Archive for year: 2023

While inflation is slowing, it is still a concern. The huge YOY increases in the monthly Consumer Price Index peaked in June 2022 at 9.1% then began to slow until turning up in July & August 2023. In September prices grew 0.2% from August but the CPI remained stable at +3.7% vs 2022. However, Grocery inflation continued to drop. After 12 straight months of double-digit YOY monthly increases, grocery inflation is down to +2.4%, 7 consecutive months below 10%. As we have learned, 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.

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 considerably since June 2022, but Petflation generally increased until June 2023. It passed the National CPI in July 2022 and at 5.7% in September, it is still 1.5 times the national rate of 3.7%. 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 September 2021 to September 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 September, Pet prices were up from last month overall and in all segments but Non-Vet Services.

In September 21, the CPI was +6.7% and Pet prices were +3.2%. Like the CPI, prices in the Services segments generally inflated after mid-2020, while Product inflation stayed low until late 21. In 22 Petflation took off. Food prices grew consistently but the other segments had mixed patterns until July 22, when all increased. In Aug>Oct Petflation accelerated. In Nov>Dec, Services & Food prices continued to grow while Vet & Supplies prices stabilized. In Jan>Apr, prices grew every month except for 1 dip by Supplies. In May Products prices grew while Services slowed. In June/July this was reversed. In August all but Services fell. In September this pattern was reversed. Petflation has been above the CPI since November 2022.

• U.S. CPI – The inflation rate was below 2% through 2020. It turned up in January 21 and continued to grow until flattening out in Jul>Dec 22. Prices turned up again in Jan>Sep but 34% of the overall 19.8% increase in the 45 months since December 2019 happened in the 6 months from January>June 2022 – 13% of the time.
• Pet Food – Prices were at or below December 2019 levels from Apr 20>Sep 21. They turned up with a sharp lift in Dec which continued until the Jun>Aug 23 dip. Prices then grew in September. 93% of the 23.1% increase since 2019 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 Feb> May, grew 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 23, a new record. They fell in March, set a record in May, fell in Jun>Aug then grew in September.
• 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 22>Mar 23 but the increase slowed to +0.1% in April. Prices fell -0.3% in May, turned up again in Jun>Aug, then fell in September.
• Veterinary – Inflation has been consistent in Veterinary. Prices turned up in March 2020 and grew through 2021. A surge began in December 21 which put them above the overall CPI. In May 22 prices fell and stabilized in June causing them to fall below the National CPI. However, prices turned up again and despite some dips they have stayed above the CPI since July 22. In 2023 prices grew Jan>May, stabilized Jun>Jul, fell in August, then increased in September.
• Total Pet – Petflation is a sum of the segments. In December 21 the pricing surge began. In Mar>Jun 22 the segments had ups & downs, but Petflation grew again from Jul>Nov. It slowed in December, turned up Jan>May 23, fell in Jun>Aug, then grew in September. Except for 5 individual monthly dips, prices in all segments increased monthly Jan>Jun 23. In Jul>Aug there 5 more dips but only 1 in September – Services. Petflation has been above the U.S. CPI since November. 2022.

Next, we’ll turn our attention to the Year Over Year inflation rate change for September and compare it to last month, last year and to previous years. We will also show total inflation from 21>23 & 19>23. Petflation fell again to 5.7% in September, but it is still 1.5 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.

Overall, Prices were +0.2% vs August and were up 3.7% vs September 22 the same as August. Grocery inflation is down again, to +2.4% from +3.0%. Haircuts prices were unchanged from last month but only 1 of 9 categories had a decrease, compared to 4 in August. Pet Services had the decrease, -0.5%. The national YOY monthly inflation rate for September is unchanged from August but only 45% of the 21>22 rate. The 22>23 inflation rate for all categories is now below 21>22. However, the difference is slight for Non-Vet Services and Haircuts. In our 2021>2023 measurement you also can see that over 65% of the cumulative inflation since 2019 occurred in only 4 segments – Total Pet, Pet Food, Pet Supplies and Veterinary – All Pet. We should also note that the segments with the lowest percentages are Haircuts, Pet Services and Medical Services. Service Segments have generally had higher inflation rates so there was a smaller pricing lift in the recent surge. Services expenditures account for 60% of the National CPI so they are very influential. We also see that Pet Products have a very different patttern. The 21>23 inflation surge provided over 93% of their overall inflation since 2019. This happened because Pet Products prices in 2021 were just starting to recover from a deflationary period.

• U.S. CPI– Prices are +0.2% from August. The YOY increase remained stable at +3.7%. It peaked at +9.1% back in June 2022. The targeted inflation rate is <2% so we are still 85% higher than the target. After 12 straight declines, we had 2 lifts, so stability is an improvement. The current inflation rate is below 21>22 but the 21>23 rate is still 12.2%, 62% of total inflation since 2019. How many households “broke even” by increasing their income by 12% in 2 yrs.
• Pet Food– Prices are +0.3% vs August and +7.6% vs September 2022. They are also 3.2 times the Food at Home inflation rate – not good news! The YOY increase of 7.6% is being measured against a time when prices were 14.4% above the 2019 level, but that increase is still 2.3 times the pre-pandemic 3.3% increase from 2018 to 2019. The 2021>2023 inflation surge has generated 96.2% of the total 23.5% inflation since 2019.
• Food at Home – Prices are up +0.1% from August. The monthly YOY increase is 2.4%, down from 3.0% in August and considerably lower than Jul>Sep 2022 when it exceeded 13%. The 25.8% Inflation for this category since 2019 is 30% more than the national CPI and remains 2^nd to Veterinary. 61% 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 were up +1.0% from August but only +0.1% vs September 2022. They still have the lowest increase since 2019. As we noted, prices were deflated for much of 2021. However, even with recent price drops the 2021>2023 inflation surge accounted for 87% of the total price increase since 2019. They reached an all-time high in October 2022 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, fell in Jun>Aug, then turned up in September.
• Veterinary Services – Prices are up +0.9% from August. They are +7.5% from 2022 and are still in 2nd place behind Food (+7.6%) in the Pet Industry. However, they are still the leader in the increase since 2019 with 28.7% compared to Food at home at 25.8%. For Veterinary Services, relatively high annual inflation is the norm. The rate did increase during the current surge so 70% 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. Prices grew 1% from August but are -2.6% vs 2022. Prices have now deflated for 5 straight months. Medical Services are not a big part of the current surge as only 38% of the 2019>23 increase happened from 21>23.
• Pet Services – Inflation slowed in 2020 but began to grow in 2021. September 23 prices were -0.5% from August but +6.0% vs 2022, which is down from 7.2% in last month and 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 59% of the total since 2019 occurred from 21>23.
• Haircuts/Other Personal Services – Prices are unchanged from August but +4.8% from 2022, the lowest rate since 2019. Inflation has been rather consistent as just 47% of the inflation from 19>23 happened from 21>23.
• Total Pet– Petflation is now 48% lower than the 21>22 rate, but stll 1.5 times the National CPI. For September, +5.7% is the 3rd highest rate since 1997 (2022: 11.0%; 2008: 9.5%). Vs August, prices grew for all but Services so Total Pet was +0.4%. An Aug>Sep increase has happened in 13 of the last 24 years so it was not a surprise. Food & Veterinary are still the Petflation leaders, but all segments have an influence. Pet Food has been immune to inflation as Pet Parents are used to paying a lot, but inflation can reduce 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 equal to 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 4.5% or more for all but Medical Services (2.8%) and Pet Supplies (2.5%).

• U.S. CPI – The current increase is down 47% from 21>22 and 2.2% less than the average increase from 2019>2023, but it’s 91% more than the average annual increase from 2018>2021. 69% of the 19.0% 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 1^st half of 2021 kept YTD prices low then prices surged in 2022. 95.6% of the inflation since 2019 occurred from 2021>23.
• Food at Home – The 2023 YTD inflation rate has slowed but still beat the U.S. CPI by 41%. You can see the impact of supply chain issues on the Grocery category as 72% of the inflation since 2019 occurred from 2021>23.
• Pets & Pet Supplies – Although prices rose in September, the YTD inflation rate is down to 3.8%. Prices deflated significantly in both 2020 & 2021 which helped to create a very unique situation. Prices are up 10.6% from 2019 but 107% of this increase happened from 2021>23. Prices are up 11.3% from their 2021 “bottom”.
• Veterinary Services – They are still #1 in inflation since 2019 but they have only the 2^nd highest rate since 2021. At +6.4%, they have the highest average annual inflation rate since 2019. Except for a sight slowing in 2020, inflation has consistently increased since 2019. Regardless of the situation, strong Inflation is the norm in Veterinary Services.
• 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 -0.1% YTD, the only deflation in any segment.
• 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 23. The January 2023 increase of 8.4% set a new record. YTD September fell a little from 7.0% to 6.8%. Interestingly, although the rates are not as high, they have the exact same annual inflation pattern as Veterinary. The Services segments in the Pet Industry are definitely unique.
• 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. Since 2021 inflation has been a consistent 5+%, 90% higher than 18>19. Consumers are paying 21% more than in 2019, which usually reduces the purchase frequency.
• Total Pet – There were two different patterns. After 2019, Prices in the Services segments continued to increase, and the rate grew as we moved into 2021. Pet products – Food and Supplies, took 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 grew until Jun>Aug 23. 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 Jun>Aug. Prices in both segments turned up in September. The Services segments have also had ups & downs but have generally inflated. The net is a YTD Petflation rate vs 2022 of 9.1%, 2.1 times the CPI. In May 22 it was 5.8% below the CPI.

Petflation is slowing, but still strong. Petflation dropped from 6.6% in August to 5.7% in September. This is less than half of the record 12.0% set in November, but still the 3rd highest rate for the month. More bad news is that 9 of the last 14 months have been over 10% and the current rate is still 3.6 times the 1.6% average rate from 2010>2021. It’s also 1.5 times 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 5.7% from 2022 but they are up 17.4% from 2021 and 22.2% 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 it has happened before in Products. The Pet Food inflation rate is dropping, and Pet Supplies prices are now only up 0.1% vs September 22. It’s just a start. Let’s hope that it accelerates “down”.

After the record increase in 2021, Total Pet spending grew slightly to $102.71B, up $2.73B (+2.7%). Pet Food spending had double digit growth while Veterinary and Supplies $ fell after their record increases in 2021. The big news was Services. They had a record increase of $3.26B and 2 consecutive years of 30+% growth. However, a new factor affected 2022 Pet spending – strong inflation in every segment. Here are the 2022 spending specifics

• Pet Food – $38.69B; Up $4.29B (+12.5%)
• Pets & Supplies – $21.94B; Down $1.86B (-7.8%)
• Veterinary – $29.71B; Down $2.95B (-9.0%)
• Pet Services – $12.36B; Up $3.26B (+35.8%)

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’s 2022 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 2022, 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. All inflation numbers are also provided by the US BLS.

We will start with the largest Segment, Pet Food (and Treats). In 2022 Pet Food Spending totaled $38.69B in the U.S., a $4.29B (+12.5%) increase from 2021. Pet Food inflation was 10.2% in 2022 so 82% of the lift came from higher prices. In earlier research we discovered a distinct, long-term pattern in Pet Food Spending. In 2018 we broke the pattern due to outside influences – 1^st the FDA warning, then with COVID in 2020. Here is Pet Food Spending since 1997 in full Retail Dollars and adjusted for inflation. Blue highlight indicates  plateau year and a red outline is a spending drop.

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 trend catches the consumers’ attention and grows …for 2 years. Then sales plateau or even drop…and move to the next “must have”. After 2014, the changes  became bigger and the situation got more complex 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. In 2018, outside influences came into prominence. The first was the FDA warning on Grain Free dog food. This caused many Pet Parents to back away from certain foods. When the warning was declared bogus, the Food segment began to recover. Then came COVID. Fear of possible shortages caused some groups to binge buy food. That ended and spending dipped in 2021. It turned up again in 2022. However, it may have been largely due to 10.2% inflation. Of note: Considering inflation, only 45% of the 97>22 growth is real. Now, let’s take a closer look at spending since 2014.

First, some specifics behind the $4.29B (+12.5%) increase to $38.69B. In 2022, the average U.S. Household spent a total of $288.75 on Pet Food. This was an +11.9% increase from the $258.09 spent in 2021, which doesn’t exactly “add up” to the +12.5% increase in total Food Spending. With additional data provided from the US BLS, here is what happened.

• 0.5% more U.S. CUs
• Spent 6.5% more $
• 5.1% more often

By the way, if 68% of U.S. CUs are pet parents then their annual Pet Food Spending is $424.63. Here’s a recent rolling history.

2014 marks the beginning of the Super Premium era. It began in the 2^nd half of 2014 with the 25>34-year-old Millennials making the 1^st 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 upgraded to a more expensive pet food, their #1 priority became, “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 should have been due to a “must have” trend. However, a closer look at the data showed that the $4B increase in Pet Food spending in 2017 came not from a new trend but 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 2000 we began truly humanizing our pets, which is very accurately reflected in the evolution of Pet Food. We became more focused on fulfilling the health needs of our pets, beginning with the first move to premium foods in 2004. This radically increased 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 2019 the warning lost credibility. Pet Food spending stabilized in the 1^st half of the year and then grew by $2.3B in the 2^nd  half. Some Pet Parents began to return to the topline Super Premium Foods while others opted for even more expensive varieties. Also, new groups got 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 1^st half of the year and drove the biggest annual spending increase in history. However, binge buying doesn’t increase usage and it causes an overstock in home supply. In 2021, Pets “ate down” the extra food so spending fell. Another factor was the ongoing strong search for value & convenience which continues to drive many consumers online. In 2022, Pet Food spending returned to a more normal pattern. There were 0.5% more CUs. They spent a little more and bought a little more frequently. Inflation was a big factor in the spending increase in transactions. The increase in frequency came from more regularly scheduled deliveries and in an effort to lower the transaction price due to skyrocketing inflation, some pet parents also downsized their purchases but bought more often.

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 priority –

the health, wellbeing and safety of their Pet Children, which starts with the quality of their food.

Now let’s look at some specific 2022 Pet Food Spending Demographics. The first is income. Prior to 2014 it was less of a 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 2022, <$70K had a bigger lift but was still only 65% of the $70K> spending. The $30>70K group had the biggest increase and $70>100K had the only decrease. In 2015, the 50/50 divide on Pet Food spending was about $70K. By 2020, it was up to $107K, breaking the $100K barrier for the first time. In 2021 it fell to $92K and is down to $91K in 2022. That’s about 3% less than the average CU income but 22% more than the median income. Higher income is still important in Pet Food spending. Although all incomes over $40K have 100+% performance (Share of $/Share of CUs) the $150K> group is by far the best at 159%. The chart below shows annual spending for major income groups from 2017>2022. This should put the 2022 numbers into better perspective.

In 2022, only one group spent less on Food. 2017 was the only year since 2015 with spending growth in every major income group. Since 2017, we have seen the major impact on various groups by outside influences. In mid-2018 it was the FDA grain free warning. In 2020 it was the pandemic and in 2022 it was +10.2% inflation. The high inflation means that any demographic segment with an increase below 10.2% actually bought less Pet Food in 2022.

2022 National: $288.75 per CU (+11.9%); $38.69B; Up $4.29B (+12.5%);  2017>2022: Up $7.58B (+24.3%); Avg: +4.4%

The biggest lift came from the $30>70K group, which is surprising. The only drop in spending was by the middle income $70>100K group. This comes after their big lift in 2021. The $100>150K group is back to normal after their 2020 binge.

Here are 2022 specifics:

• Under $30K: (23.8% of CU’s) – $158.24 per CU (+11.0%) – $4.75B – Up $0.08B (+1.7%). Obviously, this group is very price sensitive. The number of CU’s was down 6.4% in 2022 after a small increase in 2021. Their CU count is down 17.0% from 2015. Their spending lift in 2022 was primarily due to higher prices. The average CU bought a little more Pet Food but paid a lot more. They are still fully committed to their Pets. This is evidenced by the fact that they spend 1.00% of their Total CU expenditures on their pets, including 0.45% on Pet Food. The national averages are: Total: 1.05%; Food: 0.40%.
• $30K>$70K: (28.9% of CU’s) – $260.52 per CU (+34.0%) – $10.54B – Up $2.52B (+31.4%). They are also very price sensitive so inflation had an impact. Their average income was up 0.8% while the national average increased by 7.5%. They had a 2.2% decrease in the number of CUs but a 4.6% increase in CU spending. However, their Pet Food spending was far stronger with a huge increase by all segments. The $30>39K group lost 7% in CUs but increased CU spending by 31.7% and $ +$0.44B (+21.7%). The $40>49K group fell -1.8% in numbers but they increased their CU spending by 33.7% and $ grew by +$0.84B (+40.5%). $50>69K gained 0.9% in CUs and spent 34.8% more per CU on Pet Food. This pushed their Total Pet Food Spending up $1.23B (+31.5%). This low-income group is very committed to their pets and quality food. They spent 1.09% of total expenditures on their pets and 0.5% on Pet Food.
• $70K>$100K: (14.1% of CU’s) – $302.80 per CU (-3.5%) – $5.81B – Down $0.40B (-6.5%). The only $ drop. This group has a regular up/down spending pattern. They committed to Super Premium food in 2017 but they became very sensitive to outside influences – the FDA warning in 2018, COVID in 2020 and now inflation in 2022. They have big family responsibilities and are under considerable monetary pressure. We’ll see if they make a comeback in 2023.
• $100>150K (15.5% of CU’s) – $325.92 per CU (+12.5%) – $6.71B – Up $1.25B (+23.0%). This group was the driver in the binge buying of Food in 2020. It was pure emotion, but they had the $ to do it. In 2021, they “ate down” the excess inventory but the drop was $0.46B more than the 2020 lift. In 2022, mostly thanks to inflation and a 9.6% increase in CU’s they had a 23% increase in $. Their Pet Food spending is now 13.3% above pre-pandemic 2019.
• $150K> (17.7% of CU’s) – $457.91 per CU (-5.8%) – $10.89B – Up $0.83B (+8.3%). Their Pet Food CU spending fell by -5.8% after a 68.6% lift in 21 but a 12.4% increase in CUs pushed their total $ up 8.3%. However, when you factor inflation into the numbers, they actually bought 1.7% less pet food. Inflation has made comparisons more complex. In performance, share of $/share of CUs, their score of 159.3% is the clear winner. Higher income is still important.

The pandemic certainly caused turmoil. First, the fear-based binge buy which caused a record increase in 2020. This couldn’t be repeated so spending fell in 2021. Spending returned to more normal, positive behavior in 2022 as only the $70>100K group spent less. The biggest lifts came from $30>70K and groups over $100K. Inflation was high at 10.2% but the welfare of their Pet children mattered more than the price so most Pet Parents just paid more. It is significant in this year of record inflation that the 50/50 income divide in Pet Food $ still fell slightly from $92K to $91K.

Now, Spending by Age Group…

2022 National: $288.75 per CU (+11.9%); $38.69B; Up $4.29B (+12.5%);  2017>2022 – Up $7.58B (+24.3%); Avg: +4.4%

The 25>34 yr-old and 75+ yr-old groups spent less, while all other age groups spent more.

• 55>64 (18.2% of CU’s) – $359.76 per CU (+30.4%) – $6.75B – Up $1.86B (+27.5%). This group has been at the forefront of recent major spending swings. In 2015 they upgraded to Super Premium. In 2016 they shopped for 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 then came 2020, which saw a huge lift in spending. There were 3 major 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 bringing their pets with them. In 2021, there was a big drop in $ as they “ate up” the “panic” extra stock and many of their kids moved out again. 2022 brought another big lift as 2.3% fewer CUs spent 22.8% more $, 6.2% more often.
• 45>54 (16.9% of CU’s) – $353.45 per CU (+20.8%) – $7.87B – Up $1.29B (+19.6%). 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. It is likely that much of the decrease was due to value shopping on the internet. In 2021, they opted for even more expensive food, spending 24% more on each purchase. In 2022 they had 0.9% fewer CUs, but spent 12.8% more, 7.0% more often. The result: +19.6% more $.
• 65>74 (16.2% of CU’s) – $314.66 per CU (+7.8%) – $6.64B – Up $0.51B (+8.4%). This group is all Baby Boomers. They are starting to retire but many are still working (0.7 per CU). Their Pets are a major priority. They spent 1.26% of their total CU expenditures on their pets and 0.5% on Pet Food, the highest percentages of any group. They are also the only group to spend more on Pet Food every year since 2016. In 2022, 0.5% more CUs spent 2.8% more $, 4.9% more often. Inflation affected them as an 8.4% increase was really a -1.7% decrease in the amount purchased.
• 35<44 (17.0% of CU’s) – $302.24 per CU (+20.9%) – $7.18B – Up $1.56B (+27.6%). They are 2^nd in income and CU spending but have the biggest families. Their spending pattern matches the 45>54 yr-olds but is usually less volatile. 5.5% more CUs spent 17.1% more $, 3.3% more often. They had the 2^nd biggest $ lift and are now 3^rd in Food $.
• 25>34 (15.6% of CU’s) – $224.30 per CU (-0.5%) – $80B – Down $0.11B (-2.2%). In the early Super Premium years their spending pattern often foreshadowed the overall market for the following year. In pandemic 2020 they spent 22.3% more then essentially held their ground in 2021. In 2022, 1.7% fewer CUs spent 7.9% less $, 8.0% more often.
• 75> (11.4% of CU’s) – $152.14 per CU (-41.8%) – $2.23B – Down $1.53B (-40.8%). Both the effort and the expense of Pet Parenting become issues as we reach 75+. High inflation affected them the most. They strongly moved to Super Premium Food in 2021. In 2022, many downgraded as 1.6% more CUs spent 41.8% less $, 0.2% more often.
• <25 (4.7% of CU’s) – $198.10 per CU (+101.5%) – $1.37B – Up $0.72B (+108.6%). Many moved in with other adults or got married. They also added a lot of pets. This is apparent as 5.1% less CUs spent 109.6% more $, 4.4% more often.

In 2020 the 55>64 yr olds binge bought Pet Food. In 2021 their spending naturally plummeted, the only decrease by any age group. In 2022 we had high inflation. It affected everyone but only 25>34 and 75> spent less $ on Pet Food and only 3 groups bought less product (add 65>74 to the other 2). Quality pet food remains a high priority for Pet Parents.

Next, let’s take a look at some other key demographic “movers” in 2022 Pet Food Spending. The segments that are outlined in black “flipped” from 1^st to last or vice versa from 2021. The red outline stayed the same.

The first thing that you notice is that the biggest increases are almost always radically larger than the biggest decreases. We should also note that whether you rent or own your home, you spent more on Pet Food in 2022 than in 2021. The lift was also widespread as 82% of 96 demographic segments spent more in 2022. These are good signs that Pet Food spending is doing well.

You also see that half of the 24 segments flipped from last to first or vice versa. Only 2 held their position from 2021. 7 winners flipped from last to 1^st and 2 held their position. 5 losers flipped to last from 1^st in 2021.

Most of the winners are the “usual suspects”:

• Suburbs 2500>
• White, Not Hispanic
• 2 Earners
• Homeowners, w/Mtge
• Mgrs & Professionals
• Gen X
• 55>64
• Married, Child 18>
• $100>149K

There is only 1 surprise winner – High School Grads or Less

These winners indicate a return to more normal spending patterns but you should also consider that most have a higher income so they would be less impacted by strong inflation.

Among the losers, most of the segments are not unexpected. There are some that were obviously affected by  inflation:

• No Earner
• Retired
• Born <1946
• 75>
• $70>99K.

There were a few surprises – Adv. College Degree, 2 People and Married Couple Only

The pandemic trauma may now be over. The $4.29B (+12.5%) increase was widespread across 82% of 96 demographic segments. However, 10.2% inflation is a new problem. The amount of Pet Food sold in 2022 was really only +2.2% from 2021 and only 59% of segments bought more. Pet Food spending is now up $7.5B from 2019, +24.0%, a growth rate of 7.4%, 40% more than the 5.3% from 2014>19. The downside is that 46% of that growth came from inflation…almost all in 2022. Real 19>22 growth: 4.1%. Inflation fell below 10% in August 2023. We’ll see what happens to prices & spending.

Inflation is no longer a headline, but it is still news. The huge YOY increases in the monthly Consumer Price Index peaked in June 2022 at 9.1% then began to slow until turning up in July 2023. August prices grew 0.4% from July and the CPI was +3.7% vs 2022, up from +3.2% last month – 2 straight months of increases. However, Grocery inflation continues to drop. After 12 straight months of double-digit YOY monthly increases, grocery inflation is down to +3.0%, 6 consecutive months below 10%. As we have learned, 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 considerably since June 2022, but Petflation generally increased until June 2023. It passed the National CPI in July 2022 and at 6.6% in August it is still 1.8 times the national rate of 3.7%. 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 August 2021 to August 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 August, Pet prices were down from last month overall and in all segments but Non-Vet Services.

In August 2021, the CPI was +6.5% and Pet prices were +2.8% from December 2019. Like the U.S. CPI, prices in the Services segments generally inflated after mid-2020, while Product prices generally deflated until late 2021. Then Petflation took off. 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 Vet & Supplies prices stabilized. In Jan>Apr, prices grew every month except for 1 dip by Supplies. In May Products prices grew while Services slowed. In June/July this pattern was reversed. In August all but Services fell. Petflation has been above the CPI since November 22.

• 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>Aug but 35% of the overall 19.5% increase in the 44 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 21, and it continued until the Jun>Aug 23 dip. 93% of the 22.7% increase has occurred since 22.
• 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 23, a new record. They fell in March, set a record in May, then fell in Jun>Aug.
• 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 22>Mar 23 but the increase slowed to +0.1% in April. Prices fell -0.3% in May then turned up again in Jun>Aug.
• 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 fall below the National CPI. However, prices turned up again and despite some dips they have stayed above the CPI since July 2022. In 2023 prices grew through May, stabilized, then fell in August.
• 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 23, then fell in Jun>Aug. Except for 5 individual monthly dips, prices in all segments increased monthly Jan>Jun 23. In Jul>Aug there 5 more dips but Petflation has stayed above the CPI since November 2022.

Next, we’ll turn our attention to the Year Over Year inflation rate change for August and compare it to last month, last year and to previous years. We will also show total inflation from 21>23 & 19>23. Petflation was well below double digits at 6.6% in August but is still 1.8 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.

Overall, Prices were +0.4% vs July and were up 3.7% vs August 2022. The Grocery increase is down again, to +3.0% from +3.6%, but still impacts consumers. 4 of 9 categories had decreased prices from last month, compared to 3 in July, 5 in June, 3 in May and 1 in April. All of the 4 decreases were from the Pet Industry. Only Pet Services had an increase. The national YOY monthly inflation rate for August is up from July but is still much lower than the 21>22 rate. All but 2 categories – Non-Vet Services and Haircuts have a similar yearly pattern. For Non-Vet Pet Services, the 22>23 inflation rate is not just higher than the 21>22 rate. It is the highest rate in any year since 2019. In our 2021>2023 measurement you also can see that over 65% of the cumulative inflation since 2019 occurred from 21>23 for all segments but Pet Services, Medical Services, Haircuts/Personal Services and the U.S. CPI. We should note that these individual segments are all service expenditures. This demonstrates the strong influence of all Services expenditures on the National CPI. Pet Products are unique. The 21>23 inflation surge provided over 96% of their overall inflation since 2019. This happened because Pet Products prices in 2021 were just starting to recover from a deflationary period.

• U.S. CPI– Prices are +0.4% from July. The YOY increase rose to +3.7% from 3.2%. It peaked at +9.1% back in June 2022. The targeted inflation rate is <2% so we are still 85% higher than the target. 2 lifts in a row after 12 straight declines is not good news. It’s good that the current inflation rate is below 21>22 but the 21>23 rate is still 12.2%, 62% of total inflation since 2019. How many households “broke even” by increasing their income by 12% in 2 years?
• Pet Food– Prices are -0.1% vs July and +8.7% vs August 2022. They are also 2.9 times the Food at Home inflation rate – not good news! The YOY increase of 8.7% is being measured against a time when prices were 13.0% above the 2019 level, but that increase is still 2.2 times the pre-pandemic 3.9% increase from 2018 to 2019. The 2021>2023 inflation surge actually generated 100.4% of the total 22.8% inflation since 2019.
• Food at Home – Prices are up +0.1% from July. The monthly YOY increase is 3.0%, down from 3.6% in July and considerably lower than Jul>Sep 2022 when it exceeded 13%. The 25.9% Inflation for this category since 2019 is 32% more than the national CPI and remains 2^nd to Veterinary. 65% 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 plummeted -2.6% from July. This produced deflation of -0.6% vs August 2022. They still have the lowest increase since 2019. As we noted, prices were deflated for much of 2021. However, even with recent price drops the 2021>2023 inflation surge accounted for 81% of the total price increase since 2019. They reached an all-time high in October 2022 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>August.
• Veterinary Services – Prices are down -1.2% from July. They are +8.4% from 2022 and fell back to 2nd place behind Food (+8.7%) in the Pet Industry. However, they are still the leader in the increase since 2019 with 27.7% compared to Food at home at 25.9%. For Veterinary Services, relatively high annual inflation is the norm. The rate did increase during the current surge so 70% 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. Prices grew 2% from July and are -2.1% vs 2022. Prices have now deflated for 4 straight months. Medical Services are not a big part of the current surge as only 34% of the 2019>23 increase happened from 21>23.
• Pet Services – Inflation slowed in 2020 but began to grow in 2021. August 23 prices were +0.9% from July and +7.2% vs 2022, which is up from 6.3% in July 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 58% of the total since 2019 occurred from 21>23.
• Haircuts/Other Personal Services – Prices are +0.4% from July and +5.1% from 2022, the 2nd highest rate since 2019. However, inflation has been rather consistent so just 45% of the inflation from 19>23 happened from 21>23.
• Total Pet– Petflation is now 35% lower than the 21>22 rate, but 1.8 times the National CPI. For August, +6.6% is the 3rd highest rate since 1997 (2022: 10.1%; 2008: 9.3%). Vs July, prices fell for all but Services so Total Pet was -0.9%. A Jul>Aug decrease has happened in 13 of the last 24 years so it was not a surprise. Food & Veterinary are still the Petflation leaders, but all segments have an influence in the overall numbers. Pet Food has been immune to inflation as Pet Parents are used to paying a lot, but inflation can reduce 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 equal to 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 (2.9%) and Pet Supplies (2.6%).

• U.S. CPI – The current increase is down 46% from 21>22 and only 2.3% more than the average increase from 2019>2023, but it’s double the average annual increase from 2018>2021. 69% of the 19.0% 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 1^st half of 2021 kept YTD prices low then prices surged in 2022. 95.6% of the inflation since 2019 occurred from 2021>23.
• Food at Home – The 2023 YTD inflation rate has slowed but still beat the U.S. CPI by 49%. You can see the impact of supply chain issues on the Grocery category as 73% of the inflation since 2019 occurred from 2021>23.
• Pets & Pet Supplies – The inflation rate is down to 4.3% as prices fell again in August. Prices deflated significantly in both 2020 & 2021 which helped to create a very unique situation. Prices are up 10.8% from 2019 but 109% of this increase happened from 2021>23. Prices are up 11.8% from their 2021 “bottom”.
• Veterinary Services – They are still #1 in inflation since 2019 but they are tied for the 2^nd highest rate since 2021. At +6.4%, they have the highest average annual inflation rate since 2019. Except for a sight slowing in 2020, inflation has consistently increased since 2019. Regardless of the situation, strong Inflation is the norm in Veterinary Services.
• 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 0.2% YTD, which is 99% 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 23. The January 2023 increase of 8.4% set a new record. YTD August grew a little from 6.9% to 7.0%. Interestingly, although the rates are not as high, they have the exact same annual inflation pattern as Veterinary. The Services segments in the Pet Industry are definitely unique.
• 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. Since 2021 inflation has been a consistent 5+%, 90% higher than 18>19. Consumers are paying 21% more than in 2019, which usually reduces the purchase frequency.
• Total Pet – There were two different patterns. After 2019, Prices in the Services segments continued to increase, and the rate grew as we moved into 2021. Pet products – Food and Supplies, took 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 Jun>Aug 23. 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 Jun>Aug. The Services segments have also had ups & downs but have generally inflated. The net is a YTD Petflation rate vs 2022 of 9.5%, 2.1 times the National rate. In May 22 it was 5.8% below the CPI.

Petflation is slowing, but still strong. Petflation dropped from 8.7% in July to 6.6% in August. This is well below the record 12.0% set in November, but still the 3rd highest rate for the month. More bad news is that 9 of the last 13 months have been over 10% and the current rate is still 4.1 times more than the 1.6% average rate from 2010>2021. It’s also 1.8 times 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 6.6% from 2022 but they are up 17.4% from 2021 and 21.8% 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 it may be starting in Products. The Pet Food inflation rate is dropping, and Pet Supplies prices are even deflating. It’s just a start. Let’s hope that it continues. We’ll see what happens.

In our analysis of Pet Food & Supplies Spending, we saw strong growth in the 2^nd half of 2021 which sent Supplies to a record high and returned Food to near its Pandemic binge high. Both had continued but slowed growth in early 2022. Strong inflation may have been a factor. Now we turn our attention to Pet Services. The Mid-year numbers show that spending in this segment was $10.87B, up $3.43B (+46.2%) from the previous year. Up until 2018, this segment was known for consistent, small growth. In 2018, increased outlets and competitive prices brought on a wave of new users and spending increased +$1.95B. Spending remained near this new high normal until we reached 2020. Closures due to the pandemic drove spending down $1.73B by yearend, essentially returning to the level of 2017. In 2021 things opened up and spending began to rebound. This deserves a closer look. First, we’ll look at Services spending history since 2014.

Here are the 2022 Mid-Yr Details:

Mid-Year 2022: $10.87B; ↑$3.43B (+46.2%) vs Mid-Yr 2021

Jul > Dec 2021: ↑$1.66B

Jan > Jun 2022: ↑$1.77B

Pet Services is by far the smallest industry segment. However, except for 2010 and 2011, the period immediately following the Great Recession, it had consistent annual growth from 2000 through 2016. Spending in Food and Supplies have been on a roller coaster ride during that period. Services Spending more than tripled from 2000 to 2016, with an average annual growth rate of 7.6%. Spending in the Services Segment is the most discretionary in the industry and is more strongly skewed towards higher income households. Prior to the great recession, the inflation rate averaged 3.9% with no negative impact. The recession affected every industry segment, including Services. Consumers became more value conscious, especially in terms of discretionary spending. Services saw a slight drop in spending in both 2010 and 2011, but then the inflation rate fell to the 2+% range and the segment returned to more “normal” spending behavior. In mid-2016 inflation dropped below 2% and continued down to 1.1% by the end of 2017. This was primarily due to increased competition from free-standing businesses but also an increase in the number of Pet Stores and Veterinary Clinics offering pet services. While prices still went up slightly, there were deals to be had and consumers shopped for the best price. There was no decrease in purchase frequency. Consumers just paid less so spending fell slightly. In the 2^nd half of 2017 spending turned up again. More Consumers began to take advantage of the value and convenience of the increased number of outlets offering Services. This deeper market penetration caused Services Spending to take off in 2018, up $1.95B, the biggest annual increase in history. Prices turned up again in the 1st half of 2019, +2.8% from 2018. However, Services spending inched up $0.09B. In the 2^nd half of 2019 consumers Value Shopped again so spending fell -$0.19B. Then came 2020 and the pandemic. Many of these nonessential businesses were forced to close and spending fell precipitously, -$1.73B to $6.89B, about the same as yearend 2017. In 2021 things opened up again and spending bounced back, +$0.55B vs the 1^st 6 months of 2020. Unlike Food and Supplies the increase continued to accelerate even into 2022, despite an inflation rate of 6+%. This produced a record 12-month increase and a new record high, $10.87B.

Let’s take a closer look at some key spending demographics – Age and Income.

In the graphs that follow we compare spending for the 12 months ending 6/30/22 to the previous 12 months. The graphs also include the 2021 yearend $, so you can see spending changes in the 2^nd half of 2021 and the 1^st half of 2022.

The first graph is for Income, the single most important factor in increased Pet Spending, especially in Services.

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

Mid-yr Total Spending Change: $8.41B – $5.04B = Up +$3.37B (Note green outline = increase; red outline = decrease)

• 2^nd half of 2021: Subtract Mid-21 ($5.04B) from Total 2021 ($6.81B) = Spending was up $1.77B in 2^nd half of 2021.
• 1^st half of 2022: Subtract Total 2021 ($6.81B) from Mid-22 ($8.41B) = Spending was up +$1.60B in 1^st half of 2022.

• With the Over/Under $100K measurement, you see how Services Spending is definitely skewed towards higher incomes. The halfway spending point is about $141K so about 20% of CUs spend 50% of Services $. However, spending in both the under & over $100K groups grew in both halves.
• All groups $70K> had steady growth. The <$70K groups had basically 2 different patterns. Surprisingly, the <$30K had growth in both halves. The $30>70K groups had decreased spending despite a 2022 lift by $30>50K.
• The $50>70K group had the worst performance. They had the biggest decrease, -20.9% and decreases in both halves. In fact, they were the only segment with decreased spending in the 1^st half of 2022.
• The over $150K group has 16.7% of the CUs but accounts for 46.2% of Services $. This is actually a much larger share than the 37.6% that they had in pre-pandemic 2019. The pandemic has increased the importance of this group.
• Income, especially when it is over $150K, is by far the biggest factor in the discretionary spending in the Services segment so Services spending is more unbalanced in regard to income. The highest income groups are more driven by convenience than value so high inflation rates are likely to actually increase spending because of higher prices.

Now, Services’ Spending by Age Group.

• Basically the <25 yr-olds spent less while everyone else spent more. Their spending fell slightly in both halves.
• The 55>64 group had the biggest increase, up +$1.17B (+85.4%) and held on to the top spot in Services spending.
• The 35>44 yr-olds spent +$0.79B more (+50.3%) and held on to the 2^nd spot in spending.
• The 45>54 yr olds had a small increase despite a drop in the 2^nd half of 2021. They are #3. In Mid-2021 they were #1.
• Although their lift was small this year, 25>34 yr-olds are the only group with consecutive mid-year increases.
• The 65> groups were up $1.1B (+80.3%) with lifts in both halves, including a +$0.65B increase in the 1^st half of 2022. The 65>74 yr-old Baby Boomers led the way – No Surprise.
• All groups but <25 had a spending lift in the 1^st half of 2022, a big change from Food & Supplies.

Now let’s look at what is happening in Pet Services 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. Remember, the lift in the 1st half of 2022 was +$1.77B vs 2021 and +$2.32B vs 2020.

2022 has started even better than 2021 as spending continues to grow. In 5 categories all segments spent more. Last year, only all income segments spent more. In 2020, there were 4 categories in which all segments spent less on Services. Also, the $ changes from the winners are overwhelmingly larger than the negatives of the losers. The +$1.77B increase in Pet Services came from 74 of 82 demographic segments (90%) spending more. Last year it was 78% and in 2020, 88% spent less. The strong recovery has become a growth tsunami, +58% from 2020 and even +23% from 2019.

The usual winners have overwhelmingly returned with only 2 minor surprises

• The South
• Tie: 55>64 & 65>74

Virtually all of the Losers were also expected. Here are the surprises:

• Gen X
• Northeast

The older groups, specifically Baby Boomers are driving the 1^st half lift. The 55>74 yr-olds are essentially all Boomers. Most Boomer CUs are 2 people, with no kids. The younger groups had the best performance in the 1^st half of 2021 and 2020. It appears that the Baby Boomers have at least briefly “taken back the torch”.

Services $ are at a record high and growing. Let’s review how we got to this point and speculate on what comes next.

Except for the trauma caused by the Great Recession which hit Services in 2010>11, from 2000 to 2016 the Services segment had slow but consistent growth. The number of outlets also was increasing. Services were gaining in popularity and many retail pet stores were looking for a competitive edge over the growing pet product sales of online retailers. Afterall, you can buy product, but you can’t get your dog groomed on the internet. By 2017 the number of outlets offering Pet Services had radically increased. This created a highly competitive market and the inflation rate dropped to near record lows. Value conscious consumers saw that deals were available, and they took advantage of the situation. However, they didn’t increase the frequency of purchase. They just paid less. This drove overall Pet Services spending down in the 1^st half of 2017. The segment started to recover in the 2^nd half but not enough to prevent the first annual decrease in Pet Services spending since 2011. However, it was a start. In 2018, more consumers started to recognize the convenience offered by more outlets. The latest big food upgrade was also winding down. The result was that Services started a deeper penetration into the market, especially in the younger groups. The <45 groups spent $1.47B more on Services in 2018, 74% of the total $1.95B increase in the segment. After such a big lift, a slight downturn in 2019 was not unexpected and it happened, -$0.1B. Then came 2020 and COVID. Although the consumer use of Services was becoming increasingly widespread, many Services outlets were deemed nonessential and were subject to pandemic restrictions and closures. Services Spending fell -$1.73B (-20.1%) in 2020 and nearly wiped out the big gain made in 2018.

In 2021, things opened up and Services spending began to rebound with a +$0.55B lift in the 1^st half. This lift accelerated in the 2^nd half and even the 1^st half of 2022. Spending reached a new record high of $10.87B, with an annual growth rate of 7.3% since mid-yr 2019. That’s 43% higher than the 5.1% rate from 2009 to 2019. Pet Services have become an important option that is exercised by an increasing number of Pet Parents. However, much of the growth is increasingly being driven by higher incomes. There is some good news in this trend. Higher incomes are less negatively impacted by strong inflation. They buy the same amount, just pay more. This means that Services $ are likely to continue to grow.