Archive for category: Pet Market

2015 was quite a year for Pet Food but not so good for Pets & Supplies. Now it’s time to see what the beginning of 2016 brought to Supplies Spending. In the US BLS Mid-Year Update of their Consumer Expenditure Survey covering the 12 month period ending 6/30/16, Supplies Spending was $14.84B, down $1.01B from a year ago and even slightly less than 2013. The following chart should put the recent history into perspective.

•  2015 ($14.9B) vs 2014 ($17.0B)
  • ↓$2.1B (-12.4%)
    • 1^st Half ↓$1.15B
    • 2^nd Half ↓$0.95B
• Mid-16 ($14.84B) vs Mid-15 ($15.85B)
  • ↓$1.01B (-6.4%)
    • Jul>Dec 2015 ↓$0.95B
    • Jan>Jun 2016 ↓$0.06B – Flat
• 2015 vs 2013 – Spending Flat:↓$0.06B
• Mid-16 vs Mid-14 – Spending ↓$1.09B

The Chart clearly shows the Spending ride that Supplies has taken since 2013, climbing to the summit in 2014 then descending into the valley in 2015. Supplies is a diverse and complex segment so there are a number of factors behind these changes in Spending. For this report we will focus on 2 which seem particularly relevant.

The first is pricing – inflation/deflation. Many Supplies Categories are commoditized so spending is impacted by the rise and fall of prices. 2014 was a “deflation” year. Prices were down so the largely discretionary Supplies spending was up, way up. During the Holiday season of 2014, prices turned upward. Spending was not significantly slowed…but the prices stayed up into the new year. This would have a negative impact.

At the same time in 2015, another trend was starting in another segment. A large group of consumers, mostly Baby Boomers was choosing to upgrade their Food to Super Premium. This upgrade was significantly more expensive so this group immediately began looking for ways to save on discretionary spending. Basically, everyone was looking for savings and Supplies prices were going up. The result was a $2B drop in Supplies spending primarily from only a 10% decrease in purchase frequency.  In Nov-Dec 2015, the Consumer Price Index for Pet Supplies dropped by a record 2% – but it wasn’t enough to turn the year around. Prices stayed down for the first half of 2016 and Spending stabilized at the level of the same period in 2015, which is not good, but at least it stopped falling.

Now let’s look at the 2016 Mid-year Supplies Spending versus previous year by Age Group

At the end of 2015, every age group was showing decreased spending on Supplies vs 2014. At the Mid-Year update in 2016 we are starting to see evidence of at least a pause in the decline if not the beginning of a turnaround.

• The biggest drop in Supplies is still occurring in the age groups which have Baby Boomers who range in age from 52 to 70 at the time of this report. In 2015 the Boomers opted to upgrade to Super Premium Foods and reduced spending in other areas, especially Supplies. We’re still seeing the residual effect of that choice.
• Supplies have always been an important portion of overall Pet Spending for the younger groups so it’s fitting that the Under 35 group is showing an increase. Perhaps the turnaround will start with the Millennials.
• Another point to note is the increase, although slight, at both ends of the age spectrum. The individuals in age groups are always changing. This increase indicates that new pet households are being added and that existing pet households are being maintained.

Now let’s look at Supplies Spending by Income Group to see if Money Matters.

Just like the Age Groups, every Income group showed decreased spending in 2015. At the 2016 Mid-Year update, the decline is still pretty pervasive but there are a couple of positives.

• The $1B decrease is almost equally split between the Over $70K and Under $70K groups.
• All the Income Levels under $70K are also showing a drop in Supplies Spending.
• The $100>$150K group is still reflecting the cut back in Supplies Spending which was driven by the Food Upgrade and value shopping. Their income is $120K but this group is at the peak of family responsibilities & children <18.
• There is a slight increase of $0.12B in the above average income group $70>$100K. There is probably a strong correlation between this group and the lift in the 25>34 age group, especially married couples only.
• The Over $150K group is also showing an increase of $0.11B. With an average income of $259K, discretionary spending is just that…at their discretion.

Comments

2015 was not a good year for Supplies. It was a year of price inflation. While not strictly tied to the CPI, many of the commoditized Supply Categories are strongly influenced by price. With inflation, Spending fell $2.1B in 2015. Prices had a record drop in November-December. This may have mitigated the decline but it was not enough to turn the second half around. The lower prices continued for the first half of 2016 and Spending stopped falling and flattened out at a level equal to the first half of 2015. What will happen in the second half? We’ll just have to wait and see. The Segment could certainly use a turnaround. Here are some large Demographic segments that are showing an increase in Supplies Spending for the first Half of 2016 and might lead the way.

• <$100K ↑$0.36B
• 35>44 yrs ↑$0.19B
• 3 Person or less CU’s ↑$0.5B
• College Grads ↑$0.14B
• White, Not Hispanic ↑$0.14B
• Northeast & Western Regions ↑$0.3B

The subject of this report is Single American Consumer Units (H/H’s) – 1 adult, no children or other adults. Most of our discussions on Pet Spending have focused on the various demographics segments that have 2 or more people, with or without children. There is good reason for this as they spend 80% of all Pet Dollars. However, we shouldn’t overlook the singles segment. Currently they represent 11.6% of the total U.S. population. However they are 29.5% of all Independent Financial Units (CU’s) and account for 20% of Total Pet Spending. With 29.5% of CU’s and “only”20% of Pet Spending they are not as productive as many segments. However the Total Pet Spending in 2015 by U.S. Singles was more than…

• The total of all Hispanic, African Americans & Asians
• The entire Millennial Generation.
  • Single Women alone spent more than Millennials
• The whole Northeast Region of the U.S.
• Everyone earning between $100K and $150 K
• And almost equal to all CU’s with incomes over $150K

I think that they deserve a closer look. But before we get started, I want to give credit to the US BLS. All the numbers were taken from or calculated from data in their Annual Consumer Expenditure Survey and a special report on singles spending by gender. To get a valid sample size for single men and women, they combined the data from 2014 and 2015. In order to compare these numbers to overall national data for the same period I calculated the average spending for 2014-2015. Let’s first look how singles are dispersed across society by age group.

• Two peaks at either end of the age spectrum with the low point at 35>44, which is prime time for marriage & family.
• Note that single men outnumber women up to age 55 then things change radically. Longevity may be a factor.
• Actually the percent of single men remains rather stable after age 25 – ranging from 10 to 15%.
• The 51% number in the small <25 group is a bit deceptive. The bulk of singles are in the older groups. 53% of all singles are over 55 (63% of women). Over 45, the numbers jump to 66% of all singles.(58% of Men; 74% of Women)

Now let’s get to know a little more about their characteristics, starting with homeownership and employment.

• Homeownership – (82.6% of all U.S. Pet Spending comes from Homeowners)
  • Singles are much less likely to be a homeowner.
  • Women have a higher percentage – over 50%.
  • Homeownership increases with age maxing at 65>
  • Only 3% of singles under 25 own a home.
• Earning Income – (83.1% of U.S. Pet Spending is done by “earners”)
  • 40% of all singles don’t earn money.
  • Single men are 40% more likely to be an earner.

Speaking of earning, let’s look at income and spending.

We’ll compare Singles to the National Avg in Income, Spending, Pet Spending and Pet Share of Total $pending

In the first chart we saw that Singles were significantly below par in the percentage of homeownership and “earners”. This usually results in decreased Pet Spending. Here’s how they compare on income and spending.

• Income – The average income of Singles is 50% of the National Average, about $34.5K
  • At $39.4K Men make 30% more than Women at $30K
  • While this seems challenging, consider the fact that all CU’s with an income of less than $70K make up 64.2% of the U.S. total. Their average income is $32.2K, but they still manage to spend 44% of all Pet $ and 49% of Pet Food.
• Total Spending – Annually, Single Men and Women spend about the same amount of money, which is high considering their income. This situation is especially pronounced among Single Women who make 30% less.
• Pet Spending – As you can see, Pets are important to Singles. To be more precise, Pets are extremely important to Single Women. They make 56% less than average. Overall they spend 41% less than average. However, when it comes to their Pets, their spending is basically on par with the total Nation. Amazing! Single Men spend less than 40% of what Single Women spend on their pets. This disparity is so great that it undoubtedly indicates that far fewer Single Men actually have a pet.
• Pet Spending as a Share of Total Spending – 1% has become the benchmark for performance. Pet Spending first reached 1% of Total Spending in 2008. Since then it has remained at or near this level. In 2014-15, the time covered by the data in this report, Pet Spending was 0.95% of Total Spending.
  • Total Singles – At 1.07% they are in the elite “Top 25” of the 85 demographic segments that I monitor, but as usual the story gets more complex when you drill deeper.
  • Single Women – At 1.5% they are in line for the Silver medal. Only truly Rural CU’s with a population less than 2500 and located outside of a Metropolitan Area beat them – with 1.65%.
  • Single Men – At 0.6% this is the flip side. Only 5 Segments are lower, including – Hispanics, African Americans, Asians, the members of the Greatest Generation (Born before 1929) and CU’s where the oldest child is under 6.

Now we’ll “Show you the Money” as we compare Avg CU Pet Spending to Single CU’s for every age group.

Observations

Total Singles – Overall, the pattern of CU spending generally mirrors that of the National trend. Spending starts to grow in the 25>34 age group, builds to a peak at 55>64 then falls off after 65. One thing to note is the huge spending increase for Singles between age groups 25>34 and 35>44 – 50%. The National increase is only 18%. Singles acquire pets a little later than the general population.

Single Men – This pattern is markedly different. Spending triples when they reach the 25>34 age group as they are acquiring pets. However, their spending peak comes early at age 35>44. From 45>64 their spending falls off a little bit, but it is basically static. When they reach 65, spending drops 25%. The stability in the spending from 35>65 indicates that there are few new pet households but those who have pets are committed to their pets. Also, the spending drop at age 65 is less precipitous for Single Men than the overall national numbers.

Single Women – Spending takes off in the in the 25>34 age group and essentially matches the national average by age 35>44. However, it continues to accelerate after age 45 and peaks at 55>64 at a rate that is 20% above the national average. Remember, their income is still under $40K and less than half of the national average. The 50% drop after age 65 suggests that there is a significant decrease in Pet households.

Final Thoughts

Single Pet Parents are a significant segment in the Pet Industry both in size and in spending. Here are the totals:

• 2015 Total Pet Spending for Singles was $13.45B – a 6.7% increase, despite a 1.1% drop in the number of CU’s
  • This was better than the overall industry increase of 5.3% which included a 1.1% increase in CU’s.
• Based upon the US BLS special report on singles,
  • Single Women accounted for $9.95B (74% the total)
  • Single Men Accounted for $3.50B (26% of the total)

That’s an incredible difference, considering that these groups are close to the same size – Women – 52% of CU’s; Men – 48%. We have found that gender definitely does matter in terms of Pet Spending by Single consumers.

Let’s consider the experience of Pet Parenting for Singles. It’s an enormous responsibility for anyone. However, if you are single, then all the responsibilities, big and small, “belong” to you, unless you choose to hire someone to help. By the way, that does happen. $1.64B (26%) of all 2015 Pet Services Spending was by Singles.

Singles are very interested in any product or service that makes going “solo” as a Pet Parent significantly better or easier. With relatively low income, price will always matter. However, they will spend more for a product that is significantly functionally better.

In terms of reaching this group, there appear to be 3 major opportunities/challenges:

1. Opportunity – Overall, the spending commitment to their Pet Children by Single Women is high but it actually increases significantly as they age. Remember, 1.5% of their Total Spending is on their Pets. However, the 45>54 age group spent 1.9% and the 55>64 group spent 2.4%. That last number is truly amazing and it’s not just %. The money is there – $3.4B – about the same as the spending for all single men. Make sure that older single Women have everything they need or want for their pets. Be especially cognizant about the Pet Parenting difficulties that arise as singles move into old age.
2. Challenge – The main issue with single Men as Pet Parents seems to be getting them to participate. Pets seem to be a more natural addition to the household for women than men. Getting single men started when they are young and as they reach middle age is the challenge. Through HABRI, we have an amazing amount of scientific evidence documenting the benefits of Pets. This is further magnified by the companionship that pets provide for singles. We need to put on our marketing thinking caps and find ways to get the message across to this group.
3. Income – With lower income, money will always be an issue for singles. There is also a high percentage of older adults in the group, both men and women, so some sort of Senior Discount makes sense. We need to keep singles spending and encourage transaction building. Overall, Singles didn’t participate to any great extent in the 2015 movement to upgrade to super premium food. Price was undoubtedly a major factor in that decision.

That wraps it up for this report. The Single Pet Parents demographic group definitely deserved a closer look and we certainly answered the question regarding Pet Spending and gender. Currently, it does matter and if it’s a contest, women win in a runaway.

The Pet industry has grown fantastically, from just over $2B in 1971 to almost $68B in 2015, according to data from the US Bureau of Labor Statistics. The oldest Boomers turned 25 in 1971 and began to establish households and families, which included Pet Children. Pet ownership took off and so did spending. I came into the industry on April 19, 1989. The oldest Boomers were just turning 43 and fast approaching the time when income peaks and children start leaving home.

In recent years, there has been a great deal of concern about the future. Will succeeding generations grab the baton when it is passed and maintain the spending level of the Boomers? It’s a valid question and concern. We all know that Boomers still account for a tremendous share of pet spending (48%). In fact, in 2015 they upgraded their Food to Super Premium. The result was a $5B increase and Boomers (34% of CUs) accounted for 53% of Pet Food Spending in the U.S.

That is now. Gen Xers and Millennials are much younger. How does their spending compare to the Boomers when they were the same age. Such comparisons can be difficult if you just compare $. There has been considerable inflation through the years and face it, the available product mixture of 30+ years ago was minuscule compared to today. One fair way to compare is to look at the share of Total Pet spending when each group was the same age. Pet Spending starts to take off in the 25 to 34 year old age group. In 2015, the oldest Millennials turned 34 and they “owned” this age group. For Gen X this happened in 1999. The Boomers did the same in 1980. We don’t have detailed data until 1984. However, the comparison is still reasonable as everyone aged 25 to 34 in 1984 was a Boomer.

Take a look at this graph. It shows the share of CUs, the share of total pet spending and the performance for all three generations when they first owned the 25 to 34 age group. Note: Performance = share of spending/share of CUs

• The first thing to note is that all measurements decline with succeeding generations.
• Share of CU’s – Gen X share of CU’s was 20% smaller than the Boomers and Millennials are down 26%.
• Performance – Gen X was 19% lower than Boomers and Millennials dropped off by 33%.
• Share of Total Pet Spending – Here’s the result. Compared to Boomers, the share of Total Pet Spending for…
  • Gen X is 64.6% of the Boomers. – less than 2/3
  • Millennials is 49.2% of the Boomers. – less than half

Of note, in 1984 the 25 to 34 age group (Boomers) ranked second in Total Pet $spending at $2.36B. They were edged out by the 35 to 44 group (half Boomers) at $2.38B. The Gen Xers fell to 3^rd place in 1999. The Millennials fell to 5^th in 2015, only beating out the Over 75 and Under 25 groups.

Let’s look at one other comparison – The pet spending share of total CU spending.

The next chart compares the Pet Percentage of Total CU spending, nationally and for the 25>34 group by generation.

•  Nationally, Pet Spending as a share of CU spending doubled to 0.94% from 1984 to 2015.
• The Boomers are the only generation to exceed the National Average for the 25>34 group.
• The Pet Spending share for this age group has increased about 50% but the younger generations have not kept pace with the Boomers.
• In fact, it the Boomers who were the primary drivers in National Pet Spending, as they grew older, their income increased and their human children left home.

Speaking of aging, we can go one step further in our generational comparison – the 35>44 age group – Boomers vs GenX. The 35>44 age group is the time when family responsibilities are reaching a peak. Careers are also being built but income has not quite caught up. As a result, this group has a great deal of financial pressure.

•  The Gen X 35>44 age group is 15% smaller than the Boomers.
• The Pet Spending Performance by the Gen Xers is 11% lower than the Boomers but both generations “earned their share” with 100+%.
• The net result is that the share of Pet Spending is significantly lower for the Gen X group – 25%.
• Although not quite at the Boomer “level”, Gen Xers obviously still have a strong commitment to their Pet Children.

Finally let’s compare the Pet Percentage of Total CU spending for the 35>44 age group for the two generations.

• From 1990 to 2009 the Pet Spending share of Total CU Spending almost doubled to 1.11%’
• The Boomers, in their day, kept pace with the national number.
• The Gen Xers increased the percentage of Pet Spending by this group 79% to 1.04%. However…
• They couldn’t keep pace with the national level being driven up by the older Boomers in their peak earning years.
• Of Note: Pet Spending share of Total CU spending broke the 1% barrier and peaked in 2008 at 1.13%. The Boomers were at the peak of their earnings. Their human children had left the nest and their attention and spending turned to their Pet Children. With the onset of the great recession, the Pet share of total Spending began to decline, falling below 1% in 2012 and currently stands at 0.944 % in 2015. However, Boomers still spend 1.23% of their total expenditures on their Pets – far more than any other generation.

Boomers’ spending on their animal companions shows a commitment that exceeds both earlier and later generations. They were the driving force in the industry’s spectacular growth. Let’s consider the “why” behind that commitment.

To answer the “Why?” question we will get away from math. We’ll look at one key national event and then I’ll get “personal” with some of my own remembrances about growing up as a Boomer with Pets. In the end, Pets are a very personal experience. Every Pet Parent has their own memories of their introduction to Pets and how they became an integral part of their life and a full-fledged member of the family. Now, for that “National Event”

The key event leading to the strong bond between Baby Boomers and their Pets happened before the first Baby Boomer was born. Boomers were born from 1946 through 1964. Here’s a picture of what happened on June 22, 1944.

This is a President Franklin Roosevelt signing the Servicemen’s Readjustment Act of 1944, The G.I. Bill. While World War II was not over, Victory seemed to be only a matter of time. The law was designed to help the returning servicemen readjust to society and reward them in a small way for their service and sacrifice on behalf of the country.

The law had two key elements that radically impacted U.S. Society. The first was Education Benefits which provided financial assistance for Veterans in gaining higher education and training. By 1956 7.8 million Americans had taken advantage of this program. This increased their level of education and the income for millions of families. With more income, came increased spending. There was more money available for necessities and discretionary spending on their families and ultimately in acquiring and maintaining pets.

The second key feature was VA Home Loans. This provided low interest, zero down payment home loans for servicemen. The terms were even more favorable for new construction compared to existing housing. This encouraged millions of families to move out of urban housing into new housing. There was a boom in new construction and the result was a new living space – the suburbs. These were planned communities with schools and public works in place. The growth was truly explosive as some builders were completing as many as 30 houses a day. The communities were near Urban areas but they became self-sufficient from the Urban “core”, both as a place of work and a place of dwelling. This was a new way of living for Americans, with more space and convenience.

Homeownership in the U.S. reached its low point of the 20^th century in 1940 at 43.5% of households. By 1960 it had reached 60%. It continued to climb, reaching a peak of 68% in 2004. It remained basically stable at or near this level until the economic crash. Since then it has fallen and stood at 62.3% in 2015. (In 2015, Homeowners accounted for 82.6% of Total Pet $)

Space that you own and control is a key factor in pet ownership. The Suburban environment had an additional benefit ….  a yard – more room for pets. Also remember that years ago most rental properties had a simple rule – no pets. This only changed when landlords had to respond to the pressure from the high percentage of the population who own pets.

Now, let’s take it down to a personal level. My Mom and Dad were both of the Greatest Generation, born in the early 1920’s. They met, married and ultimately lived in Kansas City, Kansas. My Dad served in the Army in WW II, fighting island to island in the Pacific Theater until he was “knocked out action” and sent home to recuperate. My Mom fought on the “Home-front”, including working in a defense plant, where she used her nimble fingers to install flight instruments in PBY “Flying Boats”.

My brother Jacque was born in July of 1945 so he is not a “true” Boomer. However, we shared the same experiences, the same values and usually the same “Boomer” ideas so he has earned an “honorary” membership in the club. I came along in December of 1948. In the early years my family moved (so I am told) through a succession of rental situations.

That all changed forever in 1951. Taking advantage of a VA Loan, my parents bought a home in a rural/suburban area. It was a small, 2 bedroom house, typical for the time. We lived near, but not in a housing tract and had a huge quarter acre lot. Ten years later we would move to a traditional suburban neighborhood, which gave my brother and I easier access to our friends but still with a big yard. This yard space was always an important factor in our interaction with our pets.

Our first pet came along shortly after moving into that first house in 1951. She was a small black and white “mixed breed” dog which came from a friend of my parents whose dog just had a litter. Apparently, I get credit for her name. I was only two at the time and had trouble pronouncing some letters. When I first saw her I tried to describe her as a “little bitty” puppy. What came out was “Jiddle Biddy”. This was shortened and her name became “Jid”.

Many of my earliest memories are playing with Jid. She was the first pet in our household but soon got company. Both my brother and I wanted more and we nagged our parents about it. We got Jid when I was 2 years old. By the time that I was 8 and in third grade, we had 2 dogs, 2 cats, a canary, a parakeet, a hamster and…a raccoon. I know that date because I remember taking Robbie, the raccoon to “show and tell” at school. The dogs and cats all came from friends. The canary was my Mom’s idea. Her mother always had one so she “grew up” with a singing canary in the house. The Parakeet and Hamster both came from Woolworth’s. The argument that my brother and I made for getting these pets was simple and effective. “All our friends have one.” The Raccoon was another story. My Dad accepted him from friends. His parents had been killed by hunters. I guess he was about 4 to 6 weeks old. I set up his home in a cardboard box with old clothes to sleep on and a ticking alarm clock to mimic his mother’s heartbeat. I hand fed him milk from a doll’s bottle that I borrowed from my cousin, Cindy. Raccoons are truly incredible. They are smart, mischievous and their paws are more like hands than paws so he was always getting into “trouble”.

Except for the birds and the hamster, all our pets lived outdoors. They had access to the basement in inclement weather but spent the vast majority of their time roaming the yard and neighborhood. This is where the dogs became “leaders of the pack”. It was a different time then. There was no air conditioning so everyone’s windows and front door were open when they were at home. We relied on screen doors to keep out the bugs and let in any breeze as a relief from the blistering Kansas summer heat. There were no leash laws and fewer fenced yards so dogs roamed free. We kids also were free. In the summer my brother and I ate breakfast then left to go play. We grabbed lunch at whoever’s house we were playing at and made it home for dinner. Our dogs were literally our constant companions. Wherever we went, they went. I remember that my Mother once said that she always knew where to find us. She just looked for our dogs lying in the front yard. When we played pick up baseball games, everybody’s dog was there, lying patiently on the sidelines.

The bond between Boomers and our pets, especially our dogs was forged in our formative years. My brother and I spent more waking hours with our dogs than we did with our parents, especially in the summer. They were always there both with us and for us, our constant friends and companions. They were ready to play at any time, to listen to our childhood rants when no adults would and always ready to extend a paw or a friendly lick when things weren’t going so well.

Is it any wonder that when we Boomers grew up that we welcomed the friends and companions of our youth into our households – not as pets, but as full-fledged members of the family. To do anything else would have been unnatural and go against everything that we learned growing up.

My adult life differs from the vast majority of other Boomers in that I have spent most of it “on the road”. I got involved in Consumer Products Sales and Marketing shortly after finishing college. As a travelling salesman, I first hit the highways then moved up to the airways. I estimate that I have put in over 750,000 miles driving for business and over 2.5 million air miles, in and out of 157 North American Airports…plus some foreign travel. I have spent Over 4000 nights in hotels. I am not bragging. I only mention this because Pet Parenting is a big responsibility. You need to be there for your Pet Children. They depend on you for both care and companionship, especially dogs.

Without exception, during the “family” years of my life, pets were always a welcome and integral part of the household. When I lived alone, usually they were not. Looking back, they would have helped but my decision was based on concern for their welfare, not mine. Why we have pets truly hit home to me a few years ago. I got home on a Friday night after a tough week on the road. No one was home so I collapsed on the couch. Licorice, my black, long haired feline companion came over, curled up on my lap and began to purr. I began to stroke him. Within seconds, I felt noticeably better; less tired, mentally and physically. Besides all the benefits of having Pets that HABRI has documented, the simple fact is that our relationship with our Pets just makes us feel better. This applies to everyone but I think we Boomers are even more susceptible because of those free, open years in our youth spent with our pet companions.

Well, that’s my pet connection story. What’s yours?

Spending on Pets, Food and Supplies in 2015 totaled $44.4B, an increase of $3.3B (8.2%) over 2014. In part 1 of this report we established who was doing most of the spending (60>80+%) in the major demographic categories. In this section, we will drill deeper into the data to determine:

• Which segments are performing best…and worst in each demographic category
• Which segments had the biggest gain or loss* in Spending $. (*or smallest gain)
• Some non-winners whose performance merits “Honorable Mention”
• The “Ultimate” Pet Products Spending Household in 2015

Performance

We’ll get started with the best “Performing” segments. To determine a segment’s performance we simply compare their share of the overall Pet Products Spending to their share of the total CU’s. (Financially independent Consumer Units) Example: If a segment spends 15% of all Pet Product $ and has 10% of all the CU’s, then their performance rating is 15/10 = 150% – very good. If their share of spending was only 5%, then their performance rating is 5/10 = 50% – not so good. This method puts every segment on a level playing field…then, may the best one win. All numbers in this report were calculated from data provided by the US BLS in their Consumer Expenditure Survey.

Here are the best and worst performers for 11 demographic categories, ranked by performance – from high to low.

Most of the “winners and losers” are the same as last year and largely due to the extraordinary lift in Food spending, all the winners match the Total Pet Spending honorees. Let’s look at some differences of note from the 2014 list.

• The average winning performance is 6% higher than last year and the average” loser” is 4% lower so the differences are becoming more extreme.
• The influence of the Baby Boomers’ upgrade in Food is apparent across several demographic categories
  • Age – Last year the 45>54 group won and was 8^th This year age has more impact – ranked 3^rd.
  • # in CU – Last year the winning number was 5+. This year it is 2
  • CU Composition – Last year it was all married couples with children. This year, only those with a child over 18.
• CU Composition – Although singles always have low performance, usually the lowest in this category goes to single parents because of their extreme financial pressures. But not in 2015.
• Age – In 2014 the lowest performers were the <25 group. In 2015 they achieved a greater share of Pet Products spending. The falling share of the over 75 group is not unexpected as their Pet Parenting days inevitably end.

Now let’s truly “Show you the money”. In the next chart, we’ll look at the biggest $ changes in spending from 2014. In most cases there are both positive and negative situations. However, in 2 categories every segment spent more in 2015.

In this chart, we truly see the Boomer’s influence on Pet Products spending and how 2015 was radically different from 2014. Not only are there new winners and losers in virtually every category, but in many cases they just switched positions. 2015’s winner was 2014’s loser and vice versa. We’ll take a look at one demographic category at a time.

• Age – This category had the biggest influence of any category. In 2014 it was ranked 7^th.
  • Winner – 55>74 yrs – Products Spending: $19.85B; Up $5.6B (+39.3%)    
    • 2014: 25>34 yrs
  • Loser – 25>44 yrs – Products Spending: $12.16B; Down $2.16B (-16.8%)
    • 2014: 45>54 yrs
  • Comment: This category most shows the influence of the Boomers since they are all in the winning segment. The 25>44 yr age group is very value conscious since they are at the peak of their family responsibilities. It appears that the 25>34 group were the first to upgrade their Pet Food in 2014, then backed off in 2015…perhaps price?
• Education – Pet Parents are widespread across all education levels. You can see that from the 2014 winner.
  • Winner – College Graduates – Products Spending: $22.52B; Up $4.25B (+23.2%)
    • 2014: Less than College grad
  • Loser – High School Graduates or less – Products Spending: $8.45B; Down 2.16B (-20.4%) 
    • 2014: Advanced Degrees
  • Comment – In 2014 all Education segments had gains. In 2015 Education level seemed to truly matter. Perhaps the value upgrading to the nutritionally superior but higher priced foods was more apparent. With generally lower income, the big drop in the less educated group could have been a result of increased financial pressures.
• # in CU – In 2014 all CU sizes had an increase in Pet Products Spending. This was not true in 2015.
  • Winner – 2 People – Products Spending: $18.57B; Up $3.87B (+26.4%)
    • 2014: 3+ People
  • Loser – 4+ People – Products Spending: $9.82B; Down $1.66B (-14.5%)
    • 2014: 2 People
  • Comment: In 2014, more people meant more spending. In 2015 it was the opposite story. Only 2 or 3 person CU’s had an increase. Spending fell slightly for 1 person CU’s, dropped further for 4 people, then fell precipitously at 5. Financial pressures are once again the likely cause for the spending decrease in the larger CUs. Of note, a 2 person CU is very common in the older age groups and in the under 25.
• # Earners – Usually more earners means a higher income and more Spending.
  • Winner – 2 Earners – Products Spending: $18.03B; Up $3.7B (+25.8%)
    • 2014: 2+ in CU w/1 Earner
  • Loser – 2+ in CU with 1 Earner – Products Spending: $8.88B; Down $2.3B (-20.6%)
    • 2014: 2 Earners
  • Comment – In this category we are seeing the impact of 2 trends. The 2014 lift in Food and subsequent drop in 2015 due to financial pressure by the 25>34 yr olds and the Boomer Food upgrade in 2015. Note: In the 25>34 age group one person often suspends employment for a time to devote themselves to child care.
• CU Composition – You will see a strong interrelationship between this group and the # Earners and Age groups.
  • Winner – Married Couple Only – $14.07; Up $3.42B (+32.2%)
    • 2014: Married Couple w/Children
  • Loser – Married, with all children <18 – $7.46B; Down $1.9B (-20.3%) 
    • 2014: Married Couple Only
  • Comment – The Married Couple only group tends to be under 25 or over 55. Both of these groups had a big lift from upgrading Food in 2015. Married w/children reflects the 2015 pull back in Food $ from the 25>34 group.
• Area Type – All Urban includes Center City and Suburban areas.
  • Winner – All Urban – Products Spending: $38.06B; Up $3.32B (+9.5%)
    • 2014: Rural (Pop. <2500)
  • Loser – Rural – Products Spending: $6.63B; Up $0.01B (0.1%)
    • 2014: Suburbs
  • Comment – All areas had an increase. The $ increase in All Urban was equally divided between city & suburbs.
• Race/Ethnic – The vast majority of Spending comes from the White, Not Hispanic group.
  • Winner – White, Not Hispanic – Products Spending: $37.78B; Up $3.13B (+8.8%)
    • 2014: White. Not Hispanic
  • Loser – African American – Products Spending: $1.54B; Down $0.04B (-2.5%)
    • 2014: African Americans
  • Comment – There is some good news. African Americans had the only decrease and it was relatively small.
• Income – Increasing Income generally increases spending…but not always.
  • Winner – Over $100K – Products Spending: $16.48B; Up $2.89B (+21.3%)
    • 2014: Over $70K
  • Loser – $70 to $99K – Products Spending: $6.94B; Down $0.68B (-8.9%) 
    • 2014: Under $30K
  • Comment – Most, but not all of the increase came from over $100K. The income of the $70>$99K group is all above the national average. However, it was the only segment with a decrease in spending.
• Region – Regions vary in size and demographics like race/ethnicity and income. Plus, the South is growing rapidly.
  • Winner – West – Products Spending: $11.91B; Up $2.65B (+28.6%)
    • 2014: Midwest
  • Loser – Midwest – Products Spending: $9.7B; Down $0.96B (-9.0%)
    • 2014: West
  • Comment – All regions had a lift in Food, especially the West and South. The West also spent more on Supplies which made them #1. The Midwest was driven down by a big decrease in Supplies after a big increase in 2014.
• Housing – Homeowners dominate, but every group increased spending for the second consecutive year.
  • Winner – Homeowner, w/No Mtge – Spending: $12.25B; Up $2.24B (+21.8%)
    • 2014: Homeowner w/Mtge
  • Loser – Renter – Products Spending: $8.69B; Up $0.49B (+6.0%)
    • 2014: Renter
  • Comment – Homeowners with No Mortgage are usually older and many are retired. The lift in spending by Renters was smaller than in 2014 but they also were the only segment with an increase in Supplies.
• Occupation – Pet Parents are widespread across occupations. Spending depends more on income than occupation.
  • Winner – Mgrs & Professionals – Products Spending: $13.03B; Up $2.12B (+19.4%)
    • 2014: Self-employed
  • Loser – Operators & Laborers – Products Spending: $2.35B; Down $0.06B (-2.4%)
    • 2014: Tech/Sales/Clerical
  • Comment – Mgrs & Professionals are usually near the top in Spending. In 2015, they were the only segment with an increase in both Food & Supplies. Retired & Self Employed also spent significantly more. All Wage & Salary Earners spent more on Food. The overall decrease by Operators/Laborers was due to a big drop in Supplies.

We’ve now seen the best overall performers and the “winners” and “losers” in terms of increase/decrease in Pet Product 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. They don’t win an award but they deserve…

Honorable Mention

• Age – <25 yrs – Products Spending: $1.31B; Up $0.4B (+42.3%)
  • Comment – This small group is just getting started with life and Pet Parenting. Their percentage of increase was more than the 55>74 age group and second only to the 55>64, all “Boomer” segment. They had a significant increase in the average CU spending for both Food and Supplies so they are adding pets and even buying upgraded Food. The only reason that their increase in $ wasn’t more is that there was a 9% drop in # of CU’s.
• Occupation – Retired – Products Spending: $7.7B; Up $1.45B (+23.2%)
  • Comment – Income is a big factor in spending but not the only factor. This lower income group is showing a lifetime commitment to their companion animals.
• Type of Area – Center City – Products Spending: $9.91B; Up $1.67B (+20.3%)
  • Comment- Usually the weakest performer of any they segment in this category, they had by far the biggest percentage increase and actually “nosed out” the Suburbs by $0.03B to also have the biggest increase in $.
• CU Composition – Single Parents- Products Spending: $1.6B; Up $0.25B (+18.5%)
  • Comment – This segment has strong financial pressures and invariably is last in performance – share of spending vs share of CU’s, but that was not the case in 2015. An increase in Food $ allowed them to slip past Single CU’s.
• Income – $50>$69K – Product Spending: $7.03B; Up $0.8B (+12.9%)
  • Comment – The income for this segment is below the national average but it still performed very well. In fact the under $70K group also showed an increase. Yet another argument that pet spending is not just about income.

Summary

My earlier analysis of the Demographic factors in Pet Products spending indicated that there were 3 major factors behind the $3.3B increase in spending.

1. Plus: The Baby Boomers upgraded their Food and increased their Food spending by $5.8B.
2. Minus: Supplies Spending fell almost across the board – down $2.1B
3. Minus: The 25>34 yrs age group upgraded their Food in 2014 but rolled back in 2015 – Down $1.02B

This in depth Demographic view strongly supports these assertions especially in the categories of Age, # in CU, CU Composition, Housing, Income and Occupation. In fact, the list should be expanded to include the 35>44 age segment as a Minus: (-$1.04B) and the under 25 age group as a Plus: Up (42.3%). The underlying reasons are a mixture of “financial pressure” for the decrease and “commitment to their companion animals” for the increase. The 25>44 age group are building careers, buying houses and taking care of most of the under 18 children in America. Their income is growing but not as fast as their responsibilities. On the other hand, the Boomers’ children have generally left the nest and now they can focus even more of their attention on their Pet family…and whatever they need, they get. The value of the new high quality foods caught their attention. They read and appreciated the facts and said “count me in”. However, they did cut back on spending in other segments because Food was their top priority. There was another significant positive move…but from the other end of the Age Spectrum. The Under 25 group stepped up with a radical increase in spending – adding pets and opting for high quality food. This bodes well for the future of the Pet Industry.

AND NOW…FINALLY, WHAT YOU HAVE ALL BEEN WAITING FOR…THE ULTIMATE PET PRODUCTS CONSUMER UNIT

The “Ultimate” Pet Products Spending Consumer Unit consists of 3 people – a married couple with an 18+ year old child, still living at home. Mom and Dad are in the 55 to 64 age range. They are White, but not of Hispanic origin. At least one of the Parents has an advanced College Degree. Everyone works in the H/H. Mom and Dad have their own business but their child also works, at least part time. They’re doing very well with a total Household income in excess of $150K. They own their home or to be more accurate, share ownership with the bank. They live in a rural area (under 2500 pop.) in the West, but it is adjacent to a good sized metropolitan area. This gives them plenty of space for their companion animals, but they are still close enough to commute to the City for business, shopping and entertainment – the benefits of the Urban environment…We all wish that there were more of them.

(↓Here are some CU Spending Fun Facts↓)

That “wraps it up” for this part of the report. In the final segment we “drill even deeper”- comparing Food to Supplies.

Over 88% of the $67.75B that we spent on our companion animals in 2015 was done by 69.9% of the 128.4 million financially independent Consumer Units. These “majority” CU’s are White, Not Hispanic. That means that the 38.4 million CU’s – 30.1%, which are Racial or Ethnic minorities, generated less than 12% of Total Pet Spending.

In our earlier demographic analyses, we noted specific instances of minority “under performance”. In this report, we will drill deeper to get more specifics on the Pet Spending by Minority Groups – Hispanics (All Races), African Americans and Asians. The U.S. is growing more ethnically diverse every day so this is a situation and an opportunity which needs to be investigated.

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

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

• The White, Not Hispanic group also includes Native Americans and Pacific Islanders.
• 2015 is the first year that the White, Not Hispanic group fell below 70% of the total CU’s
• Asian share of CU’s was down slightly.
• The biggest growth in number of CU’s came from Whites, although it was only 4K more than Total Minorities.
• African Americans are increasing at a rate more than double the White Population.
• The Hispanic growth is spectacular. Hispanic CU’s are increasing 3½ times faster than Whites.

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

• CU Size – Hispanics have by far the largest CU’s, 30+% higher than average. However, in 2015, smaller CU’s, 2-3 people, generated the most spending and had the biggest increase largely due to the Food Upgrade by the Boomers.
• # Children under 18 – In 2014, CU’s with more than 1 child bought the most pet products. In 2015, it was the older age groups with a child over 18. Note: With twice as many children per CU than Whites, the Hispanics are sure to gain in share of CU’s, even without immigration.
• # Earners– It is more likely that all the adults work in a Hispanic family. With twice as many kids, this could be tough.
• Homeownership – Homeowners account for 80+% of all Pet Spending. The percentage of Hispanics and African Americans that own homes is 40% less than Whites. Both groups are also twice as likely to live in a Center City than in the suburbs. Asians are also likely to be Center City dwellers. The rate of pet ownership is lower in Center Cities.
• Education was also an important factor in 2015 spending, especially regarding the Food Upgrade and the Veterinary segment. The Asians are the leaders, while Hispanics have the lowest percentage of after High School education.

Next, we’ll compare each to the National Avg in Income, Spending, Pet Spending and Pet Share of Total $pending.

CU National Averages: Income – $69,627; Total Spending – $55,978;

Pet Spending – $528.17; Pet Share – 0.944%

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

It’s time to look at actual Dollars Spent. We’ll review the spending on Total Pet and each industry segment in terms of share of sales as well as a 3 year history of each of the Racial/Ethnic Minority segments.

In the graph showing market share of Total Pet, as well as those that follow, the overwhelming dominance of White Americans in terms of spending on their pets is all too apparent.

• Performance = Share of Spending/Share CU’s: Hispanic – 47%; Asians – 45%; African Americans – 29%
  • This reinforces the probable low level of Pet ownership among African Americans.
  • With the exception of a big drop in Total Pet Spending by African Americans, all other groups showed an increase.
  • While the $ amount is small, the 18.7% increase by Asians could be significant. We’ll see where it comes from.
• Spending History – From 2013 to 2015, U.S. Total Pet Spending increased $10.0B (+ 17.3%). During the same period, Minority Spending fell $0.75B (-8.6%).
  • Overall, Total Minority groups showed a decline each year.
  • African Americans had a big increase in 2014, but then “gave it back” in 2015. They are basically even with 2013.
  • Hispanics had a huge decline in 2014, but made a partial comeback in 2015. However, it was not enough. They are $0.89B (17.7%) down from 2013 spending.
  • Asian spending dipped in 2014 but bounced back in 2015. They are 10% “ahead” of their 2013 total.
  • Without the two massive drops, Hispanic in 2014 and African Americans in 2015, the numbers would be positive.

Bottom Line: Pet Spending is not making progress with Minority Groups. Now, the individual segments…First Food.

• Performance = Share of Spending/Share CU’s: Hispanics – 49.0%; Asians – 46.1%; African Americans – 27.0%.
• All groups had an increase in Pet Food Spending in 2015. The increases by Asians and African Americans were especially significant. The Asians increase may be a food upgrade, but both are maintaining and possibly adding pets.
• Spending History – From 2013 to 2015, U.S. Pet Food Spending increased $6.54B (+ 28.5%). During the same period, Minority Spending increased $0.13B (+3.9%)
  • Asians are the only group with an increase in both years.
  • This “need” segment doesn’t reflect the overall U.S. growth but it is at least relatively stable. Now, Supplies.

• Performance = Share of Spending/Share CU’s: Hispanics – 69.4%; Asians – 38.0%; African Americans – 28.0%.
  • Hispanics were one of the few Demographic segments in any category to have an increase in Supplies spending.
  • The decreases from Asians and African Americans were small in $, but a 20% decrease is still significant.
• Spending History – From 2013 to 2015, U.S. Pet Supplies Spending fell $0.07B (- 0.5%) – Essentially Flat. During the same period, Minority Spending increased $0.16B (+8.2%)
  • Hispanics’ consistent growth in Supplies in conjunction with stable Food Spending is a good Pet Parenting sign.
  • The Supplies Segment is largely “discretionary” so spending is often impacted in groups with financial pressures.
  • Asians have the least income pressure so it makes a small spending cut due to a Food Upgrade more plausible.

Now, we will turn to the Service Segments. We’ll begin Non-Vet Pet Services.

• Performance = Share of Spending/Share CU’s: Hispanics – 49.3%; Asians – 45.3%; African Americans – 26.7%.
  • This segment is generally discretionary spending so income and convenience generally matter.
  • For the Hispanics, with big families and everyone working, the convenience of services becomes a real “need”.
• Spending History – From 2013 to 2015, U.S. Pet Services Spending increased $0.98B (+ 18.6%). During the same period, Minority Spending increased $0.03B (+4.2%)
  • Growth is minimal and considering the increase in CU’s, all groups are losing market share. Now, Veterinary.

• Performance = Share of Spending/Share CU’s: Asians – 50.9%; African Americans – 32.2%; Hispanics – 23.4%.
  • Income and education are big factors in Veterinary Spending. Whites and Asians had the only increases.
• Spending History – From 2013 to 2015, U.S. Veterinary Spending rose $2.56B (+17.6%). During the same period, Minority Spending decreased $1.05B (-39.6%).
  • This Demographic category illustrates the impact of the ongoing high inflation in this segment, especially among the Hispanic group. Financial pressures forced them to make a choice. They chose to spend their Pet $ on Food, Supplies and even Services at the expense of Veterinary.

Comments

One thing that we should always keep in mind is that all these numbers are averages. These Racial/Ethnic Groups are made up of individuals and are represented in virtually all Demographic Category Segments. Examples: 9% of all people with a Master’s Degree or higher are African Americans. 5% of the CU’s with an income above $200K are Hispanic.

However, overall, these rapidly growing racial/ethnic groups are not keeping pace with U.S. Pet Spending. In fact, they are losing ground…at an alarming rate. Consider this: Minority spending on Pet Products, just Food & Supplies, went from $5.3B in 2013 to $5.6B in 2015 – a $0.3B (5.0%) increase. At the same time, the number of minority CU’s increased 4.9%. So, all of this increase essentially came just from having more CU’s. At the same time, the White segment had a $6.2B (19.0%) spending increase with only a 1.1% increase in CU’s. The Result: The Total Minority Group’s market share of Pet Products spending fell 10% in just two years, even with a 5% increase in spending.

Asian Americans come from a variety of cultures, each with their own history regarding Pet Ownership. They certainly have the income and recent increases in Pet Food spending indicate the number of Asian Pet Parents may be growing.

Hispanics and African Americans are the two fastest growing groups and they share certain key characteristics. Their income is 20-30% below the National Average. Homeownership is 25-33% less. They are more likely to live in Center City areas. All these factors tend to reduce Pet Spending and ownership. The African American group has the lowest numbers in these measurements and a low percentage of Pet Households. The Hispanic group has another characteristic which is relevant to spending – kids. Having twice as many children under 18 per CU can only add to their financial pressures.

Most of the factors reducing Pet Spending are societal rather than just industry issues. However, the Pet Parenting desire still appears to be strong in these groups. We see it in Hispanic Spending on Food and especially Supplies. Also, despite having the lowest average income, African Americans still spend more on Veterinary than any other minority. The Pet Industry should recognize the situation as both a challenge and an opportunity. We need to do what we can to encourage and facilitate Pet Parenting in these groups.  It will pay “dividends” to everyone.