Archive for category: Pet Market

The pandemic had a huge impact on consumers. They stayed home and focused on needs, rather than wants. This behavior was very evident in the Pet Industry as the “needed” segments – Food and Veterinary Services, had big $ increases while the spending in the more discretionary segments – Supplies and Non-Vet Services fell. There were other factors that amplified these differences. Services outlets were often deemed non-essential, so they were subject to widespread restrictions and closures. Food had a completely different path. During the early stages of the pandemic, consumers often binge bought essential products to have a backup supply in case there were outages. This behavior applied to Pet Food, which is the only absolutely essential Pet Industry Segment. The result was a $6.8B increase in spending over the 1^st half of 2019. It should be noted that Pet Food spending was down in the 1^st half of 2019 because the segment was still feeling the impact of the “untrue” FDA warning on grain free dog food. However, the lift was still the biggest year over year increase in history.

Pet Parents maintained this extra supply of pet food throughout the balance of 2020. As we moved into 2021, there were still some outlets that were suffering but most channels had recovered, and the overall Retail Market was prospering. This caused a change in Pet Food spending. Pet Parents obviously didn’t binge again and, in a few situations, even had their pets start to “eat down” the extra supply of food to return to their previous level of home “inventory”. They also increasingly moved to internet purchasing with regular deliveries. As a result, Pet Food Spending fell -$6.4B (-16.9%) in the 12 month period ending 6/30/21 over the previous year and -$5.3B vs the 1^st 6 months of 2020.

As you know, the pandemic also caused problems in information gathering for the data collected by the US BLS for the annual Consumer Expenditure Survey (CEX), especially in the Diary method which is used for Pet Food. Those were resolved in 2020 and everything returned to a “new normal”.

Now, let’s get started with our Pet Food spending update for Mid-Year 2021. Pet Food (& Treat) Annual Spending was $31.56B, down -$6.40B (-16.9%). The following charts and observations were prepared from calculations based upon data from the current CEX report and earlier ones. The first chart will help put the $31.56B into historical perspective and truly show you the roller coaster ride that continues in Pet Food Spending.

Here are the current numbers:

        Mid 2021: $31.56B; ↓$6.40B (-16.9%) from Mid-2019. The net -$6.40B in Mid 2021 came from:

  ◦  Jul>Dec 2020: Down $1.12B from 2019.          ◦  Jan>Jun 2021: Down $5.29B from 2020.

Historical research has shown that Pet Food spending has been on a roller coaster since 2000, with 2 years up, followed by a flat or even declining year. This up and down “ride” has been driven by a succession of Food trends. The most recent were “Natural” in 2011 and “Super Premium” in 2014. Another factor was added in 2013 – deflation. As consumers opted for higher quality, more expensive pet food, competition became more intense, with the Internet now becoming a key player. 2013 was a definitely a game changer for this segment as it began an extended period of deflation which continued through 2018. Midway through 2018, Pet Food prices were still 2.3% lower than in 2013.

The spending drops in 2013 and 2016 were driven by pet parents value shopping for their recently upgraded pet food. As it turns out, 2014 brought out yet another new factor in Pet Food spending. For over 30 years Baby Boomers have been the leaders in the Pet Food, both in spending and in adopting new products. They still spend the most, but it turns out that the 25>34 year old Millennials led the movement to Super Premium in late 2014. The older groups, especially Boomers followed in 2015 and spending rose $5.4B. At the same time, the Pet Food spending of the 25>34 yr olds dropped. At first, we thought they had rolled back their upgrade. However, it turns out they were leading the way in another element of the trend to Super Premium – value shopping. The Boomers once again followed their lead and spending fell -$2.99B in 2016. For consumers, the Super Premium upgrade movement consisted of 3 stages:

1. Trial – The consumer considers the benefits vs the high price and decides to try it out. Usually from a retail outlet.
2. Commitment – After a period of time, the consumer is satisfied and is committed to the food.
3. Value Shop – After commitment, the “driver” is to find a cheaper price! – The Internet, Mass Market, Private label

This brought us to 2017. Time for a new “must have” trend. That didn’t happen but the competitive pricing situation brought about another change. Recent food trends have been driven by the higher income and higher education demographics. However, the “value” of Super Premium was established and now more “available”. Blue Collar workers led a new wave of spending, +$4.6B, as Super Premium more deeply penetrated the market. After the big lift in 2017, 2018 started off slowly, +$0.25B. Then came the FDA warning on grain free dog food. Many of the recent Super Premium converts immediately rolled back their upgrade and spending fell -$2.51B. This 2018 decrease broke a 20 year spending pattern. In the 1^st half of 2019, Pet Food spending remained stable at the new lower level. In the second half of 2019 we started to see a recovery from the overreaction to the FDA warning and spending increased by $2.3B. Then came 2020. The recovery was continuing but a new outside influence was added which had a massive impact on U.S. consumers – the COVID-19 pandemic. In March nonessential businesses were closed. This also produced a wave of panic buying in some truly essential product categories. In the Pet Industry there is only 1 truly essential category – Pet Food. Coupled with the FDA “recovery” and the ongoing movement to Super Premium, this produced an incredible $6.76B lift in Pet Food Spending in the 1^st half of 2020. Spending fell in the 2^nd half of 2020 and plummeted in the 1^st half of 2021. Pet Parents didn’t binge again and some even began using up the stockpile that they panic bought in the early days of COVID.

Let’s look at Pet Food spending by the 2 most popular demographic measures – income & age group. They both show the current and previous 12 months $ as well as 2019 and 2020 yearend. This will allow you to track the spending changes between halves and to see where we started, in pre-pandemic yearend 2019. The first graph is Income, which has been shown to be the single most important factor in increased Pet Spending.

Here’s how you get the change for each half of the 20>21 mid-yr numbers using the under $100K group as an example:

• <$100K Mid-yr Total Spending Change: $17.79B – $17.35B = Up $0.44B (green outline = increase; red outline = decrease)
• 2^nd half of 2020: Subtract Mid-20 ($17.35) from Total 2020 ($16.53B) = Spending was down $.82B in 2^nd half of 2020.
• 1^st half of 2021: Subtract Total 2020 ($16.53B) from Mid-21 ($17.79B) = Spending was up $1.26B in 1^st half of 2021.

Note: The green/pink fill in the 20/21 numbers indicates if they are up/down vs Yearend 2019.

• We see 2 distinct spending patterns in the individual groups. The <$50K and the especially the $100>149K groups both binge bought Food in the pandemic so there was a steep spending drop in 2021. The middle income $50>99K and over $150K groups cut spending in the pandemic then began recovery in 2021.
• Perhaps the most obvious fact is the spending disparity due to income. Prior to the Super Premium era, $70K was the “halfway point” in Pet Food spending. In 2013 the under $70K group accounted for 67.8% of CUs and 51.3% of Pet Food spending. Due to the rise of Super Premium, they lost the lead in 2015 as $70K> spent 50.8% of Pet Food $. In 2020, the binge buying of Pet Food by $100>150K pushed the $100K> group to the top at 55.1%. Then the big drop in 2021 flipped $70K> back into the lead at 60.8%. The halfway point in Pet Food spending is still high but is again below $100K.
• < $70K > Surprisingly, the Pet Food spending patterns for both groups are the same, but the changes are more pronounced in the higher income group because they had the $ to finance more binge buying. Both show a 2020 COVID lift and a 2021 drop. Also, both groups returned to a spending level above 2019 yearend $.
• < $100K > The spending patterns of these 2 groups are different in every way. Spending for the <$100K group fell during 2020 then bounced back in 2021 but is slightly below 2019. The $100K> massively binge bought in 2020 so there was a huge decrease in the 1st half of 2021 but they still finished slightly ahead of 2019 $. Both are being driven by a pattern of one subgroup. For the <$100K group it is $50>99K income. For $100K> it is $100>149K.
• < $50K Both the <$30K and $30>49K have a pattern like the $100>149K but the binge buying was limited due to lower income. However, both did finish the 1^st half of 2021 slightly ahead of 2019. While income is the most important factor in Pet Food Spending, it is not the only factor.
• $50 > $100K – This income group was the most negatively affected by the pandemic. Spending dropped in 2020 for both the $50>69K and $70>99K groups. They bounced back a little in 2021 but didn’t reach the 2019 level. They are under financial pressure in normal times. COVID undoubtedly made things even tougher. The drops and even the failure to return to 2019 $ were probably largely due to value shopping, especially on the internet. However, some CUs may have downgraded their Food. The biggest swings occurred in the middle income $70>99K group.
• $100K>149K – High income is increasingly becoming “where it’s at” in Pet Spending. In the 1^st half of 2020 spending went through the roof. This group drove virtually all of the binge buying of Super Premium Foods. That also made them responsible for most of the current big drop. They did end up slightly above 2019 $.
• $150K > Their Pet Food spending also fell in 2020. It was most likely due to value shopping and moving to the internet as a primary source. Their spending came back strong in 2021, 10% above 2019. It’s likely that they broadened the range of food & treats purchased and may have upgraded to even more expensive food.

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

• Each group had a unique pattern but there is one basic difference. 55>74 binge bought Food. Everyone else didn’t.
• < 25 – Their spending fell in 2020 but then bounced back in 2021 but not to the 2019 level. The pandemic had a unique impact on them. The number of CUs fell by 2.1M in 2020 as many moved back home with their parents taking their pets with them. In 2021, 1.2M set up a separate H/H again but that’s still significantly less than pre-pandemic. Their movement also helped enhance the spending lift & drop by the 55>64 yr-olds.
• 25>34 – No binge buying. They value shopped but likely upgraded their food and even added pets to their family which produced the only steady growth since mid-year 2020.
• 35 > 44 – Their spending drop in 2020 was probably due to increased value shopping, especially on the internet. When things truly opened up in 2021, they opened their wallets and spending exceeded 2019 $ by 12%.
• 45 > 54 and – They have the highest income, so their spending pattern is somewhat unusual. Their Pet Food spending continued to drop throughout 2020. It turned up in 2021 but was still 15% below 2019. They are an unlikely group to downgrade. They probably focused on savings and convenience and turned to the internet.
• 55>64 – This group is mostly Boomers, the most emotional Pet Parents. Binge buying food was an emotional response to the pandemic. They have the highest income of any Boomer group so they had the will and means to drive the binge. The movement of their children to & from home also contributed. Ultimately, they are now down 19% from 2019.
• 65 > 74 – This group is mostly Boomers but with lower income. Their pattern has similar ups and downs to the 55>64 yr-olds but with far smaller swings. There is one difference. Their 2021 numbers exceed 2019.
• 75> – COVID had virtually no impact on spending. They are committed pet parents as they had a 30% $ lift over 2019.

That gives us the “big picture” for our 2021 Mid-year update of Pet Food spending. Now we’ll take a closer look at the start of 2021. However, rather than compare it to 1^st half of 2020 to see the big negative swings, we’ll compare it to the 1^st half of 2019 and document the biggest changes since then. This will show how close that we are to a “normal” year.

The first thing that you notice is that the biggest increases are generally much larger than the biggest increases. We should also note that all Housing segments spent more in 2021 than in 2019.

• There are a number of usual winners, like $150K>, Managers, White, Not Hispanic, BA/BS, 2 People and Gen X. There are also some surprises like No Earner 2+ CUs, Center City and the Northeast.
• When we look at the losers we see a few familiar names, African Americans, HS Grads & Singles. However, five of the big losers binge bought Food in 2020 so naturally they had a huge drop in 2021. They are Self-employed, 55>64, Areas <2500, Married, Oldest Child 18> and Boomers. They haven’t recovered as yet. Perhaps they will in the 2^nd half.
• It’s a good sign that despite the 2 radical swings we are still $1.5B ahead of the time before the pandemic turmoil began in 2020 and continued into early 2021.

The spending drop was huge in the 1^st half, but not unexpected. The huge lift in Pet Food $ in the 1st half of 2020 was an emotional reaction to the pandemic. The retail inventory of many “necessary” items like toilet paper and hand sanitizers was wiped out. Consumers wanted to ensure that they had them at home in case of supply chain issues. In the Pet Industry, there is no more necessary product than Pet Food. The lives of our Pet Children depend on it. With the widespread commitment to Super Premium Food, buying a safety stock produced a huge lift in $. It was clearly an emotional reaction. When it comes to emotion related to pets, there is one group that leads the way, Baby Boomers. In the 90s, they were the 1st group to be defined as Pet Parents and they have increasingly personified their Pet Children ever since. The huge lift was amplified by additional demographic factors. A high income of $100>149K drove the lift. The 55>64 yr-old Boomers have the highest income of their group. This gave them the means to buy the extra Food. Areas <2500 population generally have more pets but fewer retail outlets. This would increase their fear of product shortages. However, the pandemic increasingly came under control in 2021, bringing a desire to return to a new normal. No binge buying. Some began a return to more normal levels of backup, and many arranged regular deliveries. All of these contrbuted to the big drop in Pet Food spending in the 1^st half of 2021. I expect a strong lift in the 2^nd half. We’ll get the data in September.

Now we will turn our attention to the final Industry Segment – Veterinary Services. For years, Veterinary Services prices have had high inflation. This has resulted in CU income becoming the most dominant factor in spending behavior and a reduction in visit frequency. Consumers paid more, just used Veterinary Services less often.

Things changed in 2017 as low inflation spurred a 7.2% increase in visit frequency and a $2.5B increase in spending. In 2018 inflation returned to more normal levels. Consumers spent $0.56B more (+2.7%). However, the inflation rate was 2.6% so virtually all of the lift was from increased prices. In 2019 the situation got worse. Consumers spent $0.58B (+2.7%) more but inflation was 4.14%. This means that there was an actual decrease in the amount of Veterinary Services purchased. In 2020 the pandemic hit and consumers concentrated on needs. For Pet Parents, that meant that they became focused on Pet Food & Veterinary Services. As a result, Veterinary spending grew $3.05B, (+14.0%).

We’ll start our analysis with the groups who were responsible for the bulk of Veterinary spending in 2020 and the $3.05B increase. The first chart details the biggest pet Veterinary spenders for each of 10 demographic categories. It shows their share of CU’s, share of Veterinary spending and their spending performance (Share of spending/share of CU’s). In terms of performance – 6 of 10 groups perform above 120%, the same as 2018 & 2019. This is more than Supplies & Services with 5 but much less than Food (8). This means that these big spenders are performing well but it also signals that there is still a large disparity between the best and worst performing demographics in the “needed” segments. Income remains the biggest factor in Veterinary Spending, but Education is also important as College Grads is a different group from Total Pet. The categories are in the order that reflects their share of Total Pet $.

1. Race/Ethnic – White, not Hispanic (87.2%) down from 90.9%. This group accounts for the vast majority of spending in every segment, but they lost significant share in 2020. Their 127.5% performance is also down from 132.6% and they fell from 2nd to 3rd in importance in Veterinary Spending but still reflects the spending disparity. Minorities did narrow the gap in 2020. Hispanics & African Americans spent 50% more while the spending by Asians almost tripled.
2. Housing – Homeowners (83.1%) down from 83.2% Homeownership is a major factor in pet ownership and spending in all industry segments. In terms of importance to Veterinary spending, their 126.3% performance rating is down from 130.5%, but they held on to 4th place. The slight decrease in share and performance came from a bigger % increase from Renters as they fell in numbers while homeownership grew. We should note that Homeownership is not as important to Veterinary Spending as it once was. In 2015 their share was 88.4% with performance of 141.8%.
3. # in CU– 2+ people (77.9%) up from 75.0% This group, which is 70% of U.S. CUs, gained share and their performance grew from 107.4% to 111.0%. Their rank in terms of importance in Veterinary Spending moved up from last to 8th. Spending by Singles and 4 person CUs was flat while 2, 3 & 5 person CUs had big gains.
4. Area – Suburban & Rural (67.1%) down from 68.7% Suburban CU’s are the biggest spenders in every segment. Rural had a great year and was added to hit the 60% goal. Performance still fell to 106.4%, from 107.9%. The decreases in share and performance came because Suburbs 2500> were up only 3.2% while Center City was +19.8%.
5. # Earners – “Everyone Works” (69.7%) down from 70.4% In this group, all adults in the CU are employed. Their Performance fell from 121.5% to 120.3% and they fell in rank from #5 to #6. Only No Earner, Singles spent less. The small drop in share and performance were due to a huge lift by 2+ People CUs with 1 or no earner.
6. CU Composition – Married Couples (58.6%) up from 57.0% Their performance also grew to 120.8% from 116.7% and they returned to the 120+% club at #6. Until 2019, Married Couples had a 60+% market share and 120+% performance in all segments. Only Married Couples with an oldest child <6 spent less. The gains came because the spending by singles was essentially flat, only +0.6%.
7. Income – Over $70K (63.4%) down from 66.3% The performance of the $70K> group fell significantly from 159.8% to 145.8%. However, higher income is still the most important factor in increased Vet spending. Only the $50>99K group spent less. The spending by the <$50K group grew by 37.0%. Those making $100K> also spent 16.4% more. The key factor in the big changes in share and performance was a 9.8% drop by the $70>99K group.
8. Age – 35>64 (60.1%) down from 63.2% Their performance also fell from 120.7% to 112.7% and they dropped out of the 120% club. Only <25 & 35>44 yr olds spent less. All other groups had double digit % increases. The drop by 35>44 yr-olds in conjunction with a 52.1% lift by 25>34 caused the big loss in share and performance.
9. Education – College Grads (61.3%) down from 63.9% Income generally increases with education. It is also important in understanding the need for regular Veterinary care. Performance also fell from 144.1% to 131.2%. Education lost share and performance but moved up to 2nd from 3rd in importance. Only those without a HS diploma spent less. The big drop in share and performance came from a 48.2% lift by HS Grads without a BA/BS. Veterinary Services are very important. The pandemic caused this need to become recognized by more education levels.
10. Occupation – All Wage & Salaried (68.1%) up from (67.3%) but their performance only increased from 110.3% to 110.7%. Tech/Sls/Clerical and Retirees spent less while most of the lift was driven by Managers & Professionals. However, the largest percentage increase was from the Self-Employed. This combination slowed the gains. It also reinforces that “the bosses” ruled in 2020.

Spending did become a little more balanced but Higher income remains the biggest single factor in Veterinary spending. We see the impact of this in many groups as it often contributes to the big spending disparity between segments. The most notable change was that the 35>64 age group fell out of the 120+% club due to a big lift by the 25>34 yr olds.

Now, we’ll look at 2020’s best and worst performing Veterinary spending segments in each category.

Almost all of the best and worst performers are those that we would expect. However, there are 7 that are different from 2019. This is the same as Services but much more than the 3 in Supplies and much less than the 10 in Food. This suggests some spending turmoil. The changes from 2019 are “boxed”. We should note:

• Income – The winner & losers are the expected groups but they are 30% closer together.
• Earners – New, but not unexpected, winner and loser. They have the highest and lowest incomes.
• Occupation – Once again, it’s all about income
• Age – The highest income group, 45>54 yr-olds returned to the top. Despite a strong showing by the 25>34 group, only those from 35>74 perform above 100%.
• Race/Ethnic; Education; Housing – The usual winners and losers but the performance gap narrowed a bit.
• Area – A fundamental change in the loser based upon population. Last year it was Rural. This year it’s Center City.
• Region – After winning for 5 straight years, the Northeast was replaced by the West at the top. The West is also the only region performing above 100%. The South has now finished last for 5 years in a row.
• CU Composition – No change here but again the performance gap narrowed a little, 10%.
• # in CU – Only 2 & 3 person Cu’s perform above 100%. We have seen spending movement to larger CUs. This is very apparent in Veterinary as the 5+ group spent 67% more and moved up a little after 2 years at the bottom.
• Generation – The loser flipped from the oldest to the youngest and the performance gap widened by 30%.

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

We saw some turmoil in performance. There was even more here. There were 4 repeats and 10 segments flipped from 1^st to last or vice versa. Last year they had 8 repeats and 4 flips. There were some surprise winners – 25>34 yr-olds & Center City but no surprise losers. In fact, in 4 categories all segments spent more. You should also note the increases were significantly larger than the decreases and 85% of 96 demographic segments spent more. Here are the specifics:

• Occupation – The winner and loser flipped with the “Bosses” returning to the top.
  • Winner – Mgrs & Professionals– Veterinary Spending: $9.87B; Up $2.11B (+27.1%)                      2019: Tech/Sales/Clerical
  • Loser – Tech/Sales/Clerical – Veterinary Spending: $3.42B; Down $0.27B (-7.4%)                          2019: Mgrs & Profess.
  • Comment – The highest income groups – Self-Employed and Mgrs & Professionals accounted for 90% of the increase. Blue Collar workers did spend $0.41B more but Retirees spent a little less, -0.04B (-1.0%).
• Region – The Northeast flipped from 1^st to last. They have now flipped for 3 consecutive years.
  • Winner – West – Veterinary Spending: $7.01B; Up $2.08B (+42.1%)                                                    2019: Northeast
  • Loser – Northeast – Veterinary Spending: $4.10B; Down $0.98B (-19.3%)                                         2019: Midwest
  • Comment – The South finished 2^nd for the 4^th consecutive year. All but the Northeast had double digit % gains.
• Race/Ethnic – Both groups held their spots as White, non-Hispanics maintained their dominance in this segment.
  • Winner – White, Not Hispanic – Veterinary: $21.67B; Up $1.85B (+9.3%)                                       2019: White, Not Hispanic
  • Loser – African American – Veterinary: $0.87B; Up $0.30B (+51.8%)                                               2019: African Americans
  • Comment– In 2019 only African Americans spent less. In 2020 everyone spent more. This shows that Pet Parents’ commitment to the health & wellbeing of their Pet Children is widespread across all racial/ethnic groups.
• Housing – Homeowners w/Mtges held their position at the top.
  • Winner – Homeowner w/Mtge – Veterinary: $14.06B; Up $1.62B (+13.0%)                                    2019: Homeowner w/Mtge
  • Loser – Renter – Veterinary: $4.19B; Up $0.53B (+14.5%)                                                                      2019: Homeowner w/o Mtge
  • Comment – Every segment spent more and in fact, Homeowners w/Mtges had the lowest percentage increase. They won because they account for 56.6% of all Veterinary spending.
• # in CU – Both the winner and loser flipped.
  • Winner – 2 People – Veterinary Spending: $9.73B; Up $1.50B (+18.3%)                                              2019: 1 Person
  • Loser – 1 Person – Veterinary Spending: $5.48B; Up $0.03B (+0.6%)                                                   2019: 2 People
  • Comment: Again, all groups spent more. 4 Person CUs and singles had increases under 2% while everyone else was in double digits, led by 5+ CUs who were up 67%.
• Generation – Baby Boomers flipped from last to first as they focused on their Pets’ needs – Food & Veterinary.
  • Winner – Baby Boomers – Veterinary: $8.93B; Up $1.45B (+19.4%)                                                  2019: Millennials
  • Loser – Gen Z – Veterinary: $0.20B; Down $0.06B (-22.5%)                                                                  2019: Baby Boomers
  • Comments – After 2 years at the bottom Boomers returned to the top. Millennials also had a good year, +$1.1B. Gen Z was the only generation to spend less.
• Area Type – Center City is a bit of a surprise and the big suburbs flipped from 1^st to last.
  • Winner – Center City – Veterinary Spending: $8.17B; Up $1.35B (+19.8%)                                       2019: Suburbs 2500>
  • Loser – Suburbs 2500> – Veterinary Spending: $11.57B; Up $0.36B (+3.2%)                                   2019: Suburbs <2500
  • Comment – All groups also spent more. The question became “How much more?” With 33% of the $ and a 20% increase, Center City won. Suburbs 2500> have 47% of $ but were only +3%. By the way, Rural was +80%.
• CU Composition – Married Couple Only flipped from last to 1^st.
  • Winner – Married, Couple Only – Veterinary: $7.04B; Up $1.31B (+22.9%)                                2019: Singles
  • Loser – Married, Oldest Child <6 – Veterinary: $0.95B; Down $0.21B (-18.2%)                          2019: Married, Couple Only
  • Comment – After a $0.72B increase in 2019, the loser was the only segment to spend less. Single Parents spent 68% more but 63% of the total $ increase came from Married Couples Only and those with a child over 18.
• # Earners – Both the winner and loser are new, but not surprising.
  • Winner – 3+ Earners – Veterinary Spending: $3.26B; Up $1.15B (+54.2%)                                     2019: 2 Earners
  • Loser – No Earner, Single – Veterinary Spending: $1.45B; Down $0.51B (-26.1%)                        2019: 1 Earner, 2+ CU
  • Comment – The winner and loser have the highest and lowest incomes and No Earner, Singles were the only group to spend less. Income is of primary importance to increased Veterinary Spending & # of earners is important. However, not every adult has to work. 1 Earner, 2+ Person CUs was only beaten by $0.03B.
• Income – $100>149K flipped from last to first.
  • Winner – $100>149K – Veterinary Spending: $5.04B; Up $1.14B (+29.1%)                                    2019: <$30K
  • Loser – $70>99K – Veterinary Spending: $3.74B; Down $0.41B (-9.8%)                                          2019: $100>149K
  • Comment – Two groups spent less, $50>69K & $70>99K. Last year we had a definite spending rollercoaster. It’s still here in 2020, but with bigger groups. <$50K: +$1.82B; $50>99K: -$0.48B; $100K>: +$1.69B.
• Age – In a bit of a surprise, the 25>34 yr-olds won while 35>44 flipped from 1^st to last.
  • Winner – 25>34 yrs – Veterinary Spending: $3.74B; Up $1.11B (+42.2%)                                       2019: 35>44 yrs
  • Loser – 35>44 yrs – Veterinary Spending: $4.47B; Down $0.59B (-11.6%)                                       2019: 45>54 yrs
  • Comment: Two groups spent less, the 35>44 yr-olds and the <25 group. Everyone else had double digit percentage increases. The 25>34 group is only 4^th in income and 5^th in Veterinary spending performance so their win is unexpected. Apparently, they were motivated by the pandemic. Their Services $ were flat but they spent a lot more in all other segments.
• Education – Those with an Advanced College Degree held their spot at the top.
  • Winner – Adv. College Degree – Veterinary Spending: $7.41B; Up $0.88B (+13.4%)                 2019: Adv. College Degree
  • Loser – <High School Grads – Veterinary Spending: $0.34B; Down $0.14B (-29.4%)                2019: Associates Degree
  • Comment – Only those without a HS Diploma spent less. College grads were up $1.29B (+9.3%). However, those with a HS Diploma but not a BA/BS spent $1.89B (+25.6%) more so the lift was widespread.

We’ve now seen the winners and losers in terms of increase/decrease in Veterinary Spending $ for 12 Demographic Categories. The 2020 pandemic brought strong  growth in Veterinary spending. However, there was some turmoil as only 4 segments held their spot from 2019 while 10 flipped from first to last or vice versa, but with almost no surprising winners. The surprise was in how widespread the spending lift was. In 4 categories, no segments spent less and overall, 85% of all demographic segments spent more. This means that there were “hidden” segments that didn’t win but made a significant contribution to the $3B increase. These groups don’t win an award, but they certainly deserve….

HONORABLE MENTION

Center City won but Rural came in second – the opposite ends of the population spectrum. Income matters as Self-Employed finished 2^nd to Managers & Professionals. However, spending became a little more balanced in both Income & Education which is reflected by the performance of the $30>39K, 1 Earner, 2+CU and HS Grads w/some College groups. It also wasn’t all about Baby Boomers and Gen X. The younger Millennials certainly stood up with a $1B increase in spending. There are many more groups that could be included as 82 of 96 segments (85%) spent more on Veterinary Services. That is significantly better than 57% in 2019 and 63% in 2018. 2020 was a good year!

Summary

2016 and 2017 produced a combined increase of $3.6B in Veterinary Spending as inflation moved to record low levels. In 2018 we had the Baby Boomer Spending “Bust” which especially impacted Food and Veterinary. The Boomers spending continued to fall in 2019. Fortunately, Gen X and Millennials stepped up to produce a small. 2.7% increase in both years. In 2020 the pandemic focused Pet Parents on the needed segments. This drove a $3B increase in Veterinary $. Boomers & Millennials led the way, but the lift was widespread as 85% of demographic segments spent more.

There was some turmoil in the segment, but the net result is that spending became a little more balanced in most demographic categories. In general, the size of the increases far exceeded the size of the decreases. In fact, in 4 categories all segments increased spending. Income and Education remain of primary importance in terms of increased spending.

Income: Performance generally increases with income and reaches it’s highest level, nearly 200% at $150K>. The “halfway” point (50%) occurred at $70>99K in 2020. This is the 1^st time that the halfway point has fallen below $100K. Spending may be more balanced, but you can see that there is still a huge disparity.

Higher Education: Performance increases with Education but doesn’t reach 100% until you have a BA/BS degree. The performance of HS Grads with an Associate Degree or at least some college is now over 90%. Those with a College Degree perform at 131%. The disparity is not as bad as Income but still big. Equality in both categories is a long way off.

The performance of other big spending groups is also very important in the Veterinary segment. We identified six demographic categories with high performing large groups. (There were 5 for Supplies and Services but 8 for Food).  Consumers have no control over Race/Ethnicity but in addition to Income and Education, Homeownership, # Earners & Marriage are also important factors in Veterinary spending. All groups but Marriage are tied to income and their high performance demonstrates that there are still big spending disparities among segments within these categories.

There were some changes of note. Marriage returned to prominence while a strong year by the 25>34 yr-olds drove the performance of the 35>64 age group significantly down.

In 2019 Veterinary spending increased +2.7% while prices rose 4.14% – a net decrease in the amount of Services. In 2020 spending grew +14.0% while inflation was 3.7%. That’s over 10% in real growth, a very positive situation. Also, although Boomers and Millennials drove the lift, increases were widespread across demographics making Veterinary spending more balanced. In 2021, the overall U.S. economy has largely recovered. We’ll see if Pet Parents continue to spend heavily on Veterinary Services.

Finally – The “Ultimate” Veterinary Services Spending Consumer Unit consists of 3 people – a married couple and their 18 yr old child. They are 45 to 54 years old. They are White, but not of Hispanic origin. At least one of them has an Adv. College Degree. Both are Mgrs/Professionals and their child also works. Their total income is $150>$200K. They live in a small suburb, adjacent to a big city in the Western U.S. and are still paying off the mortgage on their home.

Next, we’ll turn our attention to Pets and Supplies. We’ll see definite differences from Pet Food as the spending in the Supplies segment is more discretionary in nature. There are other factors too. Spending can be affected by the spending behavior in other segments, especially Food. Consumers often trade $ between segments. However, the biggest factor is price. Many supplies categories have become commoditized so pricing changes (CPI) can strongly impact Consumers’ buying behavior in this segment. In the 2nd half of 2016, deflation began, and Supplies started a 24 month spending lift, totaling $4.97B. Prices turned up in mid-2018 due to new tariffs and Supplies $ fell a record -$2.98B in 2019. In 2020 prices fell in the Spring but most Supplies weren’t considered a pandemic necessity, so sales continued to drop, -$1.65B.

Let’s see which groups were most responsible for the bulk of Pet Supplies spending in 2020 and the $1.65B decrease. The first chart details the biggest pet supplies spenders for each of 10 demographic categories. It shows their share of CU’s, share of Supplies spending and their spending performance (Share of spending/share of CU’s). The Age group is different from Total Pet and Food. It’s younger, especially from Food. The categories are presented in the order that reflects their share of Total Pet Spending. This highlights the differences in importance. All 10 of the groups have over a 60% market share. The big difference is we only have 5 groups with performance over 120%, down 2 from 2019. That’s the same as Total Pet but 3 less than Pet Food. Higher income and # of Earners are the 2 most important categories but Supplies spending, unlike Pet Food, is becoming a little more balanced across many demographics.

1. Race/Ethnic – White, not Hispanic (83.3%) down from (84.6%) This large group accounts for the vast majority of spending in every segment. Their share fell and their performance rating was down from 123.4% to 121.8% but they remain #4, in terms of importance in Supplies Spending. Minority groups account for 31.4% of all CUs but spend only 16.7% of Supplies $. This is actually their biggest share of any category. The drop was less severe for lower income Hispanics and African Americans because they are more focused on essential supplies. Asians actually spent more.
2. # in CU – 2+ people (79.5%) down from (79.8%) Their Supplies performance was 113.3%, down from 114.3%. All CU sizes but 5+ spent less. Double digit decreases by 2 & 3 person CUs drove down the 2+ CU share and performance. However, all groups but 1 person CU’s still performed above 100%.
3. Housing – Homeowners (77.7%) up from (76.6%) Homeownership is a big factor in pet ownership and spending in all segments. However, due to an increases in CUs, their performance dropped to 118.0%, from 120.1%,. They stayed in 6^th place in terms of importance for increased Pet Supplies spending but dropped out of the 120+% Club. Homeowners w/Mtges spent 0.6% more but Renters and Homeowners w/o Mtges had double digit % decreases.
4. Area – Suburban + Rural (67.1%) down from (68.0%) All areas but Rural spent less. The Suburban drop was so large that we had to add Rural to the big group in order to reach our 60% goal. Even with this positive addition the new group lost a little share and their performance fell to 106.4%, from 106.7% in 2019.
5. # Earners – “Everyone Works” (72.8%) up from (70.0%) Their performance grew from 119.6% to 127.0% and they moved up from #7 to #2 in importance. In this group, all adults in the CU are employed. Income and now # Earners is very important in Supplies $. The gains were driven by a big lift by working singles, the only group to spend more.
6. CU Composition – Married Couples (60.0%) down from (60.9%) Their performance also dropped from 124.6% to 123.7% but they stayed 3rd in importance. Only Married Couples with the oldest child 6>17 and Single Parents spent more. The Married group was driven down primarily by a $1.33B decrease in spending by Couples only and those with at least one child over 18.
7. Income Over $70K (61.1%) down from (62.6%) Although performance fell from 150.8%, to 140.5%, income is still the most important factor in increased Pet Supplies Spending. The $40>49K group spent 24% more and the $150>199K group was +0.6%, the only increases. The $70K> lost ground because they had a bigger decrease than <$70K. A 4% increase in CUs along with the 2020 movement away from discretionary spending has pushed the performance of this high income group in Supplies down to its lowest level for any industry segment.
8. Age – 25>54 (61.1%) up from (54.5%) This is a new, younger group as a spending lift by the 25>34 yr-olds pushed their spending past that of the 55>64 yr-olds. The performance level increased to 121.8% from 109.5% but the change in range caused the age category to fall from 2nd in importance to a tie for 4th. Supplies $ traditionally skew towards the younger groups. However, the 65>74 yr-olds also spent more so Supplies spending became more balanced across the age groups.
9. Education – Associates Degree or Higher (67.5%) down from (67.6%) Higher Education lost market share and their performance level decreased from 121.6 to 117.9%, largely because of an increase in the number of CUs. They fell from 5^th to 7^th  in importance. The only increases came from the opposite ends of the Education spectrum. The less than High School diploma group spent $0.17B more and those with Advanced College Degrees were +$0.28B.
10. Occupation – All Wage & Salary Earners (68.0%) up from (65.6%) – The performance of this group was 110.7%, up from 107.5%. Only the 2 highest income segments, Mgrs/Professional & Self-Employed spent more. A big drop in spending by Retirees drove up the share and performance of all wage/salary earners in Supplies spending.

Pet Supplies spending skews younger than both Total Pet and Food. The spending decrease continued in the pandemic  as consumers focused on needs rather than the more discretionary Supplies. They often traded $ as the groups with the biggest increases in Food had the biggest decreases in Supplies $. Also, the drop from 7 to 5 groups with 120+% performance indicates reduced disparity between segments.

Now, we’ll look at 2020’s best and worst performing Pet Supplies spending segments in each category.

Almost all of the best and worst performers are those that we would expect. In Pet Supplies spending, there are only 3 that are different from 2019. That is 3 less than Total Pet and 7 less than Pet Food. It is actually the lowest number for any Industry segment. As we move deeper into the data, we will start to see even more differences between the Industry Segments. Changes from 2019 are “boxed”. We should note:

• Income matters in Supplies spending.
  • The $150K> was group the top performer in all segments but Food, where $100>149K won. However, this highest income group had its lowest performance level in Supplies.
  • All of the 12 winners for best performance were either 1^st or 2^nd in income of any segment in the category.
• Region – The West won again and this year was the only region with performance over 100%. The Midwest replaced the South at the bottom. However, spending was more regionally balanced with the lowest performance at 94.8%.
• CU Composition – Last year’s winner had an oldest child over 18. Spending skewed a little younger this year. Marriage was the “key”. Only Singles and Single Parents performed below 100%.
• # in CU – 5+ People CUs was the only size to increase Pet Supplies spending so they earned their spot. Once again, only Singles perform below 100% so in Pet Supplies spending, it still just takes 2.

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

In 2019, Tarifflation caused a record $2.98B drop in Supplies spending. 2020 brought the pandemic and pet parents focused on “needs” so the more discretionary Supplies segment fell $1.65B. In the chart, there are 7 repeats from 2019 – 2 winners and 5 losers. 2 segments switched from last to first or vice versa. This is far less turmoil than last year when there were only 2 repeats but 9 “flips”. There is another improvement. In 2019 all segments in 9 of 12 categories spent less. In 2020, there was only 1 – Regions. Back in 2017, the good old days, every segment in 10 categories increased spending. In the 1^st year of the pandemic the spending decline has slowed but not stopped. Here are the specifics:

• Age – Only the 25>34 and 65>74 groups spent more.
  • Winner – 25>34 yrs – Pet Supplies Spending: $2.80B; Up $0.62B (+28.3%)               2019: <25 yrs
  • Loser – 55>64 yrs – Pet Supplies Spending: $2.73B; Down -$1.26B (-31.5%)              2019: 35>44 yrs
  • Comment: The 45>64 yr olds spent $1.71B less on Supplies.
• Occupation – Managers & Professionals flipped from last to first.
  • Winner – Managers & Professionals – Pet Supplies Spending: $5.65B; up +$0.52B (+10.1%)        2019: Blue Collar
  • Loser – Retired – Pet Supplies Spending: $1.90B; Down -$0.56B (-22.7%)                                           2019: Mgrs/Professionals
  • Comment – Only Self-Employed and Managers & Professionals spent more. All other occupational groups and Retirees had double digit percentage decreases and their spending fell at least $0.5B.
• # in CU – The winner flipped from the smallest CUs to the largest.
  • Winner – 5+ People – Pet Supplies Spending: $2.02B; Up +$0.38B (+23.3%)                              2019: 1 Person
  • Loser – 2 People – Pet Supplies Spending: $5.43B; Down -$0.97B (-15.1%)                                 2019: 2 People
  • Comment: Only 5+ CUs spent more. 2 person CUs stayed at the bottom. Their Supplies spending has fallen $2.5B, -31.5% since 2018. That’s 54% of the total 2018>2020 spending drop for the Supplies Segment.
• Area Type– Another big change – Rural won this year. Last year it was Center City. Big Suburbs stayed at the bottom.
  • Winner – Rural – Pet Supplies Spending: $1.40B; Up +$0.33B (+30.3%)                                           2019: Center City
  • Loser – Suburbs 2500> – Pet Supplies Spending: $6.59B; Down -$0.85B (-11.4%)                         2019: Suburbs 2500>
  • Comment – In 2019, all segments spent less. In 2020, only Rural Areas spent more.
• Education – Advanced College Degrees won, a big flip from the 2019 winner – less than High School grads.
  • Winner – Advanced College Degree – Pet Supplies Spending: $4.08B; Up +$0.28B (+7.5%)           2019: < HS Grads
  • Loser – BA/BS Degree – Pet Supplies Spending: $4.52B; Down $0.82B (-15.4%)                                2019: BA/BS Degree
  • Comment – BA/BS Degrees repeated as loser. In 2019, all segments spent less. In 2020, Advanced Degrees and those without a High School diploma spent more. Everyone in between spent less.
• # Earners – 1 Earner, Single kept their spot at the top.
  • Winner – 1 Earner, Single – Pet Supplies Spending: $2.38B; Up +$0.26B (+12.3%)                  2019: 1 Earner, Single
  • Loser – 2 Earners – Pet Supplies Spending: $6.59B; Down -$0.92B (-12.3%)                              2019: 1 Earner, 2+ CU
  • Comment – Income is a big factor and the # of Earners is becoming more important. In 2020 only 1 Earner, Single CUs spent more. The “Everyone Works” group grew in share and performance because they had a smaller decrease than CUs where not all adults were employed.
• Income – For the 2nd consecutive year, the winner was below the average CU income level but the gain was small.
  • Winner – $40>49K – Pet Supplies Spending: $1.27B; Up +$0.25B (+24.9%)                               2019: $30>39K
  • Loser – $70 > 99K – Pet Supplies Spending: $2.32B; Down -$0.54B (-19.0%)                              2019: $50>69K
  • Comment – The $100>149K group also spent a little more, +0.01B (+0.6%). Everyone else spent less. The over $70K group continues to generate over 60% of Supplies $. However, the biggest spenders continue to be the biggest losers as their % drop was twice that of the <$70K group.
• CU Composition – Married Couples Only flipped from 1^st to last n 2019. In 2020 they held on to the bottom spot.
  • Winner – Married, Oldest Child 6>17 – Supplies: $2.36B; Up $0.22B (+10.1%)                    2019: Married, + Adults, No Kids
  • Loser – Married, Couple Only – Supplies: $3.70B; Down -$0.80B (-17.8%)                             2019: Married, Couple Only
  • Comment – Single Parents also had a small spending increase. Married Couples Only are definitely the big losers. They account for 24% of Supplies $. Their spending from 2018>2020 is -$2.35B, 51% of Supplies’ Total decrease.
• Generation – Millennials held their spot at the top for the 3^rd consecutive year.
  • Winner – Millennials – Supplies: $4.12B; Up +$0.20B (+5.2%)                                                    2019: Millennials
  • Loser – Baby Boomers – Supplies: $4.41B; Down $1.49B (-25.3%)                                              2019: Gen X
  • Comment – This win by Millennials was driven by the 25>34 group. Gen X turned it around with a small 0.4% increase. All other generations, younger and older, spent less.
• Housing – The 2^nd and last flip as Homeowners w/Mtge moved from last to first.
  • Winner – Homeowner w/Mtge – Supplies: $8.35B; Up +$0.05B (+0.6%)                                2019: Renter
  • Loser – Homeowner w/o Mtge – Supplies: $3.43B; Down -$1.14B (-25.0%)                           2019: Homeowner w/Mtge
  • Comment – Renters also had a double digit % decrease in Supplies $. Some of the $ saved by Homeowners w/o Mtges on Supplies went toward funding their huge increase in Pet Food spending.
• Race/Ethnic – Asian Americans are truly a surprise winner.
  • Winner – Asian Americans – Supplies: $0.40B; Up +$0.04B (+10.7%)                                     2019: African Americans
  • Loser – White, Not Hispanic – Supplies: $12.63B; Down $1.60B (-11.2%)                               2019: White, Not Hispanic
  • Comment – Although their share of Pet Supplies $ has fallen from 86.3% in 2018 to 83.3%, White, Not Hispanics still drive this discretionary segment. They have the highest % of pet ownership and the second highest income. The interaction of these two factors is very clear in the Racial/Ethnic category. Whites have the most to lose and they did. Asians have the highest income. A 64¢/Month spending increase on Supplies wouldn’t even be noticed.
• Region – Both the winner and loser are new.
  • Winner – Midwest – Pet Supplies Spending: $3.06B; Down -$0.11B (-3.4%)                            2019: Northeast
  • Loser – West – Pet Supplies Spending: $3.90B; Down -$0.76B (-16.3%)                                     2019: South
  • Comment – In 2018, all regions spent more on Supplies. In 2019 they all spent a lot less. In 2020 the decreases for the Midwest and South were minimal but all Regions again spent less. They were the only Demographic Category in 2020 in which all segments decreased spending on Supplies.

We’ve now seen the winners and losers in Pet Supplies Spending $ for 12 Demographic Categories. In 2020, the pandemic priorities caused the spending decline which began in 2019 to continue. However, things got a little better. In 2019, only 3 of 96 segments had increases and 9 of 12 categories had no segments that spent more on Supplies. In 2020, 18 segments spent more and only 1 category had no segments with an increase. In performance, we saw many expected winners and 10 of 12 were the same as 2019. However, not every good performer can be “the” winner and some of these “hidden” segments should be recognized for their performance. They don’t win an award, but they deserve…

HONORABLE MENTION

In 2019, all numbers from these segments were negative. In 2020, 5 are positive but all merit some recognition in a tough, pandemic year. Most are unexpected and a very eclectic mix. Those without a High School diploma had a good year, including in Pet Supplies. Single Parents are perennial losers. In 2020 they demonstrated that they are also committed to their Pet Children. 2020 was the year of “bosses”, especially self-employed. They spent more in every industry segment and had the largest increase of any occupation in Total Pet Spending. In many categories the Pet Supplies spending leaders were virtual opposites. Age was one of these as the 65>74 yr-olds stood with the 25>34 yr-olds in spending more on Supplies. The high income $150>199K is certainly no surprise. Their increase is truly minimal, but they were the only income segment other than $40>49K group to post an increase in Supplies $. That brings us to Married Couples w/Other Adults but No Kids. They didn’t quite make it to the plus side but were very close. 2020 was a bad year for Pet Supplies. However, it was a slight improvement over 2019.

Summary

While Pet Food spending has shown a definite pattern, Pet Supplies have been on a roller coaster ride since 2009. Many Supplies categories have become commoditized and react strongly to changes in the CPI. Prices go up and spending goes down…and vice versa. Supplies spending has also been reactive to big spending changes in Food. Consumers spend more to upgrade their Food, so they spend less on Supplies – trading dollars. We saw this in 2015. In 2016 the situation reversed. Consumers value shopped for Food and spent some of the “saved” money on Supplies.

That brought us to 2017. Both Supplies and Food prices deflated while the inflation rate in both of the Services segments dropped to lows not seen in recent years. Value was the “word” and it was available across the market. Perhaps the biggest impact was that the upgrade to super premium Food significantly penetrated the market. This could have negatively impacted Supplies Spending, but it didn’t. Supplies’ spending increased in 93% of all demographic segments.

2018 started out as expected with a $1B increase in Supplies and a small lift in Food. Then the government got involved. In July the FDA issued a warning on grain free dog food and spending dropped over $2B. New tariffs were implemented on Supplies and spending flattened out then turned down $0.01B in the 2^nd half. Because of shipping timing, the full retail impact of Tariffs was delayed until 2019 when spending fell -$2.98B, affecting 97% of all demographic segments.

Among the demographic categories in which a consumer has some control, Higher Income & Marriage are still very important while Homeownership and Higher Education lost ground. In 2020 Income stayed on top and # of Earners and being a “boss” grew in importance. Supplies Spending also skewed a little younger.

The 2019 decline due to Tarifflation slowed but continued in 2020. 88% of the best/worst performers in 2019 kept their position in 2020. The pandemic caused consumers to focus on needs. That resulted in big spending lifts for Food and Veterinary and big drops in Supplies and Services. Pet Parents traded $. The best illustration of this is that 8 of the 12 segments with the biggest decrease in Supplies $ had the biggest increase in Food and/or Veterinary $. Some good news is that Supplies spending became more balanced. The performance gap between best and worst narrowed by 10.25%.

Prices are still important in Supplies $. They deflated in the spring of 2020 and stayed down until Mid-yr 2021 when they turned up again. We’ll see how this trend impacted spending in the more normal environment of 2021.

Finally – The “Ultimate” Pet Supplies Spending CU consists of 5 people – a married couple, with an oldest child over 18. They are 45>54 yrs old. They are White, but not of Hispanic origin. At least one has an Advanced Degree. Both of them work in their own business and one child just started a part time, after school job. They’re doing well with an income over $200K. They live in a small suburb, adjacent to a big city in the Western U.S. and are still paying off their mortgage.