Archive for category: Pet Market Segments

In 2021 Americans spent $99.98B on our companion animals, 1.12% of $8.94 Trillion in total expenditures. Pet Spending was up $16.23B (+19.4%), the biggest increase in history. In 2020 Consumers focused on the necessary segments – Food and Veterinary, while the discretionary segments – Supplies and Services, suffered. Out of fear of shortages, Pet Parents binge bought Food early in the pandemic. On the negative side, closures caused Services to have a radical reduction in frequency. In 2021 there was no repeat of the Food binge so $ fell. However, all other segments had record increases.

In this report we will look at the post pandemic surge in Pet Spending for the most popular demographic measurement – by Generation. Although Gen Z $ are often bundled with Millennials for long term comparisons, we will also compare their 2021 spending vs 2020. Using data from the US BLS Consumer Expenditure Survey we’ll compare the Generations.

We’ll start by defining the generations and looking at their share of U.S. Consumer Units (CUs are basically Households)

GENERATIONS DEFINED

Gen Z: Born after 1996

In 2021, Age under 25

Millennials: Born 1981 to 1996

In 2021, Age 25 to 40

Gen X: Born 1965 to 1980

In 2021, Age 41 to 56

Baby Boomers: Born 1946 to 1964

In 2021 Age 57 to 75

Silent/Greatest: Born before 1946

In 2021, Age 75+

• Baby Boomers still have the largest number of CU’s at 43.6M and 32.7% of the total. They had a slight increase in 2021 but generally they have been losing ground. In fact, they have 1.5M fewer CU’s than in 2016.
• The Oldest Generations will continue to lose CUs primarily due to death or movement to permanent care facilities.
• Gen X has the second most CUs but lost a little ground in 2021.
• Millennials have the largest number of individuals, but they rank only third in the number of CU’s.
• Both Gen Z & Millennials gained CUs. The pandemic recovery saw many younger folks leave their parents’ homes.

Now let’s look at some key CU Characteristics

Significant changes were the decrease in homeownership and CU size. This was primarily driven by the oldest group. Gen Xers still have the biggest CUs and the most Earners while Millennials have the most children <18 per CU.

• CU Size – is down from 2.5 due to a decrease by the Silent/Greatest generations. CUs with 2+ people still account for 69.5% of all U.S. CUs (down from 70.2% in 2020) and 80.6% of pet $ (up from 80.3% primarily due to a huge lift by 2 person CUs). Millennials are actively building their H/Hs. However, CU size, with all the related responsibilities, still peaks with the Gen Xers and then starts dropping. The Boomers are the last group with 2+ CUs but that will end soon. Gen Z joined the 2+ group for the 1^st time in 2020 and moved to 2.1 in 2021.
• # Children <18 – 27.1% of U.S. CU’s have children, down from 27.6% and they generate 31.9% of Pet Spending, down from 38.4%. The slight drop in CUs came from families with an oldest child under 6 or over 18. The drop in Total Pet Spending came solely from an $8B decrease by families with an oldest child over 18. All other CUs, with or without children spent more. The net result was CUs without children spent $16.53B more while those with children spent -$0.3B less. Overall, there was no change in the # of children per CU in 2021 but there was 1 change within groups. Gen X CUs fell from 0.9 to 0.8 in the average number of children <18. We noted the $8B drop in spending with an oldest child over 18. This group is often Baby Boomers.
• # Earners – Pet spending is often tied to the number of earners in a CU. In 2021, all Earner & No Earner CUs spent more on their pets. 2+ earner CUs still spent the most, but No Earner CUs had the biggest increase, +$6.3B (+60.5%). No Earners are usually older and retired. This includes the oldest Boomers but also the Silent/Greatest generations.
• Homeownership – Owning and controlling your own space has always been a major factor in increased Pet Ownership and spending. In 2021 homeownership decreased to 64.72% from 65.81%. Gen Z & Millennials had increases but Gen X and the oldest group had decreases. The homeowners share of Total Pet Spending fell from 83.3% to 80.0% due to a -$3.7B drop from those without a mortgage. This is the group that binge bought food in 2020. Homeowners with mortgages and Renters spent $19.9B more on their pets. We should also note that the number of homeowners w/no Mtge was unchanged overall and for Boomers & Gen X. It grew slightly for Gen Z & Millennials but this was offset by a decrease from the Silent/Greatest generations.
  • As expected, Gen Z are the most common renters in society. Homeownership by Millennials has moved up to 49% but it is still only 75% of the national average.
  • Gen Xers have been above the national avg since 2018 and Homeownership continues to increase with age.

Next, we’ll compare the Generations to the National Avg.:

In Income, Total CU Spending, Total Pet Spending and the Pet Share of Total CU Spending

CU National Avg: Income – $87,432; Total CU Spending – $66,906; Total Pet Spending – $748.93; Pet Share – 1.12%

• Income – The Gen Xers are still at the top but their lead fell slightly. The incomes of Boomers and Silent/Greatest continued to fall. Millennials’ income beat the national average in 2020 and continues to grow. The income of Gen Z passed that of the oldest Americans so they are no longer in last place.
• Total Spending – The Gen Xers make the most and spend the most but it’s not out of line with their income. Millennials increased their spending so that it now beats the national average. Like their income, Boomers’ spending fell even further below the national average. Due to a big lift in spending in relation to income, the oldest group is once again deficit spending in relation to their after tax income. With continued strong increases in both Income and spending, the retail importance of Millennials is growing.
• Pet Spending – Again only 2 groups exceed the national average, but Gen X returned to the top spot. Millennials are still 3^rd, 24% below Gen X but only 6% below Boomers. The oldest and youngest groups still trail.
• Pet Spending Share of Total Spending – The national number grew from 1.04% to 1.12%. The growth was driven by increases from all groups but Gen Z and Boomers. In 2020 Boomers were the only group to spend more than 1% of their total expenditures on their pets. In 2021 Boomers are still the leaders but only Gen Z spent less than 1% of their total expenditures on their pets – perhaps the surest sign of the growing importance of the Pet industry.

Now, let’s look at Total Pet Spending by Generation in terms of market share as well as the actual annual $ spent for 2016 through 2021. The 2021 numbers are boxed in red (decrease) or green (increase) to note the change from 2020.

• Boomers are no longer the biggest force in Pet Spending. Gen X took over the top spot in 2021…barely.
• The pandemic both continued and broke some long-term spending patterns. Spending in the oldest group is low and had been slowly falling. It surged in 2022. In contrast, the youngest group (combined Millennials & Gen Z) is the only one showing consistent year after year growth. Gen X had also been growing every year… until 2020. They did have the biggest “recovery” in 2021. The Boomers have been on a rollercoaster ride because they are the most likely group to have a strong reaction to trends, especially in this era of super premium foods. They also have the money to act on their feelings. In 2020 this was very apparent as they were the primary group that panic bought Pet Food out of fear of possible shortages due to the pandemic. In 2021 they couldn’t quite equal their 2020 $.
• In 2021, only Boomers spent less. Silent/Greatest: +$1.31B. Boomers: -1.90B. Gen X: +9.67B. Millennials: +$6.44B. Gen Z: +$0.71B.
• Boomers – Ave CU spent $764.68 (-36.10); 2021 Total Pet spending = $32.94B, Down $1.90B (-5.5%)
  • 2016>2021: Up $3.33B; They stayed on the roller coaster as spending turned down but is still +10.2% vs 2016.
• Gen X – Ave CU spent $941.87 (+276.65); 2021 Total Pet Spending = $33.62B, Up $9.67B (+40.3%)
  • 2016>2021: Up $14.28B Their annual Pet spending growth since 2015 had been strong and consistent until a drop in 2020. In 2021 they became #1 in CU Pet spending and Total $. Their spending is up 74% from 2016.
• Millennials + Gen Z – Ave CU spent $650.97 (+$117.16); 2021 Total Pet Spending = $26.75B, Up $7.15B (+36.5%)
  • 2016>2021: Up $15.31B; As the income and overall spending of Millennials grows, their pet spending has also grown every year. The “youngsters” have the biggest increase in $ since 2016 of any group, $15.31B, +134%.
  • Millennials Only– Ave CU spent $716.51 (+$151.44); 2021 Total Pet Spending= $25.11B, Up $6.44B (+34.5%)
  • Gen Z Only – Ave CU spent $271.27 (+$16.59); 2021 Total Pet Spending= $1.64B, Up $0.71 (+76.9%)
• Silent + Greatest – Ave CU spent $488.50 (+$134.30); 2021 Total Pet Spending = $6.66B, Up $1.31B (+24.6%)
  • 2016>2021: Down $0.24B; They also had a huge lift in CU pet spending but CU count fell 12.3%, -30% from 2016.

Gen X took over the top spot in Total Pet Spending, but Millennials’ performance was also strong. Only Boomers spent less in 2021, but their CU spending still exceeds the national average. The pet spending “torch” is slowly being passed.

Let’s look at the individual segments. First, Pet Food…

• Pet Food trends are more pronounced for Boomers, and they had the only decrease. Pet parenting is fading In the older generations, but they finally moved to Super Premium. The younger groups have had more consistent growth.
• Since 2014, Millennials’ have led the way in food trends, and they are the only group with an annual increase every year since 2016. The panic food buying in 2020 by Boomers was more of an emotional reaction than a trend.
• Boomers – Ave CU spent $280.45 (-161.61); 2021 Pet Food spending = $11.82, Down $7.49B (-38.8%)
  • 2016>2021: Down $0.1B Big reactions to every trend. They spent less than 2020 and even less than in 2016.
• Gen X – Ave CU spent $306.27 (+$75.91); 2021 Pet Food spending = $11.12B, Up $2.82B (+34.0%)
  • 2016>2021: Up $4.26B They reacted to the FDA warning by further upgrading their food. No pandemic panic buying for them. They value shopped. In 2021 they surged to the top in CU Pet Food Spending.
• Millennials + Gen Z – Ave CU spent $191.28 (+$0.26); 2021 Pet Food Spending = $7.86B, Up $0.79B (+11.2%)
  • 2016>2021: Up $3.05B They are the only group with increased spending every year since 2016. Their income is growing as is a commitment to their pets. They often pioneer food upgrades and the pandemic had little impact.
  • Millennials Only – Ave CU spent $206.12 (-$0.82); 2021 Pet Food spending = $7.23B, Up $0.37B (+5.4%)
  • Gen Z Only – Ave CU spent $104.44 (+$51.47); 2021 Pet Food spending = $0.63B, Up $0.42B (+209.0%)
• Silent/Greatest – Ave CU spent $262.00 (+$114.43); 2021 Pet Food spending = $3.61B, Up $1.44B (+66.1%)
  • 2016>2021: Up $0.57B; Their CU #s are fading but they are committed to pets as they upgraded food in 2021.

Pet Food Spending is driven by trends – new Super Premium Foods, FDA warnings and even fear of pandemic shortages. Millennials lead in thoughtful changes and Boomers lead in emotion but Gen X leads in CU $.   Now, Supplies Spending.

• All groups spent more but Gen X increased their lead at the top with a 71% spending increase.. The younger groups dominate this segment as Gen Xers and Millennials/Gen Z together account for 68% of Supplies spending.
• Gen X – Ave CU spent $265.43 (+$112.96); 2021 Pet Supplies spending = $9.40B, Up $3.91B (+71.2%)
  • 2016>2021: Up $4.15B; Gen Xers are again the leader in CU spending. They were affected by tarifflation in 2019, but essentially held their ground in 2020. In 2021 spending exploded as they made up for 2019 & 2020.
• Baby Boomers – Ave CU spent $154.03 (+$52.18); 2021 Pet Supplies spending = $6.72B, Up $2.31B (+52.3%)
  • 2016>2021: Up $0.35B In 2019 tarifflation hit. In 2020 they focused on Food! In 2021 they made it back to 2018 $
• Millennials + Gen Z – Ave CU spent $165.99 (+$42.23); 2021 Pet Supplies spending = $6.82B, Up $2.30B (+50.8%)
  • 2016>2021: Up $4.01B; Millennials earn their share in Supplies spending. They were the least impacted by the tariffs in 2019 and spent more in 2020. Their spending then took off in 2021, with a 53% increase.
  • Millennials Only– Ave CU spent $180.37 (+$55.32) 2021 Pet Supplies spending= $6.32B, Up $2.20B (+53.3%)
  • Gen Z Only – Ave CU spent $82.95 (-$28.97); 2021 Pet Supplies spending = $0.50B, Up $0.10B (+25.4%)
• Silent + Greatest – Ave CU spent $64.27 (+$16.52); 2021 Pet Supplies spending = $0.87B, Up $0.13B (+18.0%)
  • 2016>2021: Down $0.63B; This $ conscious group was hit hard by tariffs and the pandemic, but had a small lift.

In 2016 most Consumers value shopped for super premium food and spent some of their savings on Supplies. Supply prices dropped in 2017 and everyone under 72 spent more! Late 2018 saw added tariffs but only Boomers dialed back spending. In 2019 the sharply rising prices drove spending down in all groups. In 2020 Millennials and Gen X spent a little more while the older groups spent a lot less. In 2021 spending took off in all groups as they made up for recent years.

Next, we’ll turn our attention to the Service Segments. First, Non-Veterinary Pet Services

• Gen Z & the oldest group spent less. Gen X is still #1 in CU spending and $. Gen X/Millennial/Gen Z share = 62.5%
• Gen X – Ave CU spent $91.64 (+$21.66); 2021 Pet Services spending = $3.25B, Up $0.72B (+28.7%)
  • 2016>2021: Up $1.52B; In 2020 they had the 2^nd biggest drop. In 2021 they had the 2^nd biggest lift but are still #1.
• Baby Boomers – Ave CU spent $70.06 (+$19.46); 2021 Pet Services spending = $3.06B, Up $0.86B (+39.5%)
  • 2016>2021: Down $0.15B; The biggest $ drop in 2020 and the biggest lift in 2021, but they’re still behind 2016 $.
• Millennials + Gen Z – Ave CU spent $59.51 (+$11.43); 2021 Pet Services spending = $2.45B, Up $0.69B (+39.1%)
  • 2016>2021: Up $1.32B; In 2020 they had the smallest decrease of any group and with the 2021 lift they have more than doubled their 2016 spending. Despite a 31% increase in CUs Gen Z’s Services spending fell.
  • Millennials Only– Ave CU spent $66.61 (+$17.09); 2021 Pet Services spending = $2.33B, Up $0.70 (+42.9%)
  • Gen Z – Ave CU spent $18.53 (-$16.39); 2021 Pet Services spending = $0.11B, Down $0.01B (-10.2%)
• Silent + Greatest – Ave CU spent $26.29 (-$1.29); 2021 Pet Services spending = $0.35B, Down $0.07B (-16.4%)
  • 2016>2021: Down $0.42B; They definitely have the need but spending continues to fall, down 55% from 2016.

This segment had slow annual growth until 2017 which saw a small drop in spending due to an extremely competitive environment. In 2018, the increased number of outlets really hit home and spending exploded. 2019 brought another small decrease as Gen Xers & Millennials looked for and found a better deal. 2020 brought pandemic restrictions and closures. 2021 produced a record lift due to a 9.2% increase in spending and an 18.8% increase in frequency.

Now, Veterinary Services

• Boomers are still the biggest spenders in this segment, but they only lead Gen Xers in $ because of more CUs.
• The younger groups have a consistently growing commitment to this Pet Parenting responsibility. The combined Veterinary spending of Millennials/Gen Z and Gen Xers has increased $11.29B (+138%) since 2016.
• Boomers – Ave CU spent $260.14 (+$53.87); 2021 Veterinary spending= $11.35B, Up $2.41B (+27.0%)
  • 2016>2021: Up $3.24B; In 2020, Boomers focused on needed segments – Food & Veterinary. In 2021 they changed their focus to Supplies, Services and Veterinary, including a Veterinary spending increase of $2.4B.
• Gen X – Ave CU spent $278.53 (+$66.12); 2021 Veterinary spending= $9.86B, Up $2.21B (+28.9%)
  • 2016>2021: Up $4.37B; In 2016 their Veterinary spending exceeded the national CU Average. In 2018, they took over the top spot in CU spending and increased their lead in 2021. This produced a $2.2B lift in Veterinary $.
• Millennials + Gen Z– Ave CU spent $234.18 (+$63.24); 2021 Veterinary Spending $9.62B, Up $3.38B (+54.0%)
  • 2016>2021: Up $6.92B; They had the biggest lift and spending is up 256% from 2016. Veterinary is a big priority.
  • Millennials Only – Ave CU spent $263.41 (+$79.85); 2021 Veterinary spending = $9.23B, Up $3.18B (+52.5%)
  • Gen Z Only – Ave CU spent $65.35 (+$10.48); 2021 Veterinary spending = $0.40B, Up $0.20B (+101.5%)
• Silent + Greatest – Ave CU spent $135.94 (+$4.64); 2021 Veterinary spending $1.83B, Down $0.19B (-9.2%)
  • 2016>2021: Up $0.02B; Their pets’ health is still a priority. Spending fell due to a 12.3% decrease in CUs.

Gen Xers and Millennials have consistently increased their commitment to Veterinary Services. Back in 2015, their share of Veterinary Spending was 36%. It is now 60%. This indicates a big, fundamental change in spending behavior.

One last chart to compare the share of spending to the share of total CU’s to see who is “earning their share”.

• Gen X Performance – Total: 126.9%; Food: 121.9%; Supplies: 149.0%; Services: 134.5%; Veterinary: 113.9%
  • Gen Xers returned to the top spot in performance. This year they earned their share in Total Pet and all industry segments. Except for the 2020 dip they increased their Total Pet Spending every year since 2016. In 2021 they made up for the dip with a big increase in every segment. Their spending has become more balanced and they are now the performance leader in every segment. Gen Xers range in age from 41 to 56 so they are just entering the peak earning years. Expect their commitment and pet spending to continue to grow.
• Baby Boomers Performance – Total: 100.9%; Food: 105.2%; Supplies: 86.4%; Services: 102.8%; Veterinary: 106.4%
  • Boomers led the way in building the industry but are no longer the “top dogs” in $. They earn their share in all but Supplies and are still the spending leader in the “needed” segments – Food & Veterinary. They are also the most emotional Pet Parents, so their spending is subject to radical swings like 2020’s panic, binge buying of Pet Food. They should still be a major force in the Pet Industry for many more years, but the Gen Xers have now stepped up and the Millennials are also preparing to eventually take their turn at the top.
• Millennials Performance – Total: 95.8%; Food: 80.2%; Supplies: 101.2%; Services: 97.8%; Veterinary: 107.7%
  • Millennials are now the only group to have increased their pet spending every year since 2016. Their spending is more evenly balanced, and performance has improved but their future as the Pet Parenting spending leaders is still a long way off. Their income, home ownership and pet spending are all increasing. They are educated and well connected. Indications are that they may lead the way in adopting new trends, especially in food. Their progress is good news, but in reality, their leadership is probably at least a decade away.
• Silent/Greatest Performance – Total: 66.1%; Food: 104.1%; Supplies: 36.1%; Services: 38.6%; Veterinary: 55.6%
  • Pet Parenting is more challenging in old age, but they remain committed. 1.09% of their total spending is on pets.
• Gen Z Performance – Total: 36.1%; Food: 40.1; Supplies: 46.6%; Services: 27.2%; Veterinary: 26.7%
  • They are just beginning so the numbers are low. Their performance actually fell due to a 31% increase in CUs.

Baby Boomers are still the heart of the industry, but Gen Xers are now the $ leaders. Expect Gen X’ growth to continue as they are pursued by Millennials. Both groups seem ready, willing and able to take their turn at the top. Pet Spending has become more balanced across the generations. This bodes well for the continued strong growth of the industry.

 

Veterinary Services is the 2nd largest segment in the Pet Industry. For years, high inflation has been a problem in the segment. Spending grew 24.0% from 2014>2019. Prices rose 17.4%, an avg of 3.3%. This caused a reduction of visit frequency and only 28% of the growth was “real” (avg annual growth +1.3%). In late 2020 & 2021, COVID focused Pet Parents on their “children’s” needs, including Veterinary Services. In 2021 Veterinary Spending reached  $32.67B, up $7.82B (+31.5%) from 2020. Inflation was high at 4.2% but 87% of the growth was real. In this report, we’ll take a closer look at the demographics behind the 2021 numbers. (Note: All 2021 numbers in this report come from or are calculated by using data from the US BLS Consumer Expenditure Interview Survey, rather than their Diary report. The low frequency of Veterinary Visits is still generating an exceptionally high variation on the data collected by the Diary method. Interview seems to be a more logical and accurate way to track Veterinary Service Expenditures.)

Let’s get started. Veterinary Spending per CU in 2021 was $244.51 up 29.1% from $189.35 in 2020. (Note: A 2021 Pet CU (68%) Spent $359.57) More specifically, the increase in Veterinary spending came as a result of:

• 1.8% more CU’s
• Spending 11.9% more $
• 15.4% more often

We’ll take a closer look. But first, the chart below gives an overview of recent Veterinary Spending.

The big drop in the first half of 2015 coincided with the upgrade to Super Premium Foods – Trading $. Then consumers began value shopping for Premium Foods and the savings freed up $ for Veterinary Services. Spending began to climb until it flattened out at the beginning of 2017. In 2017, inflation slowed markedly in the second half and spending took off. In 2018 prices turned up again and consumers essentially held their ground through 2019. The initial reaction to COVID in 2020 was a drop in spending but the “need focused” consumers then drove a huge increase through 2021.

Now, let’s look at Veterinary spending by some specific demographics. First, here is a chart by Income Group

Veterinary Spending has become even more strongly driven by income. Spending by the <$70 group was essentially flat and $30>70K actually spent less. By far the biggest lift, +$4.3B, came from $150K> group. The 50/50 spending break point in $ also grew significantly from $96K in 2020 to $113K in 2021, an 18% increase.

National: $244.51 per CU (+29.1%) – $32.67B – Up $7.82B (+31.5%)

• Over $150K (15.8% of CUs) – $534.38/CU (+42.3%) $11.26B, Up $4.30B (+61.8%) This highest income group is the biggest Veterinary Spender as 15.8% of CUs generated 34.5% of 2021 $ and 55% of the increase from 2020.
• $100>150K (14.2% of CUs) – $360.90/CU (+34.9%) $6.84B, Up $1.80B (+35.6%) Spending by this middle/upper income group slowed in 2019 due to inflation, but it took off in 2020>21 as they reacted strongly to their pet needs.
• $70K>100K (14.8% of CUs) – $268.25/CU (+41.0%) $5.31B, Up $1.57B (+41.9%) Spending grew steadily from 2016>19. In 2020 pandemic monetary pressures caused them to spend less but they had a strong rebound in 2021.
• $30K>70K (29.7% of CUs) – $152.41/CU (+1.8%) $6.04B, Down $0.07B (-1.1%) From 2016 to 2020 their spending pattern was remarkably similar to the big spending $150K+ group. That changed in 2021 as they were the only group to spend less in Vet $ while $150K> had the biggest lift. They also fell from 2^nd to 3^rd in total Veterinary spending.
• Under $30K (25.5% of CUs) $94.06/CU (+4.9%) $3.21B, Up $0.21B (+7.2%) This group is very price sensitive. Except for a big spending dip in 2018, they have slowly but consistently increased Veterinary spending. They are now 32% ahead of their 2016 Veterinary Services $, although 56% of the increase was due to inflation.

Now, here is Veterinary Spending by Age Group

Every group spent more but the biggest lifts came from the 55>64 & 35>44 groups. Both spent $2+B more than in 2020.

National: $244.51 per CU (+29.1%) – $32.67B – Up $7.82B (+31.5%)

• <25 (4.9% of CUs) – $63.90/CU (-2.2%) – $0.42B – Up $0.09B (+28.2%) The biggest factor in the lift by this youngest group was that they moved out of their parents homes. 31.1% more CUs spent 2.5% more $ …4.6% less often.
• 25>34 (15.7% of CUs) – $237.68/CU (+33.5%) – $5.00B – Up $1.26B (+33.7%) The commitment of these Millennials to their pets is growing. After being stable from 2017>19, the pandemic caused Veterinary spending to take off In 2020 and the lift continued in 2021 due to increased frequency. 0.2% more CUs spent 4.2% more $ …28.2% more often.
• 35>44 (17.2% of CUs) – $285.97/CU (+42.6%) – $6.55B – Up $2.08B (+46.5%) In 2019, these mostly Gen Xers radically increased their spending and became #1 in Veterinary $. In 2020 spending decreased and they fell to 3^rd place. In 2021 they had the biggest % increase and moved up to #2. 2.8% more CUs spent 16.0% more $ …22.9% more often
• 45>54 (16.7% of CUs) – $273.46/CU (+23.4%) – $6.09B – Up $1.08B (+21.6%) This group has the highest income, but value is important. In 2017, the slowed inflation caused them to spend significantly more money. In 2018, prices turned up and continued to inflate in 2019. Spending dropped precipitously to their 2016 level and they lost the top spot in Veterinary $. 2020 brought a big spending lift which continued into 2021. However, their 2021 increase didn’t match the 35>44 & 54>64 groups so they fell to #3. 1.5% fewer CUs spent 16.3% more $…6.1% more often
• 55>64 (18.5% of CUs) – $309.26/CU (+42.4%) – $7.65B – Up $2.20B (+40.4%) This group was the leader in Veterinary Spending prior to 2015. In 2015 they upgraded to Super Premium Food and Vet Spending fell. In 2016 inflation slowed and they regained the top spot. In 2018 Veterinary prices began to strongly inflate again. Their spending fell and continued down into 2019. In 2020 their frequency fell but they spent a lot more, so they moved back to the top in Veterinary Spending. They maintained this position in 2021 due to a more balanced increase in both the amount and frequency of purchases. 1.4% fewer CUs spent 22.8% more $ …15.9% more often
• 65>74 (16.1% of CUs) – $225.67/CU (+12.7%) – $4.85B – Up $0.75B (+18.4%) This group is growing and is now all Boomers so they are committed to their pets. In 2020 their visit frequency fell due to the pandemic, but they spent 37% more $. In 2021 they spent 5% less but much more often. 5.1% more CUs spent 5.1% less $ …18.8% more often
• 75> (10.9% of CUs) – $144.36/CU (+21.4%) – $2.10B – Up $0.34B (+19.6%) This group of oldest Pet Parents has a strong commitment to their pets – in 2015 a $1B increase in Veterinary Spending. In 2016, they upgraded their food. In 2017 they increased spending in Food, Supplies and Services. In 2018, they turned their attention back to Veterinary and their spending has grown every year. Although the pandemic hit them hard, they still took care of their pets with increased Veterinary spending through 2021. 1.4% fewer CUs spent 14.3% more $…6.2% more often

Now, let’s take a look at some other key demographic “movers” behind the 2021 Veterinary Spending numbers.

Veterinary spending increased by $7.82B (+31.5%) in 2021. Even with a high 4.2% inflation rate, 87% of the growth was real. 2021 had widespread positivity. 90 of 96 demographic segments (93.8%) spent more on Veterinary Services while only 6 segments spent less. In 9 categories all segments spent more. There was also less turmoil as only 3 flipped from first to last or vice versa while 8 segments maintained their position from 2020.

Virtually all of the “winners” are often found at the top. The only one that is somewhat of a surprise is Millennials, but in recent years they have become more concerned about Veterinary care for their Pet “children”. Their income exceeded the national average for the 1^st time in 2020 and continues to grow so they are more able to afford the ever inflating cost of Veterinary Services.

There are also no big surprises in the “losers” group. The surprise is, and it’s a big one, that 9 of the 12 “losers” earned their spot at the bottom because they had the smallest spending increase in their category. That is very real proof of just how great 2021 was for the Veterinary Segment.

In our earlier analysis we saw that the increase was widespread across Income and Age groups. All age groups spent more and only 1 income group, $30>69K spent less and it was only -1.1%. In fact, the drop by the $30>69K group was driven by those with an income from $30>49K. The $50>69K segment had a 42% spending increase. The lift was widespread beyond Age and Income. In 9 categories all segments spent more. Besides the income category only Generations and CU composition had any segments that spent less on Veterinary Services. The segments were Single Parents and the Silent/Greatest Generations. This is not a surprise as both have low incomes and high life pressures

In recent years there had been a strong youth movement in Veterinary Spending from the <45 crowd. That changed in 2020 as the 45> groups accounted for 94% of the segment’s $3B increase. In 2021 the older crowd held on but their share of the record $7.8B increase fell to 56% – a little more balanced.

Generations is still the most popular demographic measurement. Baby Boomers fueled the growth of the Pet Industry and are still the leaders in Food and Veterinary $. However, in 2021 big increases in Services and Supplies pushed Gen X to the top in Total Pet $. Boomers have led the way in Veterinary $ for years but their lead is narrowing. As recently as 2017 their Veterinary spending was greater than all of the younger generations combined. In 2021 the younger groups spent 72% more than the Boomers. Boomers will remain a force in the industry for years to come. but the “torch” is slowly but surely being passed as Veterinary and Total Pet spending becomes demographically widespread.

Except for a small decline in 2017, Non-Vet Pet Services had shown slow but consistent growth in recent years. In 2018, that changed as spending grew a spectacular $1.95B to $8.72B. The number of outlets offering Pet Services has grown rapidly and consumers have opted for the convenience. However, spending plummeted -$1.73B in 2020 due to COVID closures and restrictions. 2021 brought a strong recovery as spending grew by $2.21B (+32.0%) a new record and hit $9.1B, also a record. In this report we will drill down into the data to see what groups drove the recovery. (Note: All numbers in this report come from or are calculated by using data from the US BLS Consumer Expenditure Surveys)

Services’ Spending per CU in 2021 was $68.13, up from $52.53 in 2020. (Note: A 2021 Pet CU (68%) Spent $100.19)

More specifically, the 32.0% increase in Total Pet Services spending came as a result of:

• 1.8% more households
• Spending 9.18% more $
• 18.78% more often

The chart below gives a visual overview of recent spending on Pet Services

After the big lift in 2018, spending essentially flattened out in 2019. Increased availability and convenience of Services has radically driven up the spending on Services. This happened despite a return to a more normal inflation rate, ≈2.4%. However, inflation grew even stronger, 2.5+% and in the 2^nd half of 2019 spending declined for the 1^st time in 18 months. The 2020 pandemic brought restrictions and closures which drove spending radically down. In 2021 the recovery began and accelerated in the 2^nd half of the year. Now, let’s look at some specific demographics of 2021 Services spending.

First, by Income Group.

Like 2018, all groups spent more in 2021. However, the biggest lifts came from higher incomes, $100K+. The <$70K groups had small increases and in fact, their 2021 spending was basically even with 2016. The 2021 50/50 dividing line in $ for Services was $133K. That is up from $123K last year and from $125K in 2019. It is still by far the highest of any segment. It is readily apparent that income is overwhelmingly the primary driver in Pet Services spending.

• <30K (25.5% of CU’s) – $22.47 per CU (+14.3%) – $0.77B, Up $0.11B (+16.8%) – This segment is getting smaller and money is tight, so Services spending is less of an option. The lift did push their Services $ up to their 2016>18 level.
• $30>70K (29.7% of CU’s) – $38.53 per CU (+7.2%) – $1.53B, Up $0.06B (+4.2%) – In 2020, they had the only increase and finished second in $ to the $150K> group. In 2021 they fell to 3rd place but they are the only group to spend more in both 2020 & 2021.
• $70>100K (14.8% of CU’s) – $52.60 per CU (+25.6%) – $1.04B, Up $0.22B (+26.4%) – The spending of this middle income group had slowly but consistently grown since 2016. Then came the pandemic and the $ plummeted in 2020, even falling below 2016. They rebounded somewhat in 2021 but the $ are still below 2018 & 2019.
• $100>150K (14.2% of CU’s) – $97.92 per CU (+55.7%) – $1.86B, Up $0.67B (+56.6%) – They had strong consistent growth from 2016>19. In 2020 they had the biggest drop, -40%. They came back in 2021 but below 2018 & 2019 $.
• $150K> (15.8% of CU’s) – $185.52 per CU (+24.5%) – $3.91B, Up $1.15B (+41.6%) – They moved steadily down after peaking in 2018. Spending took off in 2021. Their CU Services spending is now 2 to 9 times more than other groups.

Now, let’s look at spending by Age Group.

All age groups but 45>54 spent more on Services in 2021. This highest income group fell from the top spot, which they had occupied since 2019 to #3. The biggest lifts came from 35>44 and 55>64 year-olds. Here are the specifics:

• 75> (10.9% of CU’s) – $31.76 per CU (+37.5%) – $0.46B – Up $0.12B (+35.6%) This group has the greatest need for pet services, but money is always an issue. In 2019 they had the biggest increase. In 2020 they gave it all back. In 2021 spending surged with a big increase in frequency. 1.4% fewer CU’s spent 4.2% more $, 32.0% more often.
• 65>74 (16.1% of CU’s) – $63.47 per CU (+33.3%) – $1.36B – Up $0.39B (+40.1%). This group is also very value conscious and growing in numbers. From 2016 to 2019 their spending was very stable. In 2020 it fell 20% due to a big drop in frequency. In 2021 they came back strong. 5.1% more CU’s spent 11.2% more $, 20.0% more often.
• 55>64 (18.5% of CU’s) $84.25 per CU (+58.5%) – $2.09B – Up $0.75B (+56.3%) After a big drop in 2017, they began to slowly increase Services spending. A big drop in frequency drove spending down in 2020 but they had a strong recovery and took the top spot in Pet Services $ in 2021. 1.4% fewer CUs spent 28.5% more $, 23.4% more often.
• 45>54 (16.7% of CU’s)- $75.57 per CU (+0.3%) – $1.68B – Down $0.02B (-1.2%) This highest income group was #1 in Services $ until 2016. They regained the top spot in 2019 and held on in 2020 despite a 20% drop in frequency. In 2021 they increased frequency but $ fell and they are now #3. 1.5% fewer CU’s spent 8.4% less $, 9.4% more often.
• 35>44 (17.2% of CU’s) – $89.32 per CU (+56.9%) – $2.05B – Up $0.78B (+61.3%) Spending exploded in 2018 with a $1B increase pushing them to #1. In 2019 and 2020 spending fell. In 2021 they had the largest increase and moved up to #2 in Services $. 2.8% more CU’s spent 18.6% more $,32.3% more often.
• 25>34 (15.7% of CU’s) – $60.85 per CU (+15.1%) – $1.28B – Up $0.17B (+15.4%) This group of Millennials “found” the Services segment in 2018. Their spending slowly fell in 2019 & 2020 but reached a record high in 2021 due solely to a big increase in frequency. 0.2% more CU’s spent 6.0% less $, 22.5% more often.
• <25 (4.9% of CU’s) – $27.44 per CU (-15.4%) – $0.18B – Up $0.02B (+10.9%) After 2018 spending fell and stabilized. In 2021 CUs radically increased but frequency plummeted. 31.1% more CU’s spent 46.7% more $, 42.4% less often.

In 2020, 62% of the $1.7B decrease in Services $ came from the 55> groups. In 2021, only 45>54 yr-olds spent less and the biggest increase was from the 35>44 group. However, the groups over 55 years old accounted for $1.26B (57%) of the record $2.21B increase. The old folks had a strong pandemic recovery.

Finally, here are some key demographic “movers” that drove the big lift in Pet Services Spending in 2021. The segments that are outlined in black “flipped” from 1^st to last or vice versa from 2020. A red outline stayed the same.

You see the turmoil in 2021 as no segment held its position and 10 of 12 categories had at least 1 flip. However, unlike 2020 the turmoil was positive as 9 segments flipped from last to first and 5 categories had no segments that spent less on Services. In fact, 86 of 96 segments (90%) spent more on Services. This beat the previous best of 88% in 2018 and was a big change from 2020 when 79% spent less.

You see from the graph that the biggest positives were all substantially larger than the biggest decreases. This speaks to the strength and widespread nature of the lift in $ in the segments. We should also note that regardless of Race/Ethnicity, your housing arrangements, the number of people in your household, the region of the country or the type of area that you lived in, you spent more on Pet Services. That’s a pretty all-encompassing lift.

9 of the winners flipped from last to 1^st. This shows that the big Services spenders understandably lost the most due to pandemic restrictions and closures. However, they bounced back strong because Pet Services are a regular part of their Pet Parenting. The winners also demonstrate the importance of income to Services. While this segment has become more demographically widespread, higher incomes dominate. 8 of the 12 winners are either 1^st or 2^nd in income in their categories. The only winner that is somewhat of a surprise is 35>44 yr olds. Usually 45+ yr-old groups dominate.

Almost all of the losers are not unexpected. Once again, if we look at income, 8 of 12 are at or near the bottom in income in their category. 2 are not – the 45>54 yr-olds and Asians have the highest income in their category. Asians are not a surprise loser. Apparently, cultural differences cause them to spend less on their Pets than other Racial/Ethnic groups. The high-income 45>54 yr-olds are a surprise. They have been at or near the top in Services spending for years. In 2021 they finished 3^rd. It looks like they may have value shopped for a better price.

With 90% of demographic segments spending more on Services, the recovery was strong and widespread. There are no truly unique patterns, but one trend should be noted. Income is becoming even more important in Services spending. The 50/50 income dividing line in Services spending is now up to $133,000. That is 50% more than the average CU income and 90% more than the median income. 25% of CUs account for 50% of Services $ and 72% of the $2.2B lift.

Overview – After the huge lift in 2018, Services spending plateaued in 2019. There were a lot of ups and downs, but overall, the segment remained essentially stable at its new elevated level of spending. That changed with the pandemic in 2020. Like many retail services segments, Pet Services outlets were deemed nonessential and subject to restrictions This resulted in a radically reduced frequency of visits and was the biggest reason behind the 20% drop in spending.

2021 brought a strong recovery with the biggest increase in history. The segments that were hit the hardest by the pandemic generally had the strongest recovery. However, the recovery had a widespread demographic reach. In recent years, with the increasing humanization of our pets, Pet Services have become more important to Pet Parents and the Pet Industry. For Pet retail outlets, offering Services provides a key point of differentiation and a reason to shop in their store. You can’t get your dog groomed on the internet. Like other segments Services has experienced strong inflation in 2022. In the past, this has minimally impacted this income driven segment. We’ll see what 2022 brings.

 

 

 

Inflation continues to make headlines. There have been year over year increases in the monthly Consumer Price Index (CPI) larger than we have seen in decades. September prices rose 0.2% from August, and the CPI was still up +8.2% vs 2021, but down from +8.3% last month. Food at Home (groceries) prices continue to surge, up 13.0% over 2021. That’s 7 straight months of double-digit YOY monthly percentage increases. These are the first 10+% increases since 1981. As we have seen in recent years, even minor price changes can affect consumer pet spending, especially in the discretionary pet segments, so we will continue to publish monthly reports to track petflation as it evolves in the marketplace.

Total Pet prices were 4.1% higher in December 2021 than in December 2020, while the overall CPI was up 7.0%. The gap narrowed as Petflation accelerated and reached 96.7% of the national rate in June. National inflation has slowed since July but Petflation has increased, passing the National rate in July and is +11.0% in September, 34.5% higher than the national rate of 8.2%. We need to look a little 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 22 vs 21 which will include Pet Segments and relevant Human spending categories. Plus
  1. CPI change from the previous month
  2. Inflation changes for recent years (20>21, 19>20, 18>19)
  3. Total Inflation for the current month in 2022 vs 2019
  4. Average annual Year Over Year inflation rate from 2019 to 2022
• 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 September 2020 to September 2022. We will use December 2019 as a base number so we can track the progress from pre-pandemic times through an eventual recovery. Inflation is a complex issue. This chart is designed to give you a visual image of the flow of pricing. You can see the similarities and differences in patterns between segments and compare them to the overall U.S. CPI. The current numbers plus those from 12 and 24 months earlier are included as are the year-end numbers for 2020 & 2021.This will give you some key waypoints for comparisons. (Note: Some key peaks and valleys are also highlighted.)

The pandemic hit home in early 2020. In September, the national CPI was only +1.3% and Pet prices were down -0.2%. There are 2 different patterns between the Services and the Products segments. Veterinary and Services prices generally inflated after mid-2020, similar to the overall CPI. Food and Supplies prices generally deflated until late 2021. After that time, Petflation took off. Pet Food prices consistently increased but the other segments had mixed patterns until July, when prices in all segments increased. In August & September Petflation accelerated, especially in Food & Veterinary.

• U.S. CPI – The inflation rate was below 2% through 2020. It turned up in January 2021 and continued to grow until flattening out in Jul/Aug 2022. 44% of the overall 15.5% increase since 2019 happened from Jan>June 2022.
• Pet Food – Prices stayed generally below December 2019 levels from April 2020 to September 2021, when they turned up. There was a sharp increase in December but 89% of the 14.4% increase has happened since January.
• Pet Supplies – Supplies prices were high in December 2019 due to the added tariffs. They then had a “deflated” roller coaster ride until mid-2021 when they returned to December 2019 prices and essentially stayed there until 2022 when they turned sharply up reaching a new all-time pricing high in January, beating the 2009 record. Prices plateaued from February> May but turned up in June. The CPI flattened in July but turned up in Aug/Sept.
• 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 March then turned up July>September.
• Veterinary – Inflation has been generally consistent in Veterinary. Prices began rising in March 2020 and increased through 2021. Then a pricing surge began in December which pushed them past the overall CPI. In May prices fell and stabilized in June. Then strong increases in July>September again put them above the National CPI.
• Total Pet – The blending of the different segment patterns made the Pet Industry appear calm. That ended in December 2021 as prices surged in all. After mixed up and downs, in Jul>Sep inflation grew in all segments.

Next, we’ll turn our attention to the Year over Year inflation rate change for September and compare it to last month, last year and to previous years. We’ve added some human categories to put the pet numbers into perspective.

Overall, Prices were up 0.2% vs August but were up 8.2% vs September 2021. The Grocery increase is now 13.0% which is a big negative but there is another area of concern. Only 3 of 9 categories had increases over 1% from last month, but they are all “Pet”. The National CPI rate is slowing but Petflation, especially in Food & Veterinary, is getting worse.

• U.S. CPI– Prices are up 0.2% from August. The YOY increase is +8.2%, down from the 9.1% peak in June. The targeted inflation rate is <2% so we are still 4 times higher than the “target”. However, a 3rd slight decline is a good start.
• Pet Food– Prices are +1.3% vs August and 14.0% vs Sep 21. They also exceeded the Food at Home inflation rate for the 1^st time. The YOY increase is being measured against a time when prices were at 2019 levels, but that increase is over 4 times the pre-pandemic 3.3% increase from 2018 to 2019.
• Food at Home – Prices are up 0.6% from June. The increase from 2021 is 13.0%, down slightly from 13.5% last month. Inflation for this category since 2019 is the highest on the chart and is 47% more than the national CPI.
• Pets & Supplies – Prices only grew 0.3% from August but set a new record high. They fell from to 2^nd to 3rd in terms of monthly increase over 2021 for industry segments and still have the lowest increase since 2019.
• Veterinary Services – September prices grew 1.7% from August. They are +11.6% from 2021 and trail only Food in the Pet Industry. They also remain 2^nd in the increase since 2019 with 19.7% compared to Food at home at 22.9%.
• Medical Services – Prices sharply increased at the start of the pandemic in 2020 but then inflation slowed and fell to a low rate in 2021. In 2022 prices are turning sharply up again, +48% vs the pre-pandemic 2018>19 rate.
• Pet Services – Inflation slowed in 2020 but began to grow in 2021/22. Prices are +0.6% from August and +6.3% vs 2021. Prices hit a new record high in September, passing the previous record set in May.
• Haircuts & Other Personal Services – Prices are +0.3% from Aug. and +5.1% from 2021. They are +16.0% since 2019.
• Total Pet – Petflation is strong, 3+ times the rate of last year and is 34.5% ahead of the National CPI. All segments increased prices in September, but inflation is primarily being driven by Food & Veterinary. Inflation can cause reduced purchase frequency in Supplies, Services and Veterinary. Super Premium Food has been generally immune as consumers are used to paying a lot and it is needed every day. We’ll see if consumers are willing to pay the new high prices for food and buy the more discretionary products/services at the same frequency as they did in the past.

Now here’s a look at Year-to-Date numbers. How does 2022 compare to previous years…so far?

The increase from 2021 to 2022 is the biggest for 7 of 9 categories. The average annual increase since 2019 is 3.8% or more for all but Pet Food & Pet Supplies. This is largely due to deflation in the 1^st half of 2021.

• U.S. CPI – The current increase is still almost double the average increase from 2019>2022, but almost 4 times the average annual increase from 2018>2021. Inflation is a big problem that started recently.
• Pet Food – Inflation is growing stronger, especially after deflation in the 1^st half of 2021 kept YTD prices low.
• Food at Home – The 2022 YTD inflation beat the U.S. CPI by 27%. You can see the impact of supply chain issues.
• Pets & Pet Supplies – Prices have been at record levels since January. Although the 2021>22 increase is being measured against a “flat” 2021, it is significant and just slightly behind Food & veterinary in the Pet Industry.
• Veterinary Services – Trails only Food at Home in inflation since 2019 and is the only segment on the chart with a 3+% inflation rate each year throughout the pandemic and recovery. No matter what, just charge more.
• Medical Services – Prices went up significantly at the beginning of the pandemic, but inflation slowed in 2021. In 2022 there is another pricing surge as the inflation rate is 40% higher than pre-pandemic 2018>19.
• Pet Services – February & May set records for the biggest year over year monthly increases in history. Prices began to grow again in July, reaching a record high in September. The current September YTD increase of 6.0% is the largest in history. Demand has grown for Pet Services while the availability has decreased, a formula for inflation.
• Haircuts & Personal Services – The services segments, essential & non-essential were hit hardest by the pandemic. After a small decrease in March, prices turned up again. The YTD rate is just behind 2020>21 but still 89% more than 2018>19. Consumers are paying 15% more than in 2019. This usually reduces the purchase frequency.
• Total Pet – We have seen basically two different inflation patterns. After 2019, Prices in the Services segments continued to increase, and the rate accelerated as we moved into 2021. The product segments – Food and Supplies, were on a different path. They generally 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 we neared yearend. In 2022, everything changed as Food and Supplies prices turned sharply up. Food prices continued to climb. Supplies pricing stabilized then grew in Jun>Sep. The Services segments have had some ups & downs, but both are inflating now. The net was a September YTD Petflation increase vs 2021 of 8.1%, 97.6% of the high 8.3% National rate. It was only 72.5% back in March.

Petflation is growing stronger. Will it impact spending? Let’s put it into perspective. The 8.1% current YTD increase in Total Pet is still below the 8.9% record set in 2009 but 5+ times more than the 1.5% avg since then. Pet spending continues to move to higher income groups, but the impact of inflation varies by segment. Supplies is the most affected as many categories are 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 reduction in visit frequency. Spending in the Services segment is driven by higher incomes, so inflation is less impactful. We’ll just have to wait and see the overall impact on Pet Spending of the continued strong Petflation.

Pet Food Retail prices are surging. Changes in the price manufacturers charge for a product obviously impact the retail price for consumers. However, it is not always a direct correlation and often there is a significant delay in the response. The retailers who sell high demand products like Pet Food are under intense competitive pressure.

In this brief report we will update the changes in the Producer Price Index (PPI) for Pet Food to see how they match up to the changes in the retail CPI from May 2020 to August 2022. Pre-pandemic December 2019 is used as the base number in all graphs to facilitate comparisons.

The first graph plots the PPI pricing path of Dog & Cat Food and Other Pet Food vs the Pet Food Retail CPI.

• Pricing remained essentially stable for all groups through most of 2020. The first change was that the PPI for Non-Dog/Cat Pet Food began moving up in November. This lift has continued but this small category has little impact on overall Pet Food Retail Prices.
• The Dog & Cat Food PPI moved up sharply in July 2021 then essentially stabilized until the end of the year. This turned Retail Prices up slightly, only +1.6% vs 2019 by December 2021.
• In 2022, the Dog & Cat PPI turned up in Jan/Feb, stabilized in Mar/Apr, rose sharply in May/June, then grew slowly in Jul/Aug. Pet Food Retail prices began growing in February. This increase accelerated in March and continues through August. The Retail inflation rate for Pet Food is now 67% of the PPI increase for Dog & Cat Food. In February it was 31.6% and only 25.4% back in December 2021. This gap is definitely narrowing as the Retail price increases are more closely matching the increase in manufacturing costs. By the way, the increase for Other Pet Foods is a meteoric +33.7% vs 2019. This is huge but as you will see later in the report, it is not the biggest increase in any Pet Food category.

Obviously, it takes a while for a rise in the PPI to impact retail prices. Also, as we saw in most of 2020 and in the 2^nd half of 2021, stability in the PPI usually generates stability in Retail prices.

Dogs & Cats “rule” the pet food segment just like they “rule” the overall Pet Industry. However, the lift in prices for manufacturing Food for Other Pets has now gotten so large that it is having an impact in pushing Pet Food Retail Prices up.

We will now drill a little deeper into the “ruling” Dog & Cat Food categories. We will look at the individual PPI history for Dog Food and Cat Food and the 2 largest sub-categories in each – Dry/Semi-moist and Canned. Using December 2019 as a base, our chart will track and compare the Pet Food CPI and the PPI history for all groups from May 2020 to August 2022. The US BLS is now releasing timely data on these specific categories so that it can be compared to the most recent numbers from the big groups…

• The PPI for all categories was essentially unchanged from December 2019 until October 2020. At that time manufacturers’ prices in the Canned Dog Food category moved up 1.1%.
• In October 2020 Pet Food retail reached bottom in their deflationary movement. The price increase in Canned Dog Food slowed overall Pet Food deflation and essentially stabilized prices near the 2019 level.
• Both the individual PPIs and the overall Pet Food CPI plateaued from November 2020 through May 2021.
• All prices moved up slightly in June 2021, but the PPIs took off in July. The Pet Food CPI also was above December 2019 for the 1^st time since February 2020.
• Canned Dog Food led the skyrocketing PPI prices in July 2021 but all categories had a significant increase. The increase continued in August, but the CPI unexpectedly dipped slightly below December 2019.
• The PPIs for all groups essentially stabilized from September through December 2021 while the Pet Food CPI began to increase, especially from Nov>Dec.
• In January 2022, the PPIs for all but Canned Dog Food turned up again. Their increase accelerated in February, with Canned Cat Food skyrocketing up to +13.6%, almost equal to the overall increase by Canned Dog Food. The Pet Food CPI moved up slightly in January and then inflation took off in February.
• The PPIs stabilized again in March, but we should note that prices for Canned Dog Food have been stable since August, after the spectacular Jun>August lift. While manufacturing prices stabilized, inflation in Pet Food Retail began accelerating
• In May/June all PPIs took off, with the biggest lift in the period since 2019. They stabilized in July but grew again in August. The Retail Pet Food prices have grown steadily since March. There is usually a timing delay from the PPI to the CPI as it takes time for the impact to work its way from manufacturer to retailer to consumer. The big PPI lift in June probably means that Retail Pet Food prices will continue to increase.
• We see that the Canned Food categories have significantly more pricing volatility than Dry Food for both Dogs and Cats. Canned Dog Food led the way in the PPI lift and ended up with by far the biggest increase of any category in the Pet Food segment, +38.8%. Canned Cat Food finished 2^nd in Dog/Cat at +25.4%.
• However, when you look at how these individual PPIs compare to the overall PPI for Dog or Cat, it is readily apparent that Canned Cat Food has a much larger share of total Cat Food than Canned Dog Food has of Total Dog Food.

In terms of what will happen in the future, we turn again to our first chart. The PPI for Dog/Cat Food was stable through April but turned sharply up again in May/June and continues to grow. When Mfg prices rise, Distributors & Retailers must look closer at their product mix. For items that cost more, they can raise prices, accept lower margins or some combination of both. It’s likely that rising manufacturing prices will cause Retail Pet Food inflation to continue to grow. We need the PPIs to flatten for the CPI to stop increasing. We hope that any supply chain issues will be fixed, returning Pet Food Retail and Manufacturing to a more price competitive market.