Spending, CPI, demographics of overall market

2021 U.S. PET FOOD SPENDING $34.41B…Down ↓$2.44B

/in /by

After the pandemic turmoil in 2020, there was a strong recovery in 2021. Total Pet spending had a record increase and reached $99.98B, up $16.23B (+19.4%). Food spending fell after the record “panic” increase in 2020 but the other essential segment, Veterinary had record growth. The discretionary segments – Supplies & Services were hit hard by the pandemic. In 2021, Pet Parents gave them the attention they deserve…and a lot more. Here are the specifics:

  • Pet Food – $34.41B; Down $2.44B (-6.6%)
  • Pets & Supplies – $23.81B; Up $8.65B (+57.0%)
  • Veterinary – $32.67B; Up $7.82B (+31.5%)
  • Pet Services – $9.10B; Up $2.20B (+32.0%)

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 Record 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 2021, this was gathered by the U.S. Census Bureau from over 42,000 interviews and spending diaries. The final data was then compiled and published by the US BLS.

We will start with the largest Segment, Pet Food (and Treats). In 2021 Pet Food Spending totaled $34.41B in the U.S., a $2.44B (-6.6%) decrease from 2020. The current trend in high priced, super premium foods magnifies the results of any changes in consumer purchasing behavior. In earlier research we discovered a distinct, long-term pattern in Pet Food Spending. In 2018 we broke the pattern due to outside influences – 1st the FDA warning, then with COVID in 2020. Here is Pet Food Spending since 1997 in full Retail Dollars and adjusted for inflation.

The pattern began in 1997. Retail Pet Food Spending increases for 2 consecutive years then reaches a plateau year or even drops. There was a notable exception in the period from 2006 to 2010. During this time, there were two traumas which directly impacted the Pet Food Retail market. The first was the Melamine recall, which resulted in radically increased prices as consumers insisted on made in USA products with all USA ingredients. The second affected everyone – the great Recession in 2009. This was the first time that annual U.S. retail spending had declined since 1956. The net result was that the plateau period was extended to include both 2009 and 2010.

For 20 years, Pet Food was driven by short term trends. A new food trend catches the consumers’ attention and grows …for 2 years. Then sales plateau or even drop…and move to the next “must have”. After 2014, the changes  became more pronounced and the situation got more complicated 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 determined to be bogus, the Food segment began recovery. Then came COVID. Fear of possible shortages caused certain groups to binge buy food. Now, that’s over. With the spending dip in 2021 after 2 years of increases, perhaps the spending pattern is back on track. Now, let’s take a closer look at spending since 2014.

First, some specifics behind the $2.44B (-6.6%) decrease to $34.41B. In 2021, the average U.S. Household spent a total of $258.09 on Pet Food. This was an -7.9% decrease from the $280.38 spent in 2020, which doesn’t exactly “add up” to the -6.6% decrease in total Food Spending. With additional data provided from the US BLS, here is what happened.

  • 1.5% more U.S. CUs
  • Spent 12.7% less $
  • 5.5% more often

By the way, if 68% of U.S. CUs are pet parents then their annual Pet Food Spending is $379.54. Here’s a rolling history.

2014 marks the beginning of the Super Premium era. It began in the 2nd half of 2014 with the 25>34-year-old Millennials making the 1st move. In 2015 the Baby Boomers got on board in a big way, producing a $5.42B increase in spending, the biggest lift in history at the time. 2016 saw a spending change that was accelerated by the high prices of Super Premium Pet Foods. After consumers 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 1st half of the year and then grew by $2.3B in the 2nd  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 1st half of the year and drove the biggest annual spending increase in history. However, binge buying doesn’t increase usage, so spending has fallen in 2021. Another factor was the ongoing strong search for value & convenience which drove many consumers online. Consumers spent less per purchase which reflects the end of the binge as well as their search for value. There were 1.5% more CUs and they bought more frequently. The increase in frequency came from more regularly scheduled deliveries but some pet parents also downsized their purchases to lower the price. When you put all these factors together, the small drop in spending is not a surprise.

The growth of Pet Food spending since 2014 reflects the rise of Super Premium but also another trend – the spectacular increase in the number and use of Pet Medications and Supplements, which are often produced in the form of treats. Together, the strength of Pet Food and these product subcategories reflect the Pet Parents’ absolute number 1 current Concern – the health, wellbeing and safety of their Pet Children, which starts with the quality of their food.

Now let’s look at some specific 2021 Pet Food Spending Demographics. First, we’ll look at income. Prior to 2014 it was a less dominant factor in Food spending. However, the move to Super Premium has brought it more to the forefront. In 2015 the spending of the over $70K group exceeded the <$70K for the first time. In 2021, $70K> had a big drop in $ but was still 71% more than <$70K. The $100>150K had the biggest decrease while <$30K, $70>100K and $150K> actually spent more. Due to the recent movement to higher income groups, we now also report spending over/under $100K. In 2015, the 50/50 divide on Pet Food spending was about $70K. In 2019 it was $87K. In 2020 it was about $107K, breaking the $100K barrier for the first time. In 2021 it fell to $92K, about 5% more than the average CU income but 30% more than the median income. Higher income is still important in Pet Food spending. The chart below shows the annual spending for the major income groups from 2016 > 2021. This should put the 2021 numbers into better perspective.

Before we get into the details for 2021, we should note the uniqueness of 2017. With competitive pricing on Super Premium Foods and the consumers’ commitment to pet health, 2017 was the only year since 2015 with spending growth in every major income group. Since then, we have seen the major impact on various groups by outside influences. In mid-2018 it was the FDA grain free warning and in 2020 it was the pandemic.

2021 National Numbers: $258.09 per CU (-7.9%); $34.41B; Down $2.44B (-6.6%); 2016>2021 – Up $7.91B (+29.8%)

The spending pattern was mixed. The spending by the <$70K groups was stable. There was a huge drop by the 2020 binge buying $100>150K group which was somewhat mitigated by lifts from $70>100K & $150K> groups.

Here are 2021 specifics:

  • Under $30K: (25.5% of CU’s) – $142.61 per CU (-3.0%) – $4.67B – Up $0.06B (+1.3%). Obviously, this group is very price sensitive. It was also strongly impacted by the pandemic. The number of CU’s was up 4.2% in 2021 after steadily declining for years. In 2020, CUs were down 18.8% from 2015. They don’t have a lot of $ to spend but they did do some binge buying in 2020. Their spending lift in 2021 was entirely due to more CUs. They are still fully committed to their Pets. This is evidenced by the fact that they spend 1.02% of their Total CU expenditures on their pets, including 0.43% on Pet Food. The national averages are: Total: 1.12%; Food: 0.39%.
  • $30K>$70K: (29.7% of CU’s) – $194.37 per CU (+0.2%) – $8.03B – Down $0.14B (-1.7%). They are also very price sensitive and 2021 didn’t make things any better. Their average income was unchanged from 2020 to 2021 while the national average increased by 3.7%. They had a 1.9% decrease in the number of CUs which negated their slight increase in CU spending. The Pet Food spending within this big group was definitely mixed. The $30>39K group lost 7% in CUs and radically decreased spending, -$1.0B (-33.3%). The $40>49K group fell -4.5% in numbers but they increased their CU spending by 2.8%. However, their $ still fell by -$0.04B. Now, the most positive group, $50>69K. They gained 3.5% in CUs but spent 25.5% more per CU on Pet Food. These 2 factors pushed their Total Pet Food Spending up $0.90B (+30.0%). It was a big lift but not enough to overcome the decreases from $30>49K.
  • $70K>$99K: (14.8% of CU’s) – $313.68 per CU (+54.4%) – $6.21B – Up $2.45B (+65.4%). This group has a regular up/down spending pattern. They got “on board” with Super Premium food in 2017 but they became very sensitive to outside influences – the FDA warning in 2018 and COVID in 2020. However, they came back strong from both. They are middle income, with family responsibilities and under considerable monetary pressure.
  • $100>150K (14.2% of CU’s) – $289.71 per CU (-62.0%) – $5.46B – Down $8.92B (-62.1%). This group was the driver in the 2020 panic, binge buying of Food in 2020. It was an emotional reaction, but they had the $ to do it. They are “eating down” the excess inventory as the 2021 drop was $1.7B more than the 2020 lift. However, they are still spending the money “saved” on Food on their pets, with a 36+% spending lift in all other industry segments.
  • $150K> (15.8% of CU’s) – $485.93 per CU (+68.6%) – $10.05B – Up $4.12B (+69.5%). This group shows that there were strong pandemic recoveries for some groups as their Pet Food CU spending grew by 68.6%. They also illustrate the growing importance of income in Pet Spending – the higher the better. They had by far the biggest increase in Pet Food $ but they also were responsible for 87% of the $16.2B increase in Total Pet spending.

The 2020 pandemic had a slightly positive impact on the <$70K income groups. However, except for the binge buying by the $100>150K group, it was negative for higher incomes. 2021 spending was down because there was not a repeat in the binge but all groups but <$40K & $100>150K spent more per CU on Pet Food in 2021. In fact, the $70>100K & $150K> groups combined to spend $6.6B more on Pet Food in 2021 than in 2020. We should also note that Pet Food spending is up $3.22B from pre-pandemic 2019, +10.3%, a growth rate of 5.0%, which is close to the 5.3% from 2014>19.

Now, Spending by Age Group…

2021 National Numbers: $258.09 per CU (-7.9%); $34.41B; Down $2.44B (-6.6%); 2016>2021 – Up $7.91B (+29.8%)

The overall assessment appears simple. The 55>64 yr-old, young Boomers spent less, while all other groups spent more.

  • 55>64 (18.5% of CU’s) – $275.79 per CU (-52.7%) – $6.75B – Down $7.89B (-53.9%). This group (all Baby Boomers) 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 contributing factors. First was panic, binge buying due to pandemic. They also were still recovering from the FDA warning. Finally, the pandemic caused the loss of over 2 million <25 CUs. Many of them moved back with their parents bringing their pets with them. That brought us to 2021. There was no repeat of the panic buy and they “ate up” some of the extra stock. Many of their kids moved out again. Together this caused a big drop in $.
  • 45>54 (16.7% of CU’s) – $292.68 per CU (+18.3%) – $6.58B – Up $1.12B (+20.6%). 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. Although some may have dialed back their purchases. It is likely that most found value and cheaper prices by buying on the internet. In 2021, they opted for even more expensive food, spending 24% more per purchase which produced a 20.6% increase in $.
  • 65>74 (16.1% of CU’s) – $291.80 per CU (+17.5%) – $6.13B – Up $0.93B (+17.8%). This group is now all Baby Boomers and growing. They are Boomers so their Pets are a major priority. They spend 1.27% of their total CU expenditures on their pets, the highest percentage of any group. They are also the only group to spend more on Food every year since 2016. They are starting to retire but many are still working (0.6 per CU). Their income was up 5.4% vs 2020, compared to a national increase of 3.7%. They obviously spent some of the extra money on their pets.
  • 35<44 (17.2% of CU’s) – $249.89 per CU (+27.9%) – $5.62B – Up +$1.24B (+28.3%). They are primarily young Gen Xers. They are 2nd in income and CU spending but have the biggest families. Their spending pattern matches the older Gen Xers but is usually less volatile. They spent 17.9% more 8.5% more often for the 2nd biggest increase in $.
  • 25>34 (15.7% of CU’s) – $225.51 per CU (+1.3%) – $4.91B – Up +$0.12B (+2.6%). In recent years the spending pattern of these Millennials has foreshadowed the overall market for the following year. In pandemic 2020 they spent 22.3% more but just essentially held their ground in 2021. They spent 12.9% more, 10.2% less often.
  • 75> (10.9% of CU’s) – $261.20 per CU (+85.3%) – $3.76B – Up +$1.76B (+88.3%). Both the effort and the expense of Pet Parenting become issues as we reach 75+. However, they remain committed to their Pets. They got fully on board with Super Premium Pet Food in 2021. They spent 87.8% more per purchase, 1.2% less often.
  • <25 (4.9% of CU’s) – $98.30 per CU (+31.6%) – $0.66B – Up +$0.27B (+68.2%). Many of this group that had moved back in with their parents, left home again. This is apparent as 27.8% more CUs bought Pet Food 47.3% more often.

In 2020 the 55>64 yr old Boomers binge bought Pet Food. As a result, in 2021 they had a big drop in spending, which was the only decrease by any age group. The Pandemic caused more Pet Parents to focus on the health & wellbeing of their Pet Children. The result is that there is an even broader commitment to high quality, Super Premium Pet Food.

We going to drill deeper, but a little differently than we normally do. The pandemic had a major impact on Pet Food, with the 2020 binge buying by some groups followed by an inevitable big drop in 2021. We have noted that despite the decrease in 2021 $, the average growth rate from 2019>21 was 5.0%, just about equal to the 5.3% rate from 2014>19. We will identify the segments with the biggest change from pre-pandemic 2019 to post-pandemic 2021.

The first thing that you notice is that the biggest increases are radically larger than the biggest decreases. That’s always a good indication of progress. Also, we should note that whether you rent or own your home, you spent more on Pet Food after the pandemic than you did before.

About half of the winners are the “usual suspects”:

  • Advanced College Degree
  • West
  • White, Not Hispanic
  • $200K> Income
  • 2 People
  • Homeowners w/Mtge

However, some are surprises:

  • Retired
  • Center City
  • No Earner, 2+ CUs
  • 75> yrs old

These winners indicate another impact of the pandemic. We focused on home and family, including our Pet Children. Our #1 pet concern became their health & wellbeing. Even low-income groups committed to high quality pet food.

Among the “losers”, you see some of the groups that binge bought Pet Food in 2020 in fear that it might become unavailable:

  • Self-Employed
  • Married, Child 18>
  • $100>149K
  • 55>64
  • Boomers

Each of these groups increased 2020 Pet Food Spending by an average of $7.7B, +118% over 2019. Panic, Binge buying of Pet Food doesn’t get repeated and it doesn’t increase usage. It only increases your backup stock. When you think of the situation, it’s amazing that they got back to a spending level in 2021 relatively close to that of 2019.

The pandemic was a traumatic event for everyone. However, the Pet Food segment has essentially returned to the strong growth rate that it’s had since 2014. Now, we just need a hot new trend to further “fuel the growth fire”.

Retail Channel Monthly $ Update – July Final & August Advance

/in /by

By 2021, the market had generally recovered from the impact of the pandemic. Now we are being hit by extreme inflation, with rates higher than we have seen in 40 years. Obviously, this can affect retail sales, 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 begin with the Final Report for July and then move to the Advance Report for August. Our focus is comparing 2022 to 2021 but also YTD 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 information will be presented in detailed charts to facilitate visual comparison between groups/channels of:

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2021
    • Current Month Real change – % vs same month in 2021 factoring in inflation
  • Current YTD change – % & $ vs 2021
    • Current YTD Real change – % vs 2021 factoring in inflation
  • Current YTD change vs 2019 – % & $
    • Current Real change YTD vs 2019 – % factoring in inflation
  • Monthly & YTD $ & CPIs which are targeted by channel will also be shown. (CPI details are at the end of the report)

First, the July Final. Total Sales turned down for the 2nd straight month but the $ were up for July and YTD vs 2021. However, factoring inflation into the data, for the 4th straight month only Restaurants had increases in these measurements. Here is the July data for the major retail groups. (All $ are Actual, Not Seasonally Adjusted)

The July Final is $0.7B less than the Advance Report. Restaurants had the biggest change: -1.1B; Relevant Retail: +0.4B; Auto: -$0.4B; Gas Stations: +$0.4B. Sales are down again from last month in all but Restaurants, but consumers continue to spend more vs 2021, except for another dip in Auto. However, the “real” numbers tell a different story. All but Restaurants are again really down in all measurements vs 2021. Restaurants had a late recovery and half of the inflation in this group came before 2022. The inflation impact on Relevant Retail is especially significant as their Real YTD sales vs 2021 are again negative. They do have the best performance since 2019 as 64.4% of their 31.7% growth is “Real”.

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

Overall – 6 of 11 were down vs June. Vs July 2021, 10 reported more $ but only 3 were really up. In YTD vs 2021, 9 reported increases but only 4 were real. Vs 2019, only Office/Gift/Souvenir & Discount Dept Stores were “really” down.

  • Building Material Stores – Their Spring lift has ended and was not as strong as last year. YTD Home Ctr/Hdwe is up 6.8% vs 21 but Farm stores are only +2.2%. The Bldg/Matl group has an inflation rate of 10.8% which produced all negative real numbers. The pandemic caused consumers to focus on their homes which produced sales growth over 36% since 2019 in both channels. Importantly, 61.1% of this lift was real, primarily because the bulk of the lift came from 20>21, prior to the inflation wave. Avg Growth Rate: HomeCtr/Hdwe: 10.9%, Real: 6.7%; Farm: 11.4, Real: 7.3%
  • Food & Drug – Both channels are truly essential. Except for the pandemic food binge buying, they tend to have smaller fluctuations in $. However, they are radically different in inflation. The YTD rate for Grocery products is 4 times higher than for Drugs/Med products. Drug Store $ are down from June but up vs 21. Real sales are down vs July 2021 but 88% of their growth since 2019 is real. The Real Sales for Supermarkets are down for the month & YTD. Also, only 19.8% of their growth since 2019 is real. Avg Growth Rate: Supermarkets: +6.5%, Real: +1.4%; Drug Stores: +4.4%, Real: +3.9%.
  • Sporting Goods Stores – They also benefited from the pandemic in that consumers turned to self-entertainment, especially sports & outdoor activities. Their Spring lift seems to be over and 2022 YTD sales are essentially equal to 2021. Their current inflation rate is 5.2% which is down from 7.5% in April but YTD it is still 6.7%. It was also high in 20>21, +4.8%. However, 72% of their 48% lift since 2019 is real. Their Avg Growth Rate was: +14.0%; Real: +10.4%.
  • Gen Mdse Stores – Sales were up for all but $/Valu vs June. Discount Dept stores are down for the month and YTD vs 2021. All other groups are up for both. All real measurements vs 2021 are negative for all channels. Disc. Dept Stores were hurting before COVID and now their sales are “really” down from 2019. The other channels have 41% real growth. Avg Growth Rate: SupCtr/Club: 5.7%, Real: 2.2%; $/Value Strs: +7.6%, Real: +4.3%; Disc. Dept.: +2.6%, Real: -0.001%
  • Office, Gift & Souvenir Stores – Their recovery didn’t start until the spring of 2021. Sales are up across the board vs June & 2021. The growth vs 2021 has been strong enough that it turned real YTD sales positive vs 2021. However, their real sales vs 2019 are still down -1.9%. Their true recovery is still a ways off. Avg Growth Rate: +1.9%, Real: -0.6%
  • Internet/Mail Order – The growth of the “hero” of the Pandemic is slowing. July Sales are up vs June and 2021 but their YTD growth rate is only half of their average since 2019. However, 92% of their 79.0% growth since 2019 is real. Their Avg Growth Rates is: +21.4%, Real: +19.6%. As expected, they are by far the growth leaders since 2019.
  • A/O Miscellaneous – This is a group of specialty retailers. Pet Stores are 22>24% of total $. In May 2020 they began their recovery which reached a record level by December 2021 as annual sales reached $100B for the first time. In 2022, they are by far the Sales increase leaders over 2021. Their sales dipped in January from December and again in July but all measurements have been positive for every other month. Plus, 87% of their 59.4% growth since 2019 is real. Average Growth Rate is: +16.8%, Real: +14.9%. They are 2nd in growth since 2019 to the internet. I’m sure Pet Stores are helping.

There is no doubt that high inflation is an important factor in Retail. In actual $, 10 of 11 channels reported increases in monthly  and YTD sales over 2021. When you factor in inflation, the number with any “real” growth falls to 4 for YTD & 3 for monthly. This is a very clear indication of the strong impact of inflation at the retail channel level. Recent data indicates that Inflation again slowed a little. Let’s look at the impact on the Advance Retail Sales numbers for August.

We have had memorable times since 2019. Some big negatives, including the 2 biggest monthly drops in history but a lot of positives in the Pandemic recovery. Total Retail reached $600B in a month for the first time and broke the $7 Trillion barrier in 2021.  Relevant Retail was also strong as annual sales reached $4T and all big groups set annual $ales records in 2021. Now, radical inflation is a big factor with the largest increase in 40 years. At first this reduces the amount of product sold but not $ spent. This was evident again in August Relevant Retail $. There was a small overall sales increase from July and $ were up vs July 2021 for all. However, in Relevant Retail the actual amount of product sold vs 2021 fell.

Overall – Inflation Reality is still here. The monthly increase vs 2021 continues to be lower than the inflation rate. The still recovering Restaurants and Gas Stations are up double digits vs 2021 and Auto $ turned positive again. August set a new monthly $ record, but the real YTD sales vs 2021 for all but restaurants are down for the 5th straight month.

Total Retail – Every month in 2022 has set a monthly sales record. August $ are $699B, the 3rd largest of all time. 2022 has become somewhat normal as sales have stayed near the current level for 4 months. We should now expect a slight dip in September. August $ are +1.3% vs July and are up 10.4% vs August 2021 and 10.3% vs YTD 2021. However, when you factor in double digit inflation, both measurements are down for the 6th consecutive month and only 39.9% of the 31.6% growth since 2019 is real. The Avg Growth Rate is: +9.6%, Real: +4.0%. The impact of Inflation continues.

Restaurants – They were hit hard by the pandemic and didn’t truly start to recover until March 2021. Sales in the last 9 months of 2021 exceeded $70B and 2021 was the biggest year in history, $876B. January sales fell from December but then turned up, setting new all-time monthly records in March>May. $ fell in June, set a new record in July and then fell again in August. They are the only big group that is positive in all measurements vs 2021 & 2019. Inflation is high at 7.9% for August and 7.1% YTD but it is the lowest of any big group. 58.7% of their 31.0% growth since 2019 is real. Their Avg Growth Rate: +9.4%, Real: +5.7%. They only account for 12.6% of Total Retail $ales, but their strong performance helps to improve 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. In 2022 sales got on a rollercoaster – Jan down, Feb/Mar up, Apr>May down, June up, July down, August up. The August lift was strong, +9.5%. Their 4 down months are the only reported sales negatives by any big group vs 2021. This is bad but their real YTD sales numbers are much worse. Extremely high inflation has pushed their real YTD sales down -12.4% vs 2021, the worst of any group. Plus, their 24.3% growth since 2019 is really down -10.7%. Their Avg Growth Rate: +7.5%, Real: -3.7%. Inflation has slowed in the last 3 months. It is likely that the 4 drops in $ales vs 2021 were tied to higher inflation.

Gas Stations – Gas Stations were also hit hard. If you stay home, you drive less and obviously need less gas. This group started recovery in March 2021 and reached a record $584B for the year. Sales fell in Jan>Feb turned up in Mar>Jun then fell in Jul>Aug. They have the biggest increases vs 2021 and 2019 but it is not reality. Gasoline inflation has slowed so August $ are really up vs 2021. Inflation is still 26.2% and 43.9% YTD, by far the highest of any expenditure category. It has even caused consumers to buy 5.1% less than they did in 2019. Avg Growth Rate: +14.7%, Real: -1.7%. The YTD numbers show a big impact of inflation. Consumers spend more but buy less, even less than they bought 3 years ago.

Relevant Retail – Less Auto, Gas and Restaurants – This the “core” of U.S. retail and accounts for 60+% of Total Retail Spending. There are a variety of channels in this group, so they took a number of different paths through the pandemic. However, their only down month was April 2020. They finished 2020, up +7.1% and 2021 got even better as they reached a record $4.50T. They have led the way in Total Retail’s recovery which became widespread across the channels. Sales fell in Jan>Feb, then went on an up/down roller coaster from Mar>Aug with August up 1.9%. All months in 2022 set new records but their YTD increase is 18% below their 9.6% avg growth since 2019. Now, we’ll look at the impact of inflation. 62.9% of their 31.5% growth since 2019 is real. However real sales vs 2021 are down -1.2% for the month and -0.8% YTD. This shows that inflation is only a 2022 problem. Their Avg Growth Rate: +9.6%, Real: +6.2%. The performance of this huge group is critically important. This is where America shops. Real YTD sales are down almost 1% so the amount of products that consumers bought in 2022 is less than in 2021. They just paid more. That’s not good.

The impact of inflation is slowing slightly. All groups but Restaurants have no YTD real growth vs 2021 but only Relevant Retail is really down for the month. Auto & Gas Stations are still “really down” vs YTD 2019. We’ve now had 6 straight months of real monthly and YTD drops for Total Retail so we are still in Phase II of inflation. Consumer spending grows but the amount bought declines. With actual sales in 4 of the last 6 months down vs 2021, the Auto Group is close to Phase III, when consumers actually cut back on spending. If inflation continues, Phase III could become a reality.

  • Relevant Retail: Avg Growth Rate: +9.6%, Real: +6.2%. 9 channels were up vs July and 10 vs August 2021, producing an August $ales record. 10 were up YTD vs 2021. The negative impact of inflation is less but still there in the “real” data.
  • All Dept Stores – This group was struggling before COVID, and the pandemic hit them hard. They began to recover in March 2020 and have continued to grow in 2022. Their YTD numbers have been positive vs 2019 since April but in August they are still down in “real” terms in all measurements vs both 2019 & 2021. Avg Growth: +0.06%, Real: -2.7%.
  • Club/SuprCtr/$ – They fueled a big part of the overall recovery because they focus on value which has broad consumer appeal. Inflation is a big factor in their current numbers. Sales are down from July but up vs August 2021 and YTD. Their real numbers are down vs 2021 and only 38.4% of their 18.5% lift from 2019 is real. Avg Growth: +5.8%, Real: +2.3%.
  • Grocery- These stores depend on frequent purchases, so except for the binge buying in 2020, their changes are usually less radical. Inflation has hit them hard. $ are down from July. Monthly & YTD increases vs 2021 are strong but inflation is stronger. Real sales are down and only 16.0% of the growth since 2019 is real. Avg Growth: +6.5%, Real: +1.1%.
  • Health/Drug Stores – Many stores in this group are essential, but consumers visit far less frequently than Grocery stores. After a dip in June, sales turned up in Jul>Aug and are ahead of 2021. However, real sales vs August 21 are down. Their inflation rate is low so 89% of their 14.7% growth from 2019 is real. Their Avg Growth is: +4.7%, Real: +4.2%.
  • Clothing and Accessories – They were nonessential, and clothes mattered less when you stayed home. That changed in March 2021 and resulted in explosive growth which continued through May 2022. August sales are up +3.7% from 21 but real sales are -1.3%. YTD $ are up 7.9%% and 87% of their growth from 2019 is real. Avg Growth: 4.8%, Real: 4.1%.
  • Home Furnishings – They were also less impacted by COVID. Sales dipped Mar>May in 2020. Then as consumers’ focus turned to their homes, furniture became a priority. Inflation is high. Sales are up from July and vs 2021 but all of their real numbers vs 2021 are negative. Only 18.4% of their growth since 2019 is real. Avg Growth: +6.3%, Real: +1.2%.
  • Electronic & Appliances – This channel has problems beyond the pandemic. Sales fell in Apr>May of 2020 and didn’t reach 2019 levels until March 2021. Sales are up from July but are down vs 2021. The July lift was not enough to keep sales positive vs 2019 but deflation kept “real” sales up for the month & YTD vs 2019. Avg Growth: -0.08%, Real: +0.3%.
  • Building Material, Farm & Garden & Hardware –They truly benefited from the consumers’ focus on home. This year’s spring lift ended in May as Sales dropped in Jun>Jul. However, they turned sharply up in August. Monthly & YTD sales are up vs 2021, but when you factor in strong, double-digit inflation, the amount sold YTD vs 2021 is still down -3.8%. However, 59.0% of their strong 36.6% sales growth since 2019 is real. Their Avg Growth is: +11.0%, Real: +6.7%.
  • 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. August sales grew 10.7% from July and are still ahead of 2021, monthly & YTD. However, real YTD $ are still down vs 2021. Inflation in this group is lower than most groups and most comes from Sporting Goods. 79% of their 37.6% growth since 2019 is real. Avg Growth is: +11.2%, Real: +9.0%.
  • All Miscellaneous Stores – Pet Stores have been a key part of the strong and growing recovery of this group. They finished 2020 +0.9% but sales took off in March 21. They set a new monthly $ales record in December. Sales are up 3.6% from July and since April they have held the top spot in YTD increase vs 2021. Their YTD growth since 2019 is 2nd only to NonStore. Plus, 82.2% of the 45.6% growth since 2019 is real. Their Avg Growth is: +13.3%, Real: +11.2%.
  • 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. In December monthly sales exceeded $100B for the 1st time and they broke the $1 Trillion barrier for the year. Their YTD Growth has slowed significantly in 2022 but all measurements are positive. 88.4% of their 73.2% increase since 2019 is real. Their Avg Growth is: +20.1%, Real: +18.1%.

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. While the timing varied between channels, by the end of 2021 it had become very widespread. In late 2021 and now in 2022, a new challenge came to the forefront – extreme inflation. It isn’t the worst in history, but it is the biggest increase in prices in 40 years. Overall, it slowed in Jul>Aug but for Relevant Retail it got worse. On the surface, the impact is almost invisible. Sales in the total market and in the Relevant Retail group continue to grow but the growth rate has markedly slowed compared to last year. Overall, the market is generally in phase II of strong inflation – spending grows but the amount purchased falls. The channels in the graph illustrate this perfectly and show how widespread that it has become. 10 of 11 channels are up vs August & YTD 2021 However, when you factor in inflation, only 5 are up for August and 4 for YTD. Inflation is real and there are real and even worse consequences if it continues.

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 these specially created aggregates are 100% accurate but they are much closer than the overall CPI or available aggregates.

Monthly CPI changes of 0.2% or more are highlighted.

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.

 

Tracking Pet Food Pricing: The PPI (Mfg) vs CPI (Retail) – August Update

/in /by

Pet Food Retail prices are surging. Changes in the price manufacturers charge for a product obviously impact the retail price for consumers. However, it is not always a direct correlation and often there is a significant delay in the response. The retailers who sell high demand products like Pet Food are under intense competitive pressure.

In this brief report we will update the changes in the Producer Price Index (PPI) for Pet Food to see how they match up to the changes in the retail CPI from May 2020 to August 2022. Pre-pandemic December 2019 is used as the base number in all graphs to facilitate comparisons.

The first graph plots the PPI pricing path of Dog & Cat Food and Other Pet Food vs the Pet Food Retail CPI.

  • Pricing remained essentially stable for all groups through most of 2020. The first change was that the PPI for Non-Dog/Cat Pet Food began moving up in November. This lift has continued but this small category has little impact on overall Pet Food Retail Prices.
  • The Dog & Cat Food PPI moved up sharply in July 2021 then essentially stabilized until the end of the year. This turned Retail Prices up slightly, only +1.6% vs 2019 by December 2021.
  • In 2022, the Dog & Cat PPI turned up in Jan/Feb, stabilized in Mar/Apr, rose sharply in May/June, then grew slowly in Jul/Aug. Pet Food Retail prices began growing in February. This increase accelerated in March and continues through August. The Retail inflation rate for Pet Food is now 67% of the PPI increase for Dog & Cat Food. In February it was 31.6% and only 25.4% back in December 2021. This gap is definitely narrowing as the Retail price increases are more closely matching the increase in manufacturing costs. By the way, the increase for Other Pet Foods is a meteoric +33.7% vs 2019. This is huge but as you will see later in the report, it is not the biggest increase in any Pet Food category.

Obviously, it takes a while for a rise in the PPI to impact retail prices. Also, as we saw in most of 2020 and in the 2nd half of 2021, stability in the PPI usually generates stability in Retail prices.

Dogs & Cats “rule” the pet food segment just like they “rule” the overall Pet Industry. However, the lift in prices for manufacturing Food for Other Pets has now gotten so large that it is having an impact in pushing Pet Food Retail Prices up.

We will now drill a little deeper into the “ruling” Dog & Cat Food categories. We will look at the individual PPI history for Dog Food and Cat Food and the 2 largest sub-categories in each – Dry/Semi-moist and Canned. Using December 2019 as a base, our chart will track and compare the Pet Food CPI and the PPI history for all groups from May 2020 to August 2022. The US BLS is now releasing timely data on these specific categories so that it can be compared to the most recent numbers from the big groups…

  • The PPI for all categories was essentially unchanged from December 2019 until October 2020. At that time manufacturers’ prices in the Canned Dog Food category moved up 1.1%.
  • In October 2020 Pet Food retail reached bottom in their deflationary movement. The price increase in Canned Dog Food slowed overall Pet Food deflation and essentially stabilized prices near the 2019 level.
  • Both the individual PPIs and the overall Pet Food CPI plateaued from November 2020 through May 2021.
  • All prices moved up slightly in June 2021, but the PPIs took off in July. The Pet Food CPI also was above December 2019 for the 1st time since February 2020.
  • Canned Dog Food led the skyrocketing PPI prices in July 2021 but all categories had a significant increase. The increase continued in August, but the CPI unexpectedly dipped slightly below December 2019.
  • The PPIs for all groups essentially stabilized from September through December 2021 while the Pet Food CPI began to increase, especially from Nov>Dec.
  • In January 2022, the PPIs for all but Canned Dog Food turned up again. Their increase accelerated in February, with Canned Cat Food skyrocketing up to +13.6%, almost equal to the overall increase by Canned Dog Food. The Pet Food CPI moved up slightly in January and then inflation took off in February.
  • The PPIs stabilized again in March, but we should note that prices for Canned Dog Food have been stable since August, after the spectacular Jun>August lift. While manufacturing prices stabilized, inflation in Pet Food Retail began accelerating
  • In May/June all PPIs took off, with the biggest lift in the period since 2019. They stabilized in July but grew again in August. The Retail Pet Food prices have grown steadily since March. There is usually a timing delay from the PPI to the CPI as it takes time for the impact to work its way from manufacturer to retailer to consumer. The big PPI lift in June probably means that Retail Pet Food prices will continue to increase.
  • We see that the Canned Food categories have significantly more pricing volatility than Dry Food for both Dogs and Cats. Canned Dog Food led the way in the PPI lift and ended up with by far the biggest increase of any category in the Pet Food segment, +38.8%. Canned Cat Food finished 2nd in Dog/Cat at +25.4%.
  • However, when you look at how these individual PPIs compare to the overall PPI for Dog or Cat, it is readily apparent that Canned Cat Food has a much larger share of total Cat Food than Canned Dog Food has of Total Dog Food.

In terms of what will happen in the future, we turn again to our first chart. The PPI for Dog/Cat Food was stable through April but turned sharply up again in May/June and continues to grow. When Mfg prices rise, Distributors & Retailers must look closer at their product mix. For items that cost more, they can raise prices, accept lower margins or some combination of both. It’s likely that rising manufacturing prices will cause Retail Pet Food inflation to continue to grow. We need the PPIs to flatten for the CPI to stop increasing. We hope that any supply chain issues will be fixed, returning Pet Food Retail and Manufacturing to a more price competitive market.

Petflation 2022 – August Update: Prices increase to +10.1% above 2021

/in /by

Inflation continues to make headlines. There have been year over year increases in the monthly Consumer Price Index (CPI) larger than we have seen in decades. August prices fell -0.04% from July, but the CPI was still up +8.3% vs 2021, down from +8.5% last month. Food at Home (groceries) prices continue to surge, up 13.5% over 2021. That’s 6 straight months of double-digit YOY monthly percentage increases. These are the first 10+% increases since 1981. As we have seen in recent years, even minor price changes can affect consumer pet spending, especially in the more discretionary pet segments, so we will continue to publish monthly reports to track petflation as it evolves in the marketplace.

Total Pet prices were 4.1% higher in December 2021 than in December 2020, while the overall CPI was up 7.0%. The gap narrowed as Petflation accelerated and reached 96.7% of the national rate in June. National inflation has slowed since July but Petflation has increased, passing the National rate in July and is +10.1% in August. This is 21.7% higher than the national rate of 8.3% and the 2nd highest Petflation rate ever, trailing only +10.3% in January 2009. We need to look a little 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 22 vs 21 which will include Pet Segments and relevant Human spending categories. Plus
    1. CPI change from the previous month
    2. Inflation changes for recent years (20>21, 19>20, 18>19)
    3. Total Inflation for the current month in 2022 vs 2019
    4. Average annual Year Over Year inflation rate from 2019 to 2022
  • 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 2020 to August 2022. We will use December 2019 as a base number in this and future reports 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 those from 12 and 24 months earlier are included as are the year-end numbers for 2020 & 2021.This will give you some key waypoints for comparisons. (Note: Some key peaks and valleys are also highlighted.)

The pandemic hit home in early 2020. In August, the national CPI was only +1.1% and Pet prices briefly stopped deflating. There are 2 different patterns between the Services and the Products segments. Veterinary and Services prices generally inflated after mid-2020, similar to the overall CPI. 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, when prices in all segments increased. In August Petflation accelerated, especially in the Products segments.

  • 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/Aug 2022. 44% of the overall 15.3% increase since 2019 happened from Jan>June 2022.
  • Pet Food – Prices stayed generally below December 2019 levels from April 2020 to September 2021, when they turned up. There was a sharp increase in December but 88% of the 13.0% increase has happened since January.
  • 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 when they turned sharply up reaching a new all-time pricing high in January, beating the 2009 record. Prices plateaued from February to May but turned up in June. The CPI flattened in July but turned up in August.
  • 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 got on a rollercoaster in March, now with slight increases in Jul/Aug.
  • Veterinary – Inflation has been generally consistent in Veterinary. Prices began rising in March 2020 and increased through 2021. Then a pricing surge began in December which pushed them past the overall CPI. In May prices fell and stabilized in June. Then strong increases in July & August again put them above the National CPI.
  • Total Pet – The blending of the different segment patterns made the Pet Industry appear calm. That ended in December 2021 as prices surged in all. After mixed up and downs, in Jul/Aug inflation grew in all segments.

Next, we’ll turn our attention to the Year over Year inflation rate change for the month of August and compare it to last month, last year and to previous years. We’ve added some human categories to put the pet numbers into perspective.

Overall, Prices were basically flat vs July but were up 8.3% vs August 2021. The Grocery increase is now 13.5% which is a big negative but there is another area of concern. Only 3 of 9 categories had increases over 1% from last month, but they are all “Pet”. The National CPI rate is slowing but Petflation, especially in Products, is getting worse.

  • U.S. CPI – Prices are down 0.04% from July. The YOY increase is +8.3%, down from +8.5% in June. The targeted inflation rate is <2% so we are still 4 times higher than the “target”. However, a 2nd slight decline is a good start.
  • Pet Food– Prices are +1.7% vs July and 13.1% vs August 21. The YOY increase is being measured against a time when prices were at 2019 levels, but that increase is over 3 times the pre-pandemic 3.9% increase from 2018 to 2019.
  • Food at Home – Prices are up 0.7% from June. The increase from 2021 is 13.5%, which is the largest increase in any month since 13.6% in March 1979 and the largest August monthly increase since 23.4% in 1973. Inflation for this category since 2019 is the highest of any category on the chart and is 45% more than the national CPI.
  • Pets & Supplies – Prices grew 1.5% from July to a new record high. They moved up to 2nd from 3rd in terms of monthly increase over 2021 for industry segments but still have the lowest increase since 2019.
  • Veterinary Services – August prices grew 0.8% from July. They are up +10.0% from 2021 and now trail only Food in the Pet Industry. They also remain 2nd in the increase since 2019 with 17.8% compared to Food at home at 22.3%.
  • Medical Services – Prices sharply increased at the start of the pandemic in 2020 but then inflation slowed and fell to a low rate in 2021. In 2022 prices are turning sharply up again, +30% vs the pre-pandemic 2018>19 rate.
  • Pet Services – Inflation slowed in 2020 but began to grow in 2021/22. Prices are +0.1% from July and +5.7% vs 2021. Prices are still below the May peak but have turned up in July & August after falling in June.
  • Haircuts & Other Personal Services – Prices are +0.7% from July and +4.4% from 2021. They are +15.7% since 2019.
  • Total Pet – Petflation is strong, 4 times the rate of last year and is again ahead of the National CPI. All segments increased prices in August, but inflation is primarily being driven by Food & Veterinary. Inflation can cause reduced purchase frequency in Supplies, Services and Veterinary. Super Premium Food has been generally immune as consumers are used to paying big bucks and it is needed every day. We’ll see if consumers are willing to pay the new high prices for food and buy the more discretionary products/services at the same frequency as they did in the past.

Now here’s a look at Year-to-Date numbers. How does 2022 compare to previous years…so far?

The increase from 2021 to 2022 is the biggest for 7 of 9 categories. The average annual increase since 2019 is 3.8% or more for all but Pet Food & Pet Supplies. This is due to deflation in the 1st half of 2021.

  • U.S. CPI – The current increase is still almost double the average increase from 2019>2022, but almost 4 times the average annual increase from 2018>2021. Inflation is a big problem that started recently.
  • Pet Food – Inflation is growing stronger, especially after deflation in the 1st half of 2021.
  • Food at Home – The 2022 YTD inflation beat the U.S. CPI by 32.5%. You can see the impact of supply chain issues.
  • Pets & Pet Supplies – Prices have been at record levels since January. Although the 2021>22 increase is being measured against a deflationary 2021, it is significant and just slightly behind Veterinary & Food in the Pet Industry.
  • Veterinary Services – Trails only Food at Home in inflation since 2019 and is the only segment on the chart with a 3+% inflation rate each year 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 2022 there is another pricing surge as the inflation rate is 39% higher than pre-pandemic 2018>19.
  • Pet Services – February & May set records for the biggest year over year monthly increases in history. Prices seem to be becoming more stable, but the current August YTD increase of 6.0% is still the largest in history. Demand has grown for Pet Services while the availability has decreased, 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, prices turned up again. The YTD rate is just behind 2020>21 but still 89% more than 2018>19. Consumers are paying 15% more than in 2019. This usually reduces the purchase frequency.
  • Total Pet – We have seen basically two different inflation patterns. After 2019, Prices in the Services segments continued to increase, and the rate accelerated as we moved into 2021. The product segments – Food and Supplies, were on a different path. They generally 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 we neared yearend. In 2022, everything changed as Food and Supplies prices turned sharply up. Food prices continued to climb. Supplies pricing stabilized then grew in Jun>Aug. The Services segments have had some ups & downs, but both are inflating now. The net was a August YTD CPI increase vs 2021 for Total Petflation of 7.7%, 92.8% of the high 8.3% National rate. It was only 72.5% in March.

Petflation is growing stronger. Will it impact spending? Let’s put it into perspective. The 7.7% current YTD increase in Total Pet is far below the 8.9% record set in 2009 but 5 times larger than the 1.5% avg since then. Although pet spending continues to move to higher income groups, the impact of inflation varies by segment. Supplies is the most affected as many categories are 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 reduction in visit frequency. Spending in the Services segment is driven by higher incomes, so inflation is less impactful. We’ll just have to wait and see the overall impact on Pet Spending of the continued strong Petflation.

2021 Top 100 U.S. Retailers – Sales: $2.66 Trillion, Up 9.7% 162,495 Stores with Pet Products……plus the Internet!

/in /by

The U.S. Retail market reached $7.44 Trillion in 2021 from all channels – Auto Dealers, Supermarkets, Restaurants, Online retailers and even Pet Stores. Thanks to a strong, widespread pandemic recovery, this year’s increase of $1.22T (+19.8%) was far above last year’s increase of $44.6B (+0.7%). In 2020 the Total Retail Market was massively negatively impacted by COVID related closures and restrictions and only eked out a positive number because of increased spending in the Relevant Retail Segment. In 2021 there was a stronger and more balanced resurgence. (Data courtesy of the Census Bureau’s monthly retail trade report.)

In this report we will focus on the top 100 Retailers in the U.S. Market. The base data on the Top 100 comes from Kantar Research and was published by the National Retail Federation (NRF). In 2020, Restaurants were removed from the list and only Gas Stations with Convenience stores were included. To allow continued comparisons to pre-pandemic 2019, I used the data to create a revised “Restaurant Free” 2019 list. The Top 100 are the retail elite and still account for 35.8% of the total market, which is down from a record 39.0% in 2020. The vast majority of the group also stock and sell a lot of Pet Products. Let’s get started in our analysis. The report does contain a lot of data, but we’ll break it up into smaller pieces to make it more digestible.

In past years we have begun our report with a brief overview chart of this year’s sales vs the previous year’s numbers. However, the pandemic effect on the retail trade has indicated that we should look a little deeper. The U.S. Retail market has had a strong recovery from the 2020 trauma and the resurgence has become widespread across most channels. We have seen in our regular retail sales reports that different defined retail channels often took a different path from 2019 to 2021. The Top 100 report allows us to see if the company revenue size was also a factor in their journey. The following chart is definitely an overview, but it is far more detailed than past years. It also covers the pandemic period from 2019 to 2021, including both $ and market share changes for large retail subgroups of the Relevant Retail Segment based upon the amount of annual revenue.

  • The total Retail Market grew $1.2T, +19.6% in 2021. That is far greater than the $45B, +0.7% in 2020. The average growth rate since 2019 is 9.8%. That is more than double the rate of recent years: 2019, 3.6%; 2018, 4.9%; 2017, 4.3%. You can clearly see the strength of the recovery.
  • The “Non-Relevant” Retail Group (Restaurants, Auto Dlrs, Gas Stations) was hit hardest by the pandemic, with sales falling $240B, -9.9% in 2020. However, they had an incredibly strong recovery in 2021 as sales grew $640B, +29.3%. They gives them an average annual growth rate of 7.9% since 2019.
  • Relevant Retail was the hero of the pandemic. Their $284B increase in 2020 kept Total Retail positive for the year. Their sales surged even stronger in 2021 as they were up $582B, +14.4% producing an average growth rate since 2019 of +11.0%. However, their share of Total Retail fell 2.3% after peaking in 2020. As you can see, the story is a bit more complex. Let’s drill a little deeper.
  • The Top 100 Retailers make up about 60% of the Relevant Retail Market. They have shown consistent growth since 2019 with a surge of $236B, +9.9% in 2021. Their average growth since 2019 is +7.2%, which is good but not good enough. They have lost considerable share in both Total and Relevant Retail. Let’s drill even deeper.
  • The biggest subgroup in the Top 100 is the Top 10 which accounts for 55+% of the Top 100’s revenue. This group has been unchanged since 2015 and consists of Amazon, plus truly essential brick ‘n mortar retailers. Their biggest sales surge occurred in 2020. Sales grew 9.0% in 2021 but their share of revenue decreased in Total and Relevant Retail. Their average growth rate since 2019 is +10.6% which did produce a 3.6% share gain in Top 100 $.
  • The Retailers ranked from #11 to #100 changes slightly every year. Their sales in 2021 ranged from $3.5 to $65B and they accounted for 41% of the Top 100’s revenue. They have an unusual sales pattern in that their $46B decrease in 2020 is the only negative sales on the chart outside of the big drop by Rest/Auto/Gas. They did have a strong 10.7% increase in 2021 which generated an average annual gain of +2.9%. However, they have lost significant share in Total & Relevant Retail. These companies are a major part of U.S. Retail. They can have big gains but also big losses.
  • The Relevant Retailers outside of the Top 100 don’t get a lot of “press” but maybe they should. They currently account for 42% of Relevant Retail $ and 26% of Total Retail. Their 12.1% increase in 2020 was only slightly behind the Top 10 and their 21.6% increase in 2021 was more than double that of any other Relevant Retail subgroup. Their avg. increase since 2019 is +16.9%, the best of any group on the chart. While this performance is amazing, perhaps the most important fact is that they delivered 60% of Relevant Retail’s sales increase in 2020 AND from 2019>2021.

I hope that you now see why I chose to expand my overview. There is no doubt that the big retailers are critical to the success of the U.S. Retail Market. However, there are sometimes “hidden heroes” that should be noted.

The Top 100 outperformed the overall market in 2020 but not in 2021. In fact, the sales growth since 2019 trails Total Retail, Relevant Retail and even Rest/Auto/Gas. It still accounts for 35.8% of Total U.S. Retail $ so it is still critically important. We also should remember that the Top 100 is really a contest with a changing list of winners. Companies drop out and new ones are added. This can be the result of mergers, acquisitions, surging or slumping sales or even a corporate restructuring. In 2021, Speedway was acquired by 7-Eleven but 7 other companies dropped off the list.

  • Guitar Ctr • GameStop    • UNFI (Suprmkt)   • Grocery Outlet (Suprmkt)    • Belk (Dept Str)   • Sears    • AMPM (Conv)

On the plus side, PetSmart split into 2 separate companies – Chewy & PetSmart. L Brands also split as they now have separate listings for Bath & Body Works and Victoria’s Secret. Also, 6 new companies were added.

  • Harbor Freight (Hdwe) • Hudson’s Bay (Dept Str)   • Tapestry (Home Gds)   • RH (Restoration Hdwe) (Home Gds)
  • Urban Outfitters (Apparel) • Barnes & Noble (Books)

I think that we now have a good overview of U.S. Retail and the Top 100 so let’s ask and answer a very relevant question. How many Top 100 companies are buying and selling Pet Products? This will reinforce that Pets have become an integral part of the American Household and how fierce that the competition for the Pet Parents’ $ has become.

  • We should note that the data in the chart reflects the performance of the companies in the 2021 list since 2019 and is not being compared to the Top 100 list of companies from prior years
  • 85 are selling some Pet Products in stores and/or online. 2 of the companies added pet products to their offerings for the 1st time in 2021. Plus, 85 is 4 more companies than the 2020 list.
    • Their Total Retail Sales of all products is $2.56 Trillion which is…
      • 0% of the total business for the Top 100
      • 4% of the Total Retail market and 55.4% of Relevant Retail – from 85 Companies who sell Pet Products.
    • 72 Cos., with $2.39T sales sell pet products off the retail shelf in 162,495 stores – 9,000 more than 2020.
      • As you can see by the growth in both sales and store count since 2019, “in store” is still the best way to sell pet.
    • Online only is another story and the story gets complicated.
      • Amazon includes Whole Foods, which has stores so the Amazon $ are in the “Pet in Store” numbers.
      • 2 Retailers in the 2021 list added pet products to their offerings. This group had decreased sales and closed stores in 2020. Fortunately, 2021 brought a rebound in both areas, but especially in $ales.
    • The group not selling pet products, led by electronics retailers like AT&T and Dell as well as specialty retailers like Signet Jewelers and Lulumon have had extraordinarily strong pandemic sales growth, especially in 2021. However, overall, the group continues to close stores. Perhaps, more of them with see Pet as a new growth opportunity.

Pet products are an integral part of the strongest retailers and are widespread across the entire U.S. marketplace. Of the Top 100, 162,495 stores carry at least some pet items at retail. However, there are thousands of additional “pet” outlets including 15,000 Grocery Stores, 9,000 Pet Stores, 16,000 Vet Clinics, 5,000 Pet Services businesses and more. Pet Products are on the shelf in over 210,000 U.S. brick ‘n mortar stores… plus the internet.

Before we analyze the whole Top 100 list in greater detail let’s take a quick look at the Top 10 retailers in the U.S.

Although the rankings often change due to the current market factors, this group has been incredibly stable. The list is unchanged since 2013, with one slight qualification. In 2015 Albertsons purchased Safeway. The new Albertsons/Safeway group replaced the stand-alone Safeway company in the list. Now let’s get into the numbers.

  • Their Total Retail Sales were $1.56 Trillion which is:
    • 6% of Top 100 $ales, down from the 2020 peak (58.9%) but up considerably from 2019 (55.0%).
    • 8% of Relevant Retail, down from 35.5% in 2020 but about the same as 2019 (34.0%).
    • 0% of Total U.S. Retail $, down from 23.0% in 2020 but again about the same as 2019 (20.8%).
  • 2 Companies swapped rank – Costco & Kroger
  • Amazon leads the way but sales are up for all, with the biggest growth coming in 2020 for all but Costco & Drug Strs.
  • Store count was down for both years and -1.8% since 2019 – Driven by Kroger and the big Drug Chains.

These stores are truly essential to U.S. Consumers so it is no surprise that their influence peaked during the COVID crisis.

Now we will look at the detailed list of the top 100. We’ll sort it by retail channel with subtotals in key columns. For some channels there will be 2 subtotals. The subtotal in Blue compares the data history for just the 2021 list. The Black subtotal compares this year’s totals to those from previous year’s lists. We’ll then break it into smaller sections for comments. I have not done a lot of highlighting however:

  • Pet Columns ’21 & ‘20 – a “1” with an orange highlight indicates that products are only sold online
  • Rank Columns – 2021 changes in rank from the 2020 list are highlighted as follows:
    • Up 4-5 spots = Lt Blue; Up 6 or more = Green
    • Down 4-5 Spots = Yellow; Down 6 or more = Pink

Let’s get started. Remember, online $ are included in the sales of all companies.

Also Note:(*) in the 2019 columns of some previously unranked companies means the 2019 base was estimated from other data sources.

Observations

  • Alcohol Retailers first made the list in 2020 as consumers started dining at home. The behavior is continuing.
  • Apparel – They were hit hard by the pandemic but had a strong recovery in 2021. L Brands is now reported as 2 separate companies and Urban Outfitters was added. The overall loss of stores is coming from only 3 companies. BTW – The 2 companies that added Pet Products in 2021 are in the Apparel group – Ulta and Sephora
  • Auto – Growth in both years with the biggest lift in 2021. The only negative is that Advance Auto is closing stores.
  • Book Stores are back! Barnes & Noble made the list for the first time since 2015.
  • Commissary/Exchanges – They put outlet changes on hold, and they are losing revenue, especially in 2021.
  • Convenience Stores – 2020 & 2021 haven’t been very good for Convenience stores, especially those closely tied to Gas Stations. Speedway was acquired by 7-Eleven, but the combination has negative numbers across the board. AMPM dropped off the list. The only gains are coming from Casey’s, Circle K and Shell.
  • The decline in Department Stores was accelerated by the pandemic. Sales rebounded in 2021 but only Dillard’s is ahead of 2019. Two chains dropped off the list, Belk and Sears. Sears has been a fixture in U.S. Retail since they began a mail order catalog in 1893. Now, their demise seems to be getting closer. There is some good news as Hudson’s Bay made it back to the Top 100. By the way, Kohl’s is the only company increasing their number of stores.
  • Drug Stores – This group is essential but because visit frequency is low, changes in sales are generally small. The biggest lifts happened in 2021. Good Neighbor Pharmacy is the only group with a sales decrease since 2019. This was largely due to a reduction in stores. This trend is almost universal in the category as only Rite Aid added stores.

Observations

  • Electronics/Entertainment – Strong growth in 2020 which continued in 2021. Overall store count declined in both years. Gamestop dropped out in 2021 and Amazon Web Services revenue was removed from their Retail $ in 2020.
    • Amazon Retail growth was strong in 2021, +16.3% but it was only half of the +33.7% in 2020. In terms of brick ‘n mortar, their Whole Foods division continues to add stores.
    • The sales pattern was different for the others on the list. The 2021 lift generally exceed the increase in 2020. Only Qurate had a sales decrease in 2021 but they are still up vs 2019. Only Verizon sold less in 2021 than in 2019.
    • Regarding store count, Best Buy, AT&T and Verizon reduced their number of stores in both 2020 and 2021.
  • Farm – Tractor Supply continues their strong pandemic sales growth and is opening new stores at a steady rate.
  • Hobby & Crafts – Quite frankly, Hobby Lobby is the story in this group. While both companies are up in sales vs 2020 & 2019. The vast majority of the $ increase and 100% of the lift in store count were driven by Hobby Lobby.
  • Home Improvement/Hardware – This group is incredibly positive as the only negative on the chart comes from True Value closing a few stores. The data reinforces that consumers focused on their homes, especially in 2020.
    • Harbor Freight is growing fast and in 2021 earned a spot in the Top 100.
    • Sales were up vs 2020 across the board with the biggest $ lifts coming from the 3 biggest guys & the newcomer.
    • We should also note that the biggest % increases in $ since 2019 came from the same group.
    • It is also a very healthy sign when 6 of 7 companies are adding more stores.
  • Jewelry – Consumers obviously turned their attention to looking good, especially in 2021. However, if they bought from Signet, they had fewer brick ‘n mortar outlets available.
  • Mass Merchants have 3 of the 7 largest volume retailers in America – Wal-Mart, Costco and Target. Prior to the pandemic Wal-Mart & Costco usually drove the growth in this channel. In 2021 we need to add Target to this group.
    • In 2021 Wal-Mart had a 6.9% increase in sales, which is by far the lowest of the Big 3 and about the same as 2020. Their SuperCenter business was essential, so store sales increased, and their online sales took off. However, “regular” Discount Department Stores are losing market share. This impacts both Wal-Mart and Target so many outlets are adding more fresh groceries. They closed 100 stores in 2020. They opened 75 in 2021
    • Costco had a strong increase in growth, +15.8% compared to +9.3% in 2020. They are also regularly opening more new stores, +3.5% since 2019.
    • Target posted a 5th consecutive sales increase in 2021, +13.3%. This was down from +19.8% in 2020 but it pushed their lift from 2019 up to +35.6%, the largest in the entire group. They are also opening new stores and rapidly adding more fresh groceries to their Discount stores to enhance their consumer appeal.
    • Meijer has the lowest growth in sales since 2019, 13.3% but the highest rate of store growth, +5.3%. Most of the growth in $ and stores occurred in 2020.
    • BJ’s sales were up +8.0% in 2021. This is less than half of the +17.0% in 2020 but it was the 4th consecutive increase after a string of annual declines from 2013 to 2017. They also continue to strongly add more stores.

Observations

  • Office Supply Stores – This channel continues its consistent decline as Consumers maintain their move to online ordering of these products. The drop in store count is also regular but even more severe, -13.0% since 2019.
  • Pet Stores showed even stronger growth in 2021. Sales were up $4.0B (+22.3%) from 2020 and +35.6% from 2019. Most of the growth appears to be coming from online sales.
    • In this year’s report, the sales from Chewy and PetSmart are reported individually as they are now separate companies. I included a PetSmart/Chewy listing to show the total sales for the “group” from 2019 to 2021.
    • With the strong consumer movement to online purchasing, Chewy is the big story in this channel. Their growth got even stronger in 2021, +24.4% producing a net gain of 44.8% from 2019.
    • PetSmart’s growth is getting stronger, +23.1% in 2021, almost matching Chewy. They are also expanding their retail footprint, with a 2.9% increase in stores since 2019.
    • Petco’s growth since 2019, +30.5% is slightly ahead of PetSmart. Although the biggest lift came in 2021, +17.6% the growth is slightly more balanced. The big difference is that Petco cut back on their retail stores, especially in 2020. Their 2021 store count is down -7.9% from 2019.
  • Small Format Value Stores – These stores offer both value and convenience, but their appeal peaked in 2020.
    • Their sales increase fell to +2.0% from +15.5% in 2020 but the store count continues to grow, +8.6% from 2019.
    • Dollar General’s sales growth, slowed from +21.6% to +1.5% but store growth stayed at 6%.
    • Dollar Tree led in $ growth, +3.1% & added 3.1% more stores. But their growth since 2019 is ½ Dollar General’s
    • Big Lots’ $ fell slightly from 2020, -0.8% but are still +15.6% from 2019. They added stores in both 2020 & 2021.
  • Sporting Goods – The rates were mixed but all companies increased sales in both 2020 and 2021. The overall store count also grew in both years but the biggest increase in both areas came in 2021.
    • The biggest sales lifts in 2021 and since 2019 came from Dick’s and Academy.
    • Camping World finished 3rd in sales growth from 2019 but led the way in store openings.
    • The only 2 negatives came in store count – Bass Pro in 2020, producing a 3% drop since 2019 and Dick’s in 2021.
  • Supermarkets – The food “binge buying” was over so the 2021 sales increase fell to +1.6% from +10.6% and 2 companies dropped off the list – UNFI and Grocery Outlet. However, there are still 22 Supermarkets in the Top 100.
    • In 2020 only Southeastern sold less. In 2021 there were 6 companies with decreased sales.
    • 6 companies also cut back on stores producing a net drop of 650 stores from the 2020 list.
    • With $490B in sales from 16,621 stores, all carrying Pet Products on their shelves, this group is truly essential – both to the overall U.S. Retail Market and the Pet Products Industry.

Wrapping it up!

This report is focused on 2021 but we can also see the evolving impact of the pandemic. In 2020 it caused trauma for many retailers as non-essential stores were hit with restrictions and closures. On the plus side, consumers turned their focus to essentials and their homes. This helped drive incredible growth in many retail channels.

In 2021 the Total Retail market moved into a full recovery with spectacular growth. Many channels showed a strong sales rebound from 2020. Others built upon their pandemic success while many returned to a more normal growth pattern. However, a few continued to decline. The Top 100 companies had participants in all of these patterns.

The Top 100 is a contest with the winners changing slightly every year. It is a critical part of the U.S. Market, accounting for about 60% of Relevant Retail Revenue and almost 40% of the Total Retail Market. However, the pandemic also impacted the overall influence of the group in the marketplace.

Sales increased annually but the Top 100’s share of Total Retail peaked in 2020 and has steadily declined in Relevant Retail. It turned out that the Top 10 (Consistent annual growth) and #11>100 (Down in 2020, up in 2021) have radically different sales patterns. We also found a new hero – Relevant Retail not in the Top 100. The small guys can also lead.

Pet Products are an important part of the success of the Top 100. 85 companies on the list sell Pet Products in 162,495 stores and/or online. The 72 companies that stock pet products in their stores generated $2.39T in total sales. How much was from pet? Let’s “Do the math”. If we take out the $22B done by PetSmart & Petco, and the remaining companies generated only 1.7% of their sales from Pet, we’re looking at $36.9B in Pet Products sales from only 69 “non-pet” sources! (The 1.7% share for Pet is an estimate based on the last Economic Census.) If you add Pet Stores back in, Total Pet Products sales for the Top 100 are $57.5B. The APPA reported $78B in Pet Products sales for 2021. That means 69 mass market retailers accounted for 47.3% of all the Pet Products sold in the U.S. and 72 Top 100 companies generated 73.8%. Pet Products are widespread in the retail marketplace but the $ are concentrated. All Pet Industry participants should monitor the Top 100 group.

Retail sales $ are increasing in 2022 but runaway inflation has now become a major factor. We’ll see what changes that this unexpected situation brings to the retail market and the Top 100.

The Top 100 is an important part of U.S. Retail I hope that this detailed look help put this group into better perspective.

Retail Channel Monthly $ Update – June Final & July Advance

/in /by

By 2021, the market had generally recovered from the impact of the pandemic. Now we are being hit by extreme inflation, with rates higher than we have seen in 40 years. Obviously, this can affect retail sales, 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 begin with the Final Report for June and then move to the Advance Report for July. Our focus is comparing 2022 to 2021 but also YTD 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 information will be presented in detailed charts to facilitate visual comparison between groups/channels of:

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2021
    • Current Month Real change – % vs same month in 2021 factoring in inflation
  • Current YTD change – % & $ vs 2021
    • Current YTD Real change – % vs 2021 factoring in inflation
  • Current YTD change vs 2019 – % & $
    • Current Real change YTD vs 2019 – % factoring in inflation
  • Monthly & YTD $ & CPIs which are targeted by channel will also be shown. (CPI details are at the end of the report)

First, the June Final. Driven by Relevant Retail & Restaurants, Sales turned down in June. The $ were up for June and YTD vs 2021. However, factoring inflation into the data, for the 3rd straight month only Restaurants had increases in these measurements. Here is the June data for the major retail groups. (All $ are Actual, Not Seasonally Adjusted)

The June Final is $0.6B more than the Advance Report. Only Gas Stations were down. Relevant Retail: +1.5B; Auto: +$0.3B; Restaurants: N/C; Gas Stations: -$1.0B. Total Sales are down slightly from May, but consumers continue to spend more vs 2021. However, the “real” numbers give you a different view. All but Restaurants are again really down in all measurements vs 2021. Restaurants are strong due to a late recovery but also note that half of the inflation in this group came before 2022. The inflation impact on Relevant Retail is especially significant as their Real YTD sales vs 2021 are again negative. Relevant Retail does have the best performance since 2019 as 65.4% of their 31.8% growth is “Real”.

Now, let’s see how some Key Pet Relevant channels did in June.

Overall – 9 of 11 were down vs May. Vs June 2021, 10 reported more $ but only 3 were really up. In YTD vs 2021, 9 reported increases but only 4 were real. Vs 2019, only the Office/Gift/Souvenir channel was “really” down.

  • Building Material Stores – Their Spring lift is ending and was not as strong as last year. Home Ctr/Hdwe is up 7.1% vs 21 but Farm stores are only +1.2% YTD. The Bldg/Matl group has an inflation rate of 10.5+% which produced all negative real numbers. The pandemic caused consumers to focus on their homes which produced sales growth over 37% since 2019 in both channels. Importantly, 61.4% of this lift was real, primarily because the bulk of the lift came from 20>21, prior to the inflation wave. Avg Growth Rate: HomeCtr/Hdwe: 11.3%, Real: 7.2%; Farm: 11.4, Real: 7.4%
  • Food & Drug – Both channels are truly essential. Except for the food binge buying in the pandemic, they tend to have smaller fluctuations in $. However, they are radically different in inflation. The rate for Grocery products is 4 times higher than for Drugs/Med products. Drug Store $ up from May but real sales are down vs June 2021. However, 89% of their growth since 2019 is real. The Real Sales for Supermarkets are down for the month and YTD. Also, only 22.2% of their growth since 2019 is real. Avg Growth Rate: Supermarkets: +6.4%, Real: +1.5%; Drug Stores: +4.3%, Real: +3.9%.
  • Sporting Goods Stores – They also benefited from the pandemic in that consumers turned to self-entertainment, especially sports & outdoor activities. Their Spring lift seems to be kicking in again after stabilizing in April/May at a level below 2021. Their current inflation rate is 5.3% which is down from 7.5% in April but YTD it is still 6.9%. It was also high in 20>21, +4.8%. However, 72% of their 49% lift since 2019 is real. Their Avg Growth Rate was: +14.2%; Real: +10.6%.
  • Gen Mdse Stores – Sales were down for all vs May. Discount Dept stores are down for the month and YTD vs 2021. All other groups are up for both. All real measurements vs 2021 are negative for all channels. Disc. Dept Stores were hurting before COVID and only 0.4% of their 7.8% growth since 2019 is real. For the other channels, it averages 41%. Average Growth Rate: SupCtr/Club: 5.2%, Real: 1.9%; $/Value Strs: +7.5%, Real: +4.3%; Disc. Dept.: +2.5%, Real: 0.01%
  • Office, Gift & Souvenir Stores – Their recovery didn’t start until the spring of 2021. Sales are down from May but up vs 2021. The growth vs 2021 has been strong enough that it turned real YTD sales positive vs 2021. However, their real sales vs 2019 are still down -2.6%. Their true recovery is still a ways off. Avg Growth Rate: +1.7%, Real: -0.9%
  • Internet/Mail Order – The growth of the “hero” of the Pandemic is slowing. Sales are down vs May but up vs 2021. Also, their YTD growth rate is only half of their average since 2019, but 90% of their 80.3% growth since 2019 is real. Their Avg Growth Rates is: +21.7%, Real: +19.9%. As expected, they are by far the growth leaders since 2019.
  • A/O Miscellaneous – This is a group of specialty retailers. Pet Stores are 22>24% of total $. In May 2020 they began their recovery which reached a record level by December 2021 as annual sales reached $100B for the first time. In 2022, they are by far the Sales increase leaders over 2021. As expected, their sales dipped in January from December, but all measurements have been positive every month since then. Plus, 87% of their 60.1% growth since 2019 is real. Their Avg Growth Rate is: +17.0%, Real: +15.1%. They are 2nd in growth since 2019 to the internet. I’m sure Pet Stores are helping.

There is no doubt that high inflation is an important factor in Retail. In actual $, 9 channels reported increases in YTD sales over 2021 and 10 are up for the month. When you factor in inflation, the number with any “real” growth falls to 4 for YTD & 3 for monthly. This is a very clear indication of the strong impact of inflation at the retail channel level. Recent data indicates that Inflation slowed a little. Let’s look at the impact on the Advance Retail Sales numbers for July.

We have had memorable times since 2019. Some big negatives, including the 2 biggest monthly drops in history but a lot of positives in the Pandemic recovery. Total Retail reached $600B in a month for the first time and broke the $7 Trillion barrier in 2021.  Relevant Retail was also strong as annual sales reached $4T and all big groups set annual $ales records in 2021. Now, radical inflation is a big factor with the largest increase in 40 years. At first this reduces the amount of product sold but not $ spent. This was evident again in July. There was a small overall sales decrease from June but $ were up vs July 2021 for all but Auto. However, the actual amount of product sold vs 2021 fell in all but Restaurants.

Overall – Inflation Reality is here. The monthly increase vs 2021 continues to be lower than the inflation rate. The still recovering Restaurants and Gas Stations are up double digits vs 2021 but Auto $ are down again. July set a new $ record for the month, but the real monthly and YTD sales vs 2021 for all but restaurants are down for the 4th straight month.

Total Retail – Every month in 2022 has set a monthly sales record. July $ are $691B, the 4th largest of all time. In a normal year, sales should stay at or near this level until dipping slightly in September. However, 2022 is not normal. Sales are -0.6% vs June but are still up 8.6% vs July 2021 and 10.2% vs YTD 2021. However, when you factor in 12+% inflation, both measurements are down for the 5th consecutive month and only 41.1% of the 31.9% growth since 2019 is real. The Avg Growth Rate is: +9.7%, Real: +4.2%. The impact of Inflation continues to grow.

Restaurants – They were hit hard by the pandemic and didn’t truly start to recover until March 2021. Sales in the last 9 months of 2021 exceeded $70B and 2021 was the biggest year in history, $876B. January sales fell from December but then turned up, setting new all-time monthly records in March>May. $ fell in June but set a new record in July. They are the only big group that is positive in all measurements. Inflation is high at 7.5% for June and 7.0% YTD but it is the lowest of any big group. 60.8% of their 31.6% growth since 2019 is real. The May>July % is up 50% from Jan>April, showing the growing appeal of “eating out” after months of cooking at home. Their Avg Growth Rate: +9.6%, Real: +6.0%. They only account for 12.6% of Total Retail $ales, but their strong performance helps to improve 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. In 2022 sales got on a rollercoaster – Jan down, Feb/Mar up, Apr>May down, June up & July down. Except for a tiny lift in June their monthly sales have been below 2021 since March. These are the only reported sales negatives by any group vs 2021. This is bad but their real sales numbers are much worse. Extremely high inflation has pushed their real sales down -9+% in all measurements vs 2021, the worst numbers of any group. Plus, their 25.3% growth since 2019 is really down -3.4%. Their Avg Growth Rate: +7.8%, Real: -1.2%. It is likely that the drops in the reported $ales vs 2021 are tied to high inflation.

Gas Stations – Gas Stations were also hit hard. If you stay home, you drive less and obviously need less gas. This group started recovery in March 2021 and reached a record $584B for the year. Sales fell in Jan>Feb turned up in Mar>Jun then fell in July. They have the biggest increases vs 2021 and 2019 but it is not reality. Gasoline inflation slowed a bit in July but at 44.5%, it is still by far the highest of any expenditure category. It is 46.7% YTD vs 2021 and has even caused consumers to buy 5.9% less than they did in 2019. Avg Growth Rate: +14.7%, Real: -2.0%. It’s a textbook example of the initial impact of inflation. Consumers are spending more but buying less, even less than they bought 3 years ago.

Relevant Retail – Less Auto, Gas and Restaurants – This the “core” of U.S. retail and accounts for 60+% of Total Retail Spending. There are a variety of channels in this group, so they took a number of different paths through the pandemic. However, their only down month was April 2020. They finished 2020, up +7.1% and 2021 got even better as they reached a record $4.50T. They have led the way in Total Retail’s recovery which became widespread across the channels. Sales fell in Jan>Feb, went on an up/down roller coaster from Mar>June but fell again in July. All months in 2022 set new records but their YTD increase is now 25% below their 9.6% avg growth since 2019. Now, we’ll look at the impact of inflation. 63.9% of their 31.6% growth since 2019 is real. However real sales vs 2021 are down -2.0% for the month and -0.8% YTD. This shows that inflation is only a 2022 problem. Their Avg Growth Rate: +9.6%, Real: +6.3%. The performance of this huge group is critically important. This is where America shops. Real YTD sales are down almost 1% so the amount of products that consumers bought in 2022 is less than in 2021. They just paid more. That’s not good.

The impact of inflation is becoming even more apparent. All groups but Restaurants have had no monthly or YTD real growth vs 2021 for 4 consecutive months. Both Auto & Gas Stations are even “really down” vs YTD 2019. Added together, this has produced 5 straight months of real monthly and YTD drops for Total Retail. We are in Phase II of inflation. Consumer spending grows but the amount bought declines. With 4 of the last 5 months down vs 2021, the Auto Group is likely in Phase III, when consumers actually cut back on spending. If inflation continues, this worsening situation will become more widespread.

  • Relevant Retail: Avg Growth Rate: +9.6%, Real: +6.3%. 5 channels were up vs June but 8 vs July 2021, producing a July $ales record. 10 were up YTD vs 2021 but you will see the negative impact of inflation in the real numbers.
  • All Dept Stores – This group was struggling before COVID, and the pandemic hit them hard. They began to recover in March 2020 and have continued to grow in 2022. Their YTD numbers have been positive vs 2019 since April but in July they are still down in “real” terms in all measurements vs both 2019 & 2021. Avg Growth: +0.07%, Real: -2.6%.
  • Club/SuprCtr/$ – They fueled a big part of the overall recovery because they focus on value which has broad consumer appeal. Inflation is a big factor in their current numbers. July sales are down from June but up vs July 2021 and YTD. Their real numbers are down and only 36.2% of their 17.4% lift from 2019 is real. Avg Growth: +5.5%, Real: +2.1%.
  • Grocery- These stores depend on frequent purchases, so except for the binge buying in 2020, their changes are usually less radical. Inflation has hit them hard. $ are up from June. Monthly & YTD increases vs 2021 are strong but inflation is stronger. Real sales are down and only 19.4% of the growth since 2019 is real. Avg Growth: +6.4%, Real = +1.3%.
  • Health/Drug Stores – Many stores in this group are essential, but consumers visit far less frequently than Grocery stores. After a dip in June, sales turned up in July and are ahead of 2021. However, real sales vs July 2021 are down. Their inflation rate is low so 89% of their 14.4% growth from 2019 is real. Their Avg Growth is: +4.6%, Real: +4.1%.
  • Clothing and Accessories – They were nonessential, and clothes mattered less when you stayed home. That changed in March 2021 and resulted in explosive growth which continued through May 2022. July sales are only +0.2% from 2021 and real sales are -4.9%. YTD $ are up 8.7%% and 88% of their growth from 2019 is real. Avg Growth: 5.1%, Real: 4.5%.
  • Home Furnishings – They were also less impacted by COVID. Sales dipped Mar>May in 2020. Then as consumers’ focus turned to their homes, furniture became a priority. Inflation is high. Sales are up from June, but down vs July 21 and all their real numbers vs 2021 are negative. Only 24.9% of their growth since 2019 is real. Avg Growth: +6.7%, Real: +1.7%.
  • Electronic & Appliances – This channel has problems beyond the pandemic. Sales fell in Apr>May of 2020 and didn’t reach 2019 levels until March 2021. Sales are up minimally from June but are down across the board vs 2021. The increase from June and deflation kept sales positive vs 2019 but only +0.01%. Avg Growth: +0.005%, Real: +0.22%.
  • Building Material, Farm & Garden & Hardware –They truly benefited from the consumers’ focus on home. This year’s spring lift ended in May as Sales dropped -3.8% in June and -9.3% in July. July & YTD sales are up vs 2021, but when you factor in strong, double-digit inflation, the amount sold vs 2021 is significantly lower for both. However, 59.6% of their strong 36.4% sales growth since 2019 is real. Their Avg Growth is: +10.9%, Real: +6.8%.
  • 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. July sales fell -0.7% from June but were still up vs July 2021 & YTD. However, all real measurements are down vs 2021. Inflation in this group is lower than most groups and most comes from Sporting Goods. 79% of their 38.2% growth since 2019 is real. Avg Growth is: +11.4%, Real: +9.2%.
  • All Miscellaneous Stores – Pet Stores have been a key part of the strong and growing recovery of this group. They finished 2020 +0.9% but sales took off in March 21. They set a new monthly $ales record in December. Sales are down -2.1% from June but from April>July they have held the top spot in YTD increase vs 2021. Their YTD growth since 2019 is 2nd only to NonStore. Plus, 82.9% of the 46.2% growth since 2019 is real. Their Avg Growth is: +13.5%, Real: +11.4%.
  • 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. In December monthly sales exceeded $100B for the 1st time and they broke the $1 Trillion barrier for the year. Their Growth has slowed significantly in 2022 but all measurements are positive. 88.7% of their 73.6% increase since 2019 is real. Their Avg Growth is: +20.2%, Real: +18.2%.

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. While the timing varied between channels, by the end of 2021 it had become very widespread. In late 2021 and now in 2022, a new challenge came to the forefront – extreme inflation. It isn’t the worst in history, but it is the biggest increase in prices in 40 years. Overall, it slowed in July but for Relevant Retail it got worse. On the surface, the impact is almost invisible. Sales in the total market and in the Relevant Retail group continue to grow but the growth has slowed markedly. Overall, the market is generally in phase II of strong inflation – spending grows but the amount purchased falls. The channels in the graph above illustrate this perfectly and show how widespread that it has become. 8 of 11 channels are up vs July 2021 and 10 are up YTD. However, when you factor in inflation, only 2 are up for July and 4 for YTD. Inflation is real and there are real and even worse consequences if it continues. To see an example of this, take a look at what is happening in the Auto Group.

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 these specially created aggregates are 100% accurate but they are much closer than the overall CPI or available aggregates.

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 mix of actual products is substantially different.

Petflation 2022 – July Update: Prices increase to +9.1% above 2021

/in , /by

Inflation continues to make headlines. There have been year over year increases in the monthly Consumer Price Index (CPI) larger than we have seen in decades. July prices fell -0.01% from June, but the CPI was still up +8.5% vs 2021, down from +9.1% last month. Food at Home (groceries) prices continue to surge, up 13.1% over 2021. That’s 5 straight months of double-digit YOY monthly percentage increases. These are the first 10+% increases since 1981. As we have seen in recent years, even minor price fluctuations can affect consumer pet spending, especially in the more discretionary pet segments, so we will continue to publish monthly reports to track petflation as it evolves in the marketplace.

Total Pet prices were 4.1% higher in December 2021 than in December 2020, while the overall CPI was up 7.0%. The gap narrowed as Petflation accelerated and reached 96.7% of the national rate in June. In July national inflation slowed a bit to 8.5% but Petflation accelerated to 9.1%, 7% higher than the national rate. This latest surge indicates that we should look a little 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 22 vs 21 which will include Pet Segments and relevant Human spending categories. Plus
    1. CPI change from the previous month
    2. Inflation changes for recent years (20>21, 19>20, 18>19)
    3. Total Inflation for the current month in 2022 vs 2019
    4. Average annual Year Over Year inflation rate from 2019 to 2022
  • 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 July 2020 to July 2022. We will use December 2019 as a base number in this and future reports 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 those from 12 and 24 months earlier are included as are the yr-end numbers for 2020 & 2021.This will give you some key waypoints for comparisons. (Note: the Old April Peak for Veterinary is also highlighted.)

The pandemic hit home in early 2020. In July, the national CPI was only +0.8% and Pet prices deflated until August. There are 2 different patterns between the Services and the Products segments. Veterinary and Services prices generally inflated after mid-2020, similar to the overall CPI. 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 this month. While the increase in Supplies was minimal, prices in all segments increased in July.

  • 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 July 2022. 44% of the overall 15.3% increase since 2019 happened from Jan>June 2022.
  • Pet Food – Prices stayed generally below December 2019 levels from April 2020 to September 2021, when they turned up. There was a sharp increase in December but 86% of the 11.1% increase has happened since January.
  • 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 when they turned sharply up reaching a new all-time pricing high in January, beating the 2009 record. Prices plateaued from February to May but turned up in June. The CPI flattened in July but at a new record high.
  • 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 got stronger in 2022 but has been on a rollercoaster since March, turning up again in July.
  • Veterinary – Inflation has been generally consistent in Veterinary. Prices began rising in March 2020 and increased through 2021. Then a pricing surge began in December which pushed them past the overall CPI. In May prices fell and stabilized in June. July saw another increase which again put them above the National CPI.
  • Total Pet – The blending of the different segment patterns made the Pet Industry appear calm. That ended in December 2021 as prices surged in all segments. After mixed up and downs, in July inflation grew in all segments.

Next, we’ll turn our attention to the Year over Year inflation rate change for the month of July and compare it to last month, last year and to previous years. We’ve added some human categories to put the pet numbers into perspective.

Overall, Prices were basically flat vs June but were up 8.5% vs July 2021. The Grocery increase is now 13.1% which is a big negative but there is another small positive. Only 2 of 9 categories had increases over 1% from last month, down radically from 5 in March. With the slight drop in the National CPI vs last month there is hope for the future.

  • U.S. CPI – Prices are down 0.01% from June. The YOY increase is +8.5%, down from +9.1% in June. The targeted inflation rate is <2% so we are still 4 times higher than the “target”. However, the slight decline is a good start.
  • Pet Food– Prices are +1.2% vs June and 10.9% vs July 2021. The YOY increase is being measured against a time when prices were at 2019 levels, but that increase is almost 3 times the pre-pandemic 3.7% increase from 2018 to 2019.
  • Food at Home – Prices are up 1.4% from June. The increase from 2021 is 13.1%, which is the largest increase in any month since 13.6% in March 1979 and the largest July monthly increase since 13.9% in 1974. Inflation for this category since 2019 is the highest of any category on the chart and is 38% more than the national CPI.
  • Pets & Supplies – Prices grew only 0.03% from June but still set a new record high. They fell from 2nd to 3rd in terms of monthly increase over 2021 for industry segments and still have the lowest increase since 2019.
  • Veterinary Services – July prices grew 0.8% from June. They are up +9.3% from 2021 and now trail only Food in the Pet Industry. They also remain 2nd in the increase since 2019 with 17.1% compared to Food at home at 21.4%.
  • Medical Services – Prices sharply increased at the start of the pandemic in 2020 but then inflation slowed and fell to a more normal rate in 2021. In 2022 prices are turning sharply up again, +55% vs the pre-pandemic 2018>19 rate.
  • Pet Services – Inflation slowed in 2020 but began to grow in 2021/22. Prices are +0.3% from June and +5.6% vs 2021. Prices are still below the May peak but have turned up again after falling in June.
  • Haircuts & Other Personal Services – Prices are +0.2% from June and +4.3% from 2021. They are +15.4% since 2019.
  • Total Pet – Petflation is strong, 3 times the rate of last year and is now ahead of the National CPI. Prices in All segments increased in July, but inflation is primarily being driven by Food & Veterinary. Inflation can cause reduced purchase frequency in Supplies, Services and Veterinary. Super Premium Food has been generally immune as consumers are used to paying big bucks and it is needed every day. We’ll see if consumers are willing to pay the new high prices for food and buy the more discretionary products/services at the same frequency as they did in the past.

Now here’s a look at Year-to-Date numbers. How does 2022 compare to previous years…so far?

The increase from 2021 to 2022 is the biggest for 7 of 9 categories. The average annual increase since 2019 is over 3% for all but Pet Food & Pet Supplies. This is due to deflation in the 1st half of 2021.

  • U.S. CPI – The current increase is almost double the average increase from 2019>2022, but over 4 times the average annual increase from 2018>2021. Inflation is a big problem that started recently.
  • Pet Food – Inflation is growing stronger, especially after deflation in the 1st half of 2021.
  • Food at Home – The 2022 YTD inflation beat the U.S. CPI by 27.7%. You can see the impact of supply chain issues.
  • Pets & Pet Supplies – Prices have been at record levels since January. Although the 2021>22 increase is being measured against a deflationary 2021, it is significant and is 2nd only to Veterinary in the Pet Industry segments.
  • Veterinary Services – Has the most inflation since 2019 and is the only segment on the chart with a 3+% inflation rate each year 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 2022 there is another pricing surge as the inflation rate is 38% higher than pre-pandemic 2018>19.
  • Pet Services – February & May set records for the biggest year over year monthly increases in history. Prices seem to be becoming more stable, but the current July YTD increase of 6.0% is still the largest in history. Demand has grown for Pet Services while the availability has decreased, 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, prices turned up again. The YTD rate is now equal to 2020>21 but still 96% more than 2018>19. Consumers are paying 15% more than in 2019. This usually reduces the purchase frequency.
  • Total Pet – We have seen basically two different inflation patterns. After 2019, Prices in the Services segments continued to increase, and the rate accelerated as we moved into 2021. The product segments – Food and Supplies, were on a different path. They generally 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 we neared yearend. In 2022, everything changed as Food and Supplies prices turned sharply up. Food prices continued to climb. Supplies pricing stabilized then grew in June/July. The Services segments have had some ups & downs, but both are inflating in July. The net was a July YTD CPI increase vs 2021 for Total Petflation of 7.4%, 89.2% of the high 8.3% National rate. It was only 72.5% in March.

Petflation is growing stronger. Will it impact spending? Let’s put it into perspective. The 7.4% July YTD increase in Total Pet is far below the 8.9% record set in 2009 but 5 times larger than the 1.5% avg since then. Although pet spending continues to move to higher income groups, the impact of inflation varies by segment. Supplies is the most affected as many categories are 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 reduction in visit frequency. Spending in the Services segment is driven by higher incomes, so inflation is less impactful. We’ll just have to wait and see the overall impact on Pet Spending of the continued strong Petflation.

U.S. Pet Services Spending (Non-Vet) $7.44B (↓$0.40B): 2021 Mid-Year Update

/in /by

The US BLS released their Mid-Year Update of the Consumer Expenditure Survey covering the period from 7/1/2020 to 6/30/2021. In our analysis of Pet Supplies Spending, we saw an incredibly strong rebound from the 2-year decline caused by inflation then the pandemic. However, Pet Food Spending took the opposite route. Spending fell sharply in the 1st half of 2021 compared to the extra food that Pet Parents had “panic” bought due to the fear of pandemic induced shortages. Now we turn our attention to Pet Services. The Mid-year numbers show that spending in this segment was $7.44B, down $0.40B (-5.1%) 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 2021 Mid-Year Specifics:

Mid-Year 2021: $7.44B, ↓$0.40B (-5.1%) vs Mid-Yr 2020

Jul > Dec 2020: ↓$0.95B          Jan > Jun 2021: ↑$0.55B

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 2nd 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, by far the biggest annual increase in history. Prices turned up again in the first half of 2019, increasing  2.8% from 2018. However, Services spending inched up $0.09B. In the 2nd half of 2019 Value shopping again came to the forefront as 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 1st 6 months of 2020. However, there’s still a long way to go.

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

In the graphs that follow we compare spending for the 12 months ending 6/30/21 to the previous 12 months. The graphs also include the 2020 yearend $, so you can see spending changes in the 2nd half of 2020 and the 1st half of 2021.

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: $5.04B – $6.02B = Down -$0.98B (Note green outline = increase; red outline = decrease)
    • 2nd half of 2020: Subtract Mid-20 ($6.02B) from Total 2020 ($4.77B) = Spending was down $1.25B in 2nd half of 2020.
    • 1st half of 2021: Subtract Total 2020 ($4.77B) from Mid-21 ($5.04B) = Spending was up +$0.27B in 1st half of 2021

  • With the Over/Under $100K measurement, you see how Services Spending is a little less skewed towards higher incomes. The halfway spending point is about $115K so about 25% of CUs spend 50% of Services $. The overall <$70K group grew consistently in both halves reflecting the pattern of all under $70K income groups.
  • As we noted, all individual groups below $70K had steady growth. The $50>$70K led the way with a $0.29B (+46.7%) increase for the year and $0.17B lift in the 1st half of 2021.
  • The middle to high income $70 to $150K groups had the biggest negative pandemic impact as spending fell $1B in the 2nd half of 2020. The $ increased slightly, +$0.1B in the 1st half of 2021 but they were still -$0.89B for the year.
  • The over $150K group has 14.6% of the CUs but accounts for 39.2% of Services $. This is actually a larger share than the 37.6% that they had in pre-pandemic 2019. The pandemic had a minimal impact on this group.
  • With gains from all the <$70K groups and big losses from the $70>150K groups, Services spending has become a little more balanced in regard to income. However, income, especially when it is over $150K, remains the single biggest factor in the discretionary spending in the Services segment.

Now, Services’ Spending by Age Group.

  • Basically the 25>44 yr-olds spent more while everyone else spent less.
  • Although their lift was minor this year, 25>34 are the only group with 2 consecutive mid-year increases.
  • The 35>44 group had by far the biggest increase. They were up +$0.32B (+25.6%) for the year with a +$0.3B lift in the 1st half of 2021. They were the only group with increases in both halves.
  • The older groups, 45>, continue to be the most negatively impacted by the pandemic. All spent less for the year and their increase in the 1st half of 2021 was minimal.
  • All groups but 75+ did have a spending lift in the 1st half of 2021. Hopefully, the increase will grow in the 2nd

 Now let’s look at what is happening in Pet Services spending at the start of 2021 across the whole range of demographics. In our final chart we will list the biggest $ moves, up and down by individual segments in 11 demographic categories. Remember, the lift in the 1st half of 2021 was +$0.55B, a big change from -$0.78B drop in 2020.

2021 has started much better than 2020 as the market begins to open up. In the Income category all segments spent more. Last year there were 4 categories in which all segments spent less on Services. Also, the $ changes from the winners are overwhelming larger than the negatives of the losers. The +$0.55B decrease in Pet Services came from 64 of 82 demographic segments (78%) spending more. Last year 88% spent less. The recovery is beginning and becoming more widespread.

The usual winners have overwhelmingly returned but there are a couple of surprises:

  • $50>69K
  • 2+ Adults, No Kids

Most of the Losers are also expected. Here are the surprises:

  • Self-Employed
  • Suburbs 2500>
  • Married, Couples Only

The younger groups are driving the 1st half lift which is demonstrated by the performance of Millennials, 35>44 yr-olds, 2 Earners and 2+ Adults, No Kids. The younger groups also had the best performance in the 1st half of 2020. Their importance continues to grow as the Baby Boomers must ultimately pass the torch.

Spending is turning up again. 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 1st half of 2017. The segment started to recover in the 2nd 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 -$0.78B in the 1st half and -$0.95B in the 2nd half. This was a -$1.73B (-20.1%) decrease for the year and nearly wiped out the big gain made in 2018.

In 2021, things have opened up and Services spending began to rebound with a +$0.55B lift in the 1st half. What will happen in the 2nd half of 2022? Pet Services have become an important option that is exercised by an increasing number of Pet Parents. The growth in this segment should continue as we return to a new “normal”. We’ll get the yearend 2021 data in September

U.S. PET SUPPLIES SPENDING $17.42B (↑$1.14B): MID-YR 2021 UPDATE

/in /by

In our analysis of Pet Food spending, we saw that spending plummeted in the 1st half of 2021 compared to the panic buying at the beginning of the pandemic. Supplies took the opposite route. 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. Mid-Year 2021 Pet Supplies spending was $17.42B, up $1.14B (+7.0%). The following chart should put the recent spending history of this segment into better perspective.

Here are this year’s specifics:

Mid Yr 2021: $17.42B; ↑$1.14B (+7.0%) from Mid Yr 2020.

The +$1.14B came from:

Jul > Dec 2020: ↓$1.12B        Jan > Jun 2021: ↑$2.26B

We should note that while the overall lift was relatively low, the lift in the 1st half of 2021 was 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, it can go both ways. When they value shop for Premium Pet Food, they take some of the saved money and spend it on Supplies. The other factor is price. 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. On the other hand, price deflation generally drives Supplies spending up. Innovation can “trump” both of these influencers. If a new “must have” product is created, something that significantly improves the pet parenting experience, then consumers will spend their money. Unfortunately, we haven’t seen much significant innovation in the Supplies segment recently.

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

In the first half of 2018 Pet Food spending slowed to +$0.25B. Supplies’ prices switched from deflation to inflation but were only up 0.1% versus the first half of 2017. During this period Supplies Spending increased by $1.23B. Prices began to climb in the second 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 the Supplies segment was very clear. Spending became flat in the second half of 2018, then took a nosedive 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 new beginning as Supplies spending increased +$2.26B over the 1st half of 2020 and reached a level above pre-pandemic yearend 2019.

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 2020 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>100K group as an example:

Mid-yr Total Spending Change: $2.76B – $2.65B = Up $0.11B (Note: green outline = increase; red outline = decrease)

  • 2nd half of 2020: Subtract Mid-20 ($2.65B) from Total 2020 ($2.32B) = Spending was down $0.33B in 2nd half of 2020.
  • 1st half of 2021: Subtract Total 2020 ($2.32B) from Mid-21 ($2.76) = Spending was up $0.44B in 1st half of 2021.

  • Comparing the under/over $100K to the under/over $70K shows that the share of Supplies spending “flips” based upon the $70>$100K group. That means that the “halfway” dividing line is probably slightly above the average CU income of $84.7K. The Supplies $ of CUs with above average income, 33% is equal to the 67% of CUs below average.
  • The spending patterns <$70K are mixed. For $70K> they are same, with a dip at yearend but a bounce back in 2021.
  • The increase in Supplies Spending was widespread across income groups but the bulk of the lift came from lower incomes, especially <$30K and $50>70K. The two segments with decreases were an unlikely pair – $150K+ and $30>$50K. They had the only increases last year. In both cases the spending decrease was due to a big drop in Supplies $ in the 2nd half of 2020.
  • The spending movement is generally up but only 2 segments had increases in both halves, <$30K & $50>70K.
  • Inflation/deflation has less impact on the $100K> group. The negative impact of the pandemic didn’t happen for them until the 2nd half of 2020 but they largely recovered. The biggest positives came from the <$30K and the $50>$70K groups. In 2020, their spending fell -$1.43B, due to a reduced purchase frequency. In 2021 they increased frequency and spending as they returned to a near normal level. We’ll see if the lift continues in the 2nd half of 2021.

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

  • There were 2 primary patterns. For 45> spending fell in the 2nd half of 2020, then rebounded in 2021. For the 25>44 yr-olds, spending grew in both halves. The <25 group had a big drop in the # of CUs in 2020 which affected spending.
  • The 25>34 year olds had strong growth in both halves.
  • Spending by the 54>64 yr olds decreased the most in the 2nd half of 2020 and their rebound fell a little short. They also fell from the top spot in Supplies spending to #3.
  • The 65> group was the most stable. Spending fell slightly in the 2nd half of 2020 but turned positive in 2021.

Now let’s look at what happened in Supplies spending at the start of 2021 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.

  • It’s obvious that the biggest increases are radically larger than the biggest decreases, the complete opposite of 2020.
  • The increase is widespread which is very apparent as all segments in 7 categories spent more. In 2020 there were 5 categories in which all segments spent less. This reinforces that the 1st half of 2021 increase was the biggest ever.
  • Most of the winners are the “usual suspects”, like Mgrs/Professionals & Adv College Degree but there are a couple of surprises – $50>69K & 2+ Adults, No Kids.
  • In regard to the losers, African Americans & Center City are not unexpected but when all segments in 7 categories spent more there are very few true losers.
  • The Age category is a great example of the widespread lift. The 2 groups with a decrease in spending from Mid-yr 2020, <25 and 55>64 both spent more in the 1st half of 2021. Plus 55>64 had the biggest increase.
  • The Housing category is also of particular interest. Not only did all segments spend more in the 1st half of 2021, they all spent at least $0.5 billion more than they did in 2020.

The 24 month Spending winning streak for Supplies which began in the second half of 2016 came to an end in the second half of 2018. Pet Supplies increased $4.97B (+33.5%) and the lift was widespread. Only 1 of 82 demographic segments, spent less on Supplies – the Greatest Generation. This group is now too small to be accurately measured.

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 YOY 6 month increase in history. We don’t know what the 2nd half will bring but Pet Supplies are back!

 

Retail Channel Monthly $ Update – May Final & June Advance

/in /by

By 2021, the market had generally recovered from the impact of the pandemic. Now we are being hit by extreme inflation, with rates higher than we have seen in 40 years. Obviously, this can affect retail sales, 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 begin with the Final Report for May and then move to the Advance Report for June. Our focus is comparing 2022 to 2021 but also YTD 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 information will be presented in detailed charts to facilitate visual comparison between groups/channels of:

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2021
    • Current Month Real change – % vs same month in 2021 factoring in inflation
  • Current YTD change – % & $ vs 2021
    • Current YTD Real change – % vs 2021 factoring in inflation
  • Current YTD change vs 2019 – % & $
    • Current Real change YTD vs 2019 – % factoring in inflation
  • Monthly & YTD $ & CPIs which are targeted by channel will also be shown. (CPI details are at the end of the report)

First, the May Final. After a slight downturn in April sales generally grew slightly in May. The $ were up for May and YTD vs 2021 for all but Auto. However, when you factor in inflation, for the 2nd straight month only Restaurants had increases in these measurements. Here is the May data for the major retail groups. (All $ are Actual, Not Seasonally Adjusted)

The May Final is $0.5B more than the Advance Report. All but Relevant Retail were up. Relevant Retail: -1.5B; Auto: +$0.6B; Restaurants: +$0.1B; Gas Stations: +$1.4B. Total Sales are up slightly from April, as consumers continue to spend more vs 2021 in all but Auto. However, the “real” numbers give you a different view. All but Restaurants are again really down in all measurements. Restaurants are strong due to a late recovery but also note that half of the inflation in this group came before 2022. The inflation impact on Relevant Retail is especially significant as their Real YTD sales vs 2021 are again negative. Relevant Retail does have the best performance since 2019 as 65.7% of their 30.9% growth is “Real”.

Now, let’s see how some Key Pet Relevant channels did in May.

Overall – 10 of 11 were up vs April. Vs May 2021, 9 reported more $ but only 4 were really up. In YTD vs 2021, 9 reported increases but again only 4 were real. Vs 2019, only the Office/Gift/Souvenir channel was “really” down.

  • Building Material Stores – Their Spring lift has started but it is not as strong as last year. Home Ctr/Hdwe is up vs 21 but Farm stores are down YTD. The Bldg/Matl group has an inflation rate of 11% which produced all negative real numbers. The pandemic caused consumers to focus on their homes which produced sales growth over 30% since 2019 in both channels. Importantly, 61.4% of this lift was real, primarily because the bulk of the lift came from 20>21, prior to the inflation wave. Avg Growth Rate: HomeCtr/Hdwe: 11.0%, Real: 7.0%; Farm: 10.7, Real: 6.7%
  • Food & Drug – Both channels are truly essential. Except for the food binge buying in the pandemic, they tend to have smaller fluctuations in $. However, they are radically different in inflation. The rate for Grocery products is 5 times higher than for Drugs/Med products. Sales for Drug Stores are positive in all measurements and 89% of their growth since 2019 is real. The Real Sales for Supermarkets are down for the month and YTD. Also, only 24.1% of their growth since 2019 is real. Avg Growth Rate: Supermarkets: +6.2%, Real: +1.6%; Drug Stores: +3.9%, Real: +3.5%.
  • Sporting Goods Stores – They also benefited from the pandemic in that consumers turned to self-entertainment, especially sports & outdoor activities. Their normal Spring lift started in March then stabilized in April/May at a level below 2021. Their current inflation rate is 5.7% which is down from 7.5% in April but YTD it is 7.3%. It was also high in 20>21, +4.8%. However, 71% of their 48.1% lift since 2019 is real. Their Avg Growth Rate was: +14.0%; Real: +10.4%.
  • Gen Mdse Stores – Sales in all channels were up vs April. Discount Dept stores are down for the month vs 2021. All other groups are up slightly for May and YTD vs 2021. All real measurements vs 2021 are negative for all channels. Disc. Dept Stores were struggling before COVID and only 1% of their 7.7% growth since 2019 is real. For the other channels, it averages 46%. Avg Growth Rate: SupCtr/Club: 4.4%, Real: 2.1%; $/Value Strs: +7.1%, Real: +4.0%; Disc. Dept.: +2.5%, Real: 0.04%
  • Office, Gift & Souvenir Stores – Their recovery didn’t start until the spring of 2021. Sales are up vs April and vs 2021. The growth vs 2021 has been strong enough that it turned real YTD sales positive vs 2021. However, their real sales vs 2019 are still down -3.7%. Their true recovery is still a ways off. Avg Growth Rate: +1.3%, Real: -1.2%
  • Internet/Mail Order – The growth of the “hero” of the Pandemic is slowing. Sales are down vs April but up vs 2021. Also, their YTD growth rate is less than half of the average since 2019, but 90% of their 78.1% growth since 2019 is real. Their Avg Growth Rates is: +21.2%, Real: +19.5%. As expected, they are by far the growth leaders since 2019.
  • A/O Miscellaneous – This is a group of specialty retailers. Pet Stores are 22>24% of total $. In May 2020 they began their recovery which reached a record level by December 2021 as annual sales reached $100B for the first time. In 2022, they are by far the Sales increase leaders over 2021. As expected, their sales dipped in January from December, but all measurements have been positive every month since then. Plus, 87% of their 58.8% growth since 2019 is real. Their Avg Growth Rate is: +16.7%, Real: +14.8%. They are 2nd in growth since 2019 to the internet. I’m sure Pet Stores are helping.

There is no doubt that high inflation is an important factor in Retail. In actual $, 9 channels reported increases in YTD sales over 2021 and 9 are up for the month. When you factor in inflation, the number with any “real” growth falls to 4 for YTD & monthly. This is a very clear indication of the growing impact of inflation at the retail channel level. Recent data showed that Inflation continues to grow. Let’s look at the impact on the Advance Retail Sales numbers for June.

We have had memorable times since 2019. Some big negatives, including the 2 biggest monthly drops in history but a lot of positives in the Pandemic recovery. Total Retail reached $600B in a month for the first time and broke the $7 Trillion barrier in 2021.  Relevant Retail was also strong as annual sales reached $4T and all big groups set annual $ales records in 2021. Now, radical inflation is a big factor with the largest increase in 40 years. At first this reduces the amount of product sold but not $ spent. This was very evident in June. There was a small overall sales decrease from May but $ were up vs June 2021 for all but Auto. However, the actual amount of product sold vs 2021 fell in all but Restaurants.

Overall – Inflation Reality is setting in. The monthly increase vs the previous year continues to be lower than the inflation rate. The still recovering Restaurants and Gas Stations are up double digits vs 2021 but Auto $ are down again. June set a new $ record for the month, but the real monthly and YTD sales vs 2021 for all but restaurants are down.

Total Retail – Every month in 2022 has set a monthly sales record. June $ are $695B, the 3rd largest of all time. In a normal year, sales should stay at or near this level until dipping slightly in September. However, 2022 is not normal. Sales are -0.4% vs May but are still up 8.9% vs June 2021 and 10.3% vs YTD 2021. However, when you factor in 13+% inflation, both measurements are down for the 4th consecutive month and only 42.3% of the 31.9% growth since 2019 is real. The Avg Growth Rate is: +9.7%, Real: +4.3%. The impact of Inflation continues to grow.

Restaurants – They were hit hard by the pandemic and didn’t truly start to recover until March 2021. Sales in the last 9 months of 2021 exceeded $70B and 2021 was the biggest year in history, $876B. January sales fell from December but have turned up since then setting new all-time monthly records in March>May. $ fell -2.5% in June but they are the only big group that is positive in all other measurements. Inflation is high at 7.5% for June and 6.9% YTD but it is the lowest of any big group. 60.9% of their 30.7% growth since 2019 is real. The May/June % is up 50% from April, showing the appeal of “eating out” after months of cooking at home. Their Avg Growth Rate: +9.3%, Real: +5.9%. They only account for 12.7% of Total Retail sales, but their positive performance significantly helps to improve 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. In 2022 sales fell in January, turned up in Feb/Mar, fell April>May and were +0.4% in June. They are unique in that their Mar>June monthly sales are below 2021. These are the only reported sales negatives by any group vs 2021. This is bad but their real sales numbers are much worse. Extremely high inflation has pushed their real sales down -9+% in all measurements vs 2021, the worst overall numbers of any group. Plus, their 26.7% growth since 2019 is really down -2.3%. Their Avg Growth Rate: +8.2%, Real: -0.8%. It is likely that the drops in the reported $ales in March>June vs 2021 are tied to high inflation.

Gas Stations – Gas Stations were also hit hard. If you stay home, you drive less and obviously need less gas. This group started recovery in March 2021 and reached a record $584B for the year. Sales fell in January and February then turned up in March>June. They have the biggest increases vs 2021 and 2019 but it is not reality. Gasoline inflation is in all of the headlines and is by far the highest of any expenditure category. It is over 47% YTD for 2022 vs 2021 and has even caused consumers to buy 5.7% less than they did in 2019. Avg Growth Rate: +14.5%, Real: -1.9%. It’s a textbook example of the initial impact of inflation. Consumers are spending more but buying less, even less than they bought 3 years ago.

Relevant Retail – Less Auto, Gas and Restaurants – This the “core” of U.S. retail and accounts for 60+% of Total Retail Spending. There are a variety of channels in this group, so they took a number of different paths through the pandemic. However, their only down month was April 2020. They finished 2020, up +7.1% and 2021 got even better as they reached a record $4.50T. They have led the way in Total Retail’s recovery which became widespread across the channels. Sales fell in January and February, then went on an up/down roller coaster from Mar>June. All months in 2022 set new records but their YTD increase is now 22.7% below their 10.1% avg growth since 2019. Now, we’ll look at the impact of inflation. 64.2% of their 31.3% growth since 2019 is real. However real sales vs 2021 are down -3.8% for the month and -1.0% YTD. This shows that inflation is only a 2022 problem. Their Avg Growth Rate: +10.1%, Real: +6.4%. The performance of this huge group is critically important. This is where America shops. Real YTD sales are down 1.0% so the amount of products that consumers bought in 2022 is less than in 2021. They just paid more. That’s not good.

The impact of inflation is becoming even more apparent. All groups but Restaurants now have no monthly or YTD real growth vs 2021. Both Auto & Gas Stations are even “really down” vs YTD 2019. Added together, this has produced 4 straight months of real monthly and YTD drops for Total Retail. We are in Phase II of inflation. Consumer spending grows but the amount bought declines. With 4 straight down months vs 2021, the Auto Group is likely in Phase III, when consumers actually cut back on spending. If inflation continues, this worsening situation will become more widespread.

Here’s a more detailed look at June by Key Channels

  • Relevant Retail: Avg Growth Rate: +9.5%, Real: +6.4%. 4 channels were up vs May but 8 vs June 2021, producing a June $ales record. 10 were up YTD vs 2021 but you will see the negative impact of inflation in the real numbers.
  • All Dept Stores – This group was struggling before COVID, and the pandemic hit them hard. They began to recover in March 2020 and have continued to grow in 2022. Their YTD numbers have been positive vs 2019 since April but in June they are still down in real terms in all measurements vs both 2019 & 2021. Avg Growth: +0.1%, Real: -2.5%.
  • Club/SuprCtr/$ – They fueled a big part of the overall recovery because they focus on value which has broad consumer appeal. Inflation is a big factor in their current numbers. June sales are down from May but up vs June 2021 and YTD. Their real numbers are down and only 38.9% of their 17.5% lift from 2019 is real. Avg Growth: +5.5%, Real: +2.2%.
  • Grocery- These stores depend on frequent purchases, so except for the binge buying in 2020, their changes are usually less radical. Inflation has hit them hard. $ are down from May. Monthly & YTD increases vs 2021 are strong but inflation is stronger. Real sales are down and only 21.8% of the growth since 2019 is real. Avg Growth: +6.3%, Real = +1.4%.
  • Health/Drug Stores – At least the drug stores in this group are essential, but consumers visit far less frequently than Grocery stores. Most of their COVID ride has been rather calm. However, sales turned down in June vs May and 2021. Their inflation rate is low so 89% of their 13.7% growth from 2019 is real. Their Avg Growth is: +4.4%, Real: +3.9%.
  • Clothing and Accessories – They were nonessential, and clothes mattered less when you stayed home. That changed in March 2021 and resulted in explosive growth which has continued until June 2022. $ are down 8.1% from May and only +0.2% from 2021. YTD $ are still up 10.1% and 88% of their growth from 2019 is real. Avg Growth: 5.0%, Real: 4.4%.
  • Home Furnishings – They were also less impacted by COVID. Sales dipped Mar>May in 2020. Then as consumers’ focus turned to their homes, furniture became a priority. Inflation is high. They are up from May, but growth is slowing and all their real numbers vs 2021 are negative. Only 30.4% of their growth since 2019 is real. Avg Growth: +6.9%, Real: +2.0%.
  • Electronic & Appliances – Look at the graph. This channel has problems beyond the pandemic. Sales fell in Apr>May of 2020 and didn’t reach 2019 levels until March 2021. Sales are up from May but are down across the board vs 2021. The increase from May and deflation kept sales positive vs 2019 but only +1.1%. Avg Growth: +0.35%, Real: +0.44%.
  • Building Material, Farm & Garden & Hardware –They truly benefited from the consumers’ focus on home. This year’s spring lift is somewhat inconsistent as $ fell 4.2% from May. June & YTD sales are up vs 2021, but when you factor in strong, double-digit inflation, the amount sold vs 2021 is significantly lower for both. However, 61.3% of their strong 37.5% sales growth since 2019 is real. Their Avg Growth is: +11.2%, Real: +7.1%.
  • 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. Sales were up 5.7% from May which kept the month & YTD $ up vs 2021. However, all real measurements are down vs 2021. Inflation in this group is lower than most groups and most comes from Sporting Goods. 79% of their 37.7% growth since 2019 is real. Avg Growth is: +11.3%, Real: +9.1%.
  • All Miscellaneous Stores – Pet Stores have been a key part of the strong and growing recovery of this group. They finished 2020 +0.9% but sales took off in March 21. They set a new monthly $ales record in December. $ are -4.4% from May but from April>June they have held the top spot in both monthly & YTD lifts vs 2021. Their YTD growth since 2019 is 2nd only to NonStore. Plus, 82.8% of the 44.8% growth since 2019 is real. Their Avg Growth is: +13.1%, Real: +11.1%.
  • 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. In December monthly sales exceeded $100B for the 1st time and they broke the $1 Trillion barrier for the year. Their Growth has slowed significantly in 2022 but all measurements are positive. 88.7% of their 72.6% increase since 2019 is real. Their Avg Growth is: +20.0%, Real: +18.0%.

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. While the timing varied between channels, by the end of 2021 it had become very widespread. In late 2021 and now in 2022, a new challenge came to the forefront – extreme inflation. It isn’t the worst in history, but it is the biggest increase in prices in 40 years. Moreover, each month it is getting worse. On the surface, the impact is almost invisible. Sales in the total market and in the Relevant Retail group continue to grow but the growth has slowed markedly. Overall, the market is generally in phase II of strong inflation – spending grows but the amount purchased falls. The channels in the graph above illustrate this perfectly and show how widespread that it has become. 8 of 11 channels are up vs June 2021 and 10 are up YTD. However, when you factor in inflation, only 2 are up for June and 4 for YTD. Inflation is real and there are real and even worse consequences if it continues. To see an example of this, take a look at what is happening in the Auto Group.

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 these specially created aggregates are 100% accurate but they are much closer than the overall CPI or available aggregates.

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 mix of actual products is substantially different.