U.S. PET SUPPLIES SPENDING $24.38B (↑$6.96B): MID-YR 2022 UPDATE

/in /by

In our analysis of Pet Food spending, we saw that spending had returned to strong normal growth after the up & down due to the pandemic. Supplies had a different pattern. At the beginning of 2020, Supplies Spending was down due to Tarifflation. The pandemic caused consumers to focus on needs so Supplies $ continued its steady decline from its 2018 peak reaching a low point below 2016. In 2021, that all changed. Supplies Prices had been steadily deflating and Consumers finally responded. In 2021 Pet Supplies spending took off, especially in the 2nd half. The increase slowed significantly in the 1st half of 2022. High inflation may have been a factor in the slowed increase but spending is still at a record $24.38B. The following chart should put the recent spending history of this segment into better perspective.

Here are this year’s specifics:

Mid 2022: $24.38B, ↑$6.96B (+40.0%) from Mid 2021.

The +$6.96B came from: Jul > Dec 2021: ↑$6.39B; Jan > Jun 2022↑$0.57B

The lift was huge and 92% of it came from the $6.39B increase in the 2nd half of 2021, by far the biggest YOY 6 month increase in history. Like Pet Food, Pet Supplies spending has been on a roller coaster ride, but the driving force is much different. Pet Food is “need” spending and has been powered by a succession of “must have” trends and the emotional response to the Pandemic. 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, 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. Before breaking the record in 2022, Pet Supplies prices reached their peak in September of 2009. Then they began deflating and in March 2018 were down -6.7% from 2009. Price inflation in this segment can retard sales, usually by reducing the frequency of purchase. While deflation generally drives Supplies spending up. A new “must have” product can “trump” both of these influencers. 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 combination caused Supplies $ to fall $2.1B. In 2016 consumers value shopped for Food, saving $2.99B. Supplies spending stabilized then increased by $1B in the 2nd half when prices fell sharply. Consumers spent some of their “saved” money on Supplies. Supplies prices continued to deflate through 2017. Food spending increased $4.61B in 2017 but this generally came from older CUs, less focused on Supplies. The result was a $2.74B increase in Supplies spending.

In the 1st half of 2018 Pet Food spending slowed, +$0.25B. Supplies’ prices began inflating but were only +0.1% vs 2017. During this period Supplies Spending increased $1.23B. Inflation grew in the 2nd half of 2018 due to impending new tariffs in September. By June 2019 they were 3.4% higher than 2018. The impact of the tariffs on Supplies was very clear. Spending flattened in the 2nd half of 2018, then plummeted in the 1st half of 2019, -$2.09B. Prices stayed high for the rest of 2019 and spending fell an additional -$0.9B. In 2020 prices turned up again through March before plummeting,    -3.8% by June. However, due to the pandemic focus on “needs”, spending dropped an additional -$0.54B. The situation not only didn’t change in the 2nd half, it worsened as the $ fell an additional -$1.12B. However, 2021 brought a record resurgence as consumers “caught up” on the Supplies purchases that had been delayed due to the pandemic. Supplies spending increased +$8.65B in 2021, 20% above their 2018 peak. Sales passed $24B in  Mid-yr 2022 but the YOY 1st half increase slowed to +$0.57B. Inflation in Supplies took off at the beginning of 2022 so it may once again be a factor.

Here’s what Pet Supplies inflation looked like in Mid-2022:

  • Mid-Yr 22 vs 21: 5.6% • 2nd Half 21 vs 20: 3.9%       • 1st half 22 vs 21: 7.4%

You can see that the rate doubled in early 2022, which could have been a factor in the lower increase. However, 81% of the 40% spending increase was real. Inflation increased to 8.0% in the 2nd half of 2022 which made the 2022 annual YOY rate 7.7%. We’ll see if Pet Parents continue to spend at the same level despite record high prices.

Now, let’s take a closer look at the data, starting with two of the most popular demographic measures – age and income. The graphs that follow will show both the current and previous 12 months $ as well as 2021 yearend. This will allow you to track the spending changes between halves.

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 <$70K group as an example:

Mid-yr Total Spending Change: $7.12B – $6.90B = Up $0.22B (Note: green outline = increase; red outline = decrease)

  • 2nd half of 2020: Subtract Mid-21 ($6.90B) from Total 2021 ($7.53B) = Spending was up $0.63B in 2nd half of 2021.
  • 1st half of 2022: Subtract Total 2021 ($7.53B) from Mid-22 ($7.13) = Spending was down $0.41B in 1st half of 2022.

  • You see that there are 2 basic patterns. The groups over $100K had increases in both halves, with the largest lift coming in the 2nd half of 2021. The under $100K also had spending increases during the 2nd half of 2021 but they were small. In the 1st half of 2022, spending for all lower income groups but $30>50K fell vs 2021. The drop was large enough for $50>70K that it had the only overall mid-year decrease in spending of any group.
  • It is very obvious from the chart that Supplies spending has moved to the higher incomes, especially the $150K> group. Over $100K has 31.4% of CUs but accounts for 58.7% of Supplies $. That’s a performance level of 186.7%. However, the $150K> is even stronger with 16.7% of CUs generating 40.3% of Supplies spending – performance: 241.3%. The highest performance for any group under $100K is from $70>100K at 85.2% but the averages were: <$100K = 60.2%; <$70K = 53.7%. The halfway point in Supplies spending is an income of $124K. That’s 36% higher than the level for Food. Pet Supplies spending is very much driven by income.

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

  • There were 3 spending patterns. For 55> and 25>34 spending grew in both halves. The high-income 35>54 groups had a lift in the 2nd half of 21 then a small drop in 22. The <25 group had the only overall drop in spending.
  • The 2 biggest lifts came from 35>44, +$3.44B and 55>64, +$1.67B. Most of their increases came in the 2nd half of 21.
  • A big factor in the lower increase in 22 was that all but <25 had big spending increases in the 1st half of 21.
  • Supplies spending skews a little younger. The halfway point is 47 yrs old, a little younger than Food at 53 but in the middle of the highest income groups. Income is the biggest driver.

Now let’s look at what happened in Supplies spending at the start of 2022 across the whole range of demographics. In our final chart we will list the biggest $ moves, up and down by individual segments in 12 demographic categories.

  • Although the overall lift was small, the biggest increases are still radically larger than the biggest decreases.
  • The increase/decrease was mixed across the marketplace but 68% of segments spent more. There was no category in which all segments spent more. Last year there were 7. In 2020 there were 5 in which all segments spent less.
  • Many of the winners are the “usual suspects”, like $150K>, Mgrs/Professionals & 2 Earners but there are a couple of surprises – Associates degree & Center City.
  • In regard to the losers, $30>49K, Asians, 1 Earner, Singles and Renters are not unexpected but Gen X, 45>54 and those with BA/BS Degree are definitely surprises.
  • Perhaps the biggest trend is that the Baby Boomers are now catching up. The younger groups “bought in” earlier on Supplies. The wins by 55>64, Homeowners w/o Mtges, Married, w/child over 18 support the Boomers’ win.
  • The importance of high income in Supplies spending is reinforced. $150K> had the biggest 2022 lift of any segment as well as a $4B lift in the 2nd half of 2021. One way to overcome strong inflation is to make more money.

Since the Great Recession the Supplies segment has become commoditized and very sensitive to inflation/deflation. Plus, since most categories are discretionary, Supplies spending can be affected by spending changes in other segments, as Pet Parents trade $. In 2018, the Pet Industry was introduced  to a new “game changer” – outside influence. The FDA warning on grain free dog food caused a big decrease in food spending but the government also radically increased tariffs which drove Supplies prices up and spending down, a record $2.98B.

However, we weren’t done yet. That brought us to 2020 and a new, totally unexpected outside influence, the COVID pandemic. This affected all facets of society, including the Pet Industry. Consumers, including Pet Parents, focused on needs rather than wants. In the Pet Industry, this meant that their attention was drawn to Food and Veterinary Services. This led to a huge lift in Pet Food $ due to binge buying but also a big increase in Veterinary spending. The more discretionary segments, Supplies and Services, suffered. Services had an extra handicap. Many outlets were not considered essential, so they were subject to restrictions and closures. Supplies were still available, but many were considered optional by consumers so spending continued to decline throughout 2020. By yearend, $ had reached the lowest level since 2015. This all happened while prices continued to deflate. That brought us to 2021. The retail economy had largely recovered and spending patterns were returning to “normal”. This was also true in Pet Supplies. Pet Parents opened their wallets and  bought the Pet Supplies that they had been holding back on for a year. The result was the biggest annual increase in history. At the end of 2021 and throughout 2022, inflation came back into the picture with the highest YOY increases in history. The ongoing lift in Supplies spending slowed in the 1st half of 2022 but that spending was going against a record increase in 2021. There was some impact on lower incomes, but the high incomes remained strong. Inflation continued to grow in the 2nd half of 2022. We’ll see if its impact on spending increases.

Retail Channel Monthly $ Update – May Final & June Advance

/in /by

While inflation continues to slow, its cumulative effect on consumer spending is still being felt. The rate of sales increases is still slower than the decrease in inflation in a number of channels, which causes a drop in the amount of product sold. A recovery may have started but there is still a long road ahead, so we’ll continue to track the retail market with data from two reports provided by the Census Bureau and factor in the CPI from US BLS.

The Census Bureau Reports are the Monthly and the Advance Retail Sales Reports. 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 Report for May and then go to the Advance Report for June. Our focus is comparing to last year but also 2021 and 2019. We’ll show both actual and the “real” change in $ as we factor inflation into the data.

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 data will be presented in detailed charts to facilitate visual comparison between groups/channels. The charts will show 11 separate measurements. To save space they will be displayed in a stacked bar format for the channel charts.

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2022 and 2021.
    • Current Month Real change for 2023 vs 2022 and vs 2021 – % factoring in inflation
  • Current Ytd change – % & $ for 2023 vs 2022, 2021 and 2019.
    • Current Ytd Real change % for 2023 vs 2022, 2021 and 2019
  • Monthly & Ytd $ & CPIs for 22>23 and 21>23 which are targeted by channel will also be shown. (CPI Details are at the end of the report)

First, the May Final. All were up from April, and all but Gas Stations were up vs 22, 21 & 19. When you consider inflation, the negatives were fewer than in April. However, Gas Stations are still really down vs 2019. The most significant change may be that Relevant Retail is now “really” up vs May 22. (All $ are Actual, Not Seasonally Adjusted)

The May Final is $2.8B more than the Advance Report. Specifically, Restaurants: +$1.4B; Auto: +$1.0B; Gas Stations: +$0.4B; Relevant Retail: N/C. Sales were up from April for all big groups and actual sales for all but Gas Stations were positive in all measurements vs 22, 21 & 19. Strong deflation caused Gas Stations sales to drop monthly and YTD vs 2022. There are some real sales drops, especially vs 2021. Restaurants have the most growth and are the only group with all positives. To reiterate, the most significant data may be that real sales for Relevant Retail vs May 22 are positive. They have been down for 7 straight months. They are #1 in performance since 2019 but only 48% of the growth is real.

Now, let’s see how some Key Pet Relevant channels did in May in the Stacked Bar Graph Format

Overall– All 11 were up from April, but vs 22, 8 were up vs May 22 and 10 Ytd. 6 were “really” down monthly & Ytd. Vs 2021, 9 had increases but only 4 monthly & Ytd were real. Vs 2019, only Off/Gift/Souv & Disc Dept Strs were really down

  • Building Material Stores – The pandemic focus on home has produced sales growth of 35.7% since 2019. Prices for the Bldg/Matl group have inflated 20.8% since 2021 which is having an impact. HomeCtr/Hdwe stores are down for the month & Ytd vs 22 but up vs 21 &19. Farm Stores are up in all measurements. However, both have all negative real numbers vs 2022 & 2021. Importantly, only 21.5% of their 19>23 lift was real. It was only this high because most of the lift came prior to the inflation wave. Avg 19>23 Growth: HomeCtr/Hdwe: 7.3%, Real: 1.3%; Farm: 11.3%, Real: 5.0%
  • Food & Drug – Both channels are truly essential. Except for the pandemic food binge buying, they tend to have smaller fluctuations in $. However, they have been very different in inflation. The gap is closing but the Grocery rate is still 32% higher than Drugs/Med products. Drug Stores are positive in all measurements and 73% of their growth since 2019 is real. While the $ are up for Supermarkets their 2023 real sales are down vs 2022 & 2021 and just slightly positive vs 2019. Only 9% is real growth. Avg 19>23 Growth: Supermarkets: +6.4%, Real: +0.6%;Drug Stores: +5.0%, Real: +3.7%.
  • Sporting Goods Stores – They also benefited from the pandemic in that consumers turned to self-entertainment, especially sports & outdoor activities. Sales are up from April and are actually & really positive vs 2022. However, they are actually & really negative vs 21. Prices are still deflating -0.9%, a big change from +5.4% in 21>22 and +6.5% in 20>21. The result is that 60% of their 44.6% lift since 2019 is real. Their Avg 19>23 Growth Rate is: +9.7%; Real: +6.1%.
  • Gen Mdse Stores – All were up vs April and $ stores had the biggest lift. Actual sales vs 22, 21 & 19 were also up for all but Disc Dept Strs vs May 22 & 21. In real sales, the only positive was in Ytd sales for $/Value Stores vs 22. Disc Dept Stores are the worst performer and are now really down -0.1% vs 2019. The other channels average 34% In real growth. Avg 19>23 Growth: SupCtr/Club: 6.2%, Real: 2.2%; $/Value Strs: +6.6%, Real: +2.6%; Disc. Dept.: +2.7%, Real: -0.01%
  • Office, Gift & Souvenir Stores – Actual sales are up 10.9% from April but down from May 22. They were up in all other measurements vs 22, 21 & 19. Their real sales growth is down monthly vs 22 & Ytd vs 19. All other real numbers are positive. Their recovery started late but they are making slow progress. Avg Growth Rate: +0.9%, Real: -1.8%
  • Internet/Mail Order – Sales are up from April and above $100B again at $105.3B – another monthly record. All measurements are positive, but their growth is only 43% of their average since 2019. However, 79% of their 97% growth since 2019 is real. Avg Growth: +18.5%, Real: +15.4%. As expected, they are still by far the growth leaders since 2019.
  • A/O Miscellaneous – Pet Stores are 22>24% of total $. In May 2020 they began their recovery which reached a record level of $100B for the first time in 2021. In 2022 their sales dipped in January, July, Sept>Nov, rose in December, fell in Jan>Feb, then turned up in Mar>May. (May was +18%) Ytd Real sales are down vs 22, but all other measurements are positive. They are still the % increase leaders vs 2021 and 71% of their 55.2% growth since 2019 is real. Average 19>23 Growth: +11.6%, Real: +8.7%. They are still 2nd in growth since 2019 to the internet. Pet Stores are surely contributing.

Inflation remains an important factor in Retail. In actual $, 8 channels reported increases in sales vs 2022 and 9 vs 2021. When you factor in inflation, the number with any “real” growth drops to 5 vs 2022 & 4 vs 2021. Inflation has impacted sales increases. May was a strong month but the lift was still 30% less than in Jan & Feb. The impact is very visible at the retail channel level. Inflation has continued to slow. Let’s look at the impact on the Advance Retail $ales for June.

Since 2019, we have seen the 2 biggest monthly drops in history but a lot of positives in the Pandemic recovery. Total Retail reached $700B in a month for the first time and broke the $7T barrier in 2021. Relevant Retail was also strong as annual sales reached $4T in 2021 and all big groups set annual $ales records. In 2022 radical inflation was a big factor. At first, this reduces the amount of product sold but not $ spent. Total Retail hit $8T and all groups again set new annual records in 2022. In 2023, sales fell for all groups in Jan>Feb, rose in March, fell in April, grew again in May, then dropped in June. Except for a decrease by Gas Stations, all actual sales are positive vs 22, 21 & 19. There is also some stability in that of the groups’ total of 20 “real” sales measurements vs 22 & 21, 11 are again positive, including monthly sales vs 22 for Relevant Retail. The biggest change is that the lift vs 2022 is notably smaller, especially for Relevant & Total Retail.

Overall – Inflation Reality – Total, Auto & Gas prices all deflated. For Relevant Retail, the rate was slightly below the sales lift. For Restaurants, inflation remains high, +7.6% but they still have the strongest performance vs 2022 & 2021. The biggest news is that monthly real sales for Relative Retail vs last year have been positive for 2 straight months after 7 consecutive negatives. However, their Ytd Real sales are still down vs 2022 & 2021. They still have a ways to go.

Total Retail – Since June 2020, every month but April 23 has set a monthly sales record. December 22 $ were $748.9B, a new all-time record. Sales dipped in Jan>Feb, rose in Mar, fell in Apr, grew in May, then fell in June. Inflation has become deflation, but sales growth is still low. Sales are up 1.7% vs last year. That’s only 21% of their average 19>23 growth. Also, real sales are down monthly and Ytd vs 21 and only 36% of the 19>23 growth is real. Inflation in Total Retail has radically slowed vs 2022 but we still clearly see its cumulative impact. Avg 2019>23 Growth: +8.0%, Real: +3.1%.

Restaurants – They were hit hard by the pandemic and didn’t begin recovery until March 2021. However, they have had strong growth since then, setting an all-time monthly record of $91B in December and exceeding $1T in 2022 for the 1st time. They are the best performing big group vs 22 & 21. Inflation decreased to 7.6% in June from 8.2% last month but is still +15.7% vs 21 and +21.2% vs 19. 39.6% of their 40.9% growth since 19 is real but they remain 2nd in performance behind Relevant Retail. Recovery started late but inflation started early. Avg 2019>23 Growth: +8.9%, Real: +3.8%. They just account for 13.1% of Total Retail $, but their performance improves the overall retail numbers.

Auto (Motor Vehicle & Parts Dealers) – This group actively worked to overcome the stay-at-home attitude with great deals and a lot of advertising. They finished 2020 up 1% vs 2019 and hit a record $1.48T in 2021 but much of it was due to skyrocketing inflation. In 2022 sales got on a rollercoaster. Inflation started to drop mid-year, but it caused 4 down months in actual sales which are the only reported sales negatives by any big group in 2021>2022. This is bad but their real 2022 sales numbers were much worse, down -8.2% vs 2021 and -8.9% vs 2019. 2023 started off a little better in Jan>Feb, got worse in Mar>Apr, grew in May, then fell in June. Again, only monthly & Ytd real sales vs 21 are negative. Prices are -0.7% vs 22 and are down -1.4% Ytd. 10% of 19>23 growth is real. Avg 2019>23 Growth: +6.9%, Real: +0.7%.

Gas Stations – Gas Stations were also hit hard. If you stay home, you drive less and need less gas. This group started recovery in March 2021 and inflation began. Sales got on a rollercoaster in 2022 but reached a record $583B. Inflation started to slow in August and prices slightly deflated in Dec & Feb then strongly dropped in Mar>Jun, -14.0% Ytd vs 22. However, prices are still +17.5% vs 21. The deflation is directly tied to the monthly & Ytd sales drops vs 22. Look at the rates. Real sales vs 22 are up slightly but still down vs 21 & 19.  Avg 2019>23 Growth: +6.5%, Real: -1.0%. The numbers show the cumulative impact of inflation and demonstrate how strong deflation can be both a positive and a negative.

Relevant Retail – Less Auto, Gas and Restaurants – They account for 60+% of Total Retail $ in a variety of channels, so they took many different paths through the pandemic. However, their only down month was April 2020, and they led the way in Total Retail’s recovery. Sales got on a roller coaster in 2022 but all months in 2022 set new records with December reaching a new all-time high, $481B, and an annual record of $4.81T. In 2023, Jan & Feb had normal drops then grew in March, starting another roller coaster. Sales fell in June, but all actual sales are up vs 22, 21 & 19. Real sales are down vs June 21 & Ytd vs 22 & 21. Monthly Real sales vs last year have been positive for 2 straight months after 7 negatives in a row. 49% of their 19>23 $ are real – #1 in performance. Avg 2019>23 Growth is: +8.4%, Real: +4.3%. This big group is where America shops. The fact that real sales have been positive for 2 consecutive months gives us hope.

Inflation is slowing but the cumulative impact is still there. Sales increases are also slowing, but the fact that 55% of all real sales numbers vs 22 & 21 are positive again is a good sign. Restaurants are still doing well, and Auto is improving. Gas Stations are now seeing the negative impact of strong deflation with a continued drop in actual sales. However, as always, our biggest concern is Relevant Retail. Their situation has definitely improved. Ytd real sales vs 22 & 21 are still negative, which clearly shows the impact of cumulative inflation. However, monthly real sales vs 22 have been positive for 2 straight months. This is not the end of the crisis, but a slow turnaround appears to be continuing.

Here’s a more detailed look at June by Key Channels in the Stacked Bar Graph Format

  • Relevant Retail: Avg Growth Rate: +8.4%, Real: +4.3%. Only 2 channels were up from May but 7 were up vs 22 & 21. Only 4 had a “real” increase vs 22 and 5 vs 21. The negative impact of inflation appears to be slowing sales increases.
  • All Dept Stores – This group was struggling before the pandemic hit them hard. They began recovery in March 2020. Their Actual $ are down from May and for all comparisons but Ytd vs 21 & 19. Their real sales are down in all measurements, even vs 2019. Avg 2019>23 Growth: +0.3%, Real: -2.4%.
  • Club/SuprCtr/$ – They fueled a big part of the overall recovery because they focus on value which has broad consumer appeal. $ales are down vs May but up in all other measurements. Their real sales are down in all measurements but vs June 21 & Ytd vs 19. Only 34% of their 27.5% 19>23 lift is real – the impact of inflation. Avg Growth: +6.3%, Real: +2.3%.
  • Grocery- These stores depend on frequent purchases, so except for the binge buying in 2020, their changes are usually less radical. $ are down from May but up in all measurements vs 22, 21 & 19. However, inflation hit them hard. Real sales are down for all but Ytd vs 2019 and only 7.6% of the growth since 2019 is real. Avg Growth: +6.3%, Real: +0.5%.
  • Health/Drug Stores – Many stores in this group are essential, but consumers visit far less frequently than Grocery stores. Sales are down from May but up in all other measurements, both actual and real vs 22, 21 & 19. Their inflation rate has been relatively low so 74% of their 23.4% growth from 2019 is real. Avg 2019>23 Growth: +5.4%, Real: +4.0%.
  • Clothing and Accessories – Clothes initially mattered less when you stayed home. That changed in March 21 with strong growth through 2022. $ales are down from May but up vs 22, 21 & 19. However, Real sales are down for all but Ytd vs 21 & 19. Another positive is: 64% of their 2019>23 growth is real. Avg 2019>23 Growth: +3.8%, Real:+2.5%
  • Home Furnishings – In mid-2020 consumers’ focus turned to their homes and furniture became a priority. Inflation has slowed but was very high in 2022. Actual sales are down from May and in all other measurements but Ytd vs 2019. Their real sales are again all down, even vs 2019. Avg 2019>23 Growth: +4.0%, Real: -0.2%.
  • Electronic & Appliances – This channel has many problems. Sales fell in Apr>May of 2020 and didn’t reach 2019 levels until March 2021. $ales are up from May but down in all measurements but vs Jun 22 & Ytd vs 19. However, consistent deflation has caused real sales to be up in all measurements. Avg 2019>23 Growth: +0.6%, Real: +2.5%.
  • Building Material, Farm & Garden & Hardware –They truly benefited from the consumers’ focus on home. In 2022 the lift slowed as inflation grew to double digits. Inflation is still high at 8.8%. Sales are down -8.1% from May which caused them to be all negative vs 2022. They still have the highest Inflation of any channel so real sales are negative in all but Ytd vs 2019. Also, just 22% of their sales growth since 2019 is real. Avg 2019>23 Growth is: +8.1%, Real: +2.0%.
  • Sporting Goods, Hobby and Book Stores – Consumers turned their attention to recreation and Sporting Goods stores sales took off. Book & Hobby Stores recovered more slowly. Actual $ales are up from May but only positive Ytd vs 22 & 19. Real sales have the same pattern. Prices actually deflated to -0.1% vs June 22 and their inflation rate has been much lower than most groups so 64.7% of their 30.6% growth since 2019 is real. Avg 2019>23 Growth: +6.9%, Real: +4.6%.
  • All Miscellaneous Stores – Pet Stores have been a key part of the strong and growing recovery of this group. They finished 2020 at +0.9% but sales took off in March 21 and have continued to grow. Sales are -1.8% vs May but positive in all other measurements. They still have the biggest increase vs 2021 and vs 2019 they are 2nd only to NonStore. 67% of their 44.8% 19>23 growth and even 53% of their 21>23 growth is real. Their Avg 19>23 Growth is: 9.7%, Real: 6.8%.
  • NonStore Retailers – 90% of their volume comes from Internet/Mail Order/TV. The pandemic accelerated online spending. They ended 2020 +21.4%. The growth continued in 2021 as sales exceeded $100B for the 1st time and they broke the $1 Trillion barrier. Their growth slowed significantly in 2022 and now 2023. $ are down from May but all other measurements are positive. 78% of their 88.7% growth since 2019 is real. Their Avg Growth: +17.2%, Real: +14.0%.

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

Recap – The Retail recovery from the pandemic was largely driven by Relevant Retail and by the end of 2021 it had become very widespread. In 2022, there was a new challenge, the worst inflation in 40 years. Overall, and in most product categories it has slowed in Jul>Jun which should help the Retail Situation. Sales were down from May for all big groups and 9 smaller channels. Inflation continues to slow in most channels and even deflate in a few. However, some channels like Auto, Gas Stations, Grocery and Bldg Material stores still have high cumulative inflation rates so they are still struggling. Only a few channels are doing well. The new problem is that the sales increase rate vs 2022 for many channels has slowed and is even below the lower inflation rate. Real monthly sales for Relevant Retail have been positive vs 22 for 2 straight months but are still negative for 7 of 11 channels. The turnaround for Relevant retail is not widespread. It is primarily being driven by NonStore with a little help from Health Care, Electronics/Appliances  and Miscellaneous (includes Pet Stores). We still have a long way to go for a full recovery from the inflation tsunami.

Finally, here are the details and updated inflation rates for the CPIs used to calculate the impact of inflation on retail groups and channels. This includes special aggregate CPIs created with the instruction and guidance of personnel from the US BLS. I also researched data from the last Economic Census to review the share of sales by product category for the various channels to help in selecting what expenditures to include in specific aggregates. Of course, none of these specially created aggregates are 100% accurate but they are much closer than the overall CPI or available aggregates. The data also includes the CPI changes from 2021 to 2023 to show cumulative inflation.

Monthly 22>23 CPI changes of 0.2% or more are highlighted. (Green = lower; Pink = higher)

I’m sure that this list raises some questions. Here are some answers to some of the more obvious ones.

  1. Why is the group for Non-store different from the Internet?
    1. Non-store is not all internet. It also includes Fuel Oil Dealers, the non-motor fuel Energy Commodity.
  2. Why is there no Food at home included in Non-store or Internet?
    1. Online Grocery purchasing is becoming popular but almost all is from companies whose major business is brick ‘n mortar. These online sales are recorded under their primary channel.
  3. 6 Channels have the same CPI aggregate but represent a variety of business types.
    1. They also have a wide range of product types. Rather than try to build aggregates of a multitude of small expenditure categories, it seemed better to eliminate the biggest, influential groups that they don’t sell. This method is not perfect, but it is certainly closer than any existing aggregate.
  4. Why are Grocery and Supermarkets only tied to the Grocery CPI?
    1. According to the Economic Census, 76% of their sales comes from Grocery products. Grocery Products are the driver. The balance of their sales comes from a collection of a multitude of categories.
  5. What about Drug/Health Stores only being tied to Medical Commodities.
    1. An answer similar to the one for Grocery/Supermarkets. However, in this case Medical Commodities account for over 80% of these stores’ total sales.
  6. Why do SuperCtrs/Clubs and $ Stores have the same CPI?
    1. While the Big Stores sell much more fresh groceries, Groceries account for ¼ of $ Store sales. Both Channels generally offer most of the same product categories, but the actual product mix is different.

Attending SuperZoo 2023? – It is a great Opportunity! But….You Need a Plan!

/in /by

SuperZoo is stronger than ever. With 1100 exhibitors, 16,000+ expected attendees and 1000+ new products in the New Product Showcase, plus many more on the show floor, SuperZoo 2023 is literally packed with opportunities. To help attendees in working this huge show there are targeted floor sections to better focus their time on the show floor. One thing is unchanged. There is a huge array of exhibitors in every product category.

Consider these 2023 SuperZoo facts:

  • 1100+ exhibitors
  • 7 “Targeted” Floor Sections: Natural & Health; Specialty & Lifestyle; Groomers; Aquatics, Birds, Reptiles & Small Animals; Emerging Brands; Farm & Feed; International
  • 292,000+ sq ft of exhibitor booths; Plus, a 32,000 sq ft New Products Showcase
  • SuperZoo Education: Seminars on Retail and Grooming – 84 hours; 62 separate sessions … plus, show floor talks & demonstrations
  • Over 5 miles of aisles – just to walk the exhibit floor.

Whew! This show is huge. The show floor is open for 22 hours so…Let’s “Do the Math!”

If you don’t attend any seminars, visit the New Product Showcase, stop to chat with anyone in the aisles or for food, a drink or to go to the bathroom and maintain a walking speed of 2.5 mph…

You can spend…1 MINUTE AND 12 SECONDS…with each exhibitor…You definitely need a plan!

With a higher concentration of Pet retailer attendees and a commitment to groomers, there are subtle differences between SuperZoo and GPE.  However, like GPE, SuperZoo has attendees from every major retail channel and attracts a multitude of exhibitors and attendees from around the globe.

Despite the variety of offerings to fill an attendee’s time, SuperZoo is still primarily about Pet Products. New Products are critical to maintaining and growing any business so you must take the time to visit the new product area. Knowledge is power so you should also sign up for any relevant classes. Sometimes it’s not what you know, but who you know that matters most. This makes networking with other industry professionals a priority.

Every business can improve in terms of products. If you are a retailer, what sections of your store are not doing as well as you hoped and need a “facelift” or conversely, what areas are growing and need products to fill additional space? Category managers for distributors and retail chains may only be interested in targeted visits to exhibitors relevant to their “categories”. Representatives may be looking for new manufacturers…in specific product categories. Manufacturers could be looking to find distributors to handle their products or just looking to “check out” the competition. In regard to products, there is always something to see…for everyone! Plus, there are 533 Exhibitors at SZ 23 that weren’t at GPE 23.

SuperZoo is a great place to review products but Business Services, everything from Private label to POS, have also become increasingly important. In fact, 1 out of every 5 exhibitors offers some type of Business Service. Attendees can now “Leave no stone unturned” in their quest for business success. SuperZoo is about gathering information and making decisions to improve your business – whether they are made on the spot or put on your “must do” list. Your only real limitation is time. How do you make the most effective use of your time on the show floor? Here’s a suggestion.

Use the Super Search Exhibitor Visit Planner to make SuperZoo easier and more productive. I initially designed it in 2014 and have updated the data and produced a new version for every GPE and SuperZoo since then…including SZ 2023.

The “update” is not just exhibitor lists but also to the product category offerings for every33 exhibitor. I reviewed every exhibitor profile on the show site, but I also visited over 1100 websites and conducted separate internet searches to “validate” their product offerings. It is not 100% accurate, but it is close.

What does the Super Search do?…It searches for and produces a list of Exhibitors by product categories.

  • From the simplest – “give me a list that I can look at on my phone or tablet in either Booth # order or alphabetically”
  • To the most complex…”can do a simultaneous search for multiple specific product categories, allowing you to personally narrow down the initial results and see the “final” alphabetically or by booth number. The SuperZoo Super Search Exhibitor Visit Planner does both…and more…and does it quickly!

Take a look at the Updated Quick Start Guide. You will see that it looks complex but is really quite simple.

SuperZoo 2023 Super Search Exhibitor Visit Planner – Quick Start Guide

First: When you download the Excel file, Remember to Enable Editing & Macros!

The SZ 2023 Super Search Exhibitor visit planner is designed to make your time on the show floor more efficient and more productive. With the Super Search you can conduct up to 5 separate and distinct product category searches simultaneously with consolidated results produced in booth # order to facilitate your “journey”. There are detailed instructions for reference and to help you understand the nuances of the tool. However, it is really very simple so let’s get started. Here is the Dashboard where you set up your searches. ↓

On the dashboard, the first things to note are the numerous category columns. There are 7 separate floor sections, 11 different Exhibitor or Animal Types and 33 Dog and/or Cat Product categories. You can search exhibitors for any combination of these.

Let’s take a specific example running 3 simultaneous searches for several Dog/Cat categories:

  • Toys
  • Treats
  • Catnip & Litter (Must sell both)

Now referring to the Dashboard, let’s take it by the numbers:

  • This column is where you activate each search. Type in a “Y” (Cells C3>C7 will auto-capitalize) This search “line” becomes active.(cell turns green) In our example we are running 3 searches, so we have 3 “Y’s”
  • Now we enter a 1 in the correct column for each search line. Search Line 1: Toys; Search Line 2: Treats.
  • In Search Line 3 we want exhibitors that sell both Catnip and Litter, so we put a 1 in both of these columns.
  • Now we just “click” the Execute Search Button. The searches are done simultaneously, and the results combined into a single list in alphabetical order.
  • If you would like to view the list in Booth # order, just click the Booth # Sort.
  • You can switch the list back to an alpha view by clicking the Alpha Sort Button.
  • To Clear all your search categories and start a new search, click the Clear Criteria Button. Then click Execute (#4) again and you will be back to the full list

Note: Any Search Line with a Y and no 1’s in any column will always deliver the entire list regardless of what is selected in other lines. Change the Y back to an N in unused search lines. Now a sample of the results:

Company A – Has Toys Only; Company B has Dog Treats Only and is also a “Startup”; Company C is on the list for Treats and also has Catnip, but no Litter. This is not unusual as Catnip is often a Treat; Company D has Treats & Toys. Company E has both Catnip and Litter and in fact, actually has it all!

Note: The Super Search highlights your search categories, so you know “why you are there”. However, it also shows all categories that are available. Some might “pique” your interest while you are visiting the booth.

You can review the exhibitors alphabetically then put the list in Booth # order to make it easier to “work”. The Super Search also allows you to “cut down” the list during your review. (Pg 2; Point #11 – “U Pick ‘em” in Detailed Instructions) But First, I suggest that you “play” with the Super Search to get a “feel” for the tool, and then review the Detailed

Instructions. With your “play” experience, the detailed instructions will become a “quick read” and a valuable reference. You’ll soon be “up to speed” on the full capabilities of Super Search.

Good Luck and Good “Hunting” at SZ 2023!

Use the links below to download The Super Search (Be Sure to Enable editing/macros/content), the Quick Start Guide and the Detailed Instructions. Then GET STARTED!  

Download Quick Start Guide

(To save the PDF to your computer Right Click the download link and select “Save Link As…”)

Download Detailed Instructions

(To save the PDF to your computer Right Click the download link and select “Save Link As…”)

Download SZ 23 Super Search FINAL FINAL

(For the Excel file to work on your computer, be sure to enable macros/editing/content if asked.)

Since 8/6:

  • 2 Exhibitors moved
  • 1 Exhibitor changed their name
  • 2 Exhibitors dropped out
  • 6 New Exhibitors were added:

Note: The booths are all sold so this should be the FINAL list.

In the FINAL SZ 23 SuperSearch the name/booth changes since 8/6 are highlighted in beige and New Exhibitors are higlighted in pink. The name/booth changes from 7/30>8/6 are still highlighted in orange and New exhibitors are still highlighted in blue. The exhibitors that were added in the 7/24>7/30 period are still highlighted in light green.

SUPERZOO 2023 – THE PET INDUSTRY IS STRONGER THAN EVER!

/in /by

SuperZoo 2023 is only 4 weeks away. You will see in this advance look, that the Pet Industry and in person trade shows, especially SuperZoo have come back stronger than ever from the pause due to the pandemic.

Consumers’ apprehensions regarding personal contact fueled exceptional growth in Pet Products sales on the internet. However, most of these $ are coming from proven products. Buyers of all kinds, from consumers to chain store executives prefer to make in person buying decisions on new pet items. Therefore, the strong return of in person Pet Trade shows is critically important to the continued growth of the Pet Industry. You will see this demonstrated at SuperZoo 2023 with the strong influx of new exhibitors.

Currently SuperZoo 2023 has 1099 exhibitors. That is 74 more than 2022 but still 13 less than pre-pandemic 2019. Another good indication of a return to “normal” is the increased enthusiasm from the exhibitors. As of this date, there are over 200 companies on the wait list for a booth. However, they are only 5 booths left and all are reserved. The only reason that SuperZoo hasn’t blown past the exhibitor count of earlier shows is that the WPA ran out of floorspace.

So how big is the SuperZoo 2023 “house”? There are 292,000 sq ft of booths, a 32,000 sq ft New Products Showcase, with over 1000 items, and 17,000 sq ft devoted to Show Floor Education and demonstrations – 29 sessions; 22 hours. There are also 62 separate educational sessions on grooming or business subjects totaling 84 hours. This is a great opportunity for the expected 10,000+ buyers but also a challenge. They need to make a plan to take full advantage of the amazing power of SuperZoo. Total attendance including Buyers, Exhibitors, Media/Guests is expected to be 16,000+. The show will be crowded.

New is always a focus at Pet Trade shows. That also applies to exhibitors. At SuperZoo 2023:

  • 446 Exhibitors weren’t at SZ 2022
  • 533 weren’t at GPE 2023
  • And 337 didn’t do either show

Plus, over 265 are SuperZoo 1st Timers and 224 haven’t done any other major pet show, at least from 2019>2023. Those are some strong arguments for attending SuperZoo 2023. It is definitely a “must do” for all Pet Industry participants. Now, let’s look at some specifics of what you will see there. While a big change in the booth count is important, I suggest that you focus on the changes in the share of booths. To gain share, a category in any chart must increase their booth count by more than the 7.2% overall increase. Changes in this measurement will indicate how a particular group or product category is performing relative to other groups.

First, we’ll look at the overall show floor in terms of specialized sections.

  • Because they help guide attendees’ time on the huge show floor, special sections have continued to grow in size and importance. They exceeded 50% of SuperZoo booths for the 1st time in 2021. They are now up to 60%.
  • Natural & Health are the unquestioned biggest trends in Pet Products. WPA combined them in 2022. They almost always go together so it makes sense to put them in one section. Natural has been the biggest section for years. They had the biggest increase in exhibitors and gained almost 1% in share.
  • Specialty & Lifestyle (Fashion) again lost share, -0.3%. This section has been trending down in recent years.
  • Aquatics/Animals had a huge lift in booths. This is an important section. This shows that the COVID impact is over.
  • Feed & Farm continues to be important, especially with the growing “presence” of poultry in the Pet Industry.
  • Groomers will always be a major focus of SuperZoo. With a 16.9% increase in booths and a 0.7% increase in share to 8.2%, a new record high, their importance is further validated.
  • The International Pavilion is small and doesn’t reflect the importance of over 200 exhibitors from outside of the U.S.
  • The increase in share by Emerging Brands is very important because it shows the continued strong return of new companies to the industry. In fact, 1st Time SuperZoo exhibitors occupy 1 in every 4 booths at the show.

Now let’s look at the Exhibitors by type, including animal.

  • All classifications have more exhibitors and only 2 lost share – Bird & Gen Mdse/Gifts
  • In terms of Animals, there are still plenty of exhibitors offering products to cover every need for Pet Parents of all animal types. However, the biggest share gains were by Dog and Fish. Fish had the biggest % gain in booth count.
  • Business Services is again the big story on this chart. This segment includes Companies that offer services to improve existing businesses and those that help in private label production – ingredients, packaging or finished products. In 2015 there were 65 SuperZoo exhibitors in this category. In 2023 there are 220, 1 in 5 booths and a 238% increase, more than triple. The driver has been the ever-increasing appeal and availability of Private Label products. Private Label brands allow retailers to differentiate themselves, offer consumers more value and usually make more profit.

Let’s take a closer look at the “Pet Royalty”. Here are the top 10 Dog and/or Cat Categories at SuperZoo 2023.

  • This chart shows that the overall strong showing by Cat & Dog products was largely driven by these most popular categories. Only Treats has fewer booths but there were 3 with share losses – Treats, Med/Supp & Shampoos .
  • The categories are the same as 2022 but 5 moved up or down 1 spot in ranking.
  • Treats & Meds/Supp lost the most in share, but they are still in the top 2 spots with 100 more booths than #3.
  • Toys had the biggest gain in booths. They also gained 1.8% in share and moved up from 4 to3 in rank.
  • Collars/Leads gained 0.1% in share but fell from 3rd to 4th in rank. This was due to the big increase in Toys.
  • Food is the biggest $ producer and grew even stronger with a 0.4% gain in booth share.
  • Feeding Accessories had a 19% gain in booths, a 1.5% gain in share and hung on to the #6 ranking.
  • Beds & Mats had the biggest gain in share, +2.1%. They also moved from a tie for 8th in 2022 to 7th place in 2023.
  • Grooming Tools gained 0.8% in share but fell from 7th to 8th in rank, due to the big increase in booths by Beds/Mats.
  • Shampoos only have 2 more booths than 2022 so they lost share and fell from 8th to 9th in rank.
  • Apparel gained 1.0% in share showing than fashion may be coming back “in style”.

SuperZoo has an Exhibitor count close to 2019 but the average booth size grew to 273 sq ft from 252 in 2019. This is another reason why the WPA ran out of space. However, new and existing Products and Services are available to fill virtually every need or want of the attendees. Plus, the continued growth of special floor sections and making them more targeted to fulfill attendees primary needs along with a massive amount of educational sessions are 2 prime examples of the WPA’s ongoing efforts to continually improve the show.

922 exhibitors (84%) focus on Dog and/or Cat. Let’s take a closer look.

There are 74 more Exhibitors at SuperZoo 2023 than 2022. Those offering Dog and/or Cat products grew by 69. The Dog/Cat share of exhibitors increased slightly from 83.2% to 83.9%. Dogs and Cats remain the unquestioned “royalty” of the industry. Here are some of the changes from SuperZoo 2022

  • 24 of 33 categories increased their number of exhibitors; 7 had decreases; 2 had no change
  • 21 categories increased their share of total exhibitors; 12 lost share
  • Ranking changes: 6 up; 8 down; 19 no change

In terms of booth gains & losses, the Top 10 had 9 of the 23 increases. The biggest increase was 32 by the Toys category. The Top 10 only had 1 of the 8 category decreases and CBD Products had the biggest drop.

When you look at share gains & losses, the Top 10 had 7 of the 21 gains, including the biggest, +2.1% by Beds/Mats and 4 of the 7 over 1.0%. They had 3 of the 12 that lost share and the -2.4% drop by Treats was the largest and the only decrease over 2%.

The Top 10 had 2 of the 6 increases in rank & 3 of the 8 drops. However, the biggest changes were all outside of the group.

All Dog & Cat product needs are much more than covered, with a lot of choices in each. We should also note that while the overall ‘Cat” share of booths was unchanged from 2022, 3 of the 7 product categories that gained over 1% in share are cat “driven” – Litter Acc, Scratching & Furniture.

SuperZoo again showcases what is “happening” in the Pet Industry and offers a great opportunity for Industry participants, both exhibitors and attendees, to drive the growth of their businesses. It still takes effort and commitment from everyone, but SuperZoo 2023 is the surest bet in Las Vegas!

Finally, the chart below details the specifics for all 33 of the Dog/Cat product categories that I defined for the Super Search Exhibitor Visit Planner.  (Note: The SZ 2023 Super Search will be available at PetBusinessprofessor.com on 7/24.)

 

Petflation 2023 – June Update: Again below double digits, +9.6% vs 2022

/in /by

Inflation is no longer a “headline” but it is still news. The YOY increases in the monthly Consumer Price Index (CPI) that were larger than we have seen in decades are definitely slowing. June prices grew 0.3% from May and the CPI was still +3.0% vs 2022, but down from +4.0% last month. The grocery pricing surge has also slowed. After 12 straight months of double-digit YOY monthly percentage increases, grocery inflation is down to +4.7%, with 4 consecutive months below 10%. As we have seen in recent years, even minor price changes can affect consumer pet spending, especially in the discretionary pet segments, so we will continue to publish monthly reports to track petflation as it evolves in the market.

Total Petflation was +4.1% in December 2021 while the overall CPI was +7.0%. The gap narrowed as Petflation accelerated and reached 96.7% of the national rate in June 2022. National inflation has slowed since July, but Petflation has generally increased. It passed the National CPI in July 2022 and is now +9.6% in June, more than 3 times the national rate of 3.0%. We will look deeper into the numbers. This and future reports will include:

  • A rolling 24 month tracking of the CPI for all pet segments and the national CPI. The base number will be pre-pandemic December 2019 in this and future reports, which will facilitate comparisons.
  • Monthly comparisons of 23 vs 22 which will include Pet Segments and relevant Human spending categories. Plus
    1. CPI change from the previous month.
    2. Inflation changes for recent years (21>22, 20>21, 19>20, 18>19)
    3. Total Inflation for the current month in 2023 vs 2019 and now vs 2021 to see the full inflation surge.
    4. Average annual Year Over Year inflation rate from 2019 to 2023
  • YTD comparisons
    1. YTD numbers for the monthly comparisons #2>4 above

In our first graph we will track the monthly change in prices for the 24 months from June 2021 to June 2023. We will use December 2019 as a base number so we can track the progress from pre-pandemic times through an eventual recovery. Inflation is a complex issue. This chart is designed to give you a visual image of the flow of pricing. You can see the similarities and differences in patterns between segments and compare them to the overall U.S. CPI. The current numbers plus yearend and those from 12 and 24 months earlier are included. This will give you some key waypoints. In June, Pet Products prices are down from May, but they increased in both Service segments.

In June 2021, the national CPI was +5.7% and Pet prices were +2.1%. Veterinary and Services prices generally inflated after mid-2020, similar to the overall CPI while Food and Supplies prices generally deflated until late 2021. After that time, Petflation took off. Pet Food prices consistently increased but the other segments had mixed patterns until July 2022, when all increased. In Aug>Oct Petflation accelerated. In Nov>Dec, Services & Food prices continued to grow while Veterinary & Supplies prices stabilized. In Jan>June, prices grew every month except for 2 dips by Supplies, 1 dip for the other segments and a June dip by Total Pet. Cumulative Petflation from Dec 2019 has been above the U.S. CPI since November 2022.

  • U.S. CPI – The inflation rate was below 2% through 2020. It turned up in January 2021 and continued to grow until flattening out in Jul>Dec 2022. Prices turned up again in Jan>Jun but 36% of the overall 18.7% increase in the 42 months since December 2019 happened in the 6 months from January>June 2022 – 14% of the time.
  • Pet Food – Prices stayed generally below Dec 2019 levels from Apr 20 > Sep 21, when they turned up. There was a sharp lift in Dec 2021, and it continued until the dip in June. 93% of the 23.1% increase has occurred since 2022.
  • Pet Supplies – Supplies prices were high in December 2019 due to the added tariffs. They then had a “deflated” roller coaster ride until mid-2021 when they returned to December 2019 prices and essentially stayed there until 2022. They turned up in January and hit an all-time high, beating the 2009 record. They plateaued from Feb> May, turned up in June, flattened in July, then turned up in Aug>Oct setting a new record. Prices stabilized in Nov>Dec but turned up in Jan>Feb, another new record. They fell in March, set a record in May, then fell in June.
  • Pet Services– Normally inflation is 2+%. Perhaps due to closures, prices increased at a lower rate in 2020. In 2021 consumer demand increased but there were fewer outlets. Inflation grew in 2021 with the biggest lift in Jan>Apr. Inflation was stronger in 2022 but it got on a rollercoaster in Mar>June. It turned up again July>Mar but the increase slowed to +0.1% in April. Prices fell -0.3% in May then turned up slightly in June, +0.04%.
  • Veterinary – Inflation has been pretty consistent in Veterinary. Prices turned up in March 2020 and grew through 2021. A pricing surge began in December 2021 which put them above the overall CPI. In May 2022 prices fell and stabilized in June causing them to briefly fall below the National CPI. However, prices turned up again and despite Oct & Dec dips they have stayed above the National CPI since July. In 2023 prices grew except for a dip in May.
  • Total Pet – The blending of patterns made Total Pet appear calm. In December 2021 the pricing surge began. In Mar>June 2022 the segments had ups & downs, but Petflation grew again from Jul>Nov. It slowed in December, turned up Jan>May, then fell in June. Except for 5 individual monthly dips, including 2 in June, prices in all segments have increased monthly in 2023. It has been ahead of the cumulative U.S. CPI since November 2022.

Next, we’ll turn our attention to the Year over Year inflation rate change for June and compare it to last month, last year and to previous years. We will also show total inflation from 21>23 & 19>23. Petflation dropped below double digits to 9.6% in June but is now over 3 times the National rate. The chart will allow you to compare the inflation rates of 22>23 to 21>22 and other years but also see how much of the total inflation since 2019 came from the current pricing surge. Again, we’ve included some human categories to put the pet numbers into perspective.

  • U.S. CPI– Prices are +0.3% from May. The YOY increase is down to +3.0%. It peaked at +9.1% back in June 2022. The targeted inflation rate is <2% so we are still 50% higher than the target. However, a 12th straight slight decline is good news. It is also good that the current inflation rate is below 21>22 but the 21>23 rate is still 12.3%, 64% of total inflation since 2019. How many households “broke even” by increasing their income by 12% in 2 years?
  • Pet Food– Prices are -0.2% vs May and +12.1% vs June 2022. They are also 2.5 times the Food at Home inflation rate – not good news! The YOY increase of 12.1% is being measured against a time when prices were 9.8% above the 2019 level, but that increase is still an incredible 4.3 times the pre-pandemic 2.8% increase from 2018 to 2019. The 2021>2023 inflation surge generated 99% of the total 23.9% inflation since 2019.
  • Food at Home – Prices are down -0.1% from May. The monthly YOY increase is 4.7%, down from 5.8% in May and considerably lower than Jul>Sep 2022 when it exceeded 13%. The 25.2% Inflation for this category since 2019 is 32% more than the national CPI and remains 2nd to Veterinary. 69% of the inflation since 2019 occurred from 2021>2023. The pattern mirrors the national CPI, but we should note that Grocery prices began inflating in 2020>2021 then the rate accelerated. It appears that the pandemic supply chain issues in Food which contributed to higher prices started early and foreshadowed problems in other categories and the overall CPI tsunami.
  • Pets & Supplies– Prices fell -0.5% from May, and they still have the lowest increase since 2019. They also fell again to last place in terms of the monthly increase vs last year for Pet Segments. As we noted earlier, prices deflated in 2020>2021 so the 2021>2023 inflation surge accounted for 100+% of the total price increase since 2019. They reached an all-time high in October then prices deflated. 3 straight months of increases pushed them to a new record high in February. Prices fell in March, bounced back in Apr>May to a new record high then fell in June.
  • Veterinary Services – Prices are up 0.6% from They are +11.4% from 2022 and remain in 2nd place behind Food in the Pet Industry. However, they are still the leader in the increase since 2019 with 30.2% compared to Food at home at 25.2%. For Veterinary Services, relatively high annual inflation is the norm. The rate did increase during the current surge so 64% of the 4 years’ worth of inflation occurred in the 2 years from 2021>2023.
  • Medical Services – Prices turned sharply up at the start of the pandemic but then inflation slowed and fell to a low rate in 20>21. In May prices fell -0.04% from May and are -0.8% vs 2022, the only 22>23 deflation in any category. Medical Services are not a big part of the current surge as only 35% of the 2019>23 increase happened from 21>23.
  • Pet Services – Inflation slowed in 2020 but began to grow in 2021/2022. June 23 prices were up +0.04% from May and +6.3% vs 2022, which is up from 5.6% last month but much lower than 8.0% in March. Initially their inflation was tied to the current surge, but it may be becoming the norm as only 61% of the total since 2019 occurred from 21>23.
  • Haircuts/Other Personal Services – Prices are +0.4% from May and +5.0% from 2022, the 2nd highest rate since 2019. However, inflation has been rather consistent so just 54% of the inflation from 19>23 happened from 21>23.
  • Total Pet– Petflation is only 9% higher than the 21>22 rate, but 3 times the National CPI and +9.6% is the highest June rate in history. Vs May, Product Prices fell while Services increased so Total Pet fell -0.2%. Note: A May>June decrease has happened in 13 of the last 26 years so it is not that unusual. Food & Veterinary are still the Petflation leaders and have the biggest increases over the 21>22 rate. Pet Food has generally been immune to inflation as Pet Parents are used to paying a lot. However, inflation can cause reduced purchase frequency in the other segments.

Now, let’s look at the YTD numbers

The increase from 2022 to 2023 is the biggest for 4 of 9 categories – All Pet. The 22>23 rate for Haircuts is slightly below 21>22. However, the Total CPI, Pet Supplies, Medical Services and Food at Home are significantly down from 21>22. The average annual increase since 2019 is 4.4% or more for all but Medical Services (3.0%) and Pet Supplies (2.7%).

  • U.S. CPI – The current increase is down 41% from 21>22 but is still 11% more than the average increase from 2019>2023, and 2.3 times the average annual increase from 2018>2021. 72% of the 18.9% inflation since 2019 occurred from 2021>23. Inflation is a big problem that started recently.
  • Pet Food – Strong inflation continues with the highest 22>23 & 21>23 rates on the chart. Deflation in the 1st half of 2021 kept YTD prices low then prices surged in 2022. 94.3% of the inflation since 2019 occurred from 2021>23.
  • Food at Home – The 2023 YTD inflation rate has slowed slightly but still beat the U.S. CPI by 61%. You can see the impact of supply chain issues on the Grocery category as 76% of the inflation since 2019 occurred from 2021>23.
  • Pets & Pet Supplies – The inflation rate is down slightly at 5.2% as prices fell in June. Prices deflated significantly in 2021 which helped to create a very unique situation. Prices are up 11.3% from 2019 but 115% of this increase happened from 2021>23. Prices are up 13.0% from their 2021 “bottom”.
  • Veterinary Services – They held onto the top spot in inflation since 2019 but they have only the 4th highest rate since 2021. At +6.4%, they have the highest average annual inflation rate since 2019 but Veterinary is unique. They are the only category in which the inflation rate grew steadily every year from 2019>2023. Throughout the pandemic and recovery, no matter what, just charge more.
  • Medical Services – Prices went up significantly at the beginning of the pandemic, but inflation slowed in 2021. In 2023 prices have been deflating and are now at a rate actually 64% below the pre-pandemic 2018>19 rate.
  • Pet Services – May 22 set a record for the biggest year over year monthly increase in history. Prices fell in June but began to grow again in July, reaching record highs in Sep>Apr. The January 2023 increase of 8.4% was the largest in history. YTD June again slipped a little to 7.0%. Growing demand with decreased availability is a formula for inflation.
  • Haircuts & Personal Services – The services segments, essential & non-essential were hit hardest by the pandemic. After a small decrease in March 22, prices turned up again. The YTD rate is 6% below the peaks in 21 & 22 but is 82% more than 2018>19. Consumers are paying 21% more than in 2019. This usually reduces the purchase frequency.
  • Total Pet – We have seen two different inflation patterns. After 2019, Prices in the Services segments continued to increase, and the rate grew as we moved into 2021. The product segments – Food and Supplies, were on a different path. They deflated in 2020 and didn’t return to 2019 levels until mid-year 2021. Food prices began a slow increase, but Supplies remained stable until near yearend. In 2022, Food and Supplies prices turned sharply up. Food prices continued to climb until June. Supplies prices stabilized Apr>May, grew Jun>Oct, fell in Nov, rose in Dec>Feb, fell in Mar, rose in Apr>May then fell in June. The Services segments have also had ups & downs but are generally inflating. The net is a YTD Petflation rate vs 2022 of 10.2%, double the National rate. In May 22 it was 5.8% below the CPI.

Petflation is still strong. Let’s put the numbers into perspective. Petflation slowed from 10.3% in May to 9.6% in June. This is below the record 12.0% set in November, but it is a record for the month. More bad news is that 9 of the last 11 months have been over 10% and the current rate is still 6 times more than the 1.6% average rate from 2010>2021. It’s also more than triple the national rate. There is no doubt that the current pricing tsunami is a significant event in the history of the Pet Industry, but will it affect Pet Parents’ spending. In our demographic analysis of the annual Consumer Expenditure Survey which is conducted by the US BLS with help from the Census Bureau we have seen that Pet spending continues to move to higher income groups. However, the impact of inflation varies by segment. Supplies is the most affected as since 2009 many categories have become commoditized which makes them more price sensitive. Super Premium Food has become widespread because the perceived value has grown. Higher prices generally just push people to value shop. Veterinary prices have strongly inflated for years, resulting in a decrease in visit frequency. Spending in the Services segment is the most driven by higher incomes, so inflation is less impactful. This spending behavior of Pet Parents suggests that we should look a little deeper. Inflation is not just a singular event. It is cumulative. Total Pet Prices are up 9.6% from 2022 but they are up 19.2% from 2021 and 23.3% from 2019. That is a huge increase in a very short period. It puts tremendous monetary pressure on Pet Parents to prioritize their expenditures. We know that the needs of their pet children are always a high priority but let’s hope for a little relief – stabilized prices and even deflation. This is not likely in the Service segments but is definitely possible in products. It’s happened before. We need it again.

 

U.S. PET FOOD SPENDING $36.35B (↑$4.79B): MID-YEAR 2022 UPDATE

/in /by

The pandemic had a huge impact on consumers, including spending on Pet Food. We’ll do a more detailed historical review of recent years but at Mid-year in 2022 things finally seem to be returning to a more normal situation. Pet Food Spending for the 12 months ending June 30, 2022 was up $4.79B (+15.2%) from a year ago. Let’s put that into proper perspective. In pre-pandemic, Mid-2019 Pet Food spending was $28.90B. That means that the average annual growth rate from 2019>22 is +7.9%. This is 42% better than the average growth rate of +5.6% from 1984 to 2019. This industry segment is doing well. Of course, we’re starting to face what may be a new challenge – radically high inflation in Pet Food prices. Here’s what it was in mid-year 2022:

  • Mid-yr 22 vs 21: +4.0%
  • 2nd Half 21 vs 20: +1.6%
  • 1st Half 22 vs 21: +6.5%

You can see that the inflation rate in early 2022 was over 4 times higher than the rate in late 2021. It hit 10+% in June 2022 and continued at historic high levels. Prices in the 2nd half of 2022 were 14% higher than in 2021. Traditionally, “normal” inflation increases have had little impact on Pet Food spending. However, these increases are historic. We’ll get a better indication of their current impact when the 2022 yearend Pet Food spending numbers are released  in early September. I just wanted you to be aware of the situation as we review the mid-year data.

If inflation was 4.0% for Mid-Yr 2022, then 73.7% of the increase in Pet Food spending was real. Good, but not great. We’ll see what the situation looks like at yearend. Also, 59% of the $4.79B lift occurred when inflation was lower.

Now, let’s get started with our Pet Food spending update for Mid-Year 2022. As we stated earlier, Pet Food (& Treat) Annual Spending was $36.35B, up +$4.79B (+15.2%). The following charts and observations were prepared from calculations based upon data from the current CEX report and earlier ones. The first chart will help put the current numbers into historical perspective and truly show you the roller coaster ride that continues in Pet Food Spending.

Here are the current numbers:

Mid-Yr 2022: $36.39B; ↑$4.79B (+15.2%) from Mid-Yr 2021. The net gain of $4.79B came from

◦  Jul>Dec 2021: Up $2.85B from 2020.          ◦  Jan>Jun 2022: Up $1.94B from 2021.

Historical research has shown that Pet Food spending has been on a roller coaster since 2000, generally with 2 years up, followed by a flat or even declining year. This up and down “ride” was primarily driven by a succession of Food trends like Made in the USA, Natural and Super Premium”. The 2 yrs up then 1 yr flat/down pattern has been broken on a couple of occasions due to outside influences – the FDA grain free warning in 2018 and now the COVID pandemic in 2020. We may see another major influence on spending – recent skyrocketing inflation. The timing may be affected  but the Pet Food spending rollercoaster ride is likely to continue.

2013 was definitely a game changer for this segment as it began an extended period of deflation which continued through 2018. Midway through 2018, Pet Food prices were still 2.3% lower than in 2013. The spending drops in 2013 and 2016 were driven by pet parents value shopping for their recently upgraded pet food. As it turns out, 2014 brought out yet another new factor in Pet Food spending.

For over 30 years Baby Boomers were the leaders in Pet Food, both in spending and in adopting new products. Even in 2022, they still spend the most, but it turns out that the 25>34 yr-old Millennials led the movement to Super Premium in late 2014. The older groups, especially Boomers followed in 2015 and spending rose $5.4B. At the same time, the Pet Food spending of the 25>34 yr olds dropped. At first, we thought they had rolled back their upgrade. However, it turns out that they were leading the way in another element of the trend to Super Premium – value shopping. The Boomers once again followed their lead and spending fell -$2.99B in 2016. For consumers, the Super Premium upgrade movement consisted of 3 stages:

  1. Trial – The consumer considers the benefits vs the high price and decides to try it out. Usually from a retail outlet.
  2. Commitment – After a period of time, the consumer is satisfied and is committed to the food.
  3. Value Shop – After commitment, the “driver” is to find a cheaper price! – The Internet, Mass Market, Private label

This brought us to 2017. Time for a new “must have” trend. That didn’t happen but the competitive pricing situation brought about another change. Recent food trends have been driven by the higher income and higher education demographics. However, the “value” of Super Premium was established and now more “available”. Blue Collar workers led a new wave of spending, +$4.6B, as Super Premium more deeply penetrated the market. After the big lift in 2017, 2018 started off slowly, +$0.25B. Then came the FDA warning on grain free dog food. Many of the recent Super Premium converts immediately rolled back their upgrade and spending fell -$2.51B. This 2018 decrease broke a 20 year spending pattern. In the 1st half of 2019, Pet Food spending remained stable at the new lower level. In the second half of 2019 we started to see a recovery from the overreaction to the FDA warning and spending increased by $2.3B. Then came 2020. The recovery was continuing but a new outside influence was added which had a massive impact on U.S. consumers – the COVID-19 pandemic. In March nonessential businesses were closed. This also produced a wave of panic buying in some truly essential product categories. In the Pet Industry there is only 1 truly essential category – Pet Food. Coupled with the FDA “recovery” and the ongoing movement to Super Premium, this produced an incredible $6.76B lift in Pet Food Spending in the 1st half of 2020. Spending fell in the 2nd half of 2020 and plummeted in the 1st half of 2021. Pet Parents didn’t binge again, and some began using up the stockpile that they panic bought in the early days of COVID. In the 2nd half of 2021, the up/down impact of COVID was essentially over. Pet Parents were still committed to their children’s health which included Super Premium Foods and Medical Supplements, often in treat form. The internet also made this quality choice accessible to more households so Pet Food spending increased both in the 2nd half of 21 and the 1st half of 22. 59% of the lift occurred in the 2nd half of 2021 when inflation was still low. Was that a factor?

Let’s look at Pet Food spending by the 2 most popular demographic measures – income & age group. They both show the current and previous 12 months $ as well as 2021 yearend. This will allow you to track the spending changes between halves. The first graph is Income, which has been shown to be the single most important factor in increased Pet Spending and its influence continues to grow.

Here’s how you get the change for each half of the 21>22 mid-yr numbers using the over $100K group as an example:

$100K> Mid-yr Total Spending Change: $16.36B – $13.77B = Up $2.59B (green outline = increase; red outline = decrease)

    • 2nd half of 2021: Subtract Mid-21 ($13.77) from Total 2021 ($15.51B) = Spending was up $1.74B in 2nd half of 2021.
    • 1st half of 2022: Subtract Total 2021 ($15.51B) from Mid-22 ($16.36B) = Spending was up $0.85B in 1st half of 2022.
  • All increased spending for the year but there were 3 different patterns in the individual groups. #1. $150K> & $50>69K spent more in both halves. #2. <$30K & $70>99K spent less in the 1st half of 2022. #3. $30>49K & $100>149K spent less in the 2nd half of 2021. All but #2 have a high/low income mix. #2 has the lowest income and the middle income groups. Both are very price sensitive. Note: Their spending dropped during the highest inflation.
  • Perhaps the most obvious fact is the continued spending disparity due to income. Back in 2014, prior to the big lift due to Super Premium, $70K was the “halfway point” in Pet Food spending. The under $70K group accounted for 66.7% of CUs and 51.1% of Pet Food spending. They lost the lead in 2015 as $70K> spent 50.8% of Pet Food $. In 2020, the binge buying of Pet Food by $100>150K pushed the $100K> group to the top at 55.1%. Then the big drop in 2021 flipped $70K> back into the lead at 60.8%. They currently have a share of 62.0%. The halfway point in Pet Food spending is below $100K but still high at $91K, the 2nd highest in history.
  • < $70K > The Pet Food spending patterns for both big groups are similar with increases in both halves. However, in a bit of a surprise, the Fall 2021 lift is larger for $70K> while the early 2022 lift is larger for <$70K. Higher Inflation appears to not have grossly affected these big groups.
  • < $100K > The spending patterns of these 2 groups closely mirrors the Under/Over $70K pattern. The Fall 2021 spending lift for the $100K> group was 100% driven by $150> CUs. The Spring 2022 lift for <$100K was totally driven by CUs with an income of $30>69K. Again, not the result that you would expect based upon higher inflation.
  • <$30K – With a lift in the Fall and a drop in the Spring, spending for this lowest income group essentially remained stable vs last year. They may have been impacted by rising prices in 2022.
  • $30>49K – This low-income group also includes many Retirees. They are growing in number and are committed to their pets. However, their spending behavior timing often lags behind other groups which may explain the Spring lift.
  • $50>69K – This low income group was hit hard by the pandemic. With steady growth in both halves, they have finally surpassed their Pet Food spending in pre-pandemic 2019.
  • $70>99K –This middle-income group was the most negatively affected by the pandemic. However, they fully recovered in 2021. Then spending flattened in early 2022. They are very value conscious. We’ll see if the skyrocketing inflation in the 2nd half of 2022 affects their Pet Food spending.
  • $100K>149K – High income is increasingly becoming “where it’s at” in Pet Spending. This group led the way in Pet Food binge buying and the subsequent drop. Sales grew slightly in early 2022 so they remain above 2019 $.
  • $150K > Their Pet Food spending also fell in 2020, likely due to value shopping on the internet. They came back strong in 2021, 10% above 2019. $ are up slightly in 2022. Strong inflation and the resulting higher prices will likely cause them to spend more.

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

  • 25>34 yr olds had a steady decline. All other groups spent more but 75> had a spending dip in early 2022.
  • <25 – Their spending had a huge increase and they are back above $1B. It’s likely that more moved out of their parents’ home and many added pets to their household.
  • 25>34 – A -$1.35B drop after last year’s $1.77B increase. This group, especially those with families, are under a lot of financial pressure. Overall inflation likely caused many CUs to cut back on spending and even rescind Food upgrades.
  • 35 > 44 – Spending fell in 2020 likely because they turned to the internet. They are 2nd in income and their spending has smaller fluctuations. Their biggest lift occurred in the 1st half of 2022 and they exceeded $6B for the 1st time.
  • 45 > 54 and – They have the highest income, so their annual up/down spending pattern is not expected. Their Pet Food $ dropped throughout 2020 but it has increased in every half since then. However, it is still below the $7.09B peak in 2019. Value Shopping & downgrades/upgrades are all likely to be factors in a complicated pattern.
  • 55>64 – This group is still mostly Boomers, the most emotional Pet Parents. In 2020 they led the way in Pet Food binge buying. They also had the biggest 2021 drop. With growth in both halves, including a $0.77B lift in 2022 they have now returned to their pre-pandemic 2019 spending level.
  • 65 > 74 – This group is all Boomers but with lower income. Spending grew in both halves. They are committed to their pets. Even though the members change, they are the only age group with steady annual growth since 2016.
  • 75> – COVID had little impact on spending. In 2021 they upgraded, +$1.76B. Spending fell slightly in the 1st half of 22.

That gives us the “big picture” for our 2022 Mid-year update of Pet Food spending. Now we’ll take a closer look at the start of 2022. We’ll compare it to the 1st half of 2021 and document the biggest changes since then.

  • The biggest increases are much larger than the biggest decreases in 10 categories. They are almost equal in Age, but the drop is larger in CU Composition. In Housing and CU Size, all segments spent more in 2022 than in 2021.
  • There are a number of usual winners, Managers, White, Not Hisp., Boomers, 55>64, Big Suburbs, Homeowners w/Mtges and 3+ Earners. There are also some surprises like $30>49K, 2+ Unmarried Adults and HS Grads.
  • When we look at the losers, we also see some familiar names, <$30K, Born <1946, 1 Earner Single and Center City. However, there are 2 big surprises – Adv. College Deg. and 25>34 yr olds.
  • Pet Food spending in the 1st half of 2022 was $1.94B ahead of the 1st half of 2021 but $3.44B ahead of 2019. In fact, 68 of 82 demographic segments (83%) spent more in 2022 than in 2021. The pandemic turmoil appears to be over.

The spending lift was relatively large in the 1st half, but not unexpected, after the huge drop in Pet Food $ in the 1st half of 2021 following the buying binge in 2020. It appears that the steep pandemic roller coaster may have ended in 2021 and we might be back on a more normal path of consistent growth. Pet Food spending in mid-yr 2022 was $36.35B. This is $1.57B below the binge peak of $37.96B in mid-2020 but $7.49B more than the $28.90 in pre-pandemic mid-yr 2019. If we ignore the pandemic turmoil, then Pet Food spending has grown 25.9% in 3 years. That’s an annual growth rate of +7.9%, which is 41% higher than the +5.6% rate from 1984 to 2019. That’s real proof that the Pet Food segment is back and doing even better than usual. Unfortunately, we may be facing a new challenge – runaway inflation. It started slowly at the end of 2021, then continued to grow in 2022, hitting 10+% in June and has stayed in double digits. Past periods of Pet Food inflation just caused Pet Parents to spend more. Pets must have food. However, this price increase is at record levels. We should note that the pandemic is also a factor in inflation because supply chain issues related to COVID had a big impact on prices. Overall inflation has lessened but there has been little improvement in Pet Food. All pet spending has been moving towards higher incomes. Households with a lot of financial pressure could cut back on more discretionary pet spending, reduce purchase frequency, and even downgrade their pet food. We have seen little evidence of a negative impact on Pet Food in early 2022. We’ll see what happens in the 2nd half of 2022 when inflation took off. We’ll get that data in September.