Retail Channel Monthly $ Update – August Final & September Advance

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In May 2020, the Retail market began its recovery after hitting bottom in April. The road back has been long and complex and Consumer spending behavior continues to evolve. We have not beaten the virus yet so we will continue to track the ongoing recovery of the retail marketplace 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 – about 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.

We will begin with the Final Retail Report for August and then move to the Advance Report for September. Remember, the retail impact of the pandemic began in March 2020, peaked in April, then recovery started in May. We will compare 2021 to both 2020 and 2019 to document the progress that the retail market has made towards a full recovery.

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 2020 and 2019
  • Current YTD change – % & $ vs 2020 and 2019
  • Monthly and Year To Date $ will also be shown for each group/channel

First, the August Final. Retail hit bottom in April 2020 but began recovery, hitting record $ in December. $ fell in January & February but set a new all time $ record in March. In April $ fell but they rebounded in May to another record high. Sales have slowly declined through August. Here are the major retail groups. (All $ are Actual, Not Seasonally Adjusted)

The final total is $2.0B more than the Advance report projected a month ago. All groups were up slightly. The specifics were: Relevant Retail: +$0.7B; Gas Stations: +$0.6B; Auto: +$0.4B: Restaurants: +$0.3B. Sales vs July were down in all but Relevant Retail. Total Retail $ were the 8th highest month of all time. Total $ales broke $600B for the 1st time in December and has now done it 8 times. Auto still has the strongest recovery and is in fact prospering – annual YTD growth rate since 2019 is +11.9%. There were spending dips vs the previous month but for the third consecutive month, all groups were positive in all other measurements.

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

  • Overall– 5 of 11 channels were down vs July but all were up vs August 2020 and 10 vs August 2019. In YTD $, all were up vs 2020 and 10 vs 2019. August was the 4th biggest month in history for Relevant Retail.
  • Building Material Stores – Their amazing lift may finally be slowing. The surge came as a result of pandemic spending patterns developed in 2020. Consumers began focusing on their homes. Their Spring lift has slowed in 2021 but Building and Farm stores are still going strong. Sporting Goods stores have a similar spending pattern. Sales took off in May 2020, hit a record peak in December and continued strong into 2021, peaking in March. After slowing in July, the $ increased in August. YTD they are +47.4% vs 2019, an Annual Growth Rate of 21.4%!
  • Food & Drug – Supermarkets were +$77.7B in 2020. $ are down vs July but YTD are on par with the 2020 binge. They are up 14% vs August 2019 and 14.3% vs YTD 2019. Drug Stores were +$17B (+5.7%) for 2020. They had a record March. Sales have been stable since then, but all other measurements are positive and YTD $ are +7.6%.
  • General Merchandise Stores – $ in all channels fell in Jan & Feb then spiked in March. Monthly sales by channel have been slightly up or down since then but GM has been strong, +14% YTD. $ Stores & Clubs/SuperCtrs are leading the way with a combined growth rate of +8.5%. These channels promote value. Their success reinforces its importance to consumers. Also, Discount Dept Stores are again back in the game.
  • Office, Gift & Souvenir Stores– $ increased slightly from July and were +20.5% vs August 2020. The pandemic hit them hard. They are still down vs 2019 – monthly and YTD. Recovery is a long way off, but things are improving.
  • Internet/Mail Order – Their $ were up vs July as the pandemic continues to foster this channel’s growth. In August of 2019, their YTD growth was +13.9%. Now, their avg growth rate is +19.6% – a 41.0% increase.
  • 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>24% of total $). Pet Stores were usually essential, but most stores were not. In May 2020 they began their recovery. Their 2020 total sales were up +11.6%. Their August $ were down slightly from July but still #4 of all time. YTD sales are +27.5% vs 2020 and +39.3% vs 2019. Very strong!

Relevant Retail began recovery in May and reached a record level in December. $ fell in Jan & Feb, turned up again in March and began a monthly up/down rollercoaster. August $ are up and all channels but 1 are ahead of 2019 & 2020. The key drivers are the Internet, SuperCtrs/Clubs/$ Stores and Hdwe/Farm. Now, the Advance numbers for September.

2020 was a memorable year for both its traumas and triumphs. In April & May we experienced the 2 biggest retail spending drops in history, but the problems actually began in March. Retail sales began to recover in June and in October, YTD Total Retail turned positive for the 1st time since February. In December, Total Retail broke the $600B barrier – a historic first. Sales fell from their December peak in both January and February but still set monthly sales records. Then they took off again in March, setting a new monthly sales record of $633B. April sales were down slightly but they took off again in May to set yet another spending record, $643.1B. June>Sept $ fell but September was still the 8th biggest $ month in history. All major groups were down from August, but were positive in all other measurements for the fourth straight month. Some other areas of the economy are still suffering, some spending behavior has changed, and inflation has become a bigger factor in some increases. However, consumers continue to spend “big bucks”, especially in Relevant Retail, and the overall Retail marketplace continues its strong recovery.

Total Retail – In March, Total Retail hit $633.1B, a record for the most spending in any month in any year. In April, $ales dipped to $625.5B but were still $218.3B more than April 2020 – a record increase that was more than double the size of last year’s record drop. In May, sales set another new record, $643.1B. June>Sept sales dipped slightly and September was the 3rd smallest month this year, which is normal. However, at $606.8B, it was still the 8th biggest month in history. Moreover, the current YTD average annual sales growth rate since 2019 is 9.2%, the highest ever in records going back to 1992. Total Retail has not just recovered. It is stronger than ever.

Restaurants – This group has no negative measurements vs 2020 or 2019 for 4 straight months. Last February YTD sales were up 8.1% vs 2019. The Pandemic changed that. Restaurants started to close or cease in person dining in March and sales fell -$33.3B (-52.5%) compared to March 2019. Sales bottomed out in April at $30.1B, the lowest April sales since 2003. Sales started to slowly increase in May but never reached a level higher than 88% compared to the previous year. 2021 started off slowly. Through February, YTD sales were down -16.7% from pre-pandemic 2020 and -10.0% from 2019. In March sales took off and grew steadily from April Through July. Sales dipped slightly in August/September but were still strong vs 2019 & 2020. YTD their $ are plus 30.5% vs 2020 and +4.1% vs 2019. Their recovery is getting stronger.

Auto (Motor Vehicle & Parts Dealers) – Staying home causes your car to be less of a focus in your life. Sales began to fall in March and hit bottom in April. Auto Dealers began combating this “stay at home” attitude with fantastic deals and a lot of advertising. It worked. They finished 2020 up 1% vs 2019 and have returned to a strong positive pattern in 2021. The “attitude” grew amazingly positive in March and slowed only slightly in April>September as sales exceeded $122B in all 7 months – the 7 biggest months in history. To show how well consumers responded to their campaign you just need to look at the data. This group has exceeded $110B in monthly sales only 16 times in history. 13 of those occurred after the onset of the pandemic.  YTD Avg Annual Growth Since 2019 = +11.8% – the best performance of any big group.

Gas Stations – Gas Station $ales have been a mixed bag. If you drive less, you visit the gas station less often. Sales turned down in March 2020 and reached their low point in April. They moved up but generally stayed about 15% below 2019 levels for the rest of 2020. In February they were still behind 2020 in monthly and YTD $ but ahead of 2019 in both measurements. In March, sales skyrocketed and continued to grow to to a record $53.5B in July. They fell in Aug/Sept but are still +38% from 2020. They have been positive in all measurements vs 2019 & 2020 since March. Their comeback continues but there is another factor that must be considered – inflation. Gas prices can be pretty volatile. They dipped in the first 2 months of the pandemic but then returned to more normal levels for the balance of 2020. They began strongly inflating in 2021. In fact, September 2021 prices were 42.1% above 2020. That means that the 38.3% year over year $ lift in September was actually a decrease in the amount of gas sold. YTD Annual Growth Rate Since 2019 = +5.2%

Relevant Retail – Less Auto, Gas and Restaurants – This is what we consider the “core” of U.S. retail and has traditionally accounted for about 60% of Total Retail Spending. When you look at the individual channels in this group, you see a variety of results due to many factors – non-essential closures, binge buying, online shopping and a consumer focus on “home”. However, overall, April 2020 was the only month in which spending in this group was down vs 2019. Monthly $ales exceeded $400B for the first time ever in December ($407B). They finished 2020 up $260B, +7.1%. Their performance was the only reason that Total Retail was able to finish 2020 with positive numbers, +0.5%. Sales fell in January and February but set monthly records. In March they turned sharply up and then down in April. They bounced back in May then fell in June & July. In August sales rose again but fell in September. However, we should note that while December 2020 is still #1, March > September are 7 of the 9 highest $ months of all time. The Relevant Retail Market has exceeded $361B in monthly sales 9 tImes in history. 7 of those have occurred since the onset of the pandemic. It is also very important that the Relevant Retail group has posted positive numbers versus last year and YTD for every month since April 2020 and their average YTD growth rate since 2019 now stands at +10.4%. The recovery has become widespread as all channels have been positive in all measurements vs both 2020 and 2019 for 2 consecutive months. However, the primary drivers throughout the pandemic were and continue to be Nonstore, Grocery, SuperCenters/Clubs/$ Stores plus an exceptionally long 2020 “spring lift” from Hardware/Farm and Sporting Goods.

Now let’s look at what is happening in the individual retail channels to see where the $ are coming from. September $ were down 3.6% from August and the drop was widespread. However, a dip in September $ is normal and at -3.6% it was less than half of the -8% drop in 2019. The groups in the chart are less defined than in the Final Monthly reports and we will look across the whole market, not just pet relevant outlets.

Sales in 12 of 13 channels were down vs August but all were up vs September 2020, vs September 2019 and YTD vs 2020 and 2019. (Relevant Retail YTD Avg Annual Growth Rate since 2019 = +10.4%)

After hitting bottom in April 2020, Relevant Retail has now beaten the previous year’s $ for 17 consecutive months. The group set an all-time record of $407B in December and finished 2020 +$260B vs 2019. 2021 started strong, with record sales in every month. March > Sept. were 7 of the 9 biggest of all time. Essential channels are still the primary drivers:

  • Nonstore Retailers – The biggest driver. Online shopping continues to grow in # of households and in $.
  • Food & Beverage – Grocery– Restaurant $ are improving but consumers continue to eat & drink more at home.
  • Bldg Materials/Garden/Farm– Their “Spring” lift may be ending but consumers are still focused on their homes.
  • SuperCtrs/Club/Value/$ Strs – They kept the GM channel strongly positive. Value is still a big consumer priority.

Regarding the Individual Large Channels (Includes YTD Avg Annual Growth Rate since 2019)

General Merchandise Stores – Sales fell for all channels in September, but all other numbers were positive. Even Department Stores $ are growing increasingly positive. After dipping to +7.5% in February, the growth rate by Club/SuperCtr/$ stores has remained near the current 8.8%. These stores are still the key to this channel.

  • YTD Avg Annual Growth: All GM = +7.4%; Dept Stores = +1.2%; Club/SuprCtr/$ = +8.8%

Food and Beverage, plus Health & Personal Care Stores – Sales in Grocery were down in March>May from 2020 – No surprise, as these were 2020 binge months. In June>Sept they beat 2020 $. The Health, Personal Care group finished 2020 at +1.8% but 2021 has been better. September was down from August but YTD they are +10% vs 2020 and 2019.

  • YTD Avg Annual Growth: Grocery = +7.2%; Health/Drug Stores = +5.2%

Clothing and Accessories; Electronic & Appliances; Home Furnishings – March > Sept have been spectacular for all these channels. The increase in Clothing vs September 2020 was less than usual but was still +22.5%. Only Furniture was up vs August, but all remained positive in all measurements vs 2020 or 2019 for the 7th consecutive month.

  • YTD Avg Annual Growth: Clothing = +5.1%; Electronic/Appliance = +3.4%; Furniture = +10.3%

Building Material, Farm & Garden & Hardware – Their “Spring” lift which began in 2020 may be slowing. They have greatly benefited from consumers focusing on their home needs. They finished 2020 +53B (+13.8%). Sales took off in March, set a record in April then trended down May > Sept. They are still +14.4% YTD. Avg Annual Growth = +13.8%

Sporting Goods, Hobby and Book Stores – Book & Hobby stores are open but Sporting Goods stores have driven the lift in this group. Consumers turned their attention to personal recreation and sales in Sporting Goods outlets took off. The group ended 2020 +5.5% vs 2019. The growth accelerated in 2021. Even though $ fell 10% in September, it was still good enough for the 9th consecutive monthly record. September YTD they are +32.9% vs 2020. Avg Annual Growth = +17.1%

All Miscellaneous Stores – Pet Stores were deemed essential but most other stores were not, so closures hit this group particularly hard. Sales hit bottom at -$3.8B in April then began to rebound. They finished with a strong December and ended 2020 -$1.0B, -0.7%. In March 2021 sales took off and reached the $14+B level in May and they have stayed there. Sales fell -2.9% in September, but their YTD sales are now 27.8% above 2020 and 26.0% more than 2019. Their recovery has become very real. YTD Avg Annual Growth = +12.3% (4th Best)

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV. The pandemic accelerated the movement to online retail. In February 2020 NonStore $ were +8.6% YTD. In December monthly sales exceeded $100B for the 1st time. They ended 2020 at +21.4%, +$162.9B. This was 63% of the total $ increase for Relevant Retail Channels. Their 2020 performance far exceeded their 12.9% increase in 2019 and every month in 2021 has produced record $. September was -2.5% vs August but +10.6% vs 2020. YTD $ are +15.2%. YTD Avg Annual Growth = +17.9%

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded with their regular store sales.

Recap – 2020 was quite a year. April & May had the 2 biggest year over year sales decreases in history while December sales broke $600B for the first time. 2021 may become even more memorable. March>September are 7 of the 8 biggest $ales months in history with the 7 largest year over year monthly sales increases ever. The total increase was +$861B, which is 5 times the -$174B decrease from March>May 2020 which caused so much concern. At yearend 2020, Restaurants and Gas Stations were still struggling but Auto had largely recovered. Relevant retail had segments that also struggled but they still led the way for Total Spending to finish the year +0.5% vs 2019. 2021 has been even better. In June > September all major groups are positive vs both 2020 and 2019. The recovery has also become real for virtually all channels and monthly sales continue to set records. In fact, the current annual growth rates of +9.2% for Total retail and +10.4% for Relevant Retail are the highest in history. Retail has recovered but we’ll keep checking.

2020 U.S. PET FOOD SPENDING $36.84B…Up ↑$5.65B

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The Pandemic of 2020 caused much turmoil in the retail marketplace. The Pet Industry grew but the results by segment were mixed. Total spending reached $83.74B, up $5.31B (+6.8%). Food saw panic binge buying in the 1st half. It slowed slightly in the 2nd half, but spending was still strong. The other necessary segment, Veterinary, also had double digit growth. The 2 discretionary segments, Supplies and especially Services were hit hard. Here are the specifics:

  • Pet Food – $36.84B; Up $5.65B (+18.1%)
  • Pets & Supplies – $15.16B; Down $1.65B (-9.8%)
  • Veterinary – $24.85B; Up $3.05B (+14.0%)
  • Pet Services – $6.89B; Down $1.73B (-20.1%)

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 2020, 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 2020 Pet Food Spending totaled $36.84B in the U.S., a $5.65B (+18.1%) increase from 2019. This was the largest increase in history. It’s interesting that 4 of the 5 greatest $ increases and the 2 biggest $ decreases have all occurred in the last 6 years. The current trend in high priced, super premium foods magnifies the results of any changes in consumer purchasing behavior. In earlier research we discovered a distinct, long term pattern in Pet Food Spending. In 2018 we broke the pattern due to outside influences – 1st the FDA warning, then with COVID in 2020. Here is Pet Food Spending since 1997 in full Retail Dollars and adjusted for inflation.

The pattern began in 1997. Retail Pet Food Spending increases for 2 consecutive years then reaches a plateau year or even drops. There was a notable exception in 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.

For 20 years, Pet Food was 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”. After 2014, the changes  became more pronounced and the situation got even more complicated. These complications are due to a number of factors starting with the move to high priced super premium foods, but including increased competition, especially from the internet, and behavioral changes, like increased value shopping. Let’s take a closer look at spending since 2014.

First, some specifics behind the record $5.65B (18.1%) increase to $36.84B. In 2020, the average U.S. Household spent a total of $280.38 on Pet Food. This was an 18.7% increase from the $236.26 spent in 2019. This doesn’t exactly “add up” to the 18.1% increase in total Food Spending. With additional data provided from the US BLS, here is what happened.

  • 0.5% less U.S. CUs
  • Spent 40.8% more $
  • 15.7% less often

By the way, if 67% of U.S. CUs are pet parents then their annual Pet Food Spending is $418.48. Here’s a rolling history.

2014 marks the beginning of the Super Premium era. It began in the 2nd half of 2014 with the 25>34-year-old Millennials making the 1st move. In 2015 the Baby Boomers got on board in a big way, producing a $5.42B increase in spending, the biggest lift in history at the time. 2016 saw a spending change that was accelerated by the high prices of Super Premium Pet Foods. After consumers choose to upgrade to a more expensive pet food, their #1 priority becomes, “Where can I buy it for less?” “Value Shopping” on the internet was a major contributing factor in the big spending drop in 2016.

2017 was an up year which, based upon history, should have been due to a “must have” trend. 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, after the turn of the century we began truly humanizing our pets. 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. This was very evident in 2018. It should have been a year of increased spending but the consumers’ reaction to the FDA grain free warning threw the pattern out the window. In the beginning of 2019 Pet Food spending stabilized as some doubts were raised about the validity of the warning. In the second half of the year Food Spending increased +$2.3B. Some Pet Parents began to return to the topline Super Premium Foods. In some cases, they opted for even more expensive varieties. We also saw some new groups get on board the Super Premium Express.

After the 2019 recovery came the pandemic of 2020. There is nothing more necessary to a Pet Parent than pet food. This spurred binge buying, especially in the 1st half of the year and drove the biggest annual spending increase in history.

The growth of Pet Food spending since 2014 reflects the rise of Super Premium but also another trend – the spectacular increase in the number and use of Pet Medications and Supplements, which are often produced in the form of treats. Together, the strength of Pet Food and these product subcategories reflect the Pet Parents’ absolute number 1 current concern – the health, wellbeing and safety of their Pet Children, which starts with the quality of their food. How big is this trend? Prior to the pandemic, at Global Pet Expo 2020, the 2 product categories with the most exhibitors were #1 Treats and #2 Supplements.

Now let’s look at some specific 2020 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 2015 the spending of the over $70K group exceeded the <$70K for the first time. In 2020 it was almost twice as much. In 2020 the 2 big groups below $70K spent more than 2019 but all 3 big groups under $100K spent less than they did in 2015. The over $100K income group spent twice as much in 2020 as they did in 2015. Due to this movement to higher income groups, we have added a new measurement – spending over/under $100K. In 2015, the 50/50 divide on Pet Food spending was about $70K. In 2020 it is now approximately $107K, breaking the $100K barrier for the first time. It is also up from 87K in 2019. That’s a big change. The chart below shows the annual spending for the major income groups from 2015 through 2020. This should put the 2020 numbers into better perspective.

Before we get into the details for 2020, we should note the uniqueness of 2 years. With competitive pricing on Super Premium Foods and the consumers’ commitment to pet health, 2017 was the only year since 2015 with spending growth in every major income group. In 2018 the FDA grain free warning turned this situation around as all groups spent less. Now, 2020.

2020 National Numbers: $280.38 per CU (+18.7%); $36.84B; Up $5.65B (+18.1%); 2015>2020 – Up $7.35B (+24.9%)

The spending pattern was mixed. The groups <$70K and the $100K> group spent more while the middle income group spent substantially less. The inflation rate in 2020 fell from 2.9% to 0.1% which may have helped the low income groups.

Here are 2020 specifics:

  • Under $30K: (25.4% of CU’s) – $146.95 per CU (+22.3%) – $4.61B – Up $0.57B (+14.2%). Obviously, this group is very price sensitive. It is also getting smaller. The number of CU’s was down 6.5% in 2020 and 18.8% since 2015. This decrease masks the true food situation. While their Total Food spending is lower than 2015, their Avg CU spending on food in 2020 is up 22.2%. Their Total Pet Food spending is being driven down by the substantial and consistent decline in the number of CUs. This makes their spending increase in 2020 even more significant. Even this lowest income group remains fully committed to their pets.
  • $30K>$70K: (31.1% of CU’s) – $193.98 per CU (+1.2%) – $8.17B – Up $0.02B (+0.3%). This group had a 2.0% decrease in the number of CUs which basically negated their slight increase in spending. The Pet Food spending within this big group was definitely mixed. The $30>39K group lost CUs but they radically increased spending, +$0.95B (+45.4%). The $40>49K group grew +0.6% in numbers but they dialed back their spending -$0.13B. The average income for Retirees is now $42K so many are included in this group. They undoubtedly contributed to the growth in CUs but even their +$0.62B increase in Pet Food spending couldn’t turn the $40>49K group positive. Now, the most negative group, $50>69K. They lost 4.5% in CUs and spent -16.3% less per CU on Pet Food. These 2 factors pushed their Total Pet Food Spending down -$0.79B (-20.9%). It was a big drop but not enough to overcome the lift from $30>39K.
  • $70K>$99K: (15.0% of CU’s) – $203.13 per CU (-33.7%) – $3.75B – Down $2.15B (-36.4%). The Pet Food Spending for this group had been very stable. In 2017, this changed as they got “on board” with Super Premium Pet Food. They also became more sensitive, reacting to the FDA warning in 2018, bouncing back in 2019 and then plummeting due to Covid in 2020. They are middle income, with family responsibilities and under considerable monetary pressure.
  • $100K> (28.5% of CU’s) – $515.06 per CU (+44.0%) – $20.31B – Up $7.20B (+55.0%). 87% are college grads so they saw the value of Super Premium food very early. Their 2018 decrease in spending due to the FDA warning was minimal, -0.05B as many opted to move up to even more expensive types of food. They came back strong in 2019 and then were the driving force behind the huge lift in 2020. We should note that their lift was not universal. CUs making $100>149K or over $200K spent $8.89B more, while CUs making $150>199K spent $1.68B less. However, without the overall $100K> group, Pet Food Spending would have been down -$1.55B in 2020.

In 2018, the decrease in Pet Food spending was widespread across incomes. In fact, groups totaling 83.9% of all U.S. households spent less on Pet Food. In 2019, the rebound spending increase only happened for households with incomes above $40K, 61.4%. In 2020 the Pandemic lift occurred at both ends of the income spectrum but the $100K> group was the only true driver as their lift was 127% of the total increase. Besides the biggest increase in history, 2020 was significant for another reason. In the era of Super Premium, Pet Food spending has become increasingly tied to income. In 2020, the 50/50 dividing line on share of spending exceeded $100K for the 1st time. Now, Spending by Age Group…

2020 National Numbers: $280.38 per CU (+18.7%); $36.84B; Up $5.65B (+18.1%); 2015>2020 – Up $7.35B (+24.9%)

One assessment, although it is not 100% accurate, is very close. That assessment is that It’s a generational thing. Baby Boomers and Millennials spent more. Gen X, Gen Z and those born before 1946 spent less.

  • 55>64 (19.1% of CU’s) – $583.23 per CU (+90.2%) – $14.63B – Up $7.09B (+94.0%). 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. In 2018 they had a -$3.5B reaction to the FDA warning. They began to recover in 2019 but it was far short of the drop. Then came 2020, which saw an unprecedented lift in spending. There were 3 major contributing factors. First was panic, binge buying due to pandemic. They also were still recovering from the FDA warning. Finally, the pandemic caused the loss of over 2 million <25 CUs. Many of them moved back with their parents. They obviously took their pets with them, so this contributed to the spending explosion in the 55>64 year old group.
  • 45>54 (17.2% of CU’s) – $247.46 per CU (-21.7%) – $5.45B – Down -$1.63B (-23.1%). 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 “buy in” to Super Premium until 2017. They were negatively impacted by the FDA warning, but they rebounded stronger than any other group. In 2020, their spending dropped significantly. The decrease corresponded almost exactly to a $1.68B drop by the $150>199K income group. Although some may have dialed back their purchases. It is likely that most found value and cheaper prices by buying on the internet. They actually spent 9.7% more but 28.7% less often.
  • 65>74 (15.6% of CU’s) – $248.30 per CU (-1.1%) – $5.20B – Up $0.32B (+6.5%). This group is now all Baby Boomers and growing (+2.0%). They are starting to retire but many are still working (0.6 per CU). Because of their reduced income, they are often slower to react to industry trends. However, they have shown slow but consistent growth every year since 2015. They are Boomers so their Pets are a major priority. They spend 1.13% of their total CU expenditures on their pets. Only the 55>64 yr olds spend a higher percentage.
  • 35<44 (17.0% of CU’s) – $195.39 per CU (-13.9%) – $4.38B – Down -$0.61B (-12.2%). They are primarily young Gen Xers. They are 2nd in income and CU spending but have the biggest families so value shopping is a way of life. Their spending pattern tends to match the older Gen Xers but is less volatile. Their drop in frequency was 14.7%.
  • 25>34 (16.0% of CU’s) – $222.60 per CU (+26.9%) – $78B – Up +$0.87B (+22.3%). In recent years the spending pattern of these Millennials has foreshadowed the overall market for the following year. However, no one could have predicted the pandemic. They reacted strongly with a 22.3% increase in $. They spent 30.6% more, 2.8% less often. Another situation should be noted. They are the most stable in spending. That is surprising.
  • 75> (11.2% of CU’s) – $140.98 per CU (-5.1%) – $2.00B – Down -$0.02B (-1.1%). 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 (3.8% of CU’s) – $74.69 per CU (-24.5%) – $0.39B – Down -$0.37B (-48.4%). The number of CUs fell by 2.2M, -31.2%. Many moved back with their parents or in with other adults. It’s obvious by the big drop in CU Pet Food spending that those who maintained their households had a lower percentage of pet ownership.

The situation in the age groups in 2020 seems to be a generational divide. With Boomers & Millennials on the plus side and everyone else on the downside. Another significant event was that the title for top Pet Food spending CU was passed back to young Baby Boomers from old Gen Xers. The Boomers built the Pet Industry. Their dominance will inevitably fade but it will take a long time. Need proof? Look at the ongoing strong performance by the 65>74 year olds.

We need to drill deeper. Let’s take a look at the segments with the biggest change in spending in 9 categories. The segments that are outlined in black “flipped” from 1st to last or vice versa from 2019. The red outline stayed the same.

We have seen some big spending swings in recent years. Some were industry driven. Others were due to an outside influences like the FDA warning in 2018 and now the Pandemic in 2020. These outside influences had a common driver – fear. The FDA warning caused Pet Parents to back away from grain free dog food. The Pandemic caused many of them to stock up on (binge buy) their Super Premium Pet Food. This produced the biggest Pet Food Spending Lift in history. 2019 saw a recovery lift but it was almost a “normal” year in between the 2 big swings in 2018 and 2020.

The 2020 lift was truly a spectacular year of growth, but it was also somewhat stable as 5 of the 9 segments with the biggest growth were the same as 2019 and are often the best performers. The 55>64 yr olds are a true subset of the Baby Boomer group. They have been on top 3 times since 2015. Only 2 segments flipped from 1st to last and they are really the same group, Gen X. Among the losers, Renters repeated but the others were new. There were a few definite surprises. Gen X, 2 people CUs and the Big Suburbs are usually among the leaders in spending.

You see that the biggest increases were notably larger than the decreases. This was the pattern across the demographic categories. The lift was driven by specific segments. In fact, 49% of 96 demographic segments actually spent less on Pet Food. This is not what you would expect in a year that produced the biggest spending increase in history.

This Pandemic lift was fear driven and very emotional. Although most groups now view pets as part of the family, there is one group that will always be at the top, Baby Boomers. They were the first Pet Parents and their love for their Pet Children truly fueled the spectacular growth of the Pet Industry. This emotional connection has driven many big swings in spending in recent years. There is another consideration. Generations are segments with almost the same individuals every year. The 2020 lift was largely driven by a specific group – Baby Boomers. We’ll see what 2021 brings.

U.S. CU INCOME AND SPENDING IN 2020

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The Pandemic of 2020 had a huge impact on life in America. The stay at home mandates and lockdowns especially affected the Retail Trade. The effects weren’t always negative. In our regular analysis of Data from the Census Bureau’s Monthly Retail Trade reports, we saw some channels, deemed essential that actually benefited from the pandemic restrictions. Although Restaurants, Auto and Gas Stations were initially hit hard, the essential channels in the Relevant Retail group benefited from a lift in consumer spending so much that spending in the whole Retail Sector turned positive for 2020 vs 2019. Admittedly, the increase was small, +0.5% but Sales have continued to grow in 2021 in virtually all channels as at least Retail Spending has essentially recovered from the pandemic.

This data is gathered directly from Retailers by the Census Bureau so it is essentially the “sellers’ point of view”. The US Bureau of Labor Statistics conducts an annual Consumer Expenditure Survey (CEX), which is also designed and executed by Census Bureau Personnel. This presents the spending situation from the “buyers’ point of view”. The data is gathered from diaries and interviews of over 42,000 U.S. CUs (Financially Independent Consumer Units – essentially Households). The early days of the pandemic caused some problems in information gathering and responses, especially in the Diary method. These variances generally showed up in specific small segments. The overall data and the numbers for larger groups were still well within acceptable guidelines. The Census Bureau adapted their methodology to better fit the situation so that by the 2nd half of 2020, the response rate had returned to more normal levels.

The 2020 Consumer Expenditure Data was just released by the US BLS. You are all familiar with some of the data as I use it to develop mid-year and annual reports on Spending in the Pet Industry segments and Total Pet. The data goes way beyond that. It details the CU spending on over 1650 specific expenditures by over 80 demographic segments. Yes, it covers Pet Food $ but it also includes the amount spent on underwear for Children under 2 years old as well as the amount spent on bottled gas for an owned vacation home. To say that it is detailed would be a serious understatement. It also points out another major difference between the CEX and the Monthly Retail Trade report. Both are about spending. However, the Monthly Retail Trade report shows where the $ were spent but doesn’t provide details on what was bought. The CEX is essentially the opposite. It details what was purchased but doesn’t say where the consumers bought it. These 2 viewpoints are both important in getting an overall view of the situation.

I am currently building the database for my Pet Industry reports but I thought that the unique nature of 2020 merited a preliminary summary of the overall spending situation. This will put the Pet spending data into a better perspective. We’ll start with some basics and then get a little more specific for some relevant expenditures. However, if you want to know the spending situation on bottled gas for owned vacation homes, you’ll have to send me a separate request.

# of CU’s (000) – The number of CU’s in 2020 was 131,234K – down -1,008K (-0.8%). That’s 1 million less than in 2019. How unusual is that? I can’t say for sure as I only have annual data going back to 1984. However, in these records an annual drop in CUs has NEVER happened before. The 2 smallest increases were 30 thousand (+0.03%) in 1993 and 77 thousand (+0.06%) in 2009. Both 1993 and 2009 were years with significant recessions.

Let’s look at what groups lost CUs and where the people may have gone.

Here are some big decreases:

  • <25: -2,288K (-31.2%)
  • Renter: -3,083K (-6.4%)
  • Born <1946: -1517K (-9.0%)

The loss in the oldest Americans is not unexpected and is primarily due to movement to assisted living or passing on. There was an increase in homeownership, but it was far less than the drop in renters. The <25 group is getting older, but it should still be growing, not dropping precipitously.

Here are some significant increases:

  • Married, Child 18+: +322K (+3.3%)
  • 2+ Adults, No Kids: +689K (+3.2%)
  • 5+ CUs: +726K (+5.8%)

This clearly shows that a lot of the <25 group, moved back home with their parents or in with other adult friends.

This data shows that the CU count drop was driven by the pandemic economic impact on the younger crowd. Before we get into the $. Let’s look at some CU characteristics for 2020. We’ll note the changes from 2019

Number in CU

  • Avg: 2.5
  • Children <18: 0.6
  • Adults 65>: 0.4
  • Earners: 1.3

Housing Tenure

  • Homeowners: 66% (up from 64%)
    • With Mtge: 39% (up from 37%)
    • W/O Mtge: 27%
  • Renters: 34% (↓ from 36%)

Race/Ethnicity

  • African Americans: 12.7% (↓ from 13.1%)
  • White (Not Hisp), Asian or A/O: 73.1% (↓ from 73.4%)
    • White, Not Hispanic: 66.4% (↓ from 66.6%)
    • Asian: 4.7% (↓ from 4.8%)
    • All Other: 2.0%
  • Hispanic/Latino: 14.2% (↑ from 13.6%)

HS Grads w/at least Some College: 69% (↑ from 67%)

BA/BS> : 46.7% (↑ from 44.3%)

At least 1 vehicle: 90% (↑ from 89%)

Now let’s get into the $, First Gross Income

CU Gross Income – The average CU income in 2020 was $84,352. That’s up +$1500 (+1.8%) from 2019. Considering the impact of the pandemic on the workplace, any increase seems surprising. Let’s see what groups had the biggest gains and losses in earnings. The changes are expressed in percentages to allow better comparison of the impact.

Here are some big “winners”:

  • Bottom 80% of CU Incomes: +4.7%
  • < 25: +16.1%
  • Singles: +10.3%
  • Renters: +4.1%
  • Unmarried, 2+ Adults: +12.3%
  • 5+ CUs: +6.8%
  • 3+ Earners: +7.5%
  • Married, Child 18+: +4.0%
  • HS Grads: +4.6%

The income increase primarily occurred in CU’s with the lowest 80% of income. You see big increases in groups like <25 and Singles which lost a significant number of CUs. Obviously, things improved for those in these groups that held their ground. Many of the “lost” CUs moved in with parents or other adults. This had a positive impact on the income of those CUs – like Unmarried 2+ Adults, Married Couples w/child over 18, 3+ Earners and 5+ CUs. You also see that HS Grads had the biggest income increase, which is not the “normal” way of things.

And here are some that didn’t do that well:

  • Top 20% of CU Incomes: -0.2%
  • Mgrs & Professionals: -4.7%
  • Self Employed: -1.1%
  • 55>64: -4.8%
  • Homeowners w/Mtge: -1.0%
  • College Grads: -1.2%

The overall income of CUs increased 1.8% but not for the highest earners. The income for the 20% of CUs with the highest income actually fell -0.2%. The 2 highest income occupations – Managers & Professionals and Self Employed had drops in income, as did College Grads. The 55>64 year olds, the highest income group of Baby Boomers and Homeowners w/Mtge also lost ground. Overall, CU Income was up, but it was not a “normal” year.

Note: Income Disparity – CUs in the bottom 80% of Income make $51,072 per year. That is only 60.5% of the average CU income of $84,352. It is also just 23.4% of the income for the top 20%. The upper 20% (26.1M CUs) make more than 4 times as much as the bottom 80% (105.1M CUs). The top 20% earn 51.5% of the $11.1T in Total U.S. Income.

CU After Tax Income – In 2020 this was $74,949, up $3,462 (+4.8%) from 2019. The increase in these spendable $ was more than double the increase in gross income $ and almost triple the percentage increase. Let’s take a look.

Three higher income groups that had decreased gross income turned it around to produce an increase in after Tax $

  • Top 20% of CU Incomes: +0.8%
  • Homeowner w/Mtge: +3.0%
  • College Grads: +1.0%

This next group was negative in gross $. All but Self-Employed improved performance in net income but they still stayed negative. The Managers & Professionals had the biggest improvement, going from -4.4% to -0.4%.

  • 55>64: -3.3%
  • Mgrs & Profess: -0.4%
  • Self-Employed: -1.1%

In this group, the poorer got “richer” with a bigger increase in after Tax $. I added the <$30K group to our list because their performance was amazing.

  • Bottom 80% CU Inc.: +9.3%
  • <30K Income: +23.7%
  • <25: +19.4%
  • HS Grads: +9.7%
  • Renters: +7.7%
  • Singles: +12.4%
  • Unmarried, 2+ Adults +13.9%

There is 1 Winner in gross income that actually did worse in after tax income – Married, Child 18+: +1.0% (↓from 4.0%)

Now let’s move on to spending. First, Total Expenditures in 2020.

CU Total Expenditures – The Average CU in 2020 had total expenditures of $61,334, down -$1702 (-2.7%) from 2019. This is not unexpected with the trauma and restrictions of the pandemic. Let’s see what groups had the biggest losses and those with gains in spending. The changes are expressed in percentages to allow better comparison of the impact.

Here are some groups with Big Decreases in Spending:

  • Top 20% of Income: -5.5%
  • Mgrs & Prof: -6.7%
  • Self-Employed: -5.0%
  • 2 Earners: -4.2%
  • 2+ CUs: -3.8%
  • College Grads: -5.8%
  • Asians: -8.3%
  • Boomers: -7.5%
  • Urban, 2.5>5M Pop: -9.1%

You can see that in general, the biggest dips in spending came from the highest earning groups and it was skewed a little older but generally widespread, with 2+ people CUs (70.2% of the total) down -3.8%.

Now let’s see some groups that went against the trend and Increased their Spending in 2020:

  • 2nd Highest Income 20%: +1.1%
  • Lowest 20% of Income: +0.2%
  • Service Workers: +0.3%
  • 3+ Earners: +1.4%
  • Single, 1 Earner: +3.3%
  • < Assoc Degree: +0.4%
  • African Americans: +0.2%
  • Gen Z & Millennials: +2.2%
  • Urban <100K Pop: +3.0%

In general, the increases came from lower income groups, but it was somewhat mixed with both the 2nd highest income and lowest income groups spending more. That means that 40% of CUs spent more but were not able to overcome the drops by other groups, especially the big decrease from the highest earners.

We noted the extreme disparity in Income. Is there also a big Disparity in Spending? Yes! The Top Earning 20% of CUs still spend essentially as much (37.3% of the Total $8.0T) as the bottom 60% (39.3%). Per CU, they spend 2.8 times as much. Total Spending fell $287B from 2019 to 2020. 73.4% of this drop came from CUs in the top 20% in income.

We have looked at the demographics of the change in spending from 2019 to 2020. Now let’s look at some significant changes in how the money was spent.

Food, Booze & Apparel

  • Food at Home: +6.4%
  • Food away from Home: -32.6%
  • Alcohol at Home: +4.5%
  • Alcohol away from Home: -43.9%
  • Apparel: -23.8%
  • Laundry/Dry Clean: -52.6%

As we know, Supermarket Spending was up +10.7%. This shows that a lot of that lift came from nonfood items. The Restaurant & Bar numbers reflect the big drop that we saw in sales at Retail Restaurant outlets. We should also note that the 20% of CUs making the most money had a 44.8% increase in Wine at home. Their drop in Restaurant spending was also equal to the total $ spent by CUs with the lowest 40% of income. Although Clothing stores began to recover in 2021, you see the impact of store closings. Plus, if you work from home, clothes are less of a priority, and you need less dry cleaning.

Housing: +3.5%

  • Owned Home: +9.9%
    • Mtge Interest: +8.7%
    • Insurance: +9.5%
    • Maintain/Repair Serv: +18.6%
    • DIY Repair Supplies: +24.4%
  • Rental: -0.5%
    • Rent: -0.8%
    • Insurance: +8.0%
    • Maintain/Repair Serv: +32.3%
    • DIY Repair Supplies: +42.5%

We see the impact of the additional CUs acquiring homes. We also see the focus on home maintenance that drove the big spending lift in Home Centers and Hardware. One thing is constant. Insurance companies charge more!

Housekeeping Supplies: +9.3%

  • Laundry Supplies: -8.1%
  • TP & Paper Towels: +2.7%
  • Lawn & garden: +29.1%

Laundry – do less. Toilet Paper – buy more. Plus, don’t forget to maintain your yard!

Household Furniture & Equipment: +11.8%

  • All Furniture: +2.5%
  • Outdoor Furniture: +64.7%
  • Outdoor Equipment: +440.2%
  • Office Furn. Home Use: +143.9%
  • Computer Hdwe, NonBus: +41.9%
  • Portable Heat/Cool Equip: +19.4%

If you spend more time at home, including working there on a regular basis, you’re going to need furniture and equipment to do it comfortably. A home office requires office furniture. You’ll also want to upgrade your home computer. If your office is set up in a small room or basement, you need to insure a comfortable air temperature. Finally, when you take a break, why not comfortably relax in the backyard?

Transportation: -8.5%

  • Buy New Car/Truck: +2.9%
  • Buy Used Car/Truck: -0.7%
  • Leased Vehicles: +12.3%
  • Gasoline: -24.3%
  • Insurance: +1.9%
  • Parking: -45.8%
  • Rental Vehicles: -43.9%
  • Air Fares: -68.8%
  • Mass Transit: -53.7%

We saw in our Retail Channel analysis that the Auto Industry had broken even by year end 2020. That was largely driven by aggressive deals on new cars. That is reflected in these numbers. We also travelled significantly less, which is reflected by Gasoline, Mass Transit, Parking, Air Fares and Rental Cars. Once again, we can always count on insurance companies …as that spending went up +1.9%.

Healthcare: -0.3%

  • Medical Insurance: +3.9%
  • Physicians’ Services: -17.1%
  • Hospital Room/Services: -4.3%
  • Drugs: -2.0%
  • OTC Vitamins: +14.0%
  • Medical Equip/Supp: -12.4%

Health Care spending was down. Much of the expenses for COVID were covered and elective treatments were reduced. Even regular doctor visits declined. You can see that some people increased home remedies and of course, we can always count on the Insurance Industry – spending up +3.9%.

Entertainment: -5.8%

  • Fees/Admissions: -51.8%
  • Online Gaming Serv: +131.4%
  • Video Game Softwre: +36.7%
  • Video Game Hdwre: +51.7%
  • Video Streaming Serv: +34.5%
  • Musical Instruments: +35.4%

We still needed to have fun but as you see movies and in person events largely went away. We turned strongly to the internet. The big increase in musical instruments is interesting. Remember, a Musical Instruments Store chain made the list of the Top 100 Retailers for the very first time in 2020.

We have largely been focused inside the home. Let’s take a look at what was happening in terms of outdoor recreation and living. Remember sales in Sporting Goods Stores took off in the latter part of the year.

Outdoor Entertainment & Recreation: +48.9%

  • Camping trailers: +941.9%
  • Motorized RVs: +294.9%
  • Motorized Boats: +79.1%
  • Rental of RVs: -24.5%
  • Athletic/Exercise Gear: +32.0%
  • Hunting/Fishing Equip: +42.0%
  • Winter Sports Equip: -10.4%
  • Water Sports Equip: +33.1%
  • Fireworks: +154.4%

You can see that we moved towards the outdoors, and the commitment was strong. We didn’t rent. We bought! Winter Sports was an exception because you can’t just go skiing. You need to go to a resort. The lift in home fireworks was huge and probably reflects consumers trying to make up for the cancellation of a lot of the planned July 4th celebrations.

Miscellaneous Expenditures of Interest

Here are some other interesting big changes in expenditures that don’t immediately fit into previous categories.

  • Personal Care Services: -30.3%
  • Digital Book Readers: +35.6%
  • College Tuition: -18.4%
  • Elem/HS Tuition: +42.9%
  • Marijuana: -6.5%
  • Lottery/Gambling Losses: -12.2%
  • Funeral Expenses: +53.4%
  • Charity Contributions: +66.1%
  • Political Contributions: +63.0%

These generally are expected changes, but they may be bigger than expected. I was surprised by the increase in Charitable and Political contributions. It does reinforce the fact that Americans want to get involved in a crisis. I must admit that I was stunned that we spent less on Marijuana. Gambling losses were down but never fear, betting has moved online. Plus, the Top 20% in Income loss 34.5% more on gambling than in 2019.

One last thing: Government Stimulus Money. Each of these 5 groups has 20% of Total CUs, based upon income level. Here is their share of Stimulus $:

  • Total $timulus – $251B
  • Under $24K – 15.3%
  • $25>45K – 20.0%
  • $46>75K- 22.2%
  • $76>124K – 24.0%
  • $125> – 18.5%

The payment was relatively balanced. However, it is concerning that the smallest share went to the lowest income group. Perhaps, the program should have been skewed even more towards lower income groups.

The data in the report often provides specific examples which reflect the trends seen in our ongoing analysis of sales by Retail Channel. I hope that it gives you a better feel for the monetary impact of COVID on U.S. Households in 2020.