2019 Pet Spending – A First Look!

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The US BLS just released the data from their annual Consumer Expenditure Survey. I have almost completed building the detailed pet database from 35 separate files and have started the analysis, but I wanted to give you a brief first look.

In 2019 Total Pet Spending was $78.44B, down -$0.16B (-0.2%) from 2018. This is a very minor decrease following a huge $11.31B increase from 2016 to 2018.

Total Pet Spending is the sum of the individual segments. As we have seen so many times before they can have extremely different patterns. 2019 is no exception.

In this brief first look we will show you a graph of the recent spending history for Total Pet and then each individual segment. That should help put the 2019 numbers into perspective. After each graph, I will include a very brief comment. The detailed analysis will follow in future posts. I just thought that you should see the topline data as soon as possible. First, Total Pet…

The $ growth has been strong since 2013 but we seem to have a new pattern emerging – 2 years up, followed by a small decrease. In 2016 the drop was -$0.46B and in 2019 it was -$0.16B. The $ peaked mid-year 2018 at $79.83B. We seemed to be on the verge of breaking the $80B barrier then came the FDA grain free dog food warning and tariffs on Supplies. However, it appears that a recovery is beginning in the second half of 2019. Now, let’s turn to the largest segment, Pet Food & Treats…

Pet Food spending has been on a roller coaster for a number of years, driven by successive product trends. Since 2003 Pet Food has consistently had 2 successive years of spending increases followed by a down or flat year. At mid-year 2018 it looked like 2018 was on track for a small but expected increase. However, the 2nd half changed all that. In July, the FDA issued a warning on grain free dog food. Spending fell $2.51B, driving sales down $2.26B for the year and  breaking the pattern of the last 15 years. As the consumer fear died down, spending stabilized in the first half of 2019 then strongly recovered to “pre-warning” levels by the end of 2019. Now, we’ll look at Pets & Supplies…

Since the Great Recession, Pet Supplies prices have generally been deflating as many categories have become commoditized. The segment is very price sensitive. Price deflation drives spending up while even a low inflation rate depresses sales. In the second half of 2018, in anticipation of new tariffs Pet Supplies prices began to rise. The tariffs were implemented in September and by yearend Supplies prices had risen 3.5%. Sales flattened in the second half of 2018 then plummeted -$2.98B in 2019 as prices continued to rise – up 5.7% from 2018 by yearend. By the end of 2019 Supplies had “given back” 60% of the $5B gained from mid-2016 to mid-2018. Now Non-Vet Services…

Pet Services is the smallest industry segment and has long been known for slow, but consistent growth. In the graph, you can see that this pattern was broken in 2017. The number of outlets offering Services began to increase sharply during this time and pricing became more competitive. At first this didn’t increase consumer usage of Services and Pet Parents were shopping for value. Apparently, this changed in 2018 and more consumers “got the message”. Spending increased by $1.95B. This is more than twice as big as the previous largest increase in the 34 years that the US BLS has been keeping records on this segment. In 2019 spending fell slightly -$0.10B but essentially held its ground at the new elevated level. Now, on to our final segment, Veterinary Services…

Except for 2015, Veterinary Services has grown consistently through the years. The problem has been a high inflation rate, which has slowed the frequency of consumer visits while increasing prices. The inflation rate slowed in recent years which spurred $3B in spending increases in 2016-2017. In 2018, Vet spending rose $0.56B (+2.7%). Prices were up 2.6% so the amount of Veterinary Services in 2018 was unchanged from 2017. In 2019 sales increased +$0.58B (+2.7%). Unfortunately, prices jumped 4.1% so that there was a net decrease in the amount of Veterinary Services in 2019.

Comments

From a historical perspective, the decrease in Total Pet Spending was the 11th in the 35 years since 1984. However, the industry has done pretty well despite an occasional drop. In 1984 Total Pet Spending was $9.56B. That means that it has grown 720% in 35 years – an annual growth rate of 6.2% – not too bad.

We should also note another situation that I addressed in a recent report – Racial/Ethnic disparities in the Pet Industry. The report cited 2018 data which showed that White, not Hispanics accounted for 86.3% of all Pet Spending. In 2019 the situation worsened as they now account for 87.6%. Here are the specifics:

    • White, not Hispanic: $68.73B; Up $0.87B (+1.3%)
    • Hispanic: $5.44B; Down $0.38B (-6.5%)
    • Black/African American: $2.73B; Down $0.68B (-19.9%)
    • Asian: $1.54B; Up $0.02B; (+1.6%)

One reason that the Industry had a negative year was that the increase by White, not Hispanics was not big enough to overcome the spending drop by Hispanics and Blacks. The decrease was especially large for Black Americans.

Yet more evidence that this problem should be addressed, for the benefit of everyone.

That wraps it up for this brief preview of Pet Spending in 2019. In future reports we will drill deeper and deeper into the data for each segment and ultimately Total Pet. Our goal will be to determine the who, what and why behind the numbers. We will look at spending from the perspective of 96 segments in 12 demographic categories and even include the frequency of purchase as a factor. Who is spending most of the money? Which groups had the biggest changes in spending – up or down. What are the best performing demographic segments?

Even with an occasional “bump in the road” the Pet Industry is solid, but it is also complex. You have to look beneath the surface numbers to find out what is truly happening. Stay tuned for detailed, analytical updates.

 

 

Retail Channel Monthly $ Update – July Final & August Advance

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Time for our monthly update on U.S. retail sales by channel. The current COVID-19 crisis has caused turmoil in the Retail Marketplace. Consumer spending behavior has changed and continues to evolve. In this report we will track the changes and migration between channels. We will do that with data from two reports provided by the U.S. Census Bureau.

The Reports are the Monthly Retail Sales Report and the Advance Retail Sales Report. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – approximately 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

This means to get the full picture in our monthly channel update we need to look at the latest release of both reports. We will begin with the Final Retail Report from July and then move to the Advance Retail Report for August. This will also allow us to better track the consumers’ evolving spending behavior in terms of channel migration.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports and we fill focus on Pet Relevant Channels

The information will be presented in detailed charts to facilitate visual comparison between groups/channels of:

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2019
  • Current YTD change – % & $ vs 2019
  • Monthly and Year To Date $ will also be shown for each group/channel

We’ll start with the July Final report. The retail market hit bottom in April then began a slow recovery which continued in July. First, we will look at some major retail groups. (Note: The Data in all graphs is Actual, Not Seasonally Adjusted)

The final total is $2.5B less than the Advance report projected a month ago. All were down slightly from projections. Relevant Retail: -$1B; Auto:-$0.6B less; Restaurants: -$0.3 less and Gas Stations’ $ were -$0.4B. $ales were up vs June across the board. Driven by Relevant Retail, +$30B and Auto, +$8B, Total monthly sales were also up $18.8B vs 2019.

The Spring Lift is usually over by July but the COVID crisis has pushed the Spring timing back. Things began to open up in May and continued into July. However, all but Relevant Retail were still down YTD vs 2019.

Now, let’s see how some Key Pet Relevant channels were doing in July.

  • Overall – Sales in 5 of 11 groups were down vs June, but 9 of 11 again showed increases vs same month in 2019.
  • Building Material Stores – This group has their biggest annual lift in Spring. This is unchanged and even stronger. While sales were down vs June, they still have spectacular increases vs 2019. Although Sporting Goods stores are not included in this group, they have a similar Spring lift pattern. Their sales took off in May and continued to grow spectacularly through June. Although July sales dipped slightly from June, they turned positive YTD in June.
  • Food & Drug – After a dip in June vs May Supermarket sales are back up with incredibly strong growth vs 2019. After 2 months of slowed $, Drug Stores came back strong in June and July and remain positive across the board.
  • General Merchandise Stores – Sales in Clubs/SuperCtrs slowed down in June but are back up in July and still strong vs 2019. Despite slowed sales in June & July, $ Stores are showing exceptional strength vs 2019. Discount Dept. store sales were generally slowing before the pandemic. This trend has continued despite a small July lift.
  • Office, Gift and Souvenir Stores – They were slow to re-open. Sales are growing, but this group was hit hard.
  • Internet/Mail Order – The pandemic has accelerated this channel’s growth vs 2019. Sales vs June were flat, but the crisis has introduced many new consumers to online shopping and the behavior is likely to become habitual.
  • A/O Miscellaneous – This is a group of small to midsized specialty retailers – chains and independents. It includes Florists, Art Stores and Pet Stores (22 to 24% of total $). Pet Stores were usually essential, but most stores were not. The others began reopening in May and the number grew in June which produced an increase vs 2019. July was down slightly from June but was strong vs 2019 which pushed YTD sales up to +9.0%.

May began a slow recovery which continued in June and July as even more businesses began to re-open. The Relevant Retail Segment turned positive in all measurements in May and has stayed that way through July. Although many segments are now contributing, the Internet, Supermarkets, SuperCtrs/Clubs/$ Stores and Hdwe/Farm are the key drivers. Let’s see how the situation is progressing. Here are the Advance numbers for August.

April and May were the 2 biggest spending drops in history. In June, monthly sales turned positive for the first time since February. In July the recovery continued. However, it flattened out in August leaving Total Retail still down -$74B YTD.

Total Retail – Total Retail spending increased $0.6B, +0.1% vs 2019, a big change from +3.9% in July and +3.4% in June. In February 2020 sales were up $60B, +6.6% YTD versus 2019. Then came COVID-19. Hopefully, we hit bottom at -$112B in May. We began moving in the right direction but have stalled in August, still -$74B YTD and -$134B from February.

Restaurants – The Spending increase slowed to +$2.1B over July and sales were down $11.6B vs 2019. This is important as August is usually their biggest $ month of the year. January and February, normally the 2 slowest months, are on top in 2020. In February YTD sales were up $9B. Then came the forced closures. Re-openings began in May but ran into problems in July and August. Delivery/Pickup can’t make up the difference as spending is now down $106.7B YTD.

Automobile & Gas Stations – When you are staying home your car becomes less of a focus in your life. Auto Dealers, both new and used, began combating this attitude with some fantastic deals and a lot of advertising. Sales turned positive versus 2019 in June, grew strongly in July, then slowed a bit in August. Although sales are down $28.6B YTD, they are up $20B vs 2019 in the last 3 months. Gas Station $ales increased in May, June and July over the previous month, but fell in August – Down $56.6B YTD. People are still not driving as much, whether for commuting or road trips.

Relevant Retail – Less Auto, Gas and Restaurants – Many non-essential businesses began to shutter their doors in March but there was also a rash of binge/panic buying for “necessities” and a big lift in groceries as consumers focused on home cooking which drove spending up $19B. April brought a full month of closures and an end in binge buying, spending dropped $34B from March. In May, the overall market began to reopen so spending began to move in the right direction. In June and July the growth continued but it slowed in August. However, the monthly June>August $ are larger than all months in 2019 but December. The primary drivers have been Nonstore, Grocery and SuperCenters/Clubs & $ Stores along with an enhanced spring lift from the Hardware/Farm and Sporting Goods channels. The Relevant Retail group now has posted positive numbers versus last year and year to date for 4 consecutive months and is up $118B YTD (+4.9%) vs 2019. In July it was up +4.8%.

Now let’s look at what is happening in the individual retail channels across America. In August, consumer spending in the relevant retail market grew even more positive versus 2019. Let’s see where the $ came from. These groups are less defined than in the Final Monthly reports and we will look across the whole market, not just pet relevant outlets.

In July, 11 of 13 channels beat last month’s $. In August it was down to 7. In July, 10 channels beat July 2019. In August, this number was down to 7. However, in YTD numbers, 8 are now showing an increase as Health & Personal Care joined the group. The YTD decreases are coming from channels that are primarily nonessential businesses.

After a full month of stay at home and widespread closures there was a surge in May. Things truly opened up in June and July and sales continued to increase. In August they slowed slightly but YTD Relevant Retail Channels are up $117.9B vs 2019. The essential channels are responsible for the YTD lift vs 2019, primarily:

  • Nonstore Retailers – Even more consumers are online shopping.
  • Food & Beverage, especially Grocery– Restaurant $ are still down so consumers continue to eat & drink at home.
  • Bldg Materials/Garden/Farm – A bigger than usual Spring lift continues as consumers focus “on their home”.
  • SuperCtrs/Club/Value/$ Strs – Sales slowed in April but came back in May and continue to grow. This group turned the whole Gen Mdse channel positive. It clearly shows that value is still a consumer priority.

Regarding the Individual Large Channels

General Merchandise Stores – Regular Department stores are reopening which has cut the losses for total Department Stores as Discount Department stores continue to slowly fade. Club/SuperCtr/$ stores provided the big positive force. In April consumers dialed back their panic buying and spending on discretionary items was also down significantly. Since May we have seen consumer spending return to a more normal pattern in the big and small stores that promise value.

Food and Beverage, plus Health & Personal Care Stores – The Grocery segment is still driven by increased Food sales due to a slow restart by restaurants, up 7.6%, +$4.5B in August. Sales in the Health, Personal Care group were up vs 2019 in June July and August and finally turned positive YTD. Drug Store sales growth was a key factor.

Clothing and Accessories; Electronic & Appliances; Home Furnishings – In August, sales grew for the fourth consecutive month. Home Furnishing has even registered slight increases vs 2019 in July and August. However, all 3 channels are down double digit percentages in YTD sales. Clothing Stores are by far the worst performers. Even though August sales were up 7.4% over July they were still down 23.5% vs August 2019 and 34.9% YTD.

Building Material, Farm & Garden & Hardware – Sales fell again after peaking in June. However, this channel continues to benefit from consumers turning their focus to their home needs, including house and yard repair and improvements. This has accelerated and extended their Spring lift. Sales were up 11.9% vs August 2019 and up +$29.6B (+11.4%) YTD.

Sporting Goods, Hobby and Book Stores – Book and Hobby stores are open and sales in Sporting Goods stores have taken off as Consumers again sought outdoor recreation. Although sales fell again from their June peak, they were up 8% vs August 2019. YTD sales were down $3.4B in April. In August, this deficit had been cut to -$0.3B. If current trends continue, their YTD numbers could turn positive by September.

All Miscellaneous Stores – This group is mostly small to medium specialty stores – both chains and independents. Pet Stores are essential but most other stores are not, so closures hit this group particularly hard. Sales began to rebound in May and grew through July when they finally beat the monthly sales for 2019. In August sales dropped -2.9% vs July and -4.9% vs 2019. In February, this group was up $2.6B YTD. Through July,  they were down -$3.4B but moving in the right direction. That has stopped, at least temporarily as they are now down -$3.9B YTD. They have a long road ahead.

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV businesses. The COVID-19 crisis has only accelerated the ongoing movement to online retail. In February NonStore was up 8.6% YTD. In August, despite falling -4.2% from July, they are up 19.6%, +$97.2B YTD. Their increase is 82% of the total $ increase for Relevant Retail Channels. They are the clear leader and their performance far exceeds their 12.9% annual increase in 2019. Since much of their annual increase comes from holiday sales, 2020 looks to be another banner year for NonStore Retailers.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded along with their store sales in their regular channel. Whether they are up or down, their online sales are included in the totals.

Recap – April and May saw the 2 biggest year over year monthly sales declines in history. Restaurants, Auto and Gas Stations increased sales from May through July. In August, only restaurants had an increase. The Auto segment is  showing positive monthly numbers vs 2019 but Restaurants and Gas Stations are still struggling. The Relevant Retail segment has been the only true positive. Although August sales are lower than July, monthly and YTD sales vs 2019 are up for 4 consecutive months. However, for many segments in this group there is still a long way to go. In July Total Retail was positive for the second consecutive month but it turned essentially flat in August. We saw a resurgence of the virus and retail restrictions were reimposed in many areas, which contributed to sales declining from July. This is going to be a long battle with no end in sight. We will continue to monitor the data and provide you with regular updates.

 

 

 

 

2019 Top 100 U.S. Retailers – Sales: $2.4 Trillion, Up 4.5%

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The U.S. Retail market reached $6.22 Trillion in 2019 from all channels – Auto Dealers, Supermarkets, Restaurants, Online retailers and even Pet Stores. This year’s increase of $216B (+3.6%) was 23.4% below last year’s increase of $282B. This breaks a string of steadily growing increases which began in 2015. One factor is that fuel prices stabilized, and Gas station revenue flattened out. (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 39% 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. The Top 100 are not immune and you will see changes in ranking but for first time since I began tracking in 2013, the list is the same as last year. 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:

  • The total Retail Market grew $216B in 2019 (+3.6%). In 2018 it was +4.9% and in 2017, +4.3%. Although sales are still increasing, the growth rate slowed markedly in 2019.
    • The Top 100 grew $105B (+4.5%). This is less than last year’s +4.8% but significantly better than the total market.
    • The Top 100 generates $2.4 Trillion in revenue, 39.0% of the total U.S. retail market – slightly more than 2018.
  • 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 $3.7 Trillion – 59.7% of the total market. By the way, the slight gain in share is due to the flattening of Gas Station revenue.
    • If we also remove Restaurant & Gas Station $ from the Top 100, the remaining $2.2T is 36.0% of the total market.
    • … and 60.3% of the $3.7 Trillion “target” market.

The Top 100 generally outperforms the overall market. In 2019 the difference in performance was significant. The lift was driven by the Top 100 targeted retail group, less restaurants and gas stations. Remember, the Top 100 is really a contest. In a “normal” year companies drop out and new ones are added. This can be the result of mergers, acquisitions or simply surging or slumping sales. In 2019 there were no changes. However, here are some significant changes in rank:

  • You see the growing strength of the internet.
    • Wayfair moved up 12 spots from #77 to #65
  • Sales for these 2 companies continued their downhill slide.
    • Sears from #60 to #75
    • GameStop from #75 to #97

Now let’s start “drilling down” into the specifics of the 2019 Top 100. Here’s a summary of Regular and Online Retailers versus the bundled total for Restaurants & Gas Stations.

  • Regular & Online Retailers have 58.4% of the stores but 92.3% of the business, up slightly from 92.1% last year.
  • 93.0% of the increase came from Regular/online retailers. However, they are only up 4.6% versus +5.2% in 2018.
  • Restaurant sales were up $6.7B (+4.0%) in 2019 and Gas Stations turned positive, +0.62B (+4.2%).
  • The overall Store count was up +0.6% versus +0.8% in 2018. The lift was driven by Gas Stations (+9.0% due to an acquisition) and Restaurants (+0.8%). Regular retailers were basically flat (+0.03%).

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 companies, 69 are selling some mixture of Pet Products in stores and/or online. (down from 70 in 2018)
    • Their Total Retail Sales of all products is $2.09 Trillion which is…
      • 93.4% of the total business for Regular & Online Retailers in the Top 100
      • 33.6% of the Entire $6.22T U.S. Retail market – from 69 Companies who sell Pet Products.
  • 58 Cos. (up from 56), with $1.99T sales sell pet products off the retail shelf in 145,607 stores – 2600 more than 2018.
    • 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.
    • 2 traditional Retailers who only sold Pet Products online converted to in store. The others who only sell pet 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, 145,600 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 $1.33 Trillion in Sales
    • 54.8% of Top 100 $ales
    • 21.4% of Total U.S. Retail $
  • No change in rank (The group is unchanged since 2015)
  • Sales are up for all. Amazon leads the way…again.
  • Store count is down 500, (-1.4%)

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 ’19 & ‘18 – a “1” with an orange highlight indicates that products are only sold online
  • Rank Columns – Change in rank from 2018: (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

  • After a number of acquisitions over several years, Drug is still in turmoil. Now we are seeing a growing number of closures of unproductive stores. However, sales growth remains strong.
  • The Traditional Department store segment continues its overall decline. Nordstrom stores were an exception with small gains in both sales and number of outlets for 2 straight years. Belk, a small chain, had the biggest $ales growth.
    • Sears sales and store count continue to plummet.
    • Saks sold Lord & Taylor in November 2019.
    • Although all carry a few pet items, often 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. In 2019 there were no major acquisitions, but both major chains had small increases in $ales and stores.
  • 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. By 2019 this policy had spread to all military groups. 2019 sales were up in the Army/AF group which kept the overall drop in Military Exchg/Commissaries to -$0.06B (-0.5%).
  • Auto Parts Stores have become more stable in their growth. All chains increased their store count for the 2nd consecutive year. Overall, sales were up 5.5% in 2019 versus +2.5% in 2018.
  • Among Apparel retailers, the value outlets continue to show strong growth. All three of these chains carry pet products. The Gap sold Old Navy and no longer offers pet products. Ascena closed all Dress Barn stores (650).

Observations

  • Amazon continues to drive the evolution of U.S. Retail. Sales are up 267% in 5 years. With the acquisition of Whole Foods in 2017 they also have a small but growing brick ‘n mortar presence in the market.
    • Of the three Phone People, only Apple had a strong year.
    • QVC lost ground in 2019. Sales were down -5.2% and they fell 3 spots to #44 in the ranking.
    • In 2017 a move to online gaming began. GameStop sales continue to fall, and closures grow. They fell 22 spots.
  • Signet Jewelry’s sales were down -0.04%. This was bad but better than -3.4% in 2018 and -3.9% 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. In 2019 Costco was strongest, but all companies increased sales.
    • Wal-Mart had a 2.6% increase in sales which is below last year’s 3.4%. 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 third consecutive sales increase in 2019, after 3 years of flat or declining revenue.
    • Costco continues its strong growth (+9.3%), building new stores and increasing sales – both in store and online.
    • BJ’s sales were up for the second consecutive year after a string of annual declines from 2013 to 2017.
    • Meijer had small growth in sales and store count in 2019. However, since 2013 they rank third overall in the percentage of sales increase and first in the percentage of store count increase.
  • All Home Improvement/Hardware companies increased sales, but overall, the growth slowed a bit, from +4.3% to +3.4%. Store count turned positive but Lowe’s and True Value continued closures. Home Depot (#6) and Lowes (#9) led the way in sales growth, supplying $5.24B (76%) of the $6.88B lift in the category.
  • Like 2018 all Home Goods Companies but Bed Bath & Beyond increased sales. They also drove down store count. Sales were up 5.1%, again driven by Wayfair, who entered the top 100 in 2018 and now ranks #65, up 12 from last year.
  • Tractor Supply was up 5.9% which is much less than 2018, +11.4%, and below their average growth rate of +8.3% since 2013.

Observations

  • Supermarkets – $406B 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. All companies but Southeastern showed increased sales. However, the strongest growth came from Sprouts (Natural) and Aldi (Value).
    • Southeastern Grocers filed for bankruptcy in 2018. Store closures and reduced sales continue.
  • 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, but its store count growth rate has slowed.
    • Big Lots had small growth in sales and stores after trending down in both areas in 2018.
    • This retail channel continues to grow in 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 acquisition of Chewy in 2017, PetSmart’s sales registered a huge increase. In 2018, their sales were up +4.7%. In 2019, driven by the increasing popularity of the internet and Chewy, sales grew an impressive +14%. Petco qualified for the Top 100 for the first time in 2016. This was widely viewed as evidence of the strength of the U.S. Pet Industry. They hung on in 2017 but dropped out in 2018. It looks like they need a new formula, perhaps the internet, 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 – Bass Pro (includes Cabela’s) continues to struggle but the other 3 companies eked out a small sales increase (2>3%) in 2019. Sales are up overall for the category but all companies, but Academy Sports are closing some underperforming stores.

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 2019 although 4 companies had decreases, the overall sales for Restaurants in the Top 100 was up 4.0%%. This was better than the 3.6% increase in 2018 but less than the 4.6% increase in the total restaurant channel. McDonalds led the way in $, +$1.89B, but Chick-fil-A and Chipotle tied for the biggest percentage increase, +14.5%.
  • Falling gas prices in 2019 flattened the revenue growth of the total Gas Station Channel. The Top 100 Gas Station sales and stores are both up solely because Speedway acquired Andeavor Brands with their 3200+ outlets.

Wrapping it up!

The Top 100 became the Top 100 by producing big sales numbers and their performance, except for 2018, usually exceeds the overall market. In 2019 things returned to “normal”, +4.5% for the Top 100 vs +3.6% for Total Retail. The Top 100 Gas Stations, with a major acquisition, far exceeded the full market performance. However, top 100 restaurants underperformed to the overall Restaurant channel. If you just compare the “regular” retailers – both brick ‘n mortar and internet, then the Top 100 “won” big, +4.9% to +3.6% for the total “relevant” retail market.

Pet Products are an important part of the success of the Top 100. Sixty-nine companies on the list sell Pet Food and/or Supplies in 145,600 stores and/or online. Let’s take a closer look at the fifty-eight companies that stock pet products in their stores. This group generated $1.99T in total sales. How much was from pet? Let’s “Do the math”. If we take out the $11.9B done by PetSmart and the remaining companies generated only 1.5% of their sales from Pet, we’re looking at $29.7B in Pet Products sales from only 57 “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.) After a major adjustment, the APPA reported $56B in Pet Products sales for 2019. That means that 57 mass market retailers accounted for 53+% of all the Pet Products sold in the U.S. in 2019.

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 group was relatively stable in 2019, with no changes from 2018. Competition is still intense, and the current COVID-19 crisis will likely cause turmoil in 2020.

 

 

 

 

 

 

 

 

 

Race and Ethnicity in the Pet Industry

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The issue of racial and ethnic inequities is a hot topic right now and for good reason. Despite laws and constitutional amendments, major societal and economic disparities still exist between White, Not Hispanics and minorities in the United States. In this report we will start to look at the Pet industry in terms of Race and Ethnicity. The Data is taken from U.S. Government sources including the USBLS Consumer Expenditure Survey, the HUD American Housing Survey and the Census Bureau’s Annual Business Survey. All of the surveys are designed and conducted by personnel from the U.S. Census Bureau to insure that they accurately represent the situation in the total U.S.

First let’s look at the racial/ethnic share of U.S. CU’s (financially independent Consumer Units – more defined than H/Hs) compared to their share of $78.6B in Total Pet Spending in 2018. Note: 260K CUs identify as both Black and Hispanic. This is only 0.2% of all U.S. CUs and about 1.5% of each group so it has little effect on the numbers. Their data appears to more closely match that from the Black group so whenever possible it is included with them. This is a first indication of the impact of Race in U.S. society. Race/Skin Color is more significant than ethnicity.

The White, not Hispanic group obviously takes a much bigger bite out of the Pet Spending Pie. Let’s see how their spending compares at the CU level for Total Pet and the 4 industry segments.

  • As you can see the White, not Hispanic group is the runaway winner in all segments.
  • Hispanics finish 2nd across the board and Black Americans are last overall and in all segments but Veterinary.
  • Although the disparity between White and Minority spending is still huge, it is lowest in the Pet Food Segment. This makes sense as it is the only true necessity in Pet Spending. You may not opt for Super Premium, but if you have a pet, you need to buy food.
  • We usually think of Veterinary spending as another pet necessity. However, strongly inflating prices in recent years have caused many pet parents to delay or cancel services. This has been especially impactful in many minority households. The result is that the biggest racial/ethnic disparity is in the Veterinary segment.

Race/Ethnicity is a big factor in Pet Spending. Let’s take a closer look at the other key drivers behind the numbers.

The chart below shows the key CU demographics that drive increased Pet Spending. Regarding Race/Ethnicity, people have no choice in what group they are included. In the other categories they can affect what segment that they are in. The graph shows the biggest spending group in the demographic category along with their Share of Pet spending and Share of CU’s. Then we divide share of spending by share of CUs. This “Performance” allows us to compare the relative importance of the demographic categories.

The chart shows only Total Pet Spending. However, while the performance numbers may vary slightly between segments, all of these demographic groups are important in all areas of Pet Spending.

  • We saw in our very first pie chart that race/ethnicity was important. In this chart we see that there are 4 other demographics that are equally or even more important in Pet Spending.
  • Higher Income is the single most important factor in all segments. It is at its lowest level in food but grows in importance as spending becomes more discretionary in Supplies and Services…or super expensive in Veterinary.
  • A College degree generally means higher income, but it also correlates with recognizing the “value” of super premium foods and regular Veterinary care.
  • Homeownership – Space that you own, and control has always led to increased Pet ownership and spending.
  • Married couples have made a commitment to each other. They are far more likely to commit to pets.
  • Suburbia – More space means more room for Pets. Pet ownership and spending is lowest in the Central Cities. As you move away from the city it grows, peaking in the areas under 2500 population – both suburban and rural.

Now let’s break down these key demographic factors in terms of Race/Ethnicity.

The chart shows the average number or share for U.S. CUs compared to that for each of the Racial/Ethnic Groups

  • One thing that stands out immediately is the status of Asian Americans. They are the leaders in 4 of the 5 categories, including the runaway winners in Income and Education. Yet, they have a very low level of Pet Spending. This goes contrary to all the national numbers. It also shows that there are “hidden” factors when it comes to our relationship with our pets. It suggests that there may be cultural differences in Asian American households so that pet ownership is substantially less likely than for other groups.

In light of this situation, we’ll focus on comparing White, not Hispanic to Hispanic and Black American CUs.

  • Income – The Whites are a clear winner – 28% more than Hispanics and 48% more than Black Americans.
  • College Education – This generally correlates with income, but the disparity is even wider. This category is the only one in which Blacks outperform Hispanics. Both groups have socio-economic inequities which keep their numbers down. However, there is a key early difference. 87% of Blacks graduate from High School compared to 71% of Hispanics. The Hispanic numbers are driven down by foreign born individuals with a 55% HS graduation rate. Blacks benefit from the availability of Historically Black Colleges and Universities which produce 20% of all Black College Grads and also the opportunity provided by athletics. They receive 23% of all college athletic scholarships and 77% graduate.
  • Homeownership – Whites again lead the way, with a disparity even greater than income. We should also note that this is the only category in which Whites beat Asian American CUs.
  • Marriage – This is the demographic in which Black Americans are most different from the other groups. Only 30% of Black American CUs are Married Couples. This is 40% less than all other groups of which 51 to 53% are Married Couples – with or without children.
  • Suburban – Black Americans tend to live in more urban areas. They are the only group in which less than 50% of CUs live in the Suburbs. We should also note that they also live in the suburban areas with higher population.

In terms of the Best Spending Demographics, you can see why White spending far exceeds Hispanics and especially Black Americans. Now, let’s take a look at some of the worst spending groups in terms of Race and Ethnicity.

These 5 groups are the worst performing in terms of pet spending in their category.

  • Under $15K Income – 1 of every 5 Black American CUs makes under $15K – 63% higher than the National Avg.
  • Single Parents – These CUs are generally under tremendous financial pressure. You can see that they are more likely to be Hispanic and especially likely to be Black American. In fact, 32% of all Single Parent CUs are Black American. That is stunning considering that Black Americans only make up 12.9% of total U.S. CUs.
  • Less than High School Diploma – You can see where the educational disparity begins and that it goes much deeper than a college degree. 1 of every 6 Hispanic CUs has no member that completed High School.
  • Center City – Black Americans are the only group with 50+% living in Center City. Hispanics and Asians are relatively evenly divided between the Suburbs and the City, but Whites tend more toward suburban/rural living.
  • Single – In Pet Spending it just takes 2. Obviously, being single is not popular with Hispanics. Black Americans lead the way, but Whites are not far behind, which ultimately reduces the overall Pet $pending for both groups.
  • Note: Single Parents and Singles are 2 of the lowest Pet Spending Groups. They make up 47.1% of Black CUs.

We saw that Black Americans had the lowest share of all the biggest Pet Spending groups except College Degrees, where they were next to last. Now we see that they have the highest share of all the lowest Pet Spending groups but education, where they again finish next to last. This is an overwhelming combination and provides specific reasons for their low level of Pet Spending.

When we look at the varied rates of Pet Spending, one obvious question comes to the forefront. What is the percentage of Pet Ownership? For an unbiased answer we again turn to a Government resource – HUD, The Department of Housing and Urban Development. With the help of the Census Bureau, every two years HUD conducts the American Housing Survey to measure the current state of housing in the U.S. In the 2017 Survey of over 70,000 H/Hs they included a specific section on Disaster Preparedness to assess the state of readiness across the U.S. in the event of a disaster – natural or manmade. A series of questions was both relevant and significant for the Pet Industry. They asked if respondents had a pet and if so, would they need assistance in evacuating the animal in the event of a disaster? This is obviously relevant to the industry but also significant in that the U.S. Government officially recognized that our Pet Children are an integral part of U.S. households. Their only reason for asking the question was to help insure that communities are adequately prepared to protect and save all members of their community – people and pets.

The next graph shows the results of the question regarding pet ownership by racial/ethnic groups. There is a bonus as they also include Native Americans as a separate group. The numbers are lower than what you have seen from industry sources but don’t be distracted. The key is to focus on the relative differences between groups.

  • The first thing that we note is that the pet ownership rates closely reflect the relative pattern of pet spending rates for these groups.
  • The high rate for Native Americans shows that Pet Parenting is truly an American tradition.
  • Asians have the lowest rate of ownership which explains their low pet spending, despite the fact that they are leader in many key demographic categories which directly relate to increased Pet Spending.
  • Whites have more pets, but they also make a lot more money than Hispanics or Blacks. This is the fundamental basis for the pet spending difference between these 3 groups which is only magnified as incomes grow and the White households’ share of higher income groups becomes even larger.

From all this data, we see that there is a definite Racial/Ethnic disparity in pet ownership and pet spending. This is not the fault of the Industry. It is just a reflection of the extreme inequality in the current American Society. Black Americans are at the bottom of the ladder, with no clear route to the top without major societal changes.

So far, we have looked at the industry from the consumers’ perspective. What is the situation when we start looking up the distribution chain? Are Blacks, Hispanics and Asians represented in participating Pet Industry Companies. I’m not aware of any data that measures the racial/ethnic breakdown of Pet Company employees. However, the Annual Business Survey from the Census Bureau does track ownership by race/ethnicity for businesses with employees that qualify for this measurement. Larger Companies generally don’t fit the parameters but there are still thousands of small businesses that do. Let’s look at a few business types that are directly tied to the Pet Industry. This data is from 2017.

The chart below shows the percentage of Racial/Ethnic ownership in 3 Pet Business types and the number that qualify.

  • Veterinary Clinics – 27,881
  • Pet Services Outlets – 16,765
  • Pet Stores – 5191

Note: We were once again able to further define the data to include Native Americans. FYI – In 2017 they accounted for about 0.9% of U.S. CUs.  The numbers for each group will not total 100% because the owners of a small percentage of businesses are from multiple racial/ethnic groups.

Note: Other Racial/Ethnic shares of U.S. CU’s:

White: 69.0%

Hispanic: 13.4%

Black: 12.9%

Asian: 4.7%

  • Over 90% of all these businesses types are owned by White, Not Hispanics. That is a more dominant situation than Pet Spending, where their share was 86.3%.
  • Veterinary Clinics – You can see that a huge number of Veterinary Clinics are small businesses and can be classified by the race/ethnicity of the owner. Native Americans make their best showing in this category. About 92% are white while only 0.9% are owned by Black Americans.
  • Pet Services – There are also a lot of these small businesses. Stereotypically, Hispanics and Blacks are more associated with Services work. That may be true in the Pet Industry as both have their highest ownership share.
  • Pet Stores – Over 5 thousand pet store owners can be classified by race or ethnicity. The share of Asian owned pet stores actually exceeds their share of U.S. CU’s, a singular situation for any minority. Hispanics are seriously underrepresented, but the biggest concern is in regard to Black Americans. The number of stores is so small that the Census Bureau doesn’t release it because looking at metro area data could reveal the sales info for a specific business. Native American data is also suppressed but they don’t account for 12.9% of U.S. CUs, like Blacks.
  • Other Pet Businesses – In most cases the NAICS code doesn’t specifically define “Pet” businesses. However, data is available for Dog/Cat Food Manufacturers. There are 237 that can be classified. 223 (94%) are White-owned. Minorities own 14 businesses but again the number is so small that all Racial/Ethnic specifics are suppressed.

The Pet Industry is not the cause of the racial/ethnic inequality in the U.S but it certainly reflects the situation, especially for Black Americans. Let’s start with consumers. Due to socio-economic factors, Black Americans have an incredibly low level of pet ownership. This obviously suppresses spending, but it could even be a matter of health. HABRI is constantly offering evidence of the health benefits of Pets. The recent COVID-19 crisis has revealed that the overall health of Black Americans is the worst of any group. Programs should be developed to encourage and assist in increasing the level of pet ownership by Black American Households.

In terms of Industry Participants, minority representation is even more limited. There are no Blacks on any of the 3 Industry Organization Boards. That’s to be expected. You have to first be a member before you can be on the Board. Programs should be developed to encourage and aid minority Pet businesses of all kinds. Existing businesses should also take a look at their current staff and actively work for more diversity.

To solve a problem, you must first recognize its existence. Then take action to solve it. Racial/Ethnic inequality is definitely a problem in the Pet Industry. That means that it is also an opportunity. Let’s get to work!