Archive for category: Pet Market Segments

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. October prices rose 0.4% from September, and the CPI was still up +7.7% vs 2021, but down from +8.2% last month. The grocery price surge slowed a little but they’re still up 12.4% over 2021. That’s 8 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 market.

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 +11.6% in October, 50.6% higher than the national rate of 7.7%. 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 October 2020 to October 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 2020. In October, the national CPI was only +1.3% and Pet prices were down -0.4%. 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 all increased. In August>October Petflation accelerated, except for a miniscule dip in Veterinary last month.

• 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. 43% of the overall 16.0% 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 90% of the 15.6% 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>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 has turned up again July>Oct.
• Veterinary – Inflation has been pretty consistent in Veterinary. Prices turned up in March 2020 and grew through 2021. A pricing surge began in December which put them above the overall CPI. In May prices fell and stabilized in June. Prices turned up again and despite an October dip they have been above the National CPI since July.
• Total Pet – The blending of the different segment patterns made Total Pet appear calm. In December 2021 prices surged in all. The segments had mixed up & downs Mar>Jun but Total Petflation has accelerated since July.

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’ve added some human categories to put the pet numbers into perspective.

Overall, Prices were up 0.4% vs September but were up 7.7% vs October 2021. The Grocery increase is down to 12.4% which is still a big negative but there is another area of concern. Only 2 of 9 categories had increases over 1% from last month, but both are “Pet”. The National CPI rate is slowing but Petflation, especially in Food & Supplies, is getting worse.

• U.S. CPI– Prices are up 0.4% from August. The YOY increase is +7.7%, 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 4th slight decline is good news.
• Pet Food– Prices are +1.0% vs September and 15.0% vs Oct 21. They are now 21% higher than the Food at Home inflation rate – not good news! The YOY increase is being measured against a time when prices were essentially at 2019 levels, but that increase is still over 4 times the pre-pandemic 3.7% increase from 2018 to 2019.
• Food at Home – Prices are up 0.5% from September. The increase from 2021 is 12.4%, down slightly from 13.0% last month. Inflation for this category since 2019 is the highest on the chart and is 46% more than the national CPI.
• Pets & Supplies – Prices grew 1.4% from September, the biggest increase of any segment. However, they stayed in 3rd place in terms of monthly increase over 2021 for pet segments and still have the lowest increase since 2019.
• Veterinary Services – October prices fell -0.03% from September. They are +11.1% from 2021 and trail only Food in the Pet Industry. They also remain 2^nd in the increase since 2019 with 19.5% compared to Food at home at 23.1%.
• 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 October prices dipped but 2022 prices are still 6% above the pre-pandemic 2018>19 rate.
• Pet Services – Inflation slowed in 2020 but began to grow in 2021/22. October prices are +0.7% from September and +6.3% vs 2021, reaching another new record high.
• Haircuts & Other Personal Services – Prices are +0.2% from Sep. and +5.6% from 2021. They are +15.8% since 2019.
• Total Pet– Petflation is strong, 3 times the rate of last year and is 50.6% ahead of the National CPI. All but Veterinary increased prices in October, but inflation is still 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 about 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 36%. 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 34% 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 record highs in September & October. The October YTD increase of 6.1% 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 even with 2020>21 but still 93% 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>Oct. The Services segments have had ups & downs, but both are generally inflating. The net was an October YTD Petflation increase vs 2021 of 8.4%, surpassing the high 8.3% National rate. In March, it was only 72.5% of the CPI.

Petflation is growing stronger. Will it impact spending? Let’s put it into perspective. The 8.4% 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.

Total Pet spending grew to $99.98B in 2021, up $16.23B (+19.4%) from 2020, the biggest increase in history. In a big turnaround the Supplies segment led the way with a $8.65B, 57.0% increase to $23.81B. (Note: All numbers in this report come from or are calculated by using data from the US BLS Consumer Expenditure Surveys)

Spending plummeted in 2019 & 2020 down -$4.6B due to Tarifflation and the Pandemic. In 2021, with lower prices and an easing of restrictions, spending turned up sharply in the 1^st half then skyrocketed up in the 2^nd half. We’ll “drill down” into the data to try to determine what and who are “behind” the explosive growth in Supplies Spending in 2021.

In 2021, the average household spent $178.20 on Supplies, up 54.3% from $115.52 in 2020. (Note: A 2021 Pet CU (68%) Spent $262.06) This doesn’t exactly match the 57.0% total $ increase. Here are the specific details:

• 1.8% more CU’s
• Spent 40.7% more $
• 9.7% more often

Let’s start with a visual overview. The chart below shows recent Supplies spending history.

Since the great recession, spending in the Supplies segment has been driven by price. Although many supplies are needed by Pet Parents, when they are bought and how much you spend is often discretionary. When prices fall, consumers are more likely to buy more. When they go up, consumers spend less and/or buy less frequently.

2014 was the third consecutive year of deflation in Supplies as prices reached a level not seen since 2007. Consumers responded with a spending increase of over $2B. Prices stabilized and then moved up in 2015.

In 2015 we saw how the discretionary aspect of the Supplies segment can impact spending in another way. Consumers spent $5.4B for a food upgrade and cut back on Supplies – swapping $. Consumers spent 4.1% less, but they bought 10% less often. That drop in purchase frequency drove $1.6B (78%) of the $2.1B decrease in Supplies spending.

In 2016, supplies’ prices flattened out and consumers value shopped for their upgraded food. Supplies spending stabilized and began to increase in the second half. In 2017 supplies prices deflated, reaching a new post-recession low. The consumers responded with a $2.74B increase in Supplies spending that was widespread across demographic segments. An important factor in the lift was an increase in purchase frequency which was within 5% of the 2014 rate.

In 2018 prices started to move up in April and rapidly increased later in the year due to the impact of new tariffs. By December, Supplies prices were 3.3% higher than a year ago. This explains the initial growth and pull back in spending.

In 2019 we saw the full impact of the tariffs. Prices continued to increase. By yearend they were up 5.7% from the Spring of 2018 and spending plummeted -$2.98B. The major factor in the drop was a 13.1% decrease in purchasing frequency.

2020 brought the pandemic. Prices deflated but with retail restrictions and the consumers focus on needed items, both the amount spent and frequency of purchase of Supplies fell.

In 2021 the recovery began with a strong lift in the 1^st half that reached record levels in the 2^nd half. Pet parents bought all the supplies that they had been putting off for 2 years because of Tarifflation and the Pandemic. It was the greatest lift in history, but 2021 spending ended up where it was headed in 2018 before being “derailed” by outside influences.

That gives us an overview of the recent spending history. Now let’s look at some specifics regarding the “who” behind the 2021 lift. First, we’ll look at spending by income level, the most influential demographic in Pet Spending.

National: $178.20 per CU (+54.3%) – $23.81B – Up $8.65B (+57.0%).

All big income groups spent more but the 50/50 $ divide increased astronomically from $92K to $114K.

• <$30K (25.5% of CU’s)- $76.26 per CU (+33.0%) $2.62B– Up $0.69B (+35.9%). This group is very price sensitive, but their big spending lift finally put them ahead of 2016 $ despite the fact that they have 15% fewer CUs.
• $30K>70K (29.7% of CU’s)- $123.83 per CU (+27.2%) $4.91B Up $0.94 (+23.6%). This big, lower income group closely matches both the national pattern and that of the $150K+ group. Tarifflation had a big impact, but COVID and the recovery were less pronounced. Amazingly enough, until 2019 they were the leader in Total Supplies $.
• $70>$100K (14.8% of CU’s) – $160.38 per CU (+36.3%) – $3.18B Up $0.86B (+37.2%). This middle-income group had been consistent in Supplies spending. 2020 hit them hard but they too rebounded stronger than the drop.
• $100K>$150K (14.2% of CU’s) – $229.43 per CU (+56.7%)- $4.35B Up $1.59B (+57.6%). This high income group had the 2^nd biggest COVID drop & traded Supplies $ for Food & Veterinary. In 2021 they had the 2^nd strongest recovery.
• $150K> (15.8% of CU’s) – $415.37 per CU (+83.9%) $8.75B Up $4.57B (+109.2%). The more money that you have. The more that you can spend. The $200K> segment almost tripled their Supplies spending in 2021.

Every big group spent more but the biggest increases came from higher incomes. Only the $40>49K group spent less in 2021 but they had spent 25% more in 2020 so they returned to pre-pandemic 2019 $pending… but with 9% fewer CUs.

Now, we’ll look at spending by Age Group.

National: $178.20 per CU (+54.3%) – $23.81B – Up $8.65B (+57.0%).

It’s simple. Under 25 spent a little less. Over 25 spent a lot more.

• 35>44 (17.2% of CU’s) $312.65 per CU (+120.3%) – $7.17B; Up $4.0B (+126.3%) This group is second in income and overall expenditures. The strong inflation drove the $ down in 2019 but the Pandemic had little additional impact. Spending skyrocketed in 2021 as 2.8% more CUs spent 92.6% more $, 14.4% more often.
• 55>64 (18.5% of CU’s) $180.26 /CU (+65.5%) – $4.46B – Up $1.73B (+63.2%). When prices turned sharply up in the 2^nd half of 2018 and 2019, spending stalled then dropped. Spending fell again in 2020 as they binge bought pet food. They had a strong recovery in 2021 as 1.4% fewer CU’s spent 51.2% more on Supplies, 9.5% more often.
• 45>54 (16.7% of CU’s) $186.48 per CU (+27.4%) – $4.15B – Up $0.85B (+25.6%). Except for 2019 and now 2021, this highest income age group had been the leader in Supplies spending since 2007. They came back from the pandemic drop but now are in 3^rd place for Supplies $. 1.5% fewer CU’s spent 24.4% more, 2.4% more often.
• 25<34 (15.7% of CU’s) $177.00 per CU (+32.9%) – $3.72B; Up $0.93B (+33.2%). After trading Supplies $ for upgraded Food and Vet Care in 2016, these Millennials turned their attention back to Supplies. The rising prices hit them hard in 2019 but they actually increased spending in the pandemic. The lift grew even stronger in 2021 primarily due to increased purchase frequency. 0.2% more CUs spent 9.7% more $, 21.1% more often.
• 65>74 (16.1% of CU’s) $130.28 per CU (+35.6%) – $2.80B – Up $0.83B (+42.5%). This older group is very price sensitive so rising prices caused them to cut back on spending in 2019. Like the 25>34 yr-olds, they also increased spending in 2020 and spending soared in 2021. However, it was not due to increased frequency. 5.1% more CUs spent 32.0% more, 2.7% more often. Their purchase size was radically higher.
• 75> (10.9% of CU’s) $67.13 per CU (+56.0%) – $0.98B, Up $0.34B (+53.7%). This lowest income group is truly price sensitive and their spending was severely impacted by the Pandemic. They had a strong recovery in 2021 but didn’t quite make it back to their 2018 level. 1.4% fewer CU’s spent 22.8% more, 27.1% more often.
• <25 (4.9% of CUs) $80.11/CU (-27.6%) $0.53B – Down $0.03B (-5.1%). Most moved out of their parents homes but their average CU spending fell a lot. 31.1% more CUs spent 15.8% less $, 14.8% less often.

The COVID recovery was widespread and spectacular. Only <25 spent less and the performance of 35>44 was amazing.

Next, let’s take a look at some other key demographic “movers” in 2021 Pet Supplies Spending. The segments that are outlined in black “flipped” from 1^st to last or vice versa from 2020. The red outline stayed the same.

In 2019, in 9 of 12 demographic categories all segments spent less on Supplies. In 2021, in 9 categories all segments spent more. Also in 2019, 97% of 96 demographic segments spent less. In 2021, 97% spent more. Quite a turnaround.

Most of the winners and many losers are in their “usual” spot. Quite frankly, there are no surprises. There were 6 flips. 5 were from last to 1st. 5 Segments held their position from 2020.  4 of them were winners. This chart clearly shows that 2021 was an incredibly positive year for Pet Supplies spending. Your Race or ethnicity, where you lived, how you lived, the makeup and size of your household, your occupation or whether you even had a job didn’t matter. All of the segments in these demographic groups had 1 shared behavior. They spent more on Supplies for their Pet Children.

The $8.65B increase in Supplies $ was the biggest in history, beating the $3.1B lift in 2008 but should it have been expected? Supplies is a discretionary segment, so it is more susceptible to market factors, especially inflation changes, than the more needed segments. Prices deflated from 2016 to 2018, resulting in a $5B increase. Then came Tarifflation and the Pandemic and Spending fell -$4.6B. What if these 2 outside events had never happened? Where would we be  in Supplies Spending? The annual growth rate for Supplies from 2015 to 2018 was +9.9%. From 2018 to 2021 it was +6.6%. A 10% growth rate would be difficult to maintain so it is not surprising that despite the big lift, the Supplies growth rate has fallen. We shouldn’t be surprised by the massive spending lift. Supplies are discretionary, primarily in purchase frequency. Most are still needed. In 2021, Pet Parents just bought the Supplies that they have needed for the past 2 years. The current big, unanswered question is how will the high inflation rates in 2022 affect Supplies spending?

After the pandemic turmoil in 2020, there was a strong recovery in 2021. Total Pet spending had a record increase and reached $99.98B, up $16.23B (+19.4%). Food spending fell after the record “panic” increase in 2020 but the other essential segment, Veterinary had record growth. The discretionary segments – Supplies & Services were hit hard by the pandemic. In 2021, Pet Parents gave them the attention they deserve…and a lot more. Here are the specifics:

• Pet Food – $34.41B; Down $2.44B (-6.6%)
• Pets & Supplies – $23.81B; Up $8.65B (+57.0%)
• Veterinary – $32.67B; Up $7.82B (+31.5%)
• Pet Services – $9.10B; Up $2.20B (+32.0%)

The industry truly is a “sum” of its integral segments, and each segment has very specific and often very different buying behavior from the many consumer demographic segments. For this reason, we’re going to analyze each of the industry segments first. This will put the final analysis of Total Pet’s Record Spending into better perspective. Note: The numbers in this report come from or are calculated by using data from the current and past US BLS Consumer Expenditure Surveys. In 2021, this was gathered by the U.S. Census Bureau from over 42,000 interviews and spending diaries. The final data was then compiled and published by the US BLS.

We will start with the largest Segment, Pet Food (and Treats). In 2021 Pet Food Spending totaled $34.41B in the U.S., a $2.44B (-6.6%) decrease from 2020. The current trend in high priced, super premium foods magnifies the results of any changes in consumer purchasing behavior. In earlier research we discovered a distinct, long-term pattern in Pet Food Spending. In 2018 we broke the pattern due to outside influences – 1^st the FDA warning, then with COVID in 2020. Here is Pet Food Spending since 1997 in full Retail Dollars and adjusted for inflation.

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

For 20 years, Pet Food was driven by short term trends. A new food trend catches the consumers’ attention and grows …for 2 years. Then sales plateau or even drop…and move to the next “must have”. After 2014, the changes  became more pronounced and the situation got more complicated due to a number of factors starting with the move to high priced super premium foods, but including increased competition, especially from the internet, and behavioral changes, like increased value shopping. In 2018, outside influences came into prominence. The first was the FDA warning on Grain Free dog food. This caused many Pet Parents to back away from certain foods. When the warning was determined to be bogus, the Food segment began recovery. Then came COVID. Fear of possible shortages caused certain groups to binge buy food. Now, that’s over. With the spending dip in 2021 after 2 years of increases, perhaps the spending pattern is back on track. Now, let’s take a closer look at spending since 2014.

First, some specifics behind the $2.44B (-6.6%) decrease to $34.41B. In 2021, the average U.S. Household spent a total of $258.09 on Pet Food. This was an -7.9% decrease from the $280.38 spent in 2020, which doesn’t exactly “add up” to the -6.6% decrease in total Food Spending. With additional data provided from the US BLS, here is what happened.

• 1.5% more U.S. CUs
• Spent 12.7% less $
• 5.5% more often

By the way, if 68% of U.S. CUs are pet parents then their annual Pet Food Spending is $379.54. Here’s a rolling history.

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

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

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

After the 2019 recovery came the pandemic of 2020. There is nothing more necessary to a Pet Parent than pet food. This spurred binge buying, especially in the 1^st half of the year and drove the biggest annual spending increase in history. However, binge buying doesn’t increase usage, so spending has fallen in 2021. Another factor was the ongoing strong search for value & convenience which drove many consumers online. Consumers spent less per purchase which reflects the end of the binge as well as their search for value. There were 1.5% more CUs and they bought more frequently. The increase in frequency came from more regularly scheduled deliveries but some pet parents also downsized their purchases to lower the price. When you put all these factors together, the small drop in spending is not a surprise.

The growth of Pet Food spending since 2014 reflects the rise of Super Premium but also another trend – the spectacular increase in the number and use of Pet Medications and Supplements, which are often produced in the form of treats. Together, the strength of Pet Food and these product subcategories reflect the Pet Parents’ absolute number 1 current Concern – the health, wellbeing and safety of their Pet Children, which starts with the quality of their food.

Now let’s look at some specific 2021 Pet Food Spending Demographics. First, we’ll look at income. Prior to 2014 it was a less dominant factor in Food spending. However, the move to Super Premium has brought it more to the forefront. In 2015 the spending of the over $70K group exceeded the <$70K for the first time. In 2021, $70K> had a big drop in $ but was still 71% more than <$70K. The $100>150K had the biggest decrease while <$30K, $70>100K and $150K> actually spent more. Due to the recent movement to higher income groups, we now also report spending over/under $100K. In 2015, the 50/50 divide on Pet Food spending was about $70K. In 2019 it was $87K. In 2020 it was about $107K, breaking the $100K barrier for the first time. In 2021 it fell to $92K, about 5% more than the average CU income but 30% more than the median income. Higher income is still important in Pet Food spending. The chart below shows the annual spending for the major income groups from 2016 > 2021. This should put the 2021 numbers into better perspective.

Before we get into the details for 2021, we should note the uniqueness of 2017. With competitive pricing on Super Premium Foods and the consumers’ commitment to pet health, 2017 was the only year since 2015 with spending growth in every major income group. Since then, we have seen the major impact on various groups by outside influences. In mid-2018 it was the FDA grain free warning and in 2020 it was the pandemic.

2021 National Numbers: $258.09 per CU (-7.9%); $34.41B; Down $2.44B (-6.6%); 2016>2021 – Up $7.91B (+29.8%)

The spending pattern was mixed. The spending by the <$70K groups was stable. There was a huge drop by the 2020 binge buying $100>150K group which was somewhat mitigated by lifts from $70>100K & $150K> groups.

Here are 2021 specifics:

• Under $30K: (25.5% of CU’s) – $142.61 per CU (-3.0%) – $4.67B – Up $0.06B (+1.3%). Obviously, this group is very price sensitive. It was also strongly impacted by the pandemic. The number of CU’s was up 4.2% in 2021 after steadily declining for years. In 2020, CUs were down 18.8% from 2015. They don’t have a lot of $ to spend but they did do some binge buying in 2020. Their spending lift in 2021 was entirely due to more CUs. They are still fully committed to their Pets. This is evidenced by the fact that they spend 1.02% of their Total CU expenditures on their pets, including 0.43% on Pet Food. The national averages are: Total: 1.12%; Food: 0.39%.
• $30K>$70K: (29.7% of CU’s) – $194.37 per CU (+0.2%) – $8.03B – Down $0.14B (-1.7%). They are also very price sensitive and 2021 didn’t make things any better. Their average income was unchanged from 2020 to 2021 while the national average increased by 3.7%. They had a 1.9% decrease in the number of CUs which negated their slight increase in CU spending. The Pet Food spending within this big group was definitely mixed. The $30>39K group lost 7% in CUs and radically decreased spending, -$1.0B (-33.3%). The $40>49K group fell -4.5% in numbers but they increased their CU spending by 2.8%. However, their $ still fell by -$0.04B. Now, the most positive group, $50>69K. They gained 3.5% in CUs but spent 25.5% more per CU on Pet Food. These 2 factors pushed their Total Pet Food Spending up $0.90B (+30.0%). It was a big lift but not enough to overcome the decreases from $30>49K.
• $70K>$99K: (14.8% of CU’s) – $313.68 per CU (+54.4%) – $6.21B – Up $2.45B (+65.4%). This group has a regular up/down spending pattern. They got “on board” with Super Premium food in 2017 but they became very sensitive to outside influences – the FDA warning in 2018 and COVID in 2020. However, they came back strong from both. They are middle income, with family responsibilities and under considerable monetary pressure.
• $100>150K (14.2% of CU’s) – $289.71 per CU (-62.0%) – $5.46B – Down $8.92B (-62.1%). This group was the driver in the 2020 panic, binge buying of Food in 2020. It was an emotional reaction, but they had the $ to do it. They are “eating down” the excess inventory as the 2021 drop was $1.7B more than the 2020 lift. However, they are still spending the money “saved” on Food on their pets, with a 36+% spending lift in all other industry segments.
• $150K> (15.8% of CU’s) – $485.93 per CU (+68.6%) – $10.05B – Up $4.12B (+69.5%). This group shows that there were strong pandemic recoveries for some groups as their Pet Food CU spending grew by 68.6%. They also illustrate the growing importance of income in Pet Spending – the higher the better. They had by far the biggest increase in Pet Food $ but they also were responsible for 87% of the $16.2B increase in Total Pet spending.

The 2020 pandemic had a slightly positive impact on the <$70K income groups. However, except for the binge buying by the $100>150K group, it was negative for higher incomes. 2021 spending was down because there was not a repeat in the binge but all groups but <$40K & $100>150K spent more per CU on Pet Food in 2021. In fact, the $70>100K & $150K> groups combined to spend $6.6B more on Pet Food in 2021 than in 2020. We should also note that Pet Food spending is up $3.22B from pre-pandemic 2019, +10.3%, a growth rate of 5.0%, which is close to the 5.3% from 2014>19.

Now, Spending by Age Group…

2021 National Numbers: $258.09 per CU (-7.9%); $34.41B; Down $2.44B (-6.6%); 2016>2021 – Up $7.91B (+29.8%)

The overall assessment appears simple. The 55>64 yr-old, young Boomers spent less, while all other groups spent more.

• 55>64 (18.5% of CU’s) – $275.79 per CU (-52.7%) – $6.75B – Down $7.89B (-53.9%). This group (all Baby Boomers) has been at the forefront of recent major spending swings. In 2015 they upgraded to Super Premium. In 2016 they shopped for a better price. In 2017 they led a deeper penetration of the upgrade. In 2018 they had a -$3.5B reaction to the FDA warning. They began to recover in 2019 but then came 2020, which saw a huge lift in spending. There were 3 major contributing factors. First was panic, binge buying due to pandemic. They also were still recovering from the FDA warning. Finally, the pandemic caused the loss of over 2 million <25 CUs. Many of them moved back with their parents bringing their pets with them. That brought us to 2021. There was no repeat of the panic buy and they “ate up” some of the extra stock. Many of their kids moved out again. Together this caused a big drop in $.
• 45>54 (16.7% of CU’s) – $292.68 per CU (+18.3%) – $6.58B – Up $1.12B (+20.6%). This group is #1 in income and total CU expenditures. Up until 2015 they were #1 in Pet Food spending. They bought premium food but didn’t “buy in” to Super Premium until 2017. They were negatively impacted by the FDA warning, but they rebounded stronger than any other group. In 2020, their spending dropped significantly. Although some may have dialed back their purchases. It is likely that most found value and cheaper prices by buying on the internet. In 2021, they opted for even more expensive food, spending 24% more per purchase which produced a 20.6% increase in $.
• 65>74 (16.1% of CU’s) – $291.80 per CU (+17.5%) – $6.13B – Up $0.93B (+17.8%). This group is now all Baby Boomers and growing. They are Boomers so their Pets are a major priority. They spend 1.27% of their total CU expenditures on their pets, the highest percentage of any group. They are also the only group to spend more on Food every year since 2016. They are starting to retire but many are still working (0.6 per CU). Their income was up 5.4% vs 2020, compared to a national increase of 3.7%. They obviously spent some of the extra money on their pets.
• 35<44 (17.2% of CU’s) – $249.89 per CU (+27.9%) – $5.62B – Up +$1.24B (+28.3%). They are primarily young Gen Xers. They are 2^nd in income and CU spending but have the biggest families. Their spending pattern matches the older Gen Xers but is usually less volatile. They spent 17.9% more 8.5% more often for the 2^nd biggest increase in $.
• 25>34 (15.7% of CU’s) – $225.51 per CU (+1.3%) – $4.91B – Up +$0.12B (+2.6%). In recent years the spending pattern of these Millennials has foreshadowed the overall market for the following year. In pandemic 2020 they spent 22.3% more but just essentially held their ground in 2021. They spent 12.9% more, 10.2% less often.
• 75> (10.9% of CU’s) – $261.20 per CU (+85.3%) – $3.76B – Up +$1.76B (+88.3%). Both the effort and the expense of Pet Parenting become issues as we reach 75+. However, they remain committed to their Pets. They got fully on board with Super Premium Pet Food in 2021. They spent 87.8% more per purchase, 1.2% less often.
• <25 (4.9% of CU’s) – $98.30 per CU (+31.6%) – $0.66B – Up +$0.27B (+68.2%). Many of this group that had moved back in with their parents, left home again. This is apparent as 27.8% more CUs bought Pet Food 47.3% more often.

In 2020 the 55>64 yr old Boomers binge bought Pet Food. As a result, in 2021 they had a big drop in spending, which was the only decrease by any age group. The Pandemic caused more Pet Parents to focus on the health & wellbeing of their Pet Children. The result is that there is an even broader commitment to high quality, Super Premium Pet Food.

We going to drill deeper, but a little differently than we normally do. The pandemic had a major impact on Pet Food, with the 2020 binge buying by some groups followed by an inevitable big drop in 2021. We have noted that despite the decrease in 2021 $, the average growth rate from 2019>21 was 5.0%, just about equal to the 5.3% rate from 2014>19. We will identify the segments with the biggest change from pre-pandemic 2019 to post-pandemic 2021.

The first thing that you notice is that the biggest increases are radically larger than the biggest decreases. That’s always a good indication of progress. Also, we should note that whether you rent or own your home, you spent more on Pet Food after the pandemic than you did before.

About half of the winners are the “usual suspects”:

• Advanced College Degree
• West
• White, Not Hispanic
• $200K> Income
• 2 People
• Homeowners w/Mtge

However, some are surprises:

• Retired
• Center City
• No Earner, 2+ CUs
• 75> yrs old

These winners indicate another impact of the pandemic. We focused on home and family, including our Pet Children. Our #1 pet concern became their health & wellbeing. Even low-income groups committed to high quality pet food.

Among the “losers”, you see some of the groups that binge bought Pet Food in 2020 in fear that it might become unavailable:

• Self-Employed
• Married, Child 18>
• $100>149K
• 55>64
• Boomers

Each of these groups increased 2020 Pet Food Spending by an average of $7.7B, +118% over 2019. Panic, Binge buying of Pet Food doesn’t get repeated and it doesn’t increase usage. It only increases your backup stock. When you think of the situation, it’s amazing that they got back to a spending level in 2021 relatively close to that of 2019.

The pandemic was a traumatic event for everyone. However, the Pet Food segment has essentially returned to the strong growth rate that it’s had since 2014. Now, we just need a hot new trend to further “fuel the growth fire”.

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. August prices fell -0.04% from July, but the CPI was still up +8.3% vs 2021, down from +8.5% last month. Food at Home (groceries) prices continue to surge, up 13.5% over 2021. That’s 6 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 more 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 +10.1% in August. This is 21.7% higher than the national rate of 8.3% and the 2nd highest Petflation rate ever, trailing only +10.3% in January 2009. 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 August 2020 to August 2022. We will use December 2019 as a base number in this and future reports 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 August, the national CPI was only +1.1% and Pet prices briefly stopped deflating. 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 Petflation accelerated, especially in the Products segments.

• 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 15.3% 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 88% of the 13.0% 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 to May but turned up in June. The CPI flattened in July but turned up in August.
• 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 got on a rollercoaster in March, now with slight increases in Jul/Aug.
• 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 & August 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/Aug inflation grew in all segments.

Next, we’ll turn our attention to the Year over Year inflation rate change for the month of August 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 basically flat vs July but were up 8.3% vs August 2021. The Grocery increase is now 13.5% 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 Products, is getting worse.

• U.S. CPI – Prices are down 0.04% from July. The YOY increase is +8.3%, down from +8.5% in June. The targeted inflation rate is <2% so we are still 4 times higher than the “target”. However, a 2^nd slight decline is a good start.
• Pet Food– Prices are +1.7% vs July and 13.1% vs August 21. The YOY increase is being measured against a time when prices were at 2019 levels, but that increase is over 3 times the pre-pandemic 3.9% increase from 2018 to 2019.
• Food at Home – Prices are up 0.7% from June. The increase from 2021 is 13.5%, which is the largest increase in any month since 13.6% in March 1979 and the largest August monthly increase since 23.4% in 1973. Inflation for this category since 2019 is the highest of any category on the chart and is 45% more than the national CPI.
• Pets & Supplies – Prices grew 1.5% from July to a new record high. They moved up to 2^nd from 3rd in terms of monthly increase over 2021 for industry segments but still have the lowest increase since 2019.
• Veterinary Services – August prices grew 0.8% from July. They are up +10.0% from 2021 and now trail only Food in the Pet Industry. They also remain 2^nd in the increase since 2019 with 17.8% compared to Food at home at 22.3%.
• 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, +30% vs the pre-pandemic 2018>19 rate.
• Pet Services – Inflation slowed in 2020 but began to grow in 2021/22. Prices are +0.1% from July and +5.7% vs 2021. Prices are still below the May peak but have turned up in July & August after falling in June.
• Haircuts & Other Personal Services – Prices are +0.7% from July and +4.4% from 2021. They are +15.7% since 2019.
• Total Pet – Petflation is strong, 4 times the rate of last year and is again ahead of the National CPI. All segments increased prices in August, 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 big bucks 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 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.
• Food at Home – The 2022 YTD inflation beat the U.S. CPI by 32.5%. 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 deflationary 2021, it is significant and just slightly behind Veterinary & Food 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 39% higher than pre-pandemic 2018>19.
• Pet Services – February & May set records for the biggest year over year monthly increases in history. Prices seem to be becoming more stable, but the current August YTD increase of 6.0% is still 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>Aug. The Services segments have had some ups & downs, but both are inflating now. The net was a August YTD CPI increase vs 2021 for Total Petflation of 7.7%, 92.8% of the high 8.3% National rate. It was only 72.5% in March.

Petflation is growing stronger. Will it impact spending? Let’s put it into perspective. The 7.7% current YTD increase in Total Pet is far below the 8.9% record set in 2009 but 5 times larger than the 1.5% avg since then. Although pet spending continues to move to higher income groups, 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.