Archive for year: 2020

In our mid-year analysis of Pet Food spending, we saw that the spending plummeted in the 2nd half of 2018 then flattened out at the beginning of 2019. Pet Supplies spending took the exact opposite path. Mid-Year 2019 Pet Supplies spending was $17.71B, down $2.1B (-10.6%). The first half spending drop in 2019 effectively puts spending in this segment back to the level of 2 years ago in Mid-Yr 2017. The following chart should put the recent spending history of this segment into better perspective.

Here are this year’s specifics:

• Mid Yr 2019: $17.71B; ↓$2.10B (-10.6%) from Mid Yr 2018. The -$2.10B came from:
  • Jul > Dec 2018: ↓$0.01B
  • Jan > Jun 2019: ↓$2.09B

Like Pet Food, Pet Supplies spending has been on a roller coaster ride. However, the driving force is much different. Pet Food is “need” spending and has been powered by a succession of “must have” trends. Pet Supplies spending is largely discretionary, so it has been impacted by 2 primary factors. The first is spending in other major segments. When consumers ramp up their spending in Pet Food, like upgrading to Super Premium, they often cut back on Supplies. However, it can go both ways. When they value shop for Premium Pet Food, they take some of the saved money and spend it on Supplies. The other factor is price. Pet Supplies prices reached their peak in September of 2009. Then they began generally deflating and in March 2018 were down -6.7% from 2009. Although it is not a hard and fast rule, Price inflation in this largely discretionary segment can retard sales, usually by reducing the frequency of purchase. On the other hand, price deflation generally drives Supplies spending up. Innovation can “trump” both of these influencers. If a new “must have” product is created, something that significantly improves the pet parenting experience, then consumers will spend their money. The perfect example of this is the successive waves of new food trends. Unfortunately, we haven’t seen much significant innovation in the Supplies segment recently.

Recent history gives a perfect example of the Supplies roller coaster. In 2014 Supplies prices dropped sharply, while the movement to Super Premium Food was barely getting started – Supplies spending went up $2B. In 2015, consumers spent $5.4B more on Pet Food. At the same time, Pet Supplies prices went up 0.5%. This was a “killer” combination as Supplies spending fell $2.1B. In 2016 consumers value shopped for Food, saving $2.99B. Supplies spending stabilized by mid-year then increased by $1B in the second half when prices fell sharply. Consumers spent some of their “saved” money on Supplies. Supplies prices continued to deflate throughout 2017. Food spending increased $4.61B in 2017 but this came from a limited group, generally older CUs, less focused on Supplies. The result was a $2.74B increase in Supplies spending. This appeared to be somewhat of a break with the overall pattern of trading $ between segments.

In the first half of 2018 Pet Food spending slowed to +$0.25B. Supplies’ prices switched from deflation to inflation but were only up 0.1% versus the first half of 2017. During this period Supplies Spending increased by $1.23B. With new Tariffs scheduled to start in September, prices began to climb in the second half of 2018. They were up 1.7% in the second half and with implementation of the tariffs, grew an additional 1.7% in the first half of 2019. Halfway through 2019 Supplies prices were a full 3.4% higher than they were a year earlier. The impact of the tariffs on the Supplies segment is very clear. Spending became flat in the second half of 2018, then took a nosedive in the 1^st half of 2019 – down -$2.1B. In one 6 month period Supplies gave back 40% of the $5B it had gained from July 2016 to June 2018.

Let’s take a closer look at the data, starting with the two most popular demographic measures – age and income. In the graphs that follow we will compare spending for the Mid-year 12 months ending 6/30/19 to the previous period ending 6/30/18. In our graphs we will also include the 2018 yearend $pending. This will also allow you to see the spending changes in the 2^nd half of 2018 and the 1^st half of 2019.

The first graph is for Income, which has been shown to be the single most important factor in increased Pet Spending, especially in Pet Supplies and both of the Service segments.

Here’s how you get the change for each half using the $50>70K group as an example:

Mid-yr Total Spending Change: $2.43B – $2.47B = Down $0.04B (Note: green outline = increase; red outline = decrease)

• 2^nd half of 2018: Subtract Mid-18 ($2.47B) from Total 2018 ($2.61B) = Spending was up $0.14B in 2^nd half of 2018.
• 1^st half of 2019: Subtract Total 2018 ($2.61B) from Mid-19 ($2.43) = Spending was down $0.18B in 1^st half of 2019.

• In an exact reversal of the Mid-yr 2018 pattern, the decrease in Supplies Spending was widespread across income groups. The only yearly increase came from the $70>100K group. They were up in both halves. They did have a $2B decrease in Food spending during this time so they may have spent a small amount of those $ on Supplies.
• In another reversal, the biggest decrease came from the over $150K group. Their $1.02B drop accounted for 49% of the segment’s total decrease while they only have 13.1% of the CU’s. They gave back most of last year’s $1.5B gain but the drop was mitigated because this group is gaining members faster than any other income segment, +11.4%.
• The pattern of the under $50K groups matches the $150K+ segment with drops in both halves. Their combined $1.03B drop also accounted for 49% of the total decrease. However, they account for 46.0% of all CUs and their numbers are shrinking, down 1.6 million, -2.7% in the last year.
• The upper and lower middle income groups, $50>70K and $100>150K, had their own pattern with a lift in the second half of 2018 and a drop at the start of 2019. The $ changes were larger for the higher income group.
• Did tariffs have an impact? Income groups totaling 113M CU’s (86%) spent less on Supplies in the 1^st half of 2019.

Now let’s look at Pet Supplies spending by Age Group.

• Every Age group had an overall annual decrease and only the under 25 group had an increase in the 1^st half of 2019.
• The 25>44 year olds were the only ones to spend more in the second half of 2018, +$0.32B. However, they gave it all back and more, down -$0.94B in the 1^st half of 2019.
• The two smallest spending groups, <25 and 75+ had only small decreases, under -5%. However, the Supplies spending in each of the other groups fell at least -9%. Obviously, the inflation from tariffs affected all ages.

Now let’s look at what is happening in Supplies spending at the start of 2019 across the whole range of demographics. In our final chart we will list the biggest $ moves, up and down by individual segments in 11 demographic categories. Remember, the drop in the 1st half of 2019 was -$2.09B, a big change from the -$0.01B decrease in the 2^nd half of 2018.

• The first thing that you notice is that the biggest decreases are radically larger than the biggest increases.
• The downturn is also very widespread as in 5 of the 11 categories all segments decreased Supplies Spending. This is a radical turnaround from last year when 4 categories had increased supplies spending in all segments. The “flip” from last year is even more evident in the details. In the 1^st half of 2018, 89% of all segments spent more on Supplies. In 2019, only 8 segments spent more. That means 90% spent less – a total reversal.
• The list of losers is a veritable roster of the usual Supplies spending winners – Gen X, White, not Hispanic, Homeowners w/Mtge, $150K+, BA/BS, Suburban, 2 Earners… The answer is that the groups who buy the most Supplies were the groups most impacted by the price increases.
• There are a couple of minor bright spots. Like the Food segment, Singles were the unexpected winners in 3 categories. This reflects their increasing focus on their pets. It also can be seen beneath the surface in the <25 and 75+ age groups. They had by far the smallest decreases and are also the most likely to be in a 1 person CU.
• The other positive is that both African Americans and Hispanics increased their spending overall and in both halves.

The 24 month Spending winning streak for Supplies which began in the second half of 2016 came to an end in the second half of 2018. During that time spending on Pet Supplies increased $4.97B (+33.5%). It was also widespread across America. Of 82 separate demographic segments, only 1 spent less on Supplies in that period – the Greatest Generation. This 91+ year old group has now become too small to be accurately measured.

What are the market conditions that affect Supplies spending? We have to first note that the world changed for Supplies because of the great recession. Prices have generally deflated since then and spending in the segment became more sensitive to changes in price. Prices go up…spending drops, usually due to reduced purchase frequency. Prices go down… spending turns up. This situation did not exist prior to the recession.

The other factor is spending in other segments, especially Food. Pet spending comes out of “one bucket”. A big increase in one segment can result in a cut back in others and big savings can generate more spending. The recent upgrade to Super Premium Food was such a big $ commitment that it magnified this effect.

In 2018, something new was added – outside influence. The FDA warning on grain free dog food had an immediate and negative impact on the Food segment. For Supplies, it was the implementation of added tariffs. Although the tariffs were not official until September, prices in the Supplies segment began to turn up in the Spring. In the 2^nd half they were 1.9% above 2017 and kept increasing. The 1^st half 2019 CPI was 3.4% above the 1^st half of 2018. The result was that Supplies spending flattened out then plummeted in the first half of 2019, down -$2.1B. Inflation has now come to the forefront in Supplies Spending. It continued to increase. By the 2^nd half of 2019 prices had increased 4.0% in 18 months. Unless consumers adjust their behavior, this does not bode well for the 2^nd half of 2019. We’ll get that data in September.

Global Pet Expo was the showcase of the Pet Industry. It also was the forum for a major announcement from the American Pet Products Association (APPA). The revenue for the Total Pet Industry in 2019 was stated to be $95.7B. This was a huge change from 2018 numbers of $72.56B. The difference “is a result of APPA’s efforts to refine and improve its research methodology. In some cases, categories have been revised to include services or products that were previously excluded as reliable data was difficult to obtain.”

The APPA also produced revised numbers for 2018 so a comparison between the 2 years is possible. They reported that in 2018 the Pet Industry totaled $90.50B. That is $17.94B (24.7%) more than they had previously reported. That is a big revision. Let’s put an $18B increase in Consumer Spending into better perspective. $18B is 40% more than we spent on bread in 2018 and about equal to the spending on each of these categories …

• Fresh & frozen chicken
• Fresh Milk & Cream
• Coffee & Tea at home
• Beer & Wine “out on the town”
• All non-prescription drugs
• Non-business computers & hardware

That is a big gap in data. We can’t compare current data to years earlier than 2018 so in effect 60 years of Pet Spending History has been wiped out. It has also been removed from the APPA website so, we are left with the “here and now”…

In 2019 the APPA reported $95.7B for the Total Pet Industry. This is a $5.2B (5.75%) increase over $90.5B in 2018. As we have done in the past, we will take the APPA Retail numbers and figure in the impact of inflation or deflation so that we can see the true change in the amount of goods and services.

Since 2009 and the Great Recession, inflation has not been a big factor in the Pet Industry. In fact, both Food & Supplies have had multiple years of deflation since then. The Services segments have also dialed back their price increases to a certain extent. 2017 saw an all-time record low inflation rate of 0.4% for Total Pet. In 2018, it moved up slightly to 1.25% but in 2019, it almost tripled to 3.25%, the highest rate since 2009. Increasing prices can slow consumer spending in discretionary segments, like Supplies. In Veterinary Services spending, strong inflation has reduced the frequency of visits, especially among lower income groups.

Here are the specifics from 2019.

Pet Food and Services had the best year of any groups but still over 40% of the spending lift came from price increases.

• Pet Food – In 2018 Pet Food prices deflated slightly, -0.02% so a CPI increase of 2.88% in 2019 was a big turnaround. However, the segment still generated a relatively strong “real” increase of 4.09%.
• Pet Services – There has been strong competitive pressure in this segment as more outlets began offering services. This expansion may have stabilized as inflation returned to a more “normal” rate of 2.51% for this segment. The demand for Services is still there as real growth of 3.68% was the second best of any industry segment.
• Veterinary – The Veterinary segment is known for strong inflation. Since they began measuring it in 1997, Veterinary prices have increased at a rate 35% faster than human medical care. The inflation had slowed in the last two years, but it bounced back in 2019 with a rate of 4.14%, the highest rate since 2011 and 18% higher than human medical care. We see the impact on the numbers as over 71% of a 5.8% Retail increase was from prices.
• Supplies – Since the great recession, many categories in this segment have been commoditized. This means that inflation/deflation noticeably affects consumer spending. The tariffs which began late in 2018 drove prices up 2.83% in 2019. As a result, real growth was only 0.38% as prices accounted for over 88% of a 3.2% increase.

The next chart puts the 2019 increases into a more “visual” perspective.

This makes it readily apparent that the major driving force behind the increase in Retail Pet $ in 2019 was inflation. This is somewhat of a surprise compared to recent years. Since 2009, the depth of the great recession, the average annual inflation rate for Total Pet through 2018 was 1.31%. During the same period, the overall U.S. annual inflation rate averaged 1.76% so Total Pet was a relative “value” compared to other consumer expenditures. However, as we all know by now, we need to look deeper. While both of the Services segments maintained an inflation rate above the national CPI, Total Pet prices were driven down by 5 deflationary years in both Food and Supplies. In fact, Supplies’ prices in 2018 were 4.3% below the level in 2009. In 2019 Total Pet Inflation jumped up to 3.25%, 148% higher than the average of the previous 9 years. Is it any wonder that it was such a big factor in spending?

As we have seen in our demographic analysis of Pet Spending from the US BLS Consumer Expenditure Survey, money (income) is the single biggest factor in increased spending. Price changes can cause significant changes in spending behavior in the more discretionary segments. Since 2009 Supplies have been on a spending roller coaster as prices moved up and down in the short term. Veterinary inflation has caused a reduction in visit frequency and depressed spending in lower income groups. The Services Segment is the most discretionary, but an increased number of outlets and the resulting competition have reduced inflation and driven big increases because pet parents do like and want the convenience of Services. For years, Pet Food was immune from the impact of inflation. After all, you don’t buy more pet food than you need just because it is cheaper.  Then came the era of Super Premium Foods. At first, these foods were only available at an exceptionally high price so the first wave of consumers to upgrade were generally better educated with higher incomes. Then came a savior, (or demon, if you prefer) the internet. Suddenly prices were more affordable for more people. The mass market stores also stepped in. The overall increased competition flattened and even deflated prices, so a new wave of Super Premium upgrades produced a much deeper market penetration of this food category.

Now, let’s get back to the present. Although we can’t compare 2019 to any year other than 2018, we can look back to the beginning of the Pet Industry and compare it to the industry’s long term growth, even with the revised numbers.

The earliest data that we have from any source is from the US BLS Consumer Expenditure Survey in 1960. Total Pet Spending in that year was $1.08B. That may seem incredibly small but becomes believable when you consider…

• 57% fewer H/Hs (73m less)
• Only 40% of H/Hs had a pet
• Value of $1 in 1960 was $8.64

Let’s do the math and compare the long term Retail $ & Real Growth rates to the 2018>2019 increase:

• Average annual retail growth
  • 1960 > 2018: +7.9%
  • 2018 >2019: +5.7%
• Average “Real” annual growth
  • 1960 >2018: +4.2% (53.2%)
  • 2018 >2019: +2.5% (43.4%)

Obviously, 2019 wasn’t an auspicious start to a new “era”. The lower retail growth is understandable as it becomes more difficult to maintain a % growth rate over a long period. The big concern is the percentage of growth that is real. It was below 50%, which is certainly below the norm. To generate a “normal” year, the growth in 2019 needed to be +$6.3B,  $1.1B more than we got. Veterinary inflation needs to be dialed back and we need relief from tariffs on Supplies.

Now, we have an unexpected and even bigger factor, COVID-19. The rapidly growing pandemic has had an immediate and sometimes devastating impact on the U.S. marketplace. Together, we will get through this health and business crisis. However, the long term impact on consumer spending behavior is unknown. We’ll just have to wait and see.

Now we will turn our attention to the final Industry Segment – Veterinary Services. We’ll see some similarities to Services but some big differences from the Product Segments. For years, Veterinary Services prices have had high inflation. This has resulted in CU income becoming the most dominant factor in spending behavior and a reduction in visit frequency. Consumers paid more, just used Veterinary Services less often. The high inflation and prices also resulted in consumers trading Veterinary $ in reaction to big spending changes in other segments, primarily Pet Food.

Things changed in 2017 as Veterinary pricing had an all-time record low inflation rate.  Consumers responded with a 7.2% increase in visit frequency and spent $2.5B more on Veterinary Services. In 2018 inflation began to return to more normal levels. Visit frequency fell slightly -0.2% and spending essentially plateaued. Consumers spent $0.56B more (+2.7%) but since inflation was 2.6%, virtually all of the lift was from increased prices. In this report we’ll look deeper.

We’ll start with the groups who were responsible for the bulk of Veterinary spending in 2018 and the $0.56B increase. The first chart details the biggest pet Veterinary spenders for each of 10 demographic categories. It shows their share of CU’s, share of Veterinary spending and their spending performance (Share of spending/share of CU’s). One difference from the product segments is immediately apparent. In order to better target the bulk of the spending we have altered the income group. Another difference is in performance – 6 of 10 groups perform above 120%. This is down from 7 in 2017 and now equal to Supplies. Services leads with 7 and Food trails with 4. This means that these big spenders are performing well but it also signals that there is a large disparity between the best and worst performing segments. Income is clearly the biggest factor in Veterinary Spending.  The categories are presented in the order that reflects their share of Total Pet Spending which highlights the differences of the 9 matching categories.

1. Race/Ethnic – White, not Hispanic (90.9%) up from (90.0%) This group accounts for the vast majority of spending in every segment., but a 91% share is extraordinary. The 131.7% performance rating ranks #3 in terms of importance in Veterinary Spending demographics and reflects the spending disparity. Hispanics, African Americans and Asians account for 31% of U.S. CU’s, but they only spend 9% of Vet $. Asians and African Americans have a significantly lower percentage of pet ownership and African Americans have the lowest average CU income.
2. # in CU – 2+ people (81.6%) down from (84.1%) This group, which is over 70% of U.S. CUs, lost share and their performance fell from 118.0% to 115.7%. Even with a drop in performance, they still rank 7^th in terms of importance in terms of Veterinary Spending. The loss in share and performance was driven by decreased spending by  2 and 3 person CUs in conjunction with a huge, $0.61B increase by singles.
3. Housing – Homeowners (83.4%) up from (82.5%) Homeownership is a major factor in pet ownership and spending in all industry segments. In terms of importance to Veterinary spending, their 131.4% performance rating, up from 131.2%, keeps homeownership in 4th place. The slight increase in share and performance was driven by a $1.1B increase in spending by Homeowners w/Mtge. Everyone else spent less. We should note that Homeownership is not as important to Veterinary Spending as it once was. In 2015 their share was 88.4% with performance of 141.8%.
4. Education – Associates Degree and Higher (76.3) up from (73.8%) Income generally increases with education. It is also important in understanding the need for regular Veterinary care. Market share was up as was performance, which went from 137.3% to 140.0%. Education became stronger as the 2nd most important factor in Vet spending. The lift came from BA/BS and Associates Degrees. All groups with a formal degree after HS performed at 119+%.
5. Age – 35>64 (66.1%) up from (65.9%) This group switched back to 35>64 after a year as 45>74 because the 35>44 yr olds were up $0.8B while the 65>74 yr olds spent $0.2B less. Performance was also up, going from 123.4% to 124.9%. The gains would have been greater, but 55>64 spent $0.6B less. Age remained 5th in terms of importance.
6. Occupation – All Wage & Salaried (66.5%) up from (65.8%) – All Wage and Salary Earners took over from “I’m the Boss”, which included Mgrs & Professionals, Self-employed and Retirees. Mgrs & Professionals and Self Employed drove the increase but they are not in the same group. This kept the the group’s share gain down and performance only increased from 107.5% to 108.3%. Occupation was #6 in importance. Now, it is the least important category.
7. # Earners – “Everyone Works” (66.5%) up from (65.9%) In this group, all adults in the CU are employed. The share gain comes from a big year by working singles. Performance was basically steady, 115.1%, up from 115.0%. The gain from Singles was balanced by a spending drop by 2 earner CUs.
8. Income – Over $70K (68.2%) up from (65.0%) We changed this group from over $50K because Veterinary Spending is so affected by CU income and the $70K level is where the behavior changes. Only the <$30K group spent less but the decrease was huge, -$0.8B. The performance of the $70K group stayed at 169.2%, clearly showing that higher income is THE most important factor in increased Vet spending.
9. CU Composition – Married Couples (60.6%) down from (63.8%) Married couples have a big market share and 120+% performance in all segments. They loss share due to a big decrease from Couples only and an increase from singles and Unmarried, 2+ Adult CUs. Their performance also fell to 122.2% from 128.9%, but they moved up to 6th place in importance because the Occupation Category had an even worse year.
10. Area – Suburban (63.2%) up from (62.9%) Suburban CU’s are the biggest spenders in every segment. They gained a little in share and in performance, which was 113.9%, up from 113.1%. They maintained the middle ground as Center City was up $0.79B while Rural america spent $0.64B less.

We changed 1 of the groups because Higher income is by far the biggest single factor in Veterinary spending. We see the impact of this in many groups as it often contributes to the big spending disparity between segments. The most notable changes were that occupation became less important, education moved up and spending skewed a little younger.

Now, we’ll look at 2018’s best and worst performing Veterinary spending segments in each category.

Almost all of the best and worst performers are those that we would expect. However, there are 6 that are different from 2017. This is much more than Supplies (3) but less than Services (8) and Food (7). This suggests some instability but unlike Food or Services, there is no big change in $, up or down. The changes from 2017 are “boxed”. We should note:

• Income – The 258.8% Performance by the $200K> group is down from last year’s 286.0% but is still very high.
• Generation – This is a Big Change. Boomers have “owned” this segment since….
• Occupation – Self -Employed took over from Mgrs & Professionals. They are the 2 highest income segments.
• Education – The BA/BS group took over from the usual winner, Adv. College Degree.
• Age – The 45>54-year olds, the group with the highest income, solidified their position at the top. By the way, only CUs in the 35>64 age range perform above 100%.
• CU Composition – It was a bad year for Married Couples Only and a good year for Singles, but both maintained their positions at the top and bottom of performance.
• # in CU – 2 people CUs, married or unmarried are the best performers. Single people perform better than only one other type of CU – the ones with 5 or more people.
• Region – Northeast won again – 4 straight years. The South is the only region performing below 100%.

It’s time to “Show you the money”. Here are segments with the biggest $ changes in Veterinary Spending.

Spending was up a modest 2.7% but there was turmoil, and this is where we see it. There were only 2 repeats and 10 segments flipped from 1^st to last or vice versa. The only segment with more turmoil was Food. There were surprise winners – Gen X, 35>44, Center City, Singles and surprise losers – Boomers, Adv. Degrees, 55>64, Married Couple only. Last year there were 4 categories where all segments spent more . This year there were none. Here are the specifics:

• Housing – Homeowners w/o a Mtge flipped from 1^st to last.
  • Winner – Homeowner w/Mtge – Veterinary: $11.90B; Up $1.13B (+10.5%)
    • 2017: Homeowner w/o Mtge
  • Loser – Homeowner w/o Mtge – Veterinary: $5.80B; Down $0.49B (-7.7%)
    • 2017: Renter
  • Comment – Last year all groups spent more. This year it was only Homeowners w/Mtge. The Homeowners w/o mtge numbers were driven down by a big spending decrease by Retirees.
• Generation – Gen X just edged out Millennials for the win.
  • Winner – Gen X – Veterinary: $6.67B; Up $0.91B (+15.9%)
    • 2017: Baby Boomers
  • Loser – Baby Boomers – Veterinary: $8.21B; Down $1.76B (-17.7%)
    • 2017: Silent
  • Comments – The Boomers were the only generation to spend less on Veterinary Services. One factor was their adult children moving out to their own homes. The other Generations spent more producing a positive result.
• Education – Those with a BA/BS Degree are repeat winners and are up $2.48B (+44%) since 2015.
  • Winner – BA/BS Degree – Veterinary Spending: $8.06B; Up $0.90B (+12.6%)
    • 2017: BA/BS Degree
  • Loser – Adv. College Degree – Veterinary Spending: $5.39B; Down $0.50B (-8.5%)
    • 2017: Associates Degree
  • Comment – Associates Degree had a big turnaround and got out of the cellar with the biggest increase of any segment, +24.9%. They were replaced at the bottom by Adv. Degrees, an unusual spot for this group.
• Age – Last year the winner was the older Gen Xers – 45>54. This year it is their younger siblings – 35>44.
  • Winner – 35>44 yrs – Veterinary Spending: $3.83B; Up $0.84B (+28.3%)
    • 2017: 45>54 yrs
  • Loser – 55>64 yrs – Veterinary Spending: $4.78B; Down $0.64B (-11.9%)
    • 2017: 75+ yrs
  • Comment: Veterinary spending by age group was a mixed bag. <25: +$0.14B; 25>34: -$0.02B; 35>54: +$1.03B; 55>74: -$0.88B; 75+: +$0.31B. As you look at the ups and downs, a spending rollercoaster ride “ for the ages” might be a more apt description of the pattern in this category. By the way, the 75+group was up 39%.
• Region – A dual flip in this category.
  • Winner – Midwest – Veterinary Spending: $5.00B; Up $0.80B (+19.0%)
    • 2017: Northeast
  • Loser – Northeast – Veterinary Spending: $4.33B; Down $0.33B (-7.2%)
    • 2017: Midwest
  • Comment – The South finished second again. The Northeast lost but are still the best performing segment.
• Area Type – Central City flipped from last to first.
  • Winner – Central City – Veterinary Spending: $6.47B; Up $0.79B (+13.8%)
    • 2017: Suburbs >2500
  • Loser – Rural – Veterinary Spending: $1.34B; Down $0.64B (-32.2%)
    • 2017: Central City
  • Comment – Central City led the way, but all areas except Rural spent more.
• Race/Ethnic – With a 91% share of Veterinary $, White, non-Hispanics increased their dominance in this segment.
  • Winner – White, Not Hispanic – Veterinary: $19.31B; Up $0.71B (+3.8%)
    • 2017: White, Not Hispanic
  • Loser – Asian American – Veterinary: $0.17B; Down $0.24B (-58.9%)
    • 2017: African Americans
  • Comment – Asian Americans have low pet ownership but the highest income. They spent 59% less. African Americans have low pet ownership and the lowest income. They spent 60% more. Hispanics are 2^nd in pet ownership and 3^rd in income. They spent 20% less. There is no clear pattern for minority spending.
• Occupation – Self-Employed flipped from last to first.
  • Winner – Self-Employed– Veterinary Spending: $2.11B; Up $0.64B (+43.5%)
    • 2017: Mgrs & Professionals
  • Loser – Retired – Veterinary Spending: $3.54B; Down $0.62B (-15.0%)
    • 2017: Self-Employed
  • Comment – Self-Employed and Mgrs & Professionals spent $1.02B more. This overcame the $0.62B decrease by Retirees. Blue Collar workers also posted a $0.12B increase, but the Tech/Sls/Clerical group spent $0.04B less.
• CU Composition – A final double flip.
  • Winner – Single – Veterinary: $3.90B; Up $0.61B (+18.6%)
    • 2017: Married, Couple Only
  • Loser – Married, Couple Only – Veterinary: $6.77B; Down $0.57B (-7.8%)
    • 2017: Single
  • Comment – Singles had a strong year in every category. In Veterinary spending Unmarried 2+ Adult CUs and Single Parents also spent more. For all Married CU’s, only those with an oldest child over 6 had an increase.
• # in CU – Singles flipped from last to first.
  • Winner – Single – Veterinary Spending: $3.90B; Up $0.61B (+18.6%)
    • 2017: 2 People
  • Loser – 3 People – Veterinary Spending: $3.60B; Down $0.32B (-8.3%)
    • 2017: Single
  • Comment: The winning numbers were 3 and 1. CUs of all other sizes spent less.
• # Earners – The winner flipped from last to first and would be a big surprise in most years.
  • Winner – 1 Earner, Single – Veterinary Spending: $2.57B; Up $0.55B (+27.5%)
    • 2017: 2 Earners
  • Loser – No Earner, 2+ CU – Veterinary Spending: $1.61B; Down $0.39B (-19.4%)
    • 2017: 1 Earner, Single
  • Comment – While Income is of primary importance to increased Veterinary Spending, the number of earners remains on the lower tier of spending drivers. The 2018 Veterinary spending data reinforces this. 1 Person CUs, with 1 or no earner spent more. In 2+ person CUs, No Earners and 2 Earners spent less while 1 and 3+ Earners spent more. 2 and 3+ Earner CUs have the highest incomes but are in opposite “camps”. There is no clear spending pattern in the # of Earners category.
• Income – In 2018, $150 to $199K was the winner. The winner is inevitably an over $100K group in this segment.
  • Winner – $150 to $199K – Veterinary Spending: $2.74B; Up $0.33B (+13.7%)
    • 2017: $100K>149K
  • Loser – <$30K – Veterinary Spending: $1.79B; Down $0.77B (-29.9%)
    • 2017: $30 to $39K
  • Comment – The only group to spend less was <$30K but the lift was driven by $70K>, +$1.05B.

We’ve now seen the winners and losers in terms of increase/decrease in Veterinary Spending $ for 12 Demographic Categories. 2018 saw slow growth in Veterinary spending, mostly in the second half. There was a surprising amount of turmoil with 22 of 24 winners/losers being new or flipping positions. Most of the winners were not unexpected but there were some surprises like Gen X, 35>44 and Singles. This reinforces the “youth movement” in Veterinary Spending. However, there were also “hidden” segments that didn’t win but made a significant contribution to the 2018 spending increase. These groups don’t win an award, but they certainly deserve….

HONORABLE MENTION

First let’s call out a Blue Collar subsegment. Construction/Mechanics, +98.5%. African Americans also earned their spot, +60.3%. It wasn’t all about youth as the oldest Americans spent 38.9% more. Formal Education is also important but not just College Grads. Assoc. Degree spent $0.55B more. 4 People CUs and Millennials also had big increases reinforcing the youth movement. While the lift wasn’t as big as last year, it was still widespread as 58 of 92 demographic segments (63%) spent more on Veterinary Services in 2018.

Summary

2016 and 2017 produced a combined increase of $3.6B in Veterinary Spending as inflation moved to record low levels. In 2018 we had the Baby Boomer Spending “Bust” which especially impacted Food and Veterinary. They dialed back their Food upgrade and cut back on Veterinary. Another significant factor was that many adult children moved out of their parents’ homes to become financially independent. This group, plus the Gen Xers stepped up to overcome the decrease from the Boomers. Veterinary Spending became a little more balanced in terms of age and also occupation in 2018.

Veterinary services and spending should be a definite need, like Food, but there are many indications that it is becoming more discretionary and determined by income. It is very obvious when we look at performance. (Share Vet $/Share CUs)

• <$30K – 29.4%
• $30>50K – 71.7%
• $50>70K – 80.3%
• $70>99K – 119.1%
• $100>149K – 161.5%
• $150>199K – 209.1%
• $200K> – 258.8%

The “break even” point (100%) occurs at $70K+. CU’s over $70K (40.3%) account for 68% of Veterinary $. In 2018 this group continued to grow in numbers and gained share. Performance remained steady at 169%. One lower income group, $40>49K had a strong year, +28%. However, the <$30K group has almost become a non-participant in Veterinary.

The performance of other big spending groups is also very important in the Veterinary segment. We identified six demographic categories with high performing large groups. (There were 7 for Services, 6 for Supplies and 4 for Food) .  Consumers have no control over Race/Ethnicity or Age but in addition to Income – Education, Homeownership, and Marriage are important factors in Veterinary spending. The high performance in these groups also demonstrates the big spending disparities among segments within these categories.

There were some changes of note. Occupation ceased to be a major factor in spending, but formal Education after HS became even more important. Marriage lost ground as Singles stepped up their spending. Veterinary spending also skewed younger in 2018 so the big age group changed back to 35>64 from 45>74.

2018 saw a small spending increase (+2.7%) for Veterinary Services. 63% of all segments increased spending but with a 2.6% inflation rate, almost all of the lift came from prices. The lift was driven by Gen Xers and Millennials which was reflected in the strong performance of numerous segments like Singles, Married with oldest Child over 6, Center City and 35>44 yr olds. The importance of income to spending in this segment was reinforced and a definite concern came to the forefront. CUs with income <$30K (29%) spend 15% of Food $ but only 8% of Veterinary $. Is inflation putting necessary Vet Care out of reach for this group? In 2019 Veterinary Inflation jumped to 4.14%. We’ll see what happens.

Finally – The “Ultimate” Veterinary Services Spending Consumer Unit consists of 2 people – a married couple only. They are in the 45 to 54 age range. They are White, but not of Hispanic origin. At least one of them has a BA/BS Degree. They both work in their own business and their total income exceeds $200K. They live in a small suburb, adjacent to a big city in the Northeastern U.S. and are still paying off the mortgage on their home.