Archive for category: Pet Market

As we continue to drill ever deeper into the demographic Pet spending data from the US BLS, we have now reached the level of individual Industry segments. We will start with Pet Food, the largest and arguably most influential of all. Previously we have noted the trendy nature of Pet Food Spending – 2 years up then spending goes flat or turns downward for a year. In 2015 Pet Food Spending increased by $5.4B as a significant group of consumers upgraded to higher priced Super Premium Foods. In 2016 they value shopped and spending fell $2.99B. In 2017, spending increased by $4.61B (+17.4%). Indications from our Pet Products spending analysis are that this was driven by a deeper market penetration of premium foods along with increased pet ownership. Let’s take a closer look.

First, we’ll see which groups were most responsible for the bulk of Pet Food spending and the $4.61B lift. The first chart details the biggest pet food spenders for each of 10 demographic categories. It shows their share of CU’s, share of pet Food spending and their spending performance (Share of spending/share of CU’s). Although their share of the Pet Food $ may be different from their share of the Total Pet $, all 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 Food spending, higher education is far less important. Also, while Income is still the highest performing demographic characteristic, it and the other associated categories, like occupation and # of earners carry less weight in Food spending. Another big difference is that Total Pet had 6 groups performing above 120%. Pet Food had only 5. This indicates that Pet Food spending and Pet ownership is spread more evenly across demographic segments. Pet Products also had only 5 groups over 120%. This reflects the influence of the Pet Food Segment which accounts for 63% of Total Products spending and 40% of all Pet Spending.

1. Race/Ethnic – White, not Hispanic (86.6%) – up from 85.5%. This large group accounts for the vast majority of spending in every segment. With a 126.4% performance rating, this category ranks #4 in terms of importance in Pet Food Spending demographic characteristics. While Hispanics, African Americans and Asian American account for over 31% of U.S. CU’s, they only spend 13% of Pet Food $. Pet ownership is relatively high in Hispanic households. However, it is significantly lower for African Americans and Asian Americans. This is very evident in Food Spending.
2. # in CU – 2+ people (82.4%) – up from 81.2%.The share of market for 2+ CU’s is very close for all segments. Their overall Food performance of 115.6% is relatively high because singles perform so poorly. 2 Person households are the “runaway” performance leader but the 2+ group performance doesn’t reach 120% because all 3+ CU’s underperform…slightly. Their lowest performance rating is 91%, which is not bad. The old adage about Pet Spending is still true, “It just takes two.”
3. Housing – Homeowners (80.9%) – up from 79.9%. Homeownership is a huge factor in pet ownership and more pet spending. At 128.6% performance, homeownership ranks 2nd in terms of importance for increased pet Food spending. Their share of market broke the 80% barrier again in 2017, up from 79.9% in 2016. This came as a result of a big spending increase by Homeowners w/o Mortgages.
4. Income – Over $50K (70.5%) – up from 67.5%. With a performance rating of 136.9%, CU income is the single most important factor in increased Pet Food Spending. However, the over $50K income group has its smallest market share and lowest performance in the Food Segment. Since Pet Food is a “must buy” for Pet Parents, this is evidence that pet ownership is common across all income levels. Much of the lift in share is coming from middle-income segments which could indicate a probable spreading of the food upgrade and possibly increased pet ownership.
5. Age – 35>64 (67.8%) – up from 63.1%. The biggest lift came from the 55>64-yr old Boomers. The 35>54-yr old Gen Xers also had a strong contribution. Overall, they gained 4.7% in share and their performance skyrocketed from 116.5% to 127.0%. This put them back in the top 5 at #3. This further identifies the potential owners of the Food upgrade and new Pet Parents.
6. Occupation – All Wage & Salary Earners (67.7%) – up from 64.8% – The increase in market share was largely driven by a big spending increase by Blue-Collar workers and a drop from Self-Employed. Although performance increased to 110.8% it is still below 120%, which shows that Pet Food spending is widespread across all occupations and at the same time, reflects the substantial Pet Food spending by Retirees. This provides even more specifics regarding the Food upgrade and new Pet Parents.
7. CU Composition – Married Couples (62.5%) – up from 61.9%. While they gained a little in share, their performance of 126.3% fell from 3^rd to 5^th place. This reflects the growing importance  of other demographic categories.
8. # Earners – “Everyone Works” (58.4%) – down from 63.7%. The huge drop in share by this group shows that while income remains important in relation to Pet Food spending, everyone working in a CU matters much less. Their performance fell to 101.9% from 110%. This reflects a great year by 1 Earner – 2+ CU’s and Retirees, who now account for 42% of this category’s Food spending.
9. Area – Suburban (55.4%) down from 58.1%. Suburban households are still the biggest Food spenders, but they loss share and their performance fell to par, 99.6% due to a stellar year by Rural and an only fair year by Suburbs >2500.
10. Education – Associates Degree or Higher (55.4%) – down from 58.6%. Pet Food Spending generally increases with education. However, things evened out in 2017. They loss share and performance fell from 113.3% to 102.4%. This provides additional candidates for the drivers behind the expanded food upgrade and new pet ownership trends.

The big spenders for Pet Food are the same as those for Total Pet and Pet Products but generally have a lower market share and performance. Pet Food spending was up $4.6B in 2017. We have strong initial indications that much of the lift came from a deeper penetration in terms of premium food and even increased pet ownership. Income is still important, but Occupation, # of Earners and Higher Education became markedly less so. Let’s drill deeper.

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

Even as we drill down to the Industry segment level, many of the best and worst performers are the ones that we would expect. In Pet Food spending, there are  7 that are different from 2017, which is 4 more than for Total Pet. It is the same number as Pet Products but only 3 are “matches”. From this point on we will start to see more and more differences between the Industry Segments. Changes from 2016 are “boxed”. We should note:

• Income is important in every segment. However, the 178.7% Performance by the $200K> group is down from 188% last year and is by far this group’s lowest performance in any segment. The midrange groups are stepping up.
• # Earners – 2 or more earners generally means higher income. This year 1 Earner, 2+ CU’s took the top spot. This is another sign that Food spending is becoming more income balanced.
• Occupation – Blue-Collar workers is a big surprise. Retirees came in last but had a $1B increase. It is also extremely significant that the performance gap from 1^st to last has been cut in half from 2016.
• Education – HS Grads w/some College is yet another indicator of more balanced spending.
• Age – The 55>64-yr old Boomers, along with Gen Xers are performing best.
• CU Composition – Married Couples won for the 3^rd straight year. Single parents got off the “bottom”.
• Area – Rural areas had a truly great year and were the only group with 200+% performance.

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

There are no repeats – winners or losers, from 2016. 9 of the 22 segments (41%) flipped from 1^st to last or vice versa. The surprise performance winners, Blue-Collar, HS Grads w/some College, 1 Earner – 2+CU’s and Rural are all here. Plus, the lower middle-income group, $40>69K also showed us the money. It is at this level where the demographic uniqueness of the different industry segments truly shows up. Here are the specifics:

• Race/Ethnic – The White, Non-Hispanics share of Food spending is over 85%. A big % increase means Big $.
  • Winner – White, Not Hispanic – Pet Food Spending: $26.94B; Up $4.34B (+19.2%)
    • 2016: Hispanic
  • Loser – Hispanic – Pet Food Spending: $2.12B; Down $0.05B (-2.3%)
    • 2016: White, Not Hispanic
  • Comment – The winner and loser flipped. African Americans spent 28.6% more on Food, but 94% of the increase came from White, non-Hispanics. Both Hispanics and Asian Americans spent less on Pet Food in 2017. However, their combined decrease only totaled -$0.07B, -3%.
• Occupation – A surprise winner, Blue-Collar! Only Self-Employed and the Tech, Sales & Clerical segment spent less.
  • Winner – Blue-Collar Workers – Pet Food Spending: $8.22B; Up $3.98B (+93.9%)
    • 2016: Tech, Sales, Clerical
  • Loser – Self-Employed – Pet Food Spending: $1.63B; Down $0.53B (-24.3%)
    • 2016: Retired
  • Comment – Here is where the Blue-Collar influence truly shows up. While a 93% increase seems spectacular, it only amounts to a $12 monthly spending increase for existing CU’s. If a number of new Pet Parents were added, the increase would fall to well below $10. The big decrease by the Self-Employed also reflects a 9% drop in CU’s. As these CU’s “went out of business” most migrated to other occupations or retired which affected other categories.
• Housing – In 2017, all segments spent more on Food.
  • Winner – Homeowners w/o Mtge – Food: $10.19B; Up $03.91B (+62.2%)
    • 2016: Renters
  • Loser – Homeowners w/Mtge – Food: $14.97B; Up $0.08B (+0.6%)
    • 2016: Homeowners w/o Mtge
  • Comment – Homeowners w/o Mtge flipped from last to first while spending for those with mortgages was basically flat. Although the rate of increase slowed for Renters in 2017, it still continued to climb in double digits.
• # in CU – It’s simple. In 2017 “2” was the magic number, generating 67% of the increase.
  • Winner – 2 People – Pet Food Spending: $14.81B; Up $3.11B (+26.5%)
    • 2016: 4 People
  • Loser – 3 People – Pet Food Spending: $4.20B; Down $0.10B (-2.4%)
    • 2016: 2 People
  • Comment: Both singles and CU’s with 5 or more people also increased Food spending. The only segments with a decrease were 3 or 4 person CU’s. However, they only fell a total of -$0.16B, -2%.
• Age – The 55>64-yr old group flipped from last to first.
  • Winner – 55>64 yrs – Pet Food Spending: $10.24B; Up $2.83B (+38.2%)
    • 2016: 25>34 yrs
  • Loser – <25 yrs – Pet Food Spending: $0.62B; Down $0.20B (-23.9%)
    • 2016: 55>64 yrs
  • Comment: Although the 55>64-yr old were the biggest drivers, they got over $1.5B in help from the 35>54-yr olds. In fact, all age groups over 35 increased their spending on Pet Food. All groups under 35 spent less, although the only significant drop came from the under 25 segment.
• Education – HS Grads w/some College, a surprise and an indication of more educational equality in food spending.
  • Winner – HS Grad w/some College – Food Spending: $9.11B; Up $2.79B (+44.0%)
    • 2016: Assoc. Degree
  • Loser – Assoc. Degree – Food Spending: $2.88B; Down $0.30B (-9.4%)
    • 2016: Adv. College Degree
  • Comment – We can’t leave out College Grads – +$1.9B. In fact, all education levels but those with Associates Degrees spent more on Food. Their decrease comes after a 35% lift in 2016 and may just be from value shopping.
• # Earners – 1 Earner, 2+ CU’s are often under financial pressure. In 2017 they were the big spenders.
  • Winner – 1 Earner, 2+ CU – Pet Food Spending: $8.64B; Up $2.62B (+43.5%)
    • 2016: 1 Earner, Single
  • Loser – 2 Earners – Pet Food Spending: $11.09B; Down $0.28B (-2.4%)
    • 2016: No Earner, 2+ CU
  • Comment – The loser is a bit of a surprise as all segments, but 2 Earner CU’s registered an increase in Pet Food spending. The drop was minor, only -2%, so it is probably part of everyone’s continuing search for a better price.
• Area Type – All segments had an increase but Rural was spectacular.
  • Winner – Rural – Pet Food Spending: $6.16B; Up $2.42B (+64.8%)
    • 2016: Central City
  • Loser – Central City – Pet Food Spending: $7.71B; Up $0.35B (+4.8%)
    • 2016: Suburbs <2500
  • Comment – Central Cities had an increase but flipped from 1^st to last. Biggest growth – all areas under 2500 pop.
• CU Composition – A strong year for “2”, especially Married Couple Only, who flipped from last to first.
  • Winner – Married Couple Only – Food: $11.11B; Up $2.27B (+25.7%)
    • 2016: Unmarried, 2+ Adults
  • Loser – Married, Oldest Child <6 – Food: $0.60B; Down $0.46B (-43.6%)
    • 2016: Married Couple Only
  • Comment – Married Couples with the oldest child <6 was the only segment in this category to have a decrease. This group is usually younger and often under financial pressure. They dialed back their spending in 3 segments.
• Income – Pet Food spending moved down the income ladder as the $40>69K segment led the way.
  • Winner – $40 to $69K – Pet Food Spending: $7.50B; Up $2.09B (+38.6%)
    • 2016: $70 to $99K
  • Loser – $150 to $199K – Pet Food Spending: $1.74B; Down $0.68B (-28.1%)
    • 2016: $50 to $69K
  • Comment – The $30>39K group also spent less on Food in 2017. The winner is a surprise, but so is the loser. The $150>199K correlates with the income of the Self-Employed who dropped out, which explains some of the loss.
• Region – Last year’s winner is this year’s biggest “loser”.
  • Winner – Midwest – Pet Food Spending: $7.13B; Up $1.57B (+28.2%)
    • 2016: South
  • Loser – South – Pet Food Spending: $6.92B; Up $0.87B (+7.9%)
    • 2016: West
  • Comment – All regions were up. The South flipped from 1^st to last but are still performing at 99.6%.

We’ve now seen the “winners” and “losers” in terms of increase/decrease in Pet Food Spending $ for 11 Demographic Categories. Some winning segments in $, like Blue-Collar workers, HS Grads w/some College, 1 Earner- 2+ CUs and the $40 to  $69K income group reinforce our initial observations of increased demographic spending equality as a result of a spread of the premium food upgrade and even the addition of new pet households. We have recognized 11 “winning” segments that drove the $4.61B increase in Pet Food Spending. However, not every good performer can be a winner. Some “hidden” segments should be recognized for outstanding performance. They don’t win an award, but they get…

HONORABLE MENTION

Some of the Honorees, like 5+ CUs, Adults only 2+ CUs and Retirees further support just how wide and deep that the increased spending penetrated the market. Others like 3+ Earners, $100>149K income and CUs with Advanced College degrees show that spending increases also occurred with many of the “usual suspects”.

The Pet Food Spending increase was truly widespread. In fact, only 17 of 99 demographic segments spent less on Pet Food in 2017. That means that 83% spent more.

Summary

After the big spending drop in 2016, 2017 brought a $4.6B increase in Pet Food Spending. This fit right into the pattern of two years up followed by a flat or declining year. However, the 2017 Spending lift was different from the $5.4B increase in 2015. In 2017 we didn’t see consumers trading out $ in other segments to spend on upgraded Food. Both the Supplies and Veterinary segments also had double digit growth.

The increase in 2015 was driven by a movement to upgrade to super premium pet food by a substantial portion of consumers. These consumers were generally more educated, often worked as managers or were self-employed and had higher incomes. In 2016 this group began value shopping for their new food and found great deals online and in some stores, which drove spending down. That brought us to 2017. There was an extremely competitive environment with increased availability and value everywhere on these high-quality foods. This attracted the attention of a different group of consumers. The benefits of upgraded food are apparent to most Pet Parents. Now, they became a viable option for a much larger group. The upgrade “epidemic” spread to HS Grads w/some College, blue-collar workers and even to low middle income groups. It also primarily “infected” those 35 and over, especially the 55 to 65-yr olds.

Although the penetration also increased in some of the traditional groups such as managers/professionals and those with advanced College degrees, it was primarily driven by more balanced spending in a number of demographic categories. Income, homeownership and marriage remain the most important factors in Pet Food Spending. However, the amount of necessary income has been dialed back and your occupation and the number of earners in the CU has become far less important. Higher Education has also become less of a factor. There was another trend of note. Pet Food Spending sought “more space” as Rural areas and Suburbs with a population of under 2500 had a banner year.

Any analysis of Pet Food spending is always very important because of the unique nature of the segment. It is the only Industry Segment that is an absolute spending necessity. If you are a Pet Parent, you must buy food for your pet children and buy it regularly. In fact, every week over 21,000,000 U.S. households buy pet food and/or treats.

Because it is an absolute necessity, the spending behavior on Pet Food is perhaps the most important reflection of the percentage of pet ownership across a demographic category. We have focused on the spread of the premium upgrade as the driver behind the increase. However, there may have been an additional trend at work. The APPA reported an increase in Pet H/Hs from 65% to 68%. The radical increase in Pet Food spending by the segments that we have noted can support both a food upgrade and new pet H/Hs…and help identify the likely new pet parents.

Finally – This year’s “Ultimate” Pet Food Spending Consumer Unit is 2 people – a married couple, alone since their last child moved out and took “his” dog. They are in the 55 to 64 age range. They are White, but not of Hispanic origin. Neither attended College but both received special job training. Only “Dad” still works (too much) at a nearby power plant. With overtime, he will break $100K. Their house is in a rural area in the Midwest and they have a mortgage. They got back in the Pet Parenting “business” after their son left home by adopting a pair of dogs from a local shelter.

Total Pet Spending in the U.S. reached $77.13B in 2017, a $9.84B (14.6%) increase from 2016. These figures and others in this report are calculated from data in the annual Consumer Expenditure Survey conducted by the US BLS. It was a spectacular year for the industry, with the 3 largest segments registering double digit increases while Services spending fell less than 1%. The key factor in this consumer buying surge was value. Super Premium foods became more accessible in both location and price. Supply prices deflated, and both Service segments had record low inflation rates. Although the Service Segment spending fell, there was an increase in purchase frequency. Consumers just paid less. Consumers saw great value and they acted on it. This great success raises some interesting questions and deserves a closer look.

The first question is, “Who is spending most of the $77+ billion dollars?” There are of course multiple answers. We will look at Total Pet Spending in terms of 10 demographic categories. In each category we will identify the group that is responsible for most of the overall spending. Our target number was to find demographic segments in each category that account for 60% or more of the total. To get the finalists, we started with the biggest spending segment then bundled related groups until we reached 60%.

Knowing the specific group within each demographic category that was responsible for generating the bulk of Total Pet $ is the first step in our analysis. Next, we drill even deeper to show the best and worst performing demographic segments and finally, the segments that generated the biggest dollar gains or losses in 2017.

In the chart that follows, the demographic categories appear in ranked order by Total Pet market share from highest to lowest. We also included their share of total CU’s (Financially Independent Consumer Units) and their performance rating. Performance is their share of market vs their share of CU’s. This is an  important number, not just for measuring the impact of a particular demographic group, but also in measuring the importance of the whole demographic category in Spending. These are all large groups with a high market share. A performance score over 120% means that this demographic measure is extremely important in generating increased Pet Spending. I have highlighted the 6 groups with 120+% performance. This is up from 5 in 2016, as the 35>64 yr old age group joined the club.

The groups are the same as in 2016, but some rankings have changed. All Wage Earners, 35>64 yr olds and Married Couples gained in importance while # Earners and Education fell in the ranking.

1. Race/Ethnic – White, not Hispanic (87.0%) This is the 2^nd largest group and accounts for the vast majority of Pet Spending. They increased their performance rating to 127%. This category now ranks #4 in terms of importance in Pet Spending demographic characteristics, up from 5^th in 2016. Although we should note that this demographic, along with age, are the 2 areas in which the consumers have no control. Spending disparities are enhanced by differences in other areas like Income, CU Composition and homeownership. There are also apparently cultural differences which impact Pet Spending. Asian Americans rank first in income, education and spending but they rank last in Pet Spending as a percentage of total spending – 0.36% vs a national average of 0.99%.
2. # in CU – 2+ people (82.7%) It just takes two. Singles have the lowest performance of any group. If you put 2 people together, pets very likely will follow. Their overall performance of 116.0% is lower than expected because performance decreases as the number of people in the CU increases, falling to 85.9% for CU’s with 5+ people.
3. Housing – Homeowners (81.4%) Controlling your “own space” has long been the key to larger pet families and more pet spending. At 129.4% performance, homeownership still ranks 2nd in terms of importance for increased pet spending. The homeownership rate for Millennials is substantially lower than previous generations when they were the same age. However, it increased from 35% to 37% in 2017. This is definitely good news. Keep it up!
4. Income – Over $50K (72.9%) Although Pet Parenting is common in all income groups, money does matter. With a performance rating of 141.6%, CU income is the single most important factor in increased Pet Spending. Their performance increased from 140.1% in 2016. However, the increase was driven by the whole range of middle income groups from $50K to $150, not just the elite $150+K.
5. Occupation – All Wage & Salary Earners (65.8%) – Pet ownership is widespread across all segments in this group. In the past spending has been strongly  skewed towards white collar workers. In 2017, the blue-collar workers stepped up. In share, the group moved up to 5^th from 8^th Their performance increased to 107.7% but is still low. It remains below 110% because there is still spending disparity within the group and retirees also had a great year!
6. Age – 35>64 (65.8%) This group moved up in share of spending from 7^th to 6^th. Although the younger groups have increased their spending in recent years, this group of Boomers and Gen Xers was dominant in 2017. Their performance increased substantially from 118.6% to 123.2% and they joined the elite 120+% group – ranked 5^th.
7. Education – Associates Degree or Higher (64.5%) Income generally increases with education level and so does Pet spending. Education can also be a key factor in recognizing the value in product improvements, like super premium foods. In 2017 this higher educated group fell from 3^rd to 7^th in share of pet spending. This drop in ranking was due to another segment making a major move. In 2017, High School Grads with some College substantially increased their Veterinary spending but more importantly, they bought into Super Premium Foods in a big “blue wave”. I use this metaphor because there was a corresponding food spending lift by blue-collar workers. Higher Education is still an important factor in spending but the group performance dropped from 127.5% to 120.1% – from 3^rd to 6^th place.
8. CU Composition – Married Couples (63.4%) With or without children, two people, committed to each other, is an ideal situation for Pet Parenting. In 2017, primarily due to married couples only CU’s, this group moved up from 8^th to 7^th in share of spending. They also increased their performance to 128.1%, which still ranks third in importance.
9. # Earners – “Everyone Works” (62.0%) This is a composite of CU’s, regardless of size, where all adults are employed. This group’s ranking in share of overall pet spending fell from 5^th to 9^th. Their performance fell from 115.2% to 108.2%. Retirees and CU’s with 2+ people and only one earner have a significant share of Pet spending and both these groups had a great year, which caused this group to lose ground in all areas – despite a $3B spending increase.
10. Area – Suburban (59.8%) Homeownership is high and they have the “space” for pets. Their share of spending fell slightly from 60.2%. Their performance also fell from 109.7 to 107.6%. The relatively low performance shows how widely spread pet parenting is in all areas. The drop in share and performance was due to a spectacular year by CU’s in Rural areas, in every industry segment, but especially Food.

Total Pet Spending is a sum of the spending in all four industry segments. The “big demographic spenders” listed above are determined by the total pet numbers. Although the share of spending and performance of these groups may vary between segments, every one of them generates a minimum of 55.1% of the spending in every segment. As we analyze individual segments, some of the groups will change to better reflect where most of the business is coming from.

The group performance is a very important measure. Any group that exceeds 120% indicates an increased concentration of the business which makes it easier for marketing to target the big spenders. Although Income over $50K is the clear winner, Homeowners and Married couples are also strong performers. The exceptionally high performance in all six 120+% groups also indicates the presence of segments within these categories that are seriously underperforming. These can be identified and targeted for improvement.

Now, let’s drill deeper and look at 2017’s best and worst performing segments in each demographic category.

Most of the best and worst performers are just who we would expect and there are only 3 that are different from 2016. Changes from 2016 are “boxed”. We should note:

• Income is very important, which is shown by the 238.5% performance. What is not seen is the radically improved performance from the groups from $40k to $150K as Pet Spending increased across a wide range of incomes.
• Occupation – Managers and Professionals returned to the top spot for the first time since 2014. The Self-employed loss 9% in CU’s and their income and pet spending plummeted. Blue-collar workers are still at the bottom, but their performance increased from 71% to 88% so the difference between the top and bottom narrowed.
• CU Composition – Married couple only is the winner for a second consecutive year and their performance is getting stronger. However, the big news is that Single Parents moved up and out of the “loser” spot.
• # in CU – It just takes 2 and 2 is by far the best performing CU number, regardless if they are married or unmarried.
• Region – The West is perennially on top. The loser changes almost every year but 92% performance is not too bad.

There was very little change in the “players”, so most expected segments are doing well. In the next section we’ll look at the segments who literally made the biggest difference in the success of 2017.

We’ll “Show you the money”! This chart details the biggest $ changes in spending from 2016.

In this section we will truly see the difference between 2017 and 2016. There are 22 Winners and Losers. None are repeats. In 8 cases the segments actually switched from the biggest increase to the biggest decrease or vice versa.

• Race/Ethnic – The vast majority of Spending comes from the White, Not Hispanic group…and 85% of the increase.
  • Winner – White, Not Hispan – Spending: $67.14B; Up $8.36B (+14.2%)
    • 2016: Hispanic
  • Loser – Asian – Pet Spending: $1.62B; Up $0.37B (+29.4%)
    • 2016: White, Not Hispanic
  • Comment – All groups spent more. Asian Americans increased their Pet Spending by 29.4% and still came in last!
• # in CU – 2 People is a logical winner. They have more time and money to focus on their pets.
  • Winner – 2 People – Pet Spending: $35.32B; Up $6.87B (+24.2%)
    • 2016: 4 People
  • Loser – 1 Person – Pet Spending: $13.35B; Up $0.23B (+1/8%)
    • 2016: 3 People
  • Comment: All segments spent more on their pets , but 2 People CU’s generated 70% of the increase. Last year’s winner, 4 People CU’s, came within $0.01B of flipping from first to last. However, Singles “won”.
• Housing – The biggest segment, Homeowners w/Mtge hasn’t won since 2015.
  • Winner – Homeowner no Mtge – Spent: $23.18B; Up $5.64B (+32.2%) 
    • 2016: Renter
  • Loser – Renter – Pet Spending: $14.32B; Up $0.73B (+5.3%)
    • 2016: Homeowner w/Mtge
  • Comment – Renters flipped. Homeowners w/o Mtge had a lift in all segments. Retirees were a factor.
• Earners – More earners generally mean a higher income and more Spending, but not this year.
  • Winner – 1 Earner, 2+ CU – Pet Spending: $18.04B; Up $5.44B (+43.2%)
    • 2016: 2 Earners
  • Loser – No Earner, Single – Pet Spending: $4.60B; Up $0.04B (+0.9%)
    • 2016: 1 Earner, 2+ CU
  • Comment – After 2 years of the same Winner and Loser, the 1 Earner, 2+ CU group finally turned it around, in a big way. Even the low-income Single, No Earner group eked out an increase.
• CU Composition – Up or down, the big changes usually come from some sub-segment of married couples.
  • Winner – Married, Couple Only – $26.30; Up $5.30B (+25.2%)
    • 2016: 2+ Unmarried Adults
  • Loser – Married, oldest child <6 – $2.06B; Down -$0.54B (-20.8%)
    • 2016: Married Oldest Child >18
  • Comment – 2017 was the year of “2” and Married Couples with no human children, regardless of age, are showing a tremendous commitment to their pet “children”.
• Occupation – Pet Parents are widespread across occupations, but white-collar workers usually drive spending.
  • Winner – Blue-Collar Workers – Spending: $14.6B; Up $4.36B (+42.5%)
    • 2016: Mgrs & Professionals
  • Loser – Self-Employed – Pet Spending: $5.41B; Down -$1.12B (-17.1%)
    • 2016: Retired
  • Comment – In 2017 the Blue-Collar workers were the big movers, largely due to a huge increase in Pet Food spending as they upgraded to super premium.
• Age – The 55>64 yr olds definitely turned it around.
  • Winner – 55>64 yrs – Pet Spending: $21.44B; Up $4.07B (+23.5%)
    • 2016: 35>44 yrs
  • Loser – <25 yrs – Pet Spending: $1.98B; Up $0.12B (+6.6%)
    • 2016: 55>64 yrs
  • Comment: Every age group spent more in 2017, but the 45>64 group accounted for 65% of the increase.
• Education – The Associates Degree CU’s went from first to last and were the only group to spend less in 2017.
  • Winner – HS Grad, some College – Spent: $16.47B; Up $3.96B (+31.7%)
    • 2016: Assoc. Degree
  • Loser – Assoc. Degree – Pet Spending: $7.81B; Down -$0.39B (-4.8%)
    • 2016: Adv. College Degree
  • Comment – This year’s winner, High School Grads with Some College, demonstrates that Education has become less of a factor in Pet Spending, at least in some segments.
• Area Type – All groups spent more, but Rural CU’s, the smallest group, led the way, spending more in all segments.
  • Winner – Rural – Pet Spending: $10.04B; Up $3.43B (+51.9%)
    • 2016: Central City
  • Loser – Central City – Pet Spending: $20.93B; Up $0.78B (+3.9%)
    • 2016: Suburbs >2500
  • Comment – The biggest trend was that areas under 2500 pop., rural or urban, generated 61% of the increase.
• Income – Only the $30>39K group spent less.
  • Winner – $100 to $149K – Pet Spending: $15.02B; Up $3.32B (+28.4%)
    • 2016: $200K>
  • Loser – $30 to $39K – Pet Spending: $4.95B; Down -$0.93B (-13.8%)
    • 2016: $100 to $149K
  • Comment – The $100>149K group flipped from last to first but there were also strong increases in the mid-range income groups. Bundled together, the $40>99K income range increased spending by $5.17B.
• Region – Regions vary in size and demographics, but all spent more and had at least a $1.9B increase.
  • Winner – Midwest – Pet Spending: $16.43B; Up $2.92B (+21.6%)
    • 2016: South
  • Loser – West – Pet Spending: $18.56B; Up $1.93B (+11.6%)
    • 2016: Midwest
  • Comment – The Midwest flipped positions but the segments in this category are always changing positions.

We’ve now seen the best overall performers and the “winners” and “losers” in terms of increase/decrease in Total Pet Spending $ for 11 Demographic Categories. Not every good performer can be a winner but some of these “hidden” segments should be recognized for their outstanding performance. In such a great year, there were a number of candidates, but I limited my choices to 6. They don’t win an award, but they deserve….

HONORABLE MENTION

The 2017 performance of these groups doesn’t require a detailed explanation. The numbers on the chart demonstrate just how demographically widespread and significant the 2017 pet spending lift truly was.

Single Parents climbed out of the hole of being the perennial worst performer in their group. African Americans finished last in performance but still had a 30.7% increase. 2 Person CU’s “ruled” in 2017, but the biggest group, 5+ People was also up 30.3%. The $200K group was the best performer and the $100>150K group had the biggest increase, but the income range from $40>69K also spent $3.2B (26.8%) more in 2017. The focus was on the great year that was had by both Managers and Professionals and Blue-Collar workers, but Retirees also had a $2.95B increase. Finally, the spotlight was definitely on married couples only, but the 2+ Adults only group also did pretty well with a $2.7B increase. The good news was truly widespread. In fact, only 9 of 99 distinct demographic segments had a decrease. That means that 91% spent more.

Summary

2015 and 2016 brought turmoil to the market. There was a lift in spending in 2015 as many consumers upgraded to Super Premium foods, but they cut back on spending in other segments to help pay for it. In 2016 they began value shopping for food online and in stores. They used some of the money saved on food to spend on other segments, but not enough, as total spending fell slightly. Then came 2017, when the market was rampant with values. The Services segment saw increased purchase frequency, but consumers paid less. Other Segments had double digit increases and the movement to premium foods made a much deeper penetration across the market.

In 2017, on the surface, big changes weren’t immediately apparent. The demographic groups responsible for most of Total Pet Spending were the same as those in 2016. However, there were changes in their spending share rankings. The number of Earners and Higher Education became less important, while Marriage and Everyday Workers increased their influence. These were indications of a movement towards more spending equality in certain demographic categories.

In terms of performance, the most influential demographic big spending groups increased from 5 to 6, with the Top Three being Income, Home Ownership and Marriage. Knowing the demographic segments in these categories allows industry participants to more effectively target their best customers and… those most in need of improvement.

There was also very little change in the best and worst performing individual demographic segments. The most noticeable changes occurred in $. There were some surprising winners and “near winners” – Rural, Blue-Collar, HS Grads w/some College, $40>69K and Single Parents, to name a few. The most noticeable spending trends seem to be a movement towards more egalitarian spending in terms of income, education and occupation, along with significant growth in less densely populated areas. As always, to get to the heart of the matter and to more actionable data you must “drill down”. This will become even more apparent as we turn our analysis to the individual industry segments.

But before we go…The “Ultimate” Total Pet Spending Consumer Unit in 2017 consists of 2 people – a married couple, alone. They are in the 55 to 64 age range. They are White, but not of Hispanic origin. At least one of the them has an advanced College Degree. They both work as managers and are doing well  – over $200K. They’re working to pay off their house located in a lovely, small suburb of  a metropolitan area with a population of about 2,000,000 in the West.

The internet has become a huge part of our lives, affecting all aspects of our behavior, not the least of which is retail spending. U.S. consumer spending is driven by value, convenience and selection. This is a near perfect match of the “game plan” of the internet. As a result, the evolution of the retail market is accelerating as increasing numbers of consumers, across an ever broadening range of demographics, migrate to internet retailers. Brick ‘n mortar retailers are well aware of this movement and continue to increase their commitment to the .com divisions of their businesses.

In this report we will take a closer look at the total E-commerce business in the U.S. This includes sales from non-store retailers as well as the internet sales from the .com divisions of companies who derive most of their business from brick ‘n mortar outlets. We accomplish this by combining data from 4 separate reports published by the U.S. Census Bureau.

In 2017, E-Commerce sales were $449.9B, up $60.8B (+15.6%). The first chart will put those numbers into a historical perspective. In 2000, the Total Retail economy – less restaurants, was $3.0 Trillion. By 2017, it had increased 70.1% to $5.1 Trillion – an annual growth rate of 3.2%. During the same period, E-commerce sales increased by over 1500% – an annual growth rate of 17.8% – nothing short of spectacular. As you will see, the report is very “chart intensive”. This makes the data easier to digest and often reduces the need for commentary as the conclusions are visually very obvious.

The increase has been very consistent since the millennium, with the only slow down coming in 2008 and 2009 as a result of the Great Recession. However, while e-commerce growth notably slowed, we should remember that the total retail economy actually decreased in 2009 for the first time since 1956. 2010 and the years since the recession have shown strong increases in E-commerce as the new “value conscious” consumers looked to the internet for savings. Perhaps even more significant than the spectacular growth in dollars, is the growth in overall market share. Since 2000, E-commerce has moved from insignificance – less than 1%, to a 9% “force” in the retail market.

We see the annual dollars but are they consistent year round? Is there a pattern to E-commerce sales? The following graph shows what the sales looked like by calendar year quarter in 2017.

Changes in share from 2016

4^th Quarter – Up 0.2%;    2^nd Quarter – Up 0.1%;

3^rd Quarter – Down 0.1%;  1^st Quarter – Down 0.2%

The 4^th quarter holiday lift for 2017 was +38%, up from +33% in 2016. However, the quarterly spending pattern seen in the chart above has been remarkably consistent, within 1%, for every year since 2000, with one exception. The 4^th quarter of 2008 was only 28% of the year’s total. Consumer anxiety over the impending economic crisis reduced holiday spending that year. However, the pattern returned to “normal” in 2009.

Now let’s take a more detailed look at E-commerce sales. Last year the Census Bureau started breaking the E-commerce $ down by retail channel so we can see how the brick ‘n mortar companies are doing in their online battle with non-store retailers. Because of the detailed nature of the data, there is a lag time. This chart documents 2016 $ales.

In 2016, E-Commerce Sales increased $48.7B (+14.3%) over 2015 so it was another strong year for online shopping. Every channel but Health & Drug stores increased their E-commerce $, but only 4 channels gained in share. These “winners” are boxed in green. All 4 of these retail channels are very important to the Pet Industry. In the last Economic Census, they accounted for 65% of all Pet Products sales in the U.S. Here are their E-commerce specifics:

• Food & Beverage Stores – E-Comm. – $3.9B; Up $1.7B (+63.1%) – Share of e-commerce went from 0.4% to 1.0%. This huge percentage increase is a foreshadowing of even bigger things to come.
• Bldg/Hdwe/Gard/Farm – E-Comm. – $9.8B; Up $1.5B (+18.1%) – They gained 0.1% in share. It demonstrates that E-commerce is an option for all retail channels.
• Gen Merchandise – E-Comm. – $27.6B; Up $5.0B (+22.1%) – The internet is perhaps the single biggest threat to this channel. They are responding, gaining 0.5% in share.
• Non-Store Online Retlrs – E-Comm. $227.6B (+17.9%) – They started it all and continue to set the pace,+1.8% share.

Let’s also take a closer look at another channel of interest to the Pet Industry.

• Misc (Office, Florist, Gift, PET) – E-Comm. $13.9B (+2.2%) – This channel ranks 5^th in share of E-commerce business among brick ‘n mortar outlets but they loss 0.4% in share. Pet Stores increasingly offer an E-commerce option but recently their emphasis has been on increasing services, like grooming, which are not available online.

In 2016, Non-store retailers won the online “battle for the bucks” with their brick ‘n mortar rivals by a margin of 58.5% to 41.5%. Let’s look at recent history to see how this war is going.

The E-commerce sales for primarily brick ‘n mortar businesses increased $65B (+67.0%) between 2011 and 2016 but their share of total E-commerce sales fell from 48.6% to 41.5% – a 14.6% decrease. Brick ‘n mortar stores, from major chains down to independent retailers have increased their emphasis in online sales but they are not keeping pace with their non-store competition. In addition to not being as experienced in this market, another handicap that they often faced was that consumers were required to pay local sales taxes on purchases in any state in which the seller has a physical facility – retail outlets, offices or a warehouse/distribution center. No change in this for 2017, but in 2018 the U.S. Supreme Court reversed a previous ruling so the future competition may take place on a more level playing field.

Business success is usually dependent upon commitment. Just how important are E-commerce sales to any given retail channel? This final chart shows the E-commerce share of the 2016 total sales for each relevant retail channel.

The E-Commerce share of their total $ increased for 8 of 11 channels. Miscellaneous and Auto Parts stores both maintained their share but Health/Drug Stores loss ground. The single biggest gainer was Electronics/Appliances, +2.3% in share. The internet is a great place to shop for electronics. Two other significant gainers are General Merchandise (+0.7%) and Food & Beverage stores (+0.3%). These 2 channels account for 28% of the $5 Trillion retail market so any increase is very significant. Plus, there are undoubtedly more gains in E-Commerce still to come from these retailers.

Of particular interest to the Pet Industry are Miscellaneous Stores, which includes pet stores. While they ranked 5^th in total E-commerce sales $, they finished in 2nd place for brick ‘n mortar channels in terms of the E-commerce share of the total channel’s business. The commitment to E-commerce is still strong in this channel.

Also note, traditional mail order and TV are not dead. They still account for 32% of the sales of all non-store retailers. However, it is E-commerce that is changing the retail marketplace and sales growth is still strong:

• 2017: +15.6%;
• YTD September 2018: +15.3%.

In this rapidly evolving environment, retailers must either adapt or face extinction. It’s their decision.

Veterinary Services is the second largest segment in the Pet Industry. In recent years, a high inflation rate, over 3.5%, has caused a reduction in Veterinary visits and put spending on a rollercoaster ride. In 2016 spending increased 5.6%. However, in 2017 inflation slowed markedly and consumers responded. Spending reached $20.67B – Up -$2.56B (+14.1%) from 2016. In this report, we’ll take a closer look at the demographic drivers of the 2017 increase. (Note: Like 2016, all 2017 numbers in this report come from or are calculated by using data from the US BLS Consumer Expenditure Interview Survey, rather than their Diary report. The low frequency of Veterinary Visits is still generating an exceptionally high variation on the data collected by the Diary method. Interview seems to be a more logical and accurate way to track Veterinary Service Expenditures.)

Let’s get started. Veterinary Spending per H/H in 2017 was $159.01, up from $139.84 in 2017. (Note: A 2017 Pet H/H (68%) Spent $233.84) More specifically, the increase in Veterinary spending came as a result of:

• 0.3% more H/H’s
• Spending 6.1% more $
• …7.2% more often

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

There was a big spending drop in the first half of 2015, which coincided with the upgrade to Super Premium Foods – Trading $. Then consumers began value shopping for Premium Foods. The subsequent savings freed up $ for Veterinary Services. Spending began to climb until it flattened out at the beginning of 2017. In 2017, inflation in the Veterinary Segment slowed markedly, especially in the second half. The result was that spending literally “took off”.

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

Observations

Although not as pronounced as Pet Services, Veterinary Spending is driven by income. This makes it very significant that every income level increased spending in 2017. The biggest lift came from the $70 >$150K group – up $1.53B (24.6%)

• Over $150K (10.9% of H/H’s) – $5.68B, Up $0.50B (+9.6%) This highest income group is definitely the biggest driver in Veterinary Spending as 10.9% of H/H’s generated 51.4% of the $3.56B increase since 2015.
• $100>150K (12.7% of H/H’s) – $4.32B, Up $0.93B (+27.4%) This middle/upper income group responded strongly to the slowed inflation rate.
• $70K>100K (14.9% of H/H’s) – $3.43B, Up $0.60B (+21.2%) Their spending pattern almost exactly matches the $100>150K group which indicates very similar motivations.
• $30K>70K (31.4% of H/H’s) – $4.68B, Up $0.41B (+9.6%) After bottoming out during the Food upgrade, the spending by this group has grown steadily. The pattern is remarkably similar to the $150K+ group, just not quite as strong.
• Under $30K (30.2% of H/H’s) – $2.56B, Up $0.12B (+4.8%) This group is price sensitive and includes many older retirees who spent heavily in 2015 then dialed it back. The slowed inflation in 2017 brought a minor increase.

Now, here is Veterinary Spending by Age Group

Observations

The 35>44 young GenXers and those over 75 spent slightly less. Everyone else spent more. In the detailed data below, be sure to note the changes in frequency. A reduction in visit frequency has been an ongoing problem…but not in 2017.

• <25 (5.8% of H/Hs) – $73.00 per H/H – $0.55B – Up $0.14B (+33.6%) This youngest group is getting serious about the responsibilities of Pet Parenting. Their Veterinary spending has almost doubled in just 2 years.
• 25>34 (16.4% of H/Hs) – $119.58 per H/H – $2.54B -Up $0.33B (+15.4%) The commitment of these Millennials to the welfare of their pets is growing. They are the only group to increase Veterinary spending every year since 2014.
  • 2.0% more H/Hs
  • Spent 10.8% more $
  • …2.1% more often
• 35>44 (16.2% of H/H’s) – $141.43 per H/H – $2.98B – Down $0.10B (-3.1%) This group is under tremendous financial pressure as their human family responsibilities are peaking. In 2017, they had double digit increases in 3 Pet Industry segments. The Veterinary segment paid a small price for these big gains. They spent a little less…but more often.
  • 1.7% fewer H/Hs
  • Spent 9.5% less $
  • …8.9% more often
• 45>54 (18.1% of H/Hs) – $221.73 per H/H – $5.23B – Up $1.15B (+28.3%) This group has the highest income but value is still a big driver. Their response to the radically slowed inflation was to spend significantly more money and more often. They accounted for 44.9% of the total Veterinary Spending increase.
  • 2.0% fewer H/Hs
  • Spent 21.3% more $
  • …7.8% more often
• 55>64 (19.0% of H/Hs) – $219.50 per H/H – $5.42B – Up $0.70B (+15.0%) This group is all Baby Boomers and until 2015 was the leader in Veterinary Spending. In 2015 they spent an extra $5B to upgrade their Pet Food and Veterinary Spending was severely reduced. In 2016, they regained the lead in Veterinary spending and it has continued strong growth, with the same pattern – Spend slightly more money much more often.
  • 0.3% more H/Hs
  • Spent 2.4% more $
  • …12.0% more often
• 65>74 (14.3% of H/Hs) – $169.15 per H/H – $3.14B – Up $0.47B (+17.2%) This group is very price sensitive. Strong inflation has caused reduced spending. The pricing “slow down” in 2017 changed all that, especially the frequency.
  • 1.8% more H/Hs
  • Spent 4.2% more $
  • …10.5% more often
• 75> (10.2% of H/Hs) – $60.63 per H/H – $0.80B – Down -$0.15B (-15.7%) This group of oldest Pet Parents has a strong commitment to their pets – in 2015 a $1B increase in Veterinary Spending. In 2016, they upgraded their food. In 2017 they increased spending in Food, Supplies and Services. They just don’t have quite enough money.
  • 1.4% more H/Hs
  • Spent 16.2% less $
  • …0.9% less often

Now, let’s take a look at some other key demographic “movers” behind the 2017 Veterinary Spending increase.

Summary

2017 was definitely a great year for the Veterinary segment. As you look at the chart above you will see that 4 demographic categories – Income, Housing, Area Type and Race/Ethnic had no segments that spent less on Veterinary Services in 2017. The increase was truly widespread as 77 of 92 (83.7%) demographic segments spent more in 2017 than they did in 2016. The chart is basically loaded with the “usual” winners and losers.

However, there are 2 segments that are in an unusual position. Self-employed have a high average income so they are not normally a “loser”. However, in 2017 they dialed down their spending in every category but supplies. The level of the decrease was magnified by the fact that the number of “self-employed” households also fell 8.7%. Apparently, owning your own business became less popular in 2017. On the winning side, Homeowners w/o Mortgages is unusual. In 2017, they just edged out Homeowners with a mortgage by $0.2B. Their victory was fueled by a $1.0B spending increase from retired folks. This must have been “younger” retirees as the over 75 group spent less.

The continued high inflation rate in Veterinary Services has had a major impact on Veterinary spending since the great recession. The “new” value conscious consumer has rebelled against ever increasing prices. They have delayed or eliminated many routine procedures or sought alternative solutions. The spending in this “necessary” segment has become much more dependent on household income. People were visiting the Veterinarian less often, just paying more. This makes the 7% increase in frequency incredibly important as it indicates a definite change in spending behavior.

The why behind this change is a significant decrease in inflation. The CPI for Veterinary Services only increased 2.2% in 2017. This is the lowest rate since they began keeping records back in 1997. In fact, prices in the second half of 2017 only increased 0.7% – incredible. You saw the consumer response – a huge spending lift. But what comes next? In the first half of 2018, prices are up 1.7%. This seems high but it is actually the same as 2017. We’ll just have to wait and see.

2017 was a record setting year for the Pet Industry as spending soared to $77.13B, a $9.4B (14.6%) increase from 2016. The Supplies segment even exceeded this pace as spending reached $18.58B, a $2.74B (17.3%) increase. (Note: All numbers in this report come from or are calculated by using data from the US BLS Consumer Expenditure Surveys)

2017 continued and in fact, built on an upturn in Supplies spending which began in the second half of 2016. In this report we’ll “drill down” into the data to try to determine what and who are “behind” the huge spending lift in Supplies.

In 2017, the average household spent $142.90 on Supplies, up 16.9% from $122.25 in 2016. (Note: A 2017 Pet H/H (68%) Spent $210.00) This doesn’t exactly match the 17.3% total $ increase. Here are the specific details:

• 0.3% more H/H’s
• Spent 11.6% more $
• 4.7% more often

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

Since the great recession, you can’t talk about spending trends in the Supplies segment without talking about price – the CPI. Although many supplies are needed by Pet Parents, when they are bought and how much you spend is often discretionary. Additionally, many of the product categories in this segment are now considered commodities, so price is the main driver behind consumer purchasing behavior. When prices fall, consumers are more likely to buy more. When they go up, consumers spend less and/or buy less frequently.

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

In 2015 we saw how the discretionary aspect of the Supplies segment can impact spending in another way. When consumers spend a lot more $ in another segment, like for a food upgrade, they are likely to cut back on Supplies – swapping $. This is what happened in 2015. Many consumers upgraded their food, spending +$5.4B more. This gave them less to spend on other aspects of Pet Parenting. This, in conjunction with inflation, caused supplies to suffer as consumers spent 4.1% less, but they bought 10% less often. That seemingly small drop in purchase frequency (ex: Buy every 33 days instead of buying every 30 days) drove $1.6B (78%) of the $2.1B decrease in Supplies spending.

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

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

In 2017 Supplies spending increased in every income segment. Here are the specifics.

• <$30K (30.2% of H/H’s) – $133.37 per H/H – $2.69B – Up $0.09B (+3.4%). This group obviously must closely watch their discretionary spending. They are also the only group to spend less in 2017 than in 2014. However, this somewhat deceptive as their H/H supplies spending actually increased 4%, but the number of H/H’s fell 8%.
• $30K>$70K (31.4% of H/H’s)- $126.35 per H/H – $5.15B Up  $0.81B (+12.6%). This lower income group had a big drop in 2015. In 2016 they started to bounce back and in 2017 this accelerated with the 2^nd biggest $ increase.
• $70>$100K (14.9% of H/H’s) – $157.21 per H/H – $3.04B Up $0.25B (+8.9%). This middle income group spends more than the national average on supplies and closely matches the national pattern but with smaller “swings”.
• $100K>$150K (12.5% of H/H’s) – $195.40 per H/H – $3.22B Up $0.43B (+15.4%) Except for a dip in 2016, the Supplies Spending in this group has been essentially flat. The drop in 2016 actually coincided with a drop in their total H/H expenditures. Value shopping is not limited to the lower income groups.
• $150K> (10.9% of H/H’s) – $316.35 per H/H – $4.47B Up $1.15B (+34.6%) With by far the biggest lift in both $ and in percentage, this group reinforces the importance of income in Supplies spending.

Please note that while the $150K+ group had the biggest increase, the 2^nd spot belonged to the lower income $30>70K.

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

It’s the same story as the Income demographic. Every age group spent more on Supplies in 2017. Here are the specifics.

• 45>54 (18.1% of H/H’s) $179.90 per H/H – $4.24B – Up $0.56B (+15.3%) This highest income age group has been the leader in Supplies spending since 2007. Fewer H/H’s (-2.0%) spent 9.4% more on supplies, 7.5% more often.
• 55>64 (19.0% of H/H’s) $168.56 per H/H – $4.17B – Up $0.82B (+24.3%) A portion of this “Boomer” group dialed back their supplies spending while upgrading their food. In 2017 they came back strong as 0.3% more H/H’s spent 21.6% more on Supplies, 2.0% more often. The lowest Supplies prices (CPI) since 2007 were very alluring.
• 35>44 (16.2% of H/H’s) $165.53 per H/H – $3.49B – Up $0.36B (+11.5%) This group is second in income and overall expenditures. In 2016 these Gen Xers led the way with a big lift in Supplies spending which continued into 2017 when 1.7% fewer H/H’s spent 6.5% more $, 6.5% more often.
• 65>74 (14.3% of H/H’s) $132.12 per H/H – $2.45B – Up $0.20B (+8.7%) In 2016 they saved money on food and spent it on supplies. In 2017 growth continued as 1.8% more H/H’s spent 6.8% more, with the same frequency.
• 25<34 (16.4% of H/H’s) $118.54 per H/H – $2.52B – Up $0.41B (+19.4%) These Millennials are the only group spending less on Supplies in 2017 than in 2014. Their priorities have changed. They upgraded food and doubled veterinary spending. However, in 2017 2.0% more H/H’s spent 13.2% more on supplies, 3.4% more often.
• <25 (5.8% of H/H’s) $87.63 per H/H – $0.67B- Up $0.14B (+27.4%) This small group had 3.9% more H/H’s, spent 23% more $, but 0.4% less often. I think the big $ increase earns them a “pass” on the slightly lower frequency.
• 75> (10.2% of H/H’s) $78.79 per H/H – $1.04B, Up $0.14B (+31.9%) This group spends 15% more than they earn. The deflated supplies prices were very appealing as 1.4% more H/H’s spent 5.6% more, 23.1% more often.

Finally, let’s take a look some other key demographic “movers” behind the 2017 Pet Supplies Spending increase.

Summary

The big drop in spending in 2015 highlighted the vulnerability of a discretionary segment like supplies, especially through a small reduction in purchase frequency. However, the supplies segment provides many products which make the lives of pets and their “parents” easier and better, so we knew that a spending recovery was inevitable. The recovery began in the second half of 2016, as consumers “freed up” money by value shopping for their new upgraded food. Deflation in 2017 accelerated the process and spending passed the $17B level of 2014 by mid-year. By year end, spending had reached 18.58B. This was $1.58B more than 2014, $2.74B more than 2016 and $3.74B more than the spending low point in mid-2016. Purchase size was up significantly and spending frequency was 95% of 2014 – a more normal market.

If you would like more proof of “normalcy”, just look at the winners in the chart above. College Grads, Managers, Homeowners w/Mtge, $150K+ income and small Suburbs are all the “usual suspects” behind a lift in Supplies spending. However, the 2017 spending lift was almost universal. All income and age groups spent more and in fact, 89 of 94 demographic segments (94.6%) bought more supplies.

The $2.74B increase in Supplies spending was obviously great news, especially following the $0.94B increase in 2016. This gives the Supplies segment an average annual increase rate of 3% since 2014, which is not great, but is a return to more normal levels. How it happened does cause some concern as supplies prices deflated 0.4% in 2017. This may not sound like much but it did push them down to the level of 2007 and to a record 5.3% below their all-time high in 2009.

Deflation increases profit pressure on retailers and especially manufacturers. In Supplies, it appears that the only way to increase spending is to reduce prices. What happens if they go up? We’ll soon find out as prices rose sharply in the second quarter of 2018. In June of 2018 they were 1.85% higher than in December of 2017.