Spending, CPI, demographics of overall market

2019 U.S. TOTAL PET SPENDING $78.44B…Down ↓$0.16B

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In 2019 Total Pet Spending in the U.S. was $78.44B, a $0.16B (0.2%) decrease from 2018. This decrease comes after 2 years of increases. As usual there were many factors behind the numbers, including some outside the control of the industry. Pet Food bounced back after the 2018 FDA warning regarding grain free dog food. However, the new tariffs on supplies had a huge negative impact on spending. Veterinary prices continued to rise. Spending was up slightly but the amount purchased by consumers actually fell. The Services segment $ declined slightly but essentially held its ground at the new high level established by record spending in 2018. Here are the $ changes:

  • A $2.35B (+8.1%) increase in Food
  • A $2.98B (-15.1%) decrease in Supplies
  • A $0.58B (+2.7%) increase in Veterinary
  • A $0.10B (-1.1%) decrease in Services

Let’s see how these numbers blend together at the household (CU) level. In any given week, 27.1 Million U.S. CU’s (1/5) spent money on their Pets – food, supplies, services, veterinary or any combination – down from 27.2M in 2018.

In 2019, the average U.S. CU (pet & non-pet) spent a total of $593.51 on their Pets. This was a small -0.8% decrease from the $598.41 spent in 2018. However, this doesn’t “add up” to a 0.2% decrease in Total Pet Spending. With additional data provided from the US BLS, here is what happened.

  • 0.6% more CU’s
  • Spent 0.1% more $
  • 0.9% less often

If 67% of U.S. CU’s are pet parents, then their annual CU Total Pet Spending was $885.84. Now, let’s look at the recent history of Total Pet Spending. The rolling chart below provides a good overview. (Note: All numbers in this report come from or are calculated by using data from the US BLS Consumer Expenditure Surveys – The 2016>2019 Totals include Veterinary Numbers from the Interview survey, rather than the Diary survey due to high variation)

  • We should note a 3 year pattern since 2010. 2 years of increases (yr 1 the largest) followed by a small decrease.
  • In 2014-15, the Food upgrade began, but early in 2015 consumers were trading $ in other segments to pay for it.
  • In 2016, they were intensely value shopping for super premium foods. They started spending some of this saved money on Supplies and Veterinary Services, but not quite enough as spending fell slightly for the year.
  • In 2017, spending took off in all but Services, especially in the 2nd half. Consumers found more $ for their Pets.
  • In 2018 a spectacular lift in Services overcame the FDA issue in Food, tariffs on Supplies and inflation in Veterinary.
  • In 2019 a bounce back in Food and small lift in Veterinary couldn’t overcome the drop in Supplies from “tarifflation”.

Now we’ll look at some Demographics. First, 2019 Total Pet Spending by Income Group

Spending was down under $70K but mixed in the higher income groups, with $100>150K down and the others up.

Nationally: · Total Pet: ↓$0.16B· Food: ↑$2.35B  · Supplies: ↓$2.98B  · Services: ↓$0.10B  · Veterinary: ↑$0.58B

  • < $70K – (58.5% of U.S. CUs); CU Pet Spending: $364.24, -4.9%; Total $: $27.98B, ↓$1.90B (-6.4%) ..
    • Food ↓$0.63B
    • Supplies ↓$1.62B
    • Services ↓$0.26B
    • Veterinary ↑$0.60B

Money matters a lot to this group, especially to those on the low end. You can see the impact of inflation in Supplies and Services. The drop in Food spending is a late reaction to the FDA warning by Retirees ($30>39K). The big lift in Veterinary comes mosstly from the <$30K group who were catching up after a big decrease in 2018.

  • >$70K – (41.5% of U.S. CUs); CU Pet Spending: $913.12, -0.2%; Total $: $50.46B, ↑$1.74B (+3.6%) from…
    • Food ↑$2.97B
    • Supplies ↓$1.37B
    • Services ↑$0.16B
    • Veterinary ↓$0.03B
  • This group continues to grow, up 3.5% in 2019. This accounted for almost all of their spending increase. They also show that income remains the single biggest factor in Pet Spending. 41% of U.S. CUs spent 64% of Total Pet $. They led the recovery in Food but were still impacted by Supplies prices. Services $ were up but Vet $ were flat.
  • < $30K – (27.0% of U.S. CUs); CU Pet Spending: $262.84, +1.4%; Total $: $9.13B, ↓$0.34B (-3.6%) from…
    • Food ↓$0.23B
    • Supplies ↓$0.63B
    • Services ↓$0.07B
    • Veterinary ↑$0.58B

This lowest income group demonstrated their price sensitivity again in 2019. However, they are committed to their pets which is shown by their rebound in Vet Spending, +$0.58B, after a -$0.7B drop in 2018.

  • $30>$70K – (31.5% of CUs); CU Pet Spending: $448.48, -9.2%; Total $: $18.85B, ↓$1.56B (-7.6%) from…
    • Food ↓$0.40B
    • Supplies ↓$0.99B
    • Services ↓$0.19B
    • Veterinary ↑$0.02B

This low to middle income group is also by necessity price sensitive. You see this in the drops in Supplies and Services. The drop in Food $ comes from Retirees’ ($30>39K) delayed reaction to the FDA warning. They did eke out a small, but second consecutive annual increase in Vet $. They are also committed to their pets.

  • $70>$99K – (14.5% of CUs); CU Pet Spending: $737.70, +10.0%; Tot $: $14.15B, ↑$1.23B (+9.5%) from…
    • Food ↑$0.62B
    • Supplies ↓$0.02B
    • Services ↑$0.15B
    • Veterinary ↑$0.48B

This upper middle income group had a minimal negative reaction in Supplies and strong increases in all other segments. They were the best performing Pet Spending income group in 2019.

  • $100K>$149K– (13.8% of CUs); CU Pet Spend: $803.77, -8.1%; Tot $: $14.92B, ↓$0.42B (-2.7%) from…
    • Food ↑$0.74B
    • Supplies ↓$0.67B
    • Services ↑ $0.10B
    • Veterinary ↓$0.59B

They were the Star of the income groups in 2015 and 2017. In 2016, they were the worst performers. 2018 saw increases in all segments but food. 2019 brought big increases in Food & Services while Vet & Supplies fell. Veterinary is a surprise. They have the money to fulfill their needs or wants, but are still very “value” conscious.

  • $150K> – (13.3% of CUs); CU Pet Spending: $1219.98, -1.5%; Total $: $21.38B, ↑$0.93B (+4.5%) from…
    • Food ↑$1.61B
    • Supplies ↓$0.67B
    • Services ↓$0.09B
    • Veterinary ↑$0.08

Money Matters! They are the proof. They are the best performing income group in Total Pet Spending with 13.3% of U.S. Households generating 27.3% of all Pet $. They are also the only income group to increase annual Pet Spending every year since 2015. In fact they have furnished 69% of the Pet Industry’s $10.7B spending increase since 2015. This group is also growing. They added 0.8 million CUs in 2019, a 5.0% increase. In fact, their $0.93B increase was driven by the additional CUs. It does demonstrate that pet spending grows with consumers’ income, especially once you reach the $150K+ level.

Income Recap –  The top 2 drivers in consumer spending behavior are value (quality + price) and convenience. That makes income , especially disposable income very important in Pet Spending. Overall we see a big difference in pet spending behavior at the opposite ends of the income spectrum. The <$30K group has been trending down and is now below their 2015 $. On the other hand, the $150K+ group has increased Pet Spending every year since 2015. In 2019 the increase/decrease spending dividing line is basically $70K. This line is somewhat deceptive and not rigid. While the recovery in Food was only in the $70K+ groups, tarifflation drove Supplies spending down in all groups. <$70K also spent less on Services but so did the $150K+ group. Veterinary spending increased in every income level but $100>150K CUs. 2019 Total Pet Spending was definitely mixed when we look closer at the income groups.

Next let’s look at 2019 Total Pet Spending by Age Group

Totally mixed results. The groups literally flipped up or down with every change in 10 year segment.

Nationally: · Total Pet: ↓$0.16B · Food: ↑$2.35B  · Supplies: ↓$2.98B  · Services: ↓$0.10B  · Veterinary: ↑$0.58B

  • <25 – (5.5% of U.S. CUs); CU Pet Spending: $336.22, -5.4%; Total $: $2.50B, ↓$0.29B (-10.5%) from…
    • Food ↓$0.36B
    • Supplies ↑$0.20B
    • Services ↓$0.13B
    • Veterinary ↑$0.002B

This youngest group dialed back spending on Food & Services which produced their 1st Total Pet decrease in 5 yrs.

  • 25-34 – (16.1% of U.S. CUs); CU Pet Spending: $455.67, -6.8%; Total $: $9.86B, ↓$0.48B (-4.7%) from…
    • Food ↑$0.10B
    • Supplies ↓$0.65B
    • Services ↓$0.04B
    • Veterinary ↑$0.11B

These Millennials broke a 5 year pattern of increases. The drop was driven by Supplies. The other segments were relatively stable. Many are just starting households, so the fast rising Supplies’ prices were a big turnoff.

  • 35-44 – (16.9% of CUs); CU Pet Spending: $668.50, +1.3%; Total $: $14.85B, ↑$0.39B (+2.7%) from…
    • Food ↑$0.40B
    • Supplies ↓$0.82B
    • Services ↓$0.43B
    • Veterinary ↑$1.23B

This group has the largest families and is in the middle of building their careers. This makes them very sensitive to value. You see this with the drops in the inflating, discretionary segments, Supplies & Services. However, they have a growing commitment to their pets which is evident from the big lifts in Food & Veterinary Spending.

  • 45-54 – (16.8% of U.S. CUs); CU Pet Spending: $761.74, -1.0%; Total $: $17.01B, ↓$0.71B (-4.0%) from…
    • Food ↑$1.20B
    • Supplies ↓$0.75B
    • Services ↑$0.09B
    • Veterinary ↓$1.25B

This group has the highest income and occupies the top spot in CU Pet Spending. In 2018 they were briefly the leaders in Total Pet $ but they fell to #2 in 2019 because of a $2B decrease in Veterinary and Supplies spending. They are not “out of the running” yet. They had the biggest increase in Food $. We’ll see what 2020 brings.

  • 55-64 – (18.6% of U.S. CUs); CU Pet Spending: $723.79, +2.0%; Total $: $17.79B, ↑$0.29B (+1.7%) from…
    • Food ↑$0.81B
    • Supplies ↓$0.35B
    • Services ↑$0.07B
    • Veterinary ↓$0.23B

These younger Baby Boomers are especially reactive in Food trends, up or down. They are committed to their Pets but value is also an important factor. They reacted negatively to inflated prices in the Supplies and Veterinary segments but still appreciated the convenience of Services. The result was a small increase in Total Pet $.

  • 65-74 – (14.9% of U.S. CUs); CU Pet Spending: $572.02, -2.7%; Total $: $11.21B, ↓$0.08B (-0.7%) from…
    • Food ↑$0.09B
    • Supplies ↓$0.50B
    • Services ↑$0.008B
    • Veterinary ↑$0.33B

This group is growing, +2.1%. Many are retired and now 90% are Baby Boomers. They are careful with their money, but their commitment to their pets is very apparent as 1.04% of their total spending is on their companion animals. Their strong reaction to Supplies Price Inflation overcame small increases in every other segment.

  • 75> – (11.2% of U.S. CUs); CU Pet Spending: $364.25, +9.5%; Total $: $5.21B, ↑$0.73B (+16.3%) from…
    • Food ↑$0.11B
    • Supplies ↓$0.11B
    • Services ↑$0.34B
    • Veterinary ↑$0.39B

Pet Parenting is more difficult, and money is tight for these oldest Pet Parents, but their commitment is still there. They were negatively impacted by Supplies price increases but increased their spending in the other segments. The lift was especially strong in both Service segments and pushed them to the biggest increase in Total Pet $.

Age Group Recap: There was an age spending pattern, but it was unusual. Over age 25, spending flipped up or down with every change in 10 year age group. This produced an unusual winner, 75+ year olds and an unusual loser, the high income, 45>54 year olds. There were some patterns within segments. Everyone over 25 spent more on Food and less on Supplies. The drop in Services came from those under 45. Veterinary Spending increased in all age groups except the 45>64 year olds.

Next, we’ll look at the biggest winner and loser in each demographic category. In some cases, a clear spending pattern is evident. In those situations, segments are bundled together to reflect their shared spending behavior.

Key Demographic “Movers” for 2019.

In 2019, 50 of 96 Demographic Segments (52%) spent more on their Pets. Usually, this would produce an increase, but the size of the drops outweighed the increases, so spending fell -$0.16B (-0.2%). Let’s look at some specifics:

CU Size – 2+ are the “usual” winners but not in 2019. Singles and 3 person CU’s produced the only positives.

# of Earners – More earners usually means more income and increased pet spending. That was partially true in 2019 as 2 earners led the way. However, the results were mixed in other CUs with 1 earner, 2+ CUs finishing on the bottom.

CU Composition – An unusual result – with Singles the clear winner. They tend to be in the younger or older age groups. Married, with children CUs had mixed results. The big surprise was Married Couples only CUs, normally strong performers, were at the bottom along with Single Parents who are no strangers to the bottom of the spending ladder.

Income – While the $100>149K group spent less, the major income dividing line in Pet Spending was over/under $70K.

Generations – The results were split among age groups within generations. The older Millennials and younger Gen Xers spent more as did younger Boomers and those  born before 1940. This couldn’t quite make up for the drop in spending by the older Boomers and the younger Silent Generation. Generational spending reflects the mixed bag in Total Pet $ in 2019. However, Boomers’ pet spending was down for the second consecutive year.

Region – The Northeast spent more. All other regions spent less. Although the only significant drop was in the Midwest.

Housing – Another clear divide – Homeowners ↑$; Renters ↓$

Education – Another reflection of turmoil – Adv Degree ↑$; BA/BS ↓$. Note: Less than College Grads were up $0.14B.

Racial/Ethnic – A clear racial/ethnic divide – White, not Hispanic were up +1.3%. African Americans and Hispanics combined were down -11.4%, with 65% of the decrease coming from African Americans. Note: Asians were +1.6%.

Occupation – A reversal of expectations – Lower level white collar employees spent more while their bosses spent less.

Age– As noted: Age groups had no clear pattern. 45>54 yr old Gen Xers were down while the oldest group spent more.

Area – Another simple divide: Suburbs over 2500 population, which account for 45% of CUs and 46% of Total Pet $ spent more. All other areas – Center City, Small Suburbs and Rural spent less.

Finally: Pet Spending turned slightly down in 2019. The driver was the truly widespread drop in Supplies Spending as we saw the full impact of added tariffs hit home. There was some good news as Food began recovery from the 2018 FDA grain free warning and Veterinary again posted a small increase. Also, while Services spending was down slightly, the segment held its ground at its new elevated level. 2019 Pet Spending was a truly mixed bag with few clear trends.

 

 

 

 

2019 U.S. VETERINARY SERVICES SPENDING $21.80B…UP ↑$0.58B

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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 2nd 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 2nd 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.

 

2019 U.S. PET SERVICES SPENDING $8.62B…Down ↓$0.10B

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Except for a small decline in 2017, Non-Vet Pet Services has shown consistent growth in recent years. In 2018, that changed as spending grew a spectacular $1.95B to $8.72B. The number of outlets offering Pet Services has grown rapidly and consumers have opted for the convenience. However, prices were also strongly increasing. In the 2nd half of 2019 spending turned down. The final 2019 $ were $8.62B, down $0.1B (-1.1%). In this report we will drill down into the data to see what groups caused this slight decline . (Note: All numbers in this report come from or are calculated by using data from the US BLS Consumer Expenditure Surveys)

Services’ Spending per CU in 2019 was $65.22, down from $66.36 in 2018. (Note: A 2019 Pet CU (67%) Spent $97.34)

More specifically, the 1.1% decrease in Total Pet Services spending came as a result of:

  • 0.6% more households
  • Spending 2.39% less $
  • 0.69% more often

The chart below gives a visual overview of recent spending on Pet Services

You can see that after the big lift in 2018, spending essentially flattened out in 2019, similar to the pattern for the 18 months from mid-2016 through 2017. The increased availability and convenience of Services has radically driven up the spending on Services. This happened despite a return to a more normal inflation rate, +2.4%, as more people opted to use Pet Services and to do it more often. However, inflation grew even stronger, +2.5%. By the 2nd half of 2019, it made an impact as spending declined for the 1st time in 18 months. Now, let’s look at some specific spending demographics.

First, by Income Group.

In 2018, all income groups increased spending. In 2019 the middle income group, $70>150K, spent more but the lower, <$70K, and upper, $150K+ spent less. Most of the decrease (74%) came from the <$70K group and spending by the <$30K group actually fell below the level in 2015.

  • <30K (28.7% of CU’s) – $19.68 per CU (-3.7%) – $0.70B, Down $0.07B (-8.9%) – This segment is getting smaller and money is tight, so Services spending is less of an option. In 2019 their Services $ fell to 9% below 2015.
  • $30>70K (31.0% of CU’s) – $34.90 per CU (-13.5%) – $1.45B, Down $0.19B (-11.4%) – This group had the biggest decrease in Total Pet spending and Services $. Like the Supplies segment, their spending pattern mirrors $150K+.
  • $70>100K (14.5% of CU’s) – $65.00 per CU (+13.5%) – $1.24B, Up $0.15B (+13.8%) – Their spending has slowly but consistently grown since 2016. They had the biggest $ increase in Services and Total Pet. Note: They were the only group with an increase in spending per CU.
  • $100>150K (13.8% of CU’s) – $108.40 per CU (-0.2%) – $1.98B, Up $0.10B (+5.5%) – They have shown the strongest, most consistent growth since 2016. Total Pet spending was down but Services and Pet Food spending were up.
  • $150K> (13.3% of CU’s) – $185.43 per CU (-7.5%) – $3.25B, Down $0.09B (-2.8%) – They have a couple of minor spending dips, including 2019. However, this is who spends the big bucks on Services – up over $1B since 2015.

Now, let’s look at spending by Age Group.

All age groups spent more on Services in 2018. In 2019 there was a clear dividing line. The groups under 45 spent less on Services (Big loser: 35>44, -$0.43B) while those 45 or older spent more. (Big winner: 75+, +$34B) Here are the specifics:

  • 75> (11.2% of CU’s) – $51.36 per CU (+67.4%) – $0.76B – Up $0.34B (+80.5%) This rapidly growing group has the greatest need for pet services, but money is always an issue. In 2019 their income grew 8.1% and they spent a lot of this extra money on more Pet Services. 7.9% more CU’s spent 57.9% more $, 6.0% more often.
  • 65>74 (14.9% of CU’s) – $63.45 per CU (-1.4%) – $1.25B – Up $0.01B (+0.7%). This group is also very value conscious. They are also growing in numbers. In 2019 it looks like they value shopped and found some deals, so they eked out a small gain. 2.1% more CU’s spent 4.3% less $, 3.0% more often.
  • 55>64 (18.6% of CU’s) $69.38 per CU (+3.6%) – $1.70B – Up $0.07B (+4.0%) After a big drop in 2017, they began to slowly increase Services spending. In 2019, frequency fell, but they moved up to the #2 spot in Services spending, due in large part to the big decrease by the 35>44 yr olds. 0.3% more CU’s spent 9.5% more $, 5.4% less often.
  • 45>54 (16.8% of CU’s)- $90.23 per CU (+8.4%) – $2.01B – Up $0.09B (+4.8%) This highest income group was the leader in Services $ until 2016. They spent a lot more in 2018 and the growth continued in 2019 due to a big increase in frequency. The result: They are back to #1 in Services $. 3.3% fewer CU’s spent 4.3% less $, 13.3% more often.
  • 35>44 (16.9% of CU’s) – $70.09 per CU (-22.8%) – $1.57B – Down $0.43B (-21.7%) Spending exploded in 2018 with a $1B increase. In 2019 they spent $1.6B more on Veterinary and Food. They got some of those $ by cutting back on the more discretionary segments, Services and Supplies. 1.5% more CU’s spent 19.4% less $, 4.3% less often.
  • 25>34 (16.1% of CU’s) – $53.87 per CU (-3.0%) – $1.14B – Down $0.04B (-3.3%) This group of Millennials “found” the Services segment in 2018 with a 36% spending increase. In 2019, like their 35>44 yr old brethren, they also dialed back their discretionary spending on Services and Supplies. 0.3% less CU’s spent 3.5% more $, 6.3% less often.
  • <25 (5.5% of CU’s) – $26.04 per CU (-38.3%) – $0.19B – Down $0.13B – (-40.4%) After the big lift in 2018 this small, youngest group returned to being a very minor player. 3.4% fewer CU’s spent 40.6% less $, 3.9% more often.

Finally, here are some other key demographic “movers” that helped to plateau Pet Services Spending in 2019. The segments that are outlined in black “flipped” from 1st to last or vice versa from 2018. The red outline stayed the same.

In 2018 the Services spending increase was very widespread with (88%) of all segments spending more. 6 of 12 demographic categories had no segments that spent less on Services in 2018. 2019 was very different and reflected the slight decrease in spending for the segment. All categories had segments that spent less on Services and 49 total segments (51%) had decreased Services $ from 2018.

There was other evidence of the spending balance which resulted in the plateauing of Services spending. 5 segments flipped from 1st to last and 5 segments flipped from last to first. Only 1 group maintained their position – White, not Hispanics had the biggest increase in the racial/ethnic category.

There were only 2 other “usual” winners – Suburbs 2500> and those with Advanced College Degrees. In terms of “usual” losers, Renters and Hispanics are often at the bottom of Pet Spending ladders.

In our earlier analysis, we saw a very distinct pattern in the spending by age group. Americans 45 and over, led by the 75+ group, spent more on Services. Those under 45, driven down by the 35>44 year olds, spent less. Let’s see how those two patterns are reflected in the chart above.

First, the lift by the older group is evident from these winners:

  • Homeowners w/o Mtge
  • 75+ yrs old
  • No earner, Single
  • Born before 1946
  • Retirees
  • $30>39K (avg income of Retirees)

That’s half of the twelve winners. Now, the decrease by the younger group in these losers:

  • 35>44 yrs old
  • Gen X
  • Married, Oldest Child <6
  • 2 Earners (usually younger CUs)
  • Renters (most likely <45 yrs)
  • $50>69K (avg income of <35 yrs)

The pattern for the younger groups is also reinforced by the details.

There is 1 winner that seems to be out of place, the 5+ CU. Shouldn’t that be a younger CU, with kids? It turns out the largest CUs are Other Married Couples – Extra Adults, no kids. Their average age is 51 and they spent more on Services.

Once again, we are reminded that you must drill below the surface to find the true story.

After the huge lift in spending in 2018, Services spending plateaued in 2019. There were a lot of ups and downs, but overall the segment remained essentially stable at its new elevated level of spending. The young group will undoubtedly come back as their pet spending tends to be more volatile in each segment. It is very encouraging to see the increased spending by the fast growing older segment. This bodes well for the future.

COVID-19 presents the greatest uncertainty for 2020. The pandemic with widespread closures and “staying at home” likely had a big impact on this predominantly “nonessential” Pet Industry segment. We’ll get the first indication in the mid-year report published in May 2021.

 

 

 

 

Retail Channel Monthly $ Update – August Final & September Advance

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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.

This means to get the full picture in our monthly channel update we need to look at the latest release of both reports. We will begin with the Final Retail Report from August and then move to the Advance Retail Report for September. 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

We’ll start with the August Final report. The retail market hit bottom in April then began a slow recovery, which peaked in $ in July. Here are the major retail groups. (The Data in all graphs is Actual, Not Seasonally Adjusted)

The final total is $0.8B more than the Advance report projected a month ago. All but Restaurants (-$0.2B) were up slightly from projections. Relevant Retail: +$0.5B; Auto:+$0.2B; Gas Stations:+$0.2B. $ales were down from the July peak in all but restaurants. However, driven by Relevant Retail, +$18B and Auto, +$2B, monthly sales were up $1.5B vs 2019.

The Spring Lift is usually over by July but the COVID crisis has pushed the timing back as monthly sales continue to beat 2019 into August. However, all but Relevant Retail continue to be down YTD vs 2019.

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

  • Overall – Sales in 8 of 11 groups were down vs July, but 9 of 11 again showed increases vs same month in 2019.
  • Building Material Stores – This group has their biggest annual lift in Spring. This is unchanged and even stronger. While sales peaked in June, they’re still showing strong increases vs 2019. Although Sporting Goods stores are not included in this group, 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 August they were up 9.9%.
  • Food & Drug – Despite dips in June & August, Supermarkets are maintaining incredibly strong growth vs 2019. Drug Stores $ slowed in August after strong growth in June and July but remain positive compared to 2019.
  • General Merchandise Stores – Sales in Clubs/SuperCtrs slowed in June but bounced back and are still strong vs 2019. Despite slowed sales in June>August, $ Stores are showing exceptional strength vs 2019. Discount Dept. store sales were generally slowing before the pandemic. This trend has continued despite a small Summer lift.
  • Office, Gift and Souvenir Stores – They were slow to re-open. Sales are growing, but this group was hit hard.
  • Internet/Mail Order – The pandemic has accelerated this channel’s growth vs 2019. Sales peaked in July, but the crisis has introduced many new consumers to 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 June but were still strong vs 2019 which pushed YTD sales up to +9.4%.

The recovery began in May and continued in June and July as even more businesses began to re-open. The Relevant Retail Segment turned positive in all measurements in May and stayed that way through July. In August, sales fell vs July but were still strong vs 2019. The key drivers in producing positive numbers vs 2019 were the Internet, Supermarkets, SuperCtrs/Clubs/$ Stores and Hdwe/Farm.  How things are progressing? Here are the Advance numbers for September.

April and May were the 2 biggest spending drops in history. In June, monthly sales turned positive for the first time since February. In July the recovery continued. However, it flattened out in Aug/Sept leaving Total Retail still down -$37B YTD.

Total Retail – Total Retail spending fell -$15.5B vs August but was up +7.1% vs September 2019. In February 2020 sales were up $60B, +6.6% YTD versus 2019. Then came COVID-19. Hopefully, we hit bottom at -$112B in May. We began moving in the right direction but have stalled in September, still -$37B YTD and -$97B from February.

Restaurants – The Spending lift ended, down -$1.8B from August and -$8.6B vs September 2019. Things remain Topsy Turvy. August is usually their biggest $ month of the year. 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 ran into problems in the Summer. Delivery/Pickup can’t make up the difference as spending is now down $115.5B YTD.

Automobile & Gas Stations – When you are staying home your car becomes less of a focus in your life. Auto Dealers, both new and used, began combating this attitude with some fantastic deals and a lot of advertising. Monthly $ turned positive versus 2019 in June and have maintained this pace through September. Although sales are down $14.5B YTD, they are up $34.4B vs 2019 in the last 4 months. Gas Station $ales increased in May, June and July over the previous month, but fell in August & September (-$61.9B YTD) People are still not driving as much, for commuting or road trips.

Relevant Retail – Less Auto, Gas and Restaurants – Many non-essential businesses began to shutter 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. In June and July the $ growth continued but fell in August & September. However, the monthly June>September $ are larger than all months in 2019 but December. The primary drivers have been Nonstore, Grocery and SuperCenters/Clubs & $ Stores along with an enhanced 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 5 consecutive months and is up $154.9B YTD (+5.8%) vs 2019. In July it was up +4.9%.

Now let’s look at what is happening in the individual retail channels across America. In September, 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 July, 11 of 13 channels beat last month’s $. In September it was down to only 3. In July, 10 channels beat July 2019. In August, this number was down to 7. By September, the number was back to 10. However, in YTD numbers, 8 are still showing an increase.  The YTD decreases are coming from channels that are primarily nonessential businesses.

After a full month of stay at home and widespread closures there was a surge in May. Things truly opened up in June and July and sales continued to increase. In August and September, they slowed slightly but YTD Relevant Retail Channels are up $154.9B 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 through the Summer 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 – Regular Department stores are reopening which has cut the losses for total Department Stores as Discount Department stores continue to slowly fade. Club/SuperCtr/$ stores provided 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 pattern in the big and small stores that promise value.

Food and Beverage, plus Health & Personal Care Stores – The Grocery segment is still driven by increased Food sales due to a slow restart by restaurants, up 10.5%, +$5.8B in September. Monthly Sales in the Health, Personal Care group are up vs 2019 since June. In August and September, the YTD $ turned positive. Drug Store $ growth was a key factor.

Clothing and Accessories; Electronic & Appliances; Home Furnishings – After four consecutive months of growth, Sales Slowed in September. Home Furnishing is the best performer with a slight increase vs August and 3 consecutive monthly increases vs 2019. However, all 3 channels are down significant percentages in YTD sales. Clothing Stores are by far the worst performers. In September they were down 12.0% vs September 2019 and 32.6% YTD.

Building Material, Farm & Garden & Hardware – Sales peaked in the Spring. However, this channel continues to benefit from consumers turning their focus to their home needs, including house and yard repair and improvements. This has increased and extended their Spring lift to Summer. $ were up 23.4% vs September 2019 and up +$37.3B (+12.8%) YTD.

Sporting Goods, Hobby and Book Stores – Book and Hobby stores are open and sales in Sporting Goods stores have taken off as Consumers again sought outdoor recreation. Although September sales fell again from their June peak, they were up 18.3% vs September 2019. YTD sales were down $3.4B in April. In September, this deficit was wiped out as YTD $ were +$0.6B (+1.1%).

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 began to rebound in May and grew through July when they finally beat the monthly sales for 2019. In August and September sales were mixed. Back In February, this group was up $2.6B YTD. Through July,  they were down -$3.2B but moving in the right direction. After a Slow August they are again moving back on track, -$2.7B. However, they have a long road ahead.

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. Despite falling -4.2% from the July $ peak, they are up 20.5%, +$114.3B YTD. Their increase is 74% 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. Since much of their annual increase comes from holiday sales, 2020 could be another great year 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. By September, all had decreased sales. The Auto segment is  showing positive monthly numbers vs 2019 but Restaurants and Gas Stations are still struggling. The Relevant Retail segment has been the only true positive. Although August/September sales were lower than July, monthly and YTD sales vs 2019 are up for 5 consecutive months. However, for many segments in this group there is still a long way to go. In July Total Retail was positive for the second consecutive month but it has turned down since then. We saw a resurgence of the virus and retail restrictions were reimposed in many areas, which contributed to sales declining from July. This is going to be a long battle with no end in sight. We will continue to monitor the data and provide you with regular updates.

 

 

 

 

2019 U.S. PET SUPPLIES SPENDING $16.81B…DOWN ↓$2.98B

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Total Pet spending fell slightly to $78.44B in 2019, a $0.16B (-0.2%) decrease from 2018. The Supplies segment was  the driving force in this decrease as spending dropped to $16.81B, down $2.98B (-15.1%). (Note: All numbers in this report come from or are calculated by using data from the US BLS Consumer Expenditure Surveys)

After flat spending in the 2nd half of 2018, spending turned sharply down in the 1st half of 2019 then continued to decline in the 2nd half. 2019 wiped out 60% of a 24 month $5B gain in this segment. In this report we’ll “drill down” into the data to try to determine what and who are “behind” the huge drop in 2019 Pet Supplies Spending.

In 2019, the average household spent $127.15 on Supplies, down 15.6% from $150.62 in 2018. (Note: A 2019 Pet CU (67%) Spent $189.78) This doesn’t exactly match the -15.1% total $ decrease. Here are the specific details:

  • 0.6% more CU’s
  • Spent 2.9% less $
  • 13.1% less often

Let’s start with a visual overview. The chart below shows recent Supplies spending history.

Since the great recession, spending trends in the Supplies segment have been all about price – the CPI. Although many supplies are needed by Pet Parents, when they are bought and how much you spend is often discretionary. Additionally, many of the product categories in this segment are now considered commodities, so price is the main driver behind consumer purchasing behavior. When prices fall, consumers are more likely to buy more. When they go up, consumers spend less and/or buy less frequently.

2014 was the third consecutive year of deflation in Supplies as prices reached a level not seen since 2007. Consumers responded with a spending increase of over $2B. Prices stabilized and then moved up in 2015.

In 2015 we saw how the discretionary aspect of the Supplies segment can impact spending in another way. Consumers spent $5.4B for a food upgrade and cut back on Supplies – swapping $. This, in conjunction with inflation, caused supplies to suffer as consumers spent 4.1% less, but they bought 10% less often. That drop in purchase frequency drove $1.6B (78%) of the $2.1B decrease in Supplies spending.

In 2016, supplies’ prices flattened out and consumers value shopped for their upgraded food. Supplies spending stabilized and began to increase in the second half. In 2017 supplies prices deflated, reaching a new post-recession low. The consumers responded with a huge $2.74B increase in Supplies spending that was widespread across demographic segments. An important factor in the lift was an increase in purchase frequency which was within 5% of the 2014 rate.

In 2018 prices started to move up in April and rapidly increased later in the year due to the impact of new tariffs. By December, Supplies prices were 3.3% higher than a year ago. This explains the initial growth and pull back in spending.

In 2019 we saw the full impact of the tariffs. Prices continued to increase. By yearend they were up 5.7% from the Spring of 2018 and spending plummeted -$2.98B. The major factor in the drop was a 13.1% decrease in purchasing frequency.

That gives us an overview of the situation. Now let’s look at the “who” behind the numbers. First, we’ll look at spending by income level, the most influential demographic in Pet Spending.

National: $127.15 per CU (-15.6%) – $16.81B – Down $2.98B (-15.1%).

In 2019 the Supplies spending decrease was widespread across income groups.

  • <$30K (27.0% of CU’s)- $56.56 per CU (-19.3%) $2.02B– Down $0.63B (-23.6%). This group is very price sensitive as is evidenced by the big drop in CU spending. This, in combination with 5% fewer CUs put them below 2015 $.
  • $30K>70K (31.5% of CU’s)- $102.57 per CU (-20.7%) $4.27B- Down $0.99 (-18.8%). This big, lower income group closely matches both the national pattern and that of the $150K+ group. The tariff prices had a big impact. Until 2019 they were the leader in Total Supplies Spending $.
  • $70>$100K (14.5% of CU’s) – $149.41 per CU (-1.0%) – $2.86B- Down $0.02B (-0.8%). This middle-income group has been very consistent in Supplies spending which continued in 2019, as they had by far the smallest decrease.
  • $100K>$150K (13.8% of CU’s) – $171.00 per CU (-22.2%) – $3.12B- Down $0.67B (-17.7%). This higher income group is also price sensitive as they had the biggest % drop in CU spending which was mitigated by 6% more CUs.
  • $150K> (13.3% of CU’s) – $259.55 /CU (-17.1%) – $4.55B- Down $0.67B (-12.9%). The $150>199K group had the biggest drop, but $200K+ CUs also spent less. Money matters in Supplies, but strong inflation can impact anyone.

The $70>99K group had a very small decrease and the $30>39K group actually spent $0.09B more on Supplies. However, 2019 demonstrated that price is a key factor to almost everyone in a discretionary segment like Supplies.

Now, we’ll look at spending by Age Group.

National: $127.15 per CU (-15.6%) – $16.81B – Down $2.98B (-15.1%).

It’s simple. All groups over 25 yrs old spent less on Supplies. The under 25, “Gen Z” CUs spent more. Here are the details.

  • 55>64 (18.6% of CU’s) $162.59 /CU (-8.4%) – $3.99B – Down $0.35B (-8.1%). In 2017 these Boomers found the lowest Supplies prices since 2007 very alluring. They got on board. When prices turned sharply up in the 2nd half of 2018, the growth stalled. Spending fell in 2019 as 0.3% more CU’s spent 2.9% more on Supplies, 11.0% less often. However, they were the only group to spend more per transaction and became #1 in Total Supplies $.
  • 45>54 (16.8% of CU’s) $168.54 per CU (-13.8%) – $3.76B – Down $0.75B (-16.7%). Until 2019, this highest income age group had been the leader in Supplies spending since 2007. Fewer CU’s (-3.3%) spent 5.6% less on supplies, 8.7% less often. They did have the smallest drop in frequency, but fewer CUs cost them the top $ spot.
  • 35>44 (16.9% of CU’s) $144.96 per CU (-21.3%) – $3.24B; Down $0.82B (-20.1%) This group is second in income and overall expenditures but also has the biggest families. After 3 strong years, the sharply rising prices had a big impact, especially in frequency. 1.5% more CU’s spent 4.3% less $, 17.8% less often.
  • 25<34 (16.1% of CU’s) $102.62 per CU (-22.7%) – $2.18B; Down $0.65B (-22.9%). After trading Supplies $ for upgraded Food and Vet Care in 2016, these Millennials turned their attention back to Supplies. The rising prices hit them hard and 2019 spending is below 2015. 0.3% fewer CU’s spent 8.9% less on supplies, 15.1% less often.
  • 65>74 (14.9% of CU’s) $94.11 per CU (-22.9%) – $1.86B –Down $0.50B (-21.2%). This older group is very price sensitive. When prices turned up in 2018, they immediately cut back on spending. This continued into 2019 and they are also now below 2015 $. 2.1% more CU’s spent 8.8% less, 15.4% less often.
  • 75> (11.2% of CU’s) $62.72 per CU (-17.3%) – $0.93B, Down $0.11B (-10.8%). This group is truly price sensitive as they spend 12% more than they earn. They began to cut back on spending in the 2nd half of 2018 and this behavior continued throughout 2019. 7.9% more CU’s spent 3.0% less, 14.8% less often.
  • <25 (5.5% of CUs) $118.29/CU (+34.1%) $0.87B- Up $0.20B (+29.5%) 3.4% fewer CUs spent 26.9% more $, 5.7% more often. The lift came in the 2nd half and may be due to indulgence. They spent more on Supplies than Food.

The impact of the price increase was also readily apparent in this category. Only the smallest group. <25 yrs, spent more.

Next, let’s take a look at some other key demographic “movers” in 2019 Pet Supplies Spending. The segments that are outlined in black “flipped” from 1st to last or vice versa from 2018. The red outline stayed the same.

The widespread impact of the increased prices due to the added tariffs is immediately apparent. In 9 of the 12 demographic categories all segments spent less on Supplies in 2019. It gets even worse. There are 96 separate segments in the complete demographic database. The 3 “winning” segments with plus $ on the chart are the only positives in the entire group. That means that 96.9% of all demographic segments spent less on Supplies in 2019.

6 Segments flipped from first to last and there are other typical big spenders also on the bottom, like Managers & Professionals, Gen X and 2 person CUs.

On the “winning” side there are some extreme rarities like those with no High School Diploma, Service Workers, African Americans, under 25 years old and “Other” Married Couples. The $30>39K group is an occasional winner because this is the average income of Retirees. However, in 2019 Retirees spent 19.5% less on Supplies.

There is really no in depth analysis needed. The skyrocketing “Tarifflation” drove Supplies Spending down across all of America. According to US BLS historical data, Supplies spending has decreased in 15 years since 1984. However, the $2.98B drop in 2019 is the biggest in history, by 21%. Tariffs are paid for by American consumers, except when they choose not to buy or slow their frequency, then American businesses pay.

 

 

 

 

2019 U.S. PET FOOD SPENDING $31.19B…Up ↑$2.35B

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In 2019 The Pet Industry was a mixed bag. Total spending fell slightly to $78.44B, down $0.16B (-0.2%). Food recovered from the impact of the FDA grain free warning. Veterinary had another modest increase and the Services segment was basically stable. The big downside was Supplies, where we saw the full impact of tariffs. Here are the specifics:

  • Pet Food – $31.19B; Up $2.35B (+8.1%)
  • Pets & Supplies – $16.81B; Down $2.98B (-15.1%)
  • Veterinary – $21.80B; Up $0.58B (+2.7%)
  • Pet Services – $8.62B; Down $0.10B (-1.1%)

The industry truly is a “sum” of its integral segments and each segment has very specific and often very different buying behavior from the many consumer demographic segments. For this reason, we’re going to analyze each of the industry segments first. This will put the final analysis of Total Pet Spending into better perspective. Note: The numbers in this report come from or are calculated by using data from the current and past US BLS Consumer Expenditure Surveys. In 2019, 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 2019 Pet Food Spending totaled $31.19B in the U.S., a $2.35B (+8.1%) increase from 2018. This was the 4th largest increase in history. It’s interesting that 3 of the 4 greatest $ increases and the 2 biggest $ decreases have all occurred in the last 5 years. The current trend in high priced, super premium foods magnifies the results of any changes in consumer purchasing behavior. As you recall, in earlier research we discovered a distinct, long term pattern in Pet Food Spending. In 2018 we broke that pattern. We’ll see what develops in the future. Take a look at 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.

Pet Food seems to be driven by short term trends. A new food trend catches the consumers’ attention and grows…for 2 years. Then sales plateau or even drop…and we’re on to the next “must have”. The changes became more pronounced in recent years and the whole situation has gotten even more complicated since 2014. Due to an unprecedented level of competition, Food prices deflated through 2018. Then they jumped up +2.9% in 2019, the biggest increase since 2009.

After consumers choose to upgrade to a more expensive pet food, their #1 priority becomes, “Where can I buy it for less?” The internet entered this battle in a big way and “value shopping” was a major contributing factor in the big spending drop in 2016 and its influence continues to grow.

In 2017, according to the 20-year pattern, we should have been beginning a new trend. There was the expected lift in Pet Food spending but what was the new “must have” type! There were some possible candidates, but nothing stood out. A deeper dive into the data showed that the $4B increase in Pet Food spending in 2017 didn’t come from a new trend. It came from a deeper demographic penetration of Super Premium foods. Value shopping in a highly competitive market, especially on the internet had made Super Premium pet foods more accessible to a broad swath of consumers.

Like Pet Food, human behavior has changed over the years in regard to our pets. In the 90’s, Pet Owners became Pet Parents. Then, after the turn of the century we began truly humanizing our pets. This movement is very accurately reflected in the evolution of Pet Food. We became increasingly more conscious of fulfilling the health needs of our pets, beginning with the first move to premium foods in 2004. This ramped up considerably after the Melamine scare in 2007. Now consumers read pet food labels, research ingredients and expect their pet foods to meet the same quality standards as the best human foods. This was very evident in 2018. It should have been a year of increased spending but the consumers’ reaction to the FDA grain free warning threw the pattern out the window.

In 2019 Pet Food spending posted a strong recovery. Let’s look at some specifics to see where the lift came from. In 2019, the average U.S. Household (pet & non-pet) spent a total of $236.26 on Pet Food. This was an 7.4% increase from the $219.92 spent in 2018. This doesn’t exactly “add up” to the 8.1% increase in total Food Spending. With additional data provided from the US BLS, here is what happened.

  • 0.7% more U.S. households
  • Spent 12.2% more $
  • 4.2% less often

By the way, if 67% of U.S. CU’s are pet parents then their annual Pet Food Spending is $352.63. Let’s look at a rolling history of Pet Food Spending since 2013.

Pet Food Spending fell in 2013 and continued down in the first half of 2014. This corresponds to the beginning of a  general deflation which continued through 2018 in this segment. During deflation, in a “need” category like Food, you don’t buy more, you just spend less. The spectacular lift in Pet Food Spending beginning in the second half of 2014 came from a fundamental change in spending behavior. Consumers began to buy more Super Premium Food and Med/Supplements in Treat form, all of which cost more.

An increasing number of consumers chose to upgrade their Pet Food and spending peaked in 2015. Then spending began to fall in the first half of 2016 and the decline intensified in the second half. At first it appeared that consumers were backing down on the upgrade. As it turns out, they were just applying the #1 driver in their buying behavior since the great recession – price (75%). They began shopping for value and there were plenty of bargains to be found.

In 2017 Pet Food spending registered the second largest increase in history. It was time to begin a new “trend”, but this big lift was unusual. Usually the biggest increase comes in the 2nd year of a cycle. There also was no clear product focus.

Looking deeper into the data we discovered that it was not a new food trend. It was a deeper demographic penetration of Super Premium. Higher education and higher income have driven recent food trends. However, the highly price competitive market had made these high-priced foods more accessible to Blue Collar workers and those without college degrees. Baby Boomers in these groups, with their strong commitment to their pets, responded in a big way, +$3.8B.

After such a big lift in year 1, the 2018 increase was expected to be small and the first half started out that way, +$0.25B. Then the bottom dropped out in the second half of the year as spending fell -$2.51B, the biggest half year decrease in history. In July of 2018, the FDA issued a warning about the possible connection between DCM and grain free dog food. This was frightening and one suggestion was to move back to standard foods, which apparently many people did.

In the beginning of 2019 Total Pet Food spending stabilized as some doubts were raised about the validity of the warning. In the second half of the year Food Spending increased +$2.3B. Some Pet Parents began to return to the topline Super Premium Foods. In some cases, they opted for even more expensive varieties. We also saw some new groups get on board the Super Premium “Express”.

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 these 3 Pet Food 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 2019 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 2017, with competitive pricing and the consumers’ commitment to pet health, Super Premium drove spending growth in every major income group. In 2018 we had the FDA warning which affected almost all groups. In 2019 the category recovered to 2017 levels, but income once again became a key factor in the rebound. In this chart we will show the annual spending from 2015 through 2019. This will put the 2019 numbers into better perspective.

2019 National Numbers: $236.26 per CU (+7.4%); $31.19B; Up $2.39B (+8.1%); 2015>2019 – Up $1.70B (+5.8%)

There is a clear income divide which is even more defined than the graph indicates. All groups below $40K spent less. All over $40K spent more. Prices inflated 2.9% which may have impacted low income groups.

Here are 2019 specifics:

  • Under $30K: (27.0% of CU’s) – $120.17 per CU (-0.7%) – $4.04B – Down $0.23B (-5.3%). Obviously, this group is very price sensitive. It is also getting smaller. The number of CU’s was down 5.4% in 2019 and 13.1% since 2015. This decrease masks the true food situation. While their Total Food spending is lower than 2015, their Avg CU spending on food is unchanged. The Total is being driven down by the declining number of CUs. Even this lowest income group remains committed to their pets.
  • $30K>$70K: (31.5% of CU’s) – $191.66 per CU (-5.4%) – $8.15B – Down $0.40B (-4.7%). The spending for this group usually matches the national pattern. However, they broke it in 2019. Retirees’ average income is $30>39K. Their Food spending drop due to the FDA warning was slow – 2019, rather than 2018. They are a large, fast growing group. The $40>69K group was up +$0.40B. $30>39K spent -$0.80B less, turning the whole large group negative.
  • $70K>$99K: (14.5% of CU’s) – $306.19 per CU (+13.3%) – $5.90B – Up $0.62B (+11.8%). The Pet Food Spending for this group had been very stable. In 2017, this changed as they got “on board” with the Super Premium Pet Food upgrade. They also became more sensitive, reacting to the FDA warning in 2018, then bouncing back in 2019.
  • $100K>$149K: (13.8% of CU’s) – $309.94 per CU (+8.5%) – $5.92B – Up $0.74B (+14.2%) They have a high income but also large families, so they are very value conscious. Their spending matches the national pattern. You can see their sensitivity to trends/changes by their large annual swings in spending.
  • $150K> (13.3% of CU’s) – $409.78 per CU (+18.4%) – $7.19B – Up $1.61B (+29.0%). 91% are college grads so they saw the value of Super Premium food very early. They were the only group to spend more on Pet Food in 2018. Their reaction to the FDA warning was to buy even more expensive food and this behavior is growing in 2019.

In 2018, the decrease in Pet Food spending was widespread across incomes. In fact, groups totaling 83.9% of all U.S. households spent less on Pet Food. In 2019, the “rebound” spending increase only happened for households with incomes above $40K, 61.4%. As we have fully moved into the era of Super Premium, Pet Food spending is becoming more tied to income. Now, Spending by Age Group…

2019 National Numbers: $236.26 per CU (+7.4%); $31.19B; Up $2.39B (+8.1%); 2015>2019 – Up $1.70B (+5.8%)

For Pet Food spending, the youngest group was on the outside, with the only spending decrease. They gave back their big lift in 2018. The three highest income age groups (35>64) spent $2.41B more, led by the 45>54 Gen Xers.

  • 45>54 (16.8% of CU’s) – $316.22 per CU (+23.7%) – $7.09B – Up $1.20B (+20.4%) 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 fact, they took the lead in average CU Pet Food spending.
  • 55>64 (18.6% of CU’s) – $306.58 per CU (+13.6%) – $7.54B – Up $0.81B (+12.0%). This group (all Baby Boomers) has been at the forefront of recent major spending swings. In 2015 many of them upgraded to Super Premium. In 2016 this group looked for and found a better price. In 2017 they led a deeper penetration of the upgrade. In 2018 they had a -$3.5B reaction to the FDA warning. They spent more in 2019 but their comeback was far short. In fact, their Pet Food spending in 2019 is -$2.48B (-24.8%) below 2015. They only spent the most Food $ because of more CUs.
  • 35<44 (16.9% of CU’s) – $226.83 per CU (+7.7%) – $4.99B – Up $0.40B (+8.8%) They are 2nd in income and CU spending but have the biggest families. Value shopping is a way of life and their spending pattern tends to be less volatile. They opted in for Super Premium in 2017, held their ground in 2018 and are back on a growth track in 2019.
  • 65>74 (14.9% of CU’s) – $251.14 per CU (-0.2%) – $4.89B – Up $0.09B (+1.8%). This group is 90% Boomers and growing (+2.1%). They are starting to retire but many are still working (0.7 per CU). They tend to lag behind in response to industry trends. Pets are a priority as they spend 1.04% of their total CU expenditures on their pets.
  • 75> (11.2% of CU’s) – $148.54 per CU (+2.5%) – $2.02B – Up $0.11B (+5.9%). Both the effort and the expense of Pet Parenting become issues as we reach 75+. However, they remain committed to their Pets and high quality food.
  • 25>34 (16.1% of CU’s) – $175.43 per CU (-3.9%) – $3.91B – Up +$0.10B (+2.5%) In recent years their spending pattern has foreshadowed the overall market for the following year. Their spending lift in 2018 predicted the overall increase in 2019. However, the 2020 projection is questionable. They spent less per CU. The 2019 increase came only from more CUs. Another situation should be noted. They are the most stable in spending. That is surprising.
  • <25 (5.5% of CU’s) – $98.91 per CU (-26.9%) – $0.76B – Down -$0.36B (-32.4%) After a spectacular 2018, they radically cut spending and the number of CUs fell -3.3%. It appears that fewer Gen Zers are moving out from their parents homes. Except for 2018, their pet food spending has been consistently low. In 2019 they were one of only 2 groups that actually spent less than they did in 2015.

The situation in the age groups is even simpler than in the income groups. Every group over 25 (94.5%) spent more on Pet Food in 2019. The other significant event was that the title for top Pet Food spending CU was passed from young Baby Boomers to old Gen Xers. The Boomers will inevitably fade but it will take a long time. Look at the ongoing strong performance by the 65>74 year olds. Next year this group will be 100% Boomers.

We need to drill deeper. Let’s take a look at the segments with the biggest change in spending in 12 categories. The segments that are outlined “flipped” from 1st to last or vice versa from 2018. The red outline stayed the same.

2017 was a spectacular year of growth as Super Premium became very demographically widespread across America. The impact of the FDA grain free warning was very apparent in 2018. It was the year of the “flip” as 11 of 12 winning segments in 2017 became the biggest losers in 2018. There were 4 others who moved from last to first. Only the South maintained their position at the bottom of the Regions.

2019 looked a lot more normal. There was not a strict recovery of 2018 losses as only 3 segments moved from last to first. Of note, the South finally made it to the top. Only 2 flipped from first to last and 4 maintained their position – 3 at the top and 1 on the bottom. The 2019 lift in Food spending was widespread as 75% of 96 demographic segments posted an increase. The winners and losers included plenty of the “usual suspects”:

Winners: White-Not Hisp, 2 Earner, Homeowner w/Mtg, <2500 pop., Self-employed, $150>199K & Married Couple Only

Losers: Hispanic, Renters, Ctr City, Oldest Generation, Less than HS Grads, <25 yrs, 5+ People, Single Parents

On the “up” side we should also note High School Grad Only as winners. This is further evidence that Super Premium is reaching even deeper into the marketplace. We also should give credit to Gen Xers (45>54 yr olds) for taking the lead in increased spending and average spent per CU.

We also see evidence of the lag time in spending behavior for Retirees ($30>39K). They had a negative reaction to the FDA warning in 2019. Virtually everyone else reacted in the second half of 2018.

2019 was a strong year as spending returned to more normal behavior. We’ll see what happens in the 2020 pandemic.

 

 

 

 

 

 

2019 Pet Spending – A First Look!

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The US BLS just released the data from their annual Consumer Expenditure Survey. I have almost completed building the detailed pet database from 35 separate files and have started the analysis, but I wanted to give you a brief first look.

In 2019 Total Pet Spending was $78.44B, down -$0.16B (-0.2%) from 2018. This is a very minor decrease following a huge $11.31B increase from 2016 to 2018.

Total Pet Spending is the sum of the individual segments. As we have seen so many times before they can have extremely different patterns. 2019 is no exception.

In this brief first look we will show you a graph of the recent spending history for Total Pet and then each individual segment. That should help put the 2019 numbers into perspective. After each graph, I will include a very brief comment. The detailed analysis will follow in future posts. I just thought that you should see the topline data as soon as possible. First, Total Pet…

The $ growth has been strong since 2013 but we seem to have a new pattern emerging – 2 years up, followed by a small decrease. In 2016 the drop was -$0.46B and in 2019 it was -$0.16B. The $ peaked mid-year 2018 at $79.83B. We seemed to be on the verge of breaking the $80B barrier then came the FDA grain free dog food warning and tariffs on Supplies. However, it appears that a recovery is beginning in the second half of 2019. Now, let’s turn to the largest segment, Pet Food & Treats…

Pet Food spending has been on a roller coaster for a number of years, driven by successive product trends. Since 2003 Pet Food has consistently had 2 successive years of spending increases followed by a down or flat year. At mid-year 2018 it looked like 2018 was on track for a small but expected increase. However, the 2nd half changed all that. In July, the FDA issued a warning on grain free dog food. Spending fell $2.51B, driving sales down $2.26B for the year and  breaking the pattern of the last 15 years. As the consumer fear died down, spending stabilized in the first half of 2019 then strongly recovered to “pre-warning” levels by the end of 2019. Now, we’ll look at Pets & Supplies…

Since the Great Recession, Pet Supplies prices have generally been deflating as many categories have become commoditized. The segment is very price sensitive. Price deflation drives spending up while even a low inflation rate depresses sales. In the second half of 2018, in anticipation of new tariffs Pet Supplies prices began to rise. The tariffs were implemented in September and by yearend Supplies prices had risen 3.5%. Sales flattened in the second half of 2018 then plummeted -$2.98B in 2019 as prices continued to rise – up 5.7% from 2018 by yearend. By the end of 2019 Supplies had “given back” 60% of the $5B gained from mid-2016 to mid-2018. Now Non-Vet Services…

Pet Services is the smallest industry segment and has long been known for slow, but consistent growth. In the graph, you can see that this pattern was broken in 2017. The number of outlets offering Services began to increase sharply during this time and pricing became more competitive. At first this didn’t increase consumer usage of Services and Pet Parents were shopping for value. Apparently, this changed in 2018 and more consumers “got the message”. Spending increased by $1.95B. This is more than twice as big as the previous largest increase in the 34 years that the US BLS has been keeping records on this segment. In 2019 spending fell slightly -$0.10B but essentially held its ground at the new elevated level. Now, on to our final segment, Veterinary Services…

Except for 2015, Veterinary Services has grown consistently through the years. The problem has been a high inflation rate, which has slowed the frequency of consumer visits while increasing prices. The inflation rate slowed in recent years which spurred $3B in spending increases in 2016-2017. In 2018, Vet spending rose $0.56B (+2.7%). Prices were up 2.6% so the amount of Veterinary Services in 2018 was unchanged from 2017. In 2019 sales increased +$0.58B (+2.7%). Unfortunately, prices jumped 4.1% so that there was a net decrease in the amount of Veterinary Services in 2019.

Comments

From a historical perspective, the decrease in Total Pet Spending was the 11th in the 35 years since 1984. However, the industry has done pretty well despite an occasional drop. In 1984 Total Pet Spending was $9.56B. That means that it has grown 720% in 35 years – an annual growth rate of 6.2% – not too bad.

We should also note another situation that I addressed in a recent report – Racial/Ethnic disparities in the Pet Industry. The report cited 2018 data which showed that White, not Hispanics accounted for 86.3% of all Pet Spending. In 2019 the situation worsened as they now account for 87.6%. Here are the specifics:

    • White, not Hispanic: $68.73B; Up $0.87B (+1.3%)
    • Hispanic: $5.44B; Down $0.38B (-6.5%)
    • Black/African American: $2.73B; Down $0.68B (-19.9%)
    • Asian: $1.54B; Up $0.02B; (+1.6%)

One reason that the Industry had a negative year was that the increase by White, not Hispanics was not big enough to overcome the spending drop by Hispanics and Blacks. The decrease was especially large for Black Americans.

Yet more evidence that this problem should be addressed, for the benefit of everyone.

That wraps it up for this brief preview of Pet Spending in 2019. In future reports we will drill deeper and deeper into the data for each segment and ultimately Total Pet. Our goal will be to determine the who, what and why behind the numbers. We will look at spending from the perspective of 96 segments in 12 demographic categories and even include the frequency of purchase as a factor. Who is spending most of the money? Which groups had the biggest changes in spending – up or down. What are the best performing demographic segments?

Even with an occasional “bump in the road” the Pet Industry is solid, but it is also complex. You have to look beneath the surface numbers to find out what is truly happening. Stay tuned for detailed, analytical updates.

 

 

Retail Channel Monthly $ Update – July Final & August Advance

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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.

This means to get the full picture in our monthly channel update we need to look at the latest release of both reports. We will begin with the Final Retail Report from July and then move to the Advance Retail Report for August. 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

We’ll start with the July Final report. The retail market hit bottom in April then began a slow recovery which continued in July. First, we will look at some major retail groups. (Note: The Data in all graphs is Actual, Not Seasonally Adjusted)

The final total is $2.5B less than the Advance report projected a month ago. All were down slightly from projections. Relevant Retail: -$1B; Auto:-$0.6B less; Restaurants: -$0.3 less and Gas Stations’ $ were -$0.4B. $ales were up vs June across the board. Driven by Relevant Retail, +$30B and Auto, +$8B, Total monthly sales were also up $18.8B vs 2019.

The Spring Lift is usually over by July but the COVID crisis has pushed the Spring timing back. Things began to open up in May and continued into July. However, all but Relevant Retail were still down YTD vs 2019.

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

  • Overall – Sales in 5 of 11 groups were down vs June, but 9 of 11 again showed increases vs same month in 2019.
  • Building Material Stores – This group has their biggest annual lift in Spring. This is unchanged and even stronger. While sales were down vs June, they still have spectacular increases vs 2019. Although Sporting Goods stores are not included in this group, they have a similar Spring lift pattern. Their sales took off in May and continued to grow spectacularly through June. Although July sales dipped slightly from June, they turned positive YTD in June.
  • Food & Drug – After a dip in June vs May Supermarket sales are back up with incredibly strong growth vs 2019. After 2 months of slowed $, Drug Stores came back strong in June and July and remain positive across the board.
  • General Merchandise Stores – Sales in Clubs/SuperCtrs slowed down in June but are back up in July and still strong vs 2019. Despite slowed sales in June & July, $ Stores are showing exceptional strength vs 2019. Discount Dept. store sales were generally slowing before the pandemic. This trend has continued despite a small July lift.
  • Office, Gift and Souvenir Stores – They were slow to re-open. Sales are growing, but this group was hit hard.
  • Internet/Mail Order – The pandemic has accelerated this channel’s growth vs 2019. Sales vs June were flat, but the crisis has introduced many new consumers to 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. July was down slightly from June but was strong vs 2019 which pushed YTD sales up to +9.0%.

May began a slow recovery which continued in June and July as even more businesses began to re-open. The Relevant Retail Segment turned positive in all measurements in May and has stayed that way through July. Although many segments are now contributing, the Internet, Supermarkets, SuperCtrs/Clubs/$ Stores and Hdwe/Farm are the key drivers. Let’s see how the situation is progressing. Here are the Advance numbers for August.

April and May were the 2 biggest spending drops in history. In June, monthly sales turned positive for the first time since February. In July the recovery continued. However, it flattened out in August leaving Total Retail still down -$74B YTD.

Total Retail – Total Retail spending increased $0.6B, +0.1% vs 2019, a big change from +3.9% in July and +3.4% in June. In February 2020 sales were up $60B, +6.6% YTD versus 2019. Then came COVID-19. Hopefully, we hit bottom at -$112B in May. We began moving in the right direction but have stalled in August, still -$74B YTD and -$134B from February.

Restaurants – The Spending increase slowed to +$2.1B over July and sales were down $11.6B vs 2019. This is important as August is usually their biggest $ month of the year. 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 ran into problems in July and August. Delivery/Pickup can’t make up the difference as spending is now down $106.7B YTD.

Automobile & Gas Stations – When you are staying home your car becomes less of a focus in your life. Auto Dealers, both new and used, began combating this attitude with some fantastic deals and a lot of advertising. Sales turned positive versus 2019 in June, grew strongly in July, then slowed a bit in August. Although sales are down $28.6B YTD, they are up $20B vs 2019 in the last 3 months. Gas Station $ales increased in May, June and July over the previous month, but fell in August – Down $56.6B YTD. People are still not driving as much, whether for commuting or road trips.

Relevant Retail – Less Auto, Gas and Restaurants – Many non-essential businesses began to shutter 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. In June and July the growth continued but it slowed in August. However, the monthly June>August $ are larger than all months in 2019 but December. The primary drivers have been Nonstore, Grocery and SuperCenters/Clubs & $ Stores along with an enhanced 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 4 consecutive months and is up $118B YTD (+4.9%) vs 2019. In July it was up +4.8%.

Now let’s look at what is happening in the individual retail channels across America. In August, 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 July, 11 of 13 channels beat last month’s $. In August it was down to 7. In July, 10 channels beat July 2019. In August, this number was down to 7. However, in YTD numbers, 8 are now showing an increase as Health & Personal Care joined the group. The YTD decreases are coming from channels that are primarily nonessential businesses.

After a full month of stay at home and widespread closures there was a surge in May. Things truly opened up in June and July and sales continued to increase. In August they slowed slightly but YTD Relevant Retail Channels are up $117.9B 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 bigger than usual Spring lift continues as consumers focus “on their home”.
  • SuperCtrs/Club/Value/$ Strs – Sales slowed in April but came back in May and continue to grow. 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 – Regular Department stores are reopening which has cut the losses for total Department Stores as Discount Department stores continue to slowly fade. Club/SuperCtr/$ stores provided 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 pattern in the big and small stores that promise value.

Food and Beverage, plus Health & Personal Care Stores – The Grocery segment is still driven by increased Food sales due to a slow restart by restaurants, up 7.6%, +$4.5B in August. Sales in the Health, Personal Care group were up vs 2019 in June July and August and finally turned positive YTD. Drug Store sales growth was a key factor.

Clothing and Accessories; Electronic & Appliances; Home Furnishings – In August, sales grew for the fourth consecutive month. Home Furnishing has even registered slight increases vs 2019 in July and August. However, all 3 channels are down double digit percentages in YTD sales. Clothing Stores are by far the worst performers. Even though August sales were up 7.4% over July they were still down 23.5% vs August 2019 and 34.9% YTD.

Building Material, Farm & Garden & Hardware – Sales fell again after peaking in June. However, this channel continues to benefit from consumers turning their focus to their home needs, including house and yard repair and improvements. This has accelerated and extended their Spring lift. Sales were up 11.9% vs August 2019 and up +$29.6B (+11.4%) YTD.

Sporting Goods, Hobby and Book Stores – Book and Hobby stores are open and sales in Sporting Goods stores have taken off as Consumers again sought outdoor recreation. Although sales fell again from their June peak, they were up 8% vs August 2019. YTD sales were down $3.4B in April. In August, this deficit had been cut to -$0.3B. If current trends continue, their YTD numbers could turn positive by September.

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 began to rebound in May and grew through July when they finally beat the monthly sales for 2019. In August sales dropped -2.9% vs July and -4.9% vs 2019. In February, this group was up $2.6B YTD. Through July,  they were down -$3.4B but moving in the right direction. That has stopped, at least temporarily as they are now down -$3.9B YTD. They have a long road ahead.

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 August, despite falling -4.2% from July, they are up 19.6%, +$97.2B YTD. Their increase is 82% 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. Since much of their annual increase comes from holiday sales, 2020 looks to be another banner year 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. In August, only restaurants had an increase. The Auto segment is  showing positive monthly numbers vs 2019 but Restaurants and Gas Stations are still struggling. The Relevant Retail segment has been the only true positive. Although August sales are lower than July, monthly and YTD sales vs 2019 are up for 4 consecutive months. However, for many segments in this group there is still a long way to go. In July Total Retail was positive for the second consecutive month but it turned essentially flat in August. We saw a resurgence of the virus and retail restrictions were reimposed in many areas, which contributed to sales declining from July. This is going to be a long battle with no end in sight. We will continue to monitor the data and provide you with regular updates.

 

 

 

 

2019 Top 100 U.S. Retailers – Sales: $2.4 Trillion, Up 4.5%

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The U.S. Retail market reached $6.22 Trillion in 2019 from all channels – Auto Dealers, Supermarkets, Restaurants, Online retailers and even Pet Stores. This year’s increase of $216B (+3.6%) was 23.4% below last year’s increase of $282B. This breaks a string of steadily growing increases which began in 2015. One factor is that fuel prices stabilized, and Gas station revenue flattened out. (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. These companies are the retail elite and account for 39% of the total market. The vast majority also stock and sell a lot of Pet Products. The retail market is constantly evolving which produces some turmoil – mergers, acquisitions, closures. The Top 100 are not immune and you will see changes in ranking but for first time since I began tracking in 2013, the list is the same as last year. The report does contain a lot of data, but we’ll break it up into smaller pieces to make it more digestible. All of the base data on the Top 100 comes from Kantar Research and was published by the National Retail Federation (NRF).

We’ll begin with an overview:

  • The total Retail Market grew $216B in 2019 (+3.6%). In 2018 it was +4.9% and in 2017, +4.3%. Although sales are still increasing, the growth rate slowed markedly in 2019.
    • The Top 100 grew $105B (+4.5%). This is less than last year’s +4.8% but significantly better than the total market.
    • The Top 100 generates $2.4 Trillion in revenue, 39.0% of the total U.S. retail market – slightly more than 2018.
  • Let’s make the data a bit more relevant. If you remove the revenue from Auto, Restaurant and Gas Stations, the “targeted” retail market for the Pet Industry is $3.7 Trillion – 59.7% of the total market. By the way, the slight gain in share is due to the flattening of Gas Station revenue.
    • If we also remove Restaurant & Gas Station $ from the Top 100, the remaining $2.2T is 36.0% of the total market.
    • … and 60.3% of the $3.7 Trillion “target” market.

The Top 100 generally outperforms the overall market. In 2019 the difference in performance was significant. The lift was driven by the Top 100 targeted retail group, less restaurants and gas stations. Remember, the Top 100 is really a contest. In a “normal” year companies drop out and new ones are added. This can be the result of mergers, acquisitions or simply surging or slumping sales. In 2019 there were no changes. However, here are some significant changes in rank:

  • You see the growing strength of the internet.
    • Wayfair moved up 12 spots from #77 to #65
  • Sales for these 2 companies continued their downhill slide.
    • Sears from #60 to #75
    • GameStop from #75 to #97

Now let’s start “drilling down” into the specifics of the 2019 Top 100. Here’s a summary of Regular and Online Retailers versus the bundled total for Restaurants & Gas Stations.

  • Regular & Online Retailers have 58.4% of the stores but 92.3% of the business, up slightly from 92.1% last year.
  • 93.0% of the increase came from Regular/online retailers. However, they are only up 4.6% versus +5.2% in 2018.
  • Restaurant sales were up $6.7B (+4.0%) in 2019 and Gas Stations turned positive, +0.62B (+4.2%).
  • The overall Store count was up +0.6% versus +0.8% in 2018. The lift was driven by Gas Stations (+9.0% due to an acquisition) and Restaurants (+0.8%). Regular retailers were basically flat (+0.03%).

Now that we have an overview of the Top 100, let’s take a look at the “targeted” retailer segment. There are 82 total companies. How many are buying and selling Pet Products? This will reinforce how Pets have become an integral part of the American Household and how fierce that the competition for the Pet Parents’ $ has become.

  • Of 82 companies, 69 are selling some mixture of Pet Products in stores and/or online. (down from 70 in 2018)
    • Their Total Retail Sales of all products is $2.09 Trillion which is…
      • 93.4% of the total business for Regular & Online Retailers in the Top 100
      • 33.6% of the Entire $6.22T U.S. Retail market – from 69 Companies who sell Pet Products.
  • 58 Cos. (up from 56), with $1.99T sales sell pet products off the retail shelf in 145,607 stores – 2600 more than 2018.
    • As you can see by the growth in both sales and store count, 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 traditional Retailers who only sold Pet Products online converted to in store. The others who only sell pet online are losing market share. However, internet only retailers, like Wayfair are showing strong growth

Pet products are an integral part of the strongest retailers and are widespread across the entire U.S. marketplace. Of the Top 100, 145,600 stores carry at least some pet items at retail. There are thousands of additional “pet” outlets including 20,000 Grocery Stores, 10,000 Pet Stores, 16,000 Vet Clinics, 5,000 Pet Services businesses and more. Pet Products are on the shelf in over 200,000 U.S. brick ‘n mortar stores… plus the internet.

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

  • They did $1.33 Trillion in Sales
    • 54.8% of Top 100 $ales
    • 21.4% of Total U.S. Retail $
  • No change in rank (The group is unchanged since 2015)
  • Sales are up for all. Amazon leads the way…again.
  • Store count is down 500, (-1.4%)

In the next section we will look at the detailed list of the top 100. We’ll sort it by retail channel with subtotals in key columns. We’ll then break it into smaller sections for comments.

I have not done a lot of highlighting however:

  • Pet Columns ’19 & ‘18 – a “1” with an orange highlight indicates that products are only sold online
  • Rank Columns – Change in rank from 2018: (Note: Acquisitions, Divestitures and Corporate Restructuring can cause big changes in ranking.)
    • 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 sales are included in the sales of all companies

Observations

  • After a number of acquisitions over several years, Drug is still in turmoil. Now we are seeing a growing number of closures of unproductive stores. However, sales growth remains strong.
  • The Traditional Department store segment continues its overall decline. Nordstrom stores were an exception with small gains in both sales and number of outlets for 2 straight years. Belk, a small chain, had the biggest $ales growth.
    • Sears sales and store count continue to plummet.
    • Saks sold Lord & Taylor in November 2019.
    • Although all carry a few pet items, often online, this channel has never fully embraced Pet Products.
  • Much of the growth in the Convenience Store Chains in the Top 100 in recent years has come through acquisitions. In 2019 there were no major acquisitions, but both major chains had small increases in $ales and stores.
  • Military Exchanges/Commissaries have added locations in recent years, which fueled the growth in sales. In 2017 they began reducing the number of Army/AF Exchanges. By 2019 this policy had spread to all military groups. 2019 sales were up in the Army/AF group which kept the overall drop in Military Exchg/Commissaries to -$0.06B (-0.5%).
  • Auto Parts Stores have become more stable in their growth. All chains increased their store count for the 2nd consecutive year. Overall, sales were up 5.5% in 2019 versus +2.5% in 2018.
  • Among Apparel retailers, the value outlets continue to show strong growth. All three of these chains carry pet products. The Gap sold Old Navy and no longer offers pet products. Ascena closed all Dress Barn stores (650).

Observations

  • Amazon continues to drive the evolution of U.S. Retail. Sales are up 267% in 5 years. With the acquisition of Whole Foods in 2017 they also have a small but growing brick ‘n mortar presence in the market.
    • Of the three Phone People, only Apple had a strong year.
    • QVC lost ground in 2019. Sales were down -5.2% and they fell 3 spots to #44 in the ranking.
    • In 2017 a move to online gaming began. GameStop sales continue to fall, and closures grow. They fell 22 spots.
  • Signet Jewelry’s sales were down -0.04%. This was bad but better than -3.4% in 2018 and -3.9% in 2017.
  • Mass Merchants have 2 of the 4 largest volume retailers in America – Wal-Mart and Costco. Recently, these two companies have driven the growth in this channel. In 2019 Costco was strongest, but all companies increased sales.
    • Wal-Mart had a 2.6% increase in sales which is below last year’s 3.4%. Their business is mixed as SuperCenters continue to grow and their online sales are taking off. However, “regular” Discount Department Stores are losing market share. These trends impact the overall business in both Wal-Mart and Target.
    • Target posted a third consecutive sales increase in 2019, after 3 years of flat or declining revenue.
    • Costco continues its strong growth (+9.3%), building new stores and increasing sales – both in store and online.
    • BJ’s sales were up for the second consecutive year after a string of annual declines from 2013 to 2017.
    • Meijer had small growth in sales and store count in 2019. However, since 2013 they rank third overall in the percentage of sales increase and first in the percentage of store count increase.
  • All Home Improvement/Hardware companies increased sales, but overall, the growth slowed a bit, from +4.3% to +3.4%. Store count turned positive but Lowe’s and True Value continued closures. Home Depot (#6) and Lowes (#9) led the way in sales growth, supplying $5.24B (76%) of the $6.88B lift in the category.
  • Like 2018 all Home Goods Companies but Bed Bath & Beyond increased sales. They also drove down store count. Sales were up 5.1%, again driven by Wayfair, who entered the top 100 in 2018 and now ranks #65, up 12 from last year.
  • Tractor Supply was up 5.9% which is much less than 2018, +11.4%, and below their average growth rate of +8.3% since 2013.

Observations

  • Supermarkets – $406B in Sales; 15 Companies; 15,000 stores; All Selling Pet Products. This is a very important group for the Pet Industry. With the highest frequency of consumer visits of any channel, the competition is fierce. The mergers and acquisitions have slowed. All companies but Southeastern showed increased sales. However, the strongest growth came from Sprouts (Natural) and Aldi (Value).
    • Southeastern Grocers filed for bankruptcy in 2018. Store closures and reduced sales continue.
  • Small Format Value Stores: Remember, this retail channel does more business than Traditional Department Stores.
    • As expected, Dollar General increased its lead over Dollar Tree in Sales, Sales Increase and Store Count.
    • Dollar Tree continues to increase sales, but its store count growth rate has slowed.
    • Big Lots had small growth in sales and stores after trending down in both areas in 2018.
    • This retail channel continues to grow in popularity. They are committed to Pet Products and their focus on value appeals to today’s ever more price conscious consumers. Plus, they are easy to shop.
  • Pet Stores – After the acquisition of Chewy in 2017, PetSmart’s sales registered a huge increase. In 2018, their sales were up +4.7%. In 2019, driven by the increasing popularity of the internet and Chewy, sales grew an impressive +14%. Petco qualified for the Top 100 for the first time in 2016. This was widely viewed as evidence of the strength of the U.S. Pet Industry. They hung on in 2017 but dropped out in 2018. It looks like they need a new formula, perhaps the internet, to make it back into the club.
  • Office Supply Stores – This channel continues its decline as Consumers are increasingly moving to online ordering.
  • Sporting Goods – Bass Pro (includes Cabela’s) continues to struggle but the other 3 companies eked out a small sales increase (2>3%) in 2019. Sales are up overall for the category but all companies, but Academy Sports are closing some underperforming stores.

Restaurants & Gas Stations and the Grand Total

Restaurant & Gas Station Observations

Although restaurants & gas stations aren’t relevant in terms of Pet Products Sales, they are relevant in our daily lives.

  • In 2019 although 4 companies had decreases, the overall sales for Restaurants in the Top 100 was up 4.0%%. This was better than the 3.6% increase in 2018 but less than the 4.6% increase in the total restaurant channel. McDonalds led the way in $, +$1.89B, but Chick-fil-A and Chipotle tied for the biggest percentage increase, +14.5%.
  • Falling gas prices in 2019 flattened the revenue growth of the total Gas Station Channel. The Top 100 Gas Station sales and stores are both up solely because Speedway acquired Andeavor Brands with their 3200+ outlets.

Wrapping it up!

The Top 100 became the Top 100 by producing big sales numbers and their performance, except for 2018, usually exceeds the overall market. In 2019 things returned to “normal”, +4.5% for the Top 100 vs +3.6% for Total Retail. The Top 100 Gas Stations, with a major acquisition, far exceeded the full market performance. However, top 100 restaurants underperformed to the overall Restaurant channel. If you just compare the “regular” retailers – both brick ‘n mortar and internet, then the Top 100 “won” big, +4.9% to +3.6% for the total “relevant” retail market.

Pet Products are an important part of the success of the Top 100. Sixty-nine companies on the list sell Pet Food and/or Supplies in 145,600 stores and/or online. Let’s take a closer look at the fifty-eight companies that stock pet products in their stores. This group generated $1.99T in total sales. How much was from pet? Let’s “Do the math”. If we take out the $11.9B done by PetSmart and the remaining companies generated only 1.5% of their sales from Pet, we’re looking at $29.7B in Pet Products sales from only 57 “non-pet” sources! (Note: The 1.5% share for Pet items is a low end estimate based on data from the U.S. Economic Census.) After a major adjustment, the APPA reported $56B in Pet Products sales for 2019. That means that 57 mass market retailers accounted for 53+% of all the Pet Products sold in the U.S. in 2019.

Pet Products are widespread in the retail marketplace but the $ are concentrated. Regardless of your position in the Pet Industry, monitoring the Top 100 group is important. This group also reflects the ongoing evolution in the retail market – the growing influence of the internet and the importance of Value. The group was relatively stable in 2019, with no changes from 2018. Competition is still intense, and the current COVID-19 crisis will likely cause turmoil in 2020.

 

 

 

 

 

 

 

 

 

Race and Ethnicity in the Pet Industry

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The issue of racial and ethnic inequities is a hot topic right now and for good reason. Despite laws and constitutional amendments, major societal and economic disparities still exist between White, Not Hispanics and minorities in the United States. In this report we will start to look at the Pet industry in terms of Race and Ethnicity. The Data is taken from U.S. Government sources including the USBLS Consumer Expenditure Survey, the HUD American Housing Survey and the Census Bureau’s Annual Business Survey. All of the surveys are designed and conducted by personnel from the U.S. Census Bureau to insure that they accurately represent the situation in the total U.S.

First let’s look at the racial/ethnic share of U.S. CU’s (financially independent Consumer Units – more defined than H/Hs) compared to their share of $78.6B in Total Pet Spending in 2018. Note: 260K CUs identify as both Black and Hispanic. This is only 0.2% of all U.S. CUs and about 1.5% of each group so it has little effect on the numbers. Their data appears to more closely match that from the Black group so whenever possible it is included with them. This is a first indication of the impact of Race in U.S. society. Race/Skin Color is more significant than ethnicity.

The White, not Hispanic group obviously takes a much bigger bite out of the Pet Spending Pie. Let’s see how their spending compares at the CU level for Total Pet and the 4 industry segments.

  • As you can see the White, not Hispanic group is the runaway winner in all segments.
  • Hispanics finish 2nd across the board and Black Americans are last overall and in all segments but Veterinary.
  • Although the disparity between White and Minority spending is still huge, it is lowest in the Pet Food Segment. This makes sense as it is the only true necessity in Pet Spending. You may not opt for Super Premium, but if you have a pet, you need to buy food.
  • We usually think of Veterinary spending as another pet necessity. However, strongly inflating prices in recent years have caused many pet parents to delay or cancel services. This has been especially impactful in many minority households. The result is that the biggest racial/ethnic disparity is in the Veterinary segment.

Race/Ethnicity is a big factor in Pet Spending. Let’s take a closer look at the other key drivers behind the numbers.

The chart below shows the key CU demographics that drive increased Pet Spending. Regarding Race/Ethnicity, people have no choice in what group they are included. In the other categories they can affect what segment that they are in. The graph shows the biggest spending group in the demographic category along with their Share of Pet spending and Share of CU’s. Then we divide share of spending by share of CUs. This “Performance” allows us to compare the relative importance of the demographic categories.

The chart shows only Total Pet Spending. However, while the performance numbers may vary slightly between segments, all of these demographic groups are important in all areas of Pet Spending.

  • We saw in our very first pie chart that race/ethnicity was important. In this chart we see that there are 4 other demographics that are equally or even more important in Pet Spending.
  • Higher Income is the single most important factor in all segments. It is at its lowest level in food but grows in importance as spending becomes more discretionary in Supplies and Services…or super expensive in Veterinary.
  • A College degree generally means higher income, but it also correlates with recognizing the “value” of super premium foods and regular Veterinary care.
  • Homeownership – Space that you own, and control has always led to increased Pet ownership and spending.
  • Married couples have made a commitment to each other. They are far more likely to commit to pets.
  • Suburbia – More space means more room for Pets. Pet ownership and spending is lowest in the Central Cities. As you move away from the city it grows, peaking in the areas under 2500 population – both suburban and rural.

Now let’s break down these key demographic factors in terms of Race/Ethnicity.

The chart shows the average number or share for U.S. CUs compared to that for each of the Racial/Ethnic Groups

  • One thing that stands out immediately is the status of Asian Americans. They are the leaders in 4 of the 5 categories, including the runaway winners in Income and Education. Yet, they have a very low level of Pet Spending. This goes contrary to all the national numbers. It also shows that there are “hidden” factors when it comes to our relationship with our pets. It suggests that there may be cultural differences in Asian American households so that pet ownership is substantially less likely than for other groups.

In light of this situation, we’ll focus on comparing White, not Hispanic to Hispanic and Black American CUs.

  • Income – The Whites are a clear winner – 28% more than Hispanics and 48% more than Black Americans.
  • College Education – This generally correlates with income, but the disparity is even wider. This category is the only one in which Blacks outperform Hispanics. Both groups have socio-economic inequities which keep their numbers down. However, there is a key early difference. 87% of Blacks graduate from High School compared to 71% of Hispanics. The Hispanic numbers are driven down by foreign born individuals with a 55% HS graduation rate. Blacks benefit from the availability of Historically Black Colleges and Universities which produce 20% of all Black College Grads and also the opportunity provided by athletics. They receive 23% of all college athletic scholarships and 77% graduate.
  • Homeownership – Whites again lead the way, with a disparity even greater than income. We should also note that this is the only category in which Whites beat Asian American CUs.
  • Marriage – This is the demographic in which Black Americans are most different from the other groups. Only 30% of Black American CUs are Married Couples. This is 40% less than all other groups of which 51 to 53% are Married Couples – with or without children.
  • Suburban – Black Americans tend to live in more urban areas. They are the only group in which less than 50% of CUs live in the Suburbs. We should also note that they also live in the suburban areas with higher population.

In terms of the Best Spending Demographics, you can see why White spending far exceeds Hispanics and especially Black Americans. Now, let’s take a look at some of the worst spending groups in terms of Race and Ethnicity.

These 5 groups are the worst performing in terms of pet spending in their category.

  • Under $15K Income – 1 of every 5 Black American CUs makes under $15K – 63% higher than the National Avg.
  • Single Parents – These CUs are generally under tremendous financial pressure. You can see that they are more likely to be Hispanic and especially likely to be Black American. In fact, 32% of all Single Parent CUs are Black American. That is stunning considering that Black Americans only make up 12.9% of total U.S. CUs.
  • Less than High School Diploma – You can see where the educational disparity begins and that it goes much deeper than a college degree. 1 of every 6 Hispanic CUs has no member that completed High School.
  • Center City – Black Americans are the only group with 50+% living in Center City. Hispanics and Asians are relatively evenly divided between the Suburbs and the City, but Whites tend more toward suburban/rural living.
  • Single – In Pet Spending it just takes 2. Obviously, being single is not popular with Hispanics. Black Americans lead the way, but Whites are not far behind, which ultimately reduces the overall Pet $pending for both groups.
  • Note: Single Parents and Singles are 2 of the lowest Pet Spending Groups. They make up 47.1% of Black CUs.

We saw that Black Americans had the lowest share of all the biggest Pet Spending groups except College Degrees, where they were next to last. Now we see that they have the highest share of all the lowest Pet Spending groups but education, where they again finish next to last. This is an overwhelming combination and provides specific reasons for their low level of Pet Spending.

When we look at the varied rates of Pet Spending, one obvious question comes to the forefront. What is the percentage of Pet Ownership? For an unbiased answer we again turn to a Government resource – HUD, The Department of Housing and Urban Development. With the help of the Census Bureau, every two years HUD conducts the American Housing Survey to measure the current state of housing in the U.S. In the 2017 Survey of over 70,000 H/Hs they included a specific section on Disaster Preparedness to assess the state of readiness across the U.S. in the event of a disaster – natural or manmade. A series of questions was both relevant and significant for the Pet Industry. They asked if respondents had a pet and if so, would they need assistance in evacuating the animal in the event of a disaster? This is obviously relevant to the industry but also significant in that the U.S. Government officially recognized that our Pet Children are an integral part of U.S. households. Their only reason for asking the question was to help insure that communities are adequately prepared to protect and save all members of their community – people and pets.

The next graph shows the results of the question regarding pet ownership by racial/ethnic groups. There is a bonus as they also include Native Americans as a separate group. The numbers are lower than what you have seen from industry sources but don’t be distracted. The key is to focus on the relative differences between groups.

  • The first thing that we note is that the pet ownership rates closely reflect the relative pattern of pet spending rates for these groups.
  • The high rate for Native Americans shows that Pet Parenting is truly an American tradition.
  • Asians have the lowest rate of ownership which explains their low pet spending, despite the fact that they are leader in many key demographic categories which directly relate to increased Pet Spending.
  • Whites have more pets, but they also make a lot more money than Hispanics or Blacks. This is the fundamental basis for the pet spending difference between these 3 groups which is only magnified as incomes grow and the White households’ share of higher income groups becomes even larger.

From all this data, we see that there is a definite Racial/Ethnic disparity in pet ownership and pet spending. This is not the fault of the Industry. It is just a reflection of the extreme inequality in the current American Society. Black Americans are at the bottom of the ladder, with no clear route to the top without major societal changes.

So far, we have looked at the industry from the consumers’ perspective. What is the situation when we start looking up the distribution chain? Are Blacks, Hispanics and Asians represented in participating Pet Industry Companies. I’m not aware of any data that measures the racial/ethnic breakdown of Pet Company employees. However, the Annual Business Survey from the Census Bureau does track ownership by race/ethnicity for businesses with employees that qualify for this measurement. Larger Companies generally don’t fit the parameters but there are still thousands of small businesses that do. Let’s look at a few business types that are directly tied to the Pet Industry. This data is from 2017.

The chart below shows the percentage of Racial/Ethnic ownership in 3 Pet Business types and the number that qualify.

  • Veterinary Clinics – 27,881
  • Pet Services Outlets – 16,765
  • Pet Stores – 5191

Note: We were once again able to further define the data to include Native Americans. FYI – In 2017 they accounted for about 0.9% of U.S. CUs.  The numbers for each group will not total 100% because the owners of a small percentage of businesses are from multiple racial/ethnic groups.

Note: Other Racial/Ethnic shares of U.S. CU’s:

White: 69.0%

Hispanic: 13.4%

Black: 12.9%

Asian: 4.7%

  • Over 90% of all these businesses types are owned by White, Not Hispanics. That is a more dominant situation than Pet Spending, where their share was 86.3%.
  • Veterinary Clinics – You can see that a huge number of Veterinary Clinics are small businesses and can be classified by the race/ethnicity of the owner. Native Americans make their best showing in this category. About 92% are white while only 0.9% are owned by Black Americans.
  • Pet Services – There are also a lot of these small businesses. Stereotypically, Hispanics and Blacks are more associated with Services work. That may be true in the Pet Industry as both have their highest ownership share.
  • Pet Stores – Over 5 thousand pet store owners can be classified by race or ethnicity. The share of Asian owned pet stores actually exceeds their share of U.S. CU’s, a singular situation for any minority. Hispanics are seriously underrepresented, but the biggest concern is in regard to Black Americans. The number of stores is so small that the Census Bureau doesn’t release it because looking at metro area data could reveal the sales info for a specific business. Native American data is also suppressed but they don’t account for 12.9% of U.S. CUs, like Blacks.
  • Other Pet Businesses – In most cases the NAICS code doesn’t specifically define “Pet” businesses. However, data is available for Dog/Cat Food Manufacturers. There are 237 that can be classified. 223 (94%) are White-owned. Minorities own 14 businesses but again the number is so small that all Racial/Ethnic specifics are suppressed.

The Pet Industry is not the cause of the racial/ethnic inequality in the U.S but it certainly reflects the situation, especially for Black Americans. Let’s start with consumers. Due to socio-economic factors, Black Americans have an incredibly low level of pet ownership. This obviously suppresses spending, but it could even be a matter of health. HABRI is constantly offering evidence of the health benefits of Pets. The recent COVID-19 crisis has revealed that the overall health of Black Americans is the worst of any group. Programs should be developed to encourage and assist in increasing the level of pet ownership by Black American Households.

In terms of Industry Participants, minority representation is even more limited. There are no Blacks on any of the 3 Industry Organization Boards. That’s to be expected. You have to first be a member before you can be on the Board. Programs should be developed to encourage and aid minority Pet businesses of all kinds. Existing businesses should also take a look at their current staff and actively work for more diversity.

To solve a problem, you must first recognize its existence. Then take action to solve it. Racial/Ethnic inequality is definitely a problem in the Pet Industry. That means that it is also an opportunity. Let’s get to work!