Archive for category: Pet Market

In our mid-year analysis of Pet Food spending, we saw a slightly negative number but discovered that this was primarily due to a carryover from the second half of 2016 and was masking a very positive start for 2017. Pet Supplies spending tells a totally different story, and it is all positive. Mid-Year 2017 Pet Supplies spending was $17.43B, up an incredible $2.6B. Pet Supplies Spending last reached this level in Mid-Year 2013 and is higher than any annual number since 2010. The following chart should put the recent spending history into perspective.

Here are this year’s specifics:

• Mid Yr 2017 ($17.43B) vs Mid Yr 2016 ($14.84B)
  • ↑ $2.59B (+17.5%)
    • Jul > Dec 2016: ↑$1.0B
    • Jan > Jun 2017: ↑$1.6B

Like Pet Food, Pet Supplies spending is also on a roller coaster ride. However, the driving force is much different. Pet Food is “need” spending and is powered by a succession of “must have” trends. Pet Supplies spending is largely discretionary so it is impacted by 2 primary factors. The first is spending in other major segments. When consumers ramp up their spending in Pet Food, like upgrading to Super Premium, they cut back on Supplies. However, it can go both ways. When they value shop for Premium Pet Food, they take some of the saved money and spend it on Supplies. The other factor is price. Price inflation tends to retard sales, usually by reducing the frequency of purchase. On the other hand, price deflation generally drives Supplies spending up. There is also another factor that can “trump” both of these influencers – innovation. If a new “must have” product is created, something that significantly improves the pet parenting experience, then consumers will spend their money. Unfortunately, we haven’t seen much of that in this segment recently.

In 2015, consumers spent $5.4B more on Pet Food. At the same time, Pet Supplies prices went up 0.5%. This was a “killer” combination as Supplies spending fell $2.1B. In 2016 consumers value shopped for Food, saving $2.99B. Supplies spending stabilized by mid-year then increased by $1B in the second half, despite price inflation of 0.6%. Consumers spent some of their “saved” money on Supplies. In December 2016 Supplies Prices turned downward and stayed below 2016 levels all year. Food spending increased $1.94B in the first half of 2017 but this came from a limited group. The result was that Supplies Spending had explosive growth, up $1.6B. Let’s look a look a little deeper at the “who” behind the big Supplies Spending increase.

First, 2017 Mid-year Supplies Spending versus previous year by Income Group

• The Supplies spending was flat in the financially pressured <$30K group. Everyone else had an increase.
• With the exception of the lower middle income $50>$70K group, all of the increases exceeded $0.5B.
• The increases grew larger for groups with income over $100K. This is to be expected in discretionary spending.

Now, let’s take a look at another key demographic – Spending by Age Group

• Once again, the increase is very consistent across age groups, with the exception of the 25>34 year old Millennials.
• Although the spending fell in the 25>34 group, we should remember that last year they were the only group from 25>75 to have an increase in Supplies Spending. On average their Supplies Spending has been consistent over 3 yrs.
• The biggest $ increase (+$.73B) came from the 35>44 group. (Gen Xers…again). The biggest % (+48%) came from 75>

The Supplies Spending increase is remarkably well spread across both income and age groups. Mid-year sales numbers include data from parts of two calendar years. One of the priorities of this analysis is to determine how the latest year is starting out. Supplies’ Spending in the first half of 2017 was up $1.6B versus the same period in 2016. Our final chart will show the segments driving that big increase in key demographic categories.

You can see that there were very strong increases across the whole spectrum of demographic categories. In fact, only 6 of 80 separate demographic segments had a decrease in Supplies spending in the first half of 2017 and those were all minor. The leaders in our chart may all seem very familiar. They should be familiar. They are the traditional leaders in Pet Spending. The fact that they are leading the surge in 2017 Pet Supplies Spending may indicate that this segment is finally “returning to normal”. We’ll see what the second half of 2017 brings, but this is a great start

Using data from the annual Consumer Expenditure Survey conducted by the US BLS, we have done an in depth analysis of U.S. Pet Spending in over a dozen different individual demographic categories. This has given us a better understanding of “who” is behind the strength and continued growth of the Pet Industry. As always, the focus of the US BLS is on accuracy but at the same time they are never satisfied with the status quo. They are continually experimenting with new reports. This commitment to “make it better” is what led to the very timely and wildly popular demographic spending report by generation.

They’re at it again, producing a report that combines the two most popular and impactful spending demographic measures – income and age group. To get the required sample size, they combined the data from 2015 and 2016. As you recall, the Total Pet Spending for each of these years exceeded $68B. Unfortunately, because of the complexity of this test report we only have the numbers for Total Pet, not for individual industry segments…yet.

Even this “simplified” report requires a rather complex analysis. We have endeavored to keep it as simple as possible to make it easier to visualize and comprehend. The data is segregated into the following groups:

Age Groups

25 to 34 – All older Millennials

35 to 44 – All younger Gen Xers

45 to 54 – ½ Gen Xers & ½ Boomers

55 to 64 – All Boomers

65 & Over – 5 yrs of Boomers + older groups

Income Groups

Under $30K

$30K to $49K

$50K to $69K

$70K to $99K

$100K & over

This produces 25 subgroups, accounting for 98% of Total Pet Spending. The under 25 group is not included due to a very low share of Pet Spending and an extremely small sample size in the highest income levels. It is still very complex, especially in building graphs. Normally, a pie chart would be used to show the share of total CUs for each group. However, 25 slices of a pie, with 15 having a share less than 3%, make the chart unreadable. Therefore, we will focus on the largest, most impactful groups. Our first chart shows the market share for the 10 largest age/income segments.

• The economic division in the U.S. is very apparent as all the largest groups are either under $50K or over $100K.
• However, the division is strongly weighted towards lower incomes as 7 of 10 are under $50K – 5 of these are <$30K.
• The 2 largest segments of each of the 3 groups in the 35>64 age range are over $100K and under $30K.
• The oldest and youngest Americans have 4 of the 10 largest groups, all under $50K. (1/6 of all CUs are 65>, <$50K)
• There are no groups in the $70>99K range. Middle income America is obviously very fractionalized in terms of age.

It’s not all about income and age. There are other factors that impact Pet Spending. Two of the biggest are homeownership and family size, especially the number of children in the household. The following graphs show the distribution of these two demographics across income and age groups.

# of children under 18 – The financial pressure is high on lower and middle income Parents trying to fulfill the needs and wants of their human children and still be good Pet Parents. As expected, the vast majority of children are found in CU’s in the 25 to 44 year age range, especially the 35 to 44 yr old Gen Xers. Also, the number of children generally increases with CU income, except for Millennials. Their path is a bit of a roller coaster with the lowest number of children being in households with the highest income. We have all heard that Millennials are a little different. They are slow to leave their parents’ home, get married later, delay having children and are more likely to live in households with 2+ unmarried adults. These are all factors affecting the number of children in their households.

% Homeownership – About 83% of Total Pet Spending comes from Homeowners. Having more space that you control has always been a key to increased pet spending. Perhaps more than any other demographic, Homeownership regularly increases by age and income. For every age group, higher income means a higher percentage of homeownership. This is also true by income group as increased age shows increased homeownership, with one slight variation. There is a virtual tie for first at 94% by both over 55 groups, making $100K or more. The national homeownership average is 62%. You can see that the younger the group, the higher the required income to meet the average. It has been noted that Millennials are more likely to live in central cities and less likely to own a home than previous generations. This is reflected in the fact that they don’t reach the national homeownership average until their income exceeds $100K.

Now let’s get to the $pending. The next chart groups Pet Spending by income group so we can see if age matters.

• <$30K – This group represents almost 1/3 of all U.S. households and obviously has a financial struggle. The 45>64 year age group, which is ¾ Boomers spends noticeably more than the other groups.
• $30K>49K – With less family pressure the 45 and older groups increasingly focus on their Pet Children. Of note, the over 65 group takes the lead in household pet spending in this income range. The average retirees’ income is $40K. Once they reach this level, the financial pressure is reduced and they can increase their focus on their pets.
• $50>69K – Every group increases their Pet Spending but there is a big lift in the over 55 groups. Apparently this is a significant income threshold for them in terms of Pet Spending. We also see an incredible lift in the spending by the 25 to 34 year old Millennials. This could relate to that dip in the number of children that we saw earlier as well as the differences in the Millennial lifestyle.
• $70>99K – We have reached middle income. The over 55 groups show a big increase and in fact the spending of the 55 to 64 year olds takes off like a rocket. They become the overall #1 Pet Spending age/income group. The 35 to 44 group is still feeling strong financial pressure and remains in last place. The spending by the Millennials dips slightly but they are still 10% ahead of the 35 to 44 Gen Xers.
• $100K+ – Pet Spending explodes when income reaches $100K. The 55>64 year old group dips slightly but they still lead the pack. Perhaps the most significant increase (150%) comes from the 35>44 group. With some relief from financial pressure they can focus more on their pets. The only group under $1000 is the 25>34 year olds. However, their average over $100K income is 20% below the others so the $800 is on a relative par with the other groups.

Now let’s look at the same data from the age group view.

• Each age group seems to regularly increase Pet Spending as their income grows. Then, at some point they reach a significant threshold income and their Pet Spending doubles.
• For the 55 to 64 year old Boomers and the 25 to 34 year old Millennials, the critical point is $50 to 69K.
• For the oldest group, it comes at the lower $30>49K level. As we stated earlier, this is the average income for retirees and indicates a significant reduction in financial pressures.
• The 35 to 44 year olds have a different story. With the pressure from the largest families and in a critical phase of career building they don’t get any relief until their income passes $100K. When it does, they have a truly amazing response – a 150% increase in Pet Spending, moving up from last place to 3^rd, trailing only the over 55 groups.
• Although the Boomers peak at a lower level, you can certainly see that an income of $100K+ is a universal magic number in Total Pet spending

Now, we will truly “show you the money”. Here are the top 10 groups in terms of Total Pet $pending.

• These 10 age/income groups account for 50% of all U.S. CU’s and 65% of Total Pet Spending.
• Money Matters Most as all age groups making $100K or more are included.
• Age is also a huge factor as 7 of the 10 groups are over 55 years old. (55>64 Boomers win with 4 groups)
• The 3 groups under 55 all make more than $100K

Finally, let’s look at the top performers which we will define as having the highest Share of Pet $/Share of CU’s. 7 are repeats from the chart above and have matching colors in the chart below. New additions are outlined in green.

• Once again age matters as only the same two under 45, over $100K income groups made the list.
• Although it seems impossible, money matters even more in Pet Spending performance than in Pet Spending $. There are no groups making under $50K. The 2 under $50K, over 65 age groups were replaced by 2 other over 65 age groups making from $50 to $99K. Even the 55>64 Boomers lost their <$30K group to a 45>54 middle income group.

The data in this report strongly reinforces the importance of age (life stage) and especially income in Pet Spending. The availability of disposable income results in increased Pet Spending for every age group. Pet Spending really explodes when any group’s income meets or exceeds $100K. For the lower income groups, the amount of available disposable income varies due to circumstances. The younger groups have more pressure due to family size and building a career. The 45>64 age groups have less family pressure. The over 65 folks just need to meet some low minimum income levels. One thing is certain for everyone. When disposable income increases, one of the first places that it gets spent is on pets.

We’re just coming off another exciting and record setting Global Pet Expo so it seems like the right time to slow things down a bit. Usually the perfect subject to do that is the Consumer Price Index. The annual small fluctuations can have an impact on spending but they don’t generate headline news…usually. However, we are in the Pet Industry so we have learned to expect the unexpected and in terms of Petlation, the 2017 results were definitely unexpected.

The inflation rate for Total Pet in 2017 was only 0.4%. This is the lowest rate recorded since they began keeping records back in 1997. It even beat out the 0.6% rate in 2010 which was driven by the Great Recession. Every segment contributed and deserves a headline:

• Pet Food Prices fell -1.1%, the biggest drop ever and the 4^th annual decrease in the last 8 years.
• Veterinary Prices went up 2.1%. This was the smallest increase in history.
• Pet Services Prices increased 1.1%. This is half of the 2016 rate and only 2010 (0.9%) had a smaller increase.
• Pet Supplies prices fell -0.4% to register the 5^th annual decrease in 8 years. They’re now -5.3% below the 2009 peak.

Let’s put these changes in perspective. As we look back over the years since 1997, there seems to be 3 distinct periods in which the inflation rate for each segment had a similar trend. The periods are of varying lengths and some segments took the trend to a far greater extreme.  We’ll look first at the overall inflation from 1997 to 2017 then these periods:

• 1997 to 2007
• 2007 to 2009
• 2009 to 2017

Overall 1997 to 2017 – As usual, the service segments and the product segments seem to almost be in a different industry. This produces a Total Pet that seems perhaps a little high, but not unreasonable. Supplies and Veterinary are at the extreme ends of the spectrum. Pet Food looks like the most rational of the group. Let’s do a direct comparison with some categories outside of the pet industry over the same period to put these numbers in perspective:

• Pet Food: 2.1%; Human Food: 2.3% – The inflation rate of Pet Food is right on target!
• Veterinary: 4.7%; Human Medical Care: 3.6% – 30% greater than Human Medical. That’s amazing and too high!
• Total Pet: 2.7%; Overall U.S. CPI: 2.1% – It’s in the “ballpark” even after being driven up by the service segments.

1997 to 2007 – Pet Owners became Pet Parents during this time and towards the end of the period took this a step further to more humanize their Pets. The CPI for the product segments had a reasonable rate of increase which worked for Consumers, Retailers and Manufacturers. The inflation in the service segments was abnormally high, especially in Veterinary. However, Pet Services has always been more dependent on higher income so these households were less impacted by the rising prices. Veterinary Services were viewed as a need so Pet Parents continued to spend their money.

2007 to 2009 – This is a 2 year period in time where a combination of circumstances created the highest Petflation rate in history. First and foremost was the Melamine recall in the Pet Food Segment. Consumers feared for the safety of their pets and demanded that Pet Food be made in the USA to insure safety. They later upped this demand to all ingredients must be made in the USA. This resulted in a radical increase in production cost and retail price – over 20% in just 2 years. However, Pet Parents just spent the money. It was a matter of the safety of their Pet Children.

This was also a very flush time in the U.S. economy as well as in the Pet Industry. We can do no wrong was the attitude. The price increase rate for services increased by 33% to 4.8%. Even the already astronomical Veterinary price increase rate moved up to almost 6%. However, the Supplies segment saw the average annual CPI increase almost triple, from 1.2% to 3.1%. There is no true explanation for this one, except, perhaps. Raise the price. They will pay it. Then came the great recession and the aftermath/recovery.

2009 to 2017 – Total U.S. Consumer spending fell in 2009. The last time that this had happened was in 1956. Prices in the overall market also dropped in 2009 as Retailers scrambled to recover lost $. The impact in both Pet Spending and pet pricing didn’t occur until 2010 but it has been ongoing. The Product section has seen the most turmoil in pricing. Food prices have deflated in 4 of the past 8 years giving Pet Food an annual CPI rate of 0.6%, about 1/3 the rate of the “normal” years from 1997 to 2007. Pet Supplies pricing is actually down 5.3% since 2009 as 5 of 8 years have had deflating prices. For the record, Pet Supplies prices officially peaked in September of 2009. Even the Service segments are feeling the effect. The CPI increase of both service segments is down significantly from past years. Let’s take a look at our outside comparison for this period.

• Pet Food: 0.6%; Human Food: 1.7% – Obviously, the Pet Food market has become incredibly competitive.
• Veterinary: 3.4%; Human Medical Care: 3.0% – Vet Prices still increasing 13.3% faster than Human Medical.
• Total Pet: 1.3%; Overall U.S. CPI: 1.7% – A Big switch. The Petflation rate is now lower than the overall U.S. CPI.

The period from 2009 to 2017 has been a time of change and in some cases, a time of turmoil regarding pricing in the Pet Industry. The next chart shows the annual change in CPI for all segments and Total Pet. It should help put this pricing “evolution” into better perspective.

• The first thing of note is that the recession had a big impact. In 2010 the inflation rate slowed markedly, especially in the Non-Vet Services. However, the prices in the product segments actually deflated, especially Supplies.
• Apparently 2010 was looked upon as an anomaly as all but the Supplies Segment tried to increase prices at a more usual rate in 2011. In general this was not successful. Let’s look at the path of each segment.
• Veterinary – After bumping prices by 5% in 2011, they immediately dialed back their rate of increase to under 3% for the next 2 years. Prior to this they had never had 2 years in a row even under 4%. They bumped the increase to 3.5% in 2014 and it remained above 3.5% but under 4% through 2016. Even this was apparently too high. They experienced fluctuating revenue and dropping frequency in visits from the post-recession price sensitive consumers. In 2017, the inflation rate dropped to a record low 2.2% as pricing pressure intensifies in this segment,
• Services – The pattern starts out like Veterinary with a dip in 2010 and a “back to normal”, 3.8% increase in 2011. However, this didn’t work as the annual increases fell to 2+% and stayed there for 5 years. Services spending is more driven by higher income households than any other segment so they are less impacted by moderate price increases. They appeared to have found a sweet spot as sales continued to outpace inflation. Then in 2017 the inflation rate fell to 1.1%, the 2nd lowest ever. It may be that this segment is starting to feel the impact of increased competition.
• Pet Food – In 2009 Pet Food was still feeling the pricing impact due to the switch to “all made in the USA”. Food prices actually deflated in 2010. However, they returned to a more normal pattern of a 2+% increase for the next 3 years. Then we began a wave of increasingly more premium food trends. Although consumer spending increased, the overall prices decreased as “regular” brands tried to “buy back” lost consumers. There is also is another factor. Once a trend takes off, this increases the competitive pressure between those brands, retailers and even between retail channels. This has continued through 2017 and even intensified as the internet is increasingly becoming a player in the Pet Food game. Pet Food prices have deflated in 3 of the last 4 years.
• Pet Supplies – No segment has been impacted more by the recession than Supplies. They are largely discretionary spending and many categories have become commoditized. That makes them extremely price sensitive. If prices go up, spending almost always drops. This usually comes from decreased purchase frequency. A seemingly small drop can make a big difference. If average purchase frequency is 60 days and it falls to every 66 days, that 10% drop can mean $1.5B less spending. The Food segment has got around this competitive pressure by introducing innovative, ever more premium foods. The Supplies segment has not seen many premium, “must have” innovations.
• Total Pet – In 2017 the Total Pet inflation rate set an all-time record low of 0.4%. This average is determined by the individual segments. All segments were lower than 2016. However, this Total Pet number can be deceptive. High inflation in the Service segments plus deflation in Products can produce a nice industry average but it comes from 2 negative situations. For healthy, long term growth we need the products segments to go positive and the service segments to have moderate inflation. If we could get these annual rates:
  • Supplies: 0.5%  · Food: 1%       · Services: 1.5%      · Veterinary: 2.5%
  • Every segment would be better off and the Total Pet rate would be 1.5% which is still lower than the overall U.S. CPI.

We have tracked the annual changes in inflation from 2009 to 2017. In 2016-17 the CPI dropped sharply. To determine when this trend started, we noted the CPI changes by quarter vs the previous year. Suggestion: Follow 1 color at a time.

The annual Petflation rate for every industry segment dropped in 2017 versus 2016. The Service Segments’ CPI rate was reduced by almost 50%. However, The Product segments turned a minimal CPI increase in 2016 to Price deflation in 2017 as both went negative.

There are some similarities in the pattern for the two Service Segments as they both reached the low point in the second quarter of 2017 and then turned up slightly. By the final quarter in 2017, their inflation rate had been cut in half from the first quarter of 2016.

The Product segments also had some similarities. They both had a major quarterly pricing lift, although the Supplies segment was delayed by three months. Both spent almost every quarter below the pricing of the previous year and the biggest dip occurred in the final quarter of 2017. Let’s review each segment.

• Veterinary – CPI 2016: 3.7%; CPI 2017: 2.2% – Down 1.5%. The inflation rate was stable in the first 2 quarters of 2016 at about 4%. It then steadily fell for the next 12 months, bottoming out at 1.8% in the second quarter of 2017. It then moved up slightly but remained basically stable at the 2.2% annual rate. Since high prices have resulted in a reduced frequency in Vet Clinic visits. This significant price slowing could increase spending.
• Services – CPI 2016: 2.0%; CPI 2017: 1.1% – Down 0.9%. The inflation rate in Services has generally been in the 2.5% range. Since spending in this segment is more driven by higher income households than any other segment, the steady growth has basically been unaffected. This substantial drop in the CPI rate probably reflects the increased competition in the segment. This includes more separate service companies as well as an increasing number of pet stores and Vet clinics offering services.
• Pet Food – CPI 2016: 0.2%; CPI 2017: -1.1% – Down -1.3%. Pet Food had a sudden spike in prices in the 3^rd quarter of 2016 then began deflating, especially after the first quarter in 2017. The Food segment is basically operating with new rules. In the “old” days, deflation would result in reduced spending as consumers didn’t buy more food because prices were cheaper, they just spent less. Today the Pet Food segment is being driven by a succession of trends to ever more expensive premium foods. The deflation and the up and down CPI reflects the incredible competition in the segment as manufacturers and retailers, including the internet, vie for the Consumers Pet Food $.
• Pet Supplies – CPI 2016: 0.1%; CPI 2017: -0.4% – Down -0.5%. Pet Supplies pricing was down in 7 of the 8 quarters. The big anomaly was the huge spike in prices in the 4^th quarter of 2016. Coming in the peak buying season, this was unusual, to say the least. This spike had a major impact on the CPI of both 2016 and 2017. It turned 2016 positive and mitigated the across the board pricing drops in 2017. The great recession had a big impact on the Supplies segment. Although many products are “needed”, much of the spending in this category is discretionary. Also, more and more categories have become commoditized. This makes them very price sensitive. When prices edge up, spending usually falls. If prices fall, spending edges up. When consumers spend more upgrading their Pet Food, they cut back on Supplies. Most of the spending fluctuation comes from a reduction or increase in the frequency of purchases. All of these factors have created a spending roller coaster for Supplies.
• Total Pet – CPI 2016: 1.4%; CPI 2017: 0.4% – Down 1.0%. The Total is definitely a sum of the parts. The CPI rate in 2016 was very steady at or near 1.4% all year. However, when the CPI rate in the Service Segments began to drop the Total Pet CPI was buoyed up by big lifts in the Food and Supplies segment. In 2017, Service Segments slowed their decline and flattened out. However, the Products segments deflated in every quarter. The CPI for every segment was lower in 2017 than in 2016 and resulted in a record low for Total Pet.

So why track the CPI change? Because changes in prices can and do impact Consumer Spending behavior. In our analysis of the demographics of Pet Spending, household income was the single biggest factor affecting the results. Money Matters Most. This price sensitivity has grown since the Great Recession. High inflation in Veterinary Services has resulted in spending cut backs by the more price sensitive groups. The Services segment has so far been unaffected but perhaps that time has come. The Food segment has gotten around this issue through a succession of upgrades in quality and price. The Supplies segment is incredibly price sensitive and desperately needs some “must have” innovations. Hopefully we will come to a middle ground in Petflation that works both for consumers and industry participants.

Now we will look at the last and smallest segment – Pet Services. We’ll see some similarities to other segments, especially Veterinary. However we’ll also see some big differences from the Product Segments and even from Veterinary. Each of these industry segments is unique. For one thing, Services spending is definitely more discretionary in nature than the other segments. This has resulted in CU income becoming the most dominant factor in spending behavior. We’ll see the impact of this in many demographic categories. We have seen some big spending swings in the other Industry Segments in the last 2 years. Services Prices have also been inflating at a rate that is below Veterinary, but much higher than the product segments. Thus far, at least on the surface, neither of these factors has affected the consistent annual growth in spending $ that Services has enjoyed since 2011. Let’s look a little deeper.

Let’s start by identifying the groups most responsible for the bulk of Services spending in 2016 and the $0.58B increase. The first chart details the biggest Pet Services spenders for each of 10 demographic categories. It shows their share of CU’s, share of pet products spending and their spending performance (Share of spending/share of CU’s). The differences from the other segments are immediately apparent. In order to better target the bulk of the spending we had to alter the groups in four categories – income, education, age and occupation. The performance level should also be noted as 7 of 10 groups have a performance level above 120%. This compares to 8 for Veterinary, 5 for Supplies and only 4 for Food. These big spenders are performing well but it also indicates that there is a large disparity between the best and worst performing segments. Income is absolutely the biggest factor in Services Spending. The categories are presented in the order that reflects their share of Total Pet Spending which highlights the differences of the 6 matching categories.

1. Race/Ethnic – White, not Hispanic (86.8%) This large group accounts for the vast majority of spending in every segment. With a 124.3% performance rating, this category ranks #7 in terms of importance in Services Spending demographic characteristics. While Hispanics, African Americans and Asian American account for over 30% of U.S. CU’s, they only spend 13.2% of Services $. This is similar to their share of Food and Supplies – about 1% lower, but is 5% higher than their share of Veterinary Spending.
2. Housing – Homeowners (85.7%) Homeownership is a major factor in pet ownership and spending in all industry segments. The Homeowners’ share of Pet Services spending is 85.7% which is the highest of any industry segment. However, even with 137.3% performance, homeownership is only in 4th place in terms of importance for increased Pet Services spending.
3. # in CU – 2+ people (79.0%) The share of market for 2+ CU’s is very close for all segments. Their overall Pet Services performance of 112.4% is next to last. Spending is highest in 2>4 people CUs but drops off sharply for 5+ and singles.
4. Education – College Grads (69.8%) Income generally increases with education. Services spending moves up strongly with each increasing level of education. This is what led us to shift the group up to College Grads. A performance of 171.7% makes a college education the 2nd most important factor in generating greater Services
5. Occupation – “I’m the Boss” (69.2%) – The “ I’m the Boss” group consists of Mgrs & Professionals, Self-employed and retired CU’s. They have a slightly higher market share and a 30% higher performance than Total Wage & Salary earners. In fact their performance is 138.0% which puts them in 3^rd This “bossy” group combines the 2 highest income groups with the strong performing retired group.
6. Age – 45>74 (69.0%) Services Spending usually correlates with the 35>64 year olds, which includes the 3 highest income groups. However, this changed in 2016. The 35>44 group markedly increased their Veterinary spending and cut back on services. At the same time the 65>74 year olds decided to spend their money on needed services. The result was that the biggest spenders became the 45> 74 group. Their performance is 133.7% and ranks 6^th of all the groups. The number is so high because the performances of all groups under 44 and the over 75 group are very low.
7. # Earners – “Everyone Works” (67.4%) In this group, all adults in the CU are employed. Income is important so the relatively high market share is to be expected. However, their performance is 117.1%, which ranks only 8^th in importance. This comes as a result of the strong year by retirees. It also shows that retirees and 1 earner CU’s with 2+ people spend a lot of money on Services – 32.6% of Total $. This similar to the pattern in Supplies.
8. Income – Over $70K (66.7%) If we went down to the $50K income level, the market share would be 75.5%. However the $50>$69K income group only performs at 67.7%. Performance of CU’s in the $70>99K range goes up to 95.2% but it truly explodes over $100K – 232.2%. To get to the 60% market share goal we chose to group CU’s over $70K in income. This group has a performance rating of 180.2% and absolutely shows that CU income is the single most important factor in increased Pet Services Spending. However, we still have the spending anomalies of the overperforming, retired group and the underperforming, high income Asian Americans.
9. CU Composition – Married Couples (66.0%) Married couples are a big share of $ and have 120+% performance in all segments. Their performance of 135.8% puts them in 5th place in terms of importance to Services spending.
10. Area – Suburban (58.7%) Suburban CU’s spend the most $ but spending is balanced across all urban areas, including Central Cities. This is reflected by the low performance of 107.0% Rural areas are the only underperformers.

We changed 4 of the spending groups for Services to better target the biggest spenders. Higher income appears to be even more important to Services spending than it is to Veterinary, where we changed 2 groups. Services has 7 groups with performance over 120%. Veterinary has 8, but the performance levels in Services spending are markedly higher. This indicates an even  bigger spending disparity between the segments in Services than exists in Veterinary.

Now, we’ll look at 2016’s best and worst performing Pet Services spending segments in each category.

Most of the best and worst performers are not a surprise. In Pet Services spending, there are 7 that are different from 2015, the most of any segment. 4 of them are in the worst category. This is similar to the Veterinary Segment which is also very dependent on higher income for increased spending. As we drill deeper into the data, we will see some similarities with other Industry segments but each Segment is unique. Changes from 2015 are “boxed”. We should note:

• Income is even more important to Pet Services. The 425.8% Performance by the $200K> group is 30.9% better than their performance in Veterinary and 126.1% higher than what they rang up in Food.
• # Earners – 3+ Earners – Last year they spent money on a food upgrade. This year they saved money on Food and spent more on everything else. They edged out 2 Earner CUs for the top spot. These highest income groups were the only segments with 100+% Services performance in the category.
• Age – 55>64 – These Baby Boomers made a big turnaround in 2016. They were up 54% in spending and made a major commitment to Pet Services. It makes sense. They are getting older so their need for services is growing but they still have the third highest CU income in this category so they have the money to pay for it.
• Education – <HS Grad – In the Services segment, this is the expected loser. In 2016, HS Grads occupied this spot.
• CU Composition – Single Parents finished last. In 2016 it was singles. These groups are invariably at the bottom. Married, Oldest Child <6 had a 54.7% increase and replaced Married Couples Only who had a 146.9% performance.
• # in CU –Singles – In 2016 all 2>4 People CUs improved their performance. The 5+ people and Single segments both had a significant decrease. Singles edged out last year’s loser, 5+ people, for the worst performance.
• Region – In 2015 the Midwest finished second with 122%. In 2016, they were the only Region with a decrease in Services spending, down $0.56B (-34% ) This left the West as the only region with 100+% performance.

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

Pet Services was up $0.58B for the 2nd year in a row. Despite this consistency, there was turmoil. There were only 2 repeat losers and 1 repeat winner from 2015. Also, 8 of the winners in 2015 were losers in 2016, while only 3 losers became winners. In 3 categories they just switched positions. This seems somewhat unusual for a segment with steady growth. Also, like Supplies, there was 1 category where all segments spent more. Here are the specifics:

• Housing – In 2015, spending increased for all segments. In 2016 only Homeowners without a mortgage spent more.
  • Winner – Homeowner w/o Mtge – Services $: $2.25B; Up $0.78B (+53.5%)
    • 2015: Homeowner w/Mtge
  • Loser – Renter – Services $: $0.98B; Down $0.17B (-14.6%)
    • 2015: Renter
  • Comment – We see the impact of increased spending by the older groups and the decrease by the younger ones.
• Education – Education above HS does matter as the increase was driven by Associates’ and Advanced Degrees.
  • Winner – Adv. College Degree – Services $: $2.73B; Up $0.68B (+33.1%)
    • 2015: BA/BS Degree
  • Loser – BA/BS Degree – Services $: $2.04B; Down $0.25B (-10.9%)
    • 2015: HS Grad only
  • Comment – In 2015 College Grads, led by BA/BS holders fueled the increase. In 2016 the BA/BS group cut back on $ but the Advanced Degree segment more than made up the difference so College Grads are on top again.
• Age – In 2015, the 25>54 group drove spending up. In 2016 the increase came from 55>74 year olds.
  • Winner – 55>64 yrs – Services Spending: $1.89B; Up $0.66B (+54.0%)
    • 2015: 35>44yrs
  • Loser – 35>44 yrs – Services Spending: $0.9B; Down $0.29B (-24.6%)
    • 2015: 55>64 yrs
  • Comment: We see the impact of other categories and $. The big winners in 2015, the 25>44 group, changed their focus in 2016. The 25>34 yr olds spent more on Food and Veterinary. The 34>45 group turned to Veterinary and Supplies. Both now have more balanced pet spending. The 55>74 group began value shopping for Food in 2016 and spent a lot of the saved money on Services. Only the high income 45>54 group had an increase in both years.
• Area Type – Central Cities has two consecutive years of increases totaling $0.99B
  • Winner – Central City – Services Spending: $2.54B; Up $0.66B (+34.8%)
    • 2015: Suburbs 2500>
  • Loser – Suburbs 2500> – Services $: $3.28B; Down $0.16B (-4.5%)
    • 2015: Rural
  • Comment – The Suburbs 2500> didn’t have a good year. They spent less in Services and in fact, all pet segments.
• Region – All regions but the Midwest showed increases in 2016. In 2015 all regions showed growth.
  • Winner – West – Pet Services Spending: $2.36B; Up $0.55B (+30.5%)
    • 2015: Midwest
  • Loser – Midwest – Services Spending: $1.09B; Down $0.56B (-34.0%)
    • 2015: Northeast
  • Comment – The West is up $0.76B since 2014. Only the Midwest has a decrease from 2014, down $0.25B.
• Occupation – In 2015 the higher income jobs led the way. In 2016 it was the lower income jobs, plus self-employed.
  • Winner – Retired– Services Spending: $1.39B; Up $0.5B (+56.8%)
    • 2015: Mgrs. & Professionals
  • Loser – Mgrs. & Professionals – Services: $2.39B; Down $0.26B (-9.9%)
    • 2015: Retired
  • Comment – The Retired and Service worker groups had a huge turnaround from down $0.35B in 2015 to up $0.76B in 2016. The Mgrs and Tech worker groups went the other direction from up $0.82B to down $0.37B. All 4 groups are up from 2014. The Self-employed group is the only segment with increases in both 2015 and 2016.
• Race/Ethnic – The White, Non-Hispanics share of Supplies spending is 86.8% so even a 7.5% increase is a winner.
  • Winner – White, Not Hispanic – Services $: $5.93B; Up $0.41B (+7.5%)
    • 2015: White, Not Hispanic
  • Loser – African American – Services $: $0.24B; Up $0.02B (+11.3%)
    • 2015: African American
  • Comment – In 2016 all racial/ethnic groups spent more on Services. This is somewhat of a surprise in a segment which is so driven by income. The Asians had the biggest percentage increase at 29.1%. The African Americans finished last 2 years in a row but at least in 2016 it was for the lowest increase, not the biggest decrease.
• Income – 2016 was a year of mixed messages as the $30 to $49K group won – largely driven by the retirees.
  • Winner – $30 to $49K – Services Spending: $0.92B; Up $0.40B (+78.6%)
    • 2015: $150K>
  • Loser – $70 to $99K – Services $: $0.91B; Down $0.08B (-8.0%)
    • 2015: $70 to $99K
  • Comment – The 2 year drop from $70>99K reflects the changing spending behavior of the various demographic category segments which fall into this upper middle income group.
• # in CU – A big turnaround for the winner which reflects the spending of all Married Couples with children.
  • Winner – 4 People – Services Spending: $1.04B; Up $0.34B (+48.2%)
    • 2015: 1 Person
  • Loser – 1 Person – Services Spending: $1.43B; Down $0.21B (-12.8%)
    • 2015: 4 People
  • Comment: In 2016 2>4 people CU’s spent more. All others spent less. In 2015 the increase came from the 1>3 people CU’s as singles “stepped up”. Only the 5+ group spent less for 2 consecutive years. Financial pressures?
• # Earners – In 2016 every segment but 1 earner, singles spent more.
  • Winner – 2 Earners – Services Spending: $2.86B; Up $0.34B (+13.6%)
    • 2015: 1 Earner, Single
  • Loser – 1 Earner, Single – Services $: $0.93B; Down $0.29B (-23.9%)
    • 2015: 2+ in CU with 1 Earner
• Comment – In 2015 only CU’s where all adults worked spent more. In 2016, the retired folks and 2+ CU’s with only 1 earner also got on board the increase “Train”. Only the single workers were left at the station with a decrease.
• CU Composition – Every CU with 2 or more adults, with or without children spent more on Services in 2016.
  • Winner – Married Couple Only – Services: $2.17B; Up $0.17B (+8.4%)
    • 2015: Single
  • Loser – Single – Services $: $1.43B; Down $0.21B (-12.8%)
    • 2015: Unmarried, 2+ Adults
  • Comment – Increased Pet Services spending was very widespread across this demographic category. Only CU’s with single adults or single parents spent less.

We’ve now seen the winners and losers in terms of increase/decrease in Pet Services Spending $ for 11 Demographic Categories. Overall, 2016 was a year with much stronger and more widespread gains than losses. The winning increase in each category averaged +56% while the biggest decreases averaged -16%. We saw strong contributions from the 55 to 74 age group, the Central City and the West. The $0.58B increase matched 2015 and was the 5th consecutive increase, totaling $2.5B (+56.5%). Like the other Pet Segments, not every good performer can be “the” winner and some of these hidden segments should be recognized for their outstanding performance. They don’t win an award but they deserve…

Honorable Mention

Pet Services spending was up $0.58B in 2016. The increase was in tune with the segment’s performance since 2011. It was relatively demographically widespread as 49 of 82 segments (59.8%) spent more on Services. These “almost” winners reinforce the contributions of the older folks, families and Central Cities. We also see that you don’t have to have a big income or a Master’s Degree to buy Pet Services. These 5 segments aren’t award winners but their combined Services spending increase was significant at $1.31B.

Summary

In 2015 and 2016, significant changes in spending behavior for Pet Food first negatively affected, then positively affected spending in the Supplies and Veterinary segments. Through this turmoil, Services spending seemed unfazed, quietly registering a $0.58B increase in both years. The increase was relatively widespread with 60% of all demographic segments registering an increase. Also, all segments in the Racial/Ethnic category increased spending on Services

Pet Services are definitely needed by some groups. However, for most demographics, Services are a convenience and spending is very discretionary in nature. The result of this is that CU income is of paramount importance to increased Services spending. This impacts many demographic categories and we adjusted the big spender groups in 3 categories specifically to accommodate this difference in behavior and to better target where most of the $ are coming from. Just how important is income? 37% of CU’s have an income over $70K and account for 66.7% of Services Spending. This is a performance rating of 180.7% – the highest rating earned by any group in any category in any industry segment.

Performance is an important measurement. Let’s drill deeper into the performance of the big spenders in Pet Services. We identified 5 demographic categories with high performing large groups. (There were 6 for Veterinary and 3 for Food)

• Income
• Occupation
• Higher Education
• Homeownership
• CU Composition

The biggest producers in these groups all generate increased Services $ and all are categories in which the consumer can exercise some degree of control. The Racial/Ethnic and Age Categories also have high performance numbers but the consumer has no control over their inclusion in these groups. All 5 of these groups have a performance above 133%. This is incredibly high and indicates a huge disparity between the best and worst performing segments in the category. This disparity is greater in Services than in any other Industry segment. On the one hand this is good news as it makes it easier for industry participants to more effectively target their best customers. It also allows them to identify those demographic segments most in need of improvement. Unfortunately, these lowest performing groups may need considerable assistance.

There was definite turmoil in this income driven segment. There were 7 changes in the best and worst performing individual segments but the biggest changes showed up in $. 19 of 22 winners and losers in spending $ were different from 2015. In fact 8 2015 winners became losers in 2016, while 3 losers became winners. There were also some surprising winners, like the Retirees, Central City and the $30>49K income group. There were 2 major trends of note:

1. The “older” movement – The biggest increases came from the 55>74 age groups.
2. The Urbanization of the U.S. is reflected in Services with strong spending growth by Central City.

Finally – The “Ultimate” Pet Services Spending Consumer Unit consists of 2 people – a married couple, living alone now that their last child finally moved out. They are in the 55 to 64 age range. They are White, but not of Hispanic origin. At least one of them has an advanced College Degree. Both of them work, running their own business. They’re doing well with an income over $200K. They still live in a larger suburb, near a big city in the Western U.S. and are still paying off the mortgage on their home.

Next we’ll turn our attention to Pets and Supplies. We’ll see some differences from Pet Food as the spending in the Supplies segment is much more discretionary in nature. There are other factors too. Many product categories have become commoditized so pricing changes (CPI) can strongly impact Consumers’ buying behavior in this segment. Supplies’ Spending is also affected by the spending behavior in other segments. In 2015 Consumers spent $5.4B more on Pet Food. They helped pay for this by spending $2.1B less on supplies, primarily by purchasing 10% less frequently. In 2016, things turned around as Consumers value shopped for premium foods but spent $0.94B more on Supplies. This “lift” didn’t get the segment back to the $17B spent in 2014 but it was a good start in getting Supplies back on track.

Let’s see which groups were most responsible for the bulk of Pet Supplies spending in 2016 and the $0.94B lift. The first chart details the biggest pet supplies spenders for each of 10 demographic categories. It shows their share of CU’s, share of pet products spending and their spending performance (Share of spending/share of CU’s). Although their share of the Pet Supplies $ may be different from their share of the Total Pet $ or Food, all of the big spending groups are the same. The categories are presented in the order that reflects their share of Total Pet Spending. This highlights the differences in importance. In Pet Supplies spending, Homeowners have the lowest market share for any industry segment. However, the share of spending for Suburbanites is larger than for Food. All Pet Parents need supplies, regardless of their housing arrangement. However, if you have more space you have room for more supplies. Income is still the highest performing demographic characteristic and we’re back to 5 groups performing above 120%. Pet Food had only 4 as Education dropped out. Increased Education correlates with increased income and income is more important in supplies spending.

1. Race/Ethnic – White, not Hispanic (85.5%) This large group accounts for the vast majority of spending in every segment. With a 122.9% performance rating, this category ranks #3 in terms of importance in Pet Food Spending demographic characteristics. While Hispanics, African Americans and Asian American account for over 30% of U.S. CU’s, they only spend 14% of Pet Supplies $. Pet ownership is relatively high in Hispanic American households. However, it is significantly lower for African Americans and Asian Americans which is reflected in Supplies spending.
2. # in CU – 2+ people (81.2%) The share of market for 2+ CU’s is very close for all segments. Their overall Supplies performance of 114.6.1% is relatively high because singles perform so poorly. Although performance peaks in 3 People CU’s, it still remains relatively high in larger CU’s. It only falls below 100% in 5+ people CU’s and even then, it is 97.4%. In Supplies’ Spending, it definitely “just takes two.”
3. Housing – Homeowners (74.9%) Homeownership is a major factor in pet ownership and spending in all industry segments. However, with 120.0% performance, homeownership is in 5th place in terms of importance for increased pet Supplies spending. The Homeowners’ share of market fell only slightly from 75.4% in 2015. Although all segments in this category registered spending gains in Supplies in 2016, Renters gained a little ground as they had a slightly bigger percentage increase than all Homeowners.
4. Income – Over $50K (69.3%) With a performance rating of 138.6%, CU income is the single most important factor in increased Pet Supplies Spending. The increased discretionary nature of much of Supplies spending pushes the performance level slightly higher than that of Pet Food. However, it is still significantly below the Service Segments. Although they are not as pronounced as in the Food segment, we still have the same anomalies of retired Americans spending more on their pets than their income would suggest and the higher income, Asian Americans spending much less. However, Higher Income still generally generates Higher Pet Supplies Spending.
5. # Earners – “Everyone Works” (67.0%) In this group, all adults in the CU are employed. This group’s high share of Pet Supplies $ reinforces the importance of income in Supplies spending. Their performance is 116.4%, which is higher than Food but doesn’t reach the 120% level. In this case, it shows that CU’s with 2+ people and only one earner, along with retired people, still spend a lot of money on Supplies – 33% of Total $.
6. Age – 35>64 (64.2%) Traditionally Supplies Spending skews more towards the younger groups. The 35>64 group repeated their dominance from last year with a slightly higher market share, up from 62.3% in 2015. Their 118.5% performance level also improved from 114.6% and is approaching the 120% level. There was some turmoil in the category as the 25>34 age group cut back on Supplies to help “pay” for increased spending on Pet Food. However, the 65+ year olds stepped up their Supplies spending, which more than made up the difference.
7. Occupation – All Wage & Salary Earners (63.8%) – The market share and performance of this group, 104.6%, are very similar to those for food. The spending is definitely skewed towards the higher income, white collar workers. Also, the low performance shows that a lot of spending is being done by the Self-employed and retired groups.
8. Education – Associates Degree or Higher (63.1%) Income generally increases with education. We see the effect of this with a larger market share for this group than in Food and a radically improved performance level of 122.0%. This makes higher education the 4^th most important factor in generating greater Supplies
9. Area – Suburban (62.0%) Suburban CU’s are the biggest spenders in every segment. The fairly high performance of 113.0% reflects the lower share of Supplies $ in Central Cities and the truly Rural areas.
10. CU Composition – Married Couples (59.9%) Married couples are a big share of $ and have 120+% performance in all segments. Their performance of 123.2% puts them in 2nd place in terms of importance to Supplies spending.

The biggest spending groups for Pet Supplies are the same as those for Total Pet and Pet Food. However, the discretionary nature of Supplies causes spending to be more impacted by income than Food. Groups associated with higher income, like Education and # Earners, have higher performance than in Food. The numbers are actually close to those of Total Pet. Supplies also has 5 groups performing above 120%, which shows greater disparity between segments.

Now, we’ll look at 2016’s best and worst performing Pet Supplies spending segments in each category.

As usual, most of the best and worst performers are those that we would expect. In Pet Supplies spending, there are only 4 that are different from 2015. That is less change than the 6 in Pet Food but it is still 1 more than for Total Pet. As we move deeper into the data, we will start to see even more differences between the Industry Segments. Changes from 2015 are “boxed”. We should note:

• Income matters and is growing even more important. The 233.3% Performance by the $200K> group is 23.9% better than their performance in Food and 8.9% higher than last year.
  • Of Note: 8 of the 11 winners for best performance had the highest income of any segment in the category and the other 3 – White, not Hispanics, Suburbs <2500 population and 3 people Cu’s, were all second in income.
• CU Composition – This year’s winner is Married Couples with the oldest child between 6 and 17. This reflects the strong performance by the 45>54 age group as well as the improved performance of the 35>44 group. Both are almost all Gen Xers. This year’s lowest performer was singles. Last year it was single parents. Quite frankly, every year these two groups are invariably at or near the bottom in performance.
• # in CU –In 2015 there was a virtual tie in performance for all CU’s of 2 or more people. 2016 was different in that only 2 or 3 people CU’s had performance over 100% and the 3 people group finished on top. Singles are perennially the worst performers.
• Region – In 2015 the Midwest finished second with 103.6%. In 2016, they were the only Region with a decrease in $.

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

2016 was up $0.94B after a $2.1B drop in 2015 so there were a lot of changes. There are 2 repeat winners and 3 repeat losers. In 3 categories, last year’s loser was this year’s winner. In 1 category the winner and loser from 2015 switched positions. Retired persons were a surprise winner but the big news came from the Housing category where all segments had an increase. This occurred only one other time in 2016 – in Services: Racial/Ethnic Ctgy . Here are the specifics:

• Area Type – Central Cities has two consecutive years of increases totaling $1.36B
  • Winner – Central City – Supplies Spending: $4.84B; Up $0.92B (+23.4%)
    • 2015: Central City
  • Loser – Suburbs >2500 – Supplies Spending: $7.07B; Down $0.4B (-5.3%)
    • 2015: Rural
  • Comment – The larger Suburbs have the largest share of Supplies $, but they are now down $1.18B since 2014.
• Race/Ethnic – The White, Non-Hispanics share of Supplies spending is 85.8%. In 2015 they were down $2B.
  • Winner – White, Not Hispanic – Supplies: $13.58B; Up $0.81B (+6.3%)
    • 2015: Hispanic
  • Loser – Hispanic – Supplies: $1.34B; Down $0.003B (-0.2%)
    • 2015: White, Not Hispanic
  • Comment – Only Hispanics had increased Supplies spending in 2015. In 2016, they were the only group that spent less but it was a very small decrease – only $3M. The biggest concern is that the White, Non-Hispanic group is still down $1.2B from 2014.
• Age – In 2015, all age groups spent less on Supplies. In 2016 only 2 groups spent less – 25>34 and 55>64.
  • Winner – 35>44 yrs – Supplies Spending: $3.13B; Up $0.69B (+28.1%)
    • 2015: <25 yrs
  • Loser – 25>34 yrs – Supplies Spending: $2.11B; Down $0.56B (-21.0%)
    • 2015: 45>54 yrs
  • Comment: The 35>44 Gen Xers had the biggest increase while the 25>34 Millennials registered the only significant decrease. They spent a lot more on food so they cut back on supplies. Perhaps the biggest surprise was the $0.59B increase from the over 65 group.
• Occupation – In 2015, all but 1 group – Mgrs/Prof., spent less. In 2016, all but 1 group – self-employed, spent more.
  • Winner – Retired– Supplies Spending: $2.57B; Up $0.63B (+32.1%)
    • 2015: Mgrs. & Professionals
  • Loser – Self-employed– Supplies Spending: $1.50B; Down $0.22B (-12.7%)
    • 2015: Retired
  • Comment – The Retired group had a huge turnaround from down $0.35B in 2015 to up $0.63B in 2016. Unfortunately, they “paid” for it with a $1.35B decrease in Food spending. Perhaps, the best news was that every wage or salary earning occupation had an increase. This showed that the increase was very widespread.
• Income – In 2016, three income groups spent less on Supplies but that is better than 2015 when every group was down.
  • Winner – $200K> – Supplies Spending: $2.08B; Up $0.59B (+39.6%)
    • 2015: $100 to $149K
  • Loser – $150 to $199K – Supplies Spending: $1.25B; Down $0.31B (-20.1%)
    • 2015: $70 to $99K
  • Comment – The winner is no surprise. The surprise is that the combined $100>199K group was down $0.61B
• Region – The Northeast is a bit of a surprise. Their strong showing was driven by the Central Cities.
  • Winner – Northeast – Supplies Spending: $2.97B; Up $0.59B (+24.7%)
    • 2015: West
  • Loser – Midwest – Supplies Spending: $3.03B; Down $0.3B (-8.9%)
    • 2015: Midwest
  • Comment – The Midwest is down $1.7B (-36%) since 2014. They have fallen from best to worst in performance.
• # in CU – It’s simple. 2 and 3 people CU’s had the biggest increases with 3 people winning by only $0.02B.
  • Winner – 3 People – Supplies Spending: $3.12B; Up $0.55B (+21.4%)
    • 2015: 1 Person
  • Loser – 5+ People – Supplies Spending: $1.47B; Down $0.15B (-9.5%)
    • 2015: 5+ People
  • Comment: In 2015, singles were flat in spending while all other sizes spent less. In 2016, CU sizes from 1 to 3 people all posted increased Supplies spending while the CU’s with 4 or more people spent less.
• CU Composition – The winner correlates with the lift in spending from the 35>44 age group.
  • Winner – Married, Oldest child 6>17 – Supplies: $2.58B; Up $0.55B (+27.2%)
    • 2015: Unmarried, 2+ Adults
  • Loser – Married, Child >18 – Supplies: $1.48B; Down $0.13B (-8.2%)
    • 2015: Married, oldest child >18
  • Comment – Only Married Couples with an oldest child under 6 or over 18 and single parents spent less on supplies in 2016. All other CU composition segments spent more.
• Housing – All Housing segments spent more on Supplies in 2016.
  • Winner – Homeowner w/o Mtge – Supplies: $3.96B; Up $0.53B (+15.5%)
    • 2015: Renter
  • Loser – Homeowner w/Mtge – Supplies: $7.9B; Up $0.1B (+1.3%)
    • 2015: Homeowner w/o Mtge
  • Comment – With the Homeowners without a mortgage, we have another last to first position switch. Much of this segment’s spending was driven by the retired group.
• Education – A big change from last year when all education levels had reduced spending.
  • Winner – Adv. College Degree – Supplies Spending: $3.71B; Up $0.52B (+16.4%)
    • 2015: All College Grads
  • Loser – <High School Grad – Supplies Spending: $0.66B; Down $0.17B (-20.6%)
    • 2015: HS Grad or less
  • Comment – The Advanced Degree group spends the most per CU and had the biggest increase. Only those without a High School diploma and strangely, those with a BA/BS, spent less on Supplies.
• # Earners – In 2016 the “unlucky” number was 1. Only 1 earner CU’s, regardless of size, spent less on Supplies.
  • Winner – 2 Earners – Supplies Spending: $6.72B; Up $0.51B (+8.2%)
    • 2015: 2 Earners
  • Loser – 1 Earner, Single – Supplies Spending: $1.91B; Down $0.16B (-7.7%)
    • 2015: 2+ in CU with 1 Earner
  • Comment – Income is a factor, especially when discretionary spending produces financial pressures. 2 and 3 Earner CU’s spent substantially more as did the retired, No Earner CU’s. A 1 Earner CU has had the biggest decrease for 2 consecutive years.

We’ve now seen the winners and losers in terms of increase/decrease in Pet Supplies Spending $ for 11 Demographic Categories. Overall, 2016 was a year of moderate changes. The winning increase in each category was generally around $0.5B while the biggest decrease was usually in the $0.2 to $0.3B range. We saw strong contributions both from the Gen Xers and the over 65 age group. While the $0.94B increase did not gain back the $2.1B spending drop in 2015, it’s a good start. As we have noted before, not every good performer can be “the” winner and some of these “hidden” segments should be recognized for their outstanding performance. They don’t win an award but they deserve…

Honorable Mention

Pet Supplies spending was up $0.94B in 2016. While the increase was not huge, it was relatively demographically widespread as 53 of 82 segments (64.6%) spent more on Supplies. The “almost” winners in the chart reinforce the performance of both the older, retired Americans and the middle income group. We also see that you don’t have to have a College degree to buy Pet Supplies. These 5 segments didn’t win any awards but their combined Supplies spending increase totaled $2.57B. They made a difference.

Summary

In 2015 and 2016 we saw how significant changes in spending behavior in one Industry segment can impact the other segments. In 2015 a large group of consumers upgraded their Pet Food to Super Premium and spending took off – up $5.4B. However, in order to help pay for the upgrade, they cut their spending on Supplies (-$2.1B) and Veterinary ($0.5B). The $2.1B decrease resulted in a spending drop in Supplies in 74 of 82 Demographic segments (90%). It was pervasive. However, 2016 brought another change. Consumers began seriously price shopping for their high end Food, at retail and on the internet. They managed to save $2.99B and they used some of this savings to spend $0.94B more on Supplies and $1B more on Veterinary Services. Supplies didn’t come all the way back but it was a good start as almost 2/3 of the demographic segments increased spending in 2016.

Pet Supplies spending is more discretionary than Food but there are still many categories which are real needs for Pet Parents – dog collars and leads, cat litter, feeding bowls and even dog toys and chews, to name a few. Other categories like carriers, clothing and flea & tick items also become real needs under certain circumstances. The big difference between the Supply needs and Food needs is frequency of purchase. Overall, Pet Supplies are purchased less often than Pet Food and Treats but much more often than either of the Service Segments.

Although it is not an absolute necessity like Food, the spending behavior on Pet Supplies can also be a reflection of the percentage of pet ownership across a demographic category. The performance of the bulk of the spenders is also very important. We identified four demographic categories with high performing large groups. (There were 3 for Pet Food)

• Income
• Higher Education
• Homeownership
• CU Composition

Increased income, higher education, homeownership and being married all generate increased pet supplies spending and all are categories in which the consumer can exercise some degree of control. The disparity in performance of segments within these categories allows industry participants to more effectively target both their best customers as well as those most in need of improvement.

The Value shopping for Food caused considerable turmoil in that segment. The bounce back in Supplies was a little calmer and more evenly dispersed. There were only 4 changes in the best and worst performing individual segments. As usual the biggest changes showed up in $. There were some surprising winners, like the Northeast, Central Cities and Retirees. There were also 2 major trends of note:

1. The Age “split” – The biggest increases came from the 35>44 and the over 65 age groups.
2. The U.S. continues to Urbanize and our Pets are coming with us. Rent…Own… All Housing options work for pets.

Finally – The “Ultimate” Pet Supplies Spending Consumer Unit consists of 3 people – a married couple, with their 17 year old child. They are in the 45 to 54 age range. They are White, but not of Hispanic origin. At least one of them has an advanced College Degree. Both of them work, running their own business and their child just started a part time, after school job. They’re doing well with an income over $200K. They still live in a small suburb, adjacent to a big city in the Western U.S. and are still paying off the mortgage.