Spending, CPI, demographics of overall market

2022 U.S. PET FOOD SPENDING $38.69B…Up ↑$4.29B

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After the record increase in 2021, Total Pet spending grew slightly to $102.71B, up $2.73B (+2.7%). Pet Food spending had double digit growth while Veterinary and Supplies $ fell after their record increases in 2021. The big news was Services. They had a record increase of $3.26B and 2 consecutive years of 30+% growth. However, a new factor affected 2022 Pet spending – strong inflation in every segment. Here are the 2022 spending specifics

  • Pet Food – $38.69B; Up $4.29B (+12.5%)
  • Pets & Supplies – $21.94B; Down $1.86B (-7.8%)
  • Veterinary – $29.71B; Down $2.95B (-9.0%)
  • Pet Services – $12.36B; Up $3.26B (+35.8%)

The industry truly is a “sum” of its integral segments, and each segment has very specific and often very different buying behavior from the many consumer demographic segments. For this reason, we’re going to analyze each of the industry segments first. This will put the final analysis of Total Pet’s 2022 Spending into better perspective. Note: The numbers in this report come from or are calculated by using data from the current and past US BLS Consumer Expenditure Surveys. In 2022, this was gathered by the U.S. Census Bureau from over 42,000 interviews and spending diaries. The final data was then compiled and published by the US BLS. All inflation numbers are also provided by the US BLS.

We will start with the largest Segment, Pet Food (and Treats). In 2022 Pet Food Spending totaled $38.69B in the U.S., a $4.29B (+12.5%) increase from 2021. Pet Food inflation was 10.2% in 2022 so 82% of the lift came from higher prices. In earlier research we discovered a distinct, long-term pattern in Pet Food Spending. In 2018 we broke the pattern due to outside influences – 1st the FDA warning, then with COVID in 2020. Here is Pet Food Spending since 1997 in full Retail Dollars and adjusted for inflation. Blue highlight indicates  plateau year and a red outline is a spending drop.

The pattern began in 1997. Retail Pet Food Spending increases for 2 consecutive years then reaches a plateau year or even drops. There was a notable exception in the period from 2006 to 2010. During this time, there were two traumas which directly impacted the Pet Food Retail market. The first was the Melamine recall, which resulted in radically increased prices as consumers insisted on made in USA products with all USA ingredients. The second affected everyone – the great Recession in 2009. This was the first time that annual U.S. retail spending had declined since 1956. The net result was that the plateau period was extended to include both 2009 and 2010.

For 20 years, Pet Food was driven by short term trends. A new trend catches the consumers’ attention and grows …for 2 years. Then sales plateau or even drop…and move to the next “must have”. After 2014, the changes  became bigger and the situation got more complex due to a number of factors starting with the move to high priced super premium foods, but including increased competition, especially from the internet, and behavioral changes, like increased value shopping. In 2018, outside influences came into prominence. The first was the FDA warning on Grain Free dog food. This caused many Pet Parents to back away from certain foods. When the warning was declared bogus, the Food segment began to recover. Then came COVID. Fear of possible shortages caused some groups to binge buy food. That ended and spending dipped in 2021. It turned up again in 2022. However, it may have been largely due to 10.2% inflation. Of note: Considering inflation, only 45% of the 97>22 growth is real. Now, let’s take a closer look at spending since 2014.

First, some specifics behind the $4.29B (+12.5%) increase to $38.69B. In 2022, the average U.S. Household spent a total of $288.75 on Pet Food. This was an +11.9% increase from the $258.09 spent in 2021, which doesn’t exactly “add up” to the +12.5% increase in total Food Spending. With additional data provided from the US BLS, here is what happened.

  • 0.5% more U.S. CUs
  • Spent 6.5% more $
  • 5.1% more often

By the way, if 68% of U.S. CUs are pet parents then their annual Pet Food Spending is $424.63. Here’s a recent rolling history.

2014 marks the beginning of the Super Premium era. It began in the 2nd half of 2014 with the 25>34-year-old Millennials making the 1st move. In 2015 the Baby Boomers got on board in a big way, producing a $5.42B increase in spending, the biggest lift in history at the time. 2016 saw a spending change that was accelerated by the high prices of Super Premium Pet Foods. After consumers upgraded to a more expensive pet food, their #1 priority became, “Where can I buy it for less?” Value Shopping on the internet was a major contributing factor in the big spending drop in 2016.

2017 was an up year which should have been due to a “must have” trend. However, a closer look at the data showed that the $4B increase in Pet Food spending in 2017 came not from a new trend but from a deeper demographic penetration of Super Premium foods. Value shopping in a highly competitive market, especially on the internet, had made Super Premium pet foods more accessible to a broad swath of consumers.

Like Pet Food, human behavior has changed over the years in regard to our pets. In the 90’s, Pet Owners became Pet Parents. Then, after 2000 we began truly humanizing our pets, which is very accurately reflected in the evolution of Pet Food. We became more focused on fulfilling the health needs of our pets, beginning with the first move to premium foods in 2004. This radically increased after the Melamine scare in 2007. Now consumers read pet food labels, research ingredients and expect their pet foods to meet the same quality standards as the best human foods. This was very evident in 2018. It should have been a year of increased spending but the consumers’ reaction to the FDA grain free warning threw the pattern out the window. In 2019 the warning lost credibility. Pet Food spending stabilized in the 1st half of the year and then grew by $2.3B in the 2nd  half. Some Pet Parents began to return to the topline Super Premium Foods while others opted for even more expensive varieties. Also, new groups got on board the Super Premium Express.

After the 2019 recovery came the pandemic of 2020. There is nothing more necessary to a Pet Parent than pet food. This spurred binge buying, especially in the 1st half of the year and drove the biggest annual spending increase in history. However, binge buying doesn’t increase usage and it causes an overstock in home supply. In 2021, Pets “ate down” the extra food so spending fell. Another factor was the ongoing strong search for value & convenience which continues to drive many consumers online. In 2022, Pet Food spending returned to a more normal pattern. There were 0.5% more CUs. They spent a little more and bought a little more frequently. Inflation was a big factor in the spending increase in transactions. The increase in frequency came from more regularly scheduled deliveries and in an effort to lower the transaction price due to skyrocketing inflation, some pet parents also downsized their purchases but bought more often.

The growth of Pet Food spending since 2014 reflects the rise of Super Premium but also another trend – the spectacular increase in the number and use of Pet Medications and Supplements, which are often produced in the form of treats. Together, the strength of Pet Food and these product subcategories reflect the Pet Parents’ absolute number 1 priority –

the health, wellbeing and safety of their Pet Children, which starts with the quality of their food.

Now let’s look at some specific 2022 Pet Food Spending Demographics. The first is income. Prior to 2014 it was less of a factor in Food spending. However, the move to Super Premium has brought it more to the forefront. In 2015 the spending of the over $70K group exceeded the <$70K for the first time. In 2022, <$70K had a bigger lift but was still only 65% of the $70K> spending. The $30>70K group had the biggest increase and $70>100K had the only decrease. In 2015, the 50/50 divide on Pet Food spending was about $70K. By 2020, it was up to $107K, breaking the $100K barrier for the first time. In 2021 it fell to $92K and is down to $91K in 2022. That’s about 3% less than the average CU income but 22% more than the median income. Higher income is still important in Pet Food spending. Although all incomes over $40K have 100+% performance (Share of $/Share of CUs) the $150K> group is by far the best at 159%. The chart below shows annual spending for major income groups from 2017>2022. This should put the 2022 numbers into better perspective.

In 2022, only one group spent less on Food. 2017 was the only year since 2015 with spending growth in every major income group. Since 2017, we have seen the major impact on various groups by outside influences. In mid-2018 it was the FDA grain free warning. In 2020 it was the pandemic and in 2022 it was +10.2% inflation. The high inflation means that any demographic segment with an increase below 10.2% actually bought less Pet Food in 2022.

2022 National: $288.75 per CU (+11.9%); $38.69B; Up $4.29B (+12.5%);  2017>2022: Up $7.58B (+24.3%); Avg: +4.4%

The biggest lift came from the $30>70K group, which is surprising. The only drop in spending was by the middle income $70>100K group. This comes after their big lift in 2021. The $100>150K group is back to normal after their 2020 binge.

Here are 2022 specifics:

  • Under $30K: (23.8% of CU’s) – $158.24 per CU (+11.0%) – $4.75B – Up $0.08B (+1.7%). Obviously, this group is very price sensitive. The number of CU’s was down 6.4% in 2022 after a small increase in 2021. Their CU count is down 17.0% from 2015. Their spending lift in 2022 was primarily due to higher prices. The average CU bought a little more Pet Food but paid a lot more. They are still fully committed to their Pets. This is evidenced by the fact that they spend 1.00% of their Total CU expenditures on their pets, including 0.45% on Pet Food. The national averages are: Total: 1.05%; Food: 0.40%.
  • $30K>$70K: (28.9% of CU’s) – $260.52 per CU (+34.0%) – $10.54B – Up $2.52B (+31.4%). They are also very price sensitive so inflation had an impact. Their average income was up 0.8% while the national average increased by 7.5%. They had a 2.2% decrease in the number of CUs but a 4.6% increase in CU spending. However, their Pet Food spending was far stronger with a huge increase by all segments. The $30>39K group lost 7% in CUs but increased CU spending by 31.7% and $ +$0.44B (+21.7%). The $40>49K group fell -1.8% in numbers but they increased their CU spending by 33.7% and $ grew by +$0.84B (+40.5%). $50>69K gained 0.9% in CUs and spent 34.8% more per CU on Pet Food. This pushed their Total Pet Food Spending up $1.23B (+31.5%). This low-income group is very committed to their pets and quality food. They spent 1.09% of total expenditures on their pets and 0.5% on Pet Food.
  • $70K>$100K: (14.1% of CU’s) – $302.80 per CU (-3.5%) – $5.81B – Down $0.40B (-6.5%). The only $ drop. This group has a regular up/down spending pattern. They committed to Super Premium food in 2017 but they became very sensitive to outside influences – the FDA warning in 2018, COVID in 2020 and now inflation in 2022. They have big family responsibilities and are under considerable monetary pressure. We’ll see if they make a comeback in 2023.
  • $100>150K (15.5% of CU’s) – $325.92 per CU (+12.5%) – $6.71B – Up $1.25B (+23.0%). This group was the driver in the binge buying of Food in 2020. It was pure emotion, but they had the $ to do it. In 2021, they “ate down” the excess inventory but the drop was $0.46B more than the 2020 lift. In 2022, mostly thanks to inflation and a 9.6% increase in CU’s they had a 23% increase in $. Their Pet Food spending is now 13.3% above pre-pandemic 2019.
  • $150K> (17.7% of CU’s) – $457.91 per CU (-5.8%) – $10.89B – Up $0.83B (+8.3%). Their Pet Food CU spending fell by -5.8% after a 68.6% lift in 21 but a 12.4% increase in CUs pushed their total $ up 8.3%. However, when you factor inflation into the numbers, they actually bought 1.7% less pet food. Inflation has made comparisons more complex. In performance, share of $/share of CUs, their score of 159.3% is the clear winner. Higher income is still important.

The pandemic certainly caused turmoil. First, the fear-based binge buy which caused a record increase in 2020. This couldn’t be repeated so spending fell in 2021. Spending returned to more normal, positive behavior in 2022 as only the $70>100K group spent less. The biggest lifts came from $30>70K and groups over $100K. Inflation was high at 10.2% but the welfare of their Pet children mattered more than the price so most Pet Parents just paid more. It is significant in this year of record inflation that the 50/50 income divide in Pet Food $ still fell slightly from $92K to $91K.

Now, Spending by Age Group…

2022 National: $288.75 per CU (+11.9%); $38.69B; Up $4.29B (+12.5%);  2017>2022 – Up $7.58B (+24.3%); Avg: +4.4%

The 25>34 yr-old and 75+ yr-old groups spent less, while all other age groups spent more.

  • 55>64 (18.2% of CU’s) – $359.76 per CU (+30.4%) – $6.75B – Up $1.86B (+27.5%). This group has been at the forefront of recent major spending swings. In 2015 they upgraded to Super Premium. In 2016 they shopped for a better price. In 2017 they led a deeper penetration of the upgrade. In 2018 they had a -$3.5B reaction to the FDA warning. They began to recover in 2019 but then came 2020, which saw a huge lift in spending. There were 3 major factors. First was panic, binge buying due to pandemic. They also were still recovering from the FDA warning. Finally, the pandemic caused the loss of over 2 million <25 CUs. Many of them moved back with their parents bringing their pets with them. In 2021, there was a big drop in $ as they “ate up” the “panic” extra stock and many of their kids moved out again. 2022 brought another big lift as 2.3% fewer CUs spent 22.8% more $, 6.2% more often.
  • 45>54 (16.9% of CU’s) – $353.45 per CU (+20.8%) – $7.87B – Up $1.29B (+19.6%). This group is #1 in income and total CU expenditures. Up until 2015 they were #1 in Pet Food spending. They bought premium food but didn’t “buy in” to Super Premium until 2017. They were negatively impacted by the FDA warning, but they rebounded stronger than any other group. In 2020, their spending dropped significantly. It is likely that much of the decrease was due to value shopping on the internet. In 2021, they opted for even more expensive food, spending 24% more on each purchase. In 2022 they had 0.9% fewer CUs, but spent 12.8% more, 7.0% more often. The result: +19.6% more $.
  • 65>74 (16.2% of CU’s) – $314.66 per CU (+7.8%) – $6.64B – Up $0.51B (+8.4%). This group is all Baby Boomers. They are starting to retire but many are still working (0.7 per CU). Their Pets are a major priority. They spent 1.26% of their total CU expenditures on their pets and 0.5% on Pet Food, the highest percentages of any group. They are also the only group to spend more on Pet Food every year since 2016. In 2022, 0.5% more CUs spent 2.8% more $, 4.9% more often. Inflation affected them as an 8.4% increase was really a -1.7% decrease in the amount purchased.
  • 35<44 (17.0% of CU’s) – $302.24 per CU (+20.9%) – $7.18B – Up $1.56B (+27.6%). They are 2nd in income and CU spending but have the biggest families. Their spending pattern matches the 45>54 yr-olds but is usually less volatile. 5.5% more CUs spent 17.1% more $, 3.3% more often. They had the 2nd biggest $ lift and are now 3rd in Food $.
  • 25>34 (15.6% of CU’s) – $224.30 per CU (-0.5%) – $80B – Down $0.11B (-2.2%). In the early Super Premium years their spending pattern often foreshadowed the overall market for the following year. In pandemic 2020 they spent 22.3% more then essentially held their ground in 2021. In 2022, 1.7% fewer CUs spent 7.9% less $, 8.0% more often.
  • 75> (11.4% of CU’s) – $152.14 per CU (-41.8%) – $2.23B – Down $1.53B (-40.8%). Both the effort and the expense of Pet Parenting become issues as we reach 75+. High inflation affected them the most. They strongly moved to Super Premium Food in 2021. In 2022, many downgraded as 1.6% more CUs spent 41.8% less $, 0.2% more often.
  • <25 (4.7% of CU’s) – $198.10 per CU (+101.5%) – $1.37B – Up $0.72B (+108.6%). Many moved in with other adults or got married. They also added a lot of pets. This is apparent as 5.1% less CUs spent 109.6% more $, 4.4% more often.

In 2020 the 55>64 yr olds binge bought Pet Food. In 2021 their spending naturally plummeted, the only decrease by any age group. In 2022 we had high inflation. It affected everyone but only 25>34 and 75> spent less $ on Pet Food and only 3 groups bought less product (add 65>74 to the other 2). Quality pet food remains a high priority for Pet Parents.

Next, let’s take a look at some other key demographic “movers” in 2022 Pet Food Spending. The segments that are outlined in black “flipped” from 1st to last or vice versa from 2021. The red outline stayed the same.

The first thing that you notice is that the biggest increases are almost always radically larger than the biggest decreases. We should also note that whether you rent or own your home, you spent more on Pet Food in 2022 than in 2021. The lift was also widespread as 82% of 96 demographic segments spent more in 2022. These are good signs that Pet Food spending is doing well.

You also see that half of the 24 segments flipped from last to first or vice versa. Only 2 held their position from 2021. 7 winners flipped from last to 1st and 2 held their position. 5 losers flipped to last from 1st in 2021.

Most of the winners are the “usual suspects”:

  • Suburbs 2500>
  • White, Not Hispanic
  • 2 Earners
  • Homeowners, w/Mtge
  • Mgrs & Professionals
  • Gen X
  • 55>64
  • Married, Child 18>
  • $100>149K

There is only 1 surprise winner – High School Grads or Less

These winners indicate a return to more normal spending patterns but you should also consider that most have a higher income so they would be less impacted by strong inflation.

Among the losers, most of the segments are not unexpected. There are some that were obviously affected by  inflation:

  • No Earner
  • Retired
  • Born <1946
  • 75>
  • $70>99K.

There were a few surprises – Adv. College Degree, 2 People and Married Couple Only

The pandemic trauma may now be over. The $4.29B (+12.5%) increase was widespread across 82% of 96 demographic segments. However, 10.2% inflation is a new problem. The amount of Pet Food sold in 2022 was really only +2.2% from 2021 and only 59% of segments bought more. Pet Food spending is now up $7.5B from 2019, +24.0%, a growth rate of 7.4%, 40% more than the 5.3% from 2014>19. The downside is that 46% of that growth came from inflation…almost all in 2022. Real 19>22 growth: 4.1%. Inflation fell below 10% in August 2023. We’ll see what happens to prices & spending.

Retail Channel Monthly $ Update – July Final & August Advance

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Commodities prices rose in August and the cumulative effect of inflation on consumer spending is still being felt. The rate of sales increases is still slower than the decrease in inflation in a number of channels, which causes a drop in the amount of product sold. A recovery may have started but there is still a long road ahead, so we’ll continue to track the retail market with data from two reports provided by the Census Bureau and factor in the CPI from US BLS.

The Census Bureau Reports are the Monthly and the Advance Retail Sales Reports. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – about 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

We will begin with the Final Report for July and then go to the Advance Report for August. Our focus is comparing to last year but also 2021 and 2019. We’ll show both actual and the “real” change in $ as we factor inflation into the data.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports, and we’ll focus on Pet Relevant Channels.

The data will be presented in detailed charts to facilitate visual comparison between groups/channels. The charts will show 11 separate measurements. To save space they will be displayed in a stacked bar format for the channel charts.

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2022 and 2021.
    • Current Month Real change for 2023 vs 2022 and vs 2021 – % factoring in inflation
  • Current Ytd change – % & $ for 2023 vs 2022, 2021 and 2019.
    • Current Ytd Real change % for 2023 vs 2022, 2021 and 2019
  • Monthly & Ytd $ & CPIs for 22>23 and 21>23 which are targeted by channel will also be shown. (CPI Details are at the end of the report)

First, the July Final. 3 were down from June. However, all but Gas Stations were up vs 22, 21 & 19. When you consider inflation, the total number of drops vs 22 & 21 (10) was the same as June. Gas Stations are still really down vs 2019. The biggest change may be that Relevant Retail is again “really” up monthly vs 22. (All $ are Actual, Not Seasonally Adjusted)

The July Final is -$3.8B less than the Advance. Specifically, Restaurants: -$0.7B; Auto: -$0.7B; Gas Stations: -$0.2B; Relevant Retail: -$2.2B. Sales were up from June only in Restaurants & Gas Stations but actual sales for all but Gas Stations were positive in all measurements vs 22, 21 & 19. Strong deflation caused Gas Stations sales to again drop monthly & YTD vs 22. Vs 22 & 21, there were 10 “real” sales drops, 8 vs 21. Restaurants have the most growth and are the only group with all positives. Monthly real sales for Relevant Retail vs 22 are up but have been down in 15 of the last 17 months. Other real measurements vs 22 & 21 are negative. They are the top performer vs 2019 but only 48% of the growth is real.

Now, let’s see how some Key Pet Relevant channels did in July in the Stacked Bar Graph Format

Overall– 5 were up from June, but vs 22, 8 were up vs July and 10 YTD. 6 were “really” down monthly & Ytd. Vs 2021, 10 had increases but only 2 monthly & 3 Ytd were real. Vs 2019, Off/Gift/Souv & Disc Dept Strs were really down.

  • Building Material Stores – The pandemic focus on home has produced sales growth of 34.6% since 2019. Prices for the Bldg/Matl group have inflated 19.0% since 2021 which is having an impact. HomeCtr/Hdwe stores are down for the month & Ytd vs 22 but up vs 21 &19. Farm Stores are up in all measurements. However, both have all negative real numbers vs 2022 & 2021. Importantly, only 19.9% of their 19>23 lift was real. It was only this high because most of the lift came prior to the inflation wave. Avg 19>23 Growth: HomeCtr/Hdwe: 7.1%, Real: 1.1%; Farm: 11.3%, Real: 5.1%
  • Food & Drug – Both channels are truly essential. Except for the pandemic food binge buying, they tend to have smaller fluctuations in $. They have been very different in inflation and the situation just flipped as the Grocery rate is now 12% lower than Drug/Med products. Drug Stores are positive in all but real sales vs July 22 and 73% of their growth since 2019 is real. While the $ are up for Supermarkets their 2023 real sales are down vs 22 & 21 and just slightly positive vs 2019. Only 7% is real growth. Avg 19>23 Growth: Supermarkets: +6.3%, Real: +0.5%; Drug Stores: +5.4%, Real: +4.0%.
  • Sporting Goods Stores – They also benefited from the pandemic in that consumers turned to self-entertainment, especially sports & outdoor activities. Sales are down from June but are actually & really up vs 2022 and 2019. Vs 2021 the only increase is in actual $ vs July. Prices are still deflating -0.5%, a big change from +5.4% in 21>22 and +6.5% in 20>21. The result is that 59% of their 43.1% lift since 2019 is real. Their Avg 19>23 Growth Rate is: +9.4%; Real: +5.8%.
  • Gen Mdse Stores – Only $ stores were down vs June but actual sales vs 22, 21 & 19 were up for all but Disc Dept Stores vs July 22 & 21. In real sales vs 22 & 21 $/Value Stores had the only positives – vs July 22 & 21. Disc Dept Stores are the worst performer and are the only real negative vs 2019, -1.1%. The other channels average 35% In real growth. Avg 19>23 Growth: SupCtr/Club: 6.2%, Real: 2.3%; $/Value Strs: +6.7%, Real: +2.7%; Disc. Dept.: +2.4%, Real: -0.3%
  • Office, Gift & Souvenir Stores – Actual sales are up 4.6% from June but down from July 22. They were up in all other measurements vs 22, 21 & 19. Their real sales numbers are all negative including -7.3% Ytd vs 2019. Their recovery started late and their slow progress appears to have stalled in Jun>Jul. Avg Growth Rate: +0.8%, Real: -1.9%
  • Internet/Mail Order – Sales are up from June and above $100B again at $103.4B – another record for the month. All measurements are positive, but their growth is only 61% of their average since 2019. However, 79% of their 96% growth since 2019 is real. Avg Growth: +18.4%, Real: +15.2%. As expected, they are still by far the growth leaders since 2019.
  • A/O Miscellaneous – Pet Stores are 22>24% of total $. In May 2020 they began their recovery which reached a record level of $100B for the first time in 2021. In 2022 their sales dipped in January, July, Sept>Nov, rose in December, fell in Jan>Feb 23, turned up in Mar>May, then fell in June & July. However, all measurements vs 22, 21 & 19 are positive. They are still the % increase leader vs 2021 (barely) and 72% of their 55.8% growth since 2019 is real. Average 19>23 Growth: +11.7%, Real: +8.8%. They are still 2nd in growth since 2019 to the internet. Pet Stores are surely contributing.

Inflation remains an important factor in Retail. In actual $, 8 channels reported increases in sales vs 2022 and 10 vs 2021. When you factor in inflation, the number with any “real” growth drops to 5 vs 2022 & 2 vs 2021. Inflation has impacted sales increases. Vs 2022 July was a little better than June, but the lift was still only 50% of Jan/Feb. The impact is very visible at the retail channel level. Inflation grew in August. Let’s look at the impact in the August Advance Retail $ales.

Since 2019, we have seen the 2 biggest monthly drops in history but a lot of positives in the recovery. Total Retail sales reached $700B in a month for the 1st time and broke the $7T barrier in 2021. Relevant Retail was also strong as annual sales reached $4T in 2021 and all big groups set annual $ales records. In 2022 radical inflation was a big factor. First, this reduces the amount of product sold but not $ spent. Total Retail hit $8T and all groups again set new annual records in 2022. In 2023, sales got on an up/down rollercoaster. In July only 2 groups were up. In August, all but Restaurants were up. Except for Gas Stations, all actual sales are positive vs 22, 21 & 19. There is also some more good news. The groups have 20 “real” sales measurements vs 22 & 21. 13 are now positive. Relevant Retail’s real monthly sales vs 22 has been up for 2 straight months. Note: The lift vs 22 is up from July for Relevant & Total Retail but still far below Jan & Feb levels

Overall – Inflation Reality – Auto & Gas prices are still down vs 22. For Total & Relevant Retail, the rate was again below the sales lift. For Restaurants, inflation remains high, +6.5% but they are still the only group really positive vs 22 & 21. The biggest news is that monthly real sales for Relative Retail vs last year are positive again. That’s 3 of the last 4 months but only 3 of the last 18. Also, their Ytd Real sales are still down vs 2022 & 2021. They still have a ways to go.

Total Retail – Since June 2020, every month but April 23 has set a monthly sales record. December 22 $ were $748.9B, a new all-time record. Sales have been on a rollercoaster. They grew in May, fell in June & grew in July>Aug. Inflation is  only 1% but sales growth is still low. Sales are up 2.9% vs last year. That’s only 37% of their average 19>23 growth. Monthly real sales vs 21 are now positive but Ytd is still down and only 34% of the 19>23 growth is real. Inflation in Total Retail has radically slowed vs 2022 but we still see its cumulative impact. Avg 2019>23 Growth: +7.8%, Real: +2.9%.

Restaurants – They were hit hard by the pandemic and didn’t begin recovery until March 2021. However, they have had strong growth since then, setting an all-time monthly record of $91B in December and exceeding $1T in 2022 for the 1st time. They have the biggest increases vs 22, 21 & 19 and all real sales are positive. Inflation slowed to 6.5% from 7.1% last month but is still +14.9% vs 21 and +21.7% vs 19. 38.4% of their 40.6% growth since 19 is real but they remain 2nd in performance behind Relevant Retail. Recovery started late but inflation started early. Avg 2019>23 Growth: +8.9%, Real: +3.7%. They just account for 13.1% of Total Retail $, but their performance improves the overall retail numbers.

Auto (Motor Vehicle & Parts Dealers) – This group actively worked to overcome the stay-at-home attitude with great deals and a lot of advertising. They finished 2020 up 1% vs 2019 and hit a record $1.48T in 2021 but much of it was due to skyrocketing inflation. In 2022 sales got on a rollercoaster. Inflation started to drop mid-year, but it caused 4 down months in actual sales which are the only reported sales negatives by any big group in 2021>2022. This is bad but their real 2022 sales numbers were much worse, down -8.2% vs 2021 and -8.9% vs 2019. 2023 started off a little better in Jan>Feb, got worse in Mar>Apr, grew in May, fell in Jun>Jul, then grew in August. Only Ytd real sales vs 21 are negative. Prices vs 22 are -1.9% monthly & -1.4% Ytd. Only 5% of 19>23 growth is real. Avg 2019>23 Growth: +6.6%, Real: +0.4%.

Gas Stations – Gas Stations were also hit hard. If you stay home, you drive less and need less gas. This group started recovery in March 2021 and inflation began. Sales got on a rollercoaster in 2022 but reached a record $583B. Inflation started to slow in August and prices slightly deflated in Dec & Feb, strongly dropped in Mar>Jul to -20.2%. In August they turned up to -3.7%. However, they are still +21.5% vs 21. Deflation is a big factor in the monthly & Ytd sales drops vs 22. Real Ytd sales vs 22 are up slightly but still down vs 21 & 19.  Avg 2019>23 Growth: +6.3%, Real: -1.3%. The numbers show the cumulative impact of inflation and demonstrate how strong deflation can be both a positive and a negative.

Relevant Retail – Less Auto, Gas and Restaurants – They account for 60+% of Total Retail $ in a variety of channels, so they took many different paths through the pandemic. However, their only down month was April 2020, and they led the way in Total Retail’s recovery. Sales got on a roller coaster in 2022 but all months in 2022 set new records with December reaching a new all-time high, $481B, and an annual record of $4.81T. In 2023, Jan & Feb had normal drops then grew in March, starting another roller coaster. Sales fell in Jun>Jul but turned up in August. All actual sales are up vs 22, 21 & 19. Real sales are only down Ytd vs 22 & 21. Monthly Real sales vs last year are again positive. That’s 3 of the last 4 months, but also only 3 of the last 18. 48% of their 19>23 $ales growth is real – #1 in performance. Avg 2019>23 Growth is: +8.3%, Real: +4.2%. This big group is where America shops. The fact that real sales stayed positive gives us hope.

Inflation is still relatively low but the cumulative impact is still there. Sales increases are still low, but the fact that 65% of all real sales numbers vs 22 & 21 are positive is a good sign. Restaurants are still doing well, and Auto is improving. Gas Stations saw the negative impact of strong deflation with an ongoing drop in actual sales. Now prices have turned up. As always, our biggest concern is Relevant Retail. Their situation has definitely improved. Ytd real sales vs 22 & 21 are still negative, which clearly shows the impact of cumulative inflation. However, monthly real sales vs 22 have now been positive in 3 of the last 4 months. This is not the end of the crisis, but a slow turnaround appears to be continuing.

Here’s a more detailed look at August by Key Channels in the Stacked Bar Graph Format

  • Relevant Retail: Avg Growth Rate: +8.3%, Real: +4.2%. 10 channels were up from July but only 5 were up vs 22 & 8 vs 21. Only 5 had a “real” increase vs 22 & 7 vs 21. The negative impact of inflation appears to be slowing sales increases.
  • All Dept Stores – This group was struggling before the pandemic hit them hard. They began recovery in March 2020. Their Actual $ are up from July but down for all comparisons but Ytd vs 21 & 19. Their real sales are down in all measurements, even vs 2019. Avg 2019>23 Growth: +0.1%, Real: -2.6%.
  • Club/SuprCtr/$ – They fueled a big part of the overall recovery because they focus on value which has broad consumer appeal. $ales are up vs July and in all other measurements. Their real sales are down in all measurements but Ytd vs 21 & 19. Only 34% of their 27.4% 19>23 lift is real – the impact of inflation. Avg Growth: +6.2%, Real: +2.3%.
  • Grocery- These stores depend on frequent purchases, so except for the binge buying in 2020, their changes are usually less radical. $ are down from July but up in all measurements vs 22, 21 & 19. However, inflation hit them hard. Real sales are down for all but Ytd vs 2019 and only 5.6% of the growth since 2019 is real. Avg Growth: +6.2%, Real: +0.4%.
  • Health/Drug Stores – Many stores in this group are essential, but consumers visit far less frequently than Grocery stores. Sales are up from July and positive in all other measurements, both actual and real vs 22, 21 & 19. Their inflation rate has been relatively low so 73% of their 24.4% growth from 2019 is real. Avg 2019>23 Growth: +5.6%, Real: +4.2%.
  • Clothing and Accessories – Clothes initially mattered less when you stayed home. That changed in March 21 with strong growth through 2022. Actual $ales are up from July and vs 22, 21 & 19. Their real sales are only down for Ytd vs 22. Another positive is that 62% of their 2019>23 growth is real. Avg 2019>23 Growth: +3.7%, Real:+2.4%
  • Home Furnishings – In mid-2020 consumers’ focus turned to their homes and furniture became a priority. Prices are now deflating but they were very high in 2022. Sales are up from July but negative in all other measurements but actual Ytd vs 2019. Their real sales are even down vs 2019. Avg 2019>23 Growth: +3.4%, Real: -0.6%.
  • Electronic & Appliances – This channel has many problems. Sales fell in Apr>May of 2020 and didn’t reach 2019 levels until March 2021. $ales are up from July but down in all measurements but Ytd vs 19. However, consistent deflation has caused real sales to be up in all measurements. Avg 2019>23 Growth: +0.4%, Real: +2.4%.
  • Building Material, Farm & Garden & Hardware –They truly benefited from the consumers’ focus on home. In 2022 the lift slowed as inflation grew to double digits. Inflation is still high at 7.4%. Sales are down from July and they are again all negative vs 2022. They still have the highest Inflation of any channel so real sales are negative in all but Ytd vs 2019. Also, just 20% of their sales growth since 2019 is real. Avg 2019>23 Growth is: +7.7%, Real: +1.7%.
  • Sporting Goods, Hobby and Book Stores – Consumers turned their attention to recreation and Sporting Goods stores sales took off. Book & Hobby Stores recovered more slowly. Actual $ales are down from July but positive for all but vs Aug 22. Real sales are only down vs Aug 22 and Ytd vs 21. Prices deflated again and their inflation rate has been lower than most groups so 65.7% of their 29.7% growth since 2019 is real. Avg 2019>23 Growth: +6.7%, Real: +4.6%.
  • All Miscellaneous Stores – Pet Stores have been a key part of the strong and growing recovery of this group. They finished 2020 at +0.9% but sales took off in March 21 and have continued to grow. Sales are up vs July and positive in all but vs August 22. Real sales are only down vs August & Ytd 22. They are still 2nd to NonStore in increases vs 21 & 19. 66% of their 42.2% 19>23 growth and even 48% of their 21>23 growth is real. Their Avg 19>23 Growth is: 9.2%, Real: 6.3%.
  • NonStore Retailers – 90% of their volume comes from Internet/Mail Order/TV. The pandemic accelerated online spending. They ended 2020 +21.4%. The growth continued in 2021 as sales exceeded $100B for the 1st time and they broke the $1 Trillion barrier. Their growth slowed significantly in 2022 and now 2023. $ales are up from July and all other measurements, both actual and real, are positive. 78% of their 87.5% growth since 2019 is real. Their Avg Growth: +17.0%, Real: +13.9%.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded with their regular store sales.

Recap – The Retail recovery from the pandemic was largely driven by Relevant Retail and by the end of 2021 it had become very widespread. In 2022, there was a new challenge, the worst inflation in 40 years. Despite the recent uptick, inflation has slowed considerably from its peak in June 2022, which should help the Retail Situation. Sales were up from July for 4 big groups and 10 smaller channels. Inflation is slowing in many channels and even deflating in a few. However, some channels like Gas Stations, Grocery and Bldg Material stores still have high cumulative inflation rates so they are still struggling. Only a few channels are doing well. The new problem is that the sales increase rate vs 2022 for many channels has slowed and is even below the lower inflation rate. Real monthly sales for Relevant Retail have been positive vs 22 for 3 of the last 4 months but are still negative for 6 of 11 channels. The turnaround for Relevant retail is not widespread. It is primarily being driven by NonStore with a little help from Health Care. Overall, August was a little better than July, but we still have a long way to go for a full recovery from the inflation tsunami.

Finally, here are the details and updated inflation rates for the CPIs used to calculate the impact of inflation on retail groups and channels. This includes special aggregate CPIs created with the instruction and guidance of personnel from the US BLS. I also researched data from the last Economic Census to review the share of sales by product category for the various channels to help in selecting what expenditures to include in specific aggregates. Of course, none of these specially created aggregates are 100% accurate but they are much closer than the overall CPI or available aggregates. The data also includes the CPI changes from 2021 to 2023 to show cumulative inflation.

Monthly 22>23 CPI changes of 0.2% or more are highlighted. (Green = lower; Pink = higher)

I’m sure that this list raises some questions. Here are some answers to some of the more obvious ones.

  1. Why is the group for Non-store different from the Internet?
    1. Non-store is not all internet. It also includes Fuel Oil Dealers, the non-motor fuel Energy Commodity.
  2. Why is there no Food at home included in Non-store or Internet?
    1. Online Grocery purchasing is becoming popular but almost all is from companies whose major business is brick ‘n mortar. These online sales are recorded under their primary channel.
  3. 6 Channels have the same CPI aggregate but represent a variety of business types.
    1. They also have a wide range of product types. Rather than try to build aggregates of a multitude of small expenditure categories, it seemed better to eliminate the biggest, influential groups that they don’t sell. This method is not perfect, but it is certainly closer than any existing aggregate.
  4. Why are Grocery and Supermarkets only tied to the Grocery CPI?
    1. According to the Economic Census, 76% of their sales comes from Grocery products. Grocery Products are the driver. The balance of their sales comes from a collection of a multitude of categories.
  5. What about Drug/Health Stores only being tied to Medical Commodities.
    1. An answer similar to the one for Grocery/Supermarkets. However, in this case Medical Commodities account for over 80% of these stores’ total sales.
  6. Why do SuperCtrs/Clubs and $ Stores have the same CPI?
    1. While the Big Stores sell much more fresh groceries, Groceries account for ¼ of $ Store sales. Both Channels generally offer most of the same product categories, but the actual product mix is different.

Petflation 2023 – August Update: Drops 24% to +6.6% vs 2022

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Inflation is no longer a headline, but it is still news. The huge YOY increases in the monthly Consumer Price Index peaked in June 2022 at 9.1% then began to slow until turning up in July 2023. August prices grew 0.4% from July and the CPI was +3.7% vs 2022, up from +3.2% last month – 2 straight months of increases. However, Grocery inflation continues to drop. After 12 straight months of double-digit YOY monthly increases, grocery inflation is down to +3.0%, 6 consecutive months below 10%. As we have learned, even minor price changes can affect consumer pet spending, especially in the discretionary pet segments, so we will continue to publish monthly reports to track petflation as it evolves in the market.

Total Petflation was +4.1% in December 2021 while the overall CPI was +7.0%. The gap narrowed as Petflation accelerated and reached 96.7% of the national rate in June 2022. National inflation has slowed considerably since June 2022, but Petflation generally increased until June 2023. It passed the National CPI in July 2022 and at 6.6% in August it is still 1.8 times the national rate of 3.7%. We will look deeper into the numbers. This and future reports will include:

  • A rolling 24 month tracking of the CPI for all pet segments and the national CPI. The base number will be pre-pandemic December 2019 in this and future reports, which will facilitate comparisons.
  • Monthly comparisons of 23 vs 22 which will include Pet Segments and relevant Human spending categories. Plus
    1. CPI change from the previous month.
    2. Inflation changes for recent years (21>22, 20>21, 19>20, 18>19)
    3. Total Inflation for the current month in 2023 vs 2019 and now vs 2021 to see the full inflation surge.
    4. Average annual Year Over Year inflation rate from 2019 to 2023
  • YTD comparisons
    1. YTD numbers for the monthly comparisons #2>4 above

In our first graph we will track the monthly change in prices for the 24 months from August 2021 to August 2023. We will use December 2019 as a base number so we can track the progress from pre-pandemic times through an eventual recovery. Inflation is a complex issue. This chart is designed to give you a visual image of the flow of pricing. You can see the similarities and differences in patterns between segments and compare them to the overall U.S. CPI. The current numbers plus yearend and those from 12 and 24 months earlier are included. This will give you some key waypoints. In August, Pet prices were down from last month overall and in all segments but Non-Vet Services.

In August 2021, the CPI was +6.5% and Pet prices were +2.8% from December 2019. Like the U.S. CPI, prices in the Services segments generally inflated after mid-2020, while Product prices generally deflated until late 2021. Then Petflation took off. Food prices consistently increased but the other segments had mixed patterns until July 2022, when all increased. In Aug>Oct Petflation accelerated. In Nov>Dec, Services & Food prices continued to grow while Vet & Supplies prices stabilized. In Jan>Apr, prices grew every month except for 1 dip by Supplies. In May Products prices grew while Services slowed. In June/July this pattern was reversed. In August all but Services fell. Petflation has been above the CPI since November 22.

  • U.S. CPI – The inflation rate was below 2% through 2020. It turned up in January 2021 and continued to grow until flattening out in Jul>Dec 2022. Prices turned up again in Jan>Aug but 35% of the overall 19.5% increase in the 44 months since December 2019 happened in the 6 months from January>June 2022 – 14% of the time.
  • Pet Food – Prices stayed generally below Dec 2019 levels from Apr 20 > Sep 21 when they turned up. There was a sharp lift in Dec 21, and it continued until the Jun>Aug 23 dip. 93% of the 22.7% increase has occurred since 22.
  • Pet Supplies – Supplies prices were high in December 2019 due to the added tariffs. They then had a “deflated” roller coaster ride until mid-2021 when they returned to December 2019 prices and essentially stayed there until 2022. They turned up in January and hit an all-time high, beating the 2009 record. They plateaued from Feb> May, turned up in June, flattened in July, then turned up in Aug>Oct setting a new record. Prices stabilized in Nov>Dec but turned up in Jan>Feb 23, a new record. They fell in March, set a record in May, then fell in Jun>Aug.
  • Pet Services– Normally inflation is 2+%. Perhaps due to closures, prices increased at a lower rate in 2020. In 2021 consumer demand increased but there were fewer outlets. Inflation grew in 2021 with the biggest lift in Jan>Apr. Inflation was stronger in 2022 but it got on a rollercoaster in Mar>June. It turned up again July 22>Mar 23 but the increase slowed to +0.1% in April. Prices fell -0.3% in May then turned up again in Jun>Aug.
  • Veterinary – Inflation has been pretty consistent in Veterinary. Prices turned up in March 2020 and grew through 2021. A pricing surge began in December 2021 which put them above the overall CPI. In May 2022 prices fell and stabilized in June causing them to fall below the National CPI. However, prices turned up again and despite some dips they have stayed above the CPI since July 2022. In 2023 prices grew through May, stabilized, then fell in August.
  • Total Pet – The blending of patterns made Total Pet appear calm. In December 2021 the pricing surge began. In Mar>June 2022 the segments had ups & downs, but Petflation grew again from Jul>Nov. It slowed in December, turned up Jan>May 23, then fell in Jun>Aug. Except for 5 individual monthly dips, prices in all segments increased monthly Jan>Jun 23. In Jul>Aug there 5 more dips but Petflation has stayed above the CPI since November 2022.

Next, we’ll turn our attention to the Year Over Year inflation rate change for August and compare it to last month, last year and to previous years. We will also show total inflation from 21>23 & 19>23. Petflation was well below double digits at 6.6% in August but is still 1.8 times the National rate. The chart will allow you to compare the inflation rates of 22>23 to 21>22 and other years but also see how much of the total inflation since 2019 came from the current pricing surge. Again, we’ve included some human categories to put the pet numbers into perspective.

Overall, Prices were +0.4% vs July and were up 3.7% vs August 2022. The Grocery increase is down again, to +3.0% from +3.6%, but still impacts consumers. 4 of 9 categories had decreased prices from last month, compared to 3 in July, 5 in June, 3 in May and 1 in April. All of the 4 decreases were from the Pet Industry. Only Pet Services had an increase. The national YOY monthly inflation rate for August is up from July but is still much lower than the 21>22 rate. All but 2 categories – Non-Vet Services and Haircuts have a similar yearly pattern. For Non-Vet Pet Services, the 22>23 inflation rate is not just higher than the 21>22 rate. It is the highest rate in any year since 2019. In our 2021>2023 measurement you also can see that over 65% of the cumulative inflation since 2019 occurred from 21>23 for all segments but Pet Services, Medical Services, Haircuts/Personal Services and the U.S. CPI. We should note that these individual segments are all service expenditures. This demonstrates the strong influence of all Services expenditures on the National CPI. Pet Products are unique. The 21>23 inflation surge provided over 96% of their overall inflation since 2019. This happened because Pet Products prices in 2021 were just starting to recover from a deflationary period.

  • U.S. CPI– Prices are +0.4% from July. The YOY increase rose to +3.7% from 3.2%. It peaked at +9.1% back in June 2022. The targeted inflation rate is <2% so we are still 85% higher than the target. 2 lifts in a row after 12 straight declines is not good news. It’s good that the current inflation rate is below 21>22 but the 21>23 rate is still 12.2%, 62% of total inflation since 2019. How many households “broke even” by increasing their income by 12% in 2 years?
  • Pet Food– Prices are -0.1% vs July and +8.7% vs August 2022. They are also 2.9 times the Food at Home inflation rate – not good news! The YOY increase of 8.7% is being measured against a time when prices were 13.0% above the 2019 level, but that increase is still 2.2 times the pre-pandemic 3.9% increase from 2018 to 2019. The 2021>2023 inflation surge actually generated 100.4% of the total 22.8% inflation since 2019.
  • Food at Home – Prices are up +0.1% from July. The monthly YOY increase is 3.0%, down from 3.6% in July and considerably lower than Jul>Sep 2022 when it exceeded 13%. The 25.9% Inflation for this category since 2019 is 32% more than the national CPI and remains 2nd to Veterinary. 65% of the inflation since 2019 occurred from 2021>2023. The pattern mirrors the national CPI, but we should note that Grocery prices began inflating in 2020>2021 then the rate accelerated. It appears that the pandemic supply chain issues in Food which contributed to higher prices started early and foreshadowed problems in other categories and the overall CPI tsunami.
  • Pets & Supplies– Prices plummeted -2.6% from July. This produced deflation of -0.6% vs August 2022. They still have the lowest increase since 2019. As we noted, prices were deflated for much of 2021. However, even with recent price drops the 2021>2023 inflation surge accounted for 81% of the total price increase since 2019. They reached an all-time high in October 2022 then prices deflated. 3 straight months of increases pushed them to a new record high in February. Prices fell in March, bounced back in Apr>May to a new record high then fell in June>August.
  • Veterinary Services – Prices are down -1.2% from July. They are +8.4% from 2022 and fell back to 2nd place behind Food (+8.7%) in the Pet Industry. However, they are still the leader in the increase since 2019 with 27.7% compared to Food at home at 25.9%. For Veterinary Services, relatively high annual inflation is the norm. The rate did increase during the current surge so 70% of the 4 years’ worth of inflation occurred in the 2 years from 2021>2023.
  • Medical Services – Prices turned sharply up at the start of the pandemic but then inflation slowed and fell to a low rate in 20>21. Prices grew 2% from July and are -2.1% vs 2022. Prices have now deflated for 4 straight months. Medical Services are not a big part of the current surge as only 34% of the 2019>23 increase happened from 21>23.
  • Pet Services – Inflation slowed in 2020 but began to grow in 2021. August 23 prices were +0.9% from July and +7.2% vs 2022, which is up from 6.3% in July but much lower than 8.0% in March. Initially their inflation was tied to the current surge, but it may be becoming the norm as only 58% of the total since 2019 occurred from 21>23.
  • Haircuts/Other Personal Services – Prices are +0.4% from July and +5.1% from 2022, the 2nd highest rate since 2019. However, inflation has been rather consistent so just 45% of the inflation from 19>23 happened from 21>23.
  • Total Pet– Petflation is now 35% lower than the 21>22 rate, but 1.8 times the National CPI. For August, +6.6% is the 3rd highest rate since 1997 (2022: 10.1%; 2008: 9.3%). Vs July, prices fell for all but Services so Total Pet was -0.9%. A Jul>Aug decrease has happened in 13 of the last 24 years so it was not a surprise. Food & Veterinary are still the Petflation leaders, but all segments have an influence in the overall numbers. Pet Food has been immune to inflation as Pet Parents are used to paying a lot, but inflation can reduce purchase frequency in the other segments.

Now, let’s look at the YTD numbers

The increase from 2022 to 2023 is the biggest for 4 of 9 categories – All Pet. The 22>23 rate for Haircuts is equal to 21>22. However, the Total CPI, Pet Supplies, Medical Services and Food at Home are significantly down from 21>22. The average annual increase since 2019 is 4.4% or more for all but Medical Services (2.9%) and Pet Supplies (2.6%).

  • U.S. CPI – The current increase is down 46% from 21>22 and only 2.3% more than the average increase from 2019>2023, but it’s double the average annual increase from 2018>2021. 69% of the 19.0% inflation since 2019 occurred from 2021>23. Inflation is a big problem that started recently.
  • Pet Food – Strong inflation continues with the highest 22>23 & 21>23 rates on the chart. Deflation in the 1st half of 2021 kept YTD prices low then prices surged in 2022. 95.6% of the inflation since 2019 occurred from 2021>23.
  • Food at Home – The 2023 YTD inflation rate has slowed but still beat the U.S. CPI by 49%. You can see the impact of supply chain issues on the Grocery category as 73% of the inflation since 2019 occurred from 2021>23.
  • Pets & Pet Supplies – The inflation rate is down to 4.3% as prices fell again in August. Prices deflated significantly in both 2020 & 2021 which helped to create a very unique situation. Prices are up 10.8% from 2019 but 109% of this increase happened from 2021>23. Prices are up 11.8% from their 2021 “bottom”.
  • Veterinary Services – They are still #1 in inflation since 2019 but they are tied for the 2nd highest rate since 2021. At +6.4%, they have the highest average annual inflation rate since 2019. Except for a sight slowing in 2020, inflation has consistently increased since 2019. Regardless of the situation, strong Inflation is the norm in Veterinary Services.
  • Medical Services – Prices went up significantly at the beginning of the pandemic, but inflation slowed in 2021. In 2023 prices have been deflating and are now at 0.2% YTD, which is 99% below the pre-pandemic 2018>19 rate.
  • Pet Services – May 22 set a record for the biggest year over year monthly increase in history. Prices fell in June but began to grow again in July, reaching record highs in Sep>Apr 23. The January 2023 increase of 8.4% set a new record. YTD August grew a little from 6.9% to 7.0%. Interestingly, although the rates are not as high, they have the exact same annual inflation pattern as Veterinary. The Services segments in the Pet Industry are definitely unique.
  • Haircuts & Personal Services – The services segments, essential & non-essential, were hit hardest by the pandemic. After a small decrease in March 22, prices turned up again. Since 2021 inflation has been a consistent 5+%, 90% higher than 18>19. Consumers are paying 21% more than in 2019, which usually reduces the purchase frequency.
  • Total Pet – There were two different patterns. After 2019, Prices in the Services segments continued to increase, and the rate grew as we moved into 2021. Pet products – Food and Supplies, took a different path. They deflated in 2020 and didn’t return to 2019 levels until mid-year 2021. Food prices began a slow increase, but Supplies remained stable until near yearend. In 2022, Food and Supplies prices turned sharply up. Food prices continued to climb until Jun>Aug 23. Supplies prices stabilized Apr>May, grew Jun>Oct, fell in Nov, rose in Dec>Feb, fell in Mar, rose in Apr>May then fell in Jun>Aug. The Services segments have also had ups & downs but have generally inflated. The net is a YTD Petflation rate vs 2022 of 9.5%, 2.1 times the National rate. In May 22 it was 5.8% below the CPI.

Petflation is slowing, but still strong. Petflation dropped from 8.7% in July to 6.6% in August. This is well below the record 12.0% set in November, but still the 3rd highest rate for the month. More bad news is that 9 of the last 13 months have been over 10% and the current rate is still 4.1 times more than the 1.6% average rate from 2010>2021. It’s also 1.8 times the national rate. There is no doubt that the current pricing tsunami is a significant event in the history of the Pet Industry, but will it affect Pet Parents’ spending. In our demographic analysis of the annual Consumer Expenditure Survey which is conducted by the US BLS with help from the Census Bureau we have seen that Pet spending continues to move to higher income groups. However, the impact of inflation varies by segment. Supplies is the most affected as since 2009 many categories have become commoditized which makes them more price sensitive. Super Premium Food has become widespread because the perceived value has grown. Higher prices generally just push people to value shop. Veterinary prices have strongly inflated for years, resulting in a decrease in visit frequency. Spending in the Services segment is the most driven by higher incomes, so inflation is less impactful. This spending behavior of Pet Parents suggests that we should look a little deeper. Inflation is not just a singular event. It is cumulative. Total Pet Prices are up 6.6% from 2022 but they are up 17.4% from 2021 and 21.8% from 2019. That is a huge increase in a very short period. It puts tremendous monetary pressure on Pet Parents to prioritize their expenditures. We know that the needs of their pet children are always a high priority but let’s hope for a little relief – stabilized prices and even deflation. This is not likely in the Service segments, but it may be starting in Products. The Pet Food inflation rate is dropping, and Pet Supplies prices are even deflating. It’s just a start. Let’s hope that it continues. We’ll see what happens.

2022 Top 100 U.S. Retailers – Sales: $2.85 Trillion, Up 6.8% 165,205 Stores with Pet Products……plus the Internet!

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The U.S. Retail market reached $8.07 Trillion in 2022 from all channels – Auto Dealers, Supermarkets, Restaurants, Online retailers and even Pet Stores. The $705B, +9.6% lift was down significantly from the pandemic recovery of +$1.14T, +18.4% in 2021. However, the Total Retail market is now $1.9T, 30.8% ahead of 2019. That’s a strong annual growth rate of +9.4%. (Data courtesy of the Census Bureau’s monthly retail trade report.)

In this report we will focus on the top 100 Retailers in the U.S. Market. The base data on the Top 100 comes from Kantar Research and was published by the National Retail Federation (NRF). The historical data for some companies that weren’t in the Top 100 all years from 2019>2022 was gathered from other reliable sources. In 2020, Restaurants were removed from the list and only Convenience stores sales for Gas Stations were included. I adjusted the 2019 list to reflect this change. This change means that the Top 100 now only includes Relevant Retail companies. The Top 100 account for 35.2% of the total market. This share peaked at 39.0% during the 2020 pandemic and has slowly declined since then. However, the Top 100 are still the “Retail Elite”. The vast majority of the group also stock and sell a lot of Pet Products so their progress is critically important to the Pet Industry. Let’s get started in our analysis. The report does contain a lot of data, but we’ll break it up into smaller pieces to make it more digestible.

We will begin our report with an overview chart of the 2019>2022 annual sales history for major segments of the Retail Marketplace. The U.S. Retail market has strongly recovered from the 2020 pandemic trauma and the resurgence has become widespread across most channels. Our regular retail sales reports have shown that different defined retail channels often took a different path from 2019 to 2021. In the Spring of 2021 and throughout 2022 the retail market faced a new challenge – strong inflation. The YOY price increases were the largest in decades, even reaching double digits near the end of 2021. The high rate didn’t start to slow until the Fall of 2022. The Top 100 analysis allows us to see if the company revenue size was a factor in their overall pandemic/price journey from 2019>2022. The following chart shows the annual sales and market share as well as the changes in both for large retail subgroups that are based upon the amount of their annual revenue. Note: In comments we’ll show Avg Growth Rates – Actual & Real (Inflation Related)

  • The Total Retail Market grew $705B, +9.6% in 2022. That is less than the $1.14T, +18.4% in 2020. However, the growth rate since 2019 is 9.4%, which is still double the rate of recent years: 2019, 3.6%; 2018, 4.9%; 2017, 4.3%. Factoring in inflation, Real 19>22 growth was +3.4% compared to 18>19: +3.2%; 17>18: +3.0%; 16>17: +5.7%
  • The “Non-Relevant” Retail Group (Restaurants, Auto Dlrs, Gas Stations) was hit hardest by the pandemic as sales fell -9.7% in 2020. However, they had a strong recovery as 20>22 sales grew $932B, producing an average 19>22 growth rate of 8.8%. However, high inflation was a factor for all groups. Gas Stations led the way as 19>22 prices were up +50.2%.
  • Relevant Retail was the hero of the pandemic as they kept Total Retail positive in 2020. Their sales surged in the 2021 recovery then the increase slowed to +8.0% in 2022. They were still up $365B producing an average growth rate since 2019 of +9.75%. Their Real growth rate (considering inflation) was +5.75%. However, their share of Total Retail has fallen 3.5% after peaking in 2020. The story is a bit more complex. Let’s drill deeper into this group.
  • The Top 100 Retailers make up 57.5% of Relevant Retail and 35.2% of Total Retail. They have shown consistent growth since 2019 but their market share has fallen since peaking in 2020 for Relevant Retail and 2019 for Total Retail. Their avg growth since 2019 is +7.1%, but Real Growth using the latest Top 100 CPI data is +3.6% – 51%.
  • The biggest subgroup in $ales in the Top 100 is the Top 10 which accounts for 59% of the Top 100’s revenue, up from 55% in 2019. This group has been unchanged since 2015 and consists of Amazon, plus truly essential brick ‘n mortar retailers. Their biggest sales surge occurred in 2020 which was their peak in Retail market share. Their average growth rate since 2019 is +9.5%. The group is unchanged, so we know their Real growth was +5.7% – 60%.
  • The Retailers ranked from #11 to #100 change slightly every year. Their sales in 2022 ranged from $3.7B to $76B and they accounted for 41% of the Top 100’s revenue. They have an unusual sales pattern in that their $46B decrease in 2020 is the only negative sales on the chart outside of the big drop by Rest/Auto/Gas. They did have a strong 10.7% increase in 2021 but that fell to 6.1% in 2022. They have also lost market share in Total & Relevant Retail every year since 2019 but are still a big part of U.S. Retail. Avg 19>22 Growth: +3.9%; Real: 1.0% – only 26%.
  • The Relevant Retailers outside of the Top 100 don’t get a lot of “press” but maybe they should. They currently account for 42% of Relevant Retail $ and 26% of Total Retail. They had the biggest percentage increase of any Relevant Retail subgroup in all measurements since 2019. Their avg. increase since 2019 is +13.8%. Real: +9.8%, the best numbers of any group on the chart. While this performance is amazing, perhaps the most important fact is that they delivered 62% of Relevant Retail’s sales increase in 2020 and even 56% of the lift from 2019>2022.

There is no doubt that the big retailers are critical to the success of the U.S. Retail Market. However, there are sometimes “hidden heroes” that should be noted.

The Top 100 outperformed Total Retail in 2020 but not in 2021 or 2022. In fact, the sales growth since 2019 trails Total Retail, Relevant Retail and even Rest/Auto/Gas. It still generates 35.2% of Total U.S. Retail $ so it is still very important. We also should remember that the Top 100 is really a contest with a changing list of winners. Companies drop out and new ones are added. This can be the result of mergers, acquisitions, surging or slumping sales or even a corporate restructuring. In 2022, Smart & Final was acquired by Chedraui and Price Choppers merged with Tops. 4 dropped off:

  • Bed, Bath & Beyond (Home Gds) • Restoration Hdwr (Home Gds)   • Save Mart (Supmkt)   • Urban Outfitters (Appar)

On the plus side, 4 new companies were added.

  • Amway (Home Gds) • Raley’s Supermarkets (+Bashas’)   • Neiman Marcus (Dept Str)  • Schnucks (Supmkt)

I think that we now have a good overview of U.S. Retail and the Top 100 so let’s ask and answer a very relevant question. How many Top 100 companies are buying and selling Pet Products? This will reinforce that Pets have become an integral part of the American Household and how fierce that the competition for the Pet Parents’ $ has become.

  • We should note that the data in the chart only reflects the performance of the companies in the 2022 list since 2019 and is not being compared to the Top 100 list of companies from prior years
  • 87 are selling some Pet Products in stores and/or online. 2 of the companies added pet products to their offerings for the 1st time in 2022. Plus, 87 is 7 more companies than the 1st “official” all Relevant Retail Top 100 list in 2020.
    • Their Total Retail Sales of all products is $2.74 Trillion which is…
      • 96.4% of the total business for the Top 100
      • 55.4% of Relevant Retail
      • 34.0% of the Total Retail market
    • 74 Cos., with $2.58T in sales sell pet products off the retail shelf in 165,205 stores – 12,000 more than 2020.
      • 1 company on the current list added pet products to their shelves in 2022.
      • As you can see by the growth in both sales and store count since 2019, “in store” is still the best way to sell pet.
    • Online only is another story and the story gets complicated.
      • Amazon includes Whole Foods, which has stores so the Amazon $ are in the “Pet in Store” numbers.
      • 1 Retailer in the 2022 list added pet products to their offerings. This group had decreased sales and closed stores in 2020. Fortunately, 21 & 22 brought a rebound in both areas, but they still have the lowest 19>22 increase in $.
    • Some non-pet specialty retailers like Lulumon and Signet have had extraordinarily strong post pandemic growth. However, the growth in the non-pet group has generally slowed in 2022. They have also closed 5% of their stores, which is now thankfully on hold. Perhaps, more of them will see Pet as a new growth opportunity.

The pandemic caused our Pets to become an even more important part of our households. They are truly family. Pet products have long been an integral part of the strongest retailers and are now even more widespread across the entire U.S. marketplace. Of the Top 100, 165,205 stores carry at least some pet items at retail. However, there are thousands of additional “pet” outlets including 15,000 Grocery Stores, 10,000 Pet Stores, 16,000 Vet Clinics, 6,000 Pet Services businesses and more. Pet Products are on the shelf in over 215,000 U.S. brick ‘n mortar stores… plus the internet. Pet Products have become part of the new “normal” for the majority of U.S. Retailers.

Before we analyze the whole Top 100 list in greater detail let’s take a quick look at the Top 10 retailers in the U.S.

Except for changes in rank, this group has been incredibly stable. The list has been the same since 2013, with one slight qualification. In 2015 Albertsons purchased Safeway. The new Albertsons/Safeway group replaced the stand-alone Safeway company in the list. There is one change to the chart. We have added average annual 19>22 growth rates – both Actual & Real (Inflation was factored in using specifically targeted CPIs) Now let’s get into the numbers.

  • Their Total Retail Sales were $1.67 Trillion which is:
    • 58.8% of Top 100 $ales, about equal to the 2020 peak (58.9%) but up considerably from 2019 (55.0%).
    • 33.8% of Relevant Retail, down from 35.5% in 2020 but about the same as 2019 (34.0%).
    • 20.7% of Total U.S. Retail $, down from 23.0% in 2020 but exactly the same as 2019 (20.7%).
  • In ranking, Kroger & Home Depot swapped places. Walgreens fell from 6th to 8th, so Target and CVS moved up.
  • Sales vs 21 & 19 are up for all but Walgreens. The biggest growth vs 21 came from Costco but Amazon is still the leader vs 19. In average growth, 5 have rates over 10%. The group averages +9.5% with +5.7% (60%) being real.
  • Store count stabilized and turned up 0.3% in 22 but is still down vs 19 for 5 companies and -0.1% for the group.

Now we’ll look at the detailed list of the top 100. It is sorted by channel groups with subtotals in key columns. For some groups there will be 2 subtotals. The subtotal in Blue compares the data history for just the 2022 list. The Black subtotal compares this year’s totals to those from previous year’s lists. Note: I used the same CPI rate for both Blue & Black Real averages because there was little difference in group share from 2019 to 2022.  There is not a lot of highlighting, but:

  • Pet Columns ’22 & ‘21 – a “1” with an orange highlight indicates that products are only sold online.
  • Rank Columns – 2022 changes in rank from the 2021 list are highlighted as follows:
    • Up 4-5 spots = Lt Blue
    • Up 6 or more = Green
    • Down 4-5 Spots = Yellow
    • Down 6 or more = Pink

Let’s get started. Remember, online $ are included in the sales of all companies.

Note:(*) in the 2019 columns of some companies means the 2019 base was estimated from other sources.

Observations

  • Alcohol Retailers first made the list in 2020 as consumers started dining at home. The behavior is accelerating.
  • Apparel – They were hit hard by the pandemic, had a strong recovery in 2021, then the increase slowed in 2022. In 2022 sales decreased for companies focused on clothing while it increased for specialty and accessory stores. The average increase for the 22 group was Actual: +5.5%; Real: +4.8% (87%). Their performance differed from that of the category because the 2022 group had fewer companies than 2021 but more than 2019.
  • Auto – Growth slowed a little in 2022 but the only negative for this group is that Advance Auto’s average Real Sales growth is down -1.4% from 2019. Group Avg Growth: +9.8%; Real: +3.6%.
  • Book Stores – Barnes & Noble has had slow steady growth since 2019 and low inflation so 52% is real.
  • Commissary/Exchanges – They have been on hold since 2019. Sales grew a little in 22 but real sales growth is -5.7%.
  • Convenience Stores – Sales are up in 22 but most of the growth is due to 7-Eleven’s acquisition of Speedway. The 22 group has 8.0% average growth but only 24% is real. However, that’s much better than -4.9% for the category.
  • The decline in Department Stores was accelerated by the pandemic. Sales in the category grew in 22 because of the addition of Neiman Marcus. Neiman Marcus’ sales are up slightly from 2019 but Dillard’s has the only significant actual and real growth since 19. Both the 22 group and the category are both actually and really down vs 2019. J.C. Penny, a hallmark in the department store channel, has by far the worst performance.
  • Drug Stores – All but Walgreen’s increased sales in 2022 but the store closures continued. Vs 2019 only Walgreen’s and Good Neighbor Pharmacy have reduced sales but all have fewer stores. The average growth rate since 2019 is low at +2.7% but inflation is low so real growth is +2.1% (78%)

  • Electronics/Entertainment – Sales Growth slowed in 22 and even fell for 3 companies. Store closures continued for electronics retailers.
    • Amazon Retail growth slowed in 22 to only 36% of their average growth since 2019, but 85% is Real.
    • Qurate was down for the year and the only company down vs 2019. Their avg real sales growth from 19 is -6.5%.
    • 2 Electronics stores are down vs 2021 but all are up vs 2019. They continue to close stores. However, strong deflation has even pushed real sales significantly above actual.
    • 22 group avg growth: +12.0%;Real: +12.5%. This is much better than the category because 22 is a smaller group.
  • Farm – Tractor Supply growth slowed but is still +11.4%. Avg Growth: +19.1%; Real: +13.8% (72%). Plus, more stores.
  • Hobby & Crafts– Hobby Lobby is the best performer, but both companies are up in all measurements. Avg Group Growth: 5.9%; Real: +5.4%. 92% is real.
  • Home Improvement/Hardware – Growth slowed in 2022 but the only negatives on the chart come from True Value closing a few stores in 21 and the -1.6% real sales avg for Menards. Consumers are still focused on their homes.
    • Harbor Freight is still growing fast. They earned a spot in the Top 100 in 2021.
    • Vs 2021 & 2019 sales were up for all across the board with the biggest $ lifts coming from the 3 biggest guys.
    • It is also a very healthy sign when 6 of 7 companies continue to add more stores.
    • 22 Group Avg Growth: +11.5%;Real: +6.3% (55%). The category is slightly better because the group # is up by 1.
  • Jewelry – Signet switched from closing to opening stores. Strong growth continues. Avg: 21.2%; Real: 18.7% (88%).
  • Mass Merchants have 3 of the 7 largest volume retailers in America – Wal-Mart, Costco and Target. However, the value and selection offered by the whole group has increased its importance to consumers even more due to the pandemic.
    • In 2022 Wal-Mart $ were up 8.7%, better than 6.9% in 2021 and above their average increase in sales: +7.7%. Their business is driven by SuperCenters. Groceries drove up inflation so their real sales avg increase was 3.7%, only 48%. They did stop closing discount department stores in 2022 but their store count is still -0.5% from 2019.
    • Costco’s 2022 $ increase was +16.9%, up from +15.8% in 2021 and 23% more than their 13.7% average. Average real growth was 9.7% (71%). They also continued to open new stores, +5.9% vs 2019.
    • Target posted a 6th consecutive sales increase in 2022, +2.8%. However, this was down a lot from +13.2% in 2021 and their 11.7% average. Their real avg growth rate is 7.7%, 66%. Their store count is up 4.3% from 2019 as they are opening more supercenters. However, they are also adding more fresh groceries to their discount stores.
    • Meijer’s $ales were +5.6% from 21, up from 2.3% last year but below their avg of 6.1%. Their avg real growth is 2.1%, only 34%. Coincidentally, their avg growth rate from 2019 now exactly matches their 6.1% growth in stores.
    • BJ’s is now the growth leader, +22.8% vs 21 and +55.3% vs 2019. However, we should note that Costco ranks 2nd in both comparisons. BJ’s also has 8.7% more stores than in 2019. Costco is +6.1%. BJ Avg growth: +15.8%; Real: +11.8%, 75%. Club stores have moved to the forefront.

  • Office Supply Stores – This channel continues its consistent decline as Consumers maintain their move to online ordering of these products. The only positive on the chart is that Staples sales were up +0.6% from 2021. The group’s average sales growth since 2019 is -3.8%; Real: -10.4%. Store count is down even more, -17.3% from 2019.
  • Pet Stores growth in 2022 was +7.3%, down significantly from +22.3% last year but they are up +45.5% from 2019. Most of the growth in all measurements is coming from online sales.
    • Chewy and PetSmart numbers are reported individually as they are now separate companies.
    • With the strong consumer movement to online purchasing, Chewy is still the big story in this channel. They have the most sales. Their 21>22 increase was +13.6%, down from 24.4% in 21, but 76% of the Pet Store group’s 2022 $ increase. Their 64.5% sales increase vs 2019 is also nearly double that of the retail outlets. Avg Growth rate: +18.0%; Real: +14.9%. 83% of their big increase is real.
    • PetSmart’s 21>22 growth was only +2.2%, 90% less than the +23.1% in 21. Sales are still up +32.5% from 2019 and they continue to expand their retail footprint with 3.4% more stores than in 2019. Their average growth rate is +9.8%. Real growth is +6.7%, 68%. This is not as good as Chewy’s, but still very good.
    • Petco’s growth since 2019, +35.8% is slightly ahead of PetSmart. It also slowed markedly in 2022 to +4.1%, from +17.6% in 21. Avg growth: +10.7%; Real: +7.6%, 71%. The biggest difference between the 2 is that Petco has cut back on their retail stores, even in 2022. Their store count is now down -7.7% from 2019.
  • Small Format Value Stores – These stores offer value and convenience, but there are 2 types – Big Lots & $ Stores
    • Group sales grew +7.4%, up from +2.0% in 21. Avg 19>22 Growth: +8.2%; Real: +4.1%, 50%.
    • Dollar General & Dollar Tree were responsible for almost all of the group’s growth in both $ and stores. Dollar General was the leader in both areas. Avg Growth: +10.9%; Real: +6.9%, 63%. Dollar Tree also looked pretty good with 6.8% more stores and avg growth of +6.3%. However, their Real growth was +2.3%, only 37%.
    • Big Lots’ $ fell -11.1% from 21. Their store count is down -3.1% from 19. Avg $ Growth 19>22: +0.9%; Real: -3.1%
  • Sporting Goods – Sales vs 21: +4.7%, down from +13.6% in 21. All but Academy were up vs 21 but all are up vs 19. The store count has also grown despite slight drops by Dick’s and Bass Pro. Avg $ Growth: +9.1%; Real: +4.7%, 52%.
    • Camping World has the best performance vs 21 & 19 in both $ales and store growth.
    • Dick’s had the biggest actual $ increase from 19>22 despite closing 1.9% of their stores since 2019.
    • Bass Pro has the worst performance. They closed 3.1% of their stores in 20&21. Avg Growth: +2.5%; Real: -1.9%.
  • Supermarkets – As usual there was some turmoil. Because of a merger & acquisition 2 companies were replaced. 1 other dropped out and 2 new were added. Ave Growth: +7.0%; Real: 0.9%, only 13%. Store count -0.7% from 2019.
    • All were up vs 2021 in $ and only 2 were down vs 2019
    • 7 companies cut back on stores in 2022 and 8 have fewer stores than in 2019.
    • The category avgs and store count situation are better than for 2022 group because the group is bigger in 22.
    • With $540B in sales from 17K stores, all carrying Pet Products, this group is essential both to the Retail Market and the Pet Industry.

Wrapping it up!

This report is focused on 2022 but we can also see the still evolving impact of the pandemic. In 2020 many non-essential retailers were hit with restrictions and closures. On the plus side, consumers turned their focus to essentials and their homes. This helped drive incredible growth in many retail channels.

In 2021 the Total Retail market moved into a full recovery with spectacular growth. Many channels showed a strong sales rebound from 2020. Others built upon their pandemic success while many returned to a more normal growth pattern. However, a few continued to decline. The Top 100 companies had participants in all of these patterns.

In 2022 we were hit by strong inflation in many categories which slowed both actual and real growth.

The Top 100 is a contest with the winners changing slightly every year. It is a critical part of the U.S. Market, accounting for almost 60% of Relevant Retail Revenue and 35+% of Total Retail. Sales have increased annually but the Top 100’s share of Total Retail peaked in 2020 and in 2019 for Relevant Retail and has steadily declined. The Top 10 has had consistent annual growth but sales in the #11>100 actually fell in 2020 and their 19>22 increase is only about 1/3 of the Top 10’s lift. However, we should remember that we discovered a new hero in 2021 – Relevant Retail, not in the Top 100. The 19>22 Sales by these smaller guys are +47%, 50% more than the Top 10. Their performance continues to be amazing.

Pet Products are an important part of the success of the Top 100. 87 companies (96.4% of $) sell Pet items in 165K stores and/or online. The 74 companies that stock pet products in their stores generated $2.58T in total sales. How much was from pet? Let’s “Do the math”. If we take out the $23.6B done by Top 100 Pet stores and the remaining companies generated only 1.7% of their sales from Pet, we’re looking at $43.4B in Pet Products sales from 71 non-pet sources! (The 1.7% Pet share is based on the Economic Census.) If you add Product sales for Pet Stores back in, Total Pet Products sales for the Top 100 are $67B. The APPA reported $89.6B in Pet Products sales for 2022. That means 71 mass market retailers accounted for 48.4% of all the Pet Products sold in the U.S. and 74 Top 100 companies generated 74.8%. Pet Products are widespread in the retail marketplace but the $ are concentrated. All Pet Industry participants should monitor the Top 100 group.

Retail sales increases slowed in 2022 as inflation became a major factor. The situation is still evolving but the Top 100 will always be a critical part of U.S. Retail. I hope that this detailed look helped put this group into a better perspective.

Retail Channel Monthly $ Update – June Final & July Advance

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While inflation continues to slow, its cumulative effect on consumer spending is still being felt. The rate of sales increases is still slower than the decrease in inflation in a number of channels, which causes a drop in the amount of product sold. A recovery may have started but there is still a long road ahead, so we’ll continue to track the retail market with data from two reports provided by the Census Bureau and factor in the CPI from US BLS.

The Census Bureau Reports are the Monthly and the Advance Retail Sales Reports. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – about 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

We will begin with the Final Report for June and then go to the Advance Report for July. Our focus is comparing to last year but also 2021 and 2019. We’ll show both actual and the “real” change in $ as we factor inflation into the data.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports, and we’ll focus on Pet Relevant Channels.

The data will be presented in detailed charts to facilitate visual comparison between groups/channels. The charts will show 11 separate measurements. To save space they will be displayed in a stacked bar format for the channel charts.

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2022 and 2021.
    • Current Month Real change for 2023 vs 2022 and vs 2021 – % factoring in inflation
  • Current Ytd change – % & $ for 2023 vs 2022, 2021 and 2019.
    • Current Ytd Real change % for 2023 vs 2022, 2021 and 2019
  • Monthly & Ytd $ & CPIs for 22>23 and 21>23 which are targeted by channel will also be shown. (CPI Details are at the end of the report)

First, the June Final. All were down from May. However, all but Gas Stations were up vs 22, 21 & 19. When you consider inflation, the negatives (11) were more than in May (7). Gas Stations are still really down vs 2019. The biggest change may be that Relevant Retail is again “really” down monthly vs 22. (All $ are Actual, Not Seasonally Adjusted)

The June Final is $0.4B more than the Advance. Specifically, Restaurants: +$0.9B; Auto: +$1.0B; Gas Stations: -$0.7B; Relevant Retail: -$0.7B. The drop in sales for Relevant Retail from the Advance Report made one big difference. In the Advance Report for June vs 2022, their “real” sales were +0.1%. In the Final June Report their “real” sales vs June 2022 were -0.1% – a small, but significant change. Sales were down from May for all big groups but actual sales for all but Gas Stations were positive in all measurements vs 22, 21 & 19. Strong deflation caused Gas Stations sales to again drop monthly and YTD vs 2022. There were 11 real sales drops, 8 vs 2021. Restaurants have the most growth and are the only group with all positives. The big deal is that real sales for Relevant Retail vs 22 & 21 are all negative. The monthly data vs a year ago has now been negative 7 of the last 8 months. They are #1 in performance since 2019 but only 49% of the growth is real.

Now, let’s see how some Key Pet Relevant channels did in June in the Stacked Bar Graph Format

Overall– Only 2 were up from May, but vs 22, 7 were up vs June 22 and 10 Ytd. 7 were “really” down monthly & Ytd. Vs 2021, 9 had increases but only 5 monthly & 3 Ytd were real. Vs 2019, Off/Gift/Souv & Disc Dept Strs were really down.

  • Building Material Stores – The pandemic focus on home has produced sales growth of 35.7% since 2019. Prices for the Bldg/Matl group have inflated 20.2% since 2021 which is having an impact. HomeCtr/Hdwe stores are down for the month & Ytd vs 22 but up vs 21 &19. Farm Stores are up in all measurements. However, both have all negative real numbers vs 2022 & 2021. Importantly, only 22.1% of their 19>23 lift was real. It was only this high because most of the lift came prior to the inflation wave. Avg 19>23 Growth: HomeCtr/Hdwe: 7.4%, Real: 1.3%; Farm: 11.5%, Real: 5.2%
  • Food & Drug – Both channels are truly essential. Except for the pandemic food binge buying, they tend to have smaller fluctuations in $. They have been very different in inflation but the gap is closing as the Grocery rate is now only 12% higher than Drugs/Med products. Drug Stores are positive in all measurements and 74% of their growth since 2019 is real. While the $ are up for Supermarkets their 2023 real sales are down vs 2022 & 2021 and just slightly positive vs 2019. Only 8% is real growth. Avg 19>23 Growth: Supermarkets: +6.3%, Real: +0.6%; Drug Stores: +5.4%, Real: +4.0%.
  • Sporting Goods Stores – They also benefited from the pandemic in that consumers turned to self-entertainment, especially sports & outdoor activities. Sales are up from May but are only actually & really positive YTD vs 2022 and 2019. Prices are still deflating -0.9%, a big change from +5.4% in 21>22 and +6.5% in 20>21. The result is that 60% of their 43.7% lift since 2019 is real. Their Avg 19>23 Growth Rate is: +9.5%; Real: +6.0%.
  • Gen Mdse Stores – All were down vs May. However, actual sales vs 22, 21 & 19 were up for all but Disc Dept Strs vs June 22 & 21. In real sales, Clubs/SupCtrs were only up vs June 21 but $/Value Stores were up in all but Ytd vs 21. Disc Dept Stores are the worst performer and are now really down -0.9% vs 2019. The other channels average 35% In real growth. Avg 19>23 Growth: SupCtr/Club: 6.2%, Real: 2.2%; $/Value Strs: +6.7%, Real: +2.7%; Disc. Dept.: +2.5%, Real: -0.2%
  • Office, Gift & Souvenir Stores – Actual sales are up 1.3% from May but down from June 22. They were up in all other measurements vs 22, 21 & 19. Their real sales numbers are all negative including -6.8% Ytd vs 2019. Their recovery started late and their slow progress may have stalled in June. Avg Growth Rate: +0.9%, Real: -1.7%
  • Internet/Mail Order – Sales are down from May but above $100B again at $100.8B – another monthly record. All measurements are positive, but their growth is only 54% of their average since 2019. However, 80% of their 98% growth since 2019 is real. Avg Growth: +18.6%, Real: +15.4%. As expected, they are still by far the growth leaders since 2019.
  • A/O Miscellaneous – Pet Stores are 22>24% of total $. In May 2020 they began their recovery which reached a record level of $100B for the first time in 2021. In 2022 their sales dipped in January, July, Sept>Nov, rose in December, fell in Jan>Feb, turned up in Mar>May, then fell in June. Ytd Real sales are down vs 22, but all other measurements are positive. They are still the % increase leaders vs 2021 and 72% of their 56.6% growth since 2019 is real. Average 19>23 Growth: +11.9%, Real: +8.9%. They are still 2nd in growth since 2019 to the internet. Pet Stores are surely contributing.

Inflation remains an important factor in Retail. In actual $, 7 channels reported increases in sales vs 2022 and 9 vs 2021. When you factor in inflation, the number with any “real” growth drops to 4 vs 2022 & 5 vs 2021. Inflation has impacted sales increases. June was not a strong month. The lift was 30% below May & 50% of Jan & Feb. The impact is very visible at the retail channel level. Inflation grew slightly in July. Let’s look at the impact on the Advance Retail $ales for July.

Since 2019, we have seen the 2 biggest monthly drops in history but a lot of positives in the Pandemic recovery. Total Retail reached $700B in a month for the first time and broke the $7T barrier in 2021. Relevant Retail was also strong as annual sales reached $4T in 2021 and all big groups set annual $ales records. In 2022 radical inflation was a big factor. At first, this reduces the amount of product sold but not $ spent. Total Retail hit $8T and all groups again set new annual records in 2022. In 2023, sales got on an up/down rollercoaster. All were down in June and Total Retail was down in July but 2 groups were up. Except for Gas Stations, all actual sales are positive vs 22, 21 & 19. There is also some stability in that of the groups’ total of 20 “real” sales measurements vs 22 & 21, 11 are positive, including monthly sales vs 22 for Relevant Retail. Of Note: The lift vs 2022 is up from June for Relevant & Total Retail but still far below Jan & Feb levels.

Overall – Inflation Reality – Total, Auto & Gas prices all deflated. For Relevant Retail, the rate was slightly below the sales lift. For Restaurants, inflation remains high, +7.1% but they still have the strongest performance vs 2022 & 2021. The biggest news is that monthly real sales for Relative Retail vs last year are positive again. They have been negative for 8 of the last 10 months. However, their Ytd Real sales are still down vs 2022 & 2021. They still have a ways to go.

Total Retail – Since June 2020, every month but April 23 has set a monthly sales record. December 22 $ were $748.9B, a new all-time record. Sales have been on a rollercoaster. They grew in May, fell in June & grew in July. Inflation has become deflation, but sales growth is still low. Sales are up 2.5% vs last year. That’s only 32% of their average 19>23 growth. Also, real sales are down monthly and Ytd vs 21 and only 35% of the 19>23 growth is real. Inflation in Total Retail has radically slowed vs 2022 but we still see its cumulative impact. Avg 2019>23 Growth: +7.9%, Real: +3.0%.

Restaurants – They were hit hard by the pandemic and didn’t begin recovery until March 2021. However, they have had strong growth since then, setting an all-time monthly record of $91B in December and exceeding $1T in 2022 for the 1st time. They are the best performing big group vs 22 & 21. Inflation decreased to 7.1% in June from 7.6% last month but is still +15.0% vs 21 and +21.4% vs 19. 39.6% of their 41.4% growth since 19 is real but they remain 2nd in performance behind Relevant Retail. Recovery started late but inflation started early. Avg 2019>23 Growth: +9.0%, Real: +3.9%. They just account for 13.2% of Total Retail $, but their performance improves the overall retail numbers.

Auto (Motor Vehicle & Parts Dealers) – This group actively worked to overcome the stay-at-home attitude with great deals and a lot of advertising. They finished 2020 up 1% vs 2019 and hit a record $1.48T in 2021 but much of it was due to skyrocketing inflation. In 2022 sales got on a rollercoaster. Inflation started to drop mid-year, but it caused 4 down months in actual sales which are the only reported sales negatives by any big group in 2021>2022. This is bad but their real 2022 sales numbers were much worse, down -8.2% vs 2021 and -8.9% vs 2019. 2023 started off a little better in Jan>Feb, got worse in Mar>Apr, grew in May, then fell in Jun>Jul. Again, only monthly & Ytd real sales vs 21 are negative. Prices are -1.3% vs 22, monthly & Ytd. Only 7% of 19>23 growth is real. Avg 2019>23 Growth: +6.8%, Real: +0.6%.

Gas Stations – Gas Stations were also hit hard. If you stay home, you drive less and need less gas. This group started recovery in March 2021 and inflation began. Sales got on a rollercoaster in 2022 but reached a record $583B. Inflation started to slow in August and prices slightly deflated in Dec & Feb then strongly dropped in Mar>Jul, -15.0% Ytd vs 22. However, prices are still +15.3% vs 21. The deflation is directly tied to the monthly & Ytd sales drops vs 22. Real Ytd sales vs 22 are up slightly but still down vs 21 & 19.  Avg 2019>23 Growth: +6.2%, Real: -1.2%.The numbers show the cumulative impact of inflation and demonstrate how strong deflation can be both a positive and a negative.

Relevant Retail – Less Auto, Gas and Restaurants – They account for 60+% of Total Retail $ in a variety of channels, so they took many different paths through the pandemic. However, their only down month was April 2020, and they led the way in Total Retail’s recovery. Sales got on a roller coaster in 2022 but all months in 2022 set new records with December reaching a new all-time high, $481B, and an annual record of $4.81T. In 2023, Jan & Feb had normal drops then grew in March, starting another roller coaster. Sales fell in Jun>Jul, but all actual sales are up vs 22, 21 & 19. Real sales are only down Ytd vs 22 & 21. Monthly Real sales vs last year are again positive but have been negative in 8 of the last 10 months. 48% of their 19>23 $ are real – #1 in performance. Avg 2019>23 Growth is: +8.3%, Real: +4.3%. This big group is where America shops. The fact that real sales turned positive again gives us hope.

Inflation is slowing but the cumulative impact is still there. Sales increases are also slowing, but the fact that 55% of all real sales numbers vs 22 & 21 are positive again is a good sign. Restaurants are still doing well, and Auto is improving. Gas Stations are now seeing the negative impact of strong deflation with a continued drop in actual sales. However, as always, our biggest concern is Relevant Retail. Their situation has definitely improved. Ytd real sales vs 22 & 21 are still negative, which clearly shows the impact of cumulative inflation. However, monthly real sales vs 22 have been positive in 2 of the last 3 months. This is not the end of the crisis, but a slow turnaround appears to be continuing.

Here’s a more detailed look at July by Key Channels in the Stacked Bar Graph Format

  • Relevant Retail: Avg Growth Rate: +8.3%, Real: +4.3%. Only 4 channels were up from June but 6 were up vs 22 & 8 vs 21. Only 4 had a “real” increase vs 22 or 21. The negative impact of inflation appears to be slowing sales increases.
  • All Dept Stores – This group was struggling before the pandemic hit them hard. They began recovery in March 2020. Their Actual $ are up from June but down for all comparisons but Ytd vs 21 & 19. Their real sales are down in all measurements, even vs 2019. Avg 2019>23 Growth: +0.15%, Real: -2.5%.
  • Club/SuprCtr/$ – They fueled a big part of the overall recovery because they focus on value which has broad consumer appeal. $ales are down vs June but up in all other measurements. Their real sales are down in all measurements but Ytd vs 19. Only 35% of their 27.8% 19>23 lift is real – the impact of inflation. Avg Growth: +6.3%, Real: +2.4%.
  • Grocery- These stores depend on frequent purchases, so except for the binge buying in 2020, their changes are usually less radical. $ are up from June and in all measurements vs 22, 21 & 19. However, inflation hit them hard. Real sales are down for all but Ytd vs 2019 and only 6.9% of the growth since 2019 is real. Avg Growth: +6.2%, Real: +0.5%.
  • Health/Drug Stores – Many stores in this group are essential, but consumers visit far less frequently than Grocery stores. Sales are down from June but up in all other measurements, both actual and real vs 22, 21 & 19. Their inflation rate has been relatively low so 73% of their 23.9% growth from 2019 is real. Avg 2019>23 Growth: +5.5%, Real: +4.1%.
  • Clothing and Accessories – Clothes initially mattered less when you stayed home. That changed in March 21 with strong growth through 2022. $ales are up from June and vs 22, 21 & 19. However, Real sales are down for all but Ytd vs 21 & 19. Another positive is: 63% of their 2019>23 growth is real. Avg 2019>23 Growth: +3.8%, Real:+2.4%
  • Home Furnishings – In mid-2020 consumers’ focus turned to their homes and furniture became a priority. Inflation has slowed but was very high in 2022. Actual sales are down from June and in all other measurements but Ytd vs 2019. Their real sales are again all down, even vs 2019. Avg 2019>23 Growth: +3.6%, Real: -0.5%.
  • Electronic & Appliances – This channel has many problems. Sales fell in Apr>May of 2020 and didn’t reach 2019 levels until March 2021. $ales are down from June and in all measurements but Ytd vs 19. However, consistent deflation has caused real sales to be up in all measurements. Avg 2019>23 Growth: +0.5%, Real: +2.4%.
  • Building Material, Farm & Garden & Hardware –They truly benefited from the consumers’ focus on home. In 2022 the lift slowed as inflation grew to double digits. Inflation is still high at 7.4%. Sales are down from June and they are again all negative vs 2022. They still have the highest Inflation of any channel so real sales are negative in all but Ytd vs 2019. Also, just 20% of their sales growth since 2019 is real. Avg 2019>23 Growth is: +7.7%, Real: +1.7%.
  • Sporting Goods, Hobby and Book Stores – Consumers turned their attention to recreation and Sporting Goods stores sales took off. Book & Hobby Stores recovered more slowly. Actual $ales are down from June but positive for all but Ytd vs 21. Real sales are down for all but Ytd vs 22 & 19. Prices deflated again in July and their inflation rate has been much lower than most groups so 65.7% of their 30.6% growth since 2019 is real. Avg 2019>23 Growth: +6.9%, Real: +4.7%.
  • All Miscellaneous Stores – Pet Stores have been a key part of the strong and growing recovery of this group. They finished 2020 at +0.9% but sales took off in March 21 and have continued to grow. Sales are down vs June but positive in all but real $ vs July 22. Their increase vs 2021 fell to 2nd place but vs 2019 they are still 2nd. NonStore is #1 in both. 67% of their 43.6% 19>23 growth and even 50% of their 21>23 growth is real. Their Avg 19>23 Growth is: 9.5%, Real: 6.6%.
  • NonStore Retailers – 90% of their volume comes from Internet/Mail Order/TV. The pandemic accelerated online spending. They ended 2020 +21.4%. The growth continued in 2021 as sales exceeded $100B for the 1st time and they broke the $1 Trillion barrier. Their growth slowed significantly in 2022 and now 2023. $ are up from June and all other measurements are positive. 78% of their 88.0% growth since 2019 is real. Their Avg Growth: +17.1%, Real: +14.0%.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded with their regular store sales.

Recap – The Retail recovery from the pandemic was largely driven by Relevant Retail and by the end of 2021 it had become very widespread. In 2022, there was a new challenge, the worst inflation in 40 years. Overall, and in most product categories it has slowed since July 22, which should help the Retail Situation. Sales were down from June for 3 big groups and 7 smaller channels. Inflation continues to slow in most channels and even deflate in a few. However, some channels like Auto, Gas Stations, Grocery and Bldg Material stores still have high cumulative inflation rates so they are still struggling. Only a few channels are doing well. The new problem is that the sales increase rate vs 2022 for many channels has slowed and is even below the lower inflation rate. Real monthly sales for Relevant Retail have been positive vs 22 for 2 of the last 3 months but are still negative for 7 of 11 channels. The turnaround for Relevant retail is not widespread. It is primarily being driven by NonStore with a little help from Health Care, Electronics/Appliances  and Miscellaneous (includes Pet Stores). We still have a long way to go for a full recovery from the inflation tsunami.

Finally, here are the details and updated inflation rates for the CPIs used to calculate the impact of inflation on retail groups and channels. This includes special aggregate CPIs created with the instruction and guidance of personnel from the US BLS. I also researched data from the last Economic Census to review the share of sales by product category for the various channels to help in selecting what expenditures to include in specific aggregates. Of course, none of these specially created aggregates are 100% accurate but they are much closer than the overall CPI or available aggregates. The data also includes the CPI changes from 2021 to 2023 to show cumulative inflation.

Monthly 22>23 CPI changes of 0.2% or more are highlighted. (Green = lower; Pink = higher)

I’m sure that this list raises some questions. Here are some answers to some of the more obvious ones.

  1. Why is the group for Non-store different from the Internet?
    1. Non-store is not all internet. It also includes Fuel Oil Dealers, the non-motor fuel Energy Commodity.
  2. Why is there no Food at home included in Non-store or Internet?
    1. Online Grocery purchasing is becoming popular but almost all is from companies whose major business is brick ‘n mortar. These online sales are recorded under their primary channel.
  3. 6 Channels have the same CPI aggregate but represent a variety of business types.
    1. They also have a wide range of product types. Rather than try to build aggregates of a multitude of small expenditure categories, it seemed better to eliminate the biggest, influential groups that they don’t sell. This method is not perfect, but it is certainly closer than any existing aggregate.
  4. Why are Grocery and Supermarkets only tied to the Grocery CPI?
    1. According to the Economic Census, 76% of their sales comes from Grocery products. Grocery Products are the driver. The balance of their sales comes from a collection of a multitude of categories.
  5. What about Drug/Health Stores only being tied to Medical Commodities.
    1. An answer similar to the one for Grocery/Supermarkets. However, in this case Medical Commodities account for over 80% of these stores’ total sales.
  6. Why do SuperCtrs/Clubs and $ Stores have the same CPI?
    1. While the Big Stores sell much more fresh groceries, Groceries account for ¼ of $ Store sales. Both Channels generally offer most of the same product categories, but the actual product mix is different.

 

Petflation 2023 – July Update: Slows again, but still +8.7% vs 2022

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Inflation is no longer a “headline” but it is still news. The YOY increases in the monthly Consumer Price Index (CPI) that were larger than we have seen in decades are definitely slowing. July prices grew 0.2% from June and the CPI was +3.2% vs 2022, up slightly from +3.0% last month – a pause in the decline. Grocery pricing continues to slow. After 12 straight months of double-digit YOY monthly percentage increases, grocery inflation is down to +3.6%, now with 5 consecutive months below 10%. As we have learned, even minor price changes can affect consumer pet spending, especially in the discretionary pet segments, so we will continue to publish monthly reports to track petflation as it evolves in the market.

Total Petflation was +4.1% in December 2021 while the overall CPI was +7.0%. The gap narrowed as Petflation accelerated and reached 96.7% of the national rate in June 2022. National inflation has slowed since July 2022, but Petflation has generally increased. It passed the National CPI in July 2022 and is now +8.7% in July, 2.7 times the national rate of 3.2%. We will look deeper into the numbers. This and future reports will include:

  • A rolling 24 month tracking of the CPI for all pet segments and the national CPI. The base number will be pre-pandemic December 2019 in this and future reports, which will facilitate comparisons.
  • Monthly comparisons of 23 vs 22 which will include Pet Segments and relevant Human spending categories. Plus
    1. CPI change from the previous month.
    2. Inflation changes for recent years (21>22, 20>21, 19>20, 18>19)
    3. Total Inflation for the current month in 2023 vs 2019 and now vs 2021 to see the full inflation surge.
    4. Average annual Year Over Year inflation rate from 2019 to 2023
  • YTD comparisons
    1. YTD numbers for the monthly comparisons #2>4 above

In our first graph we will track the monthly change in prices for the 24 months from July 2021 to July 2023. We will use December 2019 as a base number so we can track the progress from pre-pandemic times through an eventual recovery. Inflation is a complex issue. This chart is designed to give you a visual image of the flow of pricing. You can see the similarities and differences in patterns between segments and compare them to the overall U.S. CPI. The current numbers plus yearend and those from 12 and 24 months earlier are included. This will give you some key waypoints. In July, Pet Products prices were down again from last month, but they increased in both Service segments.

In July 2021, the CPI was +6.2% and Pet prices were +2.8%. Like the U.S. CPI, Veterinary and Services prices generally inflated after mid-2020, while Food and Supplies prices generally deflated until late 2021. After that time, Petflation took off. Pet Food prices consistently increased but the other segments had mixed patterns until July 2022, when all increased. In Aug>Oct Petflation accelerated. In Nov>Dec, Services & Food prices continued to grow while Veterinary & Supplies prices stabilized. In Jan>Apr, prices grew every month except for 1 dip by Supplies. In May Products prices grew while Services slowed. In June & July this pattern was reversed. Petflation has been above the CPI since November 22.

  • U.S. CPI – The inflation rate was below 2% through 2020. It turned up in January 2021 and continued to grow until flattening out in Jul>Dec 2022. Prices turned up again in Jan>Jul but 36% of the overall 19.0% increase in the 43 months since December 2019 happened in the 6 months from January>June 2022 – 14% of the time.
  • Pet Food – Prices stayed generally below Dec 2019 levels from Apr 20 > Sep 21, when they turned up. There was a sharp lift in Dec 2021, and it continued until the Jun/Jul dip. 93% of the 22.9% increase has occurred since 2022.
  • Pet Supplies – Supplies prices were high in December 2019 due to the added tariffs. They then had a “deflated” roller coaster ride until mid-2021 when they returned to December 2019 prices and essentially stayed there until 2022. They turned up in January and hit an all-time high, beating the 2009 record. They plateaued from Feb> May, turned up in June, flattened in July, then turned up in Aug>Oct setting a new record. Prices stabilized in Nov>Dec but turned up in Jan>Feb, a new record. They fell in March, set a record in May, then fell in Jun>Jul.
  • Pet Services– Normally inflation is 2+%. Perhaps due to closures, prices increased at a lower rate in 2020. In 2021 consumer demand increased but there were fewer outlets. Inflation grew in 2021 with the biggest lift in Jan>Apr. Inflation was stronger in 2022 but it got on a rollercoaster in Mar>June. It turned up again July>Mar but the increase slowed to +0.1% in April. Prices fell -0.3% in May then turned up again in Jun>Jul.
  • Veterinary – Inflation has been pretty consistent in Veterinary. Prices turned up in March 2020 and grew through 2021. A pricing surge began in December 2021 which put them above the overall CPI. In May 2022 prices fell and stabilized in June causing them to briefly fall below the National CPI. However, prices turned up again and despite Oct & Dec dips they have stayed above the CPI since July. In 2023 prices slowly grew except for a dip in May.
  • Total Pet – The blending of patterns made Total Pet appear calm. In December 2021 the pricing surge began. In Mar>June 2022 the segments had ups & downs, but Petflation grew again from Jul>Nov. It slowed in December, turned up Jan>May, then fell in Jun>Jul. Except for 7 individual monthly dips, including 4 in Jun>Jul, prices in all segments have increased monthly in 2023. It has been ahead of the cumulative U.S. CPI since November 2022.

Next, we’ll turn our attention to the Year over Year inflation rate change for July and compare it to last month, last year and to previous years. We will also show total inflation from 21>23 & 19>23. Petflation was again below double digits at 8.7% in July but is still over 2.7 times the National rate. The chart will allow you to compare the inflation rates of 22>23 to 21>22 and other years but also see how much of the total inflation since 2019 came from the current pricing surge. Again, we’ve included some human categories to put the pet numbers into perspective.

Overall, Prices were +0.2% vs June and were up 3.2% vs July 2022. The Grocery increase is down again, to +3.6% from +4.7%, but still impacts consumers. Prices often rebound in July so it’s not surprising that only 3 of 9 categories had decreased prices from last month, compared to 5 in June 3 in May and 1 in April. Of the 6 categories with increases, 3 were from Pet – Veterinary, Services and Total. 3 of the 6 were over 0.3%, Haircuts: 0.6%; Groceries & Pet Services: 0.4%. The national YOY monthly inflation rate for July is up from June but is still much lower than the 21>22 rate. All but 3 categories – Veterinary, Non-Vet Services and Haircuts have a similar pattern. In the 2 Pet Categories the 22>23 inflation rate is higher than the 21>22 rate and is in fact the highest rate in any year since 2019. In our 2021>2023 measurement you also can see that over 67% of the cumulative inflation since 2019 occurred from 21>23 for all segments but Pet Services, Medical Services, Haircuts/Personal Services and the U.S. CPI. Note: These are service expenditures and show its increasing influence on the CPI. Pet Products are unique. The 21>23 inflation surge provided over 98% of the overall inflation since 2019. This happened because Pet Products prices were deflated in 2021.

  • U.S. CPI– Prices are +0.2% from June. The YOY increase rose to +3.2% from 3.0%. It peaked at +9.1% back in June 2022. The targeted inflation rate is <2% so we are still 50% higher than the target. This is the 1st lift after 12 straight declines. Not good news. It’s good that the current inflation rate is below 21>22 but the 21>23 rate is still 12.0%, 63% of total inflation since 2019. How many households “broke even” by increasing their income by 12% in 2 years?
  • Pet Food– Prices are -0.2% vs June and +10.6% vs July 2022. They are also 2.9 times the Food at Home inflation rate – not good news! The YOY increase of 10.6% is being measured against a time when prices were 11.1% above the 2019 level, but that increase is still an incredible 2.9 times the pre-pandemic 3.6% increase from 2018 to 2019. The 2021>2023 inflation surge generated 100% of the total 22.7% inflation since 2019.
  • Food at Home – Prices are up +0.4% from June. The monthly YOY increase is 3.6%, down from 4.7% in June and considerably lower than Jul>Sep 2022 when it exceeded 13%. The 25.7% Inflation for this category since 2019 is 34% more than the national CPI and remains 2nd to Veterinary. 67% of the inflation since 2019 occurred from 2021>2023. The pattern mirrors the national CPI, but we should note that Grocery prices began inflating in 2020>2021 then the rate accelerated. It appears that the pandemic supply chain issues in Food which contributed to higher prices started early and foreshadowed problems in other categories and the overall CPI tsunami.
  • Pets & Supplies– Prices fell -0.5% from June, and they still have the lowest increase since 2019. They also stayed in last place in terms of the monthly increase vs last year for Pet Segments. As we noted earlier, prices were deflated for much of 2021 so the 2021>2023 inflation surge accounted for 96% of the total price increase since 2019. They reached an all-time high in October then prices deflated. 3 straight months of increases pushed them to a new record high in February. Prices fell in March, bounced back in Apr>May to a new record high then fell in June & July.
  • Veterinary Services – Prices are up 0.1% from June. They are +10.63% from 2022 and took over 1st place from Food (+10.61%) in the Pet Industry. Plus, they are still the leader in the increase since 2019 with 29.6% compared to Food at home at 25.7%. For Veterinary Services, relatively high annual inflation is the norm. The rate did increase during the current surge so 70% of the 4 years’ worth of inflation occurred in the 2 years from 2021>2023.
  • Medical Services – Prices turned sharply up at the start of the pandemic but then inflation slowed and fell to a low rate in 20>21. In July prices fell -0.3% from June and are -1.5% vs 2022, the only 22>23 deflation in any category. Medical Services are not a big part of the current surge as only 33% of the 2019>23 increase happened from 21>23.
  • Pet Services – Inflation slowed in 2020 but began to grow in 2021/2022. July 23 prices were up +0.4% from June and +6.3% vs 2022, which is the same as last month but much lower than 8.0% in March. Initially their inflation was tied to the current surge, but it may be becoming the norm as only 59% of the total since 2019 occurred from 21>23.
  • Haircuts/Other Personal Services – Prices are +0.6% from June and +5.3% from 2022, the 2nd highest rate since 2019. However, inflation has been rather consistent so just 46% of the inflation from 19>23 happened from 21>23.
  • Total Pet– Petflation is now 4% lower than the 21>22 rate, but 2.7 times the National CPI. For July, +8.7% is 2nd only to +9.1% in 2022. Vs June, Product Prices fell while Services increased so Total Pet was +0.03%. A June>July increase has happened in 19 of the last 26 years so a small increase was expected. Food & Veterinary are still the Petflation leaders, but only Service segments have a 22>23 rate above 21>22. Pet Food has been immune to inflation as Pet Parents are used to paying a lot. However, inflation can cause reduced purchase frequency in the other segments.

Now, let’s look at the YTD numbers

The increase from 2022 to 2023 is the biggest for 4 of 9 categories – All Pet. The 22>23 rate for Haircuts is slightly below 21>22. However, the Total CPI, Pet Supplies, Medical Services and Food at Home are significantly down from 21>22. The average annual increase since 2019 is 4.4% or more for all but Medical Services (3.0%) and Pet Supplies (2.7%).

  • U.S. CPI – The current increase is down 45% from 21>22 and only 4.5% more than the average increase from 2019>2023, but it’s 2.1 times the average annual increase from 2018>2021. 71% of the 18.9% inflation since 2019 occurred from 2021>23. Inflation is a big problem that started recently.
  • Pet Food – Strong inflation continues with the highest 22>23 & 21>23 rates on the chart. Deflation in the 1st half of 2021 kept YTD prices low then prices surged in 2022. 95.2% of the inflation since 2019 occurred from 2021>23.
  • Food at Home – The 2023 YTD inflation rate has slowed but still beat the U.S. CPI by 57%. You can see the impact of supply chain issues on the Grocery category as 74% of the inflation since 2019 occurred from 2021>23.
  • Pets & Pet Supplies – The inflation rate is down to 5.0% as prices fell again in July. Prices deflated significantly in in both 2020 & 2021 which helped to create a very unique situation. Prices are up 11.1% from 2019 but 114% of this increase happened from 2021>23. Prices are up 12.6% from their 2021 “bottom”.
  • Veterinary Services – They are still #1 in inflation since 2019 but they have only the 3rd highest rate since 2021. At +6.4%, they have the highest average annual inflation rate since 2019. Except for a sight slowing in 2020, prices have consistently increased since 2019. Regardless of the situation, strong Inflation is the norm in Veterinary Services.
  • Medical Services – Prices went up significantly at the beginning of the pandemic, but inflation slowed in 2021. In 2023 prices have been deflating and are now at a rate actually 77% below the pre-pandemic 2018>19 rate.
  • Pet Services – May 22 set a record for the biggest year over year monthly increase in history. Prices fell in June but began to grow again in July, reaching record highs in Sep>Apr. The January 2023 increase of 8.4% set a new record. YTD July again slipped a little to 6.9%. Interestingly, although the rates are not as high, they have the exact same annual inflation pattern as Veterinary. The Services segments in the Pet Industry are definitely unique.
  • Haircuts & Personal Services – The services segments, essential & non-essential were hit hardest by the pandemic. After a small decrease in March 22, prices turned up again. Since 2021 inflation has been a consistent 5+%, 90% higher than 18>19. Consumers are paying 21% more than in 2019, which usually reduces the purchase frequency.
  • Total Pet – There were two different patterns. After 2019, Prices in the Services segments continued to increase, and the rate grew as we moved into 2021. Pet products – Food and Supplies, took a different path. They deflated in 2020 and didn’t return to 2019 levels until mid-year 2021. Food prices began a slow increase, but Supplies remained stable until near yearend. In 2022, Food and Supplies prices turned sharply up. Food prices continued to climb until Jun/Jul 23. Supplies prices stabilized Apr>May, grew Jun>Oct, fell in Nov, rose in Dec>Feb, fell in Mar, rose in Apr>May then fell in Jun>Jul. The Services segments have also had ups & downs but are generally inflating. The net is a YTD Petflation rate vs 2022 of 10.0%, 2.2 times the National rate. In May 22 it was 5.8% below the CPI.

Petflation is still strong. Let’s put the numbers into perspective. Petflation slowed from 9.6% in June to 8.7% in July. This is below the record 12.0% set in November, but still 2nd highest for the month. More bad news is that 9 of the last 12 months have been over 10% and the current rate is still 5.4 times more than the 1.6% average rate from 2010>2021. It’s also 2.7 times the national rate. There is no doubt that the current pricing tsunami is a significant event in the history of the Pet Industry, but will it affect Pet Parents’ spending. In our demographic analysis of the annual Consumer Expenditure Survey which is conducted by the US BLS with help from the Census Bureau we have seen that Pet spending continues to move to higher income groups. However, the impact of inflation varies by segment. Supplies is the most affected as since 2009 many categories have become commoditized which makes them more price sensitive. Super Premium Food has become widespread because the perceived value has grown. Higher prices generally just push people to value shop. Veterinary prices have strongly inflated for years, resulting in a decrease in visit frequency. Spending in the Services segment is the most driven by higher incomes, so inflation is less impactful. This spending behavior of Pet Parents suggests that we should look a little deeper. Inflation is not just a singular event. It is cumulative. Total Pet Prices are up 8.7% from 2022 but they are up 18.5% from 2021 and 22.7% from 2019. That is a huge increase in a very short period. It puts tremendous monetary pressure on Pet Parents to prioritize their expenditures. We know that the needs of their pet children are always a high priority but let’s hope for a little relief – stabilized prices and even deflation. This is not likely in the Service segments but is definitely possible in products. It’s happened before. We need it again.

U.S. Pet Services Spending (Non-Vet) $10.87B (↑$3.43B): 2022 Mid-Year Update

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In our analysis of Pet Food & Supplies Spending, we saw strong growth in the 2nd half of 2021 which sent Supplies to a record high and returned Food to near its Pandemic binge high. Both had continued but slowed growth in early 2022. Strong inflation may have been a factor. Now we turn our attention to Pet Services. The Mid-year numbers show that spending in this segment was $10.87B, up $3.43B (+46.2%) from the previous year. Up until 2018, this segment was known for consistent, small growth. In 2018, increased outlets and competitive prices brought on a wave of new users and spending increased +$1.95B. Spending remained near this new high normal until we reached 2020. Closures due to the pandemic drove spending down $1.73B by yearend, essentially returning to the level of 2017. In 2021 things opened up and spending began to rebound. This deserves a closer look. First, we’ll look at Services spending history since 2014.

Here are the 2022 Mid-Yr Details:

Mid-Year 2022: $10.87B; ↑$3.43B (+46.2%) vs Mid-Yr 2021

Jul > Dec 2021: ↑$1.66B

Jan > Jun 2022: ↑$1.77B

Pet Services is by far the smallest industry segment. However, except for 2010 and 2011, the period immediately following the Great Recession, it had consistent annual growth from 2000 through 2016. Spending in Food and Supplies have been on a roller coaster ride during that period. Services Spending more than tripled from 2000 to 2016, with an average annual growth rate of 7.6%. Spending in the Services Segment is the most discretionary in the industry and is more strongly skewed towards higher income households. Prior to the great recession, the inflation rate averaged 3.9% with no negative impact. The recession affected every industry segment, including Services. Consumers became more value conscious, especially in terms of discretionary spending. Services saw a slight drop in spending in both 2010 and 2011, but then the inflation rate fell to the 2+% range and the segment returned to more “normal” spending behavior. In mid-2016 inflation dropped below 2% and continued down to 1.1% by the end of 2017. This was primarily due to increased competition from free-standing businesses but also an increase in the number of Pet Stores and Veterinary Clinics offering pet services. While prices still went up slightly, there were deals to be had and consumers shopped for the best price. There was no decrease in purchase frequency. Consumers just paid less so spending fell slightly. In the 2nd half of 2017 spending turned up again. More Consumers began to take advantage of the value and convenience of the increased number of outlets offering Services. This deeper market penetration caused Services Spending to take off in 2018, up $1.95B, the biggest annual increase in history. Prices turned up again in the 1st half of 2019, +2.8% from 2018. However, Services spending inched up $0.09B. In the 2nd half of 2019 consumers Value Shopped again so spending fell -$0.19B. Then came 2020 and the pandemic. Many of these nonessential businesses were forced to close and spending fell precipitously, -$1.73B to $6.89B, about the same as yearend 2017. In 2021 things opened up again and spending bounced back, +$0.55B vs the 1st 6 months of 2020. Unlike Food and Supplies the increase continued to accelerate even into 2022, despite an inflation rate of 6+%. This produced a record 12-month increase and a new record high, $10.87B.

Let’s take a closer look at some key spending demographics – Age and Income.

In the graphs that follow we compare spending for the 12 months ending 6/30/22 to the previous 12 months. The graphs also include the 2021 yearend $, so you can see spending changes in the 2nd half of 2021 and the 1st half of 2022.

The first graph is for Income, the single most important factor in increased Pet Spending, especially in Services.

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

Mid-yr Total Spending Change: $8.41B – $5.04B = Up +$3.37B (Note green outline = increase; red outline = decrease)

  • 2nd half of 2021: Subtract Mid-21 ($5.04B) from Total 2021 ($6.81B) = Spending was up $1.77B in 2nd half of 2021.
  • 1st half of 2022: Subtract Total 2021 ($6.81B) from Mid-22 ($8.41B) = Spending was up +$1.60B in 1st half of 2022.

  • With the Over/Under $100K measurement, you see how Services Spending is definitely skewed towards higher incomes. The halfway spending point is about $141K so about 20% of CUs spend 50% of Services $. However, spending in both the under & over $100K groups grew in both halves.
  • All groups $70K> had steady growth. The <$70K groups had basically 2 different patterns. Surprisingly, the <$30K had growth in both halves. The $30>70K groups had decreased spending despite a 2022 lift by $30>50K.
  • The $50>70K group had the worst performance. They had the biggest decrease, -20.9% and decreases in both halves. In fact, they were the only segment with decreased spending in the 1st half of 2022.
  • The over $150K group has 16.7% of the CUs but accounts for 46.2% of Services $. This is actually a much larger share than the 37.6% that they had in pre-pandemic 2019. The pandemic has increased the importance of this group.
  • Income, especially when it is over $150K, is by far the biggest factor in the discretionary spending in the Services segment so Services spending is more unbalanced in regard to income. The highest income groups are more driven by convenience than value so high inflation rates are likely to actually increase spending because of higher prices.

Now, Services’ Spending by Age Group.

  • Basically the <25 yr-olds spent less while everyone else spent more. Their spending fell slightly in both halves.
  • The 55>64 group had the biggest increase, up +$1.17B (+85.4%) and held on to the top spot in Services spending.
  • The 35>44 yr-olds spent +$0.79B more (+50.3%) and held on to the 2nd spot in spending.
  • The 45>54 yr olds had a small increase despite a drop in the 2nd half of 2021. They are #3. In Mid-2021 they were #1.
  • Although their lift was small this year, 25>34 yr-olds are the only group with consecutive mid-year increases.
  • The 65> groups were up $1.1B (+80.3%) with lifts in both halves, including a +$0.65B increase in the 1st half of 2022. The 65>74 yr-old Baby Boomers led the way – No Surprise.
  • All groups but <25 had a spending lift in the 1st half of 2022, a big change from Food & Supplies.

Now let’s look at what is happening in Pet Services spending at the start of 2022 across the whole range of demographics. In our final chart we will list the biggest $ moves, up and down by individual segments in 12 demographic categories. Remember, the lift in the 1st half of 2022 was +$1.77B vs 2021 and +$2.32B vs 2020.

2022 has started even better than 2021 as spending continues to grow. In 5 categories all segments spent more. Last year, only all income segments spent more. In 2020, there were 4 categories in which all segments spent less on Services. Also, the $ changes from the winners are overwhelmingly larger than the negatives of the losers. The +$1.77B increase in Pet Services came from 74 of 82 demographic segments (90%) spending more. Last year it was 78% and in 2020, 88% spent less. The strong recovery has become a growth tsunami, +58% from 2020 and even +23% from 2019.

The usual winners have overwhelmingly returned with only 2 minor surprises

  • The South
  • Tie: 55>64 & 65>74

Virtually all of the Losers were also expected. Here are the surprises:

  • Gen X
  • Northeast

The older groups, specifically Baby Boomers are driving the 1st half lift. The 55>74 yr-olds are essentially all Boomers. Most Boomer CUs are 2 people, with no kids. The younger groups had the best performance in the 1st half of 2021 and 2020. It appears that the Baby Boomers have at least briefly “taken back the torch”.

Services $ are at a record high and growing. Let’s review how we got to this point and speculate on what comes next.

Except for the trauma caused by the Great Recession which hit Services in 2010>11, from 2000 to 2016 the Services segment had slow but consistent growth. The number of outlets also was increasing. Services were gaining in popularity and many retail pet stores were looking for a competitive edge over the growing pet product sales of online retailers. Afterall, you can buy product, but you can’t get your dog groomed on the internet. By 2017 the number of outlets offering Pet Services had radically increased. This created a highly competitive market and the inflation rate dropped to near record lows. Value conscious consumers saw that deals were available, and they took advantage of the situation. However, they didn’t increase the frequency of purchase. They just paid less. This drove overall Pet Services spending down in the 1st half of 2017. The segment started to recover in the 2nd half but not enough to prevent the first annual decrease in Pet Services spending since 2011. However, it was a start. In 2018, more consumers started to recognize the convenience offered by more outlets. The latest big food upgrade was also winding down. The result was that Services started a deeper penetration into the market, especially in the younger groups. The <45 groups spent $1.47B more on Services in 2018, 74% of the total $1.95B increase in the segment. After such a big lift, a slight downturn in 2019 was not unexpected and it happened, -$0.1B. Then came 2020 and COVID. Although the consumer use of Services was becoming increasingly widespread, many Services outlets were deemed nonessential and were subject to pandemic restrictions and closures. Services Spending fell -$1.73B (-20.1%) in 2020 and nearly wiped out the big gain made in 2018.

In 2021, things opened up and Services spending began to rebound with a +$0.55B lift in the 1st half. This lift accelerated in the 2nd half and even the 1st half of 2022. Spending reached a new record high of $10.87B, with an annual growth rate of 7.3% since mid-yr 2019. That’s 43% higher than the 5.1% rate from 2009 to 2019. Pet Services have become an important option that is exercised by an increasing number of Pet Parents. However, much of the growth is increasingly being driven by higher incomes. There is some good news in this trend. Higher incomes are less negatively impacted by strong inflation. They buy the same amount, just pay more. This means that Services $ are likely to continue to grow.

U.S. PET SUPPLIES SPENDING $24.38B (↑$6.96B): MID-YR 2022 UPDATE

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In our analysis of Pet Food spending, we saw that spending had returned to strong normal growth after the up & down due to the pandemic. Supplies had a different pattern. At the beginning of 2020, Supplies Spending was down due to Tarifflation. The pandemic caused consumers to focus on needs so Supplies $ continued its steady decline from its 2018 peak reaching a low point below 2016. In 2021, that all changed. Supplies Prices had been steadily deflating and Consumers finally responded. In 2021 Pet Supplies spending took off, especially in the 2nd half. The increase slowed significantly in the 1st half of 2022. High inflation may have been a factor in the slowed increase but spending is still at a record $24.38B. The following chart should put the recent spending history of this segment into better perspective.

Here are this year’s specifics:

Mid 2022: $24.38B, ↑$6.96B (+40.0%) from Mid 2021.

The +$6.96B came from: Jul > Dec 2021: ↑$6.39B; Jan > Jun 2022↑$0.57B

The lift was huge and 92% of it came from the $6.39B increase in the 2nd half of 2021, by far the biggest YOY 6 month increase in history. Like Pet Food, Pet Supplies spending has been on a roller coaster ride, but the driving force is much different. Pet Food is “need” spending and has been powered by a succession of “must have” trends and the emotional response to the Pandemic. Supplies spending is largely discretionary, so it has been impacted by 2 primary factors. The first is spending in other major segments. When consumers ramp up their spending in Pet Food, like upgrading to Super Premium, they often cut back on Supplies. However, when they value shop for Premium Pet Food, they take some of the saved money and spend it on Supplies. The other factor is price. Before breaking the record in 2022, Pet Supplies prices reached their peak in September of 2009. Then they began deflating and in March 2018 were down -6.7% from 2009. Price inflation in this segment can retard sales, usually by reducing the frequency of purchase. While deflation generally drives Supplies spending up. A new “must have” product can “trump” both of these influencers. Unfortunately, we haven’t seen much significant innovation in the Supplies segment recently.

Recent history gives a perfect example of the Supplies roller coaster. In 2014 Supplies prices dropped sharply, while the movement to Super Premium Food was barely getting started – Supplies spending went up $2B. In 2015, consumers spent $5.4B more on Pet Food. At the same time, Pet Supplies prices went up 0.5%. This combination caused Supplies $ to fall $2.1B. In 2016 consumers value shopped for Food, saving $2.99B. Supplies spending stabilized then increased by $1B in the 2nd half when prices fell sharply. Consumers spent some of their “saved” money on Supplies. Supplies prices continued to deflate through 2017. Food spending increased $4.61B in 2017 but this generally came from older CUs, less focused on Supplies. The result was a $2.74B increase in Supplies spending.

In the 1st half of 2018 Pet Food spending slowed, +$0.25B. Supplies’ prices began inflating but were only +0.1% vs 2017. During this period Supplies Spending increased $1.23B. Inflation grew in the 2nd half of 2018 due to impending new tariffs in September. By June 2019 they were 3.4% higher than 2018. The impact of the tariffs on Supplies was very clear. Spending flattened in the 2nd half of 2018, then plummeted in the 1st half of 2019, -$2.09B. Prices stayed high for the rest of 2019 and spending fell an additional -$0.9B. In 2020 prices turned up again through March before plummeting,    -3.8% by June. However, due to the pandemic focus on “needs”, spending dropped an additional -$0.54B. The situation not only didn’t change in the 2nd half, it worsened as the $ fell an additional -$1.12B. However, 2021 brought a record resurgence as consumers “caught up” on the Supplies purchases that had been delayed due to the pandemic. Supplies spending increased +$8.65B in 2021, 20% above their 2018 peak. Sales passed $24B in  Mid-yr 2022 but the YOY 1st half increase slowed to +$0.57B. Inflation in Supplies took off at the beginning of 2022 so it may once again be a factor.

Here’s what Pet Supplies inflation looked like in Mid-2022:

  • Mid-Yr 22 vs 21: 5.6% • 2nd Half 21 vs 20: 3.9%       • 1st half 22 vs 21: 7.4%

You can see that the rate doubled in early 2022, which could have been a factor in the lower increase. However, 81% of the 40% spending increase was real. Inflation increased to 8.0% in the 2nd half of 2022 which made the 2022 annual YOY rate 7.7%. We’ll see if Pet Parents continue to spend at the same level despite record high prices.

Now, let’s take a closer look at the data, starting with two of the most popular demographic measures – age and income. The graphs that follow will show both the current and previous 12 months $ as well as 2021 yearend. This will allow you to track the spending changes between halves.

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

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

Mid-yr Total Spending Change: $7.12B – $6.90B = Up $0.22B (Note: green outline = increase; red outline = decrease)

  • 2nd half of 2020: Subtract Mid-21 ($6.90B) from Total 2021 ($7.53B) = Spending was up $0.63B in 2nd half of 2021.
  • 1st half of 2022: Subtract Total 2021 ($7.53B) from Mid-22 ($7.13) = Spending was down $0.41B in 1st half of 2022.

  • You see that there are 2 basic patterns. The groups over $100K had increases in both halves, with the largest lift coming in the 2nd half of 2021. The under $100K also had spending increases during the 2nd half of 2021 but they were small. In the 1st half of 2022, spending for all lower income groups but $30>50K fell vs 2021. The drop was large enough for $50>70K that it had the only overall mid-year decrease in spending of any group.
  • It is very obvious from the chart that Supplies spending has moved to the higher incomes, especially the $150K> group. Over $100K has 31.4% of CUs but accounts for 58.7% of Supplies $. That’s a performance level of 186.7%. However, the $150K> is even stronger with 16.7% of CUs generating 40.3% of Supplies spending – performance: 241.3%. The highest performance for any group under $100K is from $70>100K at 85.2% but the averages were: <$100K = 60.2%; <$70K = 53.7%. The halfway point in Supplies spending is an income of $124K. That’s 36% higher than the level for Food. Pet Supplies spending is very much driven by income.

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

  • There were 3 spending patterns. For 55> and 25>34 spending grew in both halves. The high-income 35>54 groups had a lift in the 2nd half of 21 then a small drop in 22. The <25 group had the only overall drop in spending.
  • The 2 biggest lifts came from 35>44, +$3.44B and 55>64, +$1.67B. Most of their increases came in the 2nd half of 21.
  • A big factor in the lower increase in 22 was that all but <25 had big spending increases in the 1st half of 21.
  • Supplies spending skews a little younger. The halfway point is 47 yrs old, a little younger than Food at 53 but in the middle of the highest income groups. Income is the biggest driver.

Now let’s look at what happened in Supplies spending at the start of 2022 across the whole range of demographics. In our final chart we will list the biggest $ moves, up and down by individual segments in 12 demographic categories.

  • Although the overall lift was small, the biggest increases are still radically larger than the biggest decreases.
  • The increase/decrease was mixed across the marketplace but 68% of segments spent more. There was no category in which all segments spent more. Last year there were 7. In 2020 there were 5 in which all segments spent less.
  • Many of the winners are the “usual suspects”, like $150K>, Mgrs/Professionals & 2 Earners but there are a couple of surprises – Associates degree & Center City.
  • In regard to the losers, $30>49K, Asians, 1 Earner, Singles and Renters are not unexpected but Gen X, 45>54 and those with BA/BS Degree are definitely surprises.
  • Perhaps the biggest trend is that the Baby Boomers are now catching up. The younger groups “bought in” earlier on Supplies. The wins by 55>64, Homeowners w/o Mtges, Married, w/child over 18 support the Boomers’ win.
  • The importance of high income in Supplies spending is reinforced. $150K> had the biggest 2022 lift of any segment as well as a $4B lift in the 2nd half of 2021. One way to overcome strong inflation is to make more money.

Since the Great Recession the Supplies segment has become commoditized and very sensitive to inflation/deflation. Plus, since most categories are discretionary, Supplies spending can be affected by spending changes in other segments, as Pet Parents trade $. In 2018, the Pet Industry was introduced  to a new “game changer” – outside influence. The FDA warning on grain free dog food caused a big decrease in food spending but the government also radically increased tariffs which drove Supplies prices up and spending down, a record $2.98B.

However, we weren’t done yet. That brought us to 2020 and a new, totally unexpected outside influence, the COVID pandemic. This affected all facets of society, including the Pet Industry. Consumers, including Pet Parents, focused on needs rather than wants. In the Pet Industry, this meant that their attention was drawn to Food and Veterinary Services. This led to a huge lift in Pet Food $ due to binge buying but also a big increase in Veterinary spending. The more discretionary segments, Supplies and Services, suffered. Services had an extra handicap. Many outlets were not considered essential, so they were subject to restrictions and closures. Supplies were still available, but many were considered optional by consumers so spending continued to decline throughout 2020. By yearend, $ had reached the lowest level since 2015. This all happened while prices continued to deflate. That brought us to 2021. The retail economy had largely recovered and spending patterns were returning to “normal”. This was also true in Pet Supplies. Pet Parents opened their wallets and  bought the Pet Supplies that they had been holding back on for a year. The result was the biggest annual increase in history. At the end of 2021 and throughout 2022, inflation came back into the picture with the highest YOY increases in history. The ongoing lift in Supplies spending slowed in the 1st half of 2022 but that spending was going against a record increase in 2021. There was some impact on lower incomes, but the high incomes remained strong. Inflation continued to grow in the 2nd half of 2022. We’ll see if its impact on spending increases.

Retail Channel Monthly $ Update – May Final & June Advance

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While inflation continues to slow, its cumulative effect on consumer spending is still being felt. The rate of sales increases is still slower than the decrease in inflation in a number of channels, which causes a drop in the amount of product sold. A recovery may have started but there is still a long road ahead, so we’ll continue to track the retail market with data from two reports provided by the Census Bureau and factor in the CPI from US BLS.

The Census Bureau Reports are the Monthly and the Advance Retail Sales Reports. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – about 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

We will begin with the Final Report for May and then go to the Advance Report for June. Our focus is comparing to last year but also 2021 and 2019. We’ll show both actual and the “real” change in $ as we factor inflation into the data.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports, and we fill focus on Pet Relevant Channels

The data will be presented in detailed charts to facilitate visual comparison between groups/channels. The charts will show 11 separate measurements. To save space they will be displayed in a stacked bar format for the channel charts.

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2022 and 2021.
    • Current Month Real change for 2023 vs 2022 and vs 2021 – % factoring in inflation
  • Current Ytd change – % & $ for 2023 vs 2022, 2021 and 2019.
    • Current Ytd Real change % for 2023 vs 2022, 2021 and 2019
  • Monthly & Ytd $ & CPIs for 22>23 and 21>23 which are targeted by channel will also be shown. (CPI Details are at the end of the report)

First, the May Final. All were up from April, and all but Gas Stations were up vs 22, 21 & 19. When you consider inflation, the negatives were fewer than in April. However, Gas Stations are still really down vs 2019. The most significant change may be that Relevant Retail is now “really” up vs May 22. (All $ are Actual, Not Seasonally Adjusted)

The May Final is $2.8B more than the Advance Report. Specifically, Restaurants: +$1.4B; Auto: +$1.0B; Gas Stations: +$0.4B; Relevant Retail: N/C. Sales were up from April for all big groups and actual sales for all but Gas Stations were positive in all measurements vs 22, 21 & 19. Strong deflation caused Gas Stations sales to drop monthly and YTD vs 2022. There are some real sales drops, especially vs 2021. Restaurants have the most growth and are the only group with all positives. To reiterate, the most significant data may be that real sales for Relevant Retail vs May 22 are positive. They have been down for 7 straight months. They are #1 in performance since 2019 but only 48% of the growth is real.

Now, let’s see how some Key Pet Relevant channels did in May in the Stacked Bar Graph Format

Overall– All 11 were up from April, but vs 22, 8 were up vs May 22 and 10 Ytd. 6 were “really” down monthly & Ytd. Vs 2021, 9 had increases but only 4 monthly & Ytd were real. Vs 2019, only Off/Gift/Souv & Disc Dept Strs were really down

  • Building Material Stores – The pandemic focus on home has produced sales growth of 35.7% since 2019. Prices for the Bldg/Matl group have inflated 20.8% since 2021 which is having an impact. HomeCtr/Hdwe stores are down for the month & Ytd vs 22 but up vs 21 &19. Farm Stores are up in all measurements. However, both have all negative real numbers vs 2022 & 2021. Importantly, only 21.5% of their 19>23 lift was real. It was only this high because most of the lift came prior to the inflation wave. Avg 19>23 Growth: HomeCtr/Hdwe: 7.3%, Real: 1.3%; Farm: 11.3%, Real: 5.0%
  • Food & Drug – Both channels are truly essential. Except for the pandemic food binge buying, they tend to have smaller fluctuations in $. However, they have been very different in inflation. The gap is closing but the Grocery rate is still 32% higher than Drugs/Med products. Drug Stores are positive in all measurements and 73% of their growth since 2019 is real. While the $ are up for Supermarkets their 2023 real sales are down vs 2022 & 2021 and just slightly positive vs 2019. Only 9% is real growth. Avg 19>23 Growth: Supermarkets: +6.4%, Real: +0.6%;Drug Stores: +5.0%, Real: +3.7%.
  • Sporting Goods Stores – They also benefited from the pandemic in that consumers turned to self-entertainment, especially sports & outdoor activities. Sales are up from April and are actually & really positive vs 2022. However, they are actually & really negative vs 21. Prices are still deflating -0.9%, a big change from +5.4% in 21>22 and +6.5% in 20>21. The result is that 60% of their 44.6% lift since 2019 is real. Their Avg 19>23 Growth Rate is: +9.7%; Real: +6.1%.
  • Gen Mdse Stores – All were up vs April and $ stores had the biggest lift. Actual sales vs 22, 21 & 19 were also up for all but Disc Dept Strs vs May 22 & 21. In real sales, the only positive was in Ytd sales for $/Value Stores vs 22. Disc Dept Stores are the worst performer and are now really down -0.1% vs 2019. The other channels average 34% In real growth. Avg 19>23 Growth: SupCtr/Club: 6.2%, Real: 2.2%; $/Value Strs: +6.6%, Real: +2.6%; Disc. Dept.: +2.7%, Real: -0.01%
  • Office, Gift & Souvenir Stores – Actual sales are up 10.9% from April but down from May 22. They were up in all other measurements vs 22, 21 & 19. Their real sales growth is down monthly vs 22 & Ytd vs 19. All other real numbers are positive. Their recovery started late but they are making slow progress. Avg Growth Rate: +0.9%, Real: -1.8%
  • Internet/Mail Order – Sales are up from April and above $100B again at $105.3B – another monthly record. All measurements are positive, but their growth is only 43% of their average since 2019. However, 79% of their 97% growth since 2019 is real. Avg Growth: +18.5%, Real: +15.4%. As expected, they are still by far the growth leaders since 2019.
  • A/O Miscellaneous – Pet Stores are 22>24% of total $. In May 2020 they began their recovery which reached a record level of $100B for the first time in 2021. In 2022 their sales dipped in January, July, Sept>Nov, rose in December, fell in Jan>Feb, then turned up in Mar>May. (May was +18%) Ytd Real sales are down vs 22, but all other measurements are positive. They are still the % increase leaders vs 2021 and 71% of their 55.2% growth since 2019 is real. Average 19>23 Growth: +11.6%, Real: +8.7%. They are still 2nd in growth since 2019 to the internet. Pet Stores are surely contributing.

Inflation remains an important factor in Retail. In actual $, 8 channels reported increases in sales vs 2022 and 9 vs 2021. When you factor in inflation, the number with any “real” growth drops to 5 vs 2022 & 4 vs 2021. Inflation has impacted sales increases. May was a strong month but the lift was still 30% less than in Jan & Feb. The impact is very visible at the retail channel level. Inflation has continued to slow. Let’s look at the impact on the Advance Retail $ales for June.

Since 2019, we have seen the 2 biggest monthly drops in history but a lot of positives in the Pandemic recovery. Total Retail reached $700B in a month for the first time and broke the $7T barrier in 2021. Relevant Retail was also strong as annual sales reached $4T in 2021 and all big groups set annual $ales records. In 2022 radical inflation was a big factor. At first, this reduces the amount of product sold but not $ spent. Total Retail hit $8T and all groups again set new annual records in 2022. In 2023, sales fell for all groups in Jan>Feb, rose in March, fell in April, grew again in May, then dropped in June. Except for a decrease by Gas Stations, all actual sales are positive vs 22, 21 & 19. There is also some stability in that of the groups’ total of 20 “real” sales measurements vs 22 & 21, 11 are again positive, including monthly sales vs 22 for Relevant Retail. The biggest change is that the lift vs 2022 is notably smaller, especially for Relevant & Total Retail.

Overall – Inflation Reality – Total, Auto & Gas prices all deflated. For Relevant Retail, the rate was slightly below the sales lift. For Restaurants, inflation remains high, +7.6% but they still have the strongest performance vs 2022 & 2021. The biggest news is that monthly real sales for Relative Retail vs last year have been positive for 2 straight months after 7 consecutive negatives. However, their Ytd Real sales are still down vs 2022 & 2021. They still have a ways to go.

Total Retail – Since June 2020, every month but April 23 has set a monthly sales record. December 22 $ were $748.9B, a new all-time record. Sales dipped in Jan>Feb, rose in Mar, fell in Apr, grew in May, then fell in June. Inflation has become deflation, but sales growth is still low. Sales are up 1.7% vs last year. That’s only 21% of their average 19>23 growth. Also, real sales are down monthly and Ytd vs 21 and only 36% of the 19>23 growth is real. Inflation in Total Retail has radically slowed vs 2022 but we still clearly see its cumulative impact. Avg 2019>23 Growth: +8.0%, Real: +3.1%.

Restaurants – They were hit hard by the pandemic and didn’t begin recovery until March 2021. However, they have had strong growth since then, setting an all-time monthly record of $91B in December and exceeding $1T in 2022 for the 1st time. They are the best performing big group vs 22 & 21. Inflation decreased to 7.6% in June from 8.2% last month but is still +15.7% vs 21 and +21.2% vs 19. 39.6% of their 40.9% growth since 19 is real but they remain 2nd in performance behind Relevant Retail. Recovery started late but inflation started early. Avg 2019>23 Growth: +8.9%, Real: +3.8%. They just account for 13.1% of Total Retail $, but their performance improves the overall retail numbers.

Auto (Motor Vehicle & Parts Dealers) – This group actively worked to overcome the stay-at-home attitude with great deals and a lot of advertising. They finished 2020 up 1% vs 2019 and hit a record $1.48T in 2021 but much of it was due to skyrocketing inflation. In 2022 sales got on a rollercoaster. Inflation started to drop mid-year, but it caused 4 down months in actual sales which are the only reported sales negatives by any big group in 2021>2022. This is bad but their real 2022 sales numbers were much worse, down -8.2% vs 2021 and -8.9% vs 2019. 2023 started off a little better in Jan>Feb, got worse in Mar>Apr, grew in May, then fell in June. Again, only monthly & Ytd real sales vs 21 are negative. Prices are -0.7% vs 22 and are down -1.4% Ytd. 10% of 19>23 growth is real. Avg 2019>23 Growth: +6.9%, Real: +0.7%.

Gas Stations – Gas Stations were also hit hard. If you stay home, you drive less and need less gas. This group started recovery in March 2021 and inflation began. Sales got on a rollercoaster in 2022 but reached a record $583B. Inflation started to slow in August and prices slightly deflated in Dec & Feb then strongly dropped in Mar>Jun, -14.0% Ytd vs 22. However, prices are still +17.5% vs 21. The deflation is directly tied to the monthly & Ytd sales drops vs 22. Look at the rates. Real sales vs 22 are up slightly but still down vs 21 & 19.  Avg 2019>23 Growth: +6.5%, Real: -1.0%. The numbers show the cumulative impact of inflation and demonstrate how strong deflation can be both a positive and a negative.

Relevant Retail – Less Auto, Gas and Restaurants – They account for 60+% of Total Retail $ in a variety of channels, so they took many different paths through the pandemic. However, their only down month was April 2020, and they led the way in Total Retail’s recovery. Sales got on a roller coaster in 2022 but all months in 2022 set new records with December reaching a new all-time high, $481B, and an annual record of $4.81T. In 2023, Jan & Feb had normal drops then grew in March, starting another roller coaster. Sales fell in June, but all actual sales are up vs 22, 21 & 19. Real sales are down vs June 21 & Ytd vs 22 & 21. Monthly Real sales vs last year have been positive for 2 straight months after 7 negatives in a row. 49% of their 19>23 $ are real – #1 in performance. Avg 2019>23 Growth is: +8.4%, Real: +4.3%. This big group is where America shops. The fact that real sales have been positive for 2 consecutive months gives us hope.

Inflation is slowing but the cumulative impact is still there. Sales increases are also slowing, but the fact that 55% of all real sales numbers vs 22 & 21 are positive again is a good sign. Restaurants are still doing well, and Auto is improving. Gas Stations are now seeing the negative impact of strong deflation with a continued drop in actual sales. However, as always, our biggest concern is Relevant Retail. Their situation has definitely improved. Ytd real sales vs 22 & 21 are still negative, which clearly shows the impact of cumulative inflation. However, monthly real sales vs 22 have been positive for 2 straight months. This is not the end of the crisis, but a slow turnaround appears to be continuing.

Here’s a more detailed look at June by Key Channels in the Stacked Bar Graph Format

  • Relevant Retail: Avg Growth Rate: +8.4%, Real: +4.3%. Only 2 channels were up from May but 7 were up vs 22 & 21. Only 4 had a “real” increase vs 22 and 5 vs 21. The negative impact of inflation appears to be slowing sales increases.
  • All Dept Stores – This group was struggling before the pandemic hit them hard. They began recovery in March 2020. Their Actual $ are down from May and for all comparisons but Ytd vs 21 & 19. Their real sales are down in all measurements, even vs 2019. Avg 2019>23 Growth: +0.3%, Real: -2.4%.
  • Club/SuprCtr/$ – They fueled a big part of the overall recovery because they focus on value which has broad consumer appeal. $ales are down vs May but up in all other measurements. Their real sales are down in all measurements but vs June 21 & Ytd vs 19. Only 34% of their 27.5% 19>23 lift is real – the impact of inflation. Avg Growth: +6.3%, Real: +2.3%.
  • Grocery- These stores depend on frequent purchases, so except for the binge buying in 2020, their changes are usually less radical. $ are down from May but up in all measurements vs 22, 21 & 19. However, inflation hit them hard. Real sales are down for all but Ytd vs 2019 and only 7.6% of the growth since 2019 is real. Avg Growth: +6.3%, Real: +0.5%.
  • Health/Drug Stores – Many stores in this group are essential, but consumers visit far less frequently than Grocery stores. Sales are down from May but up in all other measurements, both actual and real vs 22, 21 & 19. Their inflation rate has been relatively low so 74% of their 23.4% growth from 2019 is real. Avg 2019>23 Growth: +5.4%, Real: +4.0%.
  • Clothing and Accessories – Clothes initially mattered less when you stayed home. That changed in March 21 with strong growth through 2022. $ales are down from May but up vs 22, 21 & 19. However, Real sales are down for all but Ytd vs 21 & 19. Another positive is: 64% of their 2019>23 growth is real. Avg 2019>23 Growth: +3.8%, Real:+2.5%
  • Home Furnishings – In mid-2020 consumers’ focus turned to their homes and furniture became a priority. Inflation has slowed but was very high in 2022. Actual sales are down from May and in all other measurements but Ytd vs 2019. Their real sales are again all down, even vs 2019. Avg 2019>23 Growth: +4.0%, Real: -0.2%.
  • Electronic & Appliances – This channel has many problems. Sales fell in Apr>May of 2020 and didn’t reach 2019 levels until March 2021. $ales are up from May but down in all measurements but vs Jun 22 & Ytd vs 19. However, consistent deflation has caused real sales to be up in all measurements. Avg 2019>23 Growth: +0.6%, Real: +2.5%.
  • Building Material, Farm & Garden & Hardware –They truly benefited from the consumers’ focus on home. In 2022 the lift slowed as inflation grew to double digits. Inflation is still high at 8.8%. Sales are down -8.1% from May which caused them to be all negative vs 2022. They still have the highest Inflation of any channel so real sales are negative in all but Ytd vs 2019. Also, just 22% of their sales growth since 2019 is real. Avg 2019>23 Growth is: +8.1%, Real: +2.0%.
  • Sporting Goods, Hobby and Book Stores – Consumers turned their attention to recreation and Sporting Goods stores sales took off. Book & Hobby Stores recovered more slowly. Actual $ales are up from May but only positive Ytd vs 22 & 19. Real sales have the same pattern. Prices actually deflated to -0.1% vs June 22 and their inflation rate has been much lower than most groups so 64.7% of their 30.6% growth since 2019 is real. Avg 2019>23 Growth: +6.9%, Real: +4.6%.
  • All Miscellaneous Stores – Pet Stores have been a key part of the strong and growing recovery of this group. They finished 2020 at +0.9% but sales took off in March 21 and have continued to grow. Sales are -1.8% vs May but positive in all other measurements. They still have the biggest increase vs 2021 and vs 2019 they are 2nd only to NonStore. 67% of their 44.8% 19>23 growth and even 53% of their 21>23 growth is real. Their Avg 19>23 Growth is: 9.7%, Real: 6.8%.
  • NonStore Retailers – 90% of their volume comes from Internet/Mail Order/TV. The pandemic accelerated online spending. They ended 2020 +21.4%. The growth continued in 2021 as sales exceeded $100B for the 1st time and they broke the $1 Trillion barrier. Their growth slowed significantly in 2022 and now 2023. $ are down from May but all other measurements are positive. 78% of their 88.7% growth since 2019 is real. Their Avg Growth: +17.2%, Real: +14.0%.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded with their regular store sales.

Recap – The Retail recovery from the pandemic was largely driven by Relevant Retail and by the end of 2021 it had become very widespread. In 2022, there was a new challenge, the worst inflation in 40 years. Overall, and in most product categories it has slowed in Jul>Jun which should help the Retail Situation. Sales were down from May for all big groups and 9 smaller channels. Inflation continues to slow in most channels and even deflate in a few. However, some channels like Auto, Gas Stations, Grocery and Bldg Material stores still have high cumulative inflation rates so they are still struggling. Only a few channels are doing well. The new problem is that the sales increase rate vs 2022 for many channels has slowed and is even below the lower inflation rate. Real monthly sales for Relevant Retail have been positive vs 22 for 2 straight months but are still negative for 7 of 11 channels. The turnaround for Relevant retail is not widespread. It is primarily being driven by NonStore with a little help from Health Care, Electronics/Appliances  and Miscellaneous (includes Pet Stores). We still have a long way to go for a full recovery from the inflation tsunami.

Finally, here are the details and updated inflation rates for the CPIs used to calculate the impact of inflation on retail groups and channels. This includes special aggregate CPIs created with the instruction and guidance of personnel from the US BLS. I also researched data from the last Economic Census to review the share of sales by product category for the various channels to help in selecting what expenditures to include in specific aggregates. Of course, none of these specially created aggregates are 100% accurate but they are much closer than the overall CPI or available aggregates. The data also includes the CPI changes from 2021 to 2023 to show cumulative inflation.

Monthly 22>23 CPI changes of 0.2% or more are highlighted. (Green = lower; Pink = higher)

I’m sure that this list raises some questions. Here are some answers to some of the more obvious ones.

  1. Why is the group for Non-store different from the Internet?
    1. Non-store is not all internet. It also includes Fuel Oil Dealers, the non-motor fuel Energy Commodity.
  2. Why is there no Food at home included in Non-store or Internet?
    1. Online Grocery purchasing is becoming popular but almost all is from companies whose major business is brick ‘n mortar. These online sales are recorded under their primary channel.
  3. 6 Channels have the same CPI aggregate but represent a variety of business types.
    1. They also have a wide range of product types. Rather than try to build aggregates of a multitude of small expenditure categories, it seemed better to eliminate the biggest, influential groups that they don’t sell. This method is not perfect, but it is certainly closer than any existing aggregate.
  4. Why are Grocery and Supermarkets only tied to the Grocery CPI?
    1. According to the Economic Census, 76% of their sales comes from Grocery products. Grocery Products are the driver. The balance of their sales comes from a collection of a multitude of categories.
  5. What about Drug/Health Stores only being tied to Medical Commodities.
    1. An answer similar to the one for Grocery/Supermarkets. However, in this case Medical Commodities account for over 80% of these stores’ total sales.
  6. Why do SuperCtrs/Clubs and $ Stores have the same CPI?
    1. While the Big Stores sell much more fresh groceries, Groceries account for ¼ of $ Store sales. Both Channels generally offer most of the same product categories, but the actual product mix is different.

Petflation 2023 – June Update: Again below double digits, +9.6% vs 2022

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Inflation is no longer a “headline” but it is still news. The YOY increases in the monthly Consumer Price Index (CPI) that were larger than we have seen in decades are definitely slowing. June prices grew 0.3% from May and the CPI was still +3.0% vs 2022, but down from +4.0% last month. The grocery pricing surge has also slowed. After 12 straight months of double-digit YOY monthly percentage increases, grocery inflation is down to +4.7%, with 4 consecutive months below 10%. As we have seen in recent years, even minor price changes can affect consumer pet spending, especially in the discretionary pet segments, so we will continue to publish monthly reports to track petflation as it evolves in the market.

Total Petflation was +4.1% in December 2021 while the overall CPI was +7.0%. The gap narrowed as Petflation accelerated and reached 96.7% of the national rate in June 2022. National inflation has slowed since July, but Petflation has generally increased. It passed the National CPI in July 2022 and is now +9.6% in June, more than 3 times the national rate of 3.0%. We will look deeper into the numbers. This and future reports will include:

  • A rolling 24 month tracking of the CPI for all pet segments and the national CPI. The base number will be pre-pandemic December 2019 in this and future reports, which will facilitate comparisons.
  • Monthly comparisons of 23 vs 22 which will include Pet Segments and relevant Human spending categories. Plus
    1. CPI change from the previous month.
    2. Inflation changes for recent years (21>22, 20>21, 19>20, 18>19)
    3. Total Inflation for the current month in 2023 vs 2019 and now vs 2021 to see the full inflation surge.
    4. Average annual Year Over Year inflation rate from 2019 to 2023
  • YTD comparisons
    1. YTD numbers for the monthly comparisons #2>4 above

In our first graph we will track the monthly change in prices for the 24 months from June 2021 to June 2023. We will use December 2019 as a base number so we can track the progress from pre-pandemic times through an eventual recovery. Inflation is a complex issue. This chart is designed to give you a visual image of the flow of pricing. You can see the similarities and differences in patterns between segments and compare them to the overall U.S. CPI. The current numbers plus yearend and those from 12 and 24 months earlier are included. This will give you some key waypoints. In June, Pet Products prices are down from May, but they increased in both Service segments.

In June 2021, the national CPI was +5.7% and Pet prices were +2.1%. Veterinary and Services prices generally inflated after mid-2020, similar to the overall CPI while Food and Supplies prices generally deflated until late 2021. After that time, Petflation took off. Pet Food prices consistently increased but the other segments had mixed patterns until July 2022, when all increased. In Aug>Oct Petflation accelerated. In Nov>Dec, Services & Food prices continued to grow while Veterinary & Supplies prices stabilized. In Jan>June, prices grew every month except for 2 dips by Supplies, 1 dip for the other segments and a June dip by Total Pet. Cumulative Petflation from Dec 2019 has been above the U.S. CPI since November 2022.

  • U.S. CPI – The inflation rate was below 2% through 2020. It turned up in January 2021 and continued to grow until flattening out in Jul>Dec 2022. Prices turned up again in Jan>Jun but 36% of the overall 18.7% increase in the 42 months since December 2019 happened in the 6 months from January>June 2022 – 14% of the time.
  • Pet Food – Prices stayed generally below Dec 2019 levels from Apr 20 > Sep 21, when they turned up. There was a sharp lift in Dec 2021, and it continued until the dip in June. 93% of the 23.1% increase has occurred since 2022.
  • Pet Supplies – Supplies prices were high in December 2019 due to the added tariffs. They then had a “deflated” roller coaster ride until mid-2021 when they returned to December 2019 prices and essentially stayed there until 2022. They turned up in January and hit an all-time high, beating the 2009 record. They plateaued from Feb> May, turned up in June, flattened in July, then turned up in Aug>Oct setting a new record. Prices stabilized in Nov>Dec but turned up in Jan>Feb, another new record. They fell in March, set a record in May, then fell in June.
  • Pet Services– Normally inflation is 2+%. Perhaps due to closures, prices increased at a lower rate in 2020. In 2021 consumer demand increased but there were fewer outlets. Inflation grew in 2021 with the biggest lift in Jan>Apr. Inflation was stronger in 2022 but it got on a rollercoaster in Mar>June. It turned up again July>Mar but the increase slowed to +0.1% in April. Prices fell -0.3% in May then turned up slightly in June, +0.04%.
  • Veterinary – Inflation has been pretty consistent in Veterinary. Prices turned up in March 2020 and grew through 2021. A pricing surge began in December 2021 which put them above the overall CPI. In May 2022 prices fell and stabilized in June causing them to briefly fall below the National CPI. However, prices turned up again and despite Oct & Dec dips they have stayed above the National CPI since July. In 2023 prices grew except for a dip in May.
  • Total Pet – The blending of patterns made Total Pet appear calm. In December 2021 the pricing surge began. In Mar>June 2022 the segments had ups & downs, but Petflation grew again from Jul>Nov. It slowed in December, turned up Jan>May, then fell in June. Except for 5 individual monthly dips, including 2 in June, prices in all segments have increased monthly in 2023. It has been ahead of the cumulative U.S. CPI since November 2022.

Next, we’ll turn our attention to the Year over Year inflation rate change for June and compare it to last month, last year and to previous years. We will also show total inflation from 21>23 & 19>23. Petflation dropped below double digits to 9.6% in June but is now over 3 times the National rate. The chart will allow you to compare the inflation rates of 22>23 to 21>22 and other years but also see how much of the total inflation since 2019 came from the current pricing surge. Again, we’ve included some human categories to put the pet numbers into perspective.

  • U.S. CPI– Prices are +0.3% from May. The YOY increase is down to +3.0%. It peaked at +9.1% back in June 2022. The targeted inflation rate is <2% so we are still 50% higher than the target. However, a 12th straight slight decline is good news. It is also good that the current inflation rate is below 21>22 but the 21>23 rate is still 12.3%, 64% of total inflation since 2019. How many households “broke even” by increasing their income by 12% in 2 years?
  • Pet Food– Prices are -0.2% vs May and +12.1% vs June 2022. They are also 2.5 times the Food at Home inflation rate – not good news! The YOY increase of 12.1% is being measured against a time when prices were 9.8% above the 2019 level, but that increase is still an incredible 4.3 times the pre-pandemic 2.8% increase from 2018 to 2019. The 2021>2023 inflation surge generated 99% of the total 23.9% inflation since 2019.
  • Food at Home – Prices are down -0.1% from May. The monthly YOY increase is 4.7%, down from 5.8% in May and considerably lower than Jul>Sep 2022 when it exceeded 13%. The 25.2% Inflation for this category since 2019 is 32% more than the national CPI and remains 2nd to Veterinary. 69% of the inflation since 2019 occurred from 2021>2023. The pattern mirrors the national CPI, but we should note that Grocery prices began inflating in 2020>2021 then the rate accelerated. It appears that the pandemic supply chain issues in Food which contributed to higher prices started early and foreshadowed problems in other categories and the overall CPI tsunami.
  • Pets & Supplies– Prices fell -0.5% from May, and they still have the lowest increase since 2019. They also fell again to last place in terms of the monthly increase vs last year for Pet Segments. As we noted earlier, prices deflated in 2020>2021 so the 2021>2023 inflation surge accounted for 100+% of the total price increase since 2019. They reached an all-time high in October then prices deflated. 3 straight months of increases pushed them to a new record high in February. Prices fell in March, bounced back in Apr>May to a new record high then fell in June.
  • Veterinary Services – Prices are up 0.6% from They are +11.4% from 2022 and remain in 2nd place behind Food in the Pet Industry. However, they are still the leader in the increase since 2019 with 30.2% compared to Food at home at 25.2%. For Veterinary Services, relatively high annual inflation is the norm. The rate did increase during the current surge so 64% of the 4 years’ worth of inflation occurred in the 2 years from 2021>2023.
  • Medical Services – Prices turned sharply up at the start of the pandemic but then inflation slowed and fell to a low rate in 20>21. In May prices fell -0.04% from May and are -0.8% vs 2022, the only 22>23 deflation in any category. Medical Services are not a big part of the current surge as only 35% of the 2019>23 increase happened from 21>23.
  • Pet Services – Inflation slowed in 2020 but began to grow in 2021/2022. June 23 prices were up +0.04% from May and +6.3% vs 2022, which is up from 5.6% last month but much lower than 8.0% in March. Initially their inflation was tied to the current surge, but it may be becoming the norm as only 61% of the total since 2019 occurred from 21>23.
  • Haircuts/Other Personal Services – Prices are +0.4% from May and +5.0% from 2022, the 2nd highest rate since 2019. However, inflation has been rather consistent so just 54% of the inflation from 19>23 happened from 21>23.
  • Total Pet– Petflation is only 9% higher than the 21>22 rate, but 3 times the National CPI and +9.6% is the highest June rate in history. Vs May, Product Prices fell while Services increased so Total Pet fell -0.2%. Note: A May>June decrease has happened in 13 of the last 26 years so it is not that unusual. Food & Veterinary are still the Petflation leaders and have the biggest increases over the 21>22 rate. Pet Food has generally been immune to inflation as Pet Parents are used to paying a lot. However, inflation can cause reduced purchase frequency in the other segments.

Now, let’s look at the YTD numbers

The increase from 2022 to 2023 is the biggest for 4 of 9 categories – All Pet. The 22>23 rate for Haircuts is slightly below 21>22. However, the Total CPI, Pet Supplies, Medical Services and Food at Home are significantly down from 21>22. The average annual increase since 2019 is 4.4% or more for all but Medical Services (3.0%) and Pet Supplies (2.7%).

  • U.S. CPI – The current increase is down 41% from 21>22 but is still 11% more than the average increase from 2019>2023, and 2.3 times the average annual increase from 2018>2021. 72% of the 18.9% inflation since 2019 occurred from 2021>23. Inflation is a big problem that started recently.
  • Pet Food – Strong inflation continues with the highest 22>23 & 21>23 rates on the chart. Deflation in the 1st half of 2021 kept YTD prices low then prices surged in 2022. 94.3% of the inflation since 2019 occurred from 2021>23.
  • Food at Home – The 2023 YTD inflation rate has slowed slightly but still beat the U.S. CPI by 61%. You can see the impact of supply chain issues on the Grocery category as 76% of the inflation since 2019 occurred from 2021>23.
  • Pets & Pet Supplies – The inflation rate is down slightly at 5.2% as prices fell in June. Prices deflated significantly in 2021 which helped to create a very unique situation. Prices are up 11.3% from 2019 but 115% of this increase happened from 2021>23. Prices are up 13.0% from their 2021 “bottom”.
  • Veterinary Services – They held onto the top spot in inflation since 2019 but they have only the 4th highest rate since 2021. At +6.4%, they have the highest average annual inflation rate since 2019 but Veterinary is unique. They are the only category in which the inflation rate grew steadily every year from 2019>2023. Throughout the pandemic and recovery, no matter what, just charge more.
  • Medical Services – Prices went up significantly at the beginning of the pandemic, but inflation slowed in 2021. In 2023 prices have been deflating and are now at a rate actually 64% below the pre-pandemic 2018>19 rate.
  • Pet Services – May 22 set a record for the biggest year over year monthly increase in history. Prices fell in June but began to grow again in July, reaching record highs in Sep>Apr. The January 2023 increase of 8.4% was the largest in history. YTD June again slipped a little to 7.0%. Growing demand with decreased availability is a formula for inflation.
  • Haircuts & Personal Services – The services segments, essential & non-essential were hit hardest by the pandemic. After a small decrease in March 22, prices turned up again. The YTD rate is 6% below the peaks in 21 & 22 but is 82% more than 2018>19. Consumers are paying 21% more than in 2019. This usually reduces the purchase frequency.
  • Total Pet – We have seen two different inflation patterns. After 2019, Prices in the Services segments continued to increase, and the rate grew as we moved into 2021. The product segments – Food and Supplies, were on a different path. They deflated in 2020 and didn’t return to 2019 levels until mid-year 2021. Food prices began a slow increase, but Supplies remained stable until near yearend. In 2022, Food and Supplies prices turned sharply up. Food prices continued to climb until June. Supplies prices stabilized Apr>May, grew Jun>Oct, fell in Nov, rose in Dec>Feb, fell in Mar, rose in Apr>May then fell in June. The Services segments have also had ups & downs but are generally inflating. The net is a YTD Petflation rate vs 2022 of 10.2%, double the National rate. In May 22 it was 5.8% below the CPI.

Petflation is still strong. Let’s put the numbers into perspective. Petflation slowed from 10.3% in May to 9.6% in June. This is below the record 12.0% set in November, but it is a record for the month. More bad news is that 9 of the last 11 months have been over 10% and the current rate is still 6 times more than the 1.6% average rate from 2010>2021. It’s also more than triple the national rate. There is no doubt that the current pricing tsunami is a significant event in the history of the Pet Industry, but will it affect Pet Parents’ spending. In our demographic analysis of the annual Consumer Expenditure Survey which is conducted by the US BLS with help from the Census Bureau we have seen that Pet spending continues to move to higher income groups. However, the impact of inflation varies by segment. Supplies is the most affected as since 2009 many categories have become commoditized which makes them more price sensitive. Super Premium Food has become widespread because the perceived value has grown. Higher prices generally just push people to value shop. Veterinary prices have strongly inflated for years, resulting in a decrease in visit frequency. Spending in the Services segment is the most driven by higher incomes, so inflation is less impactful. This spending behavior of Pet Parents suggests that we should look a little deeper. Inflation is not just a singular event. It is cumulative. Total Pet Prices are up 9.6% from 2022 but they are up 19.2% from 2021 and 23.3% from 2019. That is a huge increase in a very short period. It puts tremendous monetary pressure on Pet Parents to prioritize their expenditures. We know that the needs of their pet children are always a high priority but let’s hope for a little relief – stabilized prices and even deflation. This is not likely in the Service segments but is definitely possible in products. It’s happened before. We need it again.