Archive for category: Pet Market

We looked at the Total Pet Spending for 2019 and its key demographic sources. Now we’ll start drilling down into the data. Ultimately, we will look at each individual segment but the first stop in our journey of discovery will be Pet Products – Pet Food and Supplies. Food and Supplies are the industry segments that are most familiar to consumers as they are stocked in over 200,000 U.S. retail outlets, plus the internet. Every week over 21,000,000 U.S. households buy food and/or treats for their pet children. Pet Products accounted for $48.01B (61.2%) of the $78.44B in Total Pet spending in 2019. This was down $0.64B (-1.3%) from the $48.65B that was spent in 2018. Pet Food spending rebounded from the reaction to the 2018 FDA warning on grain free dog food, but the impact on Supplies from the new tariffs really hit home in 2019. Supplies prices rose sharply which affected virtually every demographic segment and spending plummeted.

Overall, in 2019 Pet Food spending rose +$2.35B, while Supplies spending fell a record -$2.98B. We’ll combine the data and see where the bulk of Pet Products spending comes from.

We will follow the same methodology that we used in our Total Pet analysis. First, we will look at Pet Products Spending in terms of the same 10 demographic category groups that were responsible for 60+% of Total Pet spending. Then we will look for the best and worst performing segments in each category and finally, the segments that generated the biggest dollar gains or losses in 2019.

The first chart details the biggest pet product spenders for each demographic category. It shows their share of CU’s, share of pet products spending and their spending performance (spending share/share of CU’s). Although their share of the total products $ may be different from their share of the Total Pet $, the biggest spending groups are the same. The categories are shown in the order that reflects their share of Total Pet Spending. This highlights the differences. In Pet Products spending, the # of earners, age and marriage are more important while education matters less. We should note that, like Total Pet Spending, Income is the highest performing demographic characteristic. In Pet Products there are 5 groups with a performance rating of over 120%, up from 4 last year. This is one less than Total Pet, which indicates that Pet Products spending is growing more concentrated but is still spread more evenly across the category segments.

1. Race/Ethnic – White, not Hispanic (86.2%, up from 84.5%) They are no longer the largest group but still account for the vast majority of spending in every segment. With a 125.7% performance rating, this category now ranks 3rd in terms of importance in Pet Products Spending demographic characteristics. Hispanics, African Americans and Asian American account for 31.4% of U.S. CU’s, but they only spend 13.8% of Pet Products $. Although pet ownership is relatively high in Hispanic households, it is significantly lower for African Americans and Asians.
2. Housing – Homeowners (80.0% up from 78.1%). Controlling your “own space” has long been the key to pet ownership and more pet spending. Their performance grew from 123.0% to 125.6% but they officially fell from third to fourth place in terms of importance for increased pet products spending. Homeowners spending only increased by 0.1% in 2019. The small increase was totally driven by those without a mortgage. Those with a mortgage spent less. Their overall gain in share and performance was due to a bad year for Renters, -10.1%.
3. # in CU – 2+ people (80.1%, down from 81.3%) The share for Pet Products is higher than for Total Pet, 78.2%. If you put 2 people together, pets very likely will follow. If you have a pet, you must spend money on food and supplies. Their performance of 114.7% is down from 115.2% because of a bad year for 2, 4 and 5+ person CUs and a good year for singles. Performance peaks at 3 people but only CUs with 5+ people and singles perform below 100%.
4. Education – Associates Degree or Higher (63.7%, down from 65.0%). Their performance level also fell significantly from 119.2% to 114.5%. Formal Education mattered less in 2019. Those without a High School diploma spent less, $0.61B, but the biggest decrease came from those with either an Associates or College degree, -$1.05B. The only group to spend more were High School Grads with or without some college courses, +$1.02B.
5. # Earners – “Everyone Works” (67.7%, up from 61.2%). Their performance is 115.7%, up from 105.8%. In this group, all adults in the CU are employed. Every segment in the group spent more while everyone else spent less. The 2+ people and only one earner segment was down -$2.58B in 2019 and -$4.3B from 2017. Income is a growing priority in Pet Products Spending, but now how many people work to get it is also becoming more important.
6. Occupation – All Wage & Salary Earners (63.0%, up from 62.4%). Their performance also grew from 102.1% to 103.4. These small changes are somewhat deceptive as there was some turmoil. Internally, there was a big spending drop from Managers but a lift from Blue Collar. Externally, Self-Employed also spent more while Retirees spent less.
7. Income – Over $70K (61.5%, up from 57.4%). Pet Parenting is common in all income groups but money increasingly matters in spending behavior for all industry segments. With a performance rating of 148.2%, up from 142.4%, CU income continues to grow as the single most important factor in increased Pet Products Spending. As a general rule,  Higher Income = Higher Pet Products Spending. This was especially true in 2019. All income groups over $70K spent more, +$1.61B but couldn’t make up for the decrease by all groups under $70K, -$2.24B.
8. Age – 35>64 (63.7%, up from 61.9%). Their performance also bounced back from 117.0% to 121.9% and they rejoined the 120+% performance club. Every group under 45 or over 64 spent less. The 45>64 yr olds spent $0.91B more but couldn’t overcome the -$1.55B drop by the older and younger groups. The <35 group was down -$0.72B.
9. Area – Suburban (61.6%, up from 61.4%). Their performance stayed at 110.7%. Suburban households are the biggest pet spenders but space mattered in 2019. Suburban and Rural areas under 2500 population spent $0.95B more while Suburban areas over 2500 were down -$1.19B and Center City $ fell -$0.39B.
10. CU Composition – Married Couples (62.3%, down from 62.7%). Their performance grew from 126.4% to 127.4% due to fewer CUs and a big $ drop by Single Parents. Couples only and those with an oldest child 6>17 spent less. The other Married segments spent more. They kept 2nd place so Marriage remains very important in Pet Products $.

The biggest spending groups are the same for Pet Products as for Total Pet, but there are subtle differences in market share and performance. Money matters most but now how many earners also matters. It also appears that Pet Products Spending is becoming less balanced  across almost all demographic categories.

Now, let’s drill deeper and look at 2019’s best and worst performing Products spending segments in each category.

Most of the best and worst performers are the ones that we would expect. However, there are 7 that are different from 2018. That is the same as last year and 2017, but again is 2 more than Total Pet. Changes from 2018 are “boxed”.

We should note: Only 1 of the Product winners is different from Total Pet – the West, who lost in Total Pet to the Northeast because of their Veterinary segment performance.

The average performance of the 2019 Product winners was 140.7%, up from 134.6% – 10 were up. The average for the losers was 56.8%, down from 63.4% – 11 were down. The significant widening of the gap between best and worst indicates that Pet Products spending became less balanced across America in 2019. We should also note:

• Generation – Gen X replaced the Boomers at the top in 2018 and they continue to hold their ground.
• CU Composition, CU Size and # Earners – The new winners in all of these categories reinforce the growing “youth” and “higher income” movements in Pet Products and the total industry.
• Age – The high income 45>54 group replaced 55>64, specific evidence of the transition from Boomers to Gen X and of the growing importance of income in Pet Spending in all categories.
• Region – The West held on to the top spot but once again only 2 regions are performing above 100%

Almost all of the winners are the ones we expected, but the gap between them and the losers has increased.

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

In this section we will see who drove Pet Products spending down. There are three repeats from 2018 and 9 Segments switched positions – from first to last or vice versa. This is less turmoil as 2018 had only 1 repeat but 15 flips. There is only 1 truly surprising winner, High School Grads Only. Here are the specifics:

• # Earners – The winner is new but 1 Earner, 2+ People CUs held on to the bottom spot.
  • Winner – 2 Earners – Products Spending: $20.49B; Up $1.79B (+9.6%)                       2018: No Earner, Single
  • Loser –– 1 Earner, 2+ CU – Products Spending: $8.67B; Down $2.58B (-23.0%)         2018: 1 Earner, 2+ CU
  • Comment – The # of Earners is becoming more of a factor in Pet Products spending. Only CUs where all adults worked spent more, +$2.72B. The other CUs were down -$3.36B.
• Area Type – The larger Suburbs flipped from first to last.
  • Winner – Suburbs <2500 – Products Spending: $8.90B; Up $0.88B (+11.0%)             2018: Suburbs 2500>
  • Loser – Suburbs 2500> – Products Spending: $20.67B; Down $1.19B (-5.4%)              2018: Rural
  • Comment – Anti-Urbanization? All areas under 2500 pop.: Up $0.95B; Areas over 2500 pop.: Down $1.58B.
• # in CU – The winner and loser held their spots. 1 and 3 People CUs were the only groups to spend more.
  • Winner – 3 People – Products Spending: $8.96B; Up $0.88B (+10.9%)                           2018: 3 People
  • Loser – 2 People – Products Spending: $19.18B; Down $1.03B (-5.1%)                             2018: 2 People
  • Comment: All CU sizes spent less on Supplies but only 5+ CUs spent less on Food.
• Education – BA/BS Degree holders flipped from first to last.
  • Winner – HS Grad Only – Products Spending: $7.08B; Up $0.85B (+13.6%)              2018: BA/BS Degree
  • Loser – BA/BS Degree – Products Spending: $13.49B; Down $0.67B (-4.7%)              2018: HS Grad w/some College
  • Comment – Education became less of a factor in 2019 Pet Products Spending. Only HS Grads with no formal degree spent more. Everyone else, <HS Grads and anyone with an Associates or College degree, spent less.
• CU Composition – Both the winner and loser are new.
  • Winner – Married, Oldest child 18> – Products: $5.41B; Up $0.67B (+14.2%)         2018: Married, Oldest Child <6
  • Loser – Married, Oldest Child 6>17 – Products: $5.55B; Down $1.21B (-17.9%)        2018: Married, Couple Only
  • Comment – It truly was a strange year. Married Couples Only and Single Parents were down again. If you were married and had children, the oldest had to be under 6 or over 18 to spend more. Singles had a good year plus other all adult CUs with no kids, whether Married or not, also spent more.
• Housing – The winner and loser swapped places for the second year in a row.
  • Winner – Homeowner w/o Mtge – Products: $12.77B; Up $0.63B (+5.2%)            2018: Renter
  • Loser –– Renter – Products Spending: $9.58B; Down $1.09B (-10.2%)                       2018: Homeowner w/o Mtge
  • Comment– Wealthier Homeowners who have paid off their homes, but are not retired, appear to be the drivers.
• Region – Both the 2018 winner and loser flipped in 2019.
  • Winner – Northeast – Products Spending: $8.47B; Up $0.63B (+8.0%)                         2018: Midwest
  • Loser – Midwest – Products Spending: $10.19B; Down $0.93B (-8.4%)                          2018: Northeast
  • Comment – All regions spent less on Supplies but more on Food. Only the Northeast had a Products $ increase.
• Income – Both winner and loser were new.
  • Winner – $70 to $99K – Products Spending: $8.76B; Up $0.60B (+7.4%)                  2018: $150 to $199K
  • Loser – <$30K – Products Spending: $6.06B; Down $0.85B (-12.3%)                           2018: $50 to $69K
  • Comment – There was a clear divide in spending by income. Every income group making less than $70K spent less. Every group above $70K spent more. The lowest income member of both either won or lost.
• Occupation – Both the Winner and Loser are new, but neither is surprising.
  • Winner – Self Employed – Products Spending: $4.92B; Up $0.58B (+13.4%)         2018: Tech, Sales, Clerical
  • Loser – Retired – Products Spending: $7.12B; Down $1.62B (-18.5%)                        2018: Blue Collar Workers
  • Comment – Blue Collar workers and low level white collar workers also spent more. Spending decreases by their Managers and Retirees produced the decrease in Products $.
• Age – The 55>64 year olds (mostly young Boomers) flipped from last to first.
  • Winner – 55>64 yrs – Products Spending: $11.54B; Up $0.46B (+4.2%)                    2018: 65>74 yrs
  • Loser – 25>34 yrs – Products Spending: $6.09B; Down $0.55B (-8.3%)                      2018: 55>64 yrs
  • Comment: The spending dividing line was unusual to say the least – 25 years old. The <25 yrs group spent more on Supplies. All older groups spent less. For Food, the exact opposite was true. However, when you added up the changes in Food and Supplies, only the 45>54 and 55>64 year olds spent more on Pet Products.
• Generation – Both the winner and loser are new, but neither is a surprise.
  • Winner – Gen X – Products Spending: $15.50B; Up $0.36B (+2.4%)                           2018: Millennials
  • Loser – Born <1946 – Products Spending: $3.58B; Down $0.67B (-15.7%)                2018: Baby Boomers
  • Comment – All Generations spent less on Supplies and everyone born after 1945 spent more on Food. However, when you add them up, Gen X was the only Generation to spend more on Pet Products.
• Race/Ethnic – White, Non-Hispanics gained ground in 2019 and now account for 86.2% of Pet Products’ $.
  • Winner – White, Not Hispanic – Products Spending: $41.37B; Up $0.27B (+0.7%)        2018: Hispanic
  • Loser – Hispanic – Products Spending: $3.73B; Down $0.52B (-12.1%)                               2018: White, Not Hispanic 
  • Comment – White, Not Hispanics spent more on Food which produced positive Products $pending. All Minorities spent less on both Food and Supplies. African Americans & Hispanics had double digit % drops in Products $.

We’ve now seen the winners and losers in terms of increase/decrease in Pet Products $ for 12 Demographic Categories. 2019 was not a good year for Pet Products Spending. Food rebounded from the negative impact of the 2018 FDA warning on grain free dog food but couldn’t overcome the record drop in Supplies $ due to Tarifflation. All but 3 segments spent less on Supplies, but 75% spent more on food so that 36 (37.5%) spent more on Pet Products. Of course, not every good performer can be a winner but some of these “hidden” segments should be recognized for their outstanding effort. I’ve narrowed the group down to 6. They don’t win an award, but they deserve….

HONORABLE MENTION

Honorable Mention

Pet Products spending was down $0.64B in 2019. However, It was again a mixed bag. A rebound in Food couldn’t quite counter the big, widespread drop in Supplies. Married Couples often lead the way but not in 2019. Only select segments like those with Other Adults but No Kids spent more. The # of Earners mattered more, including 1 Earner, Singles. In 2019 it was basically all about money as all groups with income over $70K spent more, including $150>199K. Spending by 1 Person CUs also continued to increase as they had a second consecutive year of 5% growth. They are still the worst performing size but are 30.2% of U.S. CUs and their numbers are increasing, +1.1M CUs in 2019. Spending by Blue Collar workers, especially nonService workers, began to bounce back after their drop in 2018. Finally, Education became a little less important in 2019 as High School Grads, including those with some College were the only segments in the category to spend more on Pet Products. Pet Products spending was down again in 2019 and like 2018, this drop was due to outside factors. 2018: FDA Warning; 2019: Tariffs

Summary

Spending has seen a lot of turmoil since 2015. Many consumers upgraded to Super Premium Food and cut back on Supplies in 2015. In 2016 they value shopped for Food and Spent some of the saved money on Supplies. In 2017 there was increased availability and value in both segments. More Consumers recognized the opportunity and spent $7B more. 2018 was calm, until the second half when the FDA warning on grain free dog food caused many consumers to downgrade their food and new tariffs on Supplies flattened spending growth. The result was -$1B drop in Products $.

In 2019 Pet Food spending rebounded to a new record level but the full impact of higher prices in the Supplies segment really hit home, with a record $2.98 decrease in spending. The drop was almost universal as 93 of 96 demographic segments spent less. The result was a -$0.64B drop in Pet Products $, the second consecutive decrease.

On the surface, one change was immediately apparent. In the demographic groups responsible for most of Pet Products Spending, $50K> was replaced by $70K>. In their spending share and rankings, # Earners and Age moved up while Higher Education and Marriage became less important. In performance, Income, Marriage and now Race/Ethnicity are the top 3. There were again 5 groups with 120+% performance as the Age Group rejoined the club. Total Pet has the same 5, plus Higher Education so Pet Products spending is still slightly more balanced than Total Pet.

When we looked at the performance of individual segments, most winners were expected. The 4 new winners reflect the movement to younger (Gen X vs Boomers) and higher income CUs.

The $ drop was smaller in 2019 and there was more stability than in 2018. In terms of $ change, 3 segments held their position (only 1 in 2018) and 9 flipped from 1^st to last or vice versa (15 in 2018). However, there were fewer segments with increased spending, 36, compared to 54 last year. Most of the winners were the “usual suspects”. There was only one true surprise – High School Grads with no college. Many of the other winners support the trends to higher income and younger CUs – 2 Earners, 3 People, Married, Oldest Child >18. These segments all tend to be a big part of another winning segment – Gen X. However, Baby Boomers aren’t done yet – 55>64 yr olds and Homeowners w/o Mtges also won. Now…2020. By almost any measure, the pandemic made it a year like no other. Indications are that Pet Parents spent more time with and money on their pet children. The year was radically different, but our question will remain the same. Who was spending the money?

Finally,… The “Ultimate” 2019 Pet Products Spending CU is a married couple with 1 child over 18. They are in the 45>54 age range and are White, but not Hispanic. At least one has an advanced College Degree. Both of them work in their own business, earning over $200K. They still have a mortgage on their house located in a small Suburb  in the West.

 

 

 

 

87.6% of the $77.44B that we spent on our companion animals in 2019 was done by 68.6% of the 132.2 million financially independent Consumer Units. These “majority” CU’s are White, Not Hispanic. That means that the 41.6 million CU’s – 31.4%, which are Racial or Ethnic minorities, generated only 12.4% of Total Pet Spending.

This disparity is evidence of yet another inequity in our society. In this report, we will drill deeper to get more specifics on the Pet Spending by Hispanics (All Races), African Americans and Asians. The U.S. is growing more ethnically diverse every day, so this is a situation and an opportunity which needs to be investigated.

Note: All the numbers are calculated from or taken directly from the Annual US BLS Consumer Expenditure Survey.

Let’s get started by looking at the Racial/Ethnic make-up of the U.S.

• The White, Not Hispanic group also includes Native Americans and Pacific Islanders.
• All the growth in number of CU’s came from minorities, +874K while White CU’s decreased by -73K.
• In 2015 the White, Not Hispanic group fell below 70% of the total CU’s for the 1^st time. It continues to decline.
• Asians – smallest share, but the most growth, +2.4%.
• African Americans, the second largest minority had the biggest increase in numbers.
• The Hispanic growth slowed slightly but they are still the largest minority group.

Now let’s take a look at some of the characteristics that we have found to be important in pet spending behavior.

• CU Size – Hispanics have by far the largest CU’s, 28% higher than average. However, in 2019, only 1 and 3 person CU’s spent more on their pets. 4+ people CU’s were down $1.1B
• # Children under 18 – In 2019 Married couples with children spent less with 2 exceptions – oldest child, either under 6 or over 18. Note: With significantly more children per CU than Whites, the minority share of CU’s is sure to grow. This is especially true for Hispanics, even without immigration.
• # Earners– It is more likely that all the adults work in Hispanic or Asian families. With over 40% more kids than Asians and a much lower income, this could be tough for Hispanics.
• Homeownership – Homeowners account for 81.4% of all Pet Spending. The percentage of Hispanics and African Americans that own homes is 34>40% less than Whites. Both are also twice as likely to live in a Center City than in the suburbs. Asians are also likely to be Center City dwellers. The rate of pet ownership is lower in Center Cities.
• Education is an important factor in Pet spending. it generally means higher income and helps in determining value in premium foods and Vet Services. Asians are the leaders. Hispanics have the lowest % of post High School education.

Next, we’ll compare each to the National Avg in Income, Spending, Pet Spending and Pet Share of Total $pending. CU National Averages: Income – $82,852; Total Spending – $62,949; Pet Spending – $593.51; Pet Share – 0.943%

• Asian Americans make and spend the most money…but not on their pets. This may be due to cultural differences.
• African Americans and Hispanics have lower incomes, but their overall spending is relatively in line. However, they spend significantly less on their pets. This is especially true of African Americans and indicates a significantly lower rate of pet ownership. A consumer survey from HUD on emergency disaster planning found this number to be 24%.
• The spending of White Americans is very much tied to income, except where their pets are concerned, then…$$$.

It’s time to look at actual $ spent. We’ll begin with each industry segment which will put the Total Pet $ into better perspective. We will look at 2019 $ as well as a 6 year history. There is a huge disparity in $ between Whites and Minorities but there are also significant differences in key demographic characteristics among the minority groups that affect their spending. We will use multiple graphs to drill deeper into the data. First, Recent Pet Food History…

The graph shows the overall Pet Food Spending history from 2014 to 2019. You see that the White, Not Hispanic group mirrors the Super Premium spending waves, both up and down. On the other hand, Total Minority spending showed steady growth in the premium era until 2019. Their big drop in 2019 could be a late reaction to the 2018 FDA warning. From 2014>2019:

• Pet Food $ were up $7.12B (+30.0%)
• White, Not Hispanics were up $6.28B (+30.1%)
• Minorities were up $0.84B (+26.2%) – Note: In 2018, at their peak, they were up $1.63B (+50.8%).

Until 2019, Minorities showed steady growth in Pet Food Spending during the Super Premium era. They may be slower to react to food trends. Their biggest lift came in 2018 which may parallel the overall lift in 2017 due to a deeper penetration of the upgrade. The 2019 drop may be a late reaction to the FDA warning. Let’s take a closer look at 2019 and the spending history of specific minorities.

In 2019 we saw an overall rebound in Pet Food spending after the drop in 2018 due to the reaction to the FDA warning on grain free dog food. However, this pattern was not true for minorities. All groups were down in 2019. For Hispanics and African Americans, Pet Food spending fell significantly – double digit %. This was probably due to a slower reaction to the 2018 FDA warning. Spending also decreased for the high income, highly educated Asian group. This minor decrease was likely a result of value shopping. The overall minority decrease drove the White CU share of spending up to 88.2%, second only to their share of Veterinary spending. Here are the specifics:

2019 National: Avg CU spent – $236.26 (+$16.34); 2019 Total Pet Food Spending: $31.19B, Up $2.35B (+8.1%)

• White, Not Hispanic – Avg CU spent – $300.59 (+$32.22); 2019 Total Food Spending: $27.14B, Up +$3.13B (+13.0%)
  • There are large subsets in this group which react quickly and strongly to trends in Pet Food.
• Total Minorities – Avg CU spent – $97.10 (-$18.88); 2019 Total Food Spending: $4.05B, Down -$0.79B (-16.3%)
  • Total minorities had consistent growth for 4 years. A delayed reaction to the FDA warning generated a big drop.
• Hispanic – Avg CU spent – $121.06 (-$27.89); 2019 Total Food Spending: $2.30B, Down -$0.44B (-16.1%)
  • They had the biggest $ drop after a big lift in 2018. Both are delayed reactions to the 2017 lift and 2018 drop.
• African Americans – Avg CU spent – $64.67 (-$17.86); 2019 Total Food Spending: $1.05B, Down -$0.32B (-23.4%)
  • Spending began to fall in 2018. Their higher education may have made some more aware of the FDA warning.
• Asians – Avg CU spent – $108.45 (-$1.84); 2019 Total Food Spending: $0.70B, Down -$0.02B (-3.0%)
  • High Income but low pet ownership. Their spending is susceptible to trends but tends to be more stable.
• 2019 Performance = Share of Spending/Share CU’s. Shows if groups are “earning their share”:
  • White, Not Hispanic – 126.9%; Minorities – 41.3%; Hispanics – 54.4%; Asians – 47.0%; African Americans – 25.8%.
  • Note: In 2018: Whites – 120.5%; Minorities – 48.0%; Hispanics – 71.0%; Asians – 53.3%; African Americans – 37.0%
• Spending History – From 2014 to 2019, U.S. Pet Food Spending increased $7.12B (+ 29.6%). There were 2 big spending drops – 2016 & 2018, but 3 major Super Premium waves – 2015, 2017, 2019, that produced this increase:
  • White, Not Hispanic: + $6.28B (+30.1%) Their spending is reflected in the National Pattern.
  • Total Minorities: +$0.84 (+26.2%) Minorities “bought in” to the upgrade but each has a different story.
  • Hispanics: +$0.50B (+27.8%) Their spending basically lags 1 year behind the National pattern and peaked at +52.2% in 2018.
  • African Americans: +$0.13B (+14.1%) They are the only group with 3 consecutive years of increases. Their spending peaked at +65.2% in 2017 then began to fall through 2019, probably in reaction to the FDA warning.
  • Asians: +$0.21B (+42.9%) Had 2 consecutive declining years – 2016 & 2017. Generally small changes but had a big lift in 2018 which peaked their spending at +46.9%.

Although their distinctly different demographics produced different patterns, all minorities have made some level of commitment to upgrading their Pet Food. Now, let’s turn our attention to Pet Supplies. First, 2014>2019 Spending

The graph shows the overall Pet Supplies Spending history from 2014 to 2019. Pet Supplies spending is more discretionary than Food, so it reacts more to price changes. You see major spending dips in 2015 and 2019 due to inflation.  The White, Not Hispanic group mirrors the National pattern.  However, Total Minority spending dropped in both 2018 & 2019. This reflects their price sensitivity as inflation began at mid-year 2018. Overall, from 2014>2019:

• Pet Supplies $ were down -$0.19B (-1.1%)
• White, Not Hispanics were down -$0.57B (-3.9%)
• Minorities were up $0.39B (+17.7%)

Minority Supplies spending reflects their focus on “essential” supplies. The more discretionary items are the most impacted by price swings. Note: White, Not Hispanic Spending peaked in 2018, +16.5%; Minorities, +33.2% in 2017.

Now, let’s take a closer look at 2019 and the spending history of specific minorities.

Prices started up in April of 2018. By the end of 2019 they had inflated 5.7%, the most since the great recession. This had a big impact as discretionary Supplies spending has become more price sensitive to today’s “value conscious” consumers of all income levels. All RacialEthnic groups spent less but the biggest % drops were in the higher income groups. The lower income groups, Hispanics and especially African Americans are more focused on “essential” supplies and less likely to indulge in more discretionary purchases. Minorities have their largest share of $ in Supplies. This is largely due to the lack of major product trends in the segment and their commitment to essential products. Here are the specifics:

2019 National: Avg CU spent – $127.15 (-$23.47); 2019 Total Pet Supplies Spending: $16.81B, Down $2.98B (-15.1%)

• White, Not Hispanic – Avg CU spent – $156.87 (-$31.35); 2019 Supplies Spending: $14.23B, Down -$2.86B (-16.7%)
  • There are large subsets in this group which react quickly and strongly to inflation/deflation.
• Total Minorities – Avg CU spent – $62.30 (-$4.45); 2019 Supplies Spending: $2.59B, Down -$0.13B (-4.8%)
  • Rising prices drove spending in all groups down.
• Hispanic – Avg CU spent – $79.97 (-$5.91); 2019 Supplies Spending: $1.43B, Down -$0.08B (-5.0%)
  • They buy more discretionary supplies but are price sensitive. As prices began to rise in 2018, spending dropped.
• African Americans – Avg CU spent – $45.80 (-$1.31); 2019 Supplies Spending: $0.79B, Down -$0.01B (-0.6%)
  • Their low income limits their discretionary purchases, so the rising prices had little impact on spending.
• Asians – Avg CU spent – $57.44 (-$8.80); 2019 Supplies Spending: $0.36B, Down -$0.05B (-11.2%)
  • Low pet ownership, high income… but value conscious. Their $ also started to drop as prices started up in 2018.
• 2019 Performance = Share of Spending/Share CU’s. Shows if groups are “earning their share”:
  • White, Not Hispanic – 123.4%; Minorities – 49.0%; Hispanics – 62.9%; Asians – 45.2%; African Americans – 36.0%.
  • Note: In 2018: Whites – 125.0%; Minorities – 48.0%; Hispanics – 57.0%; Asians – 44.0%; African Americans – 31.3% The lowest income groups spent less but gained share and improved performance because the Supplies spending drop was in the most discretionary categories, which they are less likely to buy.
• Spending History – From 2014 to 2019, U.S. Supplies Spending fell $0.19B (-1.1%). Despite a deflationary spending increase wave from 2016>2018, two spending drops in 2015 and 2019, caused by inflation produced a net decrease.
  • White, Not Hispanic: -$0.57B (-3.9%) They reflect and drive the National Pattern. $ Peaked at +16.5% in 2018.
  • Total Minorities: +$0.39 (+17.7%) More focused on necessities, but price matters. $ peaked at +33.2% in 2017.
  • Hispanics: +$0.19B (+15.3%) With deflating prices, they expanded their discretionary Supplies purchases, peaking at +30.6% in 2017. However, when prices turned up in 2018, their spending turned down.
  • African Americans: +$0.13B (+19.7%) Surprisingly, the spending changes from 2014>2019 of this lowest income group exactly match the national pattern but are much less volatile because they are focused on essentials.
  • Asians: +$0.05B (+16.1%) Their spending also matched the national pattern until 2018. They have the highest income but are value conscious as $ began to drop when prices turned up in 2018. 2017 Peak was +90.3%

All minorities have a commitment to essential supplies. Discretionary spending increases with income, but all groups are sensitive to some degree to the ongoing deflation/inflation trends in this segment.

Now, let’s turn our attention to Non-Vet Services. First, an overview of 2014>2019 Spending

The graph shows the overall Pet Services Spending history from 2014 to 2019. Services spending is the most discretionary of any segment, so it is very dependent upon income. The two slight spending dips in 2017 and 2019 are the only decreases since the great recession. We should also note that spending increased every year for White, not Hispanics. Drops were caused by Minorities.

Overall, from 2014>2019:

• Pet Services $ were up $2.95B (+52.0%)
• White, Not Hispanics were up $2.53B (+50.6%)
• Minorities were up $0.42B (+62.7%)

With a big expansion in outlets, Services became more accessible. This ultimately drove the huge lift in 2018. Minorities $ peaked at +89.6%. The 2017 dip was due to value shopping. In 2019, rising inflation was a factor for lower income CUs.

Now, let’s take a closer look at 2019 and the spending history of specific minorities.

An increased number of outlets boosted competition and made Services more accessible and convenient for all groups. After a period of low inflation, prices turned up in May of 2018. By the end of 2019 they had inflated 5.6%, double the “normal” rate. It had less of an impact on the higher income groups, whose primary focus is convenience. However, the lower income groups, Hispanics and African Americans, saw double digit drops in Services Spending in 2019.

Here are the specifics:

2019 National: Avg CU spent – $65.22 (-$1.14); 2019 Total Pet Services Spending: $8.62B, Down $0.10B (-1.1%)

• White, Not Hispanic – Avg CU spent – $83.06 (+$0.91); 2019 Services Spending: $7.53B, Up +$0.08B (+1.0%)
  • They held their ground at the new high level even as prices inflated.
• Total Minorities – Avg CU spent – $26.28 (-$4.85); 2019 Services Spending: $1.09B, Down -$0.18B (-14.2%)
  • Rising prices drove spending down in low income groups, which are 85% of all minorities.
• Hispanic – Avg CU spent – $29.68 (-$7.06); 2019 Services Spending: $0.53B, Down -$0.12B (-17.6%)
  • They have higher discretionary spending but are price sensitive. Rising prices caused a sharp drop in spending.
• African Americans – Avg CU spent – $18.08 (-$5.90); 2019 Services Spending: $0.31B, Down -$0.10B (-22.9%)
  • Their low income limits their discretionary purchases, so the rising prices had a big impact on spending.
• Asians – Avg CU spent – $39.17 (+$4.36); 2019 Services Spending: $0.25B, Up +$0.04B (+15.3%)
  • Low pet ownership, but the highest income. They appreciate the convenience – a big increase in $ in 2019.
• 2019 Performance = Share of Spending/Share CU’s. Shows if groups are “earning their share”:
  • White, Not Hispanic – 127.4%; Minorities – 40.3%; Asians – 60.1%; Hispanics – 45.5%; African Americans – 27.7%.
  • Note: In 2018: Whites – 123.8%; Minorities – 46.9%; Asians – 52.5%; Hispanics – 55.4%; African Americans – 36.1% Income truly matters in Services spending. Strong inflation caused a significate drop in share and performance for the lower income minorities while the higher income groups gained ground.
• Spending History – From 2014 to 2019, U.S. Services Spending grew $2.95B (+52.0%). A radically increased number of outlets offering Services made them more accessible and drove sales up in all groups.
  • White, Not Hispanic: $2.53B (+50.6%) A huge share of $ and the only group to increase spending every year.
  • Total Minorities: +$0.42B (+62.7%) Strong growth but price matters. $ peaked at +89.6% in 2018.
  • Hispanics: +$0.25B (+89.3%) They radically expanded their Services purchases. Their spending exactly matched the national pattern, peaking at +132% in 2018 but when prices turned up in 2018, their spending fell sharply.
  • African Americans: +$0.05B (+19.2%) Their spending grew spectacularly from 2015 to 2018, +95.2%. Then prices turned up which had the biggest impact on this lowest income group. Services $ dropped -22.9%.
  • Asians: +$0.12B (+92.3%) They obviously appreciate the increased convenience of Services and they have the money to pay for it. Their Services $ increased +178% from 2017 to 2019.

All Pet Parents appreciate and want the convenience of Pet Services. However, it is the most discretionary of all the industry segments, so income is a definite factor in spending behavior patterns.

Now, let’s look at Veterinary Services. Here is an overview of 2014>2019 Veterinary Spending.

The graph shows the Veterinary Services Spending history from 2014 to 2019. Veterinary spending is a necessary expenditure, but a high inflation rate has made it more dependent upon income. Spending has only fallen once since 2014 and that was driven by minorities. In fact, Minority spending fell in 3 of the last five years but increased every year for White, not Hispanics.

Overall, from 2014>2019:

• Veterinary $ were up $4.22B (+24.0%)
• White, Not Hispanics were up $4.55B (+29.8%)
• Minorities were down -$0.32B (-13.9%)

The growth in this segment has slowed since 2017. You can see the impact of rising prices on Minority spending. There was an inflation spike in 2015 which caused the only overall decrease and the biggest $ drop for minorities.

Now, let’s take a closer look at 2019 and the spending history of specific minorities.

Strong inflation has resulted in a reduction in the frequency of Veterinary visits since the great recession. Much of the segment’s growth has just come from higher prices. In 2019 inflation reached 4.14% so the amount of Veterinary Services actually declined from 2018. The strongly rising prices especially impacted the lowest income group, African Americans. Even though spending in 2019 increased +2.7% for White, Not Hispanics they also had a net decrease in the amount of Veterinary Services. The only “true” gains came from Hispanics and Asians.

Here are the specifics:

2019 National: Avg CU spent – $164.88 (+$3.37); 2019 Veterinary Services Spending: $21.80B, Up $0.58B (+2.7%)

• White, Not Hispanic – Avg CU spent – $218.65 (+$5.93); 2019 Veterinary Spending: $19.83B, Up +$0.52B (+2.7%)
  • Another small gain in dollars, keeping their string of annual increases intact.
• Total Minorities – Avg CU spent – $26.28 (-$4.85); 2019 Veterinary Spending: $1.98B, Up +$0.06B (+3.1%)
  • A small gain due to increased spending by Hispanics and Asians. Minorities also had 0.9M more CUs.
• Hispanic – Avg CU spent – $65.75 (+$13.06); 2019 Veterinary Spending: $1.18B, Up +$0.12B (+27.3%)
  • Inflation and delayed frequency has caused a spending roller coaster. 2019 was an “up” year.
• African Americans – Avg CU spent – $32.97 (-$15.92); 2019 Veterinary Spending: $0.57B, Down -$0.26B (-31.1%)
  • Their low income contributes to even bigger swings in spending. The strong inflation caused a big decrease.
• Asians – Avg CU spent – $35.91 (+$8.61); 2019 Veterinary Spending: $0.23B, Up +$0.06B (+34.7%)
  • They have high income but rising prices have produced a perfect annual up/down spending pattern.
• 2019 Performance = Share of Spending/Share CU’s. Shows if groups are “earning their share”:
  • White, Not Hispanic – 132.6%; Minorities – 28.8%; Hispanics – 39.9%; Asians – 21.8%; African Americans – 20.0%.
  • Note: In 2018: Whites – 131.7%; Minorities – 29.3%; Hispanics – 32.6%; Asians – 16.9%; African Americans – 30.3% Once again the change in frequency made the biggest difference. 2019 brought a big $ drop by African Americans which couldn’t be overcome by significant gains from other minorities. It is somewhat surprising that in a “need” category like Veterinary, White, Not Hispanics have their biggest share of the $. Veterinary care is needed by Pet Parents, but the frequency has become more discretionary.
• Spending History – From 2014 to 2019, Veterinary Spending rose $4.22B (+24.0%). White, not Hispanics have shown consistent growth. Minorities have been on an up & down spending rollercoaster ride which even produced an overall small decrease in spending for the whole Veterinary segment in 2015.
  • White, Not Hispanic: +$4.55B (+29.8%) Over 90% of the business and annual growth since 2014.
  • Total Minorities:-$0.32B (-13.9%) 2 ups and 3 downs since 2014. After 2014, $ peaked at -12.2% in 2017.
  • Hispanics: +$0.62B (+110.7%) They have an up and down pattern but their spending more than doubled. This is great but somewhat deceptive. The frequency variation has caused some extremely high peaks and big drops with lower income groups. Hispanics Veterinary $ fell -$1.23B, -68.7% from 2013>2014, likely from a big drop in frequency.
  • African Americans: -$0.97B (-63.0%) Also up and down spending changes but they have yet to recover from the 55% spending drop in 2015. A spike in Veterinary prices along with frequency issues likely caused that decrease.
  • Asians: +$0.02B (+9.5%) Their spending turned sharply down in 2018. Inflation and reduced visit frequency even affected this highest income group. 2017 Peak was +95.2%

Income matters but inflation affects all income levels. In this necessary segment, Pet Parents don’t stop spending they just cut back on the frequency. White, Not Hispanics have a higher income and the highest level of Pet ownership. The result is that they dominate this segment with over 90% of the spending.

Now, let’s look at Total Pet. Here is an overview of 2014>2019 Spending.

The graph shows the Total Pet Spending history from 2014 to 2019. Each Segment has a different story. The two drops in Total Pet Spending are tied to Food Value Shopping in 2016 and Supplies inflation in 2019. The White, Not Hispanic group mirrored the National pattern until 2019. Total Minority spending dropped in both 2015 & 2019. Their 2019 decrease was large enough that it drove the whole industry down. Overall, from 2014>2019:

• Total Pet $ were up $14.12B (+22.0%)
• White, Not Hispanics were up $12.79B (+22.9%)
• Minorities were up $1.33B (+15.9%)

The Total Pet spending pattern for Whites and Minorities only matched in 2017 & 2018 when both spent more. In the other years they were opposites. Spending peaked for Minorities in 2018 at 28.2%.

Now, let’s take a closer look at 2019 and the spending history of specific minorities.

There were a lot of things going on in 2019. The two biggest factors were the rebound in Pet Food spending after the FDA warning and the high inflation in Supplies prices. The reaction to these and other trends in the industry varied among Racial Ethnic groups. However, income may be the most important demographic difference. The two highest income groups, Whites and Asians spent more on their pets in 2019. However, it wasn’t enough to overcome spending decreases by the lower income groups, Hispanics and African Americans. Here are the specifics:

2019 National: Avg CU spent – $593.51 (-$4.90); 2019 Total Pet Spending: $78.44B, Down $0.16B (-0.2%)

• White, Not Hispanic – Avg CU spent – $759.17 (+$7.72); 2019 Total Pet Spending: $68.73B, Up +$0.87B (+1.3%)
  • They had a huge drop in Supplies but increased $ in other segments, especially Food, with a +$3.1B spending rebound from the 2018 FDA warning.
• Total Minorities – Avg CU spent – $232.65 (-$31.38); 2019 Total Pet Spending: $9.71B, Down -$1.03B (-9.6%)
  • Spending drops by the lower income groups, African Americans and Hispanics, especially in Food and Services, produced a small decrease in Total Pet Industry spending.
• Hispanic – Avg CU spent – $296.46 (-$27.80); 2019 Supplies Spending: $5.44B, Down -$0.38B (-6.5%)
  • Their decrease was primarily driven by a big drop in Food, a delayed reaction to the 2018 FDA warning.
• African Americans – Avg CU spent – $161.52 (-$40.49); 2019 Total Pet Spending: $2.73B, Down -$0.68B (-19.9%)
  • Spending was down in all segments, with the biggest drops in Food and Veterinary.
• Asians – Avg CU spent – $240.97 (+$2.33); 2019 Supplies Spending: $1.54B, Up +$0.03B (+2.0%)
  • Lifts in Services and Veterinary Services overcame drops in Food and Supplies.
• 2019 Performance = Share of Spending/Share CU’s. Shows if groups are “earning their share”:
  • White, Not Hispanic – 127.8%; Minorities – 39.4%; Hispanics – 51.2%; Asians – 41.0%; African Americans – 26.6%.
  • Note: In 2018: Whites – 125.0%; Minorities – 44.2%; Hispanics – 55.4%; Asians – 41.0%; African Americans – 33.6% The lowest income groups, especially African Americans, loss considerable ground in 2019.
• Spending History – From 2014 to 2019, Total Pet Spending grew $14.12B (+22.0%). This period saw a series of up and down spending waves in Food, Supplies and Services. The annual growth was +4.1%, which is considerably below the 7.7% industry average since 1960.
  • White, Not Hispanic:+$12.79B (+22.9%) They drive Pet Spending with only 1 small drop in 2016.
  • Total Minorities: +$1.33 (+15.9%) Different patterns. $ peaked at +28.2% in 2018. Exceeding the rate of Whites.
  • Hispanics: +$1.57B (+40.6%) They have the highest % growth and are the only group that spent more every year from 2015 to 2018. Spending fell in 2019 in all segments but Veterinary. They peaked at +50.4% in 2018.
  • African Americans: -$0.65B (-19.2%) They are the only group with a decrease. This is primarily due to the big drop in Veterinary in 2015. However, they have the lowest income – the biggest factor in Pet Spending. Their spending peaked at +0.9% in 2018, but spending was up 39.2% from 2015.
  • Asians: +$0.41B (+36.3%) They have the highest income, but their spending has been in an up then down pattern every year since 2014. This shows that there are other factors besides income affecting Pet spending.

In 2019 income truly mattered in Pet Spending. However, from 2014>2019 all groups but African Americans increased Pet Spending. Now, we’re going to look a little closer at the most accurate comparison, Spending Performance.

Spending performance is determined by dividing a group’s share of Total $ spent by their share of total U.S. CUs. This factors in both changes in $ spent and in the number of CU so it accurately accounts for the ongoing evolution of both the Pet Industry and U.S. Society.

The graph below shows the annual Total Pet Spending performance of all Racial/Ethnic groups from 2015 to 2019. Total Pet $ grew 15.8% during this time but Minority Pet $ grew 22.3% as they climbed up from their 2015 low point. They were aided by a +7.6% increase in CUs compared to only +1% for whites. It was a tumultuous time in the industry with two down years and big spending swings in many segments. Some of the key industry trends behind those swings were:

• Food: 2015 – the first wave of Super Premium; 2016 – Value Shopping; 2017 – Deeper market penetration of Super Premium; 2018 – FDA warning on grain free dog food; 2019 – Rebound from FDA warning.
• Supplies: 2015 – Cut back on Supplies to pay for upgraded Food; 2016>2018 Prices deflated so spending grew; 2019 – Tariffs cause strong inflation and spending dropped like a rock.
• Services – 2015>2017 rapid expansion of outlets increases availability and competitive pressure, so spending fell in 2017; 2018 – Availability “hits home” and spending explodes. 2019 brings value shopping and spending falls slightly.
• Veterinary – Inflation continues, which reduces visit frequency. Consumers just pay more so Spending goes up.

CU # Change 2015>2019

Whites: +0.9M (+1.0%); Share: 69.9% > 68.6%

All Minorities: +2.9M (+7.6%); Share: 30.1% > 31.4%

Hispanics: +1.2M (+7.1%); Share: 13.0% > 13.6%

African Americans: +1.0M (+6.3%); Share: 12.7% > 13.1%

Asians: +0.7M (+12.7%); Share: 4.4% > 4.8%

• White, Not Hispanic – This group is slowly growing in numbers but losing ground in share of CUs. They are the overwhelming, dominant force in the Pet Industry with 87.6% of Total Pet $ and at least 84.6% of each segment. They have large subgroups, so they are impacted by trends. However, their performance is still up vs 2015.
• Total Minorities – 2019 was a bad year for lower income minorities. Minorities performance had been improving but now it is essentially at the same level as 2015.
• Hispanics – They are the largest minority, with the biggest increase in numbers. Like Whites, they have an up and down performance pattern, but it is the exact opposite. They have lower income and the lowest level of education. It appears likely that they have a slower reaction to industry trends. 2019 was bad for them but they are the only minority group with improved performance over 2015.
• African Americans – The second biggest group with the second largest increase in numbers. They have by far the worst performance. Almost all the cards are demographically stacked against them in pet spending. They have the lowest income and rate of homeownership. They are the most likely to live in a center city, 50+%. In their family life, they are the least likely to be married and most likely to live alone. Also, 32% of all single parent households are African Americans. There is one anomaly, education. Education is usually tied to income. Their lowest income level does not match their level of education – income discrimination? In 2019 their performance fell below 2015.
• Asians – Their CUs are growing, but their performance is down the most from 2015. They have high income and all the key demographics for pet spending. However, they have low pet ownership primarily due to cultural differences.

Our takeaway from this analysis is that Hispanics are likely to continue to make progress. Asians will need to become more Americanized in their pet ownership to drive spending. African Americans may need some assistance or at least an equal opportunity. While their demographic issues are not caused by the Pet Industry, we certainly see their impact. The situation of African Americans is a big problem and a big opportunity – both for our society and the Pet Industry.

 

 

 

 

 

 

 

 

 

 

Time for our monthly update on U.S. retail sales by channel. The current COVID-19 crisis has caused turmoil in the Retail Marketplace. Consumer spending behavior has changed and continues to evolve. In this report we will track the changes and migration between channels. We will do that with data from two reports provided by the U.S. Census Bureau.

The Reports are the Monthly Retail Sales Report and the Advance Retail Sales Report. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – approximately 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.

To get the full picture in our monthly channel update we will look at the latest release of both reports. We will begin with the Final Retail Report from October and then move to the Advance Retail Report for November. This will also allow us to better track the consumers’ evolving spending behavior in terms of channel migration.

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

First, the October Final report. The retail market hit bottom in April then began to recover. October saw a new peak and $ are still growing vs 2019. Here are the major retail groups. (The Data in all graphs is Actual, Not Seasonally Adjusted)

The final total is $1.0B less than the Advance report projected a month ago. All groups were slightly down. Relevant Retail: -$0.4B; Restaurants: -$0.3B; Auto: -$0.2B; Gas Stations: -$0.2B. All groups were up vs September and monthly Total Sales exceeded the previous peak in July. Driven by an exceptionally strong month from Relevant Retail and Auto, YTD Total $ales turned positive for the first time since February. The Auto segment is closing in on 2019 $ but Restaurants and Gas Stations are down -$192B. Relevant Retail remains the only positive group in YTD sales.

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

• Overall – $ in 10 of 11 groups were up vs September and 9 were up vs October 2019 and YTD. A strong month.
• Building Material Stores – Their “Spring” lift continued through Summer and now into Fall. While sales peaked in June, they’re still showing double digit % increases vs 2019. Sporting Goods stores are not included in this group, but they have a similar Spring lift pattern. Their sales took off in May, peaked in June but continued to grow vs 2019. In June, their YTD $ vs 2019 turned positive and by October they were up 14.9%.
• Food & Drug – After slowing in August & September, Supermarket $ were up again in October and are +$66.9B YTD. Drug Stores $ dipped in August but came back stronger in September and October. They’re +$12.4B YTD.
• General Merchandise Stores – $ in Clubs/SuperCtrs bounced back after slowing in September and are up $28.5B vs 2019. $ Stores sales slowed from June>Sept but grew again in October and are now +12.6% vs 2019. Discount Dept. store sales were slowing before the pandemic. This trend has continued despite their small lift.
• Office, Gift and Souvenir Stores – A big lift but still below 2019 $. They were hit hard and have a long way to go.
• Internet/Mail Order – The pandemic has accelerated this channel’s growth vs 2019. Sales hit a new peak in October. Many new consumers have discovered online shopping and the behavior is likely to become habitual.
• A/O Miscellaneous – This is a group of small to midsized specialty retailers – chains and independents. It includes Florists, Art Stores and Pet Stores (22 to 24% of total $). Pet Stores were usually essential, but most stores were not. The others began reopening in May and the number grew in June which produced an increase vs 2019. Sales peaked in July but have stabilized and remain strong vs 2019. In fact, YTD sales are up +10.3%.

The recovery began in May and accelerated in June>July as even more businesses began to re-open. The Relevant Retail Segment was positive in all measurements in May>July. In August>September $ slowed but were still strong vs 2019. In October sales grew to a new peak. The key drivers in the positive numbers vs 2019 remain the Internet, Supermarkets, SuperCtrs/Clubs/$ Stores and Hdwe/Farm.  How are things progressing? Here are the Advance numbers for November.

April and May were the 2 biggest spending drops in history. In June, monthly sales increased for the first time since February and continued to grow in July. $ fell in Aug/Sept. but in October, all groups spent more, turning YTD Total Retail positive for the 1^st time since February. $ dipped in November but not vs 2019 so the YTD $ vs 2019 increased.

Total Retail – Total Retail spending fell -$7.3B vs October but was up $13.5B vs November 2019. In February 2020 sales were up $60B, +6.6% YTD versus 2019. Then came COVID-19. We hit bottom at -$112B in May and began moving in the right direction. We broke even in October and are now up $14.5B in November but still down -$44.5B from February.

Restaurants – Spending fell -$6.5B from October and -$12.0B vs November 2019. $ales usually drop in November, but not -11.4%. Things remain Topsy Turvy. January and February, normally the 2 slowest months, are on top in 2020. In February YTD sales were up $9B. Then came the forced closures. Re-openings began in May but have run into problems with a resurgence of the virus. Delivery/Pickup can’t make up the difference as spending is now down $135.8B YTD.

Automobile & Gas Stations – When you are staying home your car becomes less of a focus in your life. Auto Dealers began combating this attitude with fantastic deals and a lot of advertising. Monthly $ turned positive versus 2019 in June and have maintained this pace. Although sales dipped in November, this group is now +0.01% YTD vs 2019. Gas Station $ales increased in May>July but fell in August & September. They turned up again in October but were down 10.4% in November. This group is now -$75.4B YTD. People are still not driving as much, for commuting or road trips.

Relevant Retail – Less Auto, Gas and Restaurants – Many non-essential businesses shuttered their doors in March but there was also a rash of binge/panic buying for “necessities” and a big lift in groceries as consumers focused on home cooking which drove spending up $19B. April brought a full month of closures and an end in binge buying, spending dropped $34B from March. In May, the overall market began to reopen so spending began to move in the right direction and this growth continued through July. $ales fell in Aug/Sept but turned up again in Oct/Nov. We should note that the monthly June>November $ are larger than all months in 2019 but December. The primary drivers have been Nonstore, Grocery and SuperCenters/Clubs & $ Stores along with an “extended” spring lift from the Hardware/Farm and Sporting Goods channels. The Relevant Retail group now has posted positive numbers versus last year and year to date for 7 consecutive months and is up $225.6B YTD (+6.8%) vs 2019. In May when the streak began, it was up +2.7%.

Now let’s look at what is happening in the individual retail channels across America. In November, consumer spending in the relevant retail market grew even more positive versus 2019. Let’s see where the $ came from. These groups are less defined than in the Final Monthly reports and we will look across the whole market, not just pet relevant outlets.

In October 11 of 13 channels beat last months $. In November it was down to 9. In September & October 10 channels beat the same month in 2019. This number dipped to 9 in November. In YTD $, 8 are showing an increase, the same as in September & October. The YTD decreases are coming from channels that are primarily nonessential businesses.

After April’s widespread closures there was a retail surge in May. Things truly opened up in June & July and sales continued to increase. In August & September, they slowed then grew again in October & November. Relevant Retail Channels are up $225.6B vs 2019. The essential channels are responsible for the YTD lift vs 2019, primarily:

• Nonstore Retailers – Even more consumers are online shopping.
• Food & Beverage, especially Grocery– Restaurant $ are still down so consumers continue to eat & drink at home.
• Bldg Materials/Garden/Farm– A big Spring lift continues into the Summer/Fall as consumers focus on their home.
• SuperCtrs/Club/Value/$ Strs – Sales slowed in April but came back in May and continue to grow vs 2019. This group turned the whole Gen Mdse channel positive. It clearly shows that value is still a consumer priority.

Regarding the Individual Large Channels

General Merchandise Stores – Sales grew as we move into the Christmas lift for GM. However, sales for both Regular and Discount Department were fading before the crisis. Club/SuperCtr/$ stores are still the big positive force. In April consumers dialed back their panic buying and spending on discretionary items was also down significantly. Since May we have seen consumer spending return to a more normal, strong pattern in the big and small stores that promise value.

Food and Beverage, plus Health & Personal Care Stores – Although $ were flat, the Grocery segment is still strong, +$70.9B YTD, due to the continuing big drop in restaurant sales. Monthly Sales fell in the Health, Personal Care group but have been up vs 2019 since June. Since August, the YTD $ have been positive. Drug Store $ growth was a key factor.

Clothing and Accessories; Electronic & Appliances; Home Furnishings – Except for September, monthly sales have grown every month since May. All groups increased sales vs October with Electronics/Appliances leading the way at +23.2%. All 3 channels are down significant percentages in YTD sales. Clothing Stores are by far the worst performers. In November they were down 19.2% vs November 2019 and 28.5% YTD. Together, these groups are down $85B vs 2019.

Building Material, Farm & Garden & Hardware – Sales peaked in late spring, as usual. However, this channel continues to benefit from consumers turning their focus to their home needs, including house and yard repair and improvements. This has extended their “Spring” lift into the Fall. $ were up 17.2% vs November 2019 and up +$47.6B (+13.4%) YTD.

Sporting Goods, Hobby and Book Stores – Book and Hobby stores are open and sales in Sporting Goods stores have taken off as Consumers are seeking outdoor recreation. Sales reached a new peak in November, up 10.1% vs last month and 14.0% vs November 2019. The $ exceeded all months in 2019, but December. In April YTD $ were -$3.4B. This deficit was wiped out in September and through November, YTD sales were +$3.0B (+4.3%). Their holiday lift has begun.

All Miscellaneous Stores – This group is mostly small to medium specialty stores – both chains and independents. Pet Stores are essential but most other stores are not, so closures hit this group particularly hard. Sales hit bottom at -$3.8B in April then began to rebound in May and grew through July when they finally beat the monthly sales for 2019. In Aug>Sept sales plateaued. They turned up in October but are down again in November. In February, this group was up $2.6B YTD. Through November they are down -$2.7B, a difference of $5.3B. Recovery will be a long journey.

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV businesses. The COVID-19 crisis has only accelerated the ongoing movement to online retail. In February NonStore was up 8.6% YTD. In November monthly sales were the highest for any month in history and they are now up 22.6%, +$158.5B YTD. Their increase is 70% of the total $ increase for Relevant Retail Channels. They are the clear leader, and their performance far exceeds their 12.9% annual increase in 2019. 2020 has become a key turning point for NonStore Retailers.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded along with their store sales in their regular channel. Whether they are up or down, their online sales are included in the totals.

Recap – April and May saw the 2 biggest year over year monthly sales declines in history. Restaurants, Auto and Gas Stations increased sales from May through July, but results have been mixed since then. All were down in September, up in October and down again in November. The Auto segment drew even in YTD $ vs 2019 in November but Restaurants and Gas Stations are still struggling. The Relevant Retail segment has been the only true positive. Sales slowed in Aug>Sep. but then began grow again, peaking in November. Their Monthly and YTD sales vs 2019 are now up for 7 consecutive months. Overall, they are +$225B YTD but for some segments in this group there is still a long way to go. Total Retail Sales peaked in October. Although $ dropped in November, Total Retail continued to exceed 2019. YTD Total Retail is now up +$14.5B (+0.3%) vs 2019. Unfortunately, the virus is surging, and retail restrictions are being reimposed in many areas. This will be a long battle. We will continue to monitor the data and provide you with regular updates.

 

 

 

 

Veterinary Services is the 2nd largest segment in the Pet Industry. High inflation, 3.5+%, caused a reduction in Veterinary visits from 2014>2016. In 2017 inflation slowed markedly (+2.2%) and consumers responded. In 2018 prices turned upward (+2.6%) and spending plateaued. In 2019 inflation was up +4.1% and Veterinary Spending reached $21.80B – Up $0.58B (+2.7%) from 2018. However, considering inflation, “real” spending was actually down -1.4%. In this report, we’ll take a closer look at the demographics behind the 2019 numbers. (Note: All 2019 numbers in this report come from or are calculated by using data from the US BLS Consumer Expenditure Interview Survey, rather than their Diary report. The low frequency of Veterinary Visits is still generating an exceptionally high variation on the data collected by the Diary method. Interview seems to be a more logical and accurate way to track Veterinary Service Expenditures.)

Let’s get started. Veterinary Spending per CU in 2019 was $164.88, up slightly from $161.51 in 2018. (Note: A 2019 Pet CU (67%) Spent $246.09) More specifically, the increase in Veterinary spending came as a result of:

• 0.6% more CU’s
• Spending 0.5% less $
• …2.6% more often

We’ll take a closer look. But first, the chart below gives an overview of recent Veterinary Spending.

The big spending drop in the first half of 2015 coincided with the upgrade to Super Premium Foods – Trading $. Then consumers began value shopping for Premium Foods. The subsequent savings freed up $ for Veterinary Services. Spending began to climb until it flattened out at the beginning of 2017. In 2017, Veterinary inflation slowed markedly in the second half. The result was that spending literally “took off”. In 2018 prices turned up again. Consumers responded by essentially “holding their ground” through 2019. There is some price sensitivity in Veterinary Services Spending.

Now, let’s look at Veterinary spending by some specific demographics. First, here is a chart by Income Group

Although not as pronounced as Pet Services, Veterinary Spending is driven by income, 2019 was “mixed”. The only decrease came from the $100>150K income group and the biggest lifts were from <$30K & $70>100K.

National: $164.88 per CU (+2.1%) – $21.8B – Up $0.58B (+2.7%)

• Over $150K (13.3% of CUs) – $365.23/CU (-3.6%) $6.40B, Up $0.08B (+1.3%) This highest income group is the biggest driver in Veterinary Spending as 13.3% of CUs generated 29% of 2019 $. Their $ were basically flat in 2019.
• $100>150K (13.8% of CUs) – $214.43/CU (-17.8%) $3.91B, Down $0.59B (-13.1%) This middle/upper income group reacted strongly to the slowed inflation rate in 2017 but as prices turned up, their spending slowed then fell in 2019.
• $70K>100K (14.5% of CUs) – $217.10/CU (+12.9%) $4.15B, Up $0.48B (+13.1%) Their spending has steadily grown since 2016. In 2019, they had the 2^nd biggest increase overall and largest of any over $70K group.
• $30K>70K (31.5% of CUs) – $119.35/CU (-1.8%) $4.97B, Up $0.02B (+0.5%) This is the 2^nd largest group in Veterinary $ and their spending pattern is remarkably similar to the big spending $150K+ group. Vet $ were flat in 2019.
• Under $30K (27.0% of CUs) $66.43/CU (+39.8%) $2.37B, Up $0.58B (+32.3%) This group is very price sensitive. After an increase in all segments in 2017, they dialed back their pet spending on Food and Veterinary Services in 2018. They recovered 75% of the Veterinary drop in 2019 but are still 25% below their Veterinary Spending in 2015.

Now, here is Veterinary Spending by Age Group

The drop came from 45>64 yr olds while the younger and older groups spent more.

National: $164.88 per CU (+2.1%) – $21.8B – Up $0.58B (+2.7%)

• <25 (5.5% of CUs) – $92.98/CU (+3.8%) – $0.68B – Up $0.002B (+0.3%) This youngest group is getting serious about the responsibilities of Pet Parenting. While spending was flat in 2019, It is up +134% since 2015. 3.4% fewer CUs spent 9.9% more $ 5.5% less often.
• 25>34 (16.1% of CUs) – $123.75/CU (+4.6%) – $2.63B – Up $0.11B (+4.2%) The commitment of these Millennials to their pets is growing. Their Veterinary $ ticked up in 2019 after being stable for 2 years. 0.3% fewer CUs spent 0.2% less $ …but 4.8% more often.
• 35>44 (16.9% of CUs) – $226.62/CU (+30.2%) – $5.06B – Up $1.23B (+32.2%) In 2018, these mostly Gen Xers significantly ramped up their spending on Veterinary Services. This commitment accelerated in 2019 as they moved to the top in Veterinary spending. 1.5% more CUs spent 25.9% more $ …3.4% more often
• 45>54 (16.8% of CUs) – $186.75/CU (-20.5%) – $4.16B – Down $1.25B (-23.2%) This group has the highest income, but value is still a big driver. In 2017, the radically slowed inflation caused them to spend significantly more money and more often. In 2018, prices turned up and continued to inflate in 2019. They hit a wall as spending dropped precipitously and they fell from the top spot in Veterinary $ and even below their 2015 numbers. 3.3% fewer CUs spent 19.1% less $…1.8% less often
• 55>64 (18.6% of CUs) – $185.24/CU (-5.2%) – $4.55B – Down -$0.23B (-4.8%) This group is all Baby Boomers and was the leader in Veterinary Spending prior to 2015. In 2015 they upgraded to Super Premium Food and Vet Spending fell. In 2016 they began to spend more again on Veterinary Services. In 2017, as inflation significantly slowed, they regained the top spot… but not for long. In 2018 Veterinary prices began to strongly inflate again. Their spending fell and continued the downward spiral into 2019. 0.3% more CUs spent 4.2% less $…1.0% less often
• 65>74 (14.9% of CUs) – $163.32/CU (+9.1%) – $3.22B – Up $0.33B (+11.3%) This group is growing in numbers and very price sensitive. 90% are Boomers so they are committed to their pets. Despite rising prices, they significantly increased the frequency of purchase and their spending grew. 2.1% more CUs spent 3.0% less $…12.4% more often
• 75> (11.2% of CUs) – $101.63/CU (+25.3%) – $1.50B – Up $0.39B (+35.2%) This group of oldest Pet Parents has a strong commitment to their pets – in 2015 a $1B increase in Veterinary Spending. In 2016, they upgraded their food. In 2017 they increased spending in Food, Supplies and Services. In 2018, they turned their attention back to Veterinary and in 2019 they had increases in all but Supplies. 7.9% more CUs spent 14.9% more $…9.1% more often

Now, let’s take a look at some other key demographic “movers” behind the 2019 Veterinary Spending numbers.

Veterinary spending increased by $0.58B (+2.7%) in 2019. However, considering the 4.1% inflation rate, the amount of Veterinary Services was actually down 1.4% for the year. 2019 was a “mixed positive bag”. 56 of 96 demographic segments (57.3%) spent more on Veterinary Services while 40 segments spent less. There was less turmoil than in the other segments as only 4 flipped from first to last or vice versa while 7 segments maintained their position from 2018.

There were also some of the “usual” winners and losers. On the winning side were Homeowners with mortgages, White, Not Hispanic CUs, Advance College Degrees, 2 Earners and Suburban Areas over 2500 Population.

The “usual” losers were fewer in number and included: Single Parents, African Americans and Homeowners w/o Mtges.

That means that there were also some Surprises:

• Winners: Singles, 1 Person, 35>44 yr olds, Millennials/Gen Z, <$30K, Tech/Sls Clerical Workers
• Losers: 2 People, Suburban <2500, 45>54 yr olds, Mgrs & Professionals, $100>149K, Boomers.

In our earlier analysis we saw evidence in spending increases by income and by age groups. This data reinforces those results. Although the lift was relatively widespread by income, the bulk of the lift was coming from lower incomes.

• Singles/1 Person
• Tech/Sls/Clerical
• Millennials/Gen Z
• Under $30K

These winners reflect the strength of lower income groups in Veterinary Spending in 2019.

The trend in age groups was a drop in the 45>64 yr olds, with a lift in the older and especially the younger groups. These winning groups tend to be younger. Those marked with an * tend to be either younger or older.

• * Single/1 Person
• 35>44 yr Olds
• 2 Earners
• Millennials/Gen Z
• Tech/Sls/Clerical
• * Under $30K

You can see that the Age spending trend is clearly reflected in the details.

One of the biggest trends of note is the ongoing decline in Baby Boomer Veterinary Spending. This group, which fueled the growth of the Pet Industry has now had the biggest decline in Veterinary Spending for 2 consecutive years.

The Younger groups are definitely stepping up in Pet Spending. The 35>44 yr olds took over the top spot in Veterinary spending in 2019. However, it is even more important to note that the groups born after 1964 – Gen X/Millennial/Gen Z have increased their Veterinary Spending by over $3B since 2017. The Boomers are the biggest Pet Spenders because of their numbers and will be a force in the industry for years to come, but the “torch” is slowly but surely being passed.