Information by segment as defined by USBLS

U.S. Pet Services Spending (Non-Vet) $12.77B (↑$1.90B): 2023 Mid-Year Update

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In our analysis of Supplies Spending, we saw a big drop in the 2nd half of 2022, but the $ mostly rebounded in 2023. Food was different. After the big drop in Mid-2021, following the 2020 binge, spending has had strong growth for 2 years. Strong inflation was a factor in both. Now we turn our attention to Pet Services. The Mid-year numbers show that spending in this segment was $12.77B, up $1.90B (+17.5%) 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 2020. Pandemic closures drove spending down $1.73B, essentially returning to the level of 2017. In 2021 things opened up and spending spiked until growth slowed in 2023. This deserves a closer look. First, we’ll look at Services spending history since 2014.

Here are the 2022 Mid-Yr Details:

Mid-Year 2023: $12.77B, ↑$1.90B (+17.5%) vs Mid-Yr 2022

The $190B Came From:

Jul > Dec 2022: ↑$1.49B;     Jan > Jun 2023: ↑$0.41B

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 through 2022 with record increases until slowing in 2023. This lift happened despite an inflation rate of over 6% and sales reached a new record highof $12.77B in Mid-2023.

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 6/30/23 to the previous 12 months. The graphs also include the 2022 yearend $, so you can see spending changes in the 2nd half of 2022 and the 1st half of 2023.

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: $10.13B – $8.41B = Up $1.72B (Note green outline = increase; red outline = decrease)

  • 2nd half of 2022: Subtract Mid-22 ($8.41B) from Total 2022 ($9.61B) = Spending was up $1.20B in 2nd half of 2022.
  • 1st half of 2023: Subtract Total 2022 ($9.61B) from Mid-23 ($10.13B) = Spending was up +$0.52B in 1st half of 2023.

  • Services Spending is definitely skewed towards higher incomes. The halfway spending point is about $137K so about 23% of CUs spend 50% of Services $.
  • All groups $50K> increased spending while the $ dropped slightly for the <$50K but we should note that all groups had increases in the 2nd half of 2022. However, only $50>70K and $100K> had increases in both halves.
  • All groups $50K> had double digit growth with those from $50>150K having spending increases of 28+%. Also, the 2 decreases were small, about -6%.
  • The $50>70K group had the worst performance in 22, -20.9%. In 23, they were the best, +39.4%.
  • The over $150K group has 18.7% of the CUs but accounts for 44.4% 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 still 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.

  • All groups spent more. The only negatives were small 1st half 2023 drops by 25>34 & 65>74.
  • The 45>54 group had the biggest increase, up +$0.8B (+41.5%) and moved from #3 to #1in Services spending.
  • The 55>64 yr-olds spent only +$0.13B more (+5.1%) and fell from the top spot to 2nd in spending.
  • The 35>44 yr olds had a small increase +$0.07B (+3.0%) and dropped to #3 from #2 in spending.
  • Although spending dipped in 23, the 25>34 yr-olds are the only group with 3 consecutive mid-year increases.
  • The 65> groups were up $0.47B (+19.0%), driven by a +$0.49B lift in the 2nd half of 2022. You see the importance of Services to older Pet Parents. They actually spend the most. The 65>74 Baby Boomers set the pattern – No Surprise.
  • Although <25 spends very little, they had lifts in both halves and an 82% increase over 2022.

Now let’s look at what is happening in Pet Services spending at the start of 2023 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. The lift in the 1st half of 2023 was +$0.41B vs 2022. Last year it was +$1.77B vs 2021.

2023 has started slower than 2022 but spending continues to grow. There were no categories where all segments spent more. Last year, there were 5. Back in 2020, there were 4 categories in which all segments spent less. Also, except for CU Comp, the $ changes for the winners are still much larger than the negatives of the losers. The +$0.41B increase in Pet Services came from 52 of 82 demographic segments (63%) spending more. Last year it was 90% and in 2021, 78%. The strong recovery has slowed, but spending is still up +85% from 2020 and even +45% from 2019.

The usual winners have overwhelmingly returned with only 1 minor surprise  –  5+ People

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

  • Self-employed
  • BA/BS Degree
  • Boomers

The older Gen Xers are driving the 1st half lift, replacing the Baby Boomers. Gen X CUs have the largest number of people. Gen Xers have a high income and are educated. 70% own a home, usually in a larger suburb of a major metropolitan area. Also, 70% of Gen X homeowners still have a mortgage. They match most of the “winners”.

Services $ are at a record high and still growing. Let’s review how they got here 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 continued through 2022. Spending slowed in the 1st half of 2023 but reached a new record high of $12.77B, with an annual growth rate of 9.7% since mid-yr 2019. That’s 90% 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 Spending growth will probably slow but the $ are likely to continue to increase.

 

U.S. PET SUPPLIES SPENDING $23.59B (↓$0.79B): MID-YR 2023 UPDATE

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In our analysis of Pet Food spending, we saw that spending had continued strong 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 and fell in the 2nd half of 22 as inflation reached 8.0%. Inflation slowed to 5.2% in 23 and spending rebounded to $23.59B, only -3.2% below the record high in Mid-2022. The following chart should put the recent spending history of this segment into better perspective.

Here are this year’s specifics:

Mid 2023: $23.59B; ↓$0.79B, -3.2% from Mid 2022.

The -$0.79B came from:

Jul > Dec 2022: ↓$2.44B

Jan > Jun 2023: ↑$1.65B

The 2nd half 22 drop was big but not unexpected after 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, but due to the pandemic focus on “needs”, spending dropped an additional -$0.54B. The situation worsened in the 2nd half 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 21 and passed $24B in  Mid-yr 22. Inflation in Supplies took off at the beginning of 22 and spending dropped in the 2nd half. Inflation slowed a little in 23 as prices peaked and the $150K> income group drove most of a $1.65B lift.

Here’s what Pet Supplies inflation looked like in Mid-2023:

  • Mid-Yr 23 vs 22: 6.6%       • 2nd Half 22 vs 2021: 8.0%       • 1st half 23 vs 22: 5.2%

You can see that the rate slowed in early 2023 but prices still reached a record high. The 6.6% rate is the 2nd highest in history. Surprisingly, Pet Parents continued to spend at a near record level. However, they bought -9.8% less product. Inflation slowed significantly in the 2nd half of 2023. We’ll see if that impacts spending.

Now, let’s take a closer look at the data, starting with two of the most popular demographic measures – income and age. The graphs that follow will show both the current and previous 12 months $ as well as 2022 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 Spending Change: $17.12B – $17.26B = Down $0.14B (Note: green outline = increase; red outline = decrease)

  • 2nd half of 2022: Subtract Mid-22 ($17.26B) from Total 2022 ($15.58B) = Spending was down $1.68B in 2nd half of 22.
  • 1st half of 2023: Subtract Total 2022 ($15.58B) from Mid-23 ($17.12) = Spending was up $1.54B in 1st half of 23.

  • There are a mixture of patterns. The groups <$50K and $150> had decreases in the 2nd half of 2022. They also had lifts in 2023 along with the $70>100K group. The biggest lift in 2023, +$1.13B came from $150K>. The other groups had only small changes. No group had a decrease in both halves and only $70>100K had increases in both. The net result was that sales  for <$50K and $150K> were down vs 2022 while the middle income $50>150K groups were up.
  • Supplies spending is a little more balanced but it still driven by the higher incomes, especially the $150K> group. Over $100K has 35.1% of CUs but accounts for 56.8% of Supplies $. That’s a performance level of 161.9%. However, the $150K> is even stronger with 18.7% of CUs generating 36.0% of Supplies spending – performance: 192.8%. The highest performance for any group under $100K is from $70>100K at 112.2% but the averages were: <$100K = 66.5%; <$70K = 53.9%. The halfway point in Supplies spending is an income of $116K, down from $124K in 2022 but still 17% higher than the new elevated level for Food. Pet Supplies spending is still very much driven by income.

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

  • Except for 35>44, which had a drop in 22 and a lift in 23, all groups were either up or down in both halves. All those with an annual increase spent more in the 1st half of 23 than they did in 22 – <25, 45>54 and 65>.
  • The biggest lift came from 45>54, +$2.0B. Most of their increase came in the 1st half of 23.
  • The biggest drop came from 35>44, -$2.56B. All of the decrease came in the 2nd half of 22 as they had a lift in 23.
  • Supplies spending skews a little younger but it moved up in age in 2023. The halfway point is now 49 yrs old, a little younger than Food at 53 but in the middle of the highest income group. Income is still the biggest driver.

Now let’s look at what happened in Supplies spending at the start of 2023 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.

  • The lift didn’t equal the 2nd half drop but the biggest increases are still radically larger than the biggest decreases.
  • The increase was relatively widespread across the marketplace as 77% of segments spent more. There was 1 category in which all segments spent more – Race/Ethnic. Last year there were none.
  • Many of the winners are the “usual suspects”, like $150K>, 3+ Earners, 45>54, White & Homeowners w/Mtge but there are a couple of surprises – Tech/Sls/Clerical & Associates degree.
  • In regard to the losers, only a couple are expected – Center City & 2+ Adults. Most are surprising, especially $100>149K, Mgrs & Prof., 2 Earners and Adv. College Degree.
  • One of the biggest trends is that Gen X returned to the top with a $1.64B lift. This highest income, family oriented group passed recent strong showings by Millennials & Boomers.
  • While Supplies spending became slightly more balanced, income is still very important. 5 of the 12 “winners” have the highest income of any segment in their category.

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. Supplies spending slowed in the 1st half of 22 then plummeted in the 2nd half but that spending was going against a record increase in 21. Despite record high prices, spending had a widespread sales rebound in 23 but the amount purchased fell by -9.8%.  Prices remain high. We’ll see if that has an impact.

 

Petflation 2024 – May Update: Slows to +1.6% vs 2023

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The monthly Consumer Price Index peaked back in June 2022 at 9.1% then began to slow until turning up in Jul/Aug 2023. Prices fell in Oct>Dec 23, then turned up Jan>May 24. However, the CPI slowed in May to +3.3% from +3.4% in April. Grocery prices fell slightly, -0.01% from April and inflation slowed to 1.0% from 1.1%. After 12 straight months of double-digit YOY monthly increases, grocery inflation has now had 15 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.

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 22, but at 1.6% in May, it is -51.5% below the national rate, a big change from +52% in January. We will look deeper into the data. The 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 24 vs 23 which will include Pet Segments and relevant Human spending categories. Plus
    1. CPI change from the previous month.
    2. Inflation changes for recent years (22>23, 21>22, 20>21, 19>20, 18>19)
    3. Total Inflation for the current month in 2024 vs 2019 and vs 2021 to see the full inflation surge.
    4. Average annual Year Over Year inflation rate from 2019 to 2024
  • 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 May 22 to May 24. We will use December 2019 as a base number so we can track the progress from pre-pandemic times through an eventual recovery. This chart is designed to give you a visual image of the flow of pricing. You can see the similarities and differences in segment patterns and compare them to the overall U.S. CPI. The year-end numbers and those from 12 and 24 months earlier are included. We also included and highlighted (pink) the cumulative price peak for each segment. In May, Pet prices were up 0.1% from April. All but Food were up, with Services leading the way, +1.5%.

In May 22, the CPI was +13.7% and Pet prices were +10.5%. Like the CPI, prices in the Services segments generally inflated after mid-2020, while Product inflation stayed low until late 21. In 22 Petflation surged. Food prices consistently grew but the other segments had mixed patterns until July 22, when all increased. In Aug>Oct Petflation took off. In Nov>Dec, Services & Food prices continued to grow while Vet & Supplies prices stabilized. In Jan>Apr 23, prices grew every month except for 1 dip by Supplies. In May Products prices grew while Services slowed. In Jun/Jul this reversed. In August all but Services fell. In Sep/Oct this was reversed. In Nov, all but Food & Vet fell. In Dec, Supplies & Vet  drove prices up. In Jan>Mar 24 Pet prices grew despite a few drops. In April, prices in all but Vet fell. In May, all but Food grew.

  • U.S. CPI – The inflation rate was below 2% through 2020. It turned up in January 21 and continued to grow until flattening out in Jul>Dec 22. Prices turned up Jan>Sep 23, dipped in Oct>Dec, then rose Jan>May 24, but 31% of the 22.2% increase in the 53 months since Dec 2019 happened from Jan>Jun 2022 – 11.3% of the time.
  • Pet Food – Prices were at or below Dec 19 levels from Apr 20>Sep 21. They turned up & peaked in May 23. In Jun>Aug they fell, grew Sep>Nov, fell Dec>Feb, rose in Mar, fell Apr>May. 97% of the 22.0% lift came in 22 & 23.
  • Pet Supplies – Supplies prices were high in Dec 19 due to tariffs. They then had a “deflated” roller coaster ride until mid-21 when they returned to Dec 19 prices and essentially stayed there until 22. They turned up in Jan and hit an all-time high, beating the 2009 record. They plateaued Feb>May, grew in June, flattened in July, then turned up in Aug>Oct setting a new record. Prices stabilized in Nov>Dec but grew in Jan>Feb 23. They fell in Mar, but set a new record in May, then continued the rollercoaster with Dec>Feb lifts, Mar/Apr drops & a May lift.
  • Pet Services– Inflation is usually 2+%. Perhaps due to closures, prices increased at a lower rate in 2020. In 2021 consumer demand increased but with fewer outlets. Inflation grew in 21 with the biggest lift in Jan>Apr. Inflation was stronger in 22 but prices got on a rollercoaster in Mar>Jun. They turned up Jul 22>Mar 23 but the increase slowed in April and prices fell in May. They rose Jun>Aug, fell Sep>Dec, rose Jan>Mar, fell in Apr and rose in May.
  • Veterinary – Inflation has been consistent. Prices turned up in Mar 20 and grew through 21. A surge began in Dec 21 which put them above the overall CPI. In May 22 prices fell and stabilized in June causing them to fall below the CPI. However, prices rose again and despite some dips they have stayed above the CPI since July 22. In 23, prices grew Jan>May, stabilized Jun/Jul, fell in Aug, grew Sep>Dec, fell in Jan 24, but set records in Feb>May.
  • Total Pet – Petflation is a sum of the segments. In Dec 21 the price surge began. In Mar>Jun 22 the segments had ups & downs, but Petflation grew again from Jul>Nov. It slowed in Dec, grew Jan>May 23 (peak), fell Jun>Aug, grew in Sep/Oct, then fell in Nov. In December prices turned up and grew through March to a new record high. Prices fell in April then rose in May, but Petflation is again about half of the National CPI.

Next, we’ll turn our attention to the Year Over Year inflation rate change for May and compare it to last month, last year and to previous years. We will also show total inflation from 21>24 & 19>24. Petflation fell to 1.6%, down from 1.7% in April. It is again 50% below the National rate. In January, it was +52%. The chart will allow you to compare the inflation rates of 23>24 to 22>23 and other years but also see how much of the total inflation since 2019 came from the current pricing surge. We’ve included some human categories to put the pet numbers into perspective.

Overall, Prices were +0.2% from April but were +3.3% vs May 23, down from +3.4% last month because there was a bigger Apr>May price lift in 23. Grocery inflation also fell slightly to +1.0% from +1.1%. Only Pet Food & Groceries had a price decrease from last month. There were 4 drops in April – all Pet. The national YOY monthly CPI rate of 3.3% is down from 3.4% and 83% of the 22>23 rate but only 38% of 21>22. The 23>24 inflation rate is below 22>23 for all categories but Medical & Pet Services. In our 2021>2024 measurement you also can see that over 65% of the cumulative inflation since 2019 occurred in all but 2 segments – Medical Services & Haircuts – both Services categories. Service Segments have generally had higher inflation rates so there was a smaller pricing lift in the recent surge. Pet Products have a very different pattern. The 21>24 inflation surge provided 102% of their overall inflation since 2019. This happened because Pet Products prices in 2021 were still recovering from a deflationary period. Services expenditures now account for 64.1% of the National CPI so they are very influential. Their current CPI is +5.2% while the CPI for Commodities is +0.1%. This clearly shows that Services are driving almost all of the current 3.3% inflation rate.

  • U.S. CPI– Prices are +0.2% from April. The YOY increase is 3.3%, down from 3.4%. It peaked at +9.1% back in June 2022. The targeted inflation rate is <2% so we are still 65+% higher than the target. After 12 straight declines, we had 2 lifts, a stable month, 2 consecutive drops, now 3 of 6 with drops – still not good! The current rate is 17% below 22>23 but the 21>24 rate is still 16.7%, 73.9% of the total inflation since 2019. Inflation was low in early 2021.
  • Pet Food– Prices are -0.1% vs April and -1.1% vs May 23, down from -0.1%. Now, they are significantly below the Food at Home inflation rate, +1.0%. The YOY drop of -1.1% is being measured against a time when prices were 23.3% above the 2019 level and the current decrease is still below the -0.01% drop from 2020 to 2021. The 2021>2024 inflation surge has generated 99.1% of the total 23.0% inflation since 2019.
  • Food at Home – Prices are down -0.01% from April and the monthly YOY increase is 1.0%, down from 1.1%. It is radically lower than Jul>Sep 2022 when it exceeded 13%. The 26.2% Inflation for this category since 2019 is 16% more than the national CPI but still in 4th place behind 3 Services expenditures. 74.8% of the inflation since 2019 occurred from 2021>24. This mirrors the national CPI, but we should note that Grocery prices began inflating in 2020>21 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 were up 0.6% from April but are -1.0% vs May 2023. They have the lowest increase since 2019. As we noted, prices were deflated for much of 2021. As a result, the 2021>24 inflation surge accounted for 100+% of the total price increase since 2019. They reached an all-time high in October 2022 then prices deflated. 3 months of increases pushed them to a new record high in Feb 23. Prices fell in March, rose in Apr/May to a new record high, fell in Jun>Aug, grew in Sep>Oct, fell in Nov, grew again in Dec>Feb, fell in Mar>Apr, then rose in May.
  • Veterinary Services– Prices are +0.3% from April and +7.6% from 2023, still the highest rate in the Pet Industry. Plus, they are the leader in the increase since 2019 with +39.6% and since 2021, +28.2%. For Veterinary, relatively high annual inflation is the norm. However, the rate has increased during the current surge, especially in 22 & 23. It is still high in 24, so 71.2% of the cumulative inflation since 2019 occurred from 2021>24.
  • 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 0.3% from April, and they are +3.1% vs last year. Medical Services are not a big part of the current surge as only 47% of the 15.1% 2019>24 increase happened from 21>24.
  • Pet Services – Inflation slowed in 2020 but began to grow in 2021. In 2024 prices surged Jan>Mar dropped in April then rose to a record high in May, +6.4% vs 23. Inflation peaked at +8.0% back in March 23. Now, 70% of their total 19>24 inflation has occurred since 2021. In December, it was only 49%. BTW: They have the 2nd highest 19>24 rate.
  • Haircuts/Other Personal Services – Prices are +0.2% from April and +4.8% from 23. 3 of the last 5 months have been 4.0+%. Inflation has slowed but has been pretty consistent. 62% of the 19>24 inflation happened 21>24.
  • Total Pet– Petflation slowed to 1.6% from 1.7% in April and is 85% less than the 22>23 rate and 52% less than the U.S. CPI. For May, 1.6% is 48% below the 3.1% average rate since 1997. Vs April, prices grew 0.1% as all but Food had increases. Services led the way with +1.5%. An Apr>May price increase has happened in 22 of the last 27 years, so this month’s data was not surprising. In terms of Petflation, 2024 appears to be returning to a more normal pattern. However, the path to get there may be unusual and there is still a ways to go.

Now, let’s look at the YTD numbers.

The inflation rate for 22>23 was the highest for 4 of 9 categories – All Pet – Pet Food, Services, Veterinary & Total Pet. The 23>24 rate is usually much lower than 22>23 for all but Medical Services. 21>22 still has the highest rate for Food at Home, the CPI & Pet Supplies. The average annual national inflation in the 5 years since 2019  is 4.2%. Only 2 of the categories are below that rate – Medical Services (2.8%) and Pet Supplies (2.2%). It comes as no surprise that Veterinary Services has the highest average rate (6.7%), but all 5 other categories are +4.5% or higher.

  • U.S. CPI – The 23>24 rate is 3.3%, the same as April, but down 38% from 22>23 and 60% less than 21>22. It is also 21% below the average YOY increase from 2019>2024, but it’s still 63% more than the average annual increase from 2018>2021. 78% of the 22.7% inflation since 2019 occurred from 2021>24. Inflation is a big problem that started recently.
  • Pet Food – Ytd inflation is 1.6%, down from 2.2% in April and 89% less than the 22>23 rate. Now, it is also 72% lower than 21>22 and 14% below the average rate from 2018>2020. Pet Food has the highest 22>23 rate on the chart and remains in 2nd place in the 21>24 rates. Deflation in the 1st half of 2021 kept YTD prices low then prices surged in 2022 and especially in 2023. 94% of the inflation since 2019 occurred from 2021>24.
  • Food at Home – The inflation rate has slowed remarkably. At 1.1%, it is down over 87% from 22>23 & 21>22 and 56% from 20>21. Also, it is even 33% lower than the average rate from 2018>20. It remains in 3rd place for the highest inflation since 2019 but still beat the U.S. CPI by 15%. You can see the impact of supply chain issues on the Grocery category as 78% of the inflation since 2019 occurred from 2021>24.
  • Pets & Pet Supplies – Prices increased Jan>Feb, fell Mar>Apr then rose in May. The 2024 inflation rate of 0.1% is only higher than the -1.6% deflation in 20>21. Supplies have the lowest inflation since 2019. The only significant increases were 7.0% in 22 & 5.5% in 23. The 2021 deflation created a unique situation. Prices are up 11.4% from 2019 but 114% of this increase happened from 2021>24. Prices are up 13.0% from their 2021 “bottom”.
  • Veterinary Services – Inflation was high in 2019 and steadily grew until it took off in late 2022. The rate may have peaked in 2023, but it is still going strong at the start of 2024, +8.3%, the highest on the chart. They are also #1 in inflation since 2019 and since 2021. At +6.7%, they have the highest average annual inflation rate since 2019. It is 1.6 times higher than the National Average but 2.4 times higher than the Inflation average for Medical Services. 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. Ytd it is 1.9%. In a non-pandemic year, “normal” is between 2.1>2.9%. We are still seeing the impact of 2023 when prices actually deflated (-0.3%). This was the only deflationary year since the US BLS began tracking this category in 1935.
  • Pet Services – After falling in late 2023, prices surged in 2024,except for a drop in April. The Ytd 23>24 inflation rate of 5.1% is 2nd to Veterinary in the Pet Industry. It is 29% less than 22>23 and 16% below 21>22. However, it is still 1.6 times higher than the 2018>21 average rate. Pet Services is 2nd in 19>24 inflation but only 5th in inflation since 2021.
  • Haircuts & Personal Services – The services segments, essential & non-essential, were hit hardest by the pandemic. The industry responded by raising prices. Ytd inflation is 4.3%, which is 23% below the 20>21 peak but 39% above the 18>20 average. Consumers are paying over 25% more than in 2019, which usually reduces the frequency.
  • Total Pet – Ytd Petflation is 3.0%, down from 3.4%. It is 71% less than 22>23 but 32% higher than the 2018>21 average rate. However, it is now 9% below the CPI. Petflation is slowing in 2024. This is primarily being driven by drops in Pet Food inflation rates but Supplies inflation is also slowing. Services and Veterinary prices both reached record highs in May, but it was not enough to overcome the YOY monthly deflation in products.

Petflation is definitely slowing. May was 66% below the average for the month and 52% lower than the National CPI. This is about the same as it was back In 2021. One fact is often ignored in the headlines – Inflation is cumulative. Pet prices are 21.2% above 2021 and 25.6% higher than 2019. Those are big lifts. In fact, in May prices for Vet & Serv set new records. Total Pet is only 0.1% below the highest in history. Food prices are 1.1% below their peak and Supplies prices are 1.0% lower. Only Supplies prices (+10.3%) are less than 23% higher than 2019. Since price/value is the biggest driver in consumer spending, inflation will affect the Pet Industry. Services will be the least impacted as it is driven by high income CUs. Veterinary will likely see a reduction in visit frequency. The product segments will see a more complex reaction. Supplies will likely see a reduction in purchase frequency and some Pet Parents may even downgrade their Pet Food. Products will see a strong movement to online purchasing and private label. We saw evidence of this at GPE 24 where a record number of exhibitors offered OEM services. Strong, cumulative inflation has a widespread impact.

U.S. PET FOOD SPENDING $40.86B (↑$4.51B): MID-YEAR 2023 UPDATE

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The pandemic had a huge impact on Pet Food spending and the binge/bust was very visible. Recent strong inflation is also very impactful but is less visible. At Mid-year 2023, the strong $ growth that began in the 2nd half of 2021 continued. Pet Food Spending for the 12 months ending June 30, 2023 was $40.86B, up $4.51B (+12.4%) from a year ago. Let’s put that into proper perspective. In pre-pandemic, Mid-2019 Pet Food spending was $28.90B. That means that the average annual growth rate from 2019>23 is +9.1%. This is 62% higher than the average growth rate of +5.6% from 1984 to 2019. In the topline numbers, this industry segment is doing well. However, a new challenge began in 2022 – radically high inflation in Pet Food prices. Here’s what it was in mid-year 2023:

  • Mid-yr 23 vs 22: +14.1%
  • 2nd Half 22 vs 21: +14.0%
  • 1st Half 23 vs 22: +14.2%

Strong inflation began in 2022. It hit 10+% in June 2022 and prices reached a record high in May 2023. Prices have stabilized but are still within 1% of the peak. Traditionally, “normal” inflation increases have had little impact on Pet Food spending. However, the current increases are historic. While the 2024 inflation rate is now very low, high prices can affect Pet Parents’ buying behavior. We’ll get more evidence of any ongoing cumulative impact when the 2023 yearend Pet Food spending numbers are released  in early September.

If inflation was 14.1% for Mid-Yr 2023, then the 12.4% increase in Pet Food spending was really a -1.7% drop in sales. Consumers didn’t buy less. The drop came from a mixture of downgrading, moving to private label and value shopping.

Now, let’s get started with our Pet Food spending update for Mid-Year 2023. Pet Food (& Treat) Spending for the 12 months ending 6/30/23 was $40.86B, up +$4.51B (+12.4%). 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 current numbers into historical perspective and truly show you the recent change in the roller coaster ride of Pet Food Spending.

Here are the current numbers:

Mid-Yr 2023: $40.86B; ↑$4.51B (+12.4%) from Mid-Yr 2022. The net gain of $4.51B came from:

  ◦  Jul>Dec 2022: Up $2.34B from 2021.          ◦  Jan>Jun 2023: Up $2.17B from 2022.

Historical research has shown that Pet Food spending has been on a roller coaster since 2000, generally with 2 years up, followed by a flat or even declining year. This up and down “ride” was primarily driven by a succession of Food trends like Made in the USA, Natural and Super Premium”. The 2 yrs up then 1 yr flat/down pattern has been broken on a couple of occasions due to outside influences – the FDA grain free warning in 2018 and the COVID pandemic in 2020. We may see another major influence on spending – skyrocketing inflation. Right now, we’re seeing strong, consistent growth but it is primarily due to higher prices. We’ll see what happens, but the Pet Food spending rollercoaster ride is likely to continue in some form.

2013 was 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 were the leaders in Pet Food, both in spending and in adopting new products. Even in 2023, they still spend the most, but it turns out that the 25>34 yr-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 that 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. The Super Premium upgrade movement had 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 competitive pricing brought about another change. Recent food trends have been driven by higher income and higher education groups. 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 penetrated the market more deeply. 2018 started off slowly, +$0.25B. Then came the FDA warning on grain free dog food. Many of the recent Super Premium converts rolled back their upgrade and spending fell -$2.51B. This decrease broke a 20 year spending pattern. In the 1st 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  – 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 1st half of 2020. Spending fell in the 2nd half of 2020 and plummeted in the 1st half of 2021. Pet Parents didn’t binge again, and some began using up the stockpile that they panic bought in the early days of COVID. In the 2nd half of 2021, the up/down impact of COVID was essentially over. Pet Parents were still committed to their children’s health which included Super Premium Foods and Medical Supplements, often in treat form. The internet also made this quality choice accessible to more households, so Pet Food spending increased both in the 2nd half of 21 and the 1st half of 22. In 2022, strong inflation began. Prices peaked in May 2023 but remained high. Sales had strong growth in both the 2nd half of 22 and the 1st half of 23. However, inflation drove 100+% of the lift as there was a “real” -1.4% drop in Pet Food Sales. Strong inflation has stopped but prices remain within 1% of the peak. We’ll see what happens.

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 2022 yearend. This will allow you to track the spending changes between halves. The first graph is Income, which has been shown to be the single most important factor in increased Pet Spending and its influence continues to grow.

Here’s how you get the change for each half of the 22>23 mid-yr numbers using the over $100K group as an example:

  • $100K> Mid-yr Total Spending Change: $20.45B – $16.36B = Up $4.09B (green outline = increase; red outline = decrease)
    • 2nd half of 2022: Subtract Mid-22 ($16.36) from Total 2022 ($17.60B) = Spending was up $1.24B in 2nd half of 2022.
    • 1st half of 2022: Subtract Total 2022 ($17.60B) from Mid-23 ($20.45B) = Spending was up $2.85B in 1st half of 2023.
  • Spending was mixed for the year in the smaller segments but there were basically 3 different patterns in the individual groups. #1. $150K>, $100>149K & <$30K spent more in both halves. #2. $30>49K & $50>69K spent less in the 1st half of 2023. #3. $70>99K spent less in both halves. Note: The very price sensitive groups from $30K to $99K all had spending drops when inflation peaked in the 1st half of 2023.
  • Perhaps the most obvious fact is the continued spending disparity due to income. Back in 2014, prior to the big lift due to Super Premium, $70K was the “halfway point” in Pet Food spending. The under $70K group accounted for 66.7% of CUs and 51.1% of Pet Food spending. 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%. High inflation has caused another flip as $100K> is back on top with over 50.0%. The halfway point in Pet Food spending grew from $91K to $100K, the 2nd highest in history.
  • < $70K > The Pet Food spending patterns of these big groups changed in 2023. The Fall 2022 lift is larger for <$70K. However, that changed in 2023 when their sales fell while $70K> $ spiked. The impact of Higher Inflation on most lower incomes is very apparent in this big group.
  • < $100K > The spending patterns of these 2 groups closely mirrors the Under/Over $70K pattern except that the Fall 2022 spending lift for the $100K> group was slightly larger than for <$100K. The Total Spring 2023 lift came from the lowest and highest income groups, but with a $2.85B lift, $100K> was the primary driver.
  • <$30K – With a lift in the Fall and an even bigger increase in the Spring, spending for this lowest income group grew 31.2%, over twice the inflation rate. They obviously have a strong commitment to the health of their pet children.
  • $30>49K – This low-income group includes many Retirees. They are definitely committed to their pets, but their timing often lags behind other groups. The drop in 2023 was probably due to value shopping after their big 2022 lift.
  • $50>69K – This low-income group was hit hard by the pandemic. With strong growth in the 2nd half of 2022 and only a minor drop in 2023, their Pet Food spending is again above pre-pandemic 2019.
  • $70>99K –This middle-income group was the most negatively affected by the pandemic. However, they fully recovered in 2021. Spending flattened in early 2022, then dropped in the 2nd half and 1st half of 2023. They are very value conscious. The skyrocketing inflation in late 2022 and early 2023 obviously affected their Pet Food spending.
  • $100K>149K – High income is increasingly becoming “where it’s at” in Pet Spending. This group led the way in Pet Food binge buying and the subsequent drop. Sales grew in both halves but 57% of the lift was due to inflation.
  • $150K > Their Pet Food spending also fell in 2020, likely due to value shopping on the internet. They came back strong in 2021, Their pattern is similar to $100>149K but with a bigger lift in 2023. 53% of the lift was from inflation.

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

  • <25 & 75> yr olds had spending drops from 2022. All other groups spent more.
  • <25 – After a huge increase in 2022, their spending fell -30%, but it’s still $1B. Most of the drop occurred in the 1st half of 2023 when prices peaked. It’s likely mostly due to downgrades, switching to private label & value shopping.
  • 25>34 – Up $1.42B, a strong rebound from last year’s -$1.35B drop. This group, especially those with families, are under a lot of financial pressure. They ignored it and spent 34% more. Only 41% of the lift was from inflation.
  • 35 > 44 – Spending grew overall but fell in 2023 likely because high prices intensified value shopping. They are 2nd in income and their spending has smaller fluctuations. They are again above $6B at mid-year but broke $7B in 2022.
  • 45 > 54 and – They have the highest income, so an annual up/down spending pattern is not expected. Their Pet Food $ dropped throughout 2020 but it has increased in every half since then. In 2023, it is now above the previous peak of $7.09B in 2019. The money is definitely there but 54% of the lift came from inflation.
  • 55>64 – This group is still mostly Boomers, the most emotional Pet Parents. In 2020 they led the way in Pet Food binge buying. They also had the biggest 2021 drop. With growth in both halves for 2 consecutive years, including a $1.5B lift in mid-2023 they are now 33% ahead of their pre-pandemic 2019 spending level.
  • 65 > 74– This group is all Boomers but with lower income. Spending grew slightly in both halves. They are committed to their pets. Even though the members change, they are the only age group with steady annual growth since 2016.
  • 75> – In 2021 they upgraded. Spending plummeted in the 2nd half of 22 then grew in 23 but was negative for mid-yr.

That gives us the “big picture” for our 2023 Mid-year update of Pet Food spending. Now we’ll take a closer look at the start of 2023. We’ll compare it to the 1st half of 2022 and document the biggest $ changes since then.

  • The biggest increases are much larger than the biggest decreases in all categories. In 4 categories – # Earners, Race/Ethnic, Housing and Area, all segments spent more in 2023 than in 2022.
  • There are a number of usual winners, $150K>, White, Not Hisp., Adv College Degrees, Boomers and Homeowners w/Mtges. There are also some surprises like Retirees, 2+ Unmarried Adults, No Earner in 2+CUs and 25>34 yr-olds.
  • When we look at the losers, we also see some familiar names, $30>49K, Gen Z, No Earner Single and Center City. However, there are 2 big surprises – Self-employed and 35>44 yr olds.
  • Pet Food spending in the 1st half of 2023 was $2.17B ahead of the 1st half of 2022 but $5.61B ahead of 2019. In fact, 66 of 82 demographic segments (80%) spent more in 2022 than in 2021. The widespread growth continues.

The spending lift was large in the 1st half, but not unexpected. After the huge drop in Pet Food $ in the 1st half of 2021 following the buying binge in 2020, we’ve had 4 consecutive halves with strong growth. The pandemic roller coaster ended in 2021 and we now appear to be on a path of consistent growth. Pet Food spending in mid-yr 2023 was $40.86B. This is $2.9B above the binge peak of $37.96B in mid-2020 and $11.96B more than the $28.90 in pre-pandemic mid-yr 2019. If we ignore the pandemic turmoil, then Pet Food spending has grown 41.5% in 4 years. That’s an annual growth rate of +9.1%, which is 62% higher than the +5.6% rate from 1984 to 2019. That’s real proof that the Pet Food segment is back and doing even better than usual. Unfortunately, a new challenge has risen and may have driven most of the strong growth – runaway inflation. It started slowly at the end of 2021, then continued to grow in 2022, hitting 10+% in June 2022. Prices peaked in May 2023 but are still high. Past periods of Pet Food inflation just caused Pet Parents to spend more. Pets must have food. However, this price increase is at record levels. We should note that the pandemic is also a factor in inflation because supply chain issues related to COVID had a big impact on prices. Overall inflation has lessened and dropped in Pet Food in 2024. All pet spending has been moving towards higher incomes. Households with a lot of financial pressure could cut back on more discretionary pet spending, reduce purchase frequency, and even downgrade their pet food. We see evidence of inflation’s negative impact on Pet Food in early 2023 as the 12.4% lift was really a -1.7% drop. We’ll see what happens in the 2nd half of 2023 when get the 2023 data in September

Petflation 2024 – April Update: Drops to +1.7% vs 2023

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The monthly Consumer Price Index peaked back in June 2022 at 9.1% then began to slow until turning up in Jul/Aug 2023. Prices fell in Oct>Dec 23, then turned up Jan>Apr 24. However, the CPI slowed in April to +3.4% from +3.5% in March. Grocery prices rose 0.1% from March, but inflation slowed to 1.1% from 1.2% due to a 0.1% price lift in 23. After 12 straight months of double-digit YOY monthly increases, grocery inflation has now had 14 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.

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 22, but at 1.7% in April, it is again below the national rate, -50%, a big change from +52% in January. We will look deeper into the data. The 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 24 vs 23 which will include Pet Segments and relevant Human spending categories. Plus
    1. CPI change from the previous month.
    2. Inflation changes for recent years (22>23, 21>22, 20>21, 19>20, 18>19)
    3. Total Inflation for the current month in 2024 vs 2019 and vs 2021 to see the full inflation surge.
    4. Average annual Year Over Year inflation rate from 2019 to 2024
  • 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 April 22 to April 24. We will use December 2019 as a base number so we can track the progress from pre-pandemic times through an eventual recovery. This chart is designed to give you a visual image of the flow of pricing. You can see the similarities and differences in segment patterns and compare them to the overall U.S. CPI. The year-end numbers and those from 12 and 24 months earlier are included. We also included and highlighted (pink) the cumulative price peak for each segment. In April, Pet prices were down -0.2% from March. All but Veterinary were down, with Supplies leading the way, -1.2%.

In Apr 22, the CPI was +12.5% and Pet prices were +10.2%. Like the CPI, prices in the Services segments generally inflated after mid-2020, while Product inflation stayed low until late 21. In 22 Petflation surged. Food prices consistently grew but the other segments had mixed patterns until July 22, when all increased. In Aug>Oct Petflation took off. In Nov>Dec, Services & Food prices continued to grow while Vet & Supplies prices stabilized. In Jan>Apr 23, prices grew every month except for 1 dip by Supplies. In May Products prices grew while Services slowed. In Jun/Jul this reversed. In August all but Services fell. In Sep/Oct this was reversed. In Nov, all but Food & Vet fell. In Dec, Supplies & Vet  drove prices up. In Jan>Mar 24 Pet prices grew despite a few drops from all but Services. In April, prices in all but Vet fell.

  • U.S. CPI – The inflation rate was below 2% through 2020. It turned up in January 21 and continued to grow until flattening out in Jul>Dec 22. Prices turned up Jan>Sep, dipped in Oct>Dec, rose Jan>Mar, then fell in Apr, but 31% of the 22.0% increase in the 52 months since Dec 2019 happened from Jan>Jun 2022 – 11.5% of the time.
  • Pet Food – Prices were at or below Dec 19 levels from Apr 20>Sep 21. They turned up, peaking in May 23. In Jun>Aug they dipped, grew Sep>Nov, fell Dec>Feb, rose in Mar, fell in Apr. 96% of the 22.2% lift came in 22 & 23.
  • Pet Supplies – Supplies prices were high in Dec 19 due to tariffs. They then had a “deflated” roller coaster ride until mid-21 when they returned to Dec 19 prices and essentially stayed there until 22. They turned up in Jan and hit an all-time high, beating the 2009 record. They plateaued Feb>May, grew in June, flattened in July, then turned up in Aug>Oct setting a new record. Prices stabilized in Nov>Dec but grew in Jan>Feb 23. They fell in Mar, but set a new record in May, then continued the rollercoaster ride with a drops in Mar/Apr, after Dec>Feb lifts.
  • 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 prices got on a rollercoaster in Mar>Jun. They turned up Jul 22>Mar 23 but the increase slowed in April and prices fell in May. They rose Jun>Aug, fell in Sep>Dec, rose Jan>Mar, then fell in Apr.
  • Veterinary – Inflation has been consistent. Prices turned up in Mar 20 and grew through 21. A surge began in Dec 21 which put them above the overall CPI. In May 22 prices fell and stabilized in June causing them to fall below the National CPI. However, prices rose again and despite some dips they have stayed above the CPI since July 22. In 23, prices grew Jan>May, stabilized Jun/Jul, fell in Aug, grew Sep>Dec, fell in Jan 24, but set records in Feb>Apr.
  • Total Pet – Petflation is a sum of the segments. In Dec 21 the price surge began. In Mar>Jun 22 the segments had ups & downs, but Petflation grew again from Jul>Nov. It slowed in Dec, grew Jan>May 23 (peak), fell Jun>Aug, grew in Sep/Oct, then fell in Nov. In December prices turned up and grew through March to a new record high. Prices fell in April and Petflation is again below the National CPI for the first time since Nov 22.

Next, we’ll turn our attention to the Year Over Year inflation rate change for April and compare it to last month, last year and to previous years. We will also show total inflation from 21>24 & 19>24. Petflation fell to 1.7%, down from 3.8% in March. It is now 50% below the National rate. In January, it was +52%. The chart will allow you to compare the inflation rates of 23>24 to 22>23 and other years but also see how much of the total inflation since 2019 came from the current pricing surge. We’ve included some human categories to put the pet numbers into perspective.

Overall, Prices were +0.4% from March but were +3.4% vs April 23, down from +3.5% last month because there was a bigger Mar>Apr price lift in 23. Grocery inflation also fell slightly to +1.1% from +1.2%. 4 of 9 categories had a price decrease from last month – all Pet. There were only 2 in Jan>Mar. The national YOY monthly CPI rate of 3.4% is down and just 69% of the 22>23 rate and 41% of 21>22. The 23>24 inflation rate is below 22>23 for all categories but Medical Services. In our 2021>2024 measurement you also can see that over 65% of the cumulative inflation since 2019 occurred in all but 2 segments – Medical Services & Haircuts – both Services categories. Service Segments have generally had higher inflation rates so there was a smaller pricing lift in the recent surge. Pet Products have a very different pattern. The 21>24 inflation surge provided 97% of their overall inflation since 2019. This happened because Pet Products prices in 2021 were just starting to recover from a deflationary period. Services expenditures now account for 64.1% of the National CPI so they are very influential. Their current CPI is +5.3% while the CPI for Commodities is +0.3%. This clearly shows that Services are driving almost all of the current 3.4% inflation rate.

  • U.S. CPI– Prices are +0.4% from March. The YOY increase is 3.4%, down from 3.5%. It peaked at +9.1% back in June 2022. The targeted inflation rate is <2% so we are still 70% higher than the target. After 12 straight declines, we had 2 lifts, a stable month, 2 consecutive drops, now 2 of 5 with drops – still not good! The current rate is 31% below 22>23 but the 21>24 rate is still 17.4%, 76.7% of the total inflation since 2019. Inflation was low in early 2021.
  • Pet Food– Prices are -0.5% vs March and -0.1% vs April 23, down from +1.8%. Now, they are significantly below the Food at Home inflation rate, +1.1%. The YOY drop of -0.1% is being measured against a time when prices were 22.3% above the 2019 level and the current decrease is now below the -0.02% drop from 2020 to 2021. The 2021>2024 inflation surge has generated 94.1% of the total 23.9% inflation since 2019.
  • Food at Home – Prices are up +0.1% from March, but the monthly YOY increase is 1.1%, down from 1.2% last month. It is radically lower than Jul>Sep 2022 when it exceeded 13%. The 26.4% Inflation for this category since 2019 is 16% more than the national CPI but fell to 4th place behind 3 Services expenditures. 75.8% of the inflation since 2019 occurred from 2021>24. This mirrors the national CPI, but we should note that Grocery prices began inflating in 2020>21 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 were down -1.2% from March and -0.7% vs April 2023. They have the lowest increase since 2019. As we noted, prices were deflated for much of 2021. As a result, the 2021>24 inflation surge accounted for 100+% of the total price increase since 2019. They reached an all-time high in October 2022 then prices deflated. 3 months of increases pushed them to a new record high in Feb 23. Prices fell in March, bounced back in Apr/May to a new record high, fell in Jun>Aug, grew in Sep>Oct, fell in Nov, grew again in Dec>Feb, then fell in Mar>Apr.
  • Veterinary Services– Prices are +0.8% from March and +7.1% from 2023, still the highest rate in the Pet Industry. Plus, they are the leader in the increase since 2019 with +39.9% and since 2021, +29.5%. For Veterinary, relatively high annual inflation is the norm. However, the rate has increased during the current surge, especially in 22 & 23. It is still high in 24, so 73.9% of the cumulative inflation since 2019 occurred from 2021>24.
  • 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 3% from March, and they are +2.7% vs last year. Medical Services are not a big part of the current surge as only 43% of the 15.3% 2019>24 increase happened from 21>24.
  • Pet Services – Inflation slowed in 2020 but began to grow in 2021. In 2024 prices surged to a record high before dropping in April but are still +4.5% vs last year. Inflation peaked at +8.0% back in March 23. Now, 65% of their total 19>24 inflation has occurred since 2021. In December, it was only 49%. BTW: They have the 2nd highest 19>24 rate.
  • Haircuts/Other Personal Services – Prices are +1.2% from March and +4.7% from 23. 2 of the last 4 months have been 4.0+%. Inflation has slowed but has been pretty consistent. 59% of the 19>24 inflation happened 21>24.
  • Total Pet– Petflation fell to 1.7% from 3.8% in March and is now 90% less than the 22>23 rate and 50% less than the U.S. CPI. For April, 1.7% is 45% below the 3.1% average rate since 1997. Vs March, prices fell -0.2% as all but Veterinary had drops. Vet was +0.8%. A Mar>Apr price drop has only happened in 3 of the last 27 years, all since 2015, so this month’s data was somewhat surprising. In terms of Petflation, 2024 appears to be returning to a more normal pattern. However, the path to get there may be unusual and there is still a ways to go.

Now, let’s look at the YTD numbers.

The inflation rate for 22>23 was the highest for 4 of 9 categories – All Pet – Pet Food, Services, Veterinary & Total Pet. The 23>24 rate is usually much lower than 22>23 for all but Medical Services, where they are tied. 21>22 still has the highest rate for Food at Home, the CPI & Pet Supplies. The average annual national inflation in the 5 years since 2019  is 4.2%. Only 2 of the categories are below that rate – Medical Services (2.8%) and Pet Supplies (2.2%). It comes as no surprise that Veterinary Services has the highest average rate (6.6%), but all 5 other categories are +4.6% or higher.

  • U.S. CPI – The 23>24 rate is 3.3%, up from 3.2% in March, but down 41% from 22>23 and 59% less than 21>22. It is also 21% below the average YOY increase from 2019>2024, but it’s still 68% more than the average annual increase from 2018>2021. 78% of the 22.7% inflation since 2019 occurred from 2021>24. Inflation is a big problem that started recently.
  • Pet Food – Ytd inflation is 2.2%, down from 3.0% in March and 85% less than the 22>23 rate. Now, it is also 54% lower than 21>22 and only 16% above the average rate from 2018>2020. Pet Food has the highest 22>23 rate on the chart and remains in 2nd place in the 21>24 rates. Deflation in the 1st half of 2021 kept YTD prices low then prices surged in 2022 and especially in 2023. 92% of the inflation since 2019 occurred from 2021>24.
  • Food at Home – The inflation rate has slowed remarkably. At 1.1%, it is down 88% from 22>23 & 21>22 and 62% from 20>21. Also, it is now 19% lower than the average rate from 2018>20. It remains in 3rd place for the highest inflation since 2019 but still beat the U.S. CPI by 15%. You can see the impact of supply chain issues on the Grocery category as 79% of the inflation since 2019 occurred from 2021>24.
  • Pets & Pet Supplies – Prices increased in Jan & Feb, then fell in Mar & Apr and the 2024 inflation rate of 0.4% is only higher than the -2.2% deflation in 20>21. Supplies have the lowest inflation since 2019. The only significant increases were 7.0% in 22 & 5.4% in 23. The 2021 deflation created a unique situation. Prices are up 11.7% from 2019 but 113% of this increase happened from 2021>24. Prices are up 13.2% from their 2021 “bottom”.
  • Veterinary Services – Inflation was high in 2019 and steadily grew until it took off in late 2022. It may have peaked in 2023, but is still going strong at the start of 2024, +8.5%, the highest on the chart. They are also #1 in inflation since 2019 and since 2021. At +6.6%, they have the highest average annual inflation rate since 2019. It is 1.6 times higher than the National Average but 2.4 times higher than the Inflation average for Medical Services. 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. Ytd it is 1.6%. In a non-pandemic year, “normal” is between 2.1>2.9%. We are still seeing the impact of 2023 when prices actually deflated (-0.3%). This was the only deflationary year since the US BLS began tracking this category in 1935.
  • Pet Services – After falling in late 2023, prices surged in 2024 until April. The Ytd 23>24 inflation rate of 4.8% is 2nd to Veterinary in the Pet Industry. It is 37% less than 22>23 and 16% below 21>22. However, it is still 1.4 times higher than the 2018>21 average rate. Pet Services is 2nd in 19>24 inflation but only 5th in inflation since 2021.
  • Haircuts & Personal Services – The services segments, essential & non-essential, were hit hardest by the pandemic. The industry responded by raising prices. Ytd inflation is 4.1%, which is 29% below the 20>21 peak but 55% above the 18>20 average. Consumers are paying over 25% more than in 2019, which usually reduces the frequency.
  • Total Pet – Ytd Petflation is 3.4%, down from 4.0%. It is 67% less than 22>23 but 48% higher than the 2018>21 average rate. It is also still 3% above the national CPI. Petflation is slowing in 2024. This is primarily being driven by drops in Pet Food inflation rates but Supplies inflation is also slowing. Services prices dropped in April after a record high in March. Vet inflation slowed in April, but prices hit a record high. It was not enough to overcome the drops.

Petflation is definitely slowing. April was 45% below the average for the month and 50% lower than the National CPI. This is the same as it was back In 2021. One fact is often ignored in the headlines – Inflation is cumulative. Pet prices are 21.4% above 2021 and 26.1% higher than 2019. Those are big lifts. In fact, in April prices for Vet hit a new record. Total Pet & Services are only 0.2% below the highest in history. Food prices are 1% below their peak and Supplies prices are 1.6% lower. Only Supplies prices (+10.4%) are less than 26.4% higher than 2019. Since price/value is the biggest driver in consumer spending, inflation will affect the Pet Industry. Non-Vet Services will be the least impacted as it is driven by high income CUs. Veterinary will likely see a reduction in visit frequency. The product segments will see a more complex reaction. Supplies will likely see a reduction in purchase frequency and some Pet Parents may even downgrade their Pet Food. Products will see a strong movement to online purchasing and private label. We saw evidence of this at GPE 24 where a record number of exhibitors offered OEM services. Strong, cumulative inflation has a widespread impact.

Petflation 2024 – March Update: Turns up to +3.8% vs 2023

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The monthly Consumer Price Index peaked back in June 2022 at 9.1% then began to slow until turning up in Jul/Aug 2023. Prices fell in Oct>Dec 23, but turned up again in Jan>Mar 24. The CPI increased in March to +3.5% from +3.2% in February. Grocery prices fell -0.01% from February, but inflation rose to 1.2% from 1.0% due to a -0.2% price drop in 23. However, after 12 straight months of double-digit YOY monthly increases, grocery inflation has now had 13 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.

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. At 3.8% in March, it is still 9% above the national rate, but down from +52% in January. We will look deeper into the numbers. The 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 24 vs 23 which will include Pet Segments and relevant Human spending categories. Plus
    1. CPI change from the previous month.
    2. Inflation changes for recent years (22>23, 21>22, 20>21, 19>20, 18>19)
    3. Total Inflation for the current month in 2024 vs 2019 and vs 2021 to see the full inflation surge.
    4. Average annual Year Over Year inflation rate from 2019 to 2024
  • 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 March 22 to March 24. We will use December 2019 as a base number so we can track the progress from pre-pandemic times through an eventual recovery. This chart is designed to give you a visual image of the flow of pricing. You can see the similarities and differences in segment patterns and compare them to the overall U.S. CPI. The year-end numbers and those from 12 and 24 months earlier are included. We also included and highlighted (pink) the cumulative price peak for each segment. In March, Pet prices were up 1.0% from February. All but Supplies were up, with Veterinary leading the way, +2.5%.

In Mar 22, the CPI was +11.9% and Pet prices were +9.2%. Like the CPI, prices in the Services segments generally inflated after mid-2020, while Product inflation stayed low until late 21. In 22 Petflation surged. Food prices grew consistently but the other segments had mixed patterns until July 22, when all increased. In Aug>Oct Petflation took off. In Nov>Dec, Services & Food prices continued to grow while Vet & Supplies prices stabilized. In Jan>Apr 23, prices grew every month except for 1 dip by Supplies. In May Products prices grew while Services slowed. In June/July this was reversed. In August all but Services fell. In Sep/Oct this was reversed. In Nov, all but Food & Vet fell. In Dec, Supplies & Vet  drove prices up. In Jan>Mar 24 Pet prices grew despite a few drops by all but Services. Total Pet, Vet & Services are at their pricing peak.

  • U.S. CPI – The inflation rate was below 2% through 2020. It turned up in January 21 and continued to grow until flattening out in Jul>Dec 22. Prices turned up Jan>Sep, dipped in Oct>Dec, then rose Jan>Mar 24, but 32% of the 21.5% increase in the 51 months since Dec 2019 happened in the 6 months from Jan>Jun 2022 – 12% of the time.
  • Pet Food – Prices were at or below Dec 19 levels from Apr 20>Sep 21. They turned up and grew, peaking in May 23. In Jun>Aug they dipped, grew Sep>Nov, fell Dec>Feb, then rose in Mar. 94% of the 22.7% lift came in 22 & 23.
  • Pet Supplies – Supplies prices were high in Dec 19 due to tariffs. They then had a “deflated” roller coaster ride until mid-21 when they returned to Dec 19 prices and essentially stayed there until 22. They turned up in Jan and hit an all-time high, beating the 2009 record. They plateaued Feb>May, grew in June, flattened in July, then turned up in Aug>Oct setting a new record. Prices stabilized in Nov>Dec but grew in Jan>Feb 23. They fell in Mar, but set a new record in May, then continued the rollercoaster ride with a drop in March, after Dec>Jan lifts.
  • 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 prices got on a rollercoaster in Mar>Jun. They turned up Jul 22>Mar 23 but the increase slowed in April and prices fell in May. They rose again Jun>Aug, fell in Sep>Dec, then spiked in Jan>Mar.
  • Veterinary – Inflation has been consistent. Prices turned up in Mar 20 and grew through 21. A surge began in Dec 21 which put them above the overall CPI. In May 22 prices fell and stabilized in June causing them to fall below the National CPI. However, prices rose again and despite some dips they have stayed above the CPI since July 22. In 23 prices grew Jan>May, stabilized Jun/Jul, fell in Aug, grew Sep>Dec, fell in Jan 24, but set records in Feb/Mar.
  • Total Pet – Petflation is a sum of the segments. In Dec 21 the price surge began. In Mar>Jun 22 the segments had ups & downs, but Petflation grew again from Jul>Nov. It slowed in Dec, grew Jan>May 23 (peak), fell Jun>Aug, grew in Sep/Oct, then fell in Nov. In December prices turned up and grew through March to a new record high. Prices are at record highs for Total Pet and the Service segments and Petflation has been above the National CPI since Nov 22.

Next, we’ll turn our attention to the Year Over Year inflation rate change for March and compare it to last month, last year and to previous years. We will also show total inflation from 21>24 & 19>24. Petflation grew to 3.8%, up from 3.5% in February. It is still only 9% higher than the National rate. In January, it was +52%. The chart will allow you to compare the inflation rates of 23>24 to 22>23 and other years but also see how much of the total inflation since 2019 came from the current pricing surge. We’ve included some human categories to put the pet numbers into perspective.

Overall, Prices were +0.6% from February but were +3.5% vs March 23, up from +3.2% last month. Grocery inflation also grew slightly to +1.2% from +1.0%. 2 of 9 categories had a price decrease from last month – Pet Supplies & Groceries. There were also 2 in January & February, but none were repeats. The national YOY monthly CPI rate of 3.5% is up but still just 70% of the 22>23 rate and 41% of 21>22. The 23>24 inflation rate is below 22>23 for all categories but Veterinary & Medical Services. In our 2021>2024 measurement you also can see that over 65% of the cumulative inflation since 2019 occurred in all but 2 segments – Medical Services & Haircuts – both Services categories. Service Segments have generally had higher inflation rates so there was a smaller pricing lift in the recent surge. Pet Products have a very different pattern. The 21>24 inflation surge provided 99% of their overall inflation since 2019. This happened because Pet Products prices in 2021 were just starting to recover from a deflationary period. Services expenditures now account for 64.1% of the National CPI so they are very influential. Their current CPI is +5.3% while the CPI for Commodities is +0.6%. This clearly shows that Services are driving most of the current 3.5% inflation.

  • U.S. CPI– Prices are +0.6% from January. The YOY increase is 3.5%, up from 3.2%. It peaked at +9.1% back in June 2022. The targeted inflation rate is <2% so we are still 75% higher than the target. After 12 straight declines, we had 2 lifts, a stable month, 2 consecutive drops, now 3 of 4 with lifts – not good news! The current rate is 30% below 22>23 but the 21>24 rate is still 17.9%. That is 78.2% of the total inflation since 2019. Inflation was low in early 2021.
  • Pet Food– Prices are +0.8% vs February and +1.8% vs March 23, down from 2.6%. However, they are still 1.5 times the Food at Home inflation rate. The YOY increase of 1.8% is being measured against a time when prices were 20.3% above the 2019 level and the current increase is now below the pre-pandemic 2.1% increase from 2018 to 2019. The 2021>2024 inflation surge has generated 93.6% of the total 24.9% inflation since 2019.
  • Food at Home – Prices are down -0.01% from February, but the monthly YOY increase is 1.2%, up from 1.0% last month. It is still radically lower than Jul>Sep 2022 when it exceeded 13%. The 25.9% Inflation for this category since 2019 is 13% more than the national CPI and is in 3rd place behind Vet & Pet Services. 79.5% of the inflation since 2019 occurred from 2021>24. This mirrors the national CPI, but we should note that Grocery prices began inflating in 2020>21 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 were down -0.4% from February but up 0.9% vs March 2023. They have the lowest increase since 2019. As we noted, prices were deflated for much of 2021. As a result, the 2021>24 inflation surge accounted for 100+% of the total price increase since 2019. They reached an all-time high in October 2022 then prices deflated. 3 months of increases pushed them to a new record high in Feb 23. Prices fell in March, bounced back in Apr/May to a new record high, fell in Jun>Aug, grew in Sep>Oct, fell in Nov, grew again in Dec>Feb, then fell in March.
  • Veterinary Services– Prices are +2.5% from February and are +9.6% from 2023, a March record and the highest rate in the Pet Industry. Plus, they are the leader in the increase since 2019 with +39.0% and since 2021, +28.7%. For Veterinary, relatively high annual inflation is the norm. However, the rate has increased during the current surge, especially in 23 & now 24, so 73.6% of the cumulative inflation since 2019 occurred from 2021>24.
  • 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 6% from February, and they are +2.1% vs last year. Medical Services are not a big part of the current surge as only 41% of the 15.1% 2019>24 increase happened from 21>24.
  • Pet Services – Inflation slowed in 2020 but began to grow in 2021. In 2024 prices have surged, +0.3% from February and +4.8% vs last year. However, inflation is still well below the +8.0% back in March 23. Now, 68% of their total 19>24 inflation has occurred since 2021. In December, it was only 49%. BTW: They have the 2nd highest 19>24 rate.
  • Haircuts/Other Personal Services – Prices are +0.1% from February and +3.8% from 23. 4 of the last 5 months have been <4.0%. Inflation has been rather consistent as 57% of the inflation from 19>24 happened in 60% of the time.
  • Total Pet– Petflation is 60% lower than the 22>23 rate and again only 9% higher than the U.S. CPI. For March, 3.8% is still the 5th highest rate since 1997. Vs February, prices grew +1.0% as all but Supplies had lifts, especially Vet at +2.5%. A Feb>Mar price increase has happened in 23 of the last 27 years, with an average lift of 0.3%. So, it was no surprise but 3 times stronger than average. In terms of Petflation, 2024 has returned to a more normal pattern with the 2 Service segments leading the way.

Now, let’s look at the YTD numbers.

The inflation rate for 22>23 was the highest for 4 of 9 categories – 3 Pet – Pet Food, Services & Total Pet, plus Groceries. The 23>24 rate is much lower for all but Veterinary, where it actually has the highest rate of any year. 21>22 still has the highest rate for the National CPI & Pet Supplies. The average annual national inflation in the 5 years since 2019  is 4.2%. Only 2 of the categories are below that rate – Medical Services (2.8%) and Pet Supplies (2.3%). It comes as no surprise that Veterinary Services has the highest average rate (6.5%), but all 5 other categories are +4.6% or higher.

  • U.S. CPI – The 23>24 rate is 3.2%, up from 3.1% February, but down 45% from 22>23 and 60% less than 21>22. It is also 24% below the average YOY increase from 2019>2024, but it’s still 71% more than the average annual increase from 2018>2021. 79% of the 22.7% inflation since 2019 occurred from 2021>24. Inflation is a big problem that started recently.
  • Pet Food – Ytd inflation is 3.0%, down from 3.7% in February and 80% less than the 22>23 rate. Now, it is also 27% lower than 21>22 but 50% above the average rate from 2018>2020. Pet Food has the highest 22>23 rate on the chart and remains in 2nd place in the 21>24 rates. Deflation in the 1st half of 2021 kept YTD prices low then prices surged in 2022 and especially in 2023. 92% of the inflation since 2019 occurred from 2021>24.
  • Food at Home – The inflation rate has slowed remarkably. At 1.1%, it is down 89% from 22>23, 87% from 21>22 and even 69% from 20>21. However, it is still 10% higher than the average rate from 2018>20. It is also down to a tie for 3rd for the highest inflation since 2019 but still beat the U.S. CPI by 15%. You can see the impact of supply chain issues on the Grocery category as 79% of the inflation since 2019 occurred from 2021>24.
  • Pets & Pet Supplies – Prices increased in Jan & Feb, then fell in March but the 2024 inflation rate of 0.7% is only higher than the -3.2% deflation in 20>21. Supplies have the lowest inflation since 2019. The only significant increases were ≈6.2% in 22 & 23. The 2021 deflation created a unique situation. Prices are up 12.1% from 2019 but 114% of this increase happened from 2021>24. Prices are up 13.8% from their 2021 “bottom”.
  • Veterinary Services – Inflation was high in 2019 and steadily grew until it took off in late 2022. It seemed to peak in 2023, but has now grown even stronger at the start of 2024. On the chart they are #1 in inflation since 2019 and since 2021. At +6.5%, they have the highest average annual inflation rate since 2019. It is 1.5 times higher than the National Average but 2.3 times higher than the Inflation average for Medical Services. 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. Ytd it is 1.3%. Except for 19>20, it has been between 2.1>2.9%. We are still seeing the impact of 2023 when prices actually deflated (-0.3%). This was the only deflationary year since the US BLS began tracking this category in 1935.
  • Pet Services – After falling in late 2023, prices have surged in 2024. The Ytd 23>24 inflation rate of 4.9% is 2nd to Veterinary in the Pet Industry. It is 39% less than 22>23 and 14% below 21>22. However, it is still 1.6 times higher than the 2018>21 average rate. Pet Services is 2nd in 19>24 inflation but only 5th in inflation since 2021.
  • Haircuts & Personal Services – The services segments, essential & non-essential, were hit hardest by the pandemic. The industry responded by raising prices. Ytd inflation is 3.9%, which is 32% below the 20>21 peak but still 20% above the 18>20 average. Consumers are paying 25% more than in 2019, which usually reduces the frequency.
  • Total Pet – Ytd Petflation is 4.0%, down from 4.1%. It is 61% less than 22>23 but 76% higher than the 2018>21 average rate. It is also still 1.25 times the national CPI. Petflation is slowing in 2024. This is primarily being driven by drops in Pet Food inflation rates. Supplies inflation was stable monthly & YTD. Services inflation fell slightly despite prices reaching a new record high. Veterinary hit record monthly & YTD rates but it was not enough to overcome the drops.

Petflation is slowing, but it is still strong, with the 5th highest rate for March in history. It is also still higher than the National CPI. Back In 2021 it was only half of that rate. One fact is often ignored in the headlines – Inflation is cumulative. Pet prices are 22.1% above 2021 and 26.6% higher than 2019. Those are big lifts. In fact, in March prices for Total Pet & the Service segments are the highest in history. Food prices are only 0.5% below their peak and Supplies prices are only down 0.4%. Only Supplies prices (+12.2%) are less than 24.9% higher than 2019. Since price/value is the biggest driver in consumer spending, inflation will affect the Pet Industry. Non-Vet Services will be the least impacted as it is driven by high income CUs. Veterinary will likely see a reduction in visit frequency. The product segments will see a more complex reaction. Supplies will likely see a reduction in purchase frequency and some Pet Parents may even downgrade their Pet Food. Products will see a strong movement to online purchasing and private label. We saw direct evidence of this impact at GPE 24 where a record number of exhibitors offered OEM services. Strong inflation has a widespread impact.

Petflation 2024 – February Update: Drops to +3.5% vs 2023

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The monthly Consumer Price Index peaked back in June 2022 at 9.1% then began to slow until turning up in Jul/Aug 2023. Prices fell in Oct>Dec 23, but turned up again in Jan>Feb 24. The CPI increased slightly in February to +3.2% from +3.1% in January. However, Grocery inflation continues to slow. After 12 straight months of double-digit YOY monthly increases, grocery inflation is now down to +1.0%, 12 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.

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. At 3.5% in February, it is still 9% above the national rate, but down from +52% in January. We will look deeper into the numbers. The 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 24 vs 23 which will include Pet Segments and relevant Human spending categories. Plus
    1. CPI change from the previous month.
    2. Inflation changes for recent years (22>23, 21>22, 20>21, 19>20, 18>19)
    3. Total Inflation for the current month in 2024 vs 2019 and vs 2021 to see the full inflation surge.
    4. Average annual Year Over Year inflation rate from 2019 to 2024
  • 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 February 22 to February 24. We will use December 2019 as a base number so we can track the progress from pre-pandemic times through an eventual recovery. This chart is designed to give you a visual image of the flow of pricing. You can see the similarities and differences in segment patterns and compare them to the overall U.S. CPI. The year-end numbers and those from 12 and 24 months earlier are included. We also included and highlighted (pink) the cumulative price peak for each segment. In February, Pet prices were up 0.3% from last month as lifts in Vet, Services & Supplies overcame a -0.9% drop in Food.

In Feb 22, the CPI was +10.4% and Pet prices were +7.0%. Like the CPI, prices in the Services segments generally inflated after mid-2020, while Product inflation stayed low until late 21. In 22 Petflation surged. Food prices grew consistently but the other segments had mixed patterns until July 22, when all increased. In Aug>Oct Petflation took off. In Nov>Dec, Services & Food prices continued to grow while Vet & Supplies prices stabilized. In Jan>Apr 23, prices grew every month except for 1 dip by Supplies. In May Products prices grew while Services slowed. In June/July this was reversed. In August all but Services fell. In Sep/Oct this was reversed. In Nov, all but Food & Vet fell. In Dec, Supplies & Vet  drove prices up. In Jan/Feb Pet prices grew despite 2 drops by Food & 1 by Vet. Now, Total Pet and all but Food are at their pricing peak.

  • U.S. CPI – The inflation rate was below 2% through 2020. It turned up in January 21 and continued to grow until flattening out in Jul>Dec 22. Prices turned up Jan>Sep, dipped in Oct>Dec, then rose Jan>Feb 24, but 33% of the 20.8% increase in the 50 months since Dec 2019 happened in the 6 months from Jan>Jun 2022 – 12% of the time.
  • Pet Food – Prices were at or below Dec 19 levels from Apr 20>Sep 21. They turned up and grew, peaking in May 23. In Jun>Aug they dipped, grew Sep>Nov, then fell in Dec>Feb. 99% of the 21.7% increase occurred in 22 & 23.
  • Pet Supplies – Supplies prices were high in Dec 19 due to tariffs. They then had a “deflated” roller coaster ride until mid-21 when they returned to Dec 19 prices and essentially stayed there until 22. They turned up in Jan and hit an all-time high, beating the 2009 record. They plateaued Feb>May, grew 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. They fell in Mar, but set a new record in May, then continued the rollercoaster ride with lifts in Dec>Feb, back to May prices.
  • 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 prices got on a rollercoaster in Mar>Jun. They turned up Jul 22>Mar 23 but the increase slowed in April and prices fell in May. They rose again Jun>Aug, fell in Sep>Dec, then spiked in Jan>Feb.
  • Veterinary – Inflation has been consistent. Prices turned up in Mar 20 and grew through 21. A surge began in Dec 21 which put them above the overall CPI. In May 22 prices fell and stabilized in June causing them to fall below the National CPI. However, prices rose again and despite some dips they have stayed above the CPI since July 22. In 23 prices grew Jan>May, stabilized Jun>Jul, fell in Aug, grew Sep>Dec, fell in Jan 24, then set a record in Feb.
  • Total Pet – Petflation is a sum of the segments. In Dec 21 the price surge began. In Mar>Jun 22 the segments had ups & downs, but Petflation grew again from Jul>Nov. It slowed in Dec, grew Jan>May 23 (peak), fell Jun>Aug, grew in Sep/Oct, then fell in Nov. In December prices turned up and grew through February to a new record high. Prices are at a record high for all segments but Food and Petflation has been above the National CPI since Nov 22.

Next, we’ll turn our attention to the Year Over Year inflation rate change for February and compare it to last month, last year and to previous years. We will also show total inflation from 21>24 & 19>24. Petflation fell to 3.5%, down from 4.7% in January. It is now only 9% higher than the National rate. In January, it was +52%. The chart will allow you to compare the inflation rates of 23>24 to 22>23 and other years but also see how much of the total inflation since 2019 came from the current pricing surge. We’ve included some human categories to put the pet numbers into perspective.

Overall, Prices were +0.6% from January but were +3.2% vs February 23, up from +3.1% last month. Grocery inflation is down again, to +1.0% from +1.2%. 2 of 9 categories had a price decrease from last month – Pet Food & Medical Services. There were also 2 in January. That’s 3 consecutive months for Pet Food. The national YOY monthly CPI rate of 3.2% is up but still only 53% of the 22>23 rate and 41% of 21>22. The 23>24 inflation rate is below 22>23 for all categories. In our 2021>2024 measurement you also can see that over 65% of the cumulative inflation since 2019 occurred in all but 2 segments – Medical Services & Haircuts – both Services categories. Service Segments have generally had higher inflation rates so there was a smaller pricing lift in the recent surge. Pet Products have a very different pattern. The 21>24 inflation surge provided 97.9% of their overall inflation since 2019. This happened because Pet Products prices in 2021 were just starting to recover from a deflationary period. Services expenditures now account for 64.1% of the National CPI so they are very influential. Their current CPI is +5.0% while the CPI for Commodities is +0.7%. This clearly shows that Services are driving most of the current 3.2% inflation.

  • U.S. CPI– Prices are +0.6% from January. The YOY increase is 3.2%, up from 3.1%. It peaked at +9.1% back in June 2022. The targeted inflation rate is <2% so we are still 60% higher than the target. After 12 straight declines, we had 2 lifts, a stable month, 2 consecutive drops, now 3 lifts – not good news! The current rate is 47% below 22>23 but the 21>24 rate is still 18.0%. That is 78.9% of the total inflation since 2019. Inflation was low in early 2021.
  • Pet Food– Prices are -0.9% vs January and +2.6% vs February 23, down from 4.8%. However, they are still 2.6 times the Food at Home inflation rate. The YOY increase of 2.6% is being measured against a time when prices were 20.7% above the 2019 level, but that increase is still 1.5 times the pre-pandemic 1.7% increase from 2018 to 2019. The 2021>2024 inflation surge has generated 91.8% of the total 24.5% inflation since 2019.
  • Food at Home – Prices are up +0.1% from January, but the monthly YOY increase is 1.0%, down from 1.2% last month and radically lower than Jul>Sep 2022 when it exceeded 13%. The 26.2% Inflation for this category since 2019 is 15% more than the national CPI and is in 3rd place behind Vet & Pet Services. 79.8% of the inflation since 2019 occurred from 2021>24. This mirrors the national CPI, but we should note that Grocery prices began inflating in 2020>21 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 were up 1.0% from January and 0.9% vs February 2023. They still have the lowest increase since 2019. As we noted, prices were deflated for much of 2021. As a result, the 2021>24 inflation surge accounted for 100+% of the total price increase since 2019. They reached an all-time high in October 2022 then prices deflated. 3 months of increases pushed them to a new record high in Feb 23. Prices fell in March, bounced back in Apr/May to a new record high, fell in Jun>Aug, grew in Sep>Oct, fell in Nov, then grew again in Dec>Feb back to the May record level.
  • Veterinary Services – Prices are +0.9% from January, but they are +7.9% from 2023, again the highest rate in the Pet Industry. Plus, they are still the leader in the increase since 2019 with 36.3% compared to Pet Services, 26.4% and Groceries, 26.2%. For Veterinary, relatively high annual inflation is the norm. However, the rate has increased during the current surge, especially in 23 & now 24, so 69% of the cumulative inflation since 2019 occurred from 2021>24.
  • 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 fell -0.02% from January, but they are +1.1% vs last year. Medical Services are not a big part of the current surge as only 39% of the 14.7% 2019>24 increase happened from 21>24.
  • Pet Services – Inflation slowed in 2020 but began to grow in 2021. In 2024 prices have surged, +1.0% from January but +5.2% vs last year. However, inflation is still well below the +8.0% back in March 23. Now, 78% of their total 19>24 inflation has occurred since 2021. In December, it was only 49%. BTW: They have the 2nd highest 19>24 rate.
  • Haircuts/Other Personal Services – Prices are +0.3% from January and +3.9% from 23. 3 of the last 4 months have been <4.0%. Inflation has been rather consistent as 59% of the inflation from 19>24 happened in 60% of the time.
  • Total Pet– Petflation is 68% lower than the 22>23 rate and now only 9% higher than the U.S. CPI. For February, 3.5% is still the 8th highest rate since 1997. Vs January, prices grew +0.3% as all but Pet Food had strong lifts. A Jan>Feb price increase has happened every year but 2018 since 1997, with an average lift of 0.4%. In terms of Petflation, 2024 started just as we should have expected with 1 exception. Veterinary & Pet Food are still the Petflation leaders since 2021 but Pet Services replaced Pet Food in the #2 spot for Petflation since 2019.

Now, let’s look at the YTD numbers.

The inflation rate for 22>23 was the highest for 5 of 9 categories – 4 Pet – Pet Food, Services, Vet & Total Pet, plus Groceries. The 23>24 rate is much lower for all but Veterinary, Pet Services & Haircuts. It actually has the 2nd highest rate in Veterinary. 21>22 still has the highest rate for the National CPI & Pet Supplies. The average annual national inflation in the 5 years since 2019  is 4.2%. Only 2 of the categories are below that rate – Medical Services (2.8%) and Pet Supplies (2.3%). It comes as no surprise that Veterinary Services has the highest average rate (6.4%), but all 6 other categories are +4.6% or higher.

  • U.S. CPI – The 23>24 rate is 3.1%, the same as January, but down 50% from 22>23 and 60% less than 21>22. It is also 26% below the average YOY increase from 2019>2024, but it’s still 72% more than the average annual increase from 2018>2021. 79% of the 20.6% inflation since 2019 occurred from 2021>24. Inflation is a big problem that started recently.
  • Pet Food – Ytd inflation is 3.7%, down from 4.8% in January and 75% less than the 22>23 rate. However, it is still 16% higher than 21>22 and 2.3 times the average rate from 2018>2021. Pet Food has the highest 22>23 rate on the chart but has fallen to 2nd in the 21>24 rates. Deflation in the 1st half of 2021 kept YTD prices low then prices surged in 2022 and especially in 2023. 91% of the inflation since 2019 occurred from 2021>24.
  • Food at Home – The inflation rate has slowed remarkably. At 1.1%, it is down 90% from 22>23, 86% from 21>22 and even 69% from 20>21. However, it is still 32% higher than the average rate from 2018>20. It has the 2nd highest inflation since 2019 and beat the U.S. CPI by 16%. You can see the impact of supply chain issues on the Grocery category as 79% of the inflation since 2019 occurred from 2021>24.
  • Pets & Pet Supplies – Prices increased in Jan & Feb, but the 2024 inflation rate of 0.7% is only higher than the -3.5% deflation in 20>21. Supplies have the lowest inflation since 2019. The only significant increases were ≈6.2% in 22 & 23. The 2021 deflation created a unique situation. Prices are up 12.1% from 2019 but 113% of this increase happened from 2021>24. Prices are up 13.7% from their 2021 “bottom”.
  • Veterinary Services – Inflation was high in 2019 and steadily grew until it took off in late 2022, peaked in 2023 and now continues at the start of 2024. On the chart they are #1 in inflation since 2019 and since 2021. At +6.4%, they have the highest average annual inflation rate since 2019. It is 1.5 times higher than the National Average but 2.3 times higher than the Inflation average for Medical Services. 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. Ytd it is 0.8%. Except for 19>20, it has been between 2.4>3.0%. We are still seeing the impact of 2023 when prices actually deflated (-0.3%). This was the only deflationary year since the US BLS began tracking this category in 1935.
  • Pet Services – After falling in late 2023, prices have surged in 2024. The Ytd 23>24 inflation rate of 5.0% is 2nd to Veterinary in the Pet Industry. It is 38% less than 22>23 and 17% below 21>22. However, it is still 1.7 times higher than the 2018>21 average rate. Also, for the first time, Pet Services prices have inflated over 20% vs 2019 and 2021.
  • Haircuts & Personal Services – The services segments, essential & non-essential, were hit hardest by the pandemic. The industry responded by raising prices. Ytd inflation is 4.0%, which is 29% below the 20>21 peak but still 21% above the 18>20 average. Consumers are paying 25% more than in 2019, which usually reduces the frequency.
  • Total Pet – Ytd Petflation is 4.1%, down from 4.7%. It is 62% less than 22>23 but 80% higher than the 2018>21 average rate. It is also still 1.3 times the national CPI. Petflation is slowing in 2024. This is primarily being driven by drops in Pet Food Prices. Veterinary prices are still 8.7% higher than last year and inflation in Supplies and Services actually increased in February.

Petflation is slowing, but it is still strong, with the 8th highest rate for February in history. It is also still higher than the National CPI. Back In 2021 it was only half of that rate. One fact is often ignored in the headlines – Inflation is cumulative. Pet prices are 21.0% above 2021 and 25.6% higher than 2019. Those are big lifts. In fact, in February prices for all segments but Food are the highest in history. Food prices are only 1.3% below their May peak and only Supplies prices (+12.1%) are less than 25% higher than 2019. Since price/value is the biggest driver in consumer spending, inflation will affect the Pet Industry. Non-Vet Services will be the least impacted as it is driven by high income CUs. Veterinary will likely see a reduction in visit frequency. The product segments will see a more complex reaction. Supplies will likely see a reduction in purchase frequency and some Pet Parents may even downgrade their Pet Food. Both segments will see a strong movement to online purchasing and private label products. Some direct evidence of this impact is apparent at GPE 24 where a record number of exhibitors are offering OEM services. Strong inflation has a widespread impact.

Comparing the Spending Demographics of the Industry Segments – SIDE BY SIDE

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The first reports of our Pet Spending Demographics analysis have been very detailed and intense. We looked at the industry as a whole and each of the individual segments. Recent years have seen some turmoil. We have seen the very real impact of outside influences on the industry. In the 2nd half of 2018, the FDA warning on grain free dog food caused a $2.3B drop in Food $ and new Tariffs flattened Supplies $, but Services had a record lift. In 2019, Food rebounded but the tariffs really hit the Supplies segment with a $3B drop. Veterinary $ grew slightly while Services $ fell a bit. The net was -0.2% drop in Total Pet. The 2020 pandemic had varied impacts as Pet Parents focused on needs. This caused a lift in Veterinary and a huge increase in Food because some demographics binge bought out of fear of shortages. Services spending plummeted due to outlet closures and restrictions while Supplies $ continued to fall because consumers saw them as more discretionary. 2021 brought a big change, Food $ fell because there was no “binge” repeat. However, Pet Parents focused on their “children” producing a widespread record lift in all other segments and a record $16B increase. In 2022, after the record lift in 2021, spending fell in Supplies and Veterinary but Food had a strong 12.5% increase and Services continued to surge. This combination produced a 2.7% increase in Total Pet $

We have often referenced the similarities and differences in spending between Total Pet and the individual industry segments. Total Pet Spending is a sum of the parts and not all parts are equal. In this final report we are going to put the segments side by side to make the parallels, differences and changes from 2021 more readily apparent. We will address:

  • “The big spenders” – those groups which account for the bulk of pet spending.
  • The best and worst performing segments in each of twelve demographic categories
  • The segments with the biggest changes in spending $ – both positive and negative
  • “Honorable Mention” – Only segments that received this “honor” at least twice in 2022
  • And of course, the “Ultimate Spending CUs”

The emphasis is on “visual” side by side comparisons to allow you to quickly compare the industry segments. We’ll try to minimalize our comments. You can always reference one of the specific reports for more details. We’ll also break the charts up into smaller pieces that are demographically related to make the comparison more focused and easier.

Before we get started, let’s take a look at the current market share of the industry segments. The following 2 charts show the 2022 share of spending for each segment and the evolution over the past 30 years. 1992 was the last year that the Food Segment accounted for 50% of Total Pet Spending. By the way, Total Pet Spending was $16.2B in 1992. We have come a long way, +534%; annual growth rate of 6.35%. This will help put our comparisons into better perspective.

2021>2022 CHANGE IN SHARE of TOTAL PET $

Food: 37.7%; Up from 34.4%

Supplies: 21.4%; Down from 23.8%

Veterinary: 28.9%; Down from 32.7%

Services: 12.0%; Up from 9.1%

In 2022, Supplies & Veterinary lost almost 7% of share in Total Pet $ which was picked up by Food & Services. The most notable trend from 1992 to 2012 was the decline in Food share while Supplies gained in importance. Both of those have ended. In recent years, the Product Segments have been on a rollercoaster. Food reached 44% in 2020, the highest level since 44.8% in 1998. Supplies have been trending down since 2012, hitting bottom at 18.1% in 2020. The Services segments have been more stable. They have generally trended up since 2012. After falling to 8.2% in 2020, Non-Vet Services peaked at 12% in 2022. Except for the big lift in 2021 which pushed them above 30%, Veterinary has been in the 25>28% range since 2012. All are impacted by outside influences but big trends in Food and Petflation in Supplies tend to make the Product Segments more volatile than the Services Segments.

Now let’s get started with a look at the “Big Spenders”. The following 2 charts will compare the market share and performance in all Pet Industry segments by the groups responsible for the bulk of the spending in 10 demographic categories. These are the groups that we identified in our Total Pet analysis to generate at least a 60% market share of spending. As you recall, to better target the spending we altered 3 groups in Services (Area, Education and Income) and 1 in Veterinary (Education). However, to have a true side by side comparison we need to use the same groups for all. Since these 4 groups are a different size from our original analysis, the share of spending will be different. However, all meet or exceed our 60% share minimum.

The chart makes it especially easy to compare share and performance across categories. Remember, performance levels above 120% show a very high level of importance for this category in terms of increased spending. Unfortunately, it also indicates a high spending disparity among the segments within the category. There are 2 charts, each with 5 categories. The categories are listed in their order of share of Total Pet $ – from highest to lowest.

  • White, Non-Hispanic – This group has an 81+% market share in every Segment. Minorities account for 32.8% of CUs but only 14>18% of spending in any segment. Factors: Lower income for Hispanics and African Americans and lower Pet ownership in Asians and African Americans. Whites lost share in Total & Products but gained in both Service segments. Asians had the same pattern and Hispanics were down in all but Food. African Americans gained in all.
  • Homeowners – Homeownership is very important in Pet Ownership and subsequently in all Pet Spending. It also increases with age. Only the Supplies share is below 80%. The group gained 1.2% in Total Pet share. The only decrease was -0.2% in Food. The lift was driven by those w/o a mortgage. They had gains in all but Veterinary. Those with a mortgage also had a small increase in Total but their only segment gain was a 3.1% increase in Veterinary.
  • 2+ People in CU – 2+ is still the key in pet ownership. However, the results were mixed by size. Singles had more CUs but lost share in all but Services so 2+ CUs had the opposite pattern. 2 People only gained in Supplies & Services. 4 people had the opposite pattern but 3 People gained in all. 5 People was the only 2+ size to gain in share of CUs but they only gained share in Food spending and had the biggest drop in Total Pet.
  • Suburban & Rural – They lost -0.1% in Total Pet but gained in Food & Services. Both the Suburbs 2500> and Areas <2500 had drops in Veterinary but opposite patterns in Total and the other segments. The Big Suburbs were only up in Food. The areas <2500 only lost share in Food. Center City was up in Total due to gains in Veterinary & Supplies.
  • Associate’s Degree > – A huge drop in spending by College Grads caused us to expand this group to include those with an Associate’s Degree to reach our 60% minimum share. This resulted in an increase in share but a drop in performance for all segments. Despite a great year from Associate’s Degree, the new group lost share in all but Services from 2021. Overall, Higher Education is also less important. In 2021, it usually ranked 2nd. In 2022, it is still 2nd for Services but fell in Total and all other segments, even falling to 7th in Food.

  • Over $70K Income – INCOME MATTERS MOST IN PET SPENDING! Income has grown in importance in recent years and all Industry segments, but Food performed at 140+%. Over $70K gained 2.5% in CU share but lost -0.7% in Total, -2.6% in Food and -1.8% in Veterinary. The other segments gained share – Supplies, +2.6% & Services, +3.0%. The <$70K group obviously had the exact opposite pattern. Food & Veterinary spending became slightly more balanced while the income spending disparity gap widened for the discretionary Supplies & Services segments.
  • Everyone Works – Income is important, but the importance of # of Earners fell for all but Food in 2022. Despite a strong year for 3+ Earners the Everyone works group lost share in all but Food. The Food lift was strong enough to generate a gain in Total. In terms of performance, only Services is 120+%. In 2021, Supplies & Vet were also 120+%.
  • All Wage & Salary Earners– Incomes vary widely in this group, so performance is often lower. 2022 was different. The group gained 0.9% in CU share. Total Pet and all segments, but Veterinary gained in spending share. Veterinary lost -0.5% in share and -2.6% in performance. Supplies had the biggest lift – +7.8% in share and +11.4% in performance. The increase was driven by a combination of Managers/Professionals and Blue Collar workers.
  • Married Couples – Marriage is 1st in importance to spending in Food, 2nd in Total, Supplies & Veterinary but falls to 3rd in Services. In 2022 their share & performance increased in Total, Food & Services but fell in Veterinary & Supplies. The best performer inside the group was CUs with a child 18>. Outside of the group, it was Single Parents.
  • 35 to 64 yrs – Includes the 3 highest income segments. They only gained share in Total Pet (+0.3%) and Food (+6.0%). The 45>54 yr-olds gained share in all segments but their lift couldn’t overcome big losses by the 35>44 yr-olds in all segments but Food. The good news is that their Food share is now above 60% (61.1%).

Now we’ll look at the Best/Worst performers in each category. Highlighted cells are different from Total Pet; * = New Winner/Loser; ↑↓ = 5+% Performance Change from 2021. The categories are divided into related groups. 1st, Income

  • Income – Income matters. All winners were $150K>. The Supplies winner was $150>199K down from $200K> in 2021 and the disparity between 1st and last place fell by 90%. The disparity gap in Veterinary narrowed by only 5% but it narrowed by at least 30% for Food, Services & Total Pet. More balanced spending.
  • # Earners – More earners = more income. The highest income 3+ Earners segment is now on top for all. Note: They are most likely Gen Xers. No Earner, Singles (70+ yr-olds) retained their position at the bottom. The spending disparity gap narrowed by only 6% for Supplies. In the other segments it shrank by at least 15%.
  • Occupation– Mgrs & Professionals are #1 in CU income and expenditures and again the best performer in all segments. Blue Collar workers had a strong year in all but Services. They were replaced at the bottom by Service Workers or Retirees. The spending disparity actually increased by 21% in Services and by 4>9% in Food, Supplies & Total Pet. It did fall slightly, -3.5% in Veterinary.

Next are demographics of which we have no control – Age, Generation and Racial/Ethnicity

  • Racial/Ethnic– As expected, White Non-Hispanics are the top performer in all segments and African Americans occupy all the bottom slots. African Americans have the lowest income and only 25% own Pets. However, they had a strong 2022. They got the performance gap below 100% in all segments, including a 24% drop to 75% in Supplies.
  • Age – The 45>54 yr-olds now “rule”. The bottom is a mixture of young & old. 75> is the worst in Products while <25 loses in Services & Total. The spending disparity increased by 10% to 110% in Veterinary, but it fell in Total and all other segments, including a 62% drop in Supplies to 75%. Now, only the disparity in Veterinary is above 100%.
  • Generation – Gen X still “rules”. Gen Z is still at the bottom in Service segments while Born <1946 is the worst in the others. The disparity gap narrowed for all. The drop was in double digits for all but Veterinary. Now, all are <100%.

In the next 6 categories, we have at least some control

  • Education – Winning is tied to higher Education which generally correlates with income. The losers are all below an Associate’s degree. The disparity gap shrank significantly for all with an average drop of 53%. Only Services is 100+%.
  • CU Composition – 7 of 10 best/worst are different from 2021. Except for Services, kids win. The oldest kid 18> aligns with the 45>54 age group. Singles are the most common worst. Disparity lessened for all – an average drop of 32%.
  • CU Size– The top CU number is mixed, but generally 3+. “1” remains solidly on the bottom. The disparity is also bigger in all but Supplies. Disparity dropped 60% in Supplies and 4% in Services but rose in Total & other segments.
  • Housing – The perennial winner and loser. Disparity dropped slightly in Products & Services but rose in Vet & Total.
  • Area– <2500 population is on top & Central City is on the bottom. The disparity dropped by 9+% for Total and all but Services, which increased by 11%. This is a surprise. Services spending usually skews towards higher population.
  • Region – A strong year for the Midwest. The South is at the bottom in all but Supplies. The disparity in Food increased by 0.3%. Total & all other segments had double digit drops, led by Supplies which fell 62%.

Here are the categories with the biggest & smallest disparities for Total Pet & each industry segment.

I’m sure the fact that income produces the biggest spending disparity for all is no surprise. Pet spending is driven by income. The Regional “wins” reflect the growing national balance in product spending. In Area Type, Services spending is expanding beyond high population areas while Veterinary spending is now growing in Center City.

Now, here are two summary charts. The first compares the averages.

The return to “normal” is very apparent as the differences for all but Supplies are below 2019 levels. Supplies did have the biggest drop from 2021 (40%) and are less than 1% above 2019. Food has the lowest disparity for the 2nd straight year. The difference grows as you move from Products to Services. Non-Vet Services is again on top. The Veterinary disparity also fell but it is back to the 2nd highest. Total Pet fell 16% from 2021 to 78%, much more balanced.

  • Food – Down 13% from 2021, 16% from 2019, but 145% from the 2020 binge. Now they are the most balanced.
  • Supplies – The record 2021 increase produced a record disparity. The drop in 2022 brought a return to normal.
  • Veterinary – Their record lift increased the difference to over 100%. The sales drop pushed them below 2019.
  • Services – Despite a record lift in 2022, the gap narrowed by 8%, but they are the only segment over 100% .

This chart shows the number of new winners/losers.

There was much less turmoil than in 2021 but Food again led the “pack” with nearly half of the winners & losers changing as their spending rebounded from the drop in 2021.

  • With a 12.5% increase in 2022, Pet Food spending returned to a more normal pattern in 2022. The biggest change in performance was that over half of the losers moved off of the bottom.
  • Supplies spending fell sharply in 2022 but the impact only changed 4 of the 12 winners and 1 loser.
  • The Veterinary spending drop was also big but there were even fewer total changes than in Supplies.
  • Services had another record increase. It was widespread but produced few significant changes in performance.

Now, let’s look at the Demographic Segments with the Biggest Changes in $. We’ll truly see some differences between the Industry Segments. We have color highlighted differences from Total Pet. Plus:

  • ↔ = Winner/Loser same as 2021
  • ↕ = Flipped from 1st to Last or vice versa

First, the Income related categories.

  • Income – 3 winners & 5 losers were new with 3 flips. The winners are all over $100K but so are 2 of the losers. Only the loser in Services has a below average income. The $ drop in Vet & Supplies was driven by the big spenders in 21.
  • # Earners – All but 1 are new with 4 flips. In Food & Services, the winner & loser were driven by income. In Vet 2 Earners flipped to last & the lowest income won. 2+ CU Retirees had the smallest increase in Services but spent less in all other segments, especially Food. This flipped them to a more usual position at the bottom in Total Pet.
  • Occupation – 3 repeats while 4 flipped. The high income, Mgrs & Professionals had the biggest increase in all but Vet where they had the biggest drop – no surprise after their $2.3B lift in 21. Although not as large, Tech/Sls/Clerical had a similar spending pattern in Supplies. Blue Collar had a small increase in Services but stayed at the bottom. Petflation may have caused Retirees to downgrade their Food and pushed them to the bottom in Total & Food.

Now the Age and Racial/Ethnic Categories

  • Racial Ethnic – 3 repeats & 5 flips. White, non-Hispanics won in all but Supplies & Veterinary, where they were the big loser. In 2021 they had the biggest lifts in these segments. A strong year for African Americans while other minorities, Asians & Hispanics didn’t fare so well. Asians lost in Services & Food but Hispanics lost overall.
  • Age – All new with 5 flips. There were 3 different winners but all were over 45. In 2021, 35>44 had 3 wins. In 2022 there were 4 different losers. 35>44 lost overall and in Supplies. The 55>64 yr-olds flipped from 1st to last in Veterinary. Perhaps due to a downgrade, 75> lost in Food. <25 had a great year but it was driven by Products. They were down in both Services segments, including the only spending decrease by any age group in Non-Vet Services.
  • Generation – 2 repeats & 3 flips. Gen Z made their presence known with wins in Supplies and Total. They finished last in Services but still spent more. Gen X won Food & Veterinary but flipped to the bottom in Supplies. Millennials flipped from 1st to last in Veterinary. The Food & Total Pet losers were new – the oldest group, Born <1946.

Now, here are more Demographic Categories in which the consumers can make choices.

  • Education – 1 repeat & 4 flips. Higher education is usually tied to increased income and pet spending but not in 2022. Services had the only “normal” pattern. It was a strong year for <BA/BS, especially for Associates Degree. Adv. College Degree had a huge lift in 2021 and the biggest drops in Total and all segments but Services.
  • CU Comp. – Married with Children were the best performers in Total Pet and all segments but Services. The success generally skewed a little older. Those with kids 6>17 lost in Total & Supplies and Unmarried CUs lost in both Service segments. Married, couple only lost in Food, a big turnaround from 2021 when they won in all but Supplies.
  • CU Size– 1 repeat & 4 flips. “3” was the magic number with wins in all but Services. The loser in Food & Veterinary was 2 People while the biggest CUs, 5+ lost in Supplies, Services & Total Pet.
  • Housing – 5 repeats, the most for any category & 3 flips. In Food & Services, all segments spent more. In Veterinary all spent less. Homeowners are on top. In Supplies & Total, it was those without a Mortgage. Except for the dual flip in Supplies which put Homeowners w/Mtges on the bottom, Renters were the biggest losers, which is the norm. However, we should note that they “lost” Food & Services while increasing their spending.
  • Area – 3 repeats with 5 flips. The big Suburbs are the normal winner. They held onto the top spot in Services & Total and won in Food. After big lifts in 2021, they dropped to last in Supplies & Veterinary. Central City also had a strong but mixed year. They flipped to the top in Supplies & Veterinary although they spent less in Vet $. They lost in Food & even in Services, despite a $0.8B lift. Rural Areas lost in Total despite a lift that was only 18% less than the winner.
  • Region – No repeats but 6 flips. The Midwest took control with wins in all but Supplies, where the South edged them out by $0.06B for the win. In an unusual situation, the West finished at the bottom in Total, Food & Supplies. However, they did have the biggest lift in 2021. The Northeast lost in both Service segments despite a lift in Non-Vet.

The next chart compares the number of repeats, “flips” and new segments among the 12 winners and 12 losers for each industry segment. The idea is to look for patterns in the data that cross segments. Let’s take a look.

  • Food & Services $ grew while Supplies & Veterinary $ fell. The resulting turmoil is most apparent in the $ changes.
  • With 2 straight record increases, Services led the way in stability with repeats by 83% of 2021 winners.
  • With big turnarounds in spending, Supplies (15), Veterinary (14) and Food (11) had the most flips. Veterinary & especially Supplies were mostly 1st to last while the Food flips were slightly positive. In a clear demonstration of widespread stability, Services had no flips.
  • Both patterns were evident in Total Pet as 42% flipped but 1st to last & last to 1st were equal in number.
  • There are a total of 24 winners and losers. Here’s the number different from 2021. Food: 22; Supplies: 23; Veterinary: 21; Services: 11; Total: 21. Any change in growth pattern causes more turmoil at the segment level.

Next, there were so many positive contributors that in each individual report we recognized 6 segments that didn’t win but still performed so well that they deserved Honorable Mention. I reviewed that list again and came up with segments that won Honorable Mention at least twice. Here are the 9 “SUPER Honorable Mentions” for 2022…

9 segments made the list, the same as 2021. Services had the biggest increase, +36%, but had only 1 segment on the list. 5 of their honorees either won in other segments or didn’t make the honor role. Food & Total Pet both had spending increases and tied for the lead with 6 segments on the “Super” list. All segments on this year’s list are generally “low profile” but contributed notably to the industry. We should give special kudos to Single Parents and those with an income of $40>49K. These 2 groups won Honorable Mention in 2 Industry segments and Total Pet.

Although the results were mixed, with numerous individual changes, here are some trends of note:

  1. Older Youth Movement – Boomers must inevitably fade. The Gen Xers are firmly at the top with spending skewing towards their older, wealthier members. Millennials are close behind and now Gen Z is “in the game”.
  2. The “Magic” number is 3+ – As spending has skewed younger the best performers in all but Services have 3 or more people. However, 2 person CUs still have the largest share of CU’s, 32.7% and 100+% performance in Total Pet and every segment. They’re not done yet.
  3. Improved spending balance – The performance gap between the best and worst narrowed in Total Pet and all segments. The disparity is now less than in 2019 for all but Supplies. However, we should note that Supplies narrowed the gap by 40% and their current disparity is only 0.7% more than 2019.
  4. Income is still the most important factor – The gap between best and worst narrowed in Total and all segments, but the disparity is still the biggest of any category. The best performer is always $150K+, while the worst is <$30K.

And Finally, What you have all been waiting for…

THE ULTIMATE 2022 PET SPENDING CUs – Side by Side

Color Highlighted cells are different from Total Pet; * = New in 2022

Methodology – The segments are chosen because they have the highest annual CU spending of any segment in the category. They may or may not have the most total dollars. That would depend upon the number of CUs in the group.

Final Comment – These “winners” further reinforce the key factors in increased pet spending:

Marriage– A commitment to another person demonstrates that you can make a commitment to your pet “children”.

CU Size – The “magic” number is 3+ for all but Services.

Homeownership/Area – Owning and controlling your own space has long been a key factor in Pet Parenting.

More space – Small suburbs near a big metro area offer the convenience of the city, plus room for more pets.

Income Matters Most – High Income, A High Paying Occupation, A College Degree, Everyone works with 2+ Earners. These are characteristics present in all of the Ultimate Pet Spending CUs.

Generation/Age – The highest income, 45>54 yr-old Gen Xers “rule”.

Region – Take your pick – Midwest or West, just not the Northeast or South.

I hope that this Visual Comparison helped you to get a “satellite view” of Pet Industry Spending in 2022. Please refer back to the individual segment reports to get more details.

There is one consistent winner in the Pet Industry…

…OUR PET CHILDREN

 

Petflation 2024 – January Update: Down to +4.7% vs Last Year

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Inflation slowed in January. The monthly Consumer Price Index peaked back in June 2022 at 9.1% then began to slow until turning up in Jul/Aug 2023. Prices fell in Oct>Dec but turned up in January. However, the CPI actually decreased to +3.1% from +3.4% due to a big monthly price lift in 2023. Grocery inflation continues to slow. After 12 straight months of double-digit YOY monthly increases, grocery inflation is now down to +1.2%, 11 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.

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 4.7% in January, it is still 51.6% above the national rate of 3.1%. 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 24 vs 23 which will include Pet Segments and relevant Human spending categories. Plus
    1. CPI change from the previous month.
    2. Inflation changes for recent years (22>23, 21>22, 20>21, 19>20, 18>19)
    3. Total Inflation for the current month in 2023 vs 2019 and vs 2021 to see the full inflation surge.
    4. Average annual Year Over Year inflation rate from 2019 to 2023
  • YTD comparisons (Since it is January, this month’s numbers are the YTD rate.)

In our first graph we will track the monthly change in prices for the 24 months from January 22 to January 24. We will use December 2019 as a base number so we can track the progress from pre-pandemic times through an eventual recovery. This chart is designed to give you a visual image of the flow of pricing. You can see the similarities and differences in segment patterns and compare them to the overall U.S. CPI. The year-end numbers and those from 12 and 24 months earlier are included. We also included and highlighted (pink) the cumulative price peak for each segment. In January, Pet prices were up from last month as lifts in Services & Supplies overcame drops in Food & Veterinary.

In January 22, the cumulative CPI was +9.4% and Pet prices were +5.6%. Like the CPI, prices in the Services segments generally inflated after mid-2020, while Product inflation stayed low until late 21. In 22 Petflation took off. Food prices grew consistently but the other segments had mixed patterns until July 22, when all increased. In Aug>Oct Petflation took off. In Nov>Dec, Services & Food prices continued to grow while Vet & Supplies prices stabilized. In Jan>Apr 23, prices grew every month except for 1 dip by Supplies. In May Products prices grew while Services slowed. In June/July this was reversed. In August all but Services fell. In Sep/Oct this was reversed. In November, all but Food & Vet fell. In December Supplies & Vet  drove Total Pet prices up. In January, Food & Vet prices fell while Supplies & especially Services prices surged. Note: With cumulative inflation, all but Supplies are now at or within 0.4% of their pricing peak.

  • U.S. CPI – The inflation rate was below 2% through 2020. It turned up in January 21 and continued to grow until flattening out in Jul>Dec 22. Prices turned up Jan>Sep, dipped in Oct>Dec then rose in Jan. but 30% of the 22.4% increase in the 49 months since December 19 happened in the 6 months from Jan>Jun 22 – 12.2% of the time.
  • Pet Food – Prices were at or below Dec 19 levels from Apr 20>Sep 21. They turned up and grew, peaking in May 23. They have essentially stabilized at this record level. 93% of the 22.9% increase has occurred since 2021.
  • Pet Supplies – Supplies prices were high in Dec 19 due to added tariffs. They then had a “deflated” roller coaster ride until mid-2021 when they returned to Dec 19 prices and essentially stayed there until 2022. They turned up in January and hit an all-time high, beating the 2009 record. They plateaued in Feb>May, grew 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. They fell in March, peaked at a new record in May, then continued their rollercoaster ride with lifts in Dec>Jan.
  • Pet Services– Normally inflation is 2+%. Perhaps due to closures, the rate slowed in 2020. In 2021 consumer demand increased but there were fewer outlets. Inflation grew in 2021 with the biggest lift in Jan>Apr. It was stronger in 2022 but it got on a rollercoaster in Mar>Jun. It turned up again Jul>Mar 23 but the increase slowed in April. Prices fell -0.3% in May, turned up Jun>Aug, fell in Sep>Dec. then surged to a new record high in January.
  • Veterinary – Inflation has been consistent. Prices turned up in March 20 and grew through 21. A surge began in December 21 which put them above the overall CPI. In May 22 prices fell and stabilized in June causing them to fall below the National CPI. However, prices rose again and even with dips, they have stayed above the CPI since July 22. In 23 prices grew Jan>May, stabilized Jun>Jul, fell in Aug, grew Sep>Dec (Record high) then fell in January.
  • Total Pet – Petflation is a sum of the segments. In Dec 21 the price surge began. In Mar>Jun 22 the segments had ups & downs, but Petflation grew again from Jul>Nov. It slowed in Dec, grew Jan>May 23 (peak), fell Jun>Aug, grew in Sep/Oct, fell in Nov then grew in Dec>Jan to a new record high. The January lift came from Services (+5.6%) and Supplies (+0.7%) which overcame drops in Food & Vet. However, the YOY CPI fell from 5.1% to 4.7%.

Now, we’ll turn our attention to the Year Over Year inflation rate change for January and compare it to last month, last year and to previous years. We will also show total inflation from 21>24 & 19>24. Petflation slowed to 4.7%, down from 5.1% in December but it is still 1.5 times higher than the National rate. The chart will allow you to compare the inflation rates of 23>24 to other years but also see how much of the total inflation since 2019 came from the current pricing surge which took off in 2022. Again, we’ve included some human categories to put the pet numbers into perspective.

Overall, Prices were +0.5% from December but were +3.1% vs January 23, down from +3.4% last month. Grocery inflation is down again, to +1.2% from +1.3%. 7 of 9 categories had a price increase from last month – only Vet & Pet Food prices fell. There were 5 increases in December. Pet Services had a big turnaround. After 4 monthly drops, prices rose 5.6%. The national YOY monthly CPI rate of 3.1% is only 48% of the 22>23 rate and 41% of 21>22. The 23>24 inflation rate is below 22>23 for all categories but Veterinary Services. In our 2021>2024 measurement you also can see that over 65% of the cumulative inflation since 2019 occurred in all but 2 segments – Medical Services & Haircuts – both Services categories. Service Segments have generally had higher inflation rates so there was a smaller pricing lift in the recent surge. Pet Products have a very different pattern. The 21>24 inflation surge provided 95.6% of their overall inflation since 2019. This happened because Pet Products prices in 2021 were just starting to recover from a deflationary period. Services expenditures now account for 64.1% of the National CPI so they are very influential. Their current CPI is +4.9% while the CPI for Commodities is +0.1%. Services are driving virtually all of the current 3.1% inflation.

  • U.S. CPI– Prices are +0.5% from December. The YOY increase is 3.1%, down from 3.4%. It peaked at +9.1% in June 2022. The targeted inflation rate is <2% so we are still 55% higher than the target. After 12 straight declines, we had 2 lifts, a stable month, 2 consecutive drops, now 2 lifts – not good news! The current rate is 52% below 22>23 but the 21>24 rate is still 17.9%. That is 79.6% of the total inflation since 2019. Inflation was very low in early 2021.
  • Pet Food– Prices are -0.1% vs December and +4.8% vs January 23, down from 5.1%. However, they are still 4 times the Food at Home inflation rate. The YOY increase of 4.8% is being measured against a time when prices were 17.3% above the 2019 level, but that increase is still 4 times the pre-pandemic 1.2% increase from 2018 to 2019. The 2021>2024 inflation surge has generated 90.2% of the total 26.5% (Now: 2nd highest) inflation since 2019.
  • Food at Home – Prices are up +0.7% from December, but the monthly YOY increase is 1.2%, down from 1.3% last month and radically lower than Jul>Sep 2022 when it exceeded 13%. The 26.4% Inflation for this category since 2019 is 17% more than the national CPI and is in 3rd place behind Vet & Pet Food. 79.5% of the inflation since 2019 occurred from 2021>24. This mirrors the national CPI, but we should note that Grocery prices began inflating in 2020>21 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 were up 0.7% from December and 0.5% vs January 2023. They still have the lowest increase since 2019. As we noted, prices were deflated for much of 2021. As a result, the 2021>24 inflation surge accounted for 100+% of the total price increase since 2019. They reached an all-time high in October 2022 then prices deflated. 3 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, fell in Jun>Aug, grew in Sep>Oct, fell in November, then grew sharply in Dec>Jan.
  • Veterinary Services – Prices are -0.1% from December, but they are +9.6% from 2023, again the highest rate in the Pet Industry. Plus, they are still the leader in the increase since 2019 with 36.5% compared to Pet Food, 26.5% and Groceries, 26.4%. For Veterinary, relatively high annual inflation is the norm. However, the rate has increased during the current surge, especially in 23 & now 24, so 68% of the cumulative inflation since 2019 occurred from 2021>24.
  • 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 1.0% from December and after 8 straight months of deflation are now +0.6% vs last year. Medical Services are not a big part of the current surge as only 42% of the 2019>24 increase happened from 21>24.
  • Pet Services – Inflation slowed in 2020 but began to grow in 2021. January 24 prices surged, +5.6% from December and were +4.8% vs last year, a big change from +0.7% last month, but well below the 8.0% back in March. Now, 77% of their total 2019>24 inflation has occurred since 2021. Last month it was only 49%.
  • Haircuts/Other Personal Services – Prices are +0.7% from December and +4.2% from 23, after 2 consecutive months below 4.0%. Inflation has been rather consistent as 59% of the inflation from 19>23 happened in 60% of the time.
  • Total Pet– Petflation is 56% lower than the 22>23 rate, but still 1.5 times the U.S. CPI. For January, +4.7% is the 4th highest rate since 1997 (2023: 10.6%; 2009: 10.3%; 2008: 5.2%). Vs December, prices fell -0.1% for Pet Food & Veterinary Services but grew strongly in Non-Vet Services, +5.6% and Supplies, +0.7% so Total Pet was +0.4%. A Dec>Jan price increase has happened 9 straight times and in 25 of the last 27 years with an average lift of 0.4%. In terms of Petflation, 2024 started just as we should have expected. Veterinary & Food are still the Petflation leaders, but all segments have an influence. Pet Food has largely been immune to inflation as Pet Parents are used to paying a lot, but inflation can reduce purchase frequency in the other segments.

Petflation is slowing, but it is still strong, with the 4th highest rate for January and 2023 had the 2nd highest annual rate in history. It is also 1.5 times the National CPI. In 2021 it was only 75% of that rate. Even if it slows to 0%, you can’t ignore the fact that inflation is cumulative. Pet prices are 20.9% above 2021 and 26.1% higher than 2019. Those are big lifts. Since price/value is the biggest driver in consumer spending it is likely to affect the Pet Industry. The Non-Vet Services segment will be the least impacted as it is the most driven by high income CUs. Supplies and Veterinary will likely see a reduction in purchase frequency. Food is the most needed segment so the response will be complex. It could include a movement to online shopping, switching to private label or even downgrading the quality of food.

In fact, one impact of high cumulative inflation will be very visible soon at the industry’s preeminent trade show, Global Pet Expo 2024. There are over 1100 exhibitors with 120+ actively soliciting OEM (Private Label) customers. Because many have expertise in OEM this private label trend has caused a record surge in Foreign Exhibitors, 36% of all booths including 250 from China. Inflation has further enhanced  the importance of “Value” to consumers.

2022 Veterinary Spending was $29.71B – Where did it come from…?

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Now we will turn to the final Industry Segment, Veterinary Services. For years, Veterinary Services have had high inflation. This has resulted in CU income becoming the dominant factor in spending and a reduction in visit frequency.

In 2017 low inflation spurred an unusual 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%), but inflation 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 Pet Parents focused on needs – Food & Veterinary. Veterinary spending grew $3.05B, (+14.0%). In 2021, this behavior grew even stronger and produced a record $7.82B (+31.5%) increase. In 2022 inflation reached 8.8%. Spending fell -$2.95B (-9.0%) but the amount of Veterinary Services sold fell 16.4%. Pricing matters to almost everyone.

We’ll start our analysis with the groups who were responsible for the bulk of Veterinary spending in 2022 and the $2.95B decrease. The first chart details the biggest 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 – 5 of 10 groups perform above 120%, 1 less than 2018>2021. This is currently 2 less than Supplies (7) and 1 less than Services (6) but 1 more than Food (4). This means that these big spenders are performing well but it also signals that there is still disparity between the best and worst performing demographics in this “needed” segment. Only the College Grads group is different from Total Pet and the categories are listed in the order that reflects their share of Total Pet $pending. Again, High Income is the most important factor in Spending.

  1. Race/Ethnic – White, not Hispanic (86.0%) up from 84.7%. This group accounts for the vast majority of spending in every segment and gained share in Vet $ in 2022. Their 128.0% performance is also up from 126.0% but they fell from #4 to #5 in importance in Veterinary Spending. Whites spent $2.2B less but African Americans (+$0.18B) and Asians (+$0.09B) spent more. Whites gained in share & performance because of a -$1.1B decrease by Hispanics.
  2. Housing – Homeowners (83.9%) up from 81.0% Homeownership is a major factor in pet ownership and spending in all industry segments. In terms of importance to Veterinary spending, their 128.9% performance rating is up from 125.2%, and they moved up to 4th from 5th place. All segments decreased spending but the biggest drop was by Renters, -$1.40B (-22.6%). This is produced the gains for Homeowners. However, we should note that Homeownership is still not nearly 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 (79.8%) up from 79.7% This group, which is 69.0% of U.S. CUs, gained minimally in share and their performance grew from 114.7% to 115.7%. Their rank in terms of importance in Vet Spending stayed at #8. All sizes spent less. The gains happened because Singles had a slightly bigger % decrease (-9.7%) than 2+ CUs (-8.9%).
  4. Area – Suburban & Rural (70.9%) down from 73.0% Suburban CU’s are the biggest spenders in every segment. All areas spent less. The Big Suburbs had the biggest decrease, -$1.93B (-12.1%) while Center City was only down -2.3%. This drove the big decrease in share and caused their performance to fall substantially to 108.2%, from 113.2%.
  5. Education – College Grads (60.9%) down from 65.4%. Income generally increases with education. It is also important in understanding the need for regular Veterinary care. Their performance also dropped from 138.1% to 130.3% and they fell from #2 to #3 in importance. In 2022, College grads spent -$3.27B less while those without at least a BA/BS spent $0.31B more. This lift was small but widespread as only HS Grads with some college spent less.
  6. Income – Over $70K (69.9%) down from 71.7% Their performance also fell significantly from 160.0% to 147.8% but higher income is still the most mportant factor in Veterinary spending. The only lifts were from $200K>, +$0.39B and $30>49K, +$0.04B. The biggest drops were $150>199K, -$1.51B and $70>99K, -$1.47B.
  7. # Earners – “Everyone Works” (67.7%) down from 68.6% Their Performance also fell from 121.0% to 116.1%. They dropped out of the 120+% club & fell from #6 to #7 in importance. All adults in the CU work. Only Single, No Earner CUs spent more. 2 Earners had the biggest $ drop, -$0.99B while 1 Earner, Singles had the biggest % drop, -15.8%.
  8. Occupation – All Wage & Salaried (65.9%) down from 66.4% and their performance decreased from 111.9% to 109.3%. Only Blue Collar Workers and Tech/Sls/Clerical spent more. The group lost share and performance primarily because of big drops by Mgrs/Professionals, -$1.47B and Service Workers, -$1.23B. Their perforrmance drop was also accelerated because they had 1.6 million more CUs than in 2021.
  9. CU Composition – Married Couples (62.5%) up from 60.9% Their performance also grew to 130.8% from 128.4% and they moved up to #2 from #3 in importance. Only 2 segments spent more – Married Couple with an Oldest Child 6>17, +$0.67B and Single Parents, +$0.25B. The biggest drop was by All Adult, Unmarried CUs, -$1.26B.
  10. Age – 35>64 (61.1%) down from 62.1% Their performance also fell from 118.7% to 117.1% but they moved up to 6th from 7th place in importance. Only 45>54, +$0.80B and 75>, +$0.18B spent more. The 2 biggest drops were 55>64, -$1.51B and 35>44, -$1.45B. These caused the group’s drops in share and performance.

Spending disparity fell in 6 categories and the average group performance was 123.2%, down from 125.7% in 2021. Spending became slightly more balanced. Notably, higher income & education became a little less important. Also, Married Couples reached #2 in iimportance. In 2020, they were #6.

Now, we’ll look at 2022’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 and there are only 4 that are different from 2021, down from 5 last year. This is 1 more than Services, but 1 less than Supplies and far fewer than the 11 in Food. Also, the average difference between Best & Worst was 88.8%, down from 94.4% in 2021.There was slightly less turmoil and spending disparity between segments in 2022. The changes from 2021 are “boxed”. We should note:

  • Income– The Winner & Loser are the same. The gap is 181.8% but 5.3% less than 2021.
  • Earners – This repeat winner and loser have the highest and lowest incomes. The gap narrowed by 23.2%.
  • Occupation – Service workers replaced Retirees at the bottom, but the gap was 3.5% smaller.
  • Age – The 45>54 yr-olds, the highest income group, replaced 55>64 at the top. The gap actually widened by 9.3%.
  • Race/Ethnic; Another set of expected repeats. The gap between winner and loser narrowed by 5.9%
  • Education; Housing; Area – These all had an expected repeat winner & loser, but the performance gap grew for all. Education: +1.8%; Housing: +14.3%; Area: +16.2%.
  • Region –Midwest replaced Northeast at the top. The South has now finished last for 7 years in a row, but the win/lose gap decreased by 15.2%. Also, for the second consecutive year, 2 regions performed at 100+%.
  • CU Composition – Married, Oldest child <6 replaced Single Parents at the bottom. The gap narrowed 33.6%.
  • # in CU – The same winner & loser but the gap widened by 10.7%. Only 2,3 & 4 people CUs perform above 100%.
  • Generation – No change again and the performance gap widened, but only by 1.6%.

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

We saw little turmoil in performance. That’s not true here. There were 3 repeats and 14 segments flipped from 1st to last or vice versa. Last year there were 8 repeats and 3 flips. There were 5 surprise winners – Blue Collar, <HS Grads, African Americans, No Earner, Singles & Center City. There were only 3 losers that weren’t a surprise – Northeast, Unmarried, 2+ Adults & Renters. ln 3 categories all segments spent less. In 2021, there were 9 where all spent more. Plus, in 2021, 93% of 96 demographic segments spent more. That fell to 23% in 2022.

  • Region – Both winner and loser flipped. This is 5 consecutive years of flips for the Northeast.
    • Winner – Midwest – Veterinary Spending: $7.62B; Up $1.16B (+18.0%)                               2021: Northeast
    • Loser – Northeast – Veterinary Spending: $4.88B; Down $2.64B (-35.1%)                           2021: Midwest
    • Comment – Only the Midwest increased spending. In 2021, all had double digit % increases.
  • Age – 55>64 flipped from 1st to last. 45>54 is a new winner.
    • Winner – 45>54 yrs – Veterinary Spending: $6.90B; Up $0.80B (+13.2%)                                2021: 55>64 yrs
    • Loser – 55>64 yrs – Veterinary Spending: $6.14B; Down $1.51B (-19.7%)                                2021: <25 yrs
    • Comment: Only 45>54 and 75> spent more. In 2021 all segments increased Veterinary spending. While 55>64 had the biggest individual decrease, 25>44 spending fell -$2.25B. In 2021 they spent $3.34B more, 44% of the record increase. Despite a slightly younger winner, spending skewed a little older in 2022.
  • CU Composition – This was the only category with no repeats or flips. The winner & loser are both new.
    • Winner – Married, Oldest Child 6>17 – Veterinary: $4.51B; Up $0.67B (+17.4%)              2021: Married, Couple Only
    • Loser – Unmarried, 2+ Adults – Veterinary: $4.29B; Down $1.26B (-22.7%)                       2021: Single Parents
    • Comment – Single Parents were the only group to spend less in 2021. In 2022, they were 1 of only 2 segments to spend more and it was a big lift, +41.1%. Married, Oldest Child <6 had the biggest % drop, -62.6%.
  • Generation – Millennials flipped to the bottom as Gen X replaced them on top.
    • Winner – Gen X – Veterinary: $9.73B; Up $0.46B (+4.6%)                                                        2021: Millennials
    • Loser – Millennials – Veterinary: $7.13B; Down $2.10B (-22.7%)                                           2021: Born <1946
    • Comments – Only Gen X and Gen Z had increases. 2022 was the year that Gen Z “got on board” in every aspect of Pet Parenting. They more than doubled their spending on Food & Services, spent 73% more on Supplies and had a +$0.32B (+80.9%) increase in Veterinary. Millennials had the biggest drop, but they are still up $1.1B from 2020.
  • Income – $200K> held on to the top spot while $150>199K replaced the low income $30>39K group at the bottom.
    • Winner – $200K> – Veterinary Spending: $6.72B; Up $0.39B (+6.2%)                                    2021: $200K>
    • Loser – $150>199K – Veterinary Spending: $3.43B; Down $1.51B (-30.5%)                          2021: $30>39K
    • Comment – In 2021, only the $30>39K group spent less. In 2022, 3 groups spent more – $30>39K, $40>49K and $200K>. Their increases were small and when you factor in 8.8% inflation, all groups bought a smaller amount.
  • Occupation – The winner and loser both flipped, producing 2 surprises.
    • Winner – Blue Collar – Vet Spending: $1.92B; Up $0.35B (+22.4%)                                      2021: Mgrs & Profess.
    • Loser – Mgrs & Professionals – Vet Spending: $10.67B; Down $1.47B (-12.1%)                 2021: Construction Workers
    • Comment – Tech/Sls/Cler and All Other/Unemployed also spent a little more. Service workers had the 2nd biggest $ decrease, -$1.23B, but the highest % drop, -31.3%. They had a $1.55B lift in 2021.
  • Education – <HS Grads flipped to the top while Adv. College degree replaced them at the bottom.
    • Winner – <HS Grads – Veterinary Spending: $0.62B; Up $0.25B (+66.5%)                             2021: BA/BS Degree
    • Loser – Adv. College Degree – Veterinary Spending: $8.06B; Down $1.69B (-17.4%)          2021: <HS Grads
    • Comment – In 2021, all Education levels spent more but the lift was very much skewed towards higher Education. In 2022, the situation reversed. College grads spent -$3.27B less. <College Grads only spent +$0.31B more but all segments in the group but HS Grads w/some college increased their Veterinary spending.
  • Race/Ethnic – The winner and loser flipped.
    • Winner – African Americans – Veterinary: $1.18B; Up $0.18B (+18.0%)                                2021: White, Not Hispanic
    • Loser – White, Not Hispanic – Veterinary: $25.55B; Down $2.10B (-7.6%)                           2021: African Americans
    • Comment– Asian Americans also spent more. In 2020 & 2021 all groups spent more. The 2 groups with the highest level of Pet ownership drove most of the 2019>21 increase and all of the 2022 decrease. The two groups with the lowest level of pet ownership have now spent more for 3 straight years. That’s encouraging.
  • # Earners – 2 Earners flipped from 1st to last and we have another surprise winner. No Earner, Singles.
    • Winner – No Earner, Single – Veterinary Spending: $2.44B; Up $0.02B (+0.9%)                   2021: 2 Earners
    • Loser – 2 Earners – Veterinary Spending: $12.20B; Down $0.99B (-7.5%)                              2021: 1 Earner, Single
    • Comment – No Earner, Singles had the only increase, and it was minuscule. The drops were pretty balanced across the segments. Except for 2 Earners, all CUs with 1+ earners had a drop between -$0.55B and -$0.68B.
  • # in CU – The winner and loser flipped again.
    • Winner – 3 People – Veterinary Spending: $4.89B; Down $0.12B (-2.5%)                               2021: 2 People
    • Loser – 2 People – Veterinary Spending: $11.93B; Down $1.24B (-9.4%)                                 2021: 3 People
    • Comment: In 2020 and 2021, all groups spent more. In 2022, all groups spent less. The $ drop by 2 People CUs was twice as big as #2, Singles. Most drops were small. Only 5+ CUs, -21.4% was over -10%.
  • Area Type – Another dual flip.
    • Winner – Center City – Veterinary Spending: $8.62B; Down $0.21B (-2.3%)                          2021: Suburbs 2500>
    • Loser – Suburbs 2500> – Veterinary Spending: $14.04B; Down $1.93B (-12.1%)                  2021: Center City
    • Comment – In 2020 and 2021 all groups spent more. In 2022, all spent less. Center City has now flipped for 3 straight years. The Suburbs 2500> have the biggest share of Vet $ and had a $4.4B lift in 2021. With the 2022 drop, they are still +$2.47B (+21.3%) from 2020.
  • Housing – Both Homeowners w/Mtges and Renters held onto their “usual” spots at the top and the bottom.
    • Winner – Homeowner w/Mtge – Veterinary: $16.90B; Down $0.66B (-3.8%)                        2021: Homeowner w/Mtge
    • Loser – Renter – Veterinary: $4.79B; Down $1.40B (-22.6%)                                                      2021: Renter
    • Comment – In 2021, all spent more and had an increase of at least $2B. In 2022, all spent less but Renters had the only drop over -$1B. From 2020>2022: Homeowners w/Mtges are +$2.84B (+20.1%); Homeowners w/o Mtges are +$1.43B (+21.7%); Renters are +$0.60B (+14.3%).

We’ve now seen the winners and losers in terms of increase/decrease in Veterinary Spending $ for 12 Demographic Categories. 2021 had a record lift but 2022 brought a $2.95B drop. The decrease brought little turmoil in performance as 88% held their position. However, the change in $ was a different story. Only 3 were the same as 2021 and 14 of 24 flipped from 1st to last or vice versa. However, the biggest difference was that in 2021, 93% of demographics spent more including 9 categories where all segments had increases. In 2022, only 23% spent more and there were 3 categories where all spent less. This made the “hidden gems” harder to find, but we did. Here are some segments that didn’t win but helped slow the drop in Veterinary spending. These groups don’t win an award, but they certainly deserve…

                                                                                                         HONORABLE MENTIONWith huge lifts in all segments, Gen Z “got on board” with all aspects of Pet Parenting. Because of strong family and financial pressures, Single Parents are often at the bottom in Pet spending. In 2022, they spent 54.1% more with lifts in all segments but Supplies, including a 41% increase in Vet Services. Asians have the highest income but the lowest percentage of Pet Parents. In 2022, they focused on services, with lifts in both Non-Vet & Veterinary Services. The 75+ group is also under tremendous financial pressure. Inflation caused them to dial back Food spending, but they had lifts in all other segments. Tech/Sls/Clerical workers are low profile. In 2022, they stood out with lifts in all but Supplies. Associates Degree also usually gets little notice, but 2022 was different. They increased spending in all segments.

Summary

2016 & 2017 produced a combined increase of $3.6B in Veterinary Spending as inflation moved to record low levels. In 2018 & 2019 a Baby Boomer Spending “Bust” impacted Food & Veterinary. Fortunately, Gen X and Millennials stepped up to produce a 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. In 2021 the lift grew to a record $7.82B with 93% of all segments spending more including 9 categories where all segments had increases. In 2022, the “binge” was not repeated. Inflation also increased radically to 8.8% and spending fell -$2.95B (-9.0%). There was little turmoil in the best and worst performing demographics as only 3 were different from 2021. However, there was considerable turmoil in the segments with the biggest changes. Only 3 of 24 winners & losers were the same as 2021 and 14 flipped from 1st to last or vice versa. 77% of all demographics spent less and in 3 categories, all segments decreased spending.

The performance of big spending groups is very important in all industry segments. In Veterinary we identified 5 demographic categories with high performing (120+%) large groups. That is 1 less than 2021. It is also 1 more than Pet Food, but 1 less than Services and 2 less than Supplies. The big groups with a high performance level in Veterinary are:

  • Income: $70K> (147.8%) Performance increases with income but doesn’t reach 100+% until income reaches $100K
  • CU Composition: Married Couples (130.8%) Only Married Couples perform at 100+%. (All but those w/oldest child <6)
  • Education: College Grads (130.3%) Performance increases with education. All with an Associate’s Degree> are 100+%
  • Housing: Homeowners (128.9%) Only Homeowners w/Mtge perform above 100%.
  • Race/Ethnic: White, Not Hispanic (128.0%). Hispanics, African Americans & Asians only perform between 31% and 53%

Consumers have no control over Race/Ethnicity but can make decisions in the other categories. Income is still the most important factor. The others are important but essentially equal in performance – 128>131%. Although spending fell, it became slightly more balanced with the drop from 6 to 5 big groups performing over 120%. Another indication of this is that the average spending disparity between the best and worst performing segments dropped from 94.4% to 88.8%.

Another big concern is high inflation. In 2021 spending grew 31.5% in the pandemic surge. Inflation was high at 4.2% but 84% of the growth was real. In 2022 spending fell -9.0%. Inflation was 8.8% so the amount sold was really down -16.4%. Also 77% of 96 demographic segments spent less $ but if we factor inflation into the numbers, 91% actually bought less Veterinary Services. If high inflation continues it could have a major impact on Veterinary Spending.

Finally – The “Ultimate” Veterinary Services Spending Consumer Unit consists of 4 people – a married couple with an oldest child over 18. They are 45>54 years old. They are White, but not of Hispanic origin. At least one of them has an Adv. College Degree and works as a Mgr/Professional. Their oldest child also works. Their total income is $200K>. They live in a small suburb, adjacent to a big city in the Midwest and are still paying off the mortgage on their home.