Unit in 2018 consists of 2 people – a married couple, alone. They are in the 45 to 54 age range. They are White, but not of Hispanic origin. At least one of the them has an Advanced College Degree. They have their own business and are doing well  – over $200K. They’re working to pay off their house located in a lovely, small suburb of a metropolitan area with a population of about 3,000,000 in the West.

 

 

In 2018 Total Pet Spending in the U.S. was $78.6B, a $1.47B (1.9%) increase from 2017. This was a huge change from the $9.84B increase in 2017. There were a number of factors behind the smaller increase, including some outside the control of the industry. The FDA warning regarding grain free dog food wreaked havoc in the second half and the new tariffs on supplies flattened spending during that period. Veterinary prices turned up again resulting in a net “no gain” in the amount purchased by consumers. There was also a human factor as a significant number of adult children living with their parents moved out and took their pets with them. The Services segment saved the year with a spectacular increase in spending as consumers finally responded to the convenience of significantly more outlets. Here are the $ changes:

• A -$2.27B (-7.3%) drop in Food
• A $1.22B (+6.6%) increase in Supplies
• A $0.56B (+2.7%) increase in Veterinary
• An unprecedented $1.95B (+28.9%) lift in Services

Let’s see how these numbers blend together at the household (CU) level. In any given week, 27.2 Million U.S. CU’s (1/5) spent money on their Pets – food, supplies, services, veterinary or any combination – down from 28.4M in 2017.

In 2018, the average U.S. CU (pet & non-pet) spent a total of $598.41 on their Pets. This was a small 0.8% increase from the $593.63 spent in 2017. However, this doesn’t “add up” to a 1.9% increase in Total Pet Spending. With additional data provided from the US BLS, here is what happened.

• 1.1% more CU’s
• Spent 6.4% more $
• 5.3% less often

If 67% of U.S. CU’s are pet parents, then their annual CU Total Pet Spending was $893.15. Now, 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>2018 Totals include Veterinary Numbers from the Interview survey, rather than the Diary survey due to high variation)

• In 2015, the Food upgrade began, but early in the year consumers were trading $ in other segments to pay for it.
• In 2016, they were intensely value shopping for super premium foods. They started spending some of this saved money on Supplies and Veterinary Services, but not quite enough as spending fell slightly for the year.
• In 2017, spending took off in all but Services, especially in the 2nd half. Consumers found more $ for their Pets.
• In 2018 a spectacular lift in Services overcame the FDA issue in Food, tariffs on Supplies and inflation in Veterinary.

Now we’ll look at some Demographics. First, 2018 Total Pet Spending by Income Group

Only CU’s with an income over $100K increased Total Pet Spending and most of the increase came from $150K+.

Nationally: · Total Pet: ↑$1.47B   · Food: ↓$2.27B  · Supplies: ↑$1.22B  · Services: ↑$1.95B  · Veterinary: ↑$0.56B

• < $70K – (59.7% of U.S. CUs); CU Pet Spending: $383.10, -2.7%; Total $: $29.88B, ↓$1.49B (-4.8%) from …
  • Food ↓$1.53B
  • Supplies ↑$0.07B
  • Services ↑$0.47B
  • Vet ↓$0.50B

Money matters a lot to this group, especially to those on the low end. They were quick to dial back Food spending after the FDA warning. They also cut Veterinary spending and Supplies $ were essentially flat. However, the convenience of more readily available Services appealed to this group too.

• >$70K – (40.3% of U.S. CUs); CU Pet Spending: $914.90, +0.4%; Total $: $48.72B, ↑$2.96B (+6.5%) from…
  • Food ↓$0.74B
  • Supplies ↑$1.15B
  • Services ↑$1.49B
  • Vet ↑$1.05B

This group continues to grow, up 6.1% in 2018. This accounted for almost all of their spending increase. They also show that income remains the single biggest factor in Pet Spending. 40% of U.S. CUs spent 62% of Total Pet $. Although they too spent less on Food, without them, Total Pet $ would have been down $1.5B.

• < $30K – (28.7% of U.S. CUs); CU Pet Spending: $259.13, -9.5%; Total $: $9.47B, ↓$1.44B (-13.2%) from…
  • Food ↓$0.64B
  • Supplies ↓$0.05B
  • Services ↑$0.011B
  • Vet ↓$0.77B

This lowest income group demonstrated their price sensitivity in 2018. However, even they managed to eke out a small increase in Services spending.

• $30>$70K – (31.0% of CUs); CU Pet Spending: $493.91, +0.2%; Total $: $20.41B, ↓$0.06B (-0.3%) from…
  • Food ↓$0.89B
  • Supplies ↑$0.11B
  • Services ↑$0.46B
  • Vet ↑$0.27B

This low to middle income group is by necessity price sensitive, but is also committed to their pets. They  dialed back Food $. However, they had a strong increase in both Service Segments and a little in Supplies.

• $70>$99K – (14.5% of CUs); CU Pet Spending: $670.87, -3.9%; Tot $: $12.92B, ↓$0.49B (-3.6%) from…
  • Food ↓$0.69B
  • Supplies ↓$0.16B
  • Services ↑$0.13B
  • Vet ↑$0.24B

This upper middle income group reacted negatively to the situations in Food and Supplies. Pet Services saw a 13% increase and they did ramp up their Veterinary spending by 7%, but it was not enough to compensate.

• $100K>$149K– (13.1% of CUs); CU Pet Spend: $874.85, -2.9%; Tot $: $15.34B, ↑$0.32B (+2.2%) from…
  • Food ↓$0.80B
  • Supplies ↑$0.56B
  • Services ↑ $0.38B
  • Vet ↑$0.18B

They were the Star of the income groups in 2015 and 2017. In 2016, they had the worst performance with decreased spending in every segment. They are very responsive to industry trends, especially in Pet Food. They have the money to do what is needed or what they want, but are still very “value” conscious.

• $150K> – (12.7% of CUs); CU Pet Spending: $1238.40, +2.0%; Total $: $20.46B, ↑$3.12B (+18.0%) from…
  • Food ↑$0.75B
  • Supplies ↑$0.75B
  • Services ↑$0.99B
  • Vet ↑$0.6

Money Matters! They are the proof. They are the best performing income group in Total Pet Spending with 12.7% of U.S. Households generating 26.0% of all Pet $. They are also the only income group to increase annual Pet Spending every year since 2014. In fact they have furnished 55% of the Pet Industry’s $14.3B spending increase since 2014. There is more good news. This group is growing. They added 2.5 million CUs in 2018, a 17% increase. In fact their $3.12B was primarily fueled by additional CUs. It does demonstrate that pet spending grows with consumers’ income, especially once you reach the $150K+ level.

Income Recap –  The top 2 drivers in consumer spending behavior are value (quality + price) and convenience. That makes income , especially disposable income, very important. You see this in the huge difference in pet spending behavior at the opposite ends of the income spectrum and the increase/decrease spending dividing line of $100K. This line is somewhat deceptive as there were still values to be had in Veterinary and Supplies that appealed to most groups for much of the year. Plus, all groups responded to the increased convenience in Services. The biggest issue was in Food. The FDA warning about grain free elicited 2 different responses. Many in the <$150K groups dialed their spending back to more traditional foods, but the $150K+ group may have upgraded to even more expensive varieties. The trend to super premium has made income more important to this segment and more susceptible to big swings in spending.

Next let’s look at 2018 Total Pet Spending by Age Group

All groups but 55>64 yr olds spent more but the 35>44 yr olds led the way.

Nationally: · Total Pet: ↑$1.47B   · Food: ↓$2.27B  · Supplies: ↑$1.22B  · Services: ↑$1.95B  · Veterinary: ↑$0.56B

• <25 – (5.8% of U.S. CUs); CU Pet Spending: $355.36, +37.3%; Total $: $2.79B, ↑$0.81B (+41.0%) from…
  • Food ↑$0.50B
  • Supplies ↑$0.004B
  • Services ↑$0.18B
  • Vet ↑$0.13B

This youngest group stepped up in 2018, but they are the only group to increase Pet $ every year since 2014.

• 25-34 – (16.2% of U.S. CUs); CU Pet Spending: $489.10, +9.5%; Total $: $10.35B, ↑$0.79B (+8.3%) from…
  • Food ↑$0.20B
  • Supplies ↑$0.30B
  • Services ↑$0.31
  • Vet ↓$0.02B

These older Millennials are just starting their families and careers, so they are prone to trading $ between segments. However, they have shown slow, but steady total pet spending growth since 2015.

• 35-44 – (16.7% of CUs); CU Pet Spending: $659.61, +13.9%; Total $: $14.46B, ↑$2.31B (+19.0%) from…
  • Food ↓$0.05B
  • Supplies ↑$0.56B
  • Services ↑$0.96B
  • Vet ↑$0.84B

This group has the largest families and is in the middle of building their careers. This makes them very sensitive to value. However, they have a growing commitment to their pets. Their Food spending was basically unchanged, but they truly “stepped” up with big increases in the other segments, especially Services and Veterinary.

• 45-54 – (17.5% of U.S. CUs); CU Pet Spending: $769.35, +5.4%; Total $: $17.73B, ↑$0.56B (+3.3%) from…
  • Food ↓$0.32B
  • Supplies ↑$0.27B
  • Services ↑$0.43B
  • Vet ↑$0.19B

This group has the highest income and now occupies the top spot in Pet Spending. This was their second consecutive annual increase, which hasn’t happened since 2009, when the Boomers owned this group. They did this despite having 2% fewer CUs. Food spending dropped but all other segments were up, especially Services.

• 55-64 – (18.6% of U.S. CUs); CU Pet Spending: $709.69, -18,1%; Total $: $17.50B, ↓$3.95B (-18.4%) from…
  • Food ↓$3.51B
  • Supplies ↑$0.18B
  • Services ↑$0.03B
  • Vet ↓$0.64B

Here is the problem. These younger Baby Boomers had a huge drop in Food and Veterinary. They are committed to their Pets and react very strongly to changes in the market as is evident in the chart. Whether it is a hot new food trend, value shopping or an FDA warning, they get on board quickly and the “swing” can be $ Billions.

• 65-74 – (14.7% of U.S. CUs); CU Pet Spending: $587.88, +0.3%; Total $: $11.29B, ↑$0.42B (+3.9%) from…
  • Food ↑$0.75B
  • Supplies ↓$0.09B
  • Services ↑$0.006B
  • Vet ↓$0.24B

This group is growing, +4.2%. Many are retired and now 80% are Baby Boomers. They are careful with their money, but their commitment to their pets is very apparent as 1.05% of their total spending is on their companion animals. They didn’t follow the lead of the younger Boomers and cut back on Pet Food $. They spent 18% more, but they helped pay for it by reducing their CU spending in the Veterinary and Supplies segments.

• 75> – (10.4% of U.S. CUs); CU Pet Spending: $332.53, +9.5%; Total $: $4.48B, ↑$0.52B (+13.0%) from…
  • Food ↑$0.18B
  • Supplies ↔$0.00B
  • Services ↑$0.03B
  • Vet ↑$0.31B

Pet Parenting is more difficult, and money is tight for these oldest Pet Parents, but their commitment is still there. They increased spending in 3 of the 4 industry segments, with significant lifts in Food and Veterinary.

Age Group Recap: The age dividing lines in Total Pet Spending were very clear. The 55>64 year old Baby Boomers had a huge drop in spending which was driven by Food and Veterinary. However, the industry had a positive year due to increases by literally every other group. The younger groups, especially the 35>44 year olds had the biggest lift but the 65+ year olds also contributed a $0.94B increase.

Normally, we now look at the biggest winners and losers in each demographic category. However, this didn’t reflect the true situation in 2018. As we saw in the age group analysis, the “loser” was very defined. However, it took a group effort to produce a positive result. In our final graph, we’ll look at where these demographic spending lines were drawn.

Key Demographic “Dividing Lines” for 2018.

In 2018, 50 of 82 Demographic Segments (61%) spent more on their Pets. Usually, this would produce a strong increase, but the biggest single segment drops were so large that the overall increase was only 1.9%. Let’s look at the specifics:

Generations – Boomers have long been the biggest positive factor in the pet industry. In 2018, their influence turned negative as their spending fell -$6.48B. This affected a huge number of demographic categories. You see this over and over again in the downside entries on the chart. The younger generations led the way up, but in fact all other generations spent more on their pets in 2018 and ultimately overcame the “Boomer Bust”.

Age– The 55>64 yr olds are all Boomers. Every other group spent more, with the 35>44 yr olds leading the way, +$2.81B.

Education – As usual, higher education means higher income, better informed product decisions and more Pet $.

Housing – If you paid monthly for housing, you spent more on pets. 38% of Boomer CUs are homeowners w/no Mtge.

Area – This one goes against the norm. Lower population areas generally spend more on Pets. The 2018 situation reflects the continued urbanization of America, which is being driven both by the younger groups and downsizing older CUs.

Occupation – This demographic clearly reflects the importance of income in Pet spending.

CU Composition – We see the positive influence of both young and old groups here. Singles tend to be at either end of the age spectrum and Married, with children CUs are invariably younger. Married, w/no children CUs usually have “room” for more pet spending, but not in 2018.

CU Size – The usual phrase has been “It just takes 2” and 2 person CUs led the pack in spending. In 2018 it was “Any number but 2.”

Income – Income matters in Pet Spending with big disparities between high and low and a dividing line at $100K in 2018.

# of Earners – # of earners is not quite as important as total income, but it is definitely a factor. The “everyone works” CUs led the upside while 1 earner 2+ CUs, which generally have the greatest financial pressure, had the biggest decrease.

Racial/Ethnic – Hispanics and African Americans had a significantly greater increase in pet spending than the much larger White, not Hispanic group. This goes back to the generational differences, as these minorities are 33% of all Millennial and Gen Xer CUs, but only 22% of Baby Boomers.

Finally: The Pet Industry came out on top in 2018, but just barely. Besides normal concerns and trends, there were unusual outside issues like the FDA warning and tariffs. However, their impact was primarily on Baby Boomers, so the problem was simple. The solution, as we have seen, was not. Fortunately, virtually everyone else stepped up to produce a Pet Spending increase. I don’t know if this trend will continue but it is obviously time to take a deeper look at generational pet spending.

 

 

 

 

Except for 2017, Non-Vet Pet Services has shown consistent growth in recent years. However, in 2018, the performance was spectacular. Spending grew $1.95B to $8.72B, a (+28.9%) increase from 2017. The number of outlets offering Pet Services has been increasing at a rapid rate. It looks like that this commitment really paid off in 2018. In this report we will drill down into the data to see what groups fueled the biggest spending increase in history for this segment. (Note: All numbers in this report come from or are calculated by using data from the US BLS Consumer Expenditure Surveys)

Services’ Spending per CU in 2018 was $66.36, up from $52.06 in 2017. (Note: A 2018 Pet CU (67%) Spent $99.04)

More specifically, the 28.8% increase in Total Pet Services spending came as a result of:

• 1.1% more households
• Spending 21.11% more $
• 5.24% more often

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

You can see that spending flattened out for 18 months from mid-2016 through 2017. This was a time when competition was building in the marketplace through an increased number of outlets. Value was available but it didn’t increase the number of users. The existing users just paid less. However, the impact of increased availability and convenience really hit home in 2018. Despite a return to a more normal inflation rate, +2.4%, more people opted to use Pet Services and to do it more often. This generated by far the biggest spending increase in history for this segment, +$1.95B, which came from strong growth in both halves. Now, let’s look at some specific spending demographics. First, by Income Group.

In 2018, all income groups increased spending and the $30>70K group spent 38% more, but 70% of the increase came from $100K+ CUs. Services spending is still driven by income as the $100K+ group, 25.8% of CU’s, spends 59.8% of the $.

• <30K (28.7% of CU’s) – $20.45 per CU (+5.5%) – $0.77B, Up $0.01B (+1.4%) – This segment is getting smaller and money is tight. However, even they managed to eke out an increase in CU spending and overall Services $.
• $30>70K (31.0% of CU’s) – $40.33 per CU (+38.6%) – $1.64B, Up $0.46B (+38.4%) – This group dialed back their spending on Food but they spent the “saved” money on other segments, especially Services.
• $70>100K (14.5% of CU’s) – $57.26 per CU (+14.5%) – $1.09B, Up $0.13B (+13.1%) – They cut back spending on Products and focused on Services and Veterinary. However, their Services spending is still below the 2014 level.
• $100>150K (13.1% of CU’s) – $108.59 per CU (+19.8%) – $1.87B, Up $0.38B (+25.1%) – They cut back on Food $ and focused on the other segments, including a second consecutive strong increase in Services $.
• $150K> (12.7% of CU’s) – $200.45 per CU (+20.2%) – $3.34B, Up $0.99B (+41.8%) – They have long been the driver in Services Spending. After a minor dip in in 2017, they came back with a $1B increase in 2018.

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

Although we had to take the numbers to 3 decimal places, all age groups also spent more on Services in 2018. However, the increase was clearly driven by the <55 groups, especially the 35>44 year olds. Here are the specifics:

• 75> (10.4% of CU’s) – $30.69 per CU (+3.3%) – $0.42B – Up $0.03B (+7.3%) This group has the greatest need for pet services, but money is always an issue. The competitive values made a huge difference in 2017. In 2018 they “got a good price” and significantly ramped up their frequency. 3.9% more CU’s spent 15.7% less $, 22.5% more often.
• 65>74 (14.7% of CU’s) – $64.35 per CU (-3.6%) – $1.243B – Up $0.006B (+0.5%). This group is also very value conscious. They were the only age group to decrease CU Services spending. However, they grew in numbers and increased purchase frequency, so they eked out a small gain. 4.2% more CU’s spent 8.2% less $, 5.0% more often.
• 55>64 (18.6% of CU’s) $66.96 per CU (+2.8%) – $1.64B – Up $0.03B (+1.9%) In 2016 they took over the #1 spot in Services spending. They fell to #3 in 2018. Despite decreasing in CU’s, they basically held their ground while spending in the younger groups exploded. 0.9% less CU’s spent 2.1% more $, 0.7% more often.
• 45>54 (17.5% of CU’s)- $83.24 per CU (+32.1%) – $1.92B – Up $0.43B (+29.2%) This highest income group was the leader in Services spending until 2016. They spent a lot more in 2018, but not enough to beat the new leader, 35>44 yr olds. 2.2% fewer CU’s spent 36.6% more $, 3.3% less often.
• 35>44 (16.7% of CU’s) – $90.81 per CU (+85.4%) – $2.0B – Up $0.96B (+93.3%) Spending fell in 2016. They began to recover in 2017, but spending took off in 2018. The group grew in size. but their income grew even more, +11.3%. Obviously, they spent some of the extra $ on Services. 4.3%, more CU’s spent 73.5% more $, 6.9% more often.
• 25>34 (16.2% of CU’s) – $55.53 per CU (+35.2%) – $1.18B – Up $0.31B (+35.3%) In recent years this group of Millennials focused first on upgrading Food and then Supplies and Veterinary. During this time, Services’ spending has been essentially flat. In 2018 it was Services’ “turn” as 0.9% less CU’s spent 10.7% more $, 22.2% more often.
• <25 (5.8% of CU’s) – $42.19 per CU (+133.4%) – $0.32B – Up $0.18B – (+133.3%) With increases in every segment, this small, youngest group became a “player” in 2018. The same # of CU’s spent 137.5% more $, 1.8% less often.

Finally, let’s take a look some other key demographic “movers” behind the 2018 Pet Services Spending “Explosion”

The Services spending increase was very widespread. Overall, 72 of 82 total segments (88%) spent more. As you can see from the chart, 6 of 12 demographic categories had no segments that spent less on Services in 2018.  This included:

• Racial/Ethnic Groups
• Education Levels
• Age Groups
• Regions
• CU Sizes
• CU Compositions

The decreases were also small. The average drop was -$0.08B, driven by Boomers and Retirees who each fell -$0.17B.

Pet Services is the most discretionary of all the Industry Segments, so income is the most important factor in spending. Although the spending lift was widespread across income groups in 2018, the biggest driver was the $100K+ CU’s. This dependence on income is reinforced by some of the winners in our chart above, including:

• Managers & Professionals
• $150K+ Incomes
• 2 Earners
• College Grads

We also see key evidence of the other big Services Spending driver – younger groups, especially Gen Xers.

• Gen Xers
• 35>44 yr-olds
• Singles (A “rare” winner in any segment)

On the upside there were some of the “usual suspects”:

• White, Not Hispanic
• Center City – pet services began here
• 2 People – the biggest pet spenders

On the downside, here are 5 groups with decreased spending that have a common thread:

• Retirees
• 2+ CU, No Earner
• Homeowner w/o Mtge
• $30>39K Income (avg for retirees)
• Baby Boomers – A specific subgroup of Boomers drove the decreases

For the younger Baby Boomers Pet Services’ spending was basically flat, +$0.03B. It is the older Boomers, specifically those who have retired, that drove most of the few demographic spending decreases in the Services Segment.

2018 was a year like no other in the history of Pet Services Spending, To put the $1.95B increase into perspective, the previous biggest gain was +$0.8B in 2009. In fact, total Spending for the Services segment didn’t even break the $2 Billion barrier until 1999.

So, what caused this eruption in spending? We saw the impact in 2018, but it actually has been building for a few years. In an effort to counteract the impact of the internet and the mass market, more and more pet outlets began offering Pet Services. Afterall, “You can’t get your dog groomed online”. “One Stop Shopping” is always a great draw for consumers. Retailers began applying this to Pet Products and Services. Convenience…which included a rise in mobile grooming.

The “movement” didn’t show immediate positive results. We saw some turmoil in 2017, as Services Spending actually fell -$0.07B, quite a rarity. The increased number of outlets caused some pricing pressure. Consumers are always looking for a good deal. In 2017 they found it. It didn’t change their overall behavior or spending frequency, They just paid less.

However, in 2018 the convenience message finally hit home across the Market. Significantly more consumers began using Pet Services for the first time or more often. We’ll see if the Segment can maintain this new level.

 

 

 

In 2018 The U.S. Pet Industry had a year that can best be described as a mixed bag. Total spending increased to $78.6B, up $1.47B (+1.9%). Supplies and Veterinary had modest increases, while the Services Segment had the biggest growth in history. The big downside was that the Food Segment gave back half of the $ gain made in 2017. Here are the specifics:

• Pet Food – $28.85B; Down $2.27B (-7.3%)
• Pets & Supplies – $19.80B; Up $1.22B (+6.6%)
• Veterinary – $21.23B; Up $0.56B (+1.6%)
• Pet Services – $8.72B; Up $1.95B (+28.9%)

The industry truly is a “sum” of its integral segments and each segment has very specific and often very different buying behavior from the many consumer demographic segments. For this reason, we’re going to analyze each of the industry segments first. This will put the final analysis of Total Pet Spending into better perspective. Note: The numbers in this report come from or are calculated by using data from the current and past US BLS Consumer Expenditure Surveys. In 2018, this was gathered by the U.S. Census Bureau from over 42,000 interviews and spending diaries. The final data was then compiled and published by the US BLS.

We will start with the largest Segment, Pet Food (and Treats). In 2018 Pet Food Spending totaled $28.85B in the U.S., a $2.27B (-7.3%) decrease from 2017. This was the second largest decrease in history, trailing only the -$2.99B drop in 2016. It’s interesting that the 4 greatest changes in $, up and down, have all occurred in the last 4 years. The current trend in high priced, super premium foods magnifies the results of any changes in consumer purchasing behavior. As you recall, in earlier research we discovered a distinct, long term pattern in Pet Food Spending. In 2018 we broke that pattern. Take a look at Pet Food Spending since 1997 in full Retail Dollars and adjusted for inflation.

The pattern begins in 1997. Retail Pet Food Spending increases for 2 consecutive years then reaches a plateau year or even drops. There is a notable exception – the period from 2006 to 2010. During this time, there were two traumas which directly impacted the Pet Food Retail market. The first was the Melamine recall, which resulted in radically increased prices as consumers insisted on made in USA products with all USA ingredients. The second affected everyone – the great Recession in 2009. This was the first time that annual U.S. retail spending had declined since 1956. The net result was that the plateau period was extended to include both 2009 and 2010.

Pet Food seems to be driven by short term trends. A new food trend “catches the consumers’ attention” and grows…for 2 years. Then sales plateau or even drop…and we’re on to the next “must have”. The increases have become more pronounced in recent years and the whole situation has gotten even more complicated since 2014. That was the year that Food prices began an extended period of deflation due to an unprecedentedly competitive market.

After consumers choose to upgrade to a more expensive pet food, their #1 priority becomes, “Where can I buy it for less?” The internet entered this battle in a big way and “value shopping” was a major contributing factor in the big spending drop in 2016 and its influence continues to grow.

In 2017, according to the 20-year pattern, we should have been beginning a new trend. There was the expected lift in Pet Food spending but what was the new “must have” type! There were some possible candidates, but nothing stood out. A deeper dive into the data showed that the $4B increase in Pet Food spending in 2017 didn’t come from a new trend. It came from a deeper demographic penetration of Super Premium foods. Value shopping in a highly competitive market, especially on the internet had made Super Premium pet foods more accessible to a broad swath of consumers.

Like Pet Food, human behavior has changed over the years in regard to our pets. In the 90’s, Pet Owners became Pet Parents. Then, we took it a step further after the turn of the century and began truly humanizing our pets, especially our canine children. This movement is very accurately reflected in the evolution of Pet Food. We became increasingly more conscious of fulfilling the health needs of our pets, beginning with the first move to premium foods in 2004. This ramped up considerably after the Melamine scare in 2007. Now consumers read pet food labels, research ingredients and expect their pet foods to meet the same quality standards as the best human foods. We may have moved away from trends to a new standard – an expectation of excellence – nothing else will do.

Although the $ didn’t show it, now It appears that we may have  broken the pet food trend pattern in 2017. We definitely broke it in 2018. Let’s look at some specifics. In 2018, the average U.S. Household (pet & non-pet) spent a total of $219.92 on Pet Food. This was an 8.2% decrease from the $239.66 spent in 2017. This doesn’t exactly “add up” to the 7.3% decrease in total Food Spending. With additional data provided from the US BLS, here is what happened.

• 1.0% More U.S. households
• Spent 4.0% less $
• 4.4% less often

By the way, if 67% of U.S. CU’s are pet parents then their annual Pet Food Spending is $328.24. Let’s look at a rolling history of Pet Food Spending since 2013.

Pet Food Spending fell in 2013 and continued down in the first half of 2014. This corresponds to the beginning of a  general deflation which continued through 2018 in this segment. During deflation, in a “need” category like Food, you don’t buy more, you just spend less. The spectacular lift in Pet Food Spending beginning in the second half of 2014 came from a fundamental change in spending behavior. Consumers began to buy more Super Premium Food and Med/Supplements in Treat form, all of which cost more.

An increasing number of consumers chose to upgrade their Pet Food and spending peaked in 2015. Then spending began to fall in the first half of 2016 and the decline intensified in the second half. At first it appeared that consumers were backing down on the upgrade. As it turns out, they were just applying the #1 driver in their buying behavior since the great recession – price (75%). They began shopping for value and there were plenty of bargains to be found.

In 2017 Pet Food spending registered the second largest increase in history. It was time to begin a new “trend”, but this big lift was unusual. Usually the biggest increase comes in the 2^nd year of a cycle. There also was no clear product focus.

Looking deeper into the data we discovered that it was not a new food trend. It was a deeper demographic penetration of Super Premium. Higher education and higher income have driven recent food trends. However, the highly price competitive market had made these high-priced foods more accessible to Blue Collar workers and those without college degrees. Baby Boomers in these groups, with their strong commitment to their pets, responded in a big way, +$3.8B.

After such a big lift in year 1, the 2018 increase was expected to be small and the first half started out that way, +$0.25B. Then the bottom dropped out in the second half of the year as spending fell -$2.51B, the biggest half year decrease in history. In July of 2018 the FDA issued a warning about the possible connection between DCM and grain free dog food. This was frightening and one suggestion was to move back to standard foods. A coincidence? Let’s look closer.

Before we drill into the spending data let’s look at another source of industry information – Global Pet Expo and SuperZoo. The number and nature of the exhibitors at these shows reflects the trends in the overall market and can even foreshadow things to come. Let’s look at the average exhibitor count for 3 specific Dog and Cat product categories:

1. Food – 2019; Avg: 145 Exhibitors, Up 35.5% since 2014.
2. Treats – 2019; 369 Exhibitors, Up 55.7% since 2014. Now the #1 Product Category.
3. Meds/Supplements & Therapeutic Devices – 2019; 278 Exhibitors, Up 102.9% since 2014. This category now ranks second. Plus, meds/supplements in treat form help drive treat to the top spot.

The growth of the Food and Treat categories reflects the rise of Super Premium. Many new companies joined into the fray, creating a very competitive market. Mergers/acquisitions stabilized the exhibitor count but it’s still competitive.

The growth of the meds/supp. category has been spectacular. Together, these 3 categories reflect the Pet Parents’ absolute number 1 concern – the health and wellbeing of their Pet Children, which starts with the quality of their food.

Now let’s look at some specific 2018 Pet Food Spending Demographics. First, we’ll look at income. Prior to 2014 it was a less dominant factor in Food spending. However, the move to Super Premium has brought it more to the forefront. In 2017, with competitive pricing and the consumers’ commitment to pet health, Super Premium drove spending growth in every major income group. In this chart we will show the annual spending from 2013 through 2018. This will put the 2018 numbers into better perspective .

2018 National Numbers: $219.92 per CU (-8.2%); $28.85B; Down – $2.27B (-7.3%); 2013>2018 – Up $5.89B (+25.7%)

All of these large Income groups, except the over $150K, decreased Pet Food spending in 2018. Prices deflated 0.02% in 2018 which indicates that income is not the major demographic factor in the spending drop. Here are 2018 specifics:

• Under $30K: (28.7% of CU’s) – $121.07 per CU (-9.2%) – $4.26B – Down $0.64B (-7.3%). Obviously, this group is very price sensitive. It is also getting smaller. The number of CU’s was down 3.9% in 2018 and 12.5% since 2013. This decrease masks the true food situation. While their Total Food spending is lower than 2013, their Avg CU spending on food is up 13.6%. They are still committed to their pets.
• $30K>$70K: (31.0% of CU’s) – $202.67 per CU (-8.9%) – $8.55B – Down $0.89B (-9.5%). The spending for this group is actually the closest match to the national pattern. They had the biggest dollar decrease but it gets more interesting when you look deeper. The $30>39K group’s pet food spending was up +$0.95B while the $40>$70K group was down $1.84B, 79% of the total Pet Food Spending decrease.
• $70K>$99K: (14.5% of CU’s) – $270.32 per CU (-13.6%) – $5.28B – Down $0.69B (-11.6%). The Pet Food Spending for this group has been very stable. In 2017, they got “on board” with the Pet Food upgrade but ceded 2/3 of the 2017 increase in 2018.
• $100K>$149K: (13.1% of CU’s) – $285.77 per CU (-19.1%) – $5.18B – Down $0.8B (-13.3%) They have a high income but also large families, so they are very value conscious. Except for the dip in 2014, their spending matches the national pattern. In 2017, they had the largest increase in Pet Food spending. In 2018, they gave half of it back.
• $150K> (12.7% of CU’s) – $346.07 per CU (+5.2%) – $5.57B – Up $0.75B (+15.6%). 92% are college grads so they saw the value of Super Premium food very early in the trend. There is also some hidden turmoil in this segment. The $150>199K segment is up $1.08B, the single biggest lift in the income groups. While $200K> is down

In 2017, the increase in Pet Food spending was widespread across incomes. In fact, groups totaling 84.7% of all U.S. households spent more on Pet Food. In 2018, the decrease was also widespread, as 77.0% of all households spent less on Pet Food. The 2 groups that spent more are widely separated, $30>39K and $150>199K. This indicates that while the reduction in Food spending affected most Americans, it is not directly tied to income.

Now, Spending by Age Group…

2018 National Numbers: $219.92 per CU (-8.2%); $28.85B; Down – $2.27B (-7.3%); 2013>2018 – Up $5.89B (+25.7%)

For Pet Food spending it was essentially a battle. The youngest and oldest were on the plus side while the middle groups spent less. Unfortunately, with the 55>64-year olds leading the way, the downside won.

• 55>64 (18.6% of CU’s) – $269.94 per CU (-34.7%) – $6.73B – Down $3.51B (-34.3%). This group (all Baby Boomers) has been at the forefront of recent major spending swings. In 2015 many of them upgraded to Super Premium. In 2016 this group looked for and found a better price. In 2017 they led a deeper penetration of the upgrade. Now, in 2018 they have given back 2/3 of the gains made since 2014. It’s complicated story but this group was a key to Pet Food spending in 2018.
• 45>54 (17.5% of CU’s) – $255.62 per CU (-3.6%) – $5.89B – Down $0.32B (-5.2%) This group is #1 in income and total CU expenditures. Up until 2015 they were #1 in Pet Food spending. They bought premium food but didn’t fully participate in the 2015 upgrade. They did take advantage of the 2016 discounts and spent less. In 2017, they became more committed to super premium and their Pet Food Spending reached a record high. In 2018 they lost CU’s (-1.6%) and spent slightly less on Pet Food.
• 35<44 (16.7% of CU’s) – $210.56 per CU (-5.6%) – $4.59B – Down $0.05B (-1.2%) They are 2^nd in income and expenditures but have the biggest families. Value shopping is a way of life and their spending pattern tends to be less volatile. They opted in for Super Premium in 2017 and basically held their ground in 2018.
• 65>74 (14.7% of CU’s) – $251.76 per CU (+15.6%) – $4.80B – Up $0.75B (+18.5%). This group is 80% Boomers. They are starting to retire but many are still working (0.7 per CU). They do generally have reduced family responsibilities and turn their attention to their pets, spending 1.05% of total expenditures on their pets.
• 75> (10.4% of CU’s) – $144.89 per CU (+7.7%) – $1.91B – Up $0.18B (+10.2%). Both the effort and the expense of Pet Parenting become issues as we reach 75+. However, they remain committed to their Pets and high quality food.
• 25>34 (16.2% of CU’s) – $182.49 per CU (+8.9%) – $3.82B – Up +$0.2B (+5.5%) In recent years their spending pattern has foreshadowed the overall market for the following year. The indication was that they were first to “buy in” on a new trend – from Super Premium to Value shopping. Let’s hope this continues as their spending was up in 2018 which would indicate spending will be up in the overall market in 2019.
• <25 (5.8% of CU’s) – $135.40 per CU (+69.0%) – $1.12B – Up +$0.5B (+80.2%) The performance of this smallest group was spectacular. This behavior goes beyond pet food. They increased in CU count by 6.6%. Where did all these households come from? These young Millennials were living with their parents. They moved out and took their Pets with them. Now, they are responsible for the pet related expenses, including high quality food. It’s not an equal movement of dollars because these internet connected youths will definitely buy things much cheaper than their parents. However, it undoubtedly contributed to the spending drop by the 55>64-year-old Boomers.

We need to drill deeper. Let’s take a look at the segments with the biggest change in spending in 12 categories. The segments that are outlined “flipped” from 1^st to last or vice versa from 2017. The red outline stayed the same.

2018 was the year of the “flip”. Four of 2017’s biggest losers moved to the top in 2018. The South maintained their position at the bottom. However, every other 2017 demographic category winner became the biggest loser in 2018. This is quite unprecedented. We saw that the spending drop was very widespread across income groups but was much more limited in terms of age – primarily the 55>64-year olds. Looking at the specific demographics we can identify…..

….The biggest “losing” household in Pet Food Spending for 2018.

It is a White, non-Hispanic, Baby Boomer couple living alone. Their last Millennial child finally moved out. They got job training after high school but only one of them still works, in a blue-collar job and earns about $70K. They live in a small community, under 2500 people. They have paid off their home mortgage and are looking forward to retirement.

There were multiple factors behind the drop in Pet Food Spending in 2018. Here are 3 that were definitely impactful:

1. The July 2018 warning by the FDA about a possible link between grain-free dog food and DCM. Although there is no definitive link, many pet parents, especially new converts to grain free, apparently switched back to foods with a standard mixture made by a well-established manufacturer.
2. Value Shopping – This behavior is here to stay, and its impact is noticeably magnified by the internet.
3. Millennials moving out – A Pew research study showed that 34% of 25+ yr old Millennials still lived with their parents. In 2018, Millennials began to move out, gaining over 2 million CU’s. They took their pets with them but now they are responsible for expenses. However, it wasn’t an equal $ swap because they spent less ….on the internet.

2018 was a complex and “trying” year in the Pet Food segment. We broke a spending pattern of 20 yrs. Let’s hope that the 25>34-year old’s record of predicting next year’s market stays true. If so, Pet Food $pending will increase in 2019.

 

 

 

 

The U.S. Retail market reached $6.03 Trillion in 2018 from all channels – Auto Dealers, Supermarkets, Restaurants, Online retailers and even Pet Stores. This year’s increase of $282B (+4.9%) topped last year’s increase of $235B. The increases have been steadily growing since 2015. One factor is that rising fuel prices have put Gas station revenue back on the plus side. (Data courtesy of the Census Bureau’s monthly retail trade report.)

In this report we will focus on the top 100 Retailers in the U.S. Market. These companies are the retail elite and account for 38% of the total market. The vast majority also stock and sell a lot of Pet Products. The retail market is constantly evolving which produces some turmoil – mergers, acquisitions, closures. As you will see, the Top 100 are not immune. The report does contain a lot of data, but we’ll break it up into smaller pieces to make it more digestible. All of the base data on the Top 100 comes from Kantar Research and was published by the National Retail Federation (NRF).

We’ll begin with an overview:

Observations

• The total Retail Market grew $282B in 2018 (+4.9%). In 2017 it was +4.3% and in 2016 +3.2%. Acceleration is slowing
  • The Top 100 grew $104B (+4.8%). This is better than last year’s +4.3% but slightly less than the total market.
  • The Top 100 generates $2.3 Trillion in revenue, 37.7% of the total U.S. retail market – the same as last year.
• Let’s make the data a bit more relevant. If you remove the revenue from Auto, Restaurant and Gas Stations, the “targeted” retail market for the Pet Industry is $3.6 Trillion – 59% of the total market. By the way, the slight drop in share is due to the 13% increase in Gas Station revenue.
  • If we also remove Restaurant & Gas Station $ from the Top 100, the remaining $2.1T is 34.7% of the total market.
  • … and 58.6% of the $3.6 Trillion “target” market.

The Top 100 is critically important and generally outperforms the overall market, but not in 2018. The difference was very slight. Quite frankly Gas Stations and Restaurants outside the Top 100 performed better than the biggest chains. Remember, the Top 100 is really a contest. Every year companies drop out and new ones are added. This can be the result of mergers, acquisitions or simply surging or slumping sales. Here are some changes of note in 2018:

There were 3 companies in various categories that fell off the list.

◦  Toys R Us  (Closed)

◦  SUPERVALU (Moving out of retail)

◦  Petco (last year #100 – in 2018, didn’t make the cut)

There were 3 additions, primarily due to strong sales increases.

◦  Wayfair – sales surged at this internet retailer and it entered the list at #77

◦  Camping World moved into the #93 spot

◦  Stater Bros. (made it back after dropping off the list in 2017)

Now let’s start “drilling down” into the specifics of the 2018 Top 100. Here’s a summary of Regular and Online Retailers versus the bundled total for Restaurants & Gas Stations.

• Regular & Online Retailers have 58.8% of the stores but 92.1% of the business, up from 91.9% last year.
• Most of the increase (96.5%) is coming from Regular/online retailers. They are up 5.2% compared to +4.5% in 2017.
• Restaurant sales were up $3.6B (2.2%) in 2018 and Gas Stations turned positive, +0.15B (+1.1%).
• The overall Store count was up +0.8% after a -0.9% drop in 2017. The lift was driven by regular retailers (+1.4%). Restaurants were basically flat (+0.05%) and gas stations were down -2.0%.

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.

• Of 82 possible companies, 70 are selling some mixture of Pet Products in stores and/or online. (up from 67 in 2017)
  • Their Total Retail Sales of all products is $1.96 Trillion which is…
    • 93.8% of the total business for Regular & Online Retailers in the Top 100
    • 32.6% of the Entire $6.03T U.S. Retail market – from 70 Companies who sell Pet Products.
  • 56 Cos., doing $1.83T in sales are selling pet products off the retail shelf in 142,982 stores – 1000 more than 2017.
    • As you can see by the growth in both sales and store count, in store is still the best way to sell pet.
  • Online only is another story and the story gets complicated
    • Amazon includes Whole Foods, which has stores so the Amazon $ are in the “Pet in Store” numbers.
    • Many traditional Retailers who only sell Pet Products online are losing market share. However, internet only retailers, like Wayfair are showing strong growth

Pet products are an integral part of the strongest retailers and are widespread across the entire U.S. marketplace. Of the Top 100, 143,000 stores carry at least some pet items at retail. There are thousands of additional “pet” outlets including 20,000 Grocery Stores, 10,000 Pet Stores, 16,000 Vet Clinics, 5,000 Pet Services businesses and more. Pet Products are on the shelf in over 200,000 U.S. brick ‘n mortar stores… plus the internet.

Before we analyze the whole list in greater detail let’s take a quick look at the Top 10 retailers in the U.S.

• They did $1.2 Trillion in Sales
  • 52.9% of the Top 100’s $ales
  • 19.9% of Total U.S. Retail $
• It’s the same list as 2015>2017, but 4 changed rank
• Amazon moved up to 2^nd place
• Albertsons had the only decrease  and it was minor

In the next section 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.

I have not done a lot of highlighting however:

• Pet Columns ’18 & ‘17 – a “1” with an orange highlight indicates that products are only sold online
• Rank Columns – Change in rank from 2017: (Note: Acquisitions, Divestitures and Corporate Restructuring can cause big changes in ranking.)
  • Up 4-5 spots = Lt Blue; Up 6 or more = Green
  • Down 4-5 Spots = Yellow; Down 6 or more = Pink

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

Observations

• Drug is still in turmoil with acquisitions a big factor. We see the results of the Walgreens’ acquisition of hundreds of Rite Aide stores.
• The Traditional Department store segment continues its overall decline. The “high end” Nordstrom stores were an exception with gains in both sales and number of outlets.
  • Macy’s stabilized somewhat in 2018, but Sears sales and store count plummeted.
  • Although all carry a few pet items, generally online, this channel has never fully embraced Pet Products.
• Much of the growth in the Convenience Store Chains in the Top 100 in recent years has come through acquisitions. This continued in 2018.
• Military Exchanges/Commissaries have added locations in recent years, which fueled the growth in sales. In 2017 they began reducing the number of Army/AF Exchanges. This trend continued in 2018 and for the second consecutive year they also opened no new Commissaries. Sales were essentially flat.
• Auto Parts Stores have become more stable as all chains increased their store count. Overall, sales were up slightly but it came from a mixed bag, ranging from O’Reilly’s +5.8% to AutoZone’s down -0.2%.
• Among Apparel retailers, the value outlets continue to show strong growth. All three of these chains carry pet products. Cosmetics stores are also showing surprising strength. Unfortunately, they don’t carry any pet items…yet.

Observations

• Amazon continues to drive the evolution of U.S. Retail. They moved into the #2 spot in 2018 and sales are up 129% in 5 years. Since the acquisition of Whole Foods in 2017 they also have a brick ‘n mortar presence in the market;
  • All three of the Phone People had sales percentage increases that exceeded Amazon’s – a good year!
  • QVC acquired HSN in 2017 which moved them up to #40. Sales were only up 1.8% in 2018 and they fell to #41.
  • In 2018 we officially lost Toys R Us, a long-time fixture in the Top 100.
• Signet Jewelry’s sales fell 3.4% in 2018 which follows 3.9% drop in 2017.
• Mass Merchants have 2 of the 4 largest volume retailers in America – Wal-Mart and Costco. Recently, these two companies have driven the growth in this channel and 2018 was no exception, but all companies did increase sales.
  • Wal-Mart had a 3.4% increase in sales which is slightly above last year’s 3.3%. Their business is mixed as SuperCenters continue to grow and their online sales are taking off. However, “regular” Discount Department Stores are losing market share. These trends impact the overall business in both Wal-Mart and Target.
  • Target posted a second consecutive sales increase in 2018, after 3 years of flat or declining revenue.
  • Costco continues its strong growth (+9.0%), building new stores and increasing sales – both in store and online.
  • BJ’s turned it around in 2018. Sales were up 4.5% after a string of annual declines since 2013.
• All Home Improvement/Hardware companies increased sales, but overall, the category dialed back its growth a bit. There was a drop in total store count which was driven by Lowe’s and True Value. Home Depot was up over $5B (+5.8%) in revenue but Lowe’s, another Top 10 retailer, was up $1B, only +1.5%.
• All Home Goods Companies but Bed Bath & Beyond increased sales. However, 67% of the overall increase came from Wayfair who entered the Top 100 for the first time at #77.
• Tractor Supply was up 11.4% which exceeds their average annual growth rate of 9.4% since 2013.

Observations

• Supermarkets – $391B in Sales; 15 Companies; 15,000 stores; All Selling Pet Products. This is a very important group for the Pet Industry. With the highest frequency of consumer visits of any channel, the competition is fierce. The mergers and acquisitions have slowed. Kroger sold off 800+ convenience stores which accounts for the overall drop of 1000 stores in the category. SuperValu exited the retail grocery business and Stater Bros returned to the Top 100.
  • Southeastern Grocers filed for bankruptcy which resulted in store closures and sharply reduced sales.
• Small Format Value Stores: Remember, this retail channel does more business than Traditional Department Stores.
  • As expected, Dollar General increased its lead over Dollar Tree in Sales, Sales Increase and Store Count.
  • Dollar Tree continues to increase sales and number of stores, but its growth rate has slowed.
  • Big Lots cut back in stores and sales turned slightly negative, after 3 consecutive years of small increases.
  • This retail channel continues to grow in numbers and popularity. They are committed to Pet Products and their focus on value appeals to today’s ever more price conscious consumers. Plus, they are easy to shop.
• Pet Stores – After the huge lift in sales caused by their acquisition of Chewy in 2017, PetSmart’s sales returned to a more normal growth rate, +4.7%. Petco made big news in 2016 by qualifying for the Top 100 for the first time at #98. This was viewed as evidence of the strength of the U.S. Pet Industry. They had a fair year in 2017 (+3.7%) but they fell to #100. In 2018, they just couldn’t keep up with the competition from 70 companies in the Top 100 selling pet products and they fell out of the Top 100. Perhaps, they will find a formula to make it back into the club.
• Office Supply Stores – This channel continues its decline as Consumers are increasingly moving to online ordering.
• Sporting Goods – Sports Authority closed in 2016 but acquisitions produced 3 Sporting Goods companies in the 2017 Top 100. However, the prosperity was short lived as sales for all 3 turned sharply down in 2018. The only positive note in the category was that Camping World made the Top 100 at #93.

Restaurants & Gas Stations and the Grand Total

Restaurant & Gas Station Observations

Although restaurants & gas stations aren’t relevant in terms of Pet Products Sales, they are relevant in our daily lives.

• In 2018 the revenue for Restaurants in the Top 100 was up 3.6%, a slight increase from 3.0% in 2017. However, it is significantly below the 5.9% increase in the total restaurant channel. Except for Subway, all restaurants in the Top 100 posted increases. Burger King almost made it back, going from down 2.1B in 2017 to up $1.3B in 2018. The other biggest increases came from Chick-fil-A, McDonalds and Starbucks, who all increased revenue by $0.9B.
• Rising gas prices in 2018 drove the revenue of the total channel up 13.2%. The Top 100 Gas Station sales are up only 1.1%. If consumers are trying to cut back on Gasoline usage, perhaps it shows up in these big chains.

Wrapping it up!

The Top 100 became the Top 100 by producing big sales numbers and their performance usually exceeds the overall market. The gap has been narrowing in recent years and in 2018 it turned negative. +4.8% for the Top 100 vs +4.9% for Total Retail. However, when you look a little closer you see that the “problem” is with the Top 100 Restaurants and Gas Stations. If you just compare the “regular” retailers – both brick ‘n mortar and internet, then the Top 100 “wins”, +5.0% to +4.3% for the total “relevant” retail market.

Pet Products are an important part of the success of the Top 100. Seventy companies on the list sell Pet Food and/or Supplies in 143,000 stores and/or online. Let’s take a closer look at the fifty-six companies that stock pet products in their stores. This group generated $1.96T in total sales. How much was from pet? Let’s “Do the math”. If we take out the $8.7B done by PetSmart and the remaining companies generated only 1.5% of their sales from Pet, we’re looking at $29B in Pet Products sales from only 55 “non-pet” sources! (Note: The 1.5% share for Pet items is a low end estimate based on data from the U.S. Economic Census.) The APPA reported $48B in Pet Products sales for 2018.

That means that 55 mass market retailers accounted for 60% of the Pet Products sold in the U.S. in 2018 and…

Pet Products are widespread in the retail marketplace but the $ are concentrated. Regardless of your position in the Pet Industry, monitoring the Top 100 group is important. This group also reflects the ongoing evolution in the retail market – the growing influence of the internet and the importance of Value. The Intense competition is evident in the number of mergers & acquisitions. In business, just like in biology, you must adapt to a changing environment or face extinction!

Finally, here is a link to download the 2018 Top 100 Retailer Excel file so you can do your own analysis.