Archive for category: Pet Market Segments

Next, we will look at Pet Services. It is still by far the smallest Segment, but like Supplies and Veterinary, it had a record increase in 2021. However, unlike them, there was no $ drop in 2022. The lift grew stronger, up $3.26 (+35.8%). After the great recession, Services’ annual spending slowly but steadily increased. During this time, the number of outlets offering Services strongly grew as brick ‘n mortar retailers looked for a way to combat the growing influence of online outlets. After all, you can buy products, but you can’t get your dog groomed on the Internet. This created a highly price competitive market for Pet Services. In 2017 there was a slight increase in visit frequency, but Pet Parents just paid less. This resulted in a 1.0% decrease in Services spending. In 2018 consumer behavior changed as a significant number decided to take advantage of the increased availability and convenience of Pet Services and spending literally took off, +$1.95B (+28.9%), the biggest increase in history. In 2019 Pet Parents, especially the younger ones, value shopped, and spending turned down $0.10B. In the 2020 pandemic Services outlets were often deemed nonessential and were subject to restrictions and closures which drove a huge drop in $. In 2021 things opened up again and Pet Parents came back to Services generating the biggest $ increase ever. The trend didn’t end in 2022. It accelerated with a new record increase.

Services spending is the most discretionary, but its reach is expanding. Let’s look deeper into the demographics.

Let’s start by identifying the groups most responsible for the bulk of Services spending in 2022 and the $3.26B increase. The first chart details the biggest Pet Services spenders for each of 10 demographic categories. It shows their share of CU’s, share of Services spending and their spending performance (Share of spending/share of CU’s). In order to better target the bulk of the spending we had to alter the groups in 3 categories – income, area & education. The performance level should also be noted as 6 of 10 groups have a performance level above 120%. This is 1 less than 2021 but the 2^nd most for any segment only behind Supplies with 7. Veterinary and Total Pet have 5 and Food has only 4. This indicates that the disparity between the best and worst performing segments shrank a little in 2022, but it is still the highest of any segment. Income is still the biggest factor in Services Spending. The categories are presented in the order that reflects their share of Total Pet $ which highlights the differences of the 7 matching groups. For Services, the share ranking differences from Total Pet are small. The # of Earners and Occupation are more important in Services.

1. Race/Ethnic – White, not Hispanic (84.9%) up from 84.6%. This big group accounts for most of the spending in all segments. Their performance grew from 125.9% to 126.3% and they moved up from 5^th to 4^th place in importance. All groups spent more. The Hispanics’ increase was below average which produced the gains in share & performance
2. Housing – Homeowners (80.8%) up from 80.5%. Homeownership is a big factor in spending in all industry segments. Their performance fell from 124.5% to 124.1% but they moved up from #6 to #5 in importance. All segments spent more. Homeowners gained share because of more CUs. This and a big % lift by Renters made Performance drop.
3. # in CU – 2+ people (80.0%) down from 82.2% Their performance also decreased from 118.3% to 116.0% but they moved up from #8 to #7 in importance. All sizes spent more. The drop in share and performance is due to a spectacular 52.5% increase by Singles while spending for 5+ CUs grew only +0.1%.
4. Area – City/Suburbs >2500 (77.8%) down from 80.0% in share, and performance fell from 98.1% to 96.2%. Again they are the only group not earning its share of $pending. Services is an Urban Segment. All Areas spent more but Suburbs had the biggest lift, +$1.48B. Center City “lost” with a $0.83B, 27.1% increase. Areas <2500 were +53.1%.
5. Education – College Grads (69.8%) down from 71.7%. Income generally increases with education so Services spending grows with increasing education. Performance fell from 151.5% to 149.3% but education stayed #2 in importance. Only HS Grads spent less but the <College group was +45.3% while College Grads were only +32.1%.
6. Income – $100K> (64.2%) up from 63.3% This group’s performance rating is 193.6%, down from 211.4%. CU income is still by far the most important factor in increased Pet Services Spending. Only the $30>39K and $50> 69K income groups spent less, They gained in share but their performance fell. The biggest factor in this situation was a change in CU count. The number of CUs <$100K fell -4.2% while those $100K> increased by 11.1%.
7. # Earners – “Everyone Works” (72.2%) down from 72.8%. All adults in the CU are employed. Income is important so a high market share is expected. Their performance dropped to 123.7% from 128.3% and they fell from #4 to #6 in importance. All CUs, with or without Earners spent more. Spending became slightly more balanced but again the big change was in # of CUs. The Everyone Works group grew by 2.5 million CUs causing the big performance drop.
8. Occupation– All Wage & Salaried (70.3%) up from 67.6% and their performance rating increased from 114.0% to 116.5%. – #9 to #8. Only All Other/Unemployed spent less on Services in 2022. Managers & Professionals had the biggest increase, +$1.75B (+46.0%). Tech/Sls/Cler were up 25.7% but all other segments were up at least 38.9%. Spending within the group became a little more balanced. The Wage and Salary group had a 1.6 million increase in CUs which increased share but slowed the performance lift.
9. CU Composition – Married Couples (63.6%) up from 63.3%. Married couples are a big share of $ and have 127+% performance in all segments. Their performance fell slightly to 133.1% from 133.6% but they stayed #3 in importance in Services spending. All CU types spent more. The biggest $ increase came from Married Couple Only, +$1.18B. The performance of the Married group fell because of a $0.85B, 52.5% increase by Singles.
10. Age – 35>64 (60.0%) down from 63.9%. Their performance fell from 122.0% to 115.0%. They dropped out of the 120+% club and fell to 9th in importance. Only <25 spent less. 35>64 was up $1.60B, +27.5%. The other age groups spent $1.66B more, +50.6%. This produced the drop in share and the big decrease in performance.

We changed 3 of the groups for Services – Income, Area & Education, to better target the biggest spenders. We should also note that Income is still more important to spending in Services than in any other segment. Only Race/Ethnic and Occupation gained in both share and performance. Also, Services now has 6 groups performing at 120+%, down from 7 in 2021. Overall, in 2022 Services spending became slightly more demographically balanced.

Now, we’ll look at 2022’s best and worst performing Pet Services spending segments in each category.

Except for Area, the best & worst performers are not a surprise. There are 3 that are different from 2021, all in the best group, 7 less than last year. Area shows the continued move away from high population. Income is a big factor for almost all categories. Gen X is still on top, but spending shifted towards their older members, 45>54. The average difference between Best & Worst is 100.3%, the highest of any segment. However, it is better than 108.5% in 2021. Pet Services spending became slightly more balanced in 2022. Changes from 2021 are “boxed”. We should note:

• Income is even more important to Pet Services. The $200K> group has its best performance in this segment.
• # Earners – 3+ Earners replaced 2 Earners on top but No Earner, Singles stayed on the bottom. No Surprises.
• Age – 45>54 is all Gen X and the highest income group. All groups from 35>74 performed at 100+%. 25>34 was close at 94.6%. The lowest performers were at both ends of the age spectrum.
• Area – Services $ are still skewed towards population density. However, the performance of Rural areas has tripled from 2019 and Center City has been below 100% for 3 straight years.
• CU Composition – Married, Couple Only barely edged out last year’s winner Married, Oldest child 6>17 – 142.8% to 142.5%. This was basically a tie. Single Parents remain firmly entrenched at the bottom.
• Generation – Gen X retained the Top Spot and Gen Z stayed at the bottom. Both Boomers and Millennials earned their share with 103.6% performance. Born <1946 was next to last with 54.5%.

In Pet Services spending performance, income is still the major factor. Spending began skewing younger in 2018. They slipped a little in 2019 but they basically held their ground during the 2020 pandemic. In 2021, Boomers, Millennials and the younger Gen Xers got on board. In 2022, spending skewed a little towards the older Gen Xers – 45>54.

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

In this chart you immediately see the difference from last year. In 2022 you first notice stability. There were 13 repeats. In 2021 there were none. Also, no segments flipped from 1^st to last or vice versa. In 2021 there were 13 flips. While 2021 brought a record increase, the lift in 2022 was even stronger and more widespread. In 9 categories all segments spent more compared to 5 in 2021. Also 93% of 96 demographic segments spent more, up from 90% In 2021. One thing is slightly worse. The biggest drop was -$0.12B. In 2021 it was only -$0.07B. 😊

Here are the specifics:

• Race/Ethnic – Both the winner and loser are the same as 2021.
  • Winner – White, Not Hispanic – Services: $10.50B; Up $2.80B (+36.3%)                       2021: White, Not Hispanic
  • Loser – Asian – Services: $0.31B; Up $0.09B (+43.8%)                                                        2021: Asian
  • Comment– All segments spent more. Minorities were up $0.46B, +32.8%.
• Housing – Both winner and loser are the same as 2021. All segments spent more.
  • Winner – Homeowner w/Mtge – Services: $7.01B; Up $1.82B (+35.2%)                          2021: Homeowner w/Mtge
  • Loser – Renter – Services: $2.37B; Up $0.60B (+34.1%)                                                       2021: Renter
  • Comment – Homeowners w/o Mtges had the biggest percentage increase, +39.0%.
• Occupation – For the 3^rd and last time, no change in winner and loser.
  • Winner–– Mgrs & Professionals – Pet Services Spending: $5.56B; Up $1.75B (+46.0%)         2021: Mgrs & Profess.
  • Loser – Blue Collar – Pet Services Spending: $0.44B; Up $0.14B (+48.9%)                                2021: Operators/Laborers
  • Comment – Self-Employed had the 2^nd biggest $ lift and the highest % increase, +$0.47B (+60.1%)..
• Area Type – Suburbs 2500> stayed on top while Center City replaced Rural at the bottom.
  • Winner – Suburbs 2500> – Pet Services Spending: $5.72B; Up $1.48B (+34.9%)                 2021: Suburbs 2500>
  • Loser – Center City – Pet Services Spending: $3.90B; Up $0.83B (+27.1%)                          2021: Areas <2500
  • Comment – Center City “lost” with an $0.83B increase. This shows how well the Services segment is doing.
• # in CU – 2 People won again but 5+ People is a new loser.
  • Winner – 2 People – Pet Services Spending: $5.15B; Up $1.40B (+37.3%)                         2021: 2 People
  • Loser – 5+ People – Pet Services Spending: $1.01B; Up $0.001B (+0.1%)                          2021: 3 People
  • Comment: All segments spent more. The 2 People lift was primarily driven by the Married Couple Only segment.
• Education – College Degree returned as #1. HS Grads replaced those with no HS Diploma at the bottom.
  • Winner – Adv. College Degree – Pet Services Spending: $4.77B; Up $1.32B (+38.1%)              2021: Adv. College Degree
  • Loser – HS Grads – Services Spending: $0.47B; Down $0.12B (-20.5%)                                       2021: <HS Grads
  • Comment – Only HS Grads spent less. College Grads have 46.7% of CUs but generated 64.3% of the increase. However, those with an Associate’s degree more than doubled their spending, +$0.81B (+116.3%).
• # Earners– 2 Earners held their spot at the top while No Earner, 2+ CUs replaced No Earner, Singles at the bottom.
  • Winner – 2 Earners – Pet Services Spending: $5.49B; Up $1.22B (+28.7%)                                  2021: 2 Earners
  • Loser – No Earner, 2+ CU – Pet Services Spending: $0.82B; Up $0.15B (+21.9%)                      2021: No Earner, Single
  • Comment – All segments spent more. The biggest % lifts were in Singles – 1 Earner: +52.9%; No Earner: +51.6%
• CU Composition – Married, Couple Only stayed on top. Single Parents were a new loser.
  • Winner – Married, Couple Only – Services: $3.80B; Up $1.19B (+45.5%)                       2021: Married, Couple Only
  • Loser – Single Parents – Services: $0.27B; Up $0.02B (+6.0%)                                           2021: Married, Oldest Child <6
  • Comment – All groups spent more. Last year only Married, Oldest Child <6 spent less. This year they spent 33.9% more. Single Parents don’t spend much on Services. They spent 6% more, slightly less than the 6.3% inflation rate
• Region – Both the winner, Midwest, and loser, Northeast, are new.
  • Winner – Midwest – Pet Services Spending: $2.82B; Up $1.17B (+71.5%)                            2021: West
  • Loser – Northeast – Pet Services Spending: $1.90B; Up $0.14B (+7.8%)                              2021: South
  • Comment – In 2020 all Regions spent less. In 2021 & 2022, all spent more. The South finished a close 2^nd, +$1.15B
• Generation – Boomers won again but the youngsters, Gen Z, replaced the oldsters, Born <1946, at the bottom.
  • Winner – Baby Boomers – Services: $4.15B; Up $1.10B (+35.9%)                                        2021: Baby Boomers
  • Loser – Gen Z – Services: $0.27B; Up $0.16B (+143.5%)                                                          2021: Born <1946
  • Comment – In 2021, only Gen Z and those Born <1946 spent less. In 2022, all generations spent more, but the strongest lifts again came from Boomers (+$1.10B), Millennials (+$1.00B) and Gen X (+$0.74B).
• Income – $200K> won again but $30>39K replaced $40>49K at the bottom.
  • Winner – $200K> – Pet Services Spending: $3.66B; Up $1.07B (+41.6%)                           2021: $200K>
  • Loser – $30 to $39K – Pet Services Spending: $0.37B; Down $0.04B (-9.4%)                   2021: $40 to $49K
  • Comment – The $50>69K group also spent-$0.02B less but <$30K spent 30% more and $40>49K doubled their spending. All income groups over $70K had 31+% increases, led by $70>99K at +60.9%.
• Age – Both winner and loser are new.
  • Winner – 65>74 yrs – Pet Services Spending: $2.20B; Up $0.83B (+61.1%)                        2021: 35>44 yrs
  • Loser – <25 yrs – Pet Services Spending: $0.17B; Down $0.02B (-8.4%)                            2021: 45>54 yrs
  • Comment: In 2021, only the high-income 45>54 yr-olds spent less. In 2022 only the low income <25 group had a drop in spending. The lift skewed a little older, but it was actually pretty balanced among big age ranges. 25>44 was up +$0.90B; 45>64 was +$1.24B; 65> was +$1.13B.

We’ve seen the winners and losers in terms of change in Services Spending $ for 12 Demographic Categories. The lift set another new record and was even more widespread than 2021. Here’s some data which shows the evolution from 2018 to 2022. Services were hit hard by the pandemic but recovered stronger than ever with 2 record lifts. They were the only segment to do this which reflects an attitudinal change by Pet Parents. You see the differences in the big swings.

We found the winners in performance and $, but there were others who performed well but didn’t win. They deserve….

HONORABLE MENTION

As usual this group is an eclectic mix. The Associate’s degree group immediately stands out as they more than doubled their Services’ spending. While spending skewed a little older, it also became a little more balanced among age groups which is shown by the strong performances of 25>34 yr-olds and those Born <1946. The Self-Employed group is often a winner, so they are no surprise. Their big lift didn’t happen until 2022 but their Services spending has generally grown every year, including aa 24% increase in 2020. Singles are often at the bottom in spending. They too had a small, 8% increase in spending in 2021 and followed it up with a 52% lift in 2022. Finally, the $70>99K group. Their income is below average and they have big CUs. However, they still managed to have a huge 60.9% lift in spending. In 2022, 93% of all segments increased Services spending. That means that we could have added many more to this honored group.

Summary

For years, Services’ spending slowly but steadily increased. However, the number of outlets offering Services was radically increasing. In 2017, this competitive pressure caused Pet Parents to shop for value and spending fell 1%. In 2018, the abundance of outlets and competitive prices finally had their intended impact. Many more consumers took advantage of the convenience of Pet Services and spending literally took off with a record increase to a new all-time spending high. In 2019 Consumers held their ground at the new higher level but we saw turmoil similar to 2017. Again, value shopping likely contributed to the small decrease.

In 2020, pandemic Services outlets were often deemed nonessential, so they were subject to restrictions and closures. Services are definitely needed by some groups. However, for most demographics, Services are a convenience and spending is very discretionary in nature. The reduced availability and the pandemic driven focus on the “needed” segments – Food and Veterinary caused a 20% drop in Services $.

In 2021 the Retail Marketplace opened up again and many Pet Parents strongly returned to their previous Services mantra, “I need help with my Pet “children” and I have the money to pay for it!”. This behavior was widespread as 90% of all demographics spent more on Services, producing a record increase. In 2022 Services showed that it was different from other segments. All had record lifts related to the Pandemic followed by drops, except for Services. 2022 spending didn’t decrease, it grew even stronger, +$3.26B and more widespread as 93% of demographics increased spending. However, Services is the segment where spending is the most driven by income, so it has always had a big disparity between segments. This improved slightly in 2022. Performance differences are a key measurement of disparity. Let’s consider the performance of the big groups. There were 6 categories with a 120+% performing big group, down 1 from 2021, and now 1 less than Supplies (7) but more than Veterinary (5) and Food (4). There is an even better measure of the improvement. In 2021, the average difference between best & worst performers was 108.5%. In 2022 it was 100.3%.

Another key trend in 2022 was that Gen X & Boomers are still the top 2 spenders, but their older members drove the lift.

Services were hit the hardest by the pandemic in 2020 but they had a record, widespread recovery in 2021. They are the segment most driven by high income so the 6.3%  inflation in 2022 had less of an impact. It affected the spending of some specific, financially challenged groups, but the 2022 lift was even bigger and more widespread than 2021.

At Last – The “Ultimate” Pet Services Spending Consumer Unit consists of 2 people – a married couple with no kids at home. They are 45>54 yrs-old and White, but not of Hispanic origin. They both work and at least one of them has an Advanced College Degree and is a Manager or Professional. They have an income of over $200K. They live in a small suburb of a metropolitan area of 2.5>5 MM in the Western U.S. and are still paying off their home mortgage.

Inflation turned up in December. 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 in December the CPI actually increased to +3.4% from +3.1% due to a big monthly price drop back in 2022. However, Grocery inflation continues to slow. After 12 straight months of double-digit YOY monthly increases, grocery inflation is now down to +1.3%, 10 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 5.1% in December, it is still 50.0% above the national rate of 3.4%. We will look deeper into the numbers. This and future reports will include:

• A rolling 24 month tracking of the CPI for all pet segments and the national CPI. The base number will be pre-pandemic December 2019 in this and future reports, which will facilitate comparisons.
• Monthly comparisons of 23 vs 22 which will include Pet Segments and relevant Human spending categories. Plus
  1. CPI change from the previous month.
  2. Inflation changes for recent years (21>22, 20>21, 19>20, 18>19)
  3. Total Inflation for the current month in 2023 vs 2019 and now vs 2021 to see the full inflation surge.
  4. Average annual Year Over Year inflation rate from 2019 to 2023
• YTD comparisons (Since it is December, this month’s YTD numbers are the annual inflation rate.)
  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 December 21 to December 23. 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 current year-end numbers from 12 and 24 months earlier are included. We also included and highlighted (pink) the cumulative price peak for each segment. In December, Pet prices were up from last month as lifts in Vet & Supplies overcame drops in Food & Services.

In December 21, the CPI was +8.5% and Pet prices were +4.5%. Like the CPI, prices in the Services segments generally inflated after mid-2020, while Product inflation stayed low until late 21. In 22 Petflation 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 & Veterinary Services fell. In December Supplies & Vet  drove Total Pet prices up 0.7% vs Nov. Petflation has been above the CPI since Nov 22.

• 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, then dipped in Oct>Dec, but 35% of the 19.4% increase in the 48 months since December 2019 happened in the 6 months from January>June 2022 – 12.5% of the time.
• Pet Food – Prices were at or below Dec 2019 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. 93% of the 23% increase has occurred since 22.
• 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 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 a big lift in Dec.
• Pet Services– Normally inflation is 2+%. Perhaps due to closures, prices increased at a lower rate in 2020. In 2021 consumer demand increased but there were fewer outlets. Inflation grew in 2021 with the biggest lift in Jan>Apr. Inflation was stronger in 2022 but it got on a rollercoaster in Mar>June. It turned up again July 22>Mar 23 but the increase slowed to +0.1% in April. Prices fell -0.3% in May, turned up again, peaking in Aug, then fell in Sep>Dec.
• 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 despite some dips they have stayed above the CPI since July 22. In 23 prices grew Jan>May, stabilized Jun>Jul, fell in Aug, then grew Sep>Dec to a new high.
• 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 big increases in Veterinary & Supplies overcame drops in Food & Services to push Total Pet close to their May 23 high point. Petflation has been above the CPI since Nov 22

Next, we’ll turn our attention to the Year Over Year inflation rate change for December and compare it to last month, last year and to previous years. We will also show total inflation from 21>23 & 19>23. Petflation rose to 5.1%, up from 4.3% in November and it is now 1.5 times the National rate. The chart will allow you to compare the inflation rates of 22>23 to 21>22 and other years but also see how much of the total inflation since 2019 came from the current pricing surge. Again, we’ve included some human categories to put the pet numbers into perspective.

Overall, Prices were -0.1% from November but were +3.4% vs December 22, up from +3.1% last month. Grocery inflation is down again, to +1.3% from +1.7%. 4 of 9 categories had a price decrease from last month – National CPI, Groceries, Pet Food & Services. There were 5 in November. That’s 4 months in a row for Pet Services. The national YOY monthly CPI rate of 3.4% is up but still only 52% of the 21>22 rate. The 22>23 inflation rate is below 21>22 for all categories but Veterinary Services. In our 2021>2023 measurement you also can see that over 65% of the cumulative inflation since 2019 occurred in only 4 segments – Total Pet, Pet Food, Pet Supplies and Veterinary – All Pet. We should also note that the segments with the lowest percentages are Haircuts, Pet Services and Medical Services. Service Segments have generally had higher inflation rates so there was a smaller pricing lift in the recent surge. Services expenditures account for 62.3% of the National CPI so they are very influential. We also see that Pet Products have a very different pattern. The 21>23 inflation surge provided 94.1% of their overall inflation since 2019. This happened because Pet Products prices in 2021 were just starting to recover from a deflationary period.

• U.S. CPI– Prices are -0.1% from November. The YOY increase is 3.4%, up from 3.1%. It peaked at +9.1% back 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 another lift – not good news! The current rate is 48% below 21>22 but the 21>23 rate is still 10.0%. That is 51.5% of the total inflation since 2019, but down from 54% last month.
• Pet Food– Prices are -0.1% vs November and +5.1% vs December 22, down from 5.6%. However, they are still 3.9 times the Food at Home inflation rate. The YOY increase of 5.1% is being measured against a time when prices were 17.0% above the 2019 level, but that increase is still 1.5 times the pre-pandemic 3.4% increase from 2018 to 2019. The 2021>2023 inflation surge has generated 91.3% of the total 23.0% inflation since 2019.
• Food at Home – Prices are down -0.5% from November. The monthly YOY increase is 1.3%, down from 1.7% in November and radically lower than Jul>Sep 2022 when it exceeded 13%. The 25.3% Inflation for this category since 2019 is 30% more than the national CPI and remains 2^nd to Veterinary. 52% of the inflation since 2019 occurred from 2021>2023. The pattern mirrors the national CPI, but we should note that Grocery prices began inflating in 2020>2021 then the rate accelerated. It appears that the pandemic supply chain issues in Food which contributed to higher prices started early and foreshadowed problems in other categories and the overall CPI tsunami.
• Pets & Supplies– Prices were up 1.4% from November and 0.1% vs December 2022. They still have the lowest increase since 2019. As we noted, prices were deflated for much of 2021. As a result, the 2021>2023 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 December.
• Veterinary Services – Prices are up +1.2% from They are +10.8% from 2022, again the highest rate in the Pet Industry. Plus, they are still the leader in the increase since 2019 with 30.9% compared to Food at home at 25.3%. For Veterinary Services, relatively high annual inflation is the norm. However, the rate has increased during the current surge, especially in 23, so 66% of the 4 years’ worth of inflation occurred in the 2 years from 2021>2023.
• Medical Services – Prices turned sharply up at the start of the pandemic but then inflation slowed and fell to a low rate in 20>21. Prices grew 0.4% from November but are -0.5% vs 22. Prices have now deflated for 8 straight months. Medical Services are not a big part of the current surge as only 39% of the 2019>23 increase happened from 21>23.
• Pet Services – Inflation slowed in 2020 but began to grow in 2021. December 23 prices were -0.02% from November and only +0.7% vs 22, which is down 50% from 1.4% last month but an amazing 91% drop from 8.0% in March. Now, only 49% of their total 17.0% inflation since 2019 occurred from 21>23.
• Haircuts/Other Personal Services – Prices are up 0.1% from November and +3.7% from 2022, 2 consecutive months below 4.0%. Inflation has been rather consistent as 48% of the inflation from 19>23 happened from 21>23.
• Total Pet– Petflation is 53% lower than the 21>22 rate, but still 1.5 times the U.S. CPI. For December, +5.1% is the 4th highest rate since 1997 (2022: 10.9%; 2008: 9.7%; 2007: 5.5%). Vs November, prices grew in Vet & Supplies so Total Pet was +0.7%. An Nov>Dec price increase has happened in 6 of the last 7 years so it was no surprise. Veterinary & Food are still the Petflation leaders, but all segments have an influence. Pet Food has been immune to inflation as Pet Parents are used to paying a lot, but inflation can reduce purchase frequency in the other segments.

Now, let’s look at the YTD (Year-End) numbers

The inflation rate for 22>23 is the highest for 2 of 9 categories – both Pet, Pet Food and Veterinary Services. The 22>23 rates for Haircuts, Pet Services & Total Pet are slightly below 21>22. However, the CPI, Pet Supplies, Medical Services and Food at Home are significantly down from 21>22. The average annual national inflation in the 4 years since 2019  is 4.5%. Only 2 of the categories are below that rate – Medical Services (2.7%) and Pet Supplies (2.4%). It comes as no surprise that Veterinary Services has the highest average rate (6.5%), but 3 other categories are over 5% – Groceries (5.8%), Pet Food (5.3%) & Total Pet (5.1%).

The U.S. government began tracking inflation in 1913. It is a critically important measurement as pricing affects spending behavior and the economy. Moreover, the income of over 90 million people is directly tied to changes in the CPI. The US BLS began tracking pricing in Total Pet and the individual industry segments in 1997. Here are some 2023 comments.

• U.S. CPI – The 2023 rate was 4.1%, the 3^rd highest since 1997, trailing 2022 (8.0%) and 2021 (4.7%). It was down 49% from 21>22 and 8.9% less than the average increase from 2019>2023, but it’s 60% more than the average annual increase from 2018>2021. 65% of the 19.2% inflation since 2019 occurred from 2021>23. Inflation is a big problem that started recently.
• Pet Food – Inflation was 10.6% in 2023, edging out 2022 (10.2%) for 2^nd place. The top spot still belongs to 2008 (11.1%). Pet Food has the highest 22>23 & 21>23 rates on the chart. Deflation in the 1^st half of 2021 kept YTD prices low then prices surged in 2022. 96% of the inflation since 2019 occurred from 2021>23.
• Food at Home – The 2023 inflation rate slowed from 11.2% in 2022 to 5.0% but was the 3^rd highest rate since 1997 (also trailing 2008’s 6.4%) It also still beat the U.S. CPI by 22%. You can see the impact of supply chain issues on the Grocery category as 67% of the inflation since 2019 occurred from 2021>23.
• Pets & Pet Supplies – Prices increased in December, but the 2023 inflation rate was only 2.6%, 6^th highest since 1997. 1^st place belongs to 2022 (7.7%). Supplies’ prices deflated significantly in both 2020 & 2021 which helped to create a very unique situation. Prices are up 10.1% from 2019 but 105% of this increase happened from 2021>23. Prices are up 10.6% from their 2021 “bottom”.
• Veterinary Services – At 9.4%, 2023 beat 8.8% in 2022 and is now the highest inflation rate in history for Veterinary Services. On the chart they are #1 in inflation since 2019 but they have only the 2^nd highest rate since 2021. At +6.5%, they have the highest average annual inflation rate since 2019. Inflation was high and consistent, around 4% from 2019>2021. It took off in 2022 & worsened in 2023. Strong Inflation is the norm in Veterinary Services.
• Medical Services – Prices went up significantly at the beginning of the pandemic, but inflation slowed in 2021. In 2023 prices have generally been deflating and finished the year at -0.3%, the only deflation in any segment. It was also the only deflationary year since the US BLS began tracking this category in 1935.
• Pet Services – The January 2023 increase of 8.4% set a new monthly record. Prices have dropped Sep>Dec and they finished the year at 5.7%, tied for 2^nd place with 2008. 2022 is the winner at 6.3%. Their price surge started in 2021 when inflation jumped to 4.7% from 2.5% in 2019 & 2020. It appears to have ended in late 2023 but prices are still +20.6% vs 2019.
• Haircuts & Personal Services – The services segments, essential & non-essential, were hit hardest by the pandemic. The industry responded by raising prices. The 4 highest inflation years since 1997 were 2022 (5.4%), 2021 (5.1%), 2023 (4.9%) and 2020 (4.4%). Consumers are paying 21% more than in 2019, which usually reduces the frequency.
• Total Pet – The Nov>Dec price lift was normal, so it had little impact on the annual numbers. Petflation in 2023 was 8.0%, 2^nd place all time to 8.9% in 2022. It only finished 2^nd because the rate slowed significantly in the 2^nd half of the year. In the 1^st half it was 44% higher than the 2022 rate. There was a mixture of roller coaster patterns, but inflation slowed somewhat for all segments during the 2^nd  half. However, all did end up with high annual inflation rates and Veterinary even set a new record. 2023 Petflation is about double the CPI. In 2021 it was 43% below the CPI.

Petflation is slowing, but it is still strong, with the 4^th highest rate for December and the 2^nd highest annual rate in history. It is also double the CPI. In 2021 it was only half of that rate. Even if it slows to 0%, you can’t ignore the fact that inflation is cumulative. Pet prices are 17.7% above 2021 and 22.2% 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 Services segment will be the least impacted as it is 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. We’ll see what happens.

We looked at the Total Pet Spending for 2022 and its key demographic sources. Now we’ll start drilling down into the data. Ultimately, we will look at each individual segment but the first stop in our journey of discovery will be Pet Products – Pet Food and Supplies. Food and Supplies are the industry segments that are most familiar to consumers as they are stocked in over 200,000 U.S. retail outlets, plus the internet. Every week over 20,000,000 U.S. households buy food and/or treats for their pet children. Pet Products accounted for $60.63B (59.0%) of the $102.71B in Total Pet $ in 2022. This was up $2.42B (+4.2%) from the $58.21B that was spent in 2021. Pet Food spending rebounded after the big drop in 2021 following the binge buy in 2020. Supplies had its own spending rollercoaster. After falling during the 2020 pandemic, there was a record surge in 2021. This couldn’t be repeated so spending fell in 2022.

Overall, in 2022 Pet Food spending rose +$4.29B, while Supplies spending fell a -$1.86B. We’ll combine the data and see where the bulk of Pet Products spending comes from.

We will follow the same methodology that we used in our Total Pet analysis. First, we will look at Pet Products Spending in terms of the same 10 demographic category groups that were responsible for 60+% of Total Pet spending. Then we will look for the best and worst performing segments in each category and finally, the segments that generated the biggest dollar gains or losses in 2022.

The first chart details the biggest pet product spenders for each demographic category. It shows their share of CU’s, share of pet products spending and their spending performance (spending share/share of CU’s). Although their share of the Pet Products $ may be different from their share of the Total Pet $, the biggest spending groups are the same. The categories are shown in the order that reflects their share of Total Pet Spending. This highlights the differences. In Pet Products spending share, larger CUs and age are more important while income matters less. However, we should note that, like Total Pet Spending, Income is the highest performing demographic characteristic. In Pet Products there are only 4 groups with a performance rating of 120+%, 1 less than last year and 1 less than Total Pet in 2022. This reflects the fact that Pet Products spending, especially on Food, is spread more evenly across the category segments.

1. Race/Ethnic – White, not Hispanic (82.7%) down from 83.8%. They are the 2^nd largest group but still account for the vast majority of spending in every segment. Their performance fell from 124.8% to 123.1% but they moved up from 4^th to 3^rd in terms of importance in Pet Products Spending demographic characteristics. Hispanics, African Americans and Asian American account for 32.8% of U.S. CU’s, but they only spend 17.3% of Pet Products $. Although the minority share of Pet Poducts $ is low, it has improved considerably from 12.8% in 2020. Pet ownership is relatively high in Hispanic households, but it is significantly lower for African Americans and Asians.
2. Housing – Homeowners (80.0%) up from 79.3%. Controlling your “own space” has long been the key to pet ownership and more pet spending. Their performance grew from 122.6% to 123.0% and they officially moved up from 5^th to 4^th in terms of importance for increased pet products spending. Although both Homeowners and Renters spent more on Pet Products in 2022, 76% of the increase came from Homeowners w/o a Mortgage. Those with a Mortgage spent $0.51B, +1.6% more but that was much better than Renters. Overall, Homeowneers were +5.2% while Renters were +0.6%. This disparity caused the positive change in Share & Performance for Homeowners.
3. # in CU – 2+ people (81.4%) up from 80.8%. The share for Pet Products is higher than for Total Pet, 80.8%. If you put 2 people together, pets very likely will follow. If you have a pet, you must spend money on food and supplies. Their performance of 117.9% is up from 116.2%. Only 2 & 5 People CUs spent less but this was overcome by a 33% lift from 3 People CUs. Singles were only +1.0%. This combination improved share & performance for 2+ People CUs.
4. Area – Suburban & Rural (72.7%) up from 72.1%, but their performance fell from 111.8% to 111.0%. Suburban households are the biggest pet spenders and they are growing in popularity. The increase in the number of CUs is what pushed the group performance down. Rural CUs alone grew by 1331, +5.5%.
5. Education – Assoc Degree> (68.6%) down from 73.4%. Their performance level also dropped sharply from 127.2% to 118.9%. They fell from 2nd to 5th in importance and are no longer in the 120+% club. The drops in share and performance are only due to a $3.5B decrease in spending by College Grads. All groups with less than a College Degree spent more on Pet Products. The Associates Degree group did especially well, +46.5%.
6. Income – Over $70K (64.3%, down from 65.3%). Pet Parenting is common in all income groups but money is a big driver in the spending behavior for all industry segments. Although their performance fell to 136.0% from 145.7%, CU income continues to be the single most important factor in increased Pet Products Spending. As a general rule,  Higher Income = Higher Pet Products Spending. In 2022 there was an up & down rollercoaster in Pet Products spending but performance grew with income. All and only, income segments over $70K perform at 100+%.
7. # Earners – “Everyone Works” (65.3%) up from 64.1%. Their performance is 111.9%, down from 113.0%. In this group, all adults in the CU are employed. While 1 Earner, Singles spent $0.44B less, 2+ Earner CUs spent $2.75B more. This produced the increase in share. The drop in performance was due to a 2.45 million increase in CUs (Note: other groups were down -1.98 million CUs) along with a $2.14B spending lift from 1 Earner, 2+ People CUs. Income is the top priority in Pet Products Spending, but how many people work to get it is less important.
8. Occupation – All Wage & Salary Earners (64.7%) up from 60.7%. Their performance also grew from 102.2% to 107.2%. Mgrs/Professionals had the biggest lift but only Tech/Sls/Cler spent less among the employed. Blue Collar $ were +32.5%. Retirees & A/O,Unemployed spent $2.1B less. Together, this produced the lift in share & performance.
9. CU Composition – Married Couples (61.1%) down from 63.7%. Their performance fell from 134.4% to 127.8% but they went from 3^rd to 2^nd in importance. Only Married, Couple Only & CUs with a Child 6>17 spent less, -$4.1B. Single Parents & Unmarried, 2+ Adult CUs were +$2.3B. These were key factors in the drops in share & performance.
10. Age – 35>64 (61.3%) up from 59.7%. Their performance also grew from 113.9% to 117.7%. Even with a -$1.26B drop by 35>44, their spending grew by +$2.49B. Outside of the group the combined change was -$0.07B. This produced the big gains in share and performance. However, they stayed in 7^th place in terms of importance.

The biggest spending groups are the same for Pet Products as for Total Pet, but there are subtle differences in market share and performance. Money matters most but how many earners, their occupation and education matters less. It also appears that Pet Products Spending is becoming more balanced  across almost all demographic categories.

Now, let’s drill deeper and look at 2022’s best and worst performing Products spending segments in each category.

Most of the best and worst performers are the ones that we would expect. However, there are 9 that are different from 2021. That is 2 less than last year but 2 more than Total Pet this year. Changes from 2021 are “boxed”. We should note: Only 2 of the Product winners are different from Total Pet – $150>199K rather than $200K> and 3 People CUs rather than 4 people CUs. These differences are slight, and both reinforce the importance of Income & Family in Pet Spending.

The average performance of the 2022 Product winners was 136.1%, down from 148.6% – 10 were down. The average for the losers was 60.7%, up from 56.3% – 10 were up. The gap between best and worst narrowed from 92.3% to 75.4% indicating that Pet Products spending became more balanced across America in 2022. We should also note:

• Generation – Gen X continues to hold their spot at the top. However, Gen Z has “awakened” which has pushed the oldest group, those Born <1946 to the bottom.
• Income, # Earners – The new winners are still at or near the top In CU income. The importance of income is also reinforced by a number of other winners, including Mgrs/Prof., 45>54, Adv. College Degree & Gen X.
• CU Composition, CU Size – Families and children remain important. Married, w/Children now outperforms Married, Couple Only. All Married CUs perform at 100+% but even Single Parents are up to 97%.
• Age – The high-income 45>54 group replaced 35>44. After the “youth” spending surge in 2021, especially on Supplies, spending is skewing towards older Gen Xers.
• Region – The Midwest took the top spot from the West, and they are the only 2 Regions performing at 100+%. However, the “under performers” are from 91>93% so spending is still relatively regionally balanced.

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

In this section we’ll see who drove Pet Products spending up. There are 2 repeats from 2021 and 12 Segments switched positions – from first to last or vice versa. This is slightly less turmoil than 2021 which had only 1 repeat but 16 flips. There is only 1 truly surprising winner, High School Grads or Less. In 2 categories, all spent more. Here are the specifics:

• Region – Both the 2021 winner and loser flipped in 2022.
  • Winner – Midwest – Products Spending: $14.93B; Up $4.05B (+37.2%)                     2021: West
  • Loser – West – Products Spending: $14.54B; Down $3.83B (-20.9%)                           2021: Midwest
  • Comment – The West had drops in both Food & Supplies. The NE had the only other decrease – in Supplies only.
• Education – Both winner and loser flipped.
  • Winner – HS Grad or Less – Products Spending: $10.45B; Up $3.37B (+47.5%)                        2021: Adv College Degree
  • Loser – Adv College Degree – Products Spending: $15.87B; Down $3.36B (-17.5%)                2021: Less than HS Grad
  • Comment – There was a clear dividing line in the 2022 Pet Products spending pattern. Those with at least a BA/BS degree spent less. All segments without a college degree spent more.
• # in CU – Both the winner and loser are new. Only 3 People CUs spent more on both Food & Supplies.
  • Winner – 3 People – Products Spending: $10.88B; Up $2.70B (+33.1%)                      2021: 2 People
  • Loser – 5+ People – Products Spending: $7.14B; Down $0.64B (-8.2%)                       2021: 4 People
  • Comment: All but 3 people CUs spent less on Supplies but only 2 and 5+ CUs spent less on Pet Products.
• Occupation – Retirees flipped from 1^st to last.
  • Winner – Mgrs & Professionals – Products Spending: $21.33B; Up $2.70B (+14.5%)                        2021: Retired
  • Loser – Retired – Products Spending: $10.23B; Down $1.13B (-9.9%)                                                   2021: Self-Employed
  • Comment – All but Retirees, Tech/Sls/Cler and All Other/Unemployed spent more. Retirees $ were down due to a big drop in Food. The other drops came because of a big decrease in Supplies spending.
• CU Composition – Again, both the winner and loser flipped.
  • Winner – Married, Oldest child 18> – Products: $6.96B; Up $2.63B (+60.8%)                     2021: Married, Oldest Child 6>17
  • Loser – Married, Oldest Child 6>17 – Products: $8.08B; Down $3.40B (-29.6%)                 2021: Married, Oldest Child 18>
  • Comment – Married Couple Only and Married, Oldest Child 6>17 were the only segments to spend less on Pet Products, but their drop was enough to turn Total Married Couples negative. Most segments were up in Food but down in Supplies. Only Oldest Child 18> and Married, plus Adults, but no kids were up in both Food & Supplies $.
• # Earners – The winner is new but No Earner, 2+ People CUs flipped to the bottom spot.
  • Winner – 1 Earner, 2+ CU – Products Spending: $12.22B; Up $2.14B (+21.2%)                             2021: No Earner, 2+ CU
  • Loser –– No Earner, 2+ CU – Products Spending: $4.47B; Down $2.58B (-36.6%)                          2021: 2 Earners
  • Comment – While income matters most, the # of Earners is still not a major factor in Pet Products spending as 1 Earner, 2+ CUs won. Only 1 Earner, Singles and No, Earner, 2+ People CUs spent less.
• Age – The 55>64 yr-olds flipped from last to first and 75> moved to the bottom due to a big drop in Food $
  • Winner – 55>64 yrs – Products Spending: $13.25B; Up $2.04B (+18.2%)                                   2021: 35>44 yrs
  • Loser – 75> yrs – Products Spending: $3.41B; Down $1.32B (-27.9%)                                         2021: 55>64 yrs
  • Comment: The only spending drops came from 25>44 and over 75. The 45>74 yr-olds spent more in both Food & Supplies. Only 25>34 yr-olds spent less on both – minor decreases. Supplies $ drove the 35>44 group down.
• Income – Both winner and loser flipped.
  • Winner – $100 to $149K – Products Spending: $11.67B; Up $1.86B (+19.0%)                          2021: $200K>
  • Loser – $200K> – Products Spending: $9.77B; Down $1.88B (-16.1%)                                        2021: $100>149K
  • Comment – A spending rollercoaster: <$40K = -$0.63B; $40>69K = +$2.07B; $70>99K = -$0.32B; $100>199K = +$3.19B; $200K> = -$1.88B. Most Impressive: $40>49K was +34.6% and spent more on both Food & Supplies.
• Housing – Homeowners w/o Mtge flipped from last to 1^st but all segments spent more on Pet Products.
  • Winner – Homeowner w/o Mtge – Products: $15.93B; Up $1.84B (+13.1%)                           2021: Homeowner w/Mtge
  • Loser –– Renter – Products Spending: $12.10B; Up $0.07B (+0.6%)                                          2021: Homeowner w/o Mtge
  • Comment– Wealthier Homeowners who have paid off their homes, but are not retired, were the big drivers.
• Generation – Both the winner and loser are new.
  • Winner – Millennials – Products Spending: $15.14B; Up $1.59B (+11.8%)                              2021: Gen X
  • Loser – Born <1946 – Products Spending: $2.77B; Down $1.71B (-38.2%)                              2021: Baby Boomers
  • Comment – There were only 2 Pet Products negatives – Gen X had a strong lift in Food, but it was overcome by a huge drop in Supplies $ and Born <1946, who were up slightly in Supplies but had a big drop in Food $.
• Area Type – The larger Suburbs held their spot on top. Center City is a new loser, but all Area Types spent more.
  • Winner – Suburbs 2500> – Products Spending: $26.70B; Up $1.44B (+5.7%)                         2021: Suburbs 2500>
  • Loser – Center City – Products Spending: $16.56B; Up $0.31B (+1.9%)                                    2021: Population <2500
  • Comment – <2500 was the only area to spend more on Supplies & Food. Center City had the only drop in Food $.
• Race/Ethnic – White, Non-Hispanic held their spot on top while Asians replaced African Americans at the bottom.
  • Winner – White, Not Hispanic – Products Spending: $50.14B; Up $1.34B (+2.7%)                       2021: White, Not Hispanic
  • Loser – Asian – Products Spending: $1.50B; Down $0.29B (-16.4%)                                                 2021: African American 
  • Comment – African Americans didn’t win but they spent 59.7% more overall and were the only group to spend more on Supplies – and on both Food & Supplies. On the flip side, Asians were the only group to spend less on both Food & Supplies. White, Not Hispanic “won” because a $3.28B Food lift overcame a $1.94B drop in Supplies.

We’ve now seen the winners and losers in terms of increase/decrease in Pet Products $ for 12 Demographic Categories. 2022 was a positive, but mixed year for Pet Products Spending. Food rebounded after the big 2021 drop from the binge buy in 2020. The lift was enough to overcome the drop in Supplies $ after the record post pandemic spending surge in 2021. In 2022, 52% of segments still spent more on Supplies, but 82% spent more on Food so that 70% spent more on Pet Products. Of course, not every good performer can be a winner but some of these “hidden” segments should be recognized for their outstanding effort. I’ve narrowed the group down to 6. They don’t win an award, but they deserve…

Honorable Mention

Pet Products spending was up $2.42B in 2022. A rebound in Food exceeded the big drop in Supplies. The lift in Pet Products spending was widespread as 70% of 96 demographic segments spent more. Income was still the most important factor, but spending became a little more balanced. In our honorable mention group, you see that Gen Z truly got into the game by more than doubling their Pet Products spending. Although 2022 spending skewed towards the older Gen X group, 70% lifts by the <25 group and CUs with an oldest child <6 showed that the younger groups were still “strong” pet parents. Some other low-income segments that often finish on the bottom in spending also had a good year. Single Parents and African Americans both increased their Pet Products spending by 58+%. Finally, Higher Education became a little less important. College Grads spent less on Pet Products while all demographic segments w/o a college degree spent more. Those with an Associate’s degree were a big contributor with a 46% increase. The lift in Pet Products spending was widespread and more balanced so there were many “heroes”.

Summary

Pet Products spending has seen a lot of turmoil since 2015. Many consumers upgraded to Super Premium Food and cut back on Supplies in 2015. In 2016 they value shopped for Food and Spent some of the saved money on Supplies. In 2017 there was increased availability and value in both segments. More Consumers recognized the opportunity and spent $7B more. 2018 was calm, until the second half when the FDA warning on grain free dog food caused many consumers to downgrade their food and new tariffs on Supplies flattened spending growth. The result was -$1B drop in Products $.

In 2019 Pet Food spending rebounded to a new record level but the full impact of higher prices in the Supplies segment really hit home, with a record $2.98 decrease in spending. The drop was almost universal as 93 of 96 demographic segments spent less. The result was a -$0.64B drop in Pet Products $, the second consecutive decrease.

2020 brought the COVID pandemic. Out of fear of reduced availability, Pet Parents binge bought Pet Food in the 1^st half of the year. As Pet Parents focused on “needs”, discretionary Supplies dropped significantly in importance and $. However, Pet Products spending still grew by $3.99B and exceeded $50B for the 1^st time at $52.0B.

In 2021, the Food binge was not repeated and pets “ate down” the overstock so Pet Food spending fell. However, Pet Parents caught up on purchasing all the Supplies that they had postponed buying due to the pandemic. The result was a record increase in Supplies and a $6.21B increase in Pet Products $.

2022 brought a return to more normal spending behavior. Pet Food spending increased $4.29B, +12.5%. Obviously, the binge was not repeated but Supplies spending only fell -7.8% and 52% of demographic segments still spent more. The net was a $2.42B, +4.2% increase which pushed Pet Products $ up to $60.63B. Overall, the lift was widespread as 70% of 96 demographic segments spent more. While the Spending leader remained Gen X, the $ moved towards their older members in the 45>54 yr-old age group. However, the youngsters also made their presence felt as Gen Z more than doubled their Pet Products spending. Spending also became more demographically balanced. The most visible feature of this change was in the big groups doing at least 60% of the dollars. In order to reach the 60% minimum, the Education group was downgraded from College Grads to those with an Associate’s Degree or more. However, the balancing act was not limited to Education. 10 of 12 categories narrowed the gap between their best and worst performing segments. Overall, the average gap narrowed from 92.3% in 2021 to 75.4% in 2022. It’s still big but definitely improving.

Finally,… The “Ultimate” 2022 Pet Products Spending CU is 3 people, a married couple with a child over 18. They are in the 45>54 age range and are White, but not Hispanic. At least one has an Advanced College Degree and is a Mgr/Professional. Everyone works, including their child, producing a CU income of $150>199K.They still have a mortgage on their house located in a small suburb  in the Midwest.

Total Pet Spending in the U.S. was $102.71B in 2021, a $2.73B (2.7%) increase from 2021. These figures and others in this report are calculated from data in the annual Consumer Expenditure Survey conducted by the US BLS. 2021 was tumultuous but it was almost all positive. The Food binge couldn’t be repeated so Food $ fell slightly but all other segments had record increases which produced the biggest Pet spending lift in history. 2022 had mixed results. Like the Food segment, the binge spending on Supplies and Veterinary Services was not repeated, so spending fell in both segments. However, Pet Food bounced back with a 12.5% increase and Services continued their spectacular growth. This produced only a small increase in Total Pet $ Spending but it certainly deserves a closer look.

The first question is, “Who is spending most of the $103 billion dollars?” There are of course multiple answers. We will look at Total Pet Spending in terms of 10 demographic categories. In each category we will identify the group that is responsible for most of the overall spending. Our goal was to find demographic segments in each category that account for 60% or more of the total. To get the finalists, we started with the biggest spending segment then bundled it with related groups until we reached at or near 60%.

Knowing the specific group within each demographic category that was responsible for generating the bulk of Total Pet $ is the first step in our analysis. Next, we will drill even deeper to show the best and worst performing demographic segments/groups and finally, the segments that generated the biggest dollar gains or losses in 2022.

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

The only group change from 2021 is that College Grads lost 6% in share and fell below the 60% threshold so Associate’s Degree> returned to the list. There were changes in the numbers and rankings. Homeowners moved up from 3^rd to 2^nd and the new Education group is 5^th. College Grads were 7^th in 2021. Again only 5 made the 120%+ club. Associate’s Degree> replaced College Grads in the club. Formal higher education matters. However, higher income remains the single most important factor in Total Pet Spending.

1. Race/Ethnic – White, not Hispanic (83.9%) down from 84.2%. This is the 2^nd largest group and has the largest share of Pet Spending. Their performance was down from 125.3% to 124.9% but they moved up from #4 to #3 in importance. Although this demographic, along with age, are 2 areas in which the consumers have no control, spending disparities within the group are enhanced by differences in other areas like Income, CU Composition and homeownership. There are also apparently cultural differences which impact Pet Spending. Asian Americans are first in income, education and total CU spending but they’re last in Pet Spending as a percentage of total spending – 0.40% vs a national average of 1.05%.
2. Housing – Homeowners (81.2%) up from 80.0%. Controlling your “own space” is a key to larger pet families and more pet spending. 2022 was a good year for Homeowners, with & without Mtges. Homeowners spent $3.5B more and the group’s performance grew from 123.6% to 124.8%. Contributing to the increase was a 3.6% drop in spending by Renters. Homeowners moved up from 5^th to 4^th place in importance. The homeownership rate grew slightly to 65.1%. The lift came entirely from younger CUs as homeownership remained stable in the older groups.
3. # in CU – 2+ people (80.8%) up from 80.6%. Singles remain the only group with under 100% performance. In 2022, there was a big increase in the number of singles, but they spent even less on their pets. At the same time, 3 person CUs spent $3.2B more. This explains the change in share and a performance increase from 115.9% to 117.1%.
4. Area – Suburban & Rural (71.7%) down from 71.8% Homeownership is high and they have the “space” for pets. All areas spent more but Center City had the biggest % lift. This, in conjunction with more CUs, pushed Suburban/Rural’s performance down from 111.4% to 109.5%. Center City still has the worst performance at 82.1%
5. Education – Associates Degree or more (71.5%) down from 74.7%. Higher Education is usually tied to higher income and Pet spending. It can also be a key factor in recognizing the value in product improvements. In 2021 College Grads binge spent $21.6B more on their pets. This was not repeated in 2022 so we returned to the Associates Degree or higher group. This group’s performance fell from 129.6% to 123.9% but they are #5 in importance. The drops are all due to College Grads. In 2022, the Associates Degree segment increased their share of Pet $ from 9.1% to 12.1% and their performance grew from 88.3% to 110.2%. They earned their spot.
6. Income – Over $70K (67.5%) down from 68.2%. They lost a little share and their performance fell to 142.8% from 152.3%. However, CU income is still by far the most important factor in increased Pet Spending. Spending was again on a roller coaster: <$40K: -$0.5B; $40>69K: +$2.1B; $70>99K: -$1.2B; $100>199K: +$2.7B; $200K>: -$0.4B. Higher income is important. Consider: $100K> = 33.2% of CUs, 53.3% of Pet $; $150K> = 17..7% of CUs, 32.9% of Pet $
7. # Earners – “Everyone Works” (66.8%) up from 66.4%. These are CUs of any size where all adults are employed. They gained share but their performance fell again, from 117.0% to 114.5%. They dropped out of the 120+% club in 2021 and are now only the 8^th most important category. Income is important but # of Earners is less so. They gained share due to a +$2.77B lift from 2+ Earner CUs but their performance fell because they added 2.5 million more CUs.
8. Occupation – All Wage & Salary Earners (65.7%) up from 63.2%. Their performance also grew from 106.5% to 109.0%. All but Service Workers spent more on their pets in 2022. Managers and Professionals (+$2.98B) and Blue Collar (+$1.43B) had the biggest spending increases. Blue Collar workers actually spent 30.2% more on their pets. Their gains were enhanced by a -$0.98B drop by Retirees and a -$1.2B decrease by “All Other”, which includes unemployed and those not working because of illness or attending school.
9. CU Composition – Married Couples (61.8%) down from 62.7%. 2 people, committed to each other, is an ideal situation for Pet Parenting. In 2022, they lost share and their performance fell from 132.4% to 129.3%, but they moved up from 3^rd to 2^nd place in importance because College Grads dropped out. Their drops in share and performance were due to a -$2.6B decrease from those with an oldest child 6>17 and a big lift by single parents.
10. Age – 35>64 (61.1%) up from 60.9%. They gained share and their performance grew from 116.2% to 117.2%. A $4.3B increase from 45>64 overwhelmed the $2.3B drop by the 35>44 yr-olds. <25 was +$0.77B while the 65> lift and 25>34 drop cancelled each other out. Pet Spending is slightly more balanced, and age stayed 7th in importance.

Total Pet Spending is a sum of the spending in all four industry segments. The “big demographic spenders” listed above are determined by the total pet numbers. The share of spending and performance of these groups varies between segments. In fact, in the Veterinary & Services segments we altered some groups to better reflect where most of the business is coming from. There’s was some turmoil but in 2022 Pet Spending returned to more normal behavior.

Performance is an important measurement. Any group that exceeds 120% indicates an increased concentration of the business which makes it easier for marketing to target the big spenders. Income over $70K is again the clear winner, but there are other strong performers. High performance also indicates the presence of segments within these categories that are seriously underperforming. These can be identified and targeted for improvement. However, 2022 is a bit more complicated. Many of the big drops in spending came from segments that binge bought Supplies & Vet Services in 2021. These big moves, up or down can affect the total group performance. We’re not there yet but we’re closer to normal.

Now, let’s drill deeper and look at 2022’s best and worst performing segments in each demographic category

Most of the best and worst performers are expected but there are 4 winners & 3 losers that are different from 21. Last year there were 9 new winners and 1 loser. The situation is becoming more normal. Changes from 2021 are “boxed”.

• Income is important in Pet Spending, which is shown by the 195.5% performance by the $200K> group and wins by the high income 3 Earners, Mgrs/Prof, 45>54 and Adv College Degrees. All groups over $70K performed at 100+%.
• Occupation – Mgrs/Professionals & Self-Employed are the only occupations with 100+% performance. Retirees edged out Service Workers (76.9%) for the bottom spot.
• Age/Generation – Gen X won again but spending skewed towards their older members with the 45>54 win.
• Region – The Midwest returned to the top. The West (the usual winner) also had 100+% performance.
• CU Size/Composition – The importance of children was maintained with wins by 4 People and those with an Oldest Child over 18. Single Parents had a strong year and moved off the bottom. The “magic” CU number fell from 5 to 4.

The winners reflect the continued move back towards more normal spending patterns from slightly older CUs. In the next section we’ll look at the segments which literally made the biggest difference in spending in 2022.

We’ll “Show you the money”! This chart details the biggest $ changes in spending from 2021.

Like 2021, in 1 category, all segments spent more – Area Type. In 2021, it was # of Earners. Only 3 segments held their spot from 2021 while 9 switched from winner to loser or vice versa. There was considerable internal turmoil but much less than in 2021 when 17 flipped. However, 87.5% were different from last year, just a little better than 96% in 2021.

• Region – The winner and loser both flipped. This only happened in the Region Category.
  • Winner – Midwest – Pet Spending: $25.36B; Up $6.39B (+33.7%)                                2021: West
  • Loser – West – Pet Spending: $26.32B; Down -$3.99B (-13.2%)                                     2021: Midwest
  • Comment – In 2021 the Midwest had the only decrease in Total Pet $. In 2022 they had double digit increases in all segments. The South also spent more, +$1.9B. The West spent less in all but Services.
• Education – Adv College degrees flipped to last, but all College Grads spent less in every industry segment.
  • Winner – Associates Degree – Pet Spending: $12.41B; Up $3.33B (+36.7%)                       2021: Adv. College Degree
  • Loser – Adv. College Degree – Pet Spending: $28.70B; Down -$3.74B (-11.5%)                 2021: < HS Grads
  • Comment – All segments w/o a College Degree spent more but those with an Associate’s Degree had an especially strong year. Their Vet spending was only +5.8% but Services was +116.3% and Products was +47.5%.
• Age – The 35>44 yr-olds flipped to the bottom as they “gave back” the 2021 big lifts in Supplies & Veterinary.
  • Winner – 45>54 yrs – Pet Spending: $21.80B; Up $3.29B (+17.8%)                              2021: 35>44 yrs
  • Loser – 35>44 yrs – Pet Spending: $19.05B; Down $2.34B (-10.9%)                             2021: 55>64 yrs
  • Comment: The high-income 45>54 yr-olds are back on top but only the 25>44 and 75+ groups spent less.
• # in CU – A new winner and loser but no flips.
  • Winner – 3 People – Pet Spending: $17.73B; Up $3.23B (+22.2%)                                2021: 2 People
  • Loser – 5+ People – Pet Spending: $10.27B; Down -$1.21B (-10.6%)                            2021: 4 People
  • Comment: All groups spent more on Services but less on Veterinary. Only 2 People CUs spent less on Food while only 3 People CUs spent more on Supplies. However, only 2 & 5+ people CUs spent less Total Pet $.
• Occupation – Retirees flipped from 1^st to last.
  • Winner –– Managers & Professionals – Pet Spending: $37.57B; Up $2.98B (+8.6%)           2021: Retired
  • Loser – Retired – Pet Spending: $17.32B; Down -$0.98B (-55.3%)                                           2021: Self-Employed
  • Comment– Only Retirees, Service Workers & Unemployed/All other spent less. Blue & White collar spent more.
• CU Composition – With big lifts in all but Veterinary, Married with an oldest child over 18 flipped from last to 1^st.
  • Winner – Married, Oldest Child 18> – Pet Spending: $11.498; Up $2.70B (+30.7%)                       2021: Married, Couple Only
  • Loser – Married, Oldest Child 6>17 – Pet Spending: $14.52B; Down -$2.58B (-15.1%)                  2021: Married, Child 18>
  • Comment – Married, oldest child 6>17 spent more on Services but were the only group with a drop in Total Pet $
• Income – With double digit increases in all but Veterinary, $100>149K flipped to the top.
  • Winner – $100>149K – Pet Spending: $20.99B; Up $2.49B (+13.4%)                              2021: $200K>
  • Loser – $70 to $99K – Pet Spending: $14.58B; Down -$1.16B (-7.3%)                             2021: $100>149K
  • Comment – There was no clear pattern. This category was on a spending rollercoaster. <$40K: -$0.54B; $40>69K: +$2.13B; $70>99K: -$1.16B; $100>199K: +$2.72B; $200K>: -$0.41B.
• # Earners – After their surprising win in 2021, No Earner 2+ CUs flipped to the bottom.
  • Winner – 1 Earner, 2+ CU – Pet Spending: $19.01B; Up $2.17B (+12.9%)                        2021: No Earner, 2+ CU
  • Loser – No Earner, 2+ CU – Pet Spending: $7.67B; Down $2.53B (-24.8%)                      2021: 1 Earner, Single
  • Comment – 1 Earner, singles also spent less. All other groups including No Earner, Singles spent more.
• Race/Ethnic – White, Not Hispanics stayed on top.
  • Winner – White, Not Hispanic – Pet Spending: $86.18B; Up $2.04B (+2.4%)                2021: White, Not Hispanic
  • Loser – Hispanic – Pet Spending: $9.45B; Down -$0.54B (-5.4%)                                     2021: African American
  • Comment – African Americans had a huge, +43.9% increase but Hispanics and Asians spent less.
• Generation – In a true surprise, Gen Z is on top. They are “growing up” and Pet Parenting is radically increasing.
  • Winner – Gen Z – Pet Spending: $3.48B; Up $1.84B (+112.6%)                                          2021: Gen X
  • Loser – Born <1946 – Pet Spending: $5.19B; Down -$1.46B (-22.0%)                               2021: Baby Boomers
  • Comment – Boomers had the 2^nd biggest lift and only the oldest generations, born <1946 spent less.
• Housing – Homeowners w/o Mtge flipped from last to 1st
  • Winner – Homeowner w/o Mtge – Pet Spending: $26.94B; Up $1.79B (+7.1%)             2021: Homeowner w/Mtge
  • Loser – Renter – Pet Spending: $19.27B; Down -$0.73B (-3.6%)                                       2021: Homeowner w/o Mtge
  • Comment – The win by Homeowners w/o Mtge was driven by CUs who have paid off their home but haven’t retired. They just edged out Homeowners w/Mtge, +$1.67B. Only Renters spent less.
• Area Type – Both winner and loser held their positions and all segments spent more.
  • Winner – Suburbs 2500> – Pet Spending: $46.46B; Up $0.99B (+2.2%)                          2021: Suburbs 2500>
  • Loser – Areas <2500 – Pet Spending: $27.18B; Up $0.81B (+3.1%)                                  2021: Areas <2500
  • Comment – The Big Suburbs stayed in their usual spot at the top. Center City had a +$0.93B lift and Areas <2500 rebounded from a drop in 2021. The increases were pretty balanced, ranging from +2.2% to +3.3%.

We’ve seen the best overall performers and the “winners” and “losers” in terms of increase/decrease in Total Pet Spending $ for 12 Demographic Categories. Now, here are some segments that didn’t win an award, but they deserve….

HONORABLE MENTION

It was not a good year for College Grads but it was a great year for those without a BA/BS. Associates had the biggest lift but those w/o a HS diploma more than doubled their Pet $. Single parents are often on the “bottom” in Pet Spending, but they spent 54% more in 2022. In 2021, African Americans had the only drop in spending by a racial/ethnic group. In 2022 they rebounded with a +43.9% increase, by far the biggest percentage lift of any group in the category. Not all Gen Zers are under 25 but all CUs below 25 are Gen Z. The <25 group have radically increased their Pet Parenting responsibility and spending. Pet Spending continues to be centered in the higher income groups but almost 70% of all CUs have pets. They are an important part of the family for all Pet Parents. Although they didn’t win any awards, the 28% Pet Spending increases by Blue Collar Workers and the low income $40>49K group clearly demonstrate the widespread importance of the Pet members of U.S. households.

Summary

To properly review 2022, we must put it into context with recent history. Total Pet Spending reached $78.60B in 2018, a $14.28B, 22.2% increase from 2014. However, it was not a steady rise, Total spending actually fell in 2016 and each segment had at least one down year. There were a number of factors driving both the growth and tumult within the industry. Two big positives were the movement to super premium pet foods and the rapid expansion of the number of outlets offering pet services. On the downside were value shopping, trading $ between segments and outside influences like the FDA dog food warning and tariffs. Pricing, inflation/deflation was also a negative/positive factor in some cases.

In 2019, the industry had another small decrease, -$0.16B (-0.2%) which was largely driven by a huge drop in spending in Supplies caused by Tarifflation. This affected virtually every demographic segment and caused Supplies $ to fall below 2014. Services spending also fell slightly as consumers value shopped. The good news was that Pet Food bounced back from the impact of the 2018 FDA warning to reach a new record high. Veterinary $ also increased 2.7%. Unfortunately, this was entirely due to a 4.1% increase in prices. The amount of Vet Services sold actually decreased.

That brings us to 2020 and the Pandemic turmoil. The effect was positive for Food and Veterinary, especially Food. Out of fear of shortages, many Pet Parents binge bought Pet Food. Spending also increased in Veterinary, as consumers focused on their Pets’ needs. The discretionary segments suffered. Supplies prices stayed high, so spending continued to decline. Services saw the biggest negative pandemic impact as many outlets were subject to closures and restrictions.

2021 was a new year and brought a change in attitude as the marketplace returned to “normal”. The Food binge buying wasn’t repeated but Pet Parents caught up with all their “children’s” wants and needs. This produced a record increase in Total Pet +$16.23B) and in all segments but Food. Gen X took back the top spot in $ and  Pet spending skewed younger and back to more traditional winners, like Homeowners w/Mtges and Incomes over $200K.

In 2022, the spending lift was much smaller. Food $ increased by 12.5% and Services had another record increase, +$3.26B. This was enough to overcome the big “binge drops” in Veterinary and Supplies and produce a 2.7% increase in Total Pet $. 72% of 96 demographic segments spent more on their pets. This is good but down considerably from 83% in 2021. The lift was not quite as widespread as 2021 but in some ways, spending became a little more balanced with strong performances by those without a college degree, Blue Collar workers, African Americans and Gen Z – to name a few. Income is still important as Gen X stayed on top. Spending also skewed a little older towards the oldest Gen Xers, 45>54 yr olds. Baby Boomers are still the “heart” of the Pet Industry, but Gen Xers are likely to stay on top in $ for a number of years, until they are eventually displaced by the Millennials.

Before we go…The Ultimate Total Pet Spending CU in 2022 has 4 people, a married couple with an oldest child 18>. They are 45>54 yrs-old. They are White, but not Hispanic. Both work and so does their oldest child. At least one has an Advanced College Degree and is a Mgr/Professional. They earn $200K+. They still have a mortgage on their house located in a small suburb in the Midwest.

Inflation continues to slow but is still far above the norm. The huge YOY increases in the monthly Consumer Price Index peaked in June 2022 at 9.1% then began to slow until turning up in July & August 2023. In October prices dropped 0.04% from September and the CPI  fell to +3.2% from +3.7% vs 2022. Grocery inflation also continued to slow. After 12 straight months of double-digit YOY monthly increases, grocery inflation is now down to +2.1%, 8 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 5.2% in October, it is still 62.5% above the national rate of 3.2%. We will look deeper into the numbers. This and future reports will include:

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

In our first graph we will track the monthly change in prices for the 24 months from October 2021 to October 2023. 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 patterns between segments and compare them to the overall U.S. CPI. The current numbers plus yearend and those from 12 and 24 months earlier are included. We also added and highlighted (pink) the cumulative price peak for each segment. In October, Pet prices were up from last month overall and in all segments but Non-Vet Services.

In October 21, the CPI was +7.6% and Pet prices were +3.4%. 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. Petflation has been above the CPI since Nov 22.

• 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, then dipped in October, but 35% of the 19.7% increase in the 46 months since December 2019 happened in the 6 months from January>June 2022 – 13% of the time.
• Pet Food – Prices were at or below Dec 2019 levels from Apr 20>Sep 21. They turned up and grew, peaking in May 23. In Jun>Aug they dipped but grew again in Sep/Oct. 93% of the 23.1% increase has occurred since 22.
• 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 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, a new record. They fell in March, peaked at a new record high in May, fell in Jun>Aug, then grew in Sep>Oct.
• Pet Services– Normally inflation is 2+%. Perhaps due to closures, prices increased at a lower rate in 2020. In 2021 consumer demand increased but there were fewer outlets. Inflation grew in 2021 with the biggest lift in Jan>Apr. Inflation was stronger in 2022 but it got on a rollercoaster in Mar>June. It turned up again July 22>Mar 23 but the increase slowed to +0.1% in April. Prices fell -0.3% in May, turned up again, peaking in Aug, then fell in Sep>Oct.
• 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 despite some dips they have stayed above the CPI since July 22. In 23, prices grew Jan>May, stabilized Jun>Jul, fell in Aug, then grew Sep>Oct to a new high.
• Total Pet – Petflation is a sum of the segments. In December 21, the pricing surge began. In Mar>Jun 22 the segments had ups & downs, but Petflation grew again from Jul>Nov. It slowed in December, turned up Jan>May 23, fell in Jun>Aug, then grew in Sep>Oct. Except for 5 monthly dips, prices in all segments increased monthly Jan>Jun 23. In Jul>Aug there 5 more dips but only 2 in Sep>Oct. Cumulative Petflation has been above the CPI since Nov. 22.

Next, we’ll turn our attention to the Year Over Year inflation rate change for October and compare it to last month, last year and to previous years. We will also show total inflation from 21>23 & 19>23. Petflation fell again to 5.2% in October, but it is still over 1.6 times the National rate. The chart will allow you to compare the inflation rates of 22>23 to 21>22 and other years but also see how much of the total inflation since 2019 came from the current pricing surge. Again, we’ve included some human categories to put the pet numbers into perspective.

Overall, Prices were -0.04% from September but were +3.2% vs October 22, down from +3.7% last month. Grocery inflation is down again, to +2.1% from +2.4%. Only 2 of 9 categories had a price decrease from last month – Pet Services & the National CPI. There was only 1 in September, but 4 in August. That’s 2 consecutive monthly decreases for Pet Services. The national YOY monthly CPI rate is down to 3.2% from 3.7% in Aug>Sep and is only 42% of the 21>22 rate. The 22>23 inflation rate is below 21>22 for all categories for the 2^nd consecutive month. In our 2021>2023 measurement you also can see that over 65% of the cumulative inflation since 2019 occurred in only 4 segments – Total Pet, Pet Food, Pet Supplies and Veterinary – All Pet. We should also note that the segments with the lowest percentages are Haircuts, Pet Services and Medical Services. Service Segments have generally had higher inflation rates so there was a smaller pricing lift in the recent surge. Services expenditures account for 61.8% of the National CPI so they are very influential. We also see that Pet Products have a very different pattern. The 21>23 inflation surge provided 94.8% of their overall inflation since 2019. This happened because Pet Products prices in 2021 were just starting to recover from a deflationary period.

• U.S. CPI– Prices are -0.04% from September. The YOY increase is 3.2%, down from 3.7%. It peaked at +9.1% back in June 2022. The targeted inflation rate is <2% so we are still 85% higher than the target. After 12 straight declines, we had 2 lifts, then a stable month and now another drop – good news! The current inflation rate is 58.4% below 21>22 but the 21>23 rate is still 11.2%. That is 57% of the total inflation since 2019, but it is now below 60%.
• Pet Food– Prices are +0.1% vs September and +6.5% vs October 2022, down from 7.6%. However, they are still 3.1 times the Food at Home inflation rate. The YOY increase of 6.5% is being measured against a time when prices were 15.4% above the 2019 level, but that increase is still 1.8 times the pre-pandemic 3.7% increase from 2018 to 2019. The 2021>2023 inflation surge has generated 98.3% of the total 22.9% inflation since 2019.
• Food at Home – Prices are up +0.3% from September. The monthly YOY increase is 2.1%, down from 2.4% in September and radically lower than Jul>Sep 2022 when it exceeded 13%. The 25.8% Inflation for this category since 2019 is 32% more than the national CPI and remains 2^nd to Veterinary. 57% of the inflation since 2019 occurred from 2021>2023. The pattern mirrors the national CPI, but we should note that Grocery prices began inflating in 2020>2021 then the rate accelerated. It appears that the pandemic supply chain issues in Food which contributed to higher prices started early and foreshadowed problems in other categories and the overall CPI tsunami.
• Pets & Supplies– Prices were up +0.1% from September but down -1.2% vs October 2022. They still have the lowest increase since 2019. As we noted, prices were deflated for much of 2021. However, even with recent price drops the 2021>2023 inflation surge accounted for 92% of the total price increase since 2019. They reached an all-time high in October 2022 then prices deflated. 3 straight months of increases pushed them to a new record high in February. Prices fell in March, bounced back in Apr>May to a new record high, fell in Jun>Aug, then turned up in Sep>Oct.
• Veterinary Services – Prices are up +0.4% from September. They are +8.1% from 2022 and took the #1 spot from Food in the Pet Industry. Plus, they are still the leader in the increase since 2019 with 29.1% compared to Food at home at 25.8%. For Veterinary Services, relatively high annual inflation is the norm. The rate did increase during the current surge so 69% of the 4 years’ worth of inflation occurred in the 2 years from 2021>2023.
• Medical Services – Prices turned sharply up at the start of the pandemic but then inflation slowed and fell to a low rate in 20>21. Prices grew 0.2% from September but are -2.0% vs 22. Prices have now deflated for 6 straight months. Medical Services are not a big part of the current surge as only 38% of the 2019>23 increase happened from 21>23.
• Pet Services – Inflation slowed in 2020 but began to grow in 2021. October 23 prices were -0.4% from September but +4.7% vs 22, which is down from 6.0% last month and much lower than 8.0% in March. Now, only 55% of their total 20.6% inflation since 2019 occurred from 21>23.
• Haircuts/Other Personal Services – Prices are up 0.4% from September and +5.0% from 2022, up slightly from 4.8% last month. Inflation has been rather consistent as 50% of the inflation from 19>23 happened from 21>23.
• Total Pet– Petflation is now 55% lower than the 21>22 rate, but still 1.6 times the National CPI. For October, +5.2% is the 4th highest rate since 1997 (2022: 11.6%; 2008: 9.7%; 2007: 5.5%). Vs September, prices again grew for all but Services so Total Pet was +0.2%. A Sep>Oct increase has happened in 17 of the last 24 years so it was not a surprise. Veterinary & Food are still the Petflation leaders, but all segments have an influence. Pet Food has been immune to inflation as Pet Parents are used to paying a lot, but inflation can reduce purchase frequency in the other segments.

Now, let’s look at the YTD numbers

The increase from 2022 to 2023 is the biggest for 4 of 9 categories – All Pet. The 22>23 rate for Haircuts is slightly below 21>22. However, the Total CPI, Pet Supplies, Medical Services and Food at Home are significantly down from 21>22. The average annual increase since 2019 is 4.5% or more for all but Medical Services (2.8%) and Pet Supplies (2.5%).

• U.S. CPI – The current increase is down 48% from 21>22 and 4.4% less than the average increase from 2019>2023, but it’s 65% more than the average annual increase from 2018>2021. 68% of the 19.1% inflation since 2019 occurred from 2021>23. Inflation is a big problem that started recently.
• Pet Food – Strong inflation continues with the highest 22>23 & 21>23 rates on the chart. Deflation in the 1^st half of 2021 kept YTD prices low then prices surged in 2022. 96% of the inflation since 2019 occurred from 2021>23.
• Food at Home – The 2023 YTD inflation rate has slowed but still beat the U.S. CPI by 35%. You can see the impact of supply chain issues on the Grocery category as 70% of the inflation since 2019 occurred from 2021>23.
• Pets & Pet Supplies – Although prices rose in October, the YTD inflation rate is down to 3.3%. Prices deflated significantly in both 2020 & 2021 which helped to create a very unique situation. Prices are up 10.4% from 2019 but 106% of this increase happened from 2021>23. Prices are up 11.0% from their 2021 “bottom”.
• Veterinary Services – They are still #1 in inflation since 2019 but they have only the 2^nd highest rate since 2021. At +6.4%, they have the highest average annual inflation rate since 2019. Except for a sight slowing in 2020, inflation has consistently increased since 2019. Regardless of the situation, strong Inflation is the norm in Veterinary Services.
• Medical Services – Prices went up significantly at the beginning of the pandemic, but inflation slowed in 2021. In 2023 prices have been deflating and are now at -0.3% YTD, the only current deflation in any segment.
• Pet Services – May 22 set a record for the biggest year over year monthly increase in history. Prices fell in June but began to grow again in July, reaching record highs in Sep>Apr 23. The January 2023 increase of 8.4% set a new record. YTD October fell a little from 6.8% to 6.6%. Interestingly, although the rates are not as high, they have the exact same annual inflation pattern as Veterinary. The Services segments in the Pet Industry are definitely unique.
• Haircuts & Personal Services – The services segments, essential & non-essential, were hit hardest by the pandemic. After a small decrease in March 22, prices turned up again. Since 2021 inflation has been a consistent 5+%, 93% higher than 18>19. Consumers are paying 21% more than in 2019, which usually reduces the purchase frequency.
• Total Pet – There were two different patterns. After 2019, Prices in the Services segments continued to increase, and the rate grew as we moved into 2021. Pet products – Food and Supplies, took a different path. They deflated in 2020 and didn’t return to 2019 levels until mid-year 2021. Food prices began a slow increase, but Supplies remained stable until near yearend. In 2022, Food and Supplies prices turned sharply up. Food prices grew until Jun>Aug 23. Supplies prices stabilized Apr>May, grew Jun>Oct, fell in Nov, rose in Dec>Feb, fell in Mar, rose in Apr>May then fell in Jun>Aug. Both turned up in Sep & Oct. The Services segments have also had ups & downs but have generally inflated. The net is a YTD Petflation rate vs 2022 of 8.7%, double the National CPI. In May 22 it was 5.8% below the CPI.

Petflation is slowing, but still strong. Petflation dropped from 5.7% in September to 5.2% in October. This is 57% below the record 12.0% set in November, but still the 4th highest rate for the month. The last 5 months have all been <10% but 9 of 15 have been 10+%. The current 5.2% rate is still 3.3 times the 1.6% average rate from 2010>2021 and also 1.6 times the national rate. There is no doubt that the current pricing tsunami is a significant event in the history of the Pet Industry, but will it affect Pet Parents’ spending. In our demographic analysis of the annual Consumer Expenditure Survey which is conducted by the US BLS with help from the Census Bureau we have seen that Pet spending continues to move to higher income groups. However, the impact of inflation varies by segment. Supplies is the most affected as since 2009 many categories have become commoditized which makes them more price sensitive. Super Premium Food has become widespread because the perceived value has grown. Higher prices generally just push people to value shop. Veterinary prices have strongly inflated for years, resulting in a decrease in visit frequency. Spending in the Services segment is the most driven by higher incomes, so inflation is less impactful. This spending behavior of Pet Parents suggests that we should look a little deeper. Inflation is not just a singular event. It is cumulative. Total Pet Prices are up 5.2% from 2022 but they are up 17.4% from 2021 and 22.0% from 2019. That is a huge increase in a very short period. It puts tremendous monetary pressure on Pet Parents to prioritize their expenditures. We know that the needs of their pet children are always a high priority but let’s hope for a little relief – stabilized prices and even deflation. This is not likely in the Service segments, but it has happened before in Products. The Pet Food inflation rate has slowed for 6 straight months, and Pet Supplies prices have deflated vs 2022 in 2 of the last 3 months, including a -1.2% drop in October. It’s just a start. Let’s hope that it accelerates “down”.