Archive for category: Pet Market

Pet Products spending totaled $51.17B for the 12-month period ending 6/30/18. This was an increase of $5.3B (+11.5%). Total U.S. spending for the period totaled $7.95 Trillion, up $370B (+4.9%). Driven by big increases in both Food and Supplies, Pet Products Spending growth far exceeded the pace of Total U.S. spending.

In this report we will update Pet Products Spending for arguably the most popular demographic measurement – by Generation. Baby Boomers built today’s Pet Industry, but they are getting old. What happens next? Gen Xers are next in line but most of the discussion revolves around Millennials. Last year at this time the Gen Xers had a big year. Are they still performing? What about the youngsters? Are they stepping up in life and spending? Have the Boomers still got it? Let’s take a closer look. The numbers come from or are calculated from data in the US BLS Consumer Expenditure Survey.

First, let’s define each generation and look side by side at their share of Consumer Units (H/H’s) and Total Spending.

          Generations Defined:

• Millennials: Born 1981 and after
  • In 2018, age 19 to 37
• Gen X: Born 1965 to 1980
  • In 2018, age 38 to 53
• Boomers: Born 1946 to 1964
  • In 2018, age 54 to 72
• Silent: Born 1928 to 1945
  • In 2018, age 73 to 90
• Greatest: Born before 1928
  • In 2018, age 91 and over

• Boomers are still the largest group with 44.4M CUs (34.0%) and the biggest spenders – $2.8T. Their numbers are down but their spending is still growing and over performing as their share in relation to their share of CUs is 105%.
• Gen X is the second largest CU group. Their overall numbers are down slightly as more singles “pair up”. However, their spending was up $123B to $2.56T. They are the leaders in spending performance, and it got even better, 121%.
• Millennials are the largest generation in sheer numbers, but third in CUs. More are developing financial independence as CUs grew by 2.7M – up 5M (+17%) in 2 years. They also had the biggest increase in spending +$228B. Their total spending was $1.77T – 3^rd However, their spending performance is only 86%.
• The Silent generation actually gained slightly in CUs and their overall spending was up $18B so they remain a viable force in the marketplace. The Greatest Generation will soon be too small to be a measurable, separate spending group. They will be replaced by Gen Z by 2020.

There is the obvious difference in age to be considered and differences in behavior. However, we have also learned that there are key Consumer Unit characteristics, like income, family situation and home ownership that make a difference both in Total Spending and in Pet Spending. Let’s look at some of these key differences.

• It just takes 2. CUs with 2 or more people account for 84.8% of all Pet Products Spending. (up from 81% last year)
• The size of the CU and number of children is all about Family responsibility and all the financial pressures that this generates. The CU size overall is unchanged from Mid-2017 and still peaks with the Gen Xers. However, the Boomer and Gen X generations decreased by 0.1 person. Perhaps, their Millennial kids are moving out.
• Married couples with children under 18 are an important segment, 23.4% of all CUs. They account for 26.5% of all Pet Products spending and 32.8% of Supplies Spending. However, as the number of children grows, the increased financial responsibility can slow Pet Spending.
• Boomers still average 2+ people in the CU. However, they are much less likely to have children <18 at home. As their human children leave home, they turn their attention and spending to their Pet Children who are still with them.
• Pet Products spending is also tied to the number of earners in a CU. 2+ Earner CUs account for 41% of the total but they spend 49% of Pet Products $. As you can see the “earning” is being done in America by Gen Xers, Millennials and Boomers with Gen Xers at the top, as to be expected. Boomers are down 0.1 as more move into retirement.
• Homeownership – Owning and controlling your own space has always been a key to increased Pet Ownership and spending. Homeowners currently account for 80.2% of all Pet Products Spending, which increased by $4.89B (+13.5%). Renters’ spending was up too, but only $0.4B (+4%), which highlights the importance of homeownership.
  • Nationally, Homeownership remained steady at 63%. Gen Xers remain at or near the national average. Homeownership continues to increase until we reach the oldest Americans.
  • The Millennials are obviously lagging behind but they did increase from 34% to 36% and are up from 32% in 2016. This is encouraging. Boomers also moved up 1% to 78%. The homeownership rate for the over 25 Millennials still remains 20% below the rate for the older generations when they were the same age.

Next, we’ll compare the Generations to the National Average in Income, Spending, Pet Products Spending and Pet Products Share of Total $pending:

• CU Avg Income – $76,335 
• Total Spending – $60,815
• Pet Products Spending – $391.90
• Pet Products Share of Total Spending – 0.64%

• Income – The 38>53-year-old Gen Xers are the leaders. The Boomers earn about 20% less and their income will continue to fall as they age. The big drop begins with the Silents as retirement becomes almost universal. The Millennials income is still 20% less than the Boomers and only 64% of the Gen Xers.
• Total Spending – The Gen Xers make the most and spend the most, but their spending is not out of line with their income. Boomers also spend more than the average, but their income can still support it. Spending doesn’t fall as fast as income with the older generations. In fact, they are actually deficit spending in relation to their after tax The Millennials under 25 are also in an after tax income deficit spending situation. The rising income from the 25>37 group makes up the difference and brings their overall generational spending more in line with income.
• Avg CU Pet Products Spending – The Boomers have been alone at the top since they made the move to upgrade to Super Premium Food in 2015. Their lead began dropping when they began value shopping for food in 2016 but it has bounced back with the 2^nd wave of Super Premium. The Millennials are closing the gap but still trail the Gen Xers by 27% and the Boomers by 41%. The Gen Xers made a big move in Pet Products spending last year as they broke the national average for the first time since 2014. However, they lost ground this year – down to 104.9% from 112%.
• Pet Products Share of Total Spending – One measure of the level of commitment to their Pets.
  • The Pet Products share of total spending increased to 0.64%. Only Boomers exceed the National Average but everyone under 91 years of age is at least 87% of the national average.
  • In a flip flop from last year, Gen Xers were the only big group to decrease their pet products spending in terms of its share of their overall spending. The drop was small and should be put into perspective. This group not only makes and spends the most money, they had by far the biggest increase per CU in these areas.
  • Millennials are in 3^rd place in both income and total spending and moved up to 3^rd place in Pet Products Spending share. Their Total Spending was up 5.5% but their Pet Products Spending was up 18.5%.
  • You can see that spending for the very Oldest, “Greatest” Americans continues to drop but the 73 to 90-year-old Silent Generation is still making “noise” with their commitment to their pet companions.

Now let’s look at Pet Products $ spent by Generation and their share of the total.

• In terms of 2018 Mid-Yr Performance, all but the Greatest were up, but the lift was driven by Boomers & Millennials.
• Boomers still have the largest share, but the Millennials gained the most, moving up to 19.4% from 17.3% last year.
• Overall – Ave CU spent $391.90 (+37.98); 2018 Mid-Yr Pet Products spending = $51.17B, Up $5.3B (+11.5%)
  • The bulk of the lift is coming from 2017. July>Dec 17, Up $3.82B; Jan>Jun 2018, Up $1.48B
• Boomers – Ave CU spent $502.14 (+$56.71); 2018 Mid-Yr Pet Products spending = $22.47B, Up $2.52B (+12.6%)
  • Big lift in 2017 but spending turned down in 2018. – Jul>Dec 17, Up $3.25B; Jan>Jun 18, Down $0.73B.
• Gen X – Ave CU spent $411.04 (+$14.03); 2018 Mid-Yr Pet Products Spending = $14.39B, Up $0.47B (+3.3%)
  • Relatively flat but turning up in 2018. – Jul>Dec 17, Down $0.24B; Jan>Jun 18, Up $0.70B
• Millennials – Ave CU spent $298.37 (+$46.65); 2018 Mid-Yr Pet Products Spending = $9.95B, Up $2.00B (+25.2%)
  • The most consistent, strong growth of any group. – Jul>Dec 17, Up $0.77B; Jan>Jun 18, Up $1.23B.
• Silent Gen. – Ave CU spent $262.63 (+$23.33); 2018 Mid-Yr Pet Products Spending = $4.29B, Up $0.36B (+9.1%)
  • Growth in both halves but the bulk of the lift came in 2018. Jul>Dec 17, Up $0.07B; Jan>Jun 18, Up $0.28B.
• Greatest Gen.– Ave CU spent $71.37 (-$0.83); 2018 Mid-Yr Pet Products Spending= $0.08B, Down $0.04B (-35.3%)

The increase was driven by Boomers in 2017 and  Millennials in 2018. Let’s look at individual segments. First, Pet Food

• Boomers drove the lift in the 2^nd half of 2017, then they began value shopping at the start of 2018.
• The Millennials had a big lift at the beginning of 2018. Perhaps this is the start of a Pet Food new trend?
• Overall – Ave Cu spent $240.44 (+$21.01); 2018 Mid-Yr Food spending = $31.36B, Up $2.92B (+10.2%)
  • After a big lift in the 2^nd half of 2017, growth slowed markedly. Jul>Dec 17 (+$2.67B); Jan>Jun 18 (+$0.25B)
• Boomers – Ave CU spent $333.30 (+$45.96); 2018 Mid-Yr Food spending= $14.96B, Up $2.11B (+16.5%)
  • July>Dec 17 (+$2.86B) – Wave to Super Premium continues. Jan>Jun 2018 (-$0.75B) – In 2018: Value shopping.
• Gen X – Ave CU spent $222.45 (-$10.83); 2018 Mid-Yr Food spending= $7.83B, Down $0.32B (-3.9%)
  • Some value shopping in 2^nd half of 2017 then began to bounce back. Jul>Dec 17 (-$0.43B); In Jan>Jun 18 (+0.11B)
• Millennials – Ave CU spent $177.16 (+$26.95); 2018 Mid-Yr Food Spending $5.85B, Up $1.06B (+22.1%)
  • Jul>Dec 17 (+$0.26B); Jan>Jun 18 (+$0.80B). Some of the lift is coming from a big increase in CUs. However, we could be seeing the start of a new food trend. Remember, Millennials pioneered the move to Super Premium.
• Silent Generation – Ave CU spent $164.31 (+$8.53); 2018 Mid-Yr Food spending $2.65B, Up $0.09B (+3.6%)
  • Spending was flat in the 2^nd half of 2017, then picked up in 2018. Jul>Dec 17 (+0.01B); Jan>Jun 18 (+$0.08B)
• Greatest Gen. – Ave CU spent $56.32 (-$1.57); 2018 Mid-Yr Food spending= $0.06B, ↓ $0.03B (-34.9%) – fading.

We are still seeing the impact of the 2^nd wave of Super Premium in 2017. However, 2018 started off strong for Millennials while Boomers began value shopping. It could signal the beginning of a new Food trend. Now, Supplies.

• Boomers still have the largest share but Supplies spending skews younger – Gen X and Millennials control 53.7%.
• The lift is consistent and widespread. The Oldest Americans are losing CUs, driving spending down.
• Overall – Ave CU spent $151.46 (+$16.97); 2018 Mid-Yr Supplies spending = $19.81B, Up $2.38B (+13.6%)
  • Supplies spending has been strong and growing for 24 months. Jul>Dec 17 (+$1.15B); Jan>Jun 18 (+$1.23B)
• Baby Boomers – Ave CU spent $158.09 (+$10.75); 2018 Mid-Yr Supplies spending= $7.50B, Up $0.40B (+5.7%)
  • With a big increase in Food $, the Supplies lift is more subdued. Jul>Dec 17 (+$0.39B); Jan>Jun 18 (+$0.01B)
• Gen X – Ave CU spent $188.59 (+$24.86); 2018 Mid-Yr Supplies spending= $6.56B, Up $0.78B (+13.4%)
  • Consistent growth with biggest lift in the 1^st half of 2018. Jul>Dec 2017 (+$0.19B); Jan>Jun 18 (+$0.59B)
• Millennials – Ave CU spent $121.21 (+19.70); 2018 Mid-Yr Supplies spending= $4.09B, Up $0.94B (+29.9%)
  • More CUs and a strong lift in both halves. Jul>Dec 17 (+$0.51B); Jan>Jun 18 (+$0.43B)
• Silent Generation – Ave CU spent $98.32 (+14.80); 2018 Mid-Yr Supplies spending= $1.64B, Up $0.26B (+19.2%)
  • Surprisingly consistent growth in both halves for this older group. Jul>Dec 17 (+$0.05B); Jan>Jun 18 (+$0.21B).
• Greatest Gen. – Ave CU spent $15.05 (+$0.74); 2018 Mid-Yr Supplies spending= $0.02B, Down $0.01B (-36.8%)

2015 saw a steep drop in Supplies spending as consumers upgraded to Super Premium Pet Food and reduced the frequency of Supplies purchases. Spending flattened out in the first half of 2016 but then this segment began a magical 24 month run. Consumers began value shopping for Pet Food and spent some saved money on Supplies. There were great values to be had as Supplies prices deflated for 22 months. This combination of circumstances generated an incredible $4.97B Supplies spending lift. The increase was driven by Gen X and Boomers, +$3.62B, but the Millennials stepped up in the last year, +$0.94B. Only the Greatest Generation spent less which was due to their declining numbers.

In the final chart we will compare each generation’s share of spending on Total Products, Pet Food and Pet Supplies to their share of CU’s and see “Who is earning their share?” Then we will review their actual performance numbers.

Performance = Share of Spending/Share of CU’s;    100+% indicates you are “earning your share”

If a share of market is outlined , then performance exceeds 100%.

• Greatest Generation – is not included in this section as both their market share and CU share are too small.
• Silent Generation Performance – Pet Products: 65.7%; Pet Food: 66.2%; Pet Supplies: 64.9%
  • This group ranges in age from 73 to 90. Pet ownership is more difficult after age 75 and this is reflected in the low share of Pet Products spending. However, the desire and the commitment are still there. Their performance is remarkably consistent between Food and Supplies, but it is definitely dropping as they age.
• Baby Boomers Performance – Pet Products: 129.2%; Pet Food: 140.4%; Pet Supplies: 111.5 %
  • The Boomers truly led the way in building the pet industry and they are still at it. They are earning their share and are the spending leader in both Food and Supplies. Driven by their 2017 spending increase in Food, their overall performance is up from last year. Ultimately this will begin to fade as they age. However, based upon their history, they will continue to perform well for many more years.
• Gen X Performance – Pet Products: 105.7%; Pet Food: 93.9%; Pet Supplies: 124.5%
  • The Gen Xers are next in line and next in performance to the Boomers. They outperform the Boomers on supplies. However, their Food performance fell below 100% as they were in the value shopping phase. Gen Xers range in age from 38 to 53. They already make and spend the most money. As they grow older, their children will start to move away from home and their focus will increasingly turn to their Pet Children. Expect their overall performance to continue above the 100% level and to ultimately surpass the Boomers.
• Millennials Performance – Pet Products: 75.3%; Pet Food: 72.4%; Pet Supplies: 80.0%
• • The Millennials are widely touted as the future of the industry. This is ultimately true, but the future is still a ways off. The Millennials are currently 19 to 37 years old. They have a lot of pets, but their responsibilities are growing, and money is still in short supply. They continue to spend a lot on Supplies as they establish pet households and seek products that make Pet Parenting easier. There is also strong evidence that they are leading the way in each new food trend. One thing is certain. Value shopping is their golden rule, especially on the internet. They are 17 years away from occupying the highest income age group. Plus, they are having children later so the spending lift from children leaving will undoubtedly be delayed. They may be 20 years away from Pet Spending dominance.

A Final Word – In the 2017 mid-year update, Pet Products Spending belonged to the Gen Xers. They produced $2.33B of a $2.41B increase with a strong performance in both Food and Supplies. This year the honor should be shared between the Boomers and the Millennials. With a huge lift in Food, Boomers accounted for 85% of the spending increase in the 2^nd half of 2017. Then the Millennials stepped up to provide 83% of the lift in the 1^st half of 2018. Overall the Boomers won, with a $2.52B increase. The Millennials finished 2^nd, +$2.0B but they win the consistency award as they spent more in both halves in both Food and Supplies. Note: An Honorable mention should go to the Silents, who also had a small lift in both halves in both segments. Overall, it was an incredible 12 months for Pet Products spending, up $5.3B.

In our mid-year analysis of Pet Food spending, we saw that the latest spending increase slowed in the 1^st half of 2018 . Pet Supplies spending tells a different story, and it is all positive. Mid-Year 2018 Pet Supplies spending was $19.81B, up $2.38B (+13.6%). This comes on the heels of a $2.59B increase in the previous 12 months. Pet Supplies spending is now at the highest level since 2009, prior to the great recession. The following chart should put the recent spending history of this segment into better perspective.

                Here are this year’s specifics:

• Mid Yr 2018: $19.81B; ↑$2.38B (+13.6%) from Mid Yr 2017.
• The +$2.38B came from:
  • Jul > Dec 2017: ↑$1.15B
  • Jan > Jun 2018: ↑$1.23B

Like Pet Food, Pet Supplies spending has been on a roller coaster ride. However, the driving force is much different. Pet Food is “need” spending and has been powered by a succession of “must have” trends. Pet Supplies spending is largely discretionary, so it has been impacted by 2 primary factors. The first is spending in other major segments. When consumers ramp up their spending in Pet Food, like upgrading to Super Premium, they often cut back on Supplies. However, it can go both ways. When they value shop for Premium Pet Food, they take some of the saved money and spend it on Supplies. The other factor is price. Pet Supplies prices reached their peak in September of 2009. With a few brief exceptions they have been generally deflating since then – down -5.3% from 2009 at the end of 2017. Although it is not a hard and fast rule, Price inflation in this largely discretionary segment can retard sales, usually by reducing the frequency of purchase. On the other hand, price deflation generally drives Supplies spending up. Innovation can “trump” both of these influencers. If a new “must have” product is created, something that significantly improves the pet parenting experience, then consumers will spend their money. The perfect example of this is the successive waves of new food trends. Unfortunately, we haven’t seen much significant innovation in the Supplies segment recently.

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

That brings us to the first half of 2018. The spending increase in Pet Food slowed to +$0.25B. However, Supplies’ prices switched from deflation to inflation. Prices increased 0.6%, but not until May so most of the spending in the 1^st half was already done. During this period Supplies Spending increased by $1.23B so there was no major impact from the upturn in prices. Although, we should note that the less price sensitive over $150K group accounted for $0.91B of the increase. If the Supplies segment could become less sensitive to minor inflation and increased spending in other segments it would be great news for manufacturers and retailers, encouraging stronger, stable growth like the last 24 months.

Now we will take a closer look at the two most popular demographic measures – age and income. In the graphs that follow we will compare spending for the Mid-year 12 months ending 6/30/18 to the previous period ending 6/30/17. In our graphs we will also include the 2017 yearend $pending. This will also allow you to see the spending changes in the 2^nd half of 2017 and the 1^st half of 2018.

The first graph is for Income, which has been shown to be the single most important factor in increased Pet Spending, especially in Pet Supplies and both of the Service segments.

Here’s how you get the change for each half using the $50>70K group as an example:

Mid-yr Total Spending Change: $2.47B – $2.30B = Up $0.17B (Note green outline = increase; red outline = decrease)

• 2^nd half of 2017: Subtract Mid-17 ($2.30B) from Total 2017 ($2.55B) = Spending was up $0.25B in 2^nd half of 2017.
• 1^st half of 2018: Subtract Total 2017 ($2.55B) from Mid-18 ($2.47) = Spending was down $0.08B in 1^st half of 2018.

• The increase in Supplies Spending was widespread across income groups. The only yearly decrease came from the $70>100K group. They were down in both halves. They did have a big increase in Food spending during this time so they may have been dialing back their Supplies spending.
• The biggest increase came from the over $150K group. Their $1.54B lift (+40.2%) accounted for 65% of the segment’s total increase while they only have 11.9% of the CU’s. However, we also should note that this group is gaining members faster than any other income segment. Their CU count is up 13.9% from a year ago.
• There are 2 other minor dips in spending. Pet Supplies spending fell -$0.06B in the second half of 2017 for the upper middle income $100>150K group and by -$08B in the first half of 2018 for lower middle income $50>70K group.
• Another interesting situation is the remarkably even distribution of Supplies spending among the under $100K groups. In fact, the under $50K group spent $5.7B while the $50>100K group only spent $5.3B. However, the <$50K group accomplished this with 47.6% of the CU’s in the U.S., while the $50>100K group only has 27.6%. There is no doubt that Money Matters in Supplies Spending.

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

• This is very consistent. Every Age group had an overall increase and an increase in each half. The groups from 25>64 each increased Supplies spending by approximately a $0.5B. The older and younger groups had smaller increases.
• Obviously, the factors affecting Pet Supplies Spending in the last 12 months were relatively evenly dispersed across America, at least in the 25 to 64 year olds.

Now let’s look at what is happening in Supplies spending at the start of 2018 across the whole range of demographics. In our final chart we will list the biggest $ moves, up and down by individual segments in 11 demographic categories. Remember, the increase in the 1st half of 2018 was $1.23B, slightly more than the $1.15B in the 2^nd half of 2017.

• In 4 of the 11 categories all segments increased Supplies Spending. Actually, only 9 of 82 demographic segments started out 2018 by spending less on Supplies. That means 89% are ↑. Very widespread growth.
• There are a lot of the usual “suspects”. Winners: $150+K, Homeowner w/Mtge, White, Not Hispanic, Suburban, 2 earners. Losers: Single Parents, Retirees, Hispanic.
• There are a couple of surprise losers: $70>99K & Advanced College Degrees. Both had a big lift in Food – Trading $ ?
• The lift is demographically widespread but Supplies Spending does skew slightly younger: 35>44, 4 People, Gen X

The Supplies segment had a great 12 months and 2018 is off to a good start but the “winning streak” is actually 24 months. It began in the second half of 2016. Since then, spending on Pet Supplies has increased $4.97B (+33.5%). It has also been widespread across America. Of 82 separate demographic segments, only 1 has spent less on Supplies in the last 24 months – the Greatest Generation. The reason for this decline is unfortunate but can’t be helped. The number of CU’s for these 91+ year old Americans has decreased by over 40% during the period.

What are the market conditions that helped to foment this “wave” of Supplies spending? We have to first note that the world changed for Supplies because of the great recession. Prices have been generally deflating since then and spending in the segment has become more sensitive to changes in price. Prices go up…spending drops, usually due to reduced purchase frequency. Prices go down… spending turns up. This situation did not exist prior to the recession.

The other factor is spending in other segments, especially Food. Whether it is a conscious decision or not, pet spending comes out of “one bucket”. A big increase in one segment can result in a cut back in others and big savings can generate more spending. The recent upgrade to Super Premium Food was such a big $ commitment that it magnified this effect.

In Mid-2016, the market was just coming off the first big wave to Super Premium and consumers were starting to value shop so $ were available. Supplies pricing turned down and continued to decline for 22 months. The time was ripe for a big lift in Supplies Spending, and it happened. At the same time a new wave was starting in the Super Premium movement, which could have derailed the Supplies lift. However, it turned out that the demographic segments that were upgrading  to super premium food were less focused on Supplies, so the impact was negligible. Supplies Spending continued to grow. That brings us to mid-2018. What comes next?

A new food trend may be starting but the lift may be minimal in 2018. Of bigger concern is inflation. Supplies prices turned up in May and by year end had increased +2.3%. We have not seen anything like this since the pre-recession, price glory days of 2009 when prices increased (+3.2%). Unless price sensitivity has gone away, this does not bode well for Supplies spending in the second half of 2018. We will have to wait and see. We’ll get the data in September.

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.

We have seen that the key demographic factor behind increased pet spending is income. At the same time, the demographic that attracts the most broadscale interest and media attention is the spending by generation. Although we can’t  bundle these 2 together. The US BLS has again produced 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 2016 and 2017. As you recall, Total Pet Spending averaged over $70B during this period . Unfortunately, due to the complexity of this report we only have the numbers for Total Pet, not for the individual industry segments.

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 Millennials
• 35 to 44 – 85% Gen Xers; 15% Millennials
• 45 to 54 – 75% Gen Xers; 25% Boomers
• 55 to 64 – All Boomers
• 65 & Over – 6 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. Therefore, we will again focus on the largest, most impactful groups. Our first chart shows the share of CU’s for the 10 largest age/income segments. There are highlights which apply to all 3 share/performance charts in the report and should help you in viewing and comparing the data.

• Outlined in green = gained share
• Outlined in red = lost share
• Filled in green = new to Top 10

Each of the age/income groups has an assigned a bar color. Ex: 55>64 $100K+ is always red. 25>34 $100K+ is orange, etc.

In terms of age, all 25>34 Income groups are a shade of yellow; 35>44 is black (only 1); 45>54 are shades of blue; 55>64 are red/pink; Over 65 are shades of green. Now that you know the “rules”, let’s get started.

• The first thing that you notice is that there is no “middle ground”. All of the 10 largest segments are either under $50K (6) or over $100K (4). Last year it was 7 to 3 but this year the high income 25>34 group replaced 35>44 <$30K.
• The 2 largest segments are at the opposite ends of the income spectrum but both “held their ground”.
• 3 of the 4 segments that gained share are $100K+. Every $100K age group from 25>64 is now in the top 10. The lift in the 65>, $30>49K group comes from Baby Boomers retiring. Average retirement income is $40K.
• All 4 of the segments that lost share are <$50K. (3 are <$30K). Most of the “losing” CUs moved up a notch in income.
• There are no big groups in the middle ground, $50>100K. Middle income America is very fractionalized by age group.

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 demographic measurements across income and age groups.

# of children under 18 – Larger households can create financial pressure which can impact spending on Pet “Children”. As expected, most children, at least the ones under 18, are in the 25>54 yr old group, peaking with the 35>44 yr olds. The number children tends to increase with income. However,  the 25>34 yr old Millennials are an exception. CU’s with incomes below $50K have the most children. There are also two dips in the number of children – $50>69K and over $100K. Let’s see if that impacts pet spending.

% Homeownership – About 81% of Total Pet Spending comes from Homeowners. Having more space that you control has always been a key to increased pet spending. 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. In CU’s making over $100K, the 55>64 yr olds edge out the over 65 group – 94 to 93 to claim the overall title. The national homeownership average is 63%. You can see that the younger the group, the higher the required income to meet the average.

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 over 45 group has fewer children and is more likely to own a home, so they have more money and space for pets.
• $30K>49K – This is the only income group to regularly increase spending with age which puts the 65+ group on top. The average retirees’ income is $40K. Once they reach this level, the financial pressure is reduced, and they can increase their focus and spending on their pets.
• $50>69K – Every age 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 noted earlier.
• $70>99K – We have reached middle income. The over 55 groups show another big increase and in fact the spending of the 55 to 64-year olds reaches the “stratosphere”. Last year they were the overall #1 Pet Spending age/income group. This year they are very close. The 25 to 44 group is still feeling strong financial pressure. The spending increase by the 35>44 yr olds slows and spending by the 25>34 yr old Millennials dips slightly – more children?
• $100K+ – $100K is a magic number. At this level Pet Spending explodes for all but the 55>64-year-old group. Their number dips to $1100 but is still equal to last year. Undoubtedly the most significant increases came from the 35>54 group. With some relief from financial pressure they focused more on their pets. Although 35>44 won the overall title with $1462, 45>54 was only $18 behind ($1.50 less per month). The only group under $1000 is the 25>34 yr olds. However, their average income is 20% below the others so $800+ spent on pets is still pretty darn good.

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

• Amazingly enough the oldest group is the most stable. As their income increases, they show strong, consistent growth in pet spending. If they have more money, they spend more on their pets. It’s as simple as that.
• The 4 younger groups have different stories to tell but they have one thing in common. At some point they reach a significant threshold income and their Pet Spending explodes, sometimes doubling or more.
• The 55 to 64-year-old Boomers and the 25 to 34-year-old Millennials are the only groups that have dips in spending, but they also have 2 significant lifts. For both, the initial big increase occurs at $50>69K. The Boomers immediately follow up with another substantial jump at $70>99K. The Millennials lose a little ground then jump 70+% at $100K.
• The 35>54 group is about 80% Gen Xers. They have 2 slightly different paths but end up in almost the same place. For the 35>44 group, spending consistently grows but flattens out at $70>99K. When income reaches $100K, their spending almost triples and they finish in 1^st For the older 45>54 group, spending growth is minimal until they reach $70K and it jumps +77%. However, it almost doubles at $100K putting them in 2^nd place overall.
• Even with a dip by the Boomers, this view certainly reinforces $100K income as a magic level in Total Pet Spending.

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

• These 10 age/income groups account for 50% of all U.S. CU’s and 68% of Total Pet Spending.
• Money Matters Most as all 5 age groups making $100K+ are included along with 2 in the $70>99K range
• Age is still a big factor as 6 of the 10 groups are 55+ yrs old, primarily due to the Boomers
• The biggest gains are from the 35>54-year olds. They took over the top 2 spots and added a group.

Finally, let’s look at the top performers which we will define as having the highest Share of Pet $/Share of CU’s. It is the same group as last year and 8 are repeats from the chart above and have matching colors in the chart below.

• Once again age matters as only the same two under 45, over $100K income groups made the list.
• However, money matters even more in Pet Spending performance than in Pet Spending $. There are no groups making under $50K. The 2 under $50K, 65+ age groups were replaced by 2 65+ age groups making from $50 to $99K.
• Only 9 groups are “earning their share” (100+%). The groups with lower performance are losing share to the 35>54 yr olds (80% Gen Xers). The biggest gains came from the 35>44-year olds as every CU over $30K improved.

The data in this report strongly reinforces the importance of income in Pet Spending. It also gives evidence that the younger groups, primarily the Gen Xers, are beginning to step up, especially in their higher income segments. 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.

Pricing – specifically the Consumer Price Index (CPI) is an important reflection of what is happing in the retail market. Manufacturers and retailers set prices but ultimately it is up to the consumer to determine if they are acceptable or not.

Since price is the primary factor in 75% of all consumer buying decisions, it definitely matters. However, it has a different impact on different industry segments.

After a record low inflation rate of 0.4% in 2017, Total Pet returned to a more “normal” 1.3% in 2018. As always, every segment contributed proportionally to the industry total. Here are the specifics:

• Pet Food Prices were down slightly (-0.02%), virtually stable. This comes after the biggest drop ever in 2017 (-1.1%) and was the 5^th annual decrease in the last 9 years.
• Veterinary Prices went up 2.6%. This was a small uptick from 2.2% in 2017, which was the lowest in history.
• Pet Services Prices increased 2.4%, more than double the 1.1% in 2017.
• Pet Supplies prices increased a full 1%. This is by far the largest increase since 2009. The previous leader was +0.07% in 2016. Prices are still -4.3% below the 2009 peak.

Before we get drill down into the numbers, let’s look at the pricing history for the industry. The US BLS began measuring the CPI for all Pet Industry segments in 1997. Here is the cumulative Petflation through 2018.

Average Annual Inflation Rate

• • • • • • • • • Veterinary Services: +4.6%
                • Non-Veterinary Services: +3.1%
                • Total Pet: +2.6%
                • Food and Treats: +2.0%
                • Pets and Supplies: +0.6%

The first thing that you note is that the pricing behavior of the 2 Services segments is far removed from the Product segments, especially Supplies. There are some key waypoints:

• 2010 – The Great Recession makes an impact on the industry. This is one year later than the overall market. Both Food and Supplies deflate. Services inflation hits a record low, but the Veterinary segment seems largely unaffected.
• 2007 – The Melamine recall. Food Prices begin to radically increase as consumers demand made in the USA.
• 2009 – Supplies prices reach their all-time high and begin a general decline.
• 2013 – Food prices peak. The move to upgrade to Super Premium and the resulting price war begins in late 2014.
• 2004>2005 – The likely start date for “humanization”. The movement to premium food begins and style becomes a factor in supplies, resulting in record inflation rates for this segment until the Great Recession hits.

The great recession was a traumatic event for consumer spending. In 2009 overall consumer spending fell for the first time since 1956. The impact on the Pet Industry was delayed until 2010 but it was significant. Pricing came to the forefront in 75% of all consumer buying decisions. Let’s take a closer look at the post-recession period.

This chart details the annual change in CPI since 2009 for the Total Industry and every industry segment.

In this more focused graph, it is readily apparent that the Great Recession significantly affected every segment, including Veterinary. We also see that every segment immediately bounced back. The 2 Service segments returned to inflation rates that were at or near pre-recession levels. Prices also increased in both of the product segments, but not nearly to pre-recession rates.

An interesting convergence occurred in 2012>2013. In 2012 inflation for both service segments moved sharply down while food prices increased. They ended up with virtually the same rate. They moved slightly apart in 2013 but this “agreement” between such divergent segments just doesn’t happen. During the same time frame, Supplies prices deflated very strongly.

That brings us to 2014>2016. Veterinary inflation increased and stabilized at about 3.6%. The Services CPI rate moved sharply up, then began to fade gradually. Pet Supplies deflation slowed in 2014 then turned to 2 consecutive years of inflation under 0.1%. In 2014 the movement to upgrade to Super Premium food began. In the resulting retail battle prices deflated for 2 years. There was a minor uptick in 2016, but not for long.

That brings us to 2017, which was a very significant year for the Pet Industry. Once again, all the segments moved in the same direction in terms of pricing – ↓Down. The service segments did not deflate but their inflation rate slowed significantly. Veterinary inflation set a new record low of 2.2%. The Services segment didn’t set a record, but they were close. Their rate of 1.1% was second only to the 0.9% in 2010 which came as a result of the great recession. After 2 years of minor inflation, Supplies prices deflated -0.4%. Not to be outdone by the Veterinary Segment, Pet Food prices fell – 1.1%, a new record decrease. These combined to produce a record low inflation rate for Total Pet of 0.4%. Perhaps it was just a coincidence, but the US BLS Expenditure reported a $9.8B (14.6%) increase in pet spending for the year.

In 2018 we also had an almost unified movement in pricing but this time it was ↑up. The Food segment CPI did not increase. It was essentially flat with a decrease of only -0.02%. The Veterinary inflation moved up to 2.6% from the record low 2.2%. This was still significantly below their recent average of 3.6%. The rate for Pet Services more than doubled from 1.1% to 2.4%. However, the biggest change came from Supplies. Their CPI increased by 1%. This may not seem like much, but prices have been generally deflating since the recession. They haven’t had an increase this large since 2009, in the pre-recession world. The tariffs imposed in 2018 are undoubtedly a factor. When you put all the segments together, Total Pet had a 1.3% increase. This seems like a reasonable post-recession inflation rate. How will spending be affected? We’ll have to wait and see. The biggest risk is for a reduction in purchase frequency, which could cost billions of $. If frequency stays at or near previous levels, then increased prices = increased $.

In this last section we will break the most recent years down even further, into quarters. In this chart, we will look at 2016 to 2018 and compare the CPI of each quarter to the same period in the previous year. The annual numbers tend to give the impression of a smooth flow. There is often considerable fluctuation.

We will follow the pricing journey over the most recent years by industry segment. First up is…

• Veterinary – The annual rates show a significant slowing of inflation in 2017 but it regained about 1/3 of the lost ground in 2018. It turns out that the decline actually began in the second quarter of 2016, reaching the low point in the second quarter of 2017. The rate then turned up slightly but remained very stable for 15 months and finished with a significant lift in the final quarter of 2018.
• Pet Services – Like Veterinary, the annual inflation rate in this segment fell in 2017 and bounced back in 2018. However, the changes were much more extreme with a 45% drop and a 120% rebound. The timing of the decline also began in the second quarter of 2016 and bottomed out in the second quarter of 2017. This low inflation rate essentially remained constant for 12 months then inflation “exploded” upward in the second quarter of 2018 with a 160% increase to 2.9%. It slowed in the third quarter but then increased to 3.9% in the fourth quarter. This segment hasn’t seen an inflation rate this high since 2011.
• Pet Food – There was a minor pricing increase in 2016 which was driven totally by a big lift in the third quarter. Prices then turned down slightly, but the drop increased markedly in the second quarter of 2017 and maintained this deflation rate for 12 months. The lower price level was stable from April through September of 2018. A huge price increase in the fourth quarter essentially erased the deflation for the year and the 2018 prices remained near the level of 2017.
• Pet Supplies – This segment had miniscule inflation in 2016. Prices turned down in 2017 but then had a huge lift (for Supplies) in 2018. The upturn in prices in 2016 was driven solely by a big lift in the fourth quarter, which is prime buying season. Prices turned slightly down in the first quarter of 2017 and maintained deflation through the first quarter of 2018. Prices then turned up in the second quarter of 2018 and inflation increased strongly, reaching a level of 2.3% by the fourth quarter. Tariffs were undoubtedly a factor in this rise.
• Total Pet – Inflation was a relatively normal 1.4% in 2016 then began to slow in the 1^st quarter of 2017. It stayed down through the 1^st quarter of 2018, bottoming out at 0.0% in the 4^th quarter of 2017. This produced a record low rate of 0.4% for 2017. Then, in the second quarter of 2018, driven primarily by big lifts in Supplies and Services, prices turned sharply up. There was another big lift in the fourth quarter (2.3%) as prices in all segments increased. The result was a 1.3% increase for the year, virtually identical to 2016.

The post-recession consumer is very price sensitive, but it is impossible to predict the impact of the pricing lift on 2018 $. Pet Food prices remained essentially unchanged. Veterinary increased but the big lifts came in Supplies and Services. These are the two most discretionary segments. We’ll see if consumers reduce their purchase frequency.

By the way, the inflation continues to grow. Here are numbers for Jan-Feb 2019 vs the first quarter of 2018.

• Non-Veterinary Services: +3.93%
• Pets and Supplies: +3.90%
• Veterinary: +3.01%
• Food and Treats: +1.42%
• Total Pet: +2.72

Now we will look at the last and smallest segment – Pet Services, the only Segment with a spending decrease in 2017. Spending totaled  $6.77B which was down, -$0.07B (-1.0%). The drop was slight but a big change for a segment that has grown consistently since 2011. Services Spending is the most discretionary of any segment so higher income is definitely the dominant factor in consumer spending.

We have categorized 2017 as a year of Value. This was true for Services too. The number of outlets offering services increased radically. This competitive market produced a lot of deals as retailers vied for the Consumers’ $. While the CPI didn’t deflate in 2017, Services had the lowest inflation rate since 2010.  Consumers in all income ranges seek value. They bought a little more often but paid a little less. As expected, this caused some turmoil. Let’s look a little deeper.

Let’s start by identifying the groups most responsible for the bulk of Services spending in 2017 and the $0.07B decrease. The first chart details the biggest Pet Services spenders for each of 10 demographic categories. It shows their share of CU’s, share of Services spending and their spending performance (Share of spending/share of CU’s). The differences from the products 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 7 for Veterinary, 6 for Supplies and only 5 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 groups.

1. Race/Ethnic – White, not Hispanic (87.9%) up from 86.8%.This big group accounts for the vast majority of spending in every segment, especially Services. Their performance improved from 124.3% to 128.3% and they moved up to #6 in terms of importance in Services Spending. Minorities are 31.5% of CUs but only generate 12.1% of Services $.
2. Housing – Homeowners (86.4%) up from 85.7%. Homeownership is a major factor in pet ownership and spending in all industry segments. The Homeowners’ share of Pet Services spending is 86.4% which is the highest of any industry segment. However, even with 137.4% performance, homeownership is only in 4th place in terms of importance for increased Pet Services spending. Their slight share gain came only from an increase in homeowning CUs.
3. # in CU – 2+ people (79.8%) up from 79.0% The share of market for 2+ CU’s is very close for all segments but lowest in Services. Their performance of 111.9% is down from 112.4% and tied for last. Essentially, they were flat for the year. 2/3-person CUs spent more, but 4+ CUs cancelled the gain. The overall share gain came from a drop by singles.
4. Occupation – “I’m the Boss” (72.2%) up from 69.2% – The “ I’m the Boss” group consists of Mgrs & Professionals, Self-employed and retired CU’s. This “bossy” group has a large and growing market share and a performance rating that increased from 138% to 141.3%. This ranks them 3^rd in terms of importance. These increases were driven by a strong year from the Mgrs & Professionals segment.
5. Income – Over $70K (71.2%) up from 66.7% The gain in share primarily came from a big increase from the $100>149K group along with a big drop from $30>69K. These indicate big changes in usage. The over $150K CUs also spent 6% less but they probably just got a better price. Services doesn’t break the 100% performance barrier until Income exceeds $100K and then it skyrockets up. This group’s performance rating is 185.2%, up from 180.2% and absolutely shows that CU income is the single most important factor in increased Pet Services Spending.
6. Education – College Grads (68.8%) down from 69.8% Income generally increases with education. Services spending moves up strongly with each increasing level of education. This is why we shifted the group up to College Grads. Performance of 161.9% was down from 171.7% but a college education is still the 2nd most important factor.
7. # Earners – “Everyone Works” (64.9%) down from (67.4%) In this group, all adults in the CU are employed. Income is important so a relatively high market share is expected. However, their performance fell to 113.3% from 120.1% and they dropped out of the 120% club. The drops were a due to a strong year by 1 Earner, 2+ CUs and retirees.
8. CU Composition – Married Couples (64.5%) down from 66.0%. Married couples are a big share of $ and have 120+% performance in all segments. Their performance fell to 130.3% from 135.8% but they stayed in 5th place in terms of importance to Services spending. The decreases were primarily due to a big lift from Unmarried 2+ Adult CUs along with drop in spending by the Married, Oldest Child <6 group.
9. Age – 45>74 (64.0%) down from 69.0%. Their performance also dropped significantly from 133.7% to 124.5% and their ranking fell from 6^th to 7^th. The decreases were primarily due to the 45>64 age range spending significantly less, but in 2 ways. The entire group spent 13% less $ for every service. However, the 45>54 yr olds increased their frequency by 5% while the 55>64 yr olds decreased theirs by 2%. Much of this drop for the whole age range was due to value shopping. Another factor was increased spending at both ends. The <25 and 75+ groups both spent more.
10. Area – Suburban (62.2%) up from 58.7% in share, while performance increased from 107.0% to 111.9%. The lift was due to a big spending increase by small Suburban areas, under 2500, along with a decrease by Central Cities. We should also note that Rural spending was up 28%, mirroring their performance in other segments.

We changed 4 of the spending groups for Services to better target the biggest spenders. Higher income is even more important to Services spending than it is to Veterinary, where we changed 3 groups. Both Services and Veterinary have 7 groups with performance over 120%. However, the performance levels in Services spending in categories related to income are markedly higher. This reinforces an even  bigger spending disparity between the segments in Services.

Now, we’ll look at 2017’s best and worst performing Pet Services spending segments in each category.

Most of the best and worst performers are not a surprise. However, there are 8 that are different from 2016, the most of any segment. 5 of them are in the best category. The only surprise is the 65>74 group. All the other winners have high incomes. As we drill deeper into the data, we will see some similarities with other Industry segments, but each Segment is unique. Changes from 2016 are “boxed”. We should note:

• Income is even more important to Pet Services. While the 398.8% Performance by the $200K> group is less than last year’s 426%, it is 39% higher than Veterinary and 123% higher than Food.
• # Earners – 2 Earners – Last year it was 3+ Earners. Both are high income and the only segments in the category with 100+% performance. The winner reflects the outstanding year by 2-person CUs, especially Married Couple Only.
• Age – 65>74 – This group certainly has an increasing need for Pet Services. However, their income is low. Most are now Baby Boomers, who traditionally spend more on their pets. This group spends 1.1% of their total CU expenditures on their pets. This is second only to the 55>64-yr old group. Only age groups between 45 and 74 have 100+% performance in Services spending.
• Occupation – Mgrs & Professionals– They took the Income top spot from Self-employed so this switch makes sense.
• CU Composition – Married Couple Only replaced last year’s surprise winner, Married Couples with an oldest child under 6. In 2017 the only 100+% performing CUs with kids are Married, with the oldest child over 6.
• Area –Suburbs <2500 – This area spends a lot of money on their pets, but they truly had a great year in 2017. Amazingly enough, their 148% performance in Pet Services was the lowest score that they had in any segment.
• Race/Ethnic – It’s not only about income. Asian Americans have the highest income of any Racial/Ethnic group, but they finished last in Services spending performance. This is because they have a low percentage of pet ownership.

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

Pet Services Spending was down $0.07B. This was the first decrease since 2010. However, that drop came as a reaction to the great recession. In 2017, it was a different story. The growing popularity of Pet Services has resulted in a big increase in the number of outlets where they are available. This competitive environment caused turbulence as Retailers vied for the Consumers’ $. The turbulence is very evident in this section. There were no repeat winners or losers from 2016 and 11 of 22 segments actually switched their position from first to last or vice versa. Food came in second, with 9 switches but the other service segment – Veterinary, only had 4. Quite a contrast. Here are the specifics:

• Education – In 2017, last year’s winner and loser switched positions
  • Winner – BA/BS Degree – Services: $2.47B; Up $0.43B (+21.2%)
    • 2016: Adv. College Degree
  • Loser – Adv. College Degree – Services: $2.18B; Down $0.55B (-20.0%)
    • 2016: BA/BS Degree
  • Comment – College Grads spent the most $ so it is not surprising that they have the biggest changes. What is interesting is that < College Grads led by HS Grads w/some College spent more, while College grads spent less.
• Occupation – Mgrs & Professionals, the highest income group, had the only significant increase.
  • Winner – Mgrs & Professionals – Services: $2.83B; Up $0.43B (+18.1%)
    • 2016: Retired
  • Loser – Self-employed – Services: $0.65B; Down $0.30B (-31.8%)
    • 2016: Mgrs & Professionals
  • Comment – The white-collar Tech, Sales, Clerical group and Retirees spent a bit more while Blue-Collar workers and Self-employed spent less.
• Region – Once again the winner and loser flipped from last year.
  • Winner – Midwest – Services: $1.50B; Up $0.41B (+38.4%)
    • 2016: West
  • Loser – West – Services: $1.94B; Down $0.43B (-18.0%)
    • 2016: Midwest
  • Comment – The Northeast also had a small increase.
• Income – 2017 was a year of mixed messages and tumult.
  • Winner – $100 to $149K – Services: $1.50B; Up $0.37B (+32.3%)
    • 2016: $30 to $49
  • Loser – $30 to $39K – Services: $0.35B; Down $0.16B (-31.4%)
    • 2016: $70 to $99K
  • Comment – Try to follow this: Under $30K was up, +0.5%. $30>50K was down a lot, -33%. The $50>70K group was down a little, -4%. Then the $70>99K group turned it around, +6%. The $100>149K segment took off, up 32%. Time for a final turnaround. The highest income, over $150K group spent 6% less. Value shopping, cutbacks and increased frequency. 2017 had it all.
• Area Type – Suburbs <2500 led the way but Rural areas also spent more.
  • Winner – Suburbs <2500 – Services: $1.01B; Up $0.28B (+37.9%)
    • 2016: Central City
  • Loser – Central City – Services: $2.20B; Down $0.34B (-13.5%)
    • 2016: Suburbs 2500>
  • Comment – After 2 winning years, Central City flipped to last. Suburbs 2500> has had 2 consecutive down years.
• Housing – After 2 years, Homeowners w/Mtge, the largest segment, returned to the top spot.
  • Winner – Homeowner w/Mtge – Services: $2.25B; Up $0.27B (+7.4%)
    • 2016: Homeowner w/o Mtge
  • Loser – Homeowner w/o Mtge – Services: $0.98B; Down $0.28B (-12.4%)
    • 2016: Renter
  • Comment – Homeowners w/o Mtge flipped from 1^st to last. Central Cities also spent less.
• Age – In a big surprise, the 75+ group had the biggest $ increase.
  • Winner – 75+ yrs – Services: $0.39B; Up $0.15B (+63.5%)
    • 2016: 55>64yrs
  • Loser – 55>64 yrs – Services: $1.61B; Down $0.28B (-14.8%)
    • 2016: 35>44 yrs
  • Comment: The 55>64-year olds flipped from 1^st to last. Their drop, combined with a decrease of -0.17B by the 45>54-year olds created a situation that couldn’t be overcome by the other age groups. In addition to the 75+ year olds, the 65>74, 35>44 and <25 age groups all posted spending increases.
• # in CU – As we have noted, it was a great year for 2 Person CUs, with a big increase in every segment.
  • Winner – 2 People – Services: $2.94B; Up $0.14B (+5.2%)
    • 2016: 4 Person
  • Loser – 4 People – Services: $0.85B; Down $0.19B (-18.2%)
    • 2016: 1 Person
  • Comment: In 2017, 4 People CUs flipped from 1^st to last. 1, 4 and 5+ person CUs spent less on Services. Only 2 or 3 people CUs spent more.
• CU Composition – An Unusual winner – Unmarried, 2+ Adult CUs. Singles were down so you definitely needed 2.
  • Winner – Unmarried, 2+ Adults – Services: $0.87B; Up $0.14B (+18.6%)
    • 2016: Married Couple Only
  • Loser – Married, Oldest Child <6 – Services: $0.24B; Down $0.19B (-44.4%)
    • 2016: Single
  • Comment – Married Couples Only had the second largest increase. In terms of CUs with Children, all married couples with an oldest child over 6 and even Single Parents spent slightly more on Services.
• # Earners – 1 Earner, 2+ CUs was the clear winner.
  • Winner – 1 Earner, 2+ CU – Services: $1.33B; Up $0.12B (+10.1%)
    • 2016: 2 Earners
  • Loser – 3 Earners – Services: $0.60B; Down $0.22B (-26.5%)
    • 2016: 1 Earner, Single
  • Comment – 2 was the magic number. All CUs with 2 or more people and 2 or less earners spent more.
• Race/Ethnic – African Americans had a big percentage increase, but they only have 4.5% of total $.
  • Winner – African American – Services: $0.30B; Up $0.07B (+29.2%)
    • 2016: White, Not Hispanic
  • Loser – Hispanic – Services: $0.42B; Down $0.08B (-16.6%)
    • 2016: African American
  • Comment – White, Non-Hispanics also spent more, but only 0.3%. Asians spent $0.07B less (-44%).

We’ve now seen the winners and losers in terms of increase and decrease in Services Spending $ for 11 Demographic Categories. 2017 was a tumultuous year. The winning increase in each category averaged +$0.25B (+26%) while the biggest decreases averaged -$0.27B (-23%).  That certainly shows a “mixed bag”. We didn’t see any major trends. Income became a little less important, at least in term of the number of Earners. The oldest groups had a strong year. 2 Person CUs, married or unmarried, performed well. We also saw a spending move towards less populated areas, like other segments. The $0.07B decrease was the first since 2010, but even in a decline there are some segments that performed well but didn’t win an award. They deserve….

Honorable Mention

In 2017, Pet Services spending fell for the first time in 7 years. The drop was only 1% and it wasn’t pervasive across the marketplace. 55 of 99 segments did spend less, but 44 spent more so there was some good news. The segments in the graph reflect some minor movement towards more equalized spending in some categories – education, age and even income. Services also mirrored a trend we saw in other industry segments. Spending tended to migrate towards less populated areas, both Rural and Urban.

Summary

The Services segment has usually been “above” changes in other segments. Since 2010 prices have steadily increased but so has Spending. 2017 saw a change. An increase in outlets offering Services created a much more competitive environment. While prices didn’t deflate, inflation slowed significantly, and “deals” abounded as Retailers began a pitched battle for Consumers’ Services $. The net result was turmoil and a 1% decrease in spending.

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 4 categories specifically to accommodate this difference in behavior and to better target where most of the $ are coming from. Just how important is income? 38.4% of CU’s have an income over $70K and account for 71.2% of Services Spending. This is a performance rating of 185.2% – the highest rating earned by any big 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 5 for Veterinary and 3 for Food)

Income

Occupation

Higher Education

Homeownership

CU Composition

The biggest producers in these groups are all prime candidates to produce 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 130% and are at their highest level in the Service Segment. This 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. This does make it easier for industry participants to more effectively target their best customers and identify those demographic segments most in need of improvement. However, some of these may need a lot of help.

The drop in spending caused definite turmoil in this income driven segment. There were 8 changes in the best and worst performing individual segments, but the biggest changes showed up in $. All winners and losers in spending $ were different from 2016, but 7 winners became losers, while 4 losers became winners. There were some surprising winners – 1 Earner- 2+CUs, 2+ Unmarried Adults, African Americans and 75+ year olds. There were no major trends, but we saw:

1. A spending gain by middle income
2. # Earners became less important
3. < College Grads spent more
4. Spending increase in low population areas

At Last – The “Ultimate” Pet Services Spending Consumer Unit consists of 2 people – a married couple, living alone. They are White, but not of Hispanic origin. At least one of them has an advanced College Degree. They just turned 65 but both of them continue to work, in managerial positions. They’re doing well with an income over $200K. They live in a smaller suburb, near a big city in the Western U.S. and are still paying off the mortgage on their home.

Some Final Services Data: # of CUs – ↑ 0.3%; Spending Frequency – ↑ 0.3%; $ Spent – ↓ 1.6%; Net = Total $ ↓1.0%