Archive for category: Pet Market Segments

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

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

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

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

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

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

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

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

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

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

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

HONORABLE MENTION

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

Summary

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

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

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

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

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

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

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

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. In March the CPI was up 8.5% vs 2021, the biggest increase since 1981. Food at Home (groceries) has a similar story. Prices were up 10% over 2021, the biggest increase and the only double-digit percentage increase in any month since 1981. As we have seen in recent years, even minor price fluctuations can affect consumer pet spending, especially in the more discretionary pet segments. With that in mind, 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%. In March 2022, Total Petflation was up +7.5% vs 2021 and the overall CPI was +8.5%. You can see that the gap has significantly narrowed. In December the rate of Petflation was 58.5% of the national number. In March it was 88.2%. 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 March 2020 to March 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 yr-end numbers for 2020 & 2021.This will give you some key waypoints for comparisons.

The pandemic began in March 2020. At that time, you see that inflation was not an issue. There are 2 distinctly different patterns between the 2 Services segments and the 2 Products segments. Although there are some ups and downs, Veterinary and Services prices generally inflated after mid-2020, a pattern similar to the overall CPI. Food and Supplies prices generally deflated until late 2021. After that time, inflation took off. In March the rate of increase over the prior month slowed for Services and Supplies but accelerated for Food and Veterinary. Here are some things to note:

• U.S. CPI – The inflation rate was below 2% through 2020. It turned up in January 2021 and continued to grow stronger through March 2022. 88% of the overall 11.9% increase since 2019 occurred in the last 15 months.
• 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. 86% of the 5.4% total has happened since November.
• Pet Supplies – Remember that Supplies prices were high in December 2019 due to the added tariffs. They 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. They have continued to set new price records in February and now March.
• Pet Services – Normally inflation is about 2+%. Perhaps due to closures, prices increased at a lower rate in 2020. In 2021 consumer demand increased but there were fewer outlets. Prices increased strongly in 2021 with the biggest lift coming in January>April. Inflation got even stronger in 2022 but the rate slowed a little in March.
• Veterinary – Inflation has always been something that you can count on in Veterinary Services. Prices began moving up in March 2020 and grew consistently through the 2021 recovery. Then a pricing surge began in December which pushed them past the overall CPI with total inflation since 2019 reaching +14.6%.
• Total Pet – The blending of the segment patterns made the Pet Industry appear calm compared to the overall market. That ended in December 2021 as prices surged for all segments. In March, Food & Vet were the drivers.

Next, we’ll turn our attention to the Year over Year inflation rate change for the month of March 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 vs 2021 were up 8.5% vs 2021 with the Grocery increase now hitting double digits. There are some small positives. Only 5 of 9 categories had price increases over 1% from last month. It was 6 in February. Plus, the price for Haircuts & Other Personal Services was up 4.6% vs 2021 but actually down from February. There is a little hope.

• U.S. CPI – Prices are up 1.3% from February. The targeted inflation rate is less than 2%. In March, prices were up 8.5%, more than 4 times higher than the “targeted” rate. Overall Inflation is getting worse.
• Pet Food – Prices are up 2.3% vs February and 5.9% vs March 2021. They are being measured against a deflationary year, but that increase is almost triple the pre-pandemic 2.1% increase from 2018 to 2019.
• Food at Home – Prices are up 1.5% from February. The increase from 2021 is 10%, which is the largest March increase and the only double digit monthly % increase for any month since 10.3% in March 1981. Inflation for this category since 2019 is still 10+% more than the national CPI.
• Pets & Supplies – Prices were up 0.6% from their record in February, setting a new record. March prices are being compared to deflated prices in 2021 but the increase only trails Food at Home, Veterinary and the national CPI.
• Veterinary Services – March prices are up an incredible 3.4% from February. This pushed them up 9.1% from 2021, more than twice the increase in past years. They also took over the top spot in the increase since 2019, +17.9%.
• Medical Services – Prices sharply increased at the start of the pandemic in March 2020 but then inflation slowed and returned to a more normal rate in 2021 and 2022.
• Pet Services – Inflation slowed in 2020 but began to grow in 2021 & 2022. Prices are up 0.3% from February and 5% from 2021, slowing slightly from a record 6.5% increase in February, but still above the increase of previous years.
• Haircuts & Other Personal Services – Prices fell from February but remain higher than usual since 2020.
• Total Pet – The inflation rate is getting larger and is now 5 times the rate of last year. Food & Veterinary are driving it up as it gets ever closer to the national CPI rate of increase. Inflation has caused problems in the past by reducing the frequency of purchase 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 still willing to pay the higher prices for more discretionary products and 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 over 3% for all but Pet Food & Pet Supplies. This is due to deflation in 2021.

• U.S. CPI – The current increase is double the average increase from 2019>2022, but over 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 2021.
• Food at Home – The 2022 YTD inflation beat the overall CPI. You can clearly see the impact of supply chain issues.
• Pets & Pet Supplies – Prices have strongly turned up since the beginning of the year. Although the 2021>22 increase is being measured against a deflationary 2021, it is very significant and the highest of any Pet Industry segment.
• Veterinary Services – Has the most inflation since 2019 and is the only segment on the chart in which the inflation rate has consistently grown 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 the rate has slowed since and has now essentially returned to pre-pandemic levels.
• Pet Services – Inflation slowed a little in March after February’s largest year over year monthly increase in history. However, the current YTD increase remains 2^nd only to 6.6% in 2009. Demand has grown for Pet Services while the availability has decreased, a formula for inflation.
• Haircuts & Personal Services – The services segments, essential and non-essential were hit hardest by the pandemic. Now as consumers move closer to their normal patterns of spending, including value shopping, prices actually fell in March. The YTD inflation is still high but moving closer to a more normal rate.
• Total Pet – When we first looked at the pandemic impact on Petflation. We saw basically two different patterns. 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. In March, inflation in the 2 largest segments – Food and Veterinary, accelerated while it slowed in Supplies and Services. This pushed the YTD CPI increase vs 2021 for Total Petflation ever closer to the extraordinarily high rates in the overall market.

Inflation is radically increasing in the Pet Market. Will it impact spending? Let’s put it into perspective. The 5.8% YTD increase in Total Pet is far below the 10.3% record set in 2009 but almost 4 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. Many categories are commoditized and very price sensitive. Super Premium Food has become widespread because the perceived value has grown. Higher prices 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 impact of the latest surge in Petflation.

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. Just recently it was announced that Food at Home (groceries) prices were up 8.6% over 2021, the biggest increase since 10.7% in 1981. This month’s huge increase is only in 4^th place with 2^nd place going to 1979, +13.9% and the top spot going to 1974, +22.3%. By the way, the average interest rate for a 30 year fixed rate mortgage in 1981 was 16.6%. As bad as things look right now, they can get much worse. As we have seen in recent years, even minor price fluctuations can affect consumer pet spending, especially in the more discretionary segments. With that in mind, we will initiate monthly reports to track petflation as it evolves in the marketplace.

Total Pet Products & Services prices were 4.1% higher in December 2021 than in December 2020. That’s high, but still much better than the overall CPI increase of 7.0%. We’ll start tracking 2022 in greater detail. Each report 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 February 2020 to February 2022. We will use the 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 yr-end numbers for 2020 & 2021.This will give you some key waypoints for comparisons.

You immediately see a distinct difference in patterns between the 2 Services segments and the 2 Products segments. While there were some dips and differences, Veterinary and Services prices generally inflated during the whole 2-year period with an accelerated rate in 2021, a pattern similar to the overall CPI. Food and Supplies were generally deflated

below December 2019 prices until mid-year 2021. At that time, Food turned slowly up and Supplies returned to 2019 levels. In December inflation accelerated for all segments but Supplies, which turned sharply up in 2022. In the 1^st two months of 2022 inflation rates continue to grow nationally and for all pet segments. Here are some things to note:

• U.S. CPI – The inflation rate was below 2% through 2020. It turned up in January 2021 and continued to grow stronger through February 2022. 87% of the overall 10.4% increase since 2019 occurred in the last 14 months.
• 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 which has grown larger through February.
• Pet Supplies – Remember that Supplies prices were high in December 2019 due to the added tariffs. They 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, then again in February, breaking the old record which was set way back in September 2009.
• Pet Services – A normal inflation rate is about 2+%. Despite or maybe because of closures, price increased at a lower rate in 2020. In 2021 consumer demand increased but there were fewer outlets. Prices increased strongly in 2021 with the biggest lifts coming in the 2^nd and 4^th In 2022, inflation has grown even stronger.
• Veterinary – Inflation has always been something that you can count on in Veterinary Services. Prices were flat in February 2020 (amazing) but began moving up in March and grew consistently through the 2021 recovery. A pricing surge that started in December allowed them to beat the overall CPI with an inflation rate of +10.8%.
• Total Pet – You can see that the blending of the segment patterns made the Pet Industry look very price calm compared to the overall market. That ended in December 2021 as prices surged up in all segments.

Next, we’ll turn our attention to the headlines, which largely focus on the Year over Year inflation rate change for the month. We’ll do a little “catch up” as this report will show comparisons for both January and February. We’re also going to look a little deeper to see how the recent numbers compare to the past, including:

• Vs last month
• 21>22
• 20>21
• 19>20
• 18>19
• Tot 19>22
• Avg 19>22

We also included some “human” categories that can be compared to a pet segment. First, a look at January!

The inflation rate from January 2021 was large and growing significantly for all pet segments. We should also note that it is getting significantly worse as prices were up over 1% from December for 6 of 9 categories.

• U.S. CPI – Through the pandemic and early recovery, inflation remained at or near normal levels. In 2021 and now 2022, inflation accelerated, resulting in increases not seen in decades.
• Pet Food – Inflation is the lowest in this segment and only about 1/3 the rate of human groceries. Note the every other year up/down pattern. Because of the size of the Food segment, you see a similar pattern in Total Pet. The 2.7% lift is small vs 2021 but it is larger because it is going against deflated numbers in 2021.
• Food at Home – You can see the low pre-pandemic inflation rate (normal) which turned sharply up in the pandemic and continues to accelerate. It is now 10 times higher than “normal”. It is largely being driven by shortages due to supply chain problems.
• Pet Supplies – Prices surged in January to a new all-time record high. (beating Sept 2009). However, we should put this increase into perspective as it comes vs a period of strong deflation
• Veterinary – Veterinary inflation had slowed before the pandemic, but it returned to more normal high levels. It is high and growing so much that the increase since 2019 is 27% greater than that of the national CPI.
• Medical Services – Inflation spiked in 2020 but has returned to a more normal rate, well below Veterinary.
• Pet Services – With closures and consumers’ DIY attitude in the pandemic, demand slowed as did inflation. That ended in 2021 as prices started up again. In January, the price increase vs 2021 was the biggest of any pet segment.
• Haircuts & Personal Services – Inflation was consistent pre-pandemic. It has grown about 50% in 2021 and 2022.
• Total Pet – Pre-pandemic, Total Pet inflation was above the national average. The deflation in the products segments drove the inflation rate for Total Pet down. However, all segments have now turned sharply up so the inflation rate is 4 times higher than it was just 1 year ago.

We have seen that prices increased strongly in January vs December producing year over year numbers that are now concerning in the Pet Industry as well as the overall market. Let’s look at February.

As you can see, a bad situation in January, got even worse in February. Prices vs February 2021 were up 7.9% overall with the Grocery increase being the largest since 1981. Again 6 of 9 categories had price increases over 1% from last month, and the increases were generally larger than the January over December increases.

• U.S. CPI – Prices are up 0.9% since January. The targeted inflation rate is less than 2%. In February, prices were up 7.9%, basically 4 times higher than the “targeted” rate.
• Pet Food – Prices are up 1.1% vs January and 3.7% vs February 2021. Granted, they are being measured against a deflationary year, but that increase is more than double the pre-pandemic increase from 2018 to 2019.
• Food at Home – As we said earlier, the year over year increase in February is the largest since 10.7% in 1981 but only 40% of the 22.3% increase in 1974. Things are bad but could get a lot worse. The inflation for this category since 2019 has now increased 10% more than the national CPI.
• Pets & Supplies – Prices were up 2.3% from their record in January, setting a new record. February prices are being compared to deflated prices in 2021 but the increase is still high, only trailing Food at Home and the national CPI.
• Veterinary Services – February 2020 was still pre-pandemic. You can see that inflation then was at more normal levels, about twice the national CPI. It then increased to a new higher level and stayed there. However, in February it fell to 2^nd place in the overall increase since 2019 as it now trails Haircuts and Other Personal services.
• Medical Services – Prices sharply increased in pre-pandemic February 2020 but then inflation slowed and has returned to a more normal rate in 2020. Prices were up 0.4% from January, the smallest increase for any category.
• Pet Services – While inflation slowed during the pandemic and early recovery, it is spiking now – Up 1.3% from January and 6.5% from 2021, the biggest increase in history and almost triple the rate of the previous 2 years.
• Haircuts & Other Personal Services – This category is obviously important to consumers and they will pay the price.
• Total Pet – The inflation rate is getting larger and is now 5 times the rate of last year. Only Food is keeping it down as it gets closer to the national CPI rate of increase. Inflation has caused problems in the past by reducing the frequency of purchase in Supplies, Services and Veterinary. Super Premium Food is generally immune as consumers are used to paying big bucks and it is needed every day. We’ll see if consumers are still willing to pay the higher prices for more discretionary products and services at the same frequency as they did in the past.

Now we’ll use the same chart format to look at Year to Date numbers – what does January + February add up to and how does 2022 compare to previous years…so far?

The strong current increase in inflation seen in January and February is reflected in YTD numbers. The increase from 2021 to 2022 is the biggest for 7 of 9 categories. The average annual increase since 2019 is over 3% for all but Pet Food & Pet Supplies. This is due to deflation in 2021.

• U.S. CPI – The current increase is double the average increase from 2019>2022, but over 4 times the average increase from 2018>2021. Inflation is a big problem that started recently.
• Pet Food – Inflation is growing stronger, especially after deflation in 2021.
• Food at Home – Thanks to February, the 2022 YTD increase in prices surpassed that of the overall CPI. You can clearly see how supply chain issues have grown more impactful on prices.
• Pets & Pet Supplies – Prices have strongly turned up since the beginning of the year, breaking their all-time record set 13 years earlier. Although this year’s increase is being measured against a deflationary 2021, it is very significant and in 3^rd place, trailing only Food at Home and the national CPI.
• Veterinary Services – This chart clearly shows that the inflation rate has consistently grown each year throughout the pandemic and recovery. Regardless of the circumstances, just charge more.
• Medical Services – Prices went up significantly just before the pandemic, but the rate has slowed since and is now essentially returned to pre-pandemic levels.
• Pet Services – February 2022 was the largest year over year monthly increase in history and now has helped produce a YTD increase that is 2^nd only to 6.6% in 2009. Demand has grown for Pet Services while the availability has decreased, a formula for inflation.
• Haircuts & Personal Services – The services segments, essential and non-essential were hit hardest by the pandemic. Now as consumers move closer to their normal patterns of spending, the segment is not prepared so the increased demand is driving prices up at an astounding rate.
• Total Pet – When we first looked at the pandemic impact on Petflation. We saw basically two different patterns. 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. Supplies had the biggest YTD increase of any segment. This change in Products, in conjunction with the strong inflation rate in both Services segments has pushed Total Petflation ever closer to the extraordinarily high rates in the overall market.

Inflation is radically increasing in the Pet Industry. Will it impact spending? Let’s put it into perspective. The 4.9% YTD increase in Total Pet is far below the 10.3% record set in 2009 but over 3 times larger than the 1.5% average since then.

Although pet spending is increasingly moving to higher income groups, the impact of inflation varies by segment. Supplies has been impacted the most. Many categories are commoditized and very price sensitive. The move to high priced Super Premium Food has become widespread because the perceived value has grown so higher prices just push people to value shop. Veterinary prices have strongly inflated for years. The result has been a reduction in visit frequency. Spending in the Services segment has taken off in recent years, but it is driven by higher incomes because of its convenience so inflation is less impactful. We’ll continue to monitor the situation but we’ll just have to wait and see the impact of the latest surge in Petflation.

 

In 2020 Total Pet Spending in the U.S. was $83.74B, a $5.31B (6.8%) increase from 2019. The biggest driver was the pandemic. Pet Parents focused on necessities and binge bought Pet Food in the 1^st half of the year. In the 2^nd half they turned their attention to the other necessary segment – Veterinary. The two more discretionary segments, Supplies and Services, suffered. Services was impacted the most with restrictions and closures but Supplies $ continued their decline due to a reduction in both $ per transaction and purchase frequency. However, there was still a net gain in Total Pet $.

• A $5.65B (+18.1%) increase in Food
• A $1.65B (-9.8%) decrease in Supplies
• A $3.05B (+14.0%) increase in Veterinary
• A $1.73B (-20.1%) decrease in Services

Let’s see how these numbers blend together at the household (CU) level. In any given week, 22.5 million U.S. CU’s (1/6) spent money on their Pets – food, supplies, services, veterinary or any combination – down from 27.1M in 2019.

In 2020, the average U.S. CU (pet & non-pet) spent a total of $637.78 on their Pets. This was a +7.5% increase from the $593.51 spent in 2019. However, this doesn’t “add up” to a 6.8% increase in Total Pet Spending. With additional data provided from the US BLS, here is what happened.

• 0.8% fewer CU’s
• Spent 29.0% more $
• 16.6% less often

If 67% of U.S. CU’s are pet parents, then their annual CU Total Pet Spending was $951.91. Now, let’s look at the recent history of Total Pet Spending. The rolling chart below provides a good overview. (Note: All numbers in this report come from or are calculated by using data from the US BLS Consumer Expenditure Surveys – The 2016>2020 Totals include Veterinary Numbers from the Interview survey, rather than the Diary survey due to high variation)

• We should note a 3-year pattern since 2010. 2 years of increases (yr 1 the largest) followed by a small decrease.
• In 2014-15, the Food upgrade began, but early in 2015 consumers were trading $ in other segments to pay for it.
• In 2016, they were intensely value shopping for super premium foods. They started spending some of this saved money on Supplies and Veterinary Services, but not quite enough as spending fell slightly for the year.
• In 2017, spending took off in all but Services, especially in the 2nd half. Consumers found more $ for their Pets.
• In 2018 a spectacular lift in Services overcame the FDA issue in Food, tariffs on Supplies and inflation in Veterinary.
• In 2019 a bounce back in Food and small lift in Veterinary couldn’t overcome the drop in Supplies from “tarifflation”.
• In 2020 consumers focused on necessities, Food & Veterinary (+$8.7B) while Services & Supplies suffered (-$3.4B).

Now we’ll look at some Demographics. First, 2020 Total Pet Spending by Income Group

<$70K spending was up. Middle income was down. $100>150K had a huge lift but $150K> spent less. Definitely mixed.

Nationally: · Total Pet: ↑$5.31B   · Food: ↑$5.65B  · Supplies: ↓$1.65B  · Services: ↓$1.73B  · Veterinary: ↑$3.05B

• < $70K – (56.5% of U.S. CUs); CU Pet Spending: $404.76, +11.1%; Total $: $29.91B, ↑$1.93B (+6.9%) ..
  • Food ↑$0.59B
  • Supplies ↓$0.39B
  • Services ↓$0.03B
  • Veterinary ↑$1.76B

Money matters a lot to this group, but the pandemic caused them to focus on Pet needs, especially Veterinary. After a 2 years of declines, they spent more in 2020 and are once again ahead of 2015 $.

• >$70K – (43.5% of U.S. CUs); CU Pet Spending: $937.46, +2.7%; Total $: $53.84B, ↑$3.38B (+6.7%) from…
  • Food ↑$5.05B
  • Supplies ↓$1.26B
  • Services ↓$1.70B
  • Veterinary ↑$1.29B

This group continues to grow, up 4.0% in 2020. On the surface, this accounted for most of their spending increase. However, it is more complicated. There were 2 big swings. The middle income $70>99K group spent significantly less in all segments while the $100>149K group spent $9.6B more in Food & Veterinary, driving much of the lift.

• < $30K – (25.4% of U.S. CUs); CU Pet Spending: $314.01, +19.5%; Total $: $10.19B, ↑$1.06B (+11.6%) from…
  • Food ↑$0.57B
  • Supplies ↓$0.09B
  • Services ↓$0.05B
  • Veterinary ↑$0.62B

Although still behind 2015 $, this lowest income group demonstrated their committment to their pets with strong increases in Food and Veterinary spending and only minimal $ drops in the more discretionary segments.

• $30>$70K – (31.1% of CUs); CU Pet Spending: $477.03, +6.4%; Total $: $19.72B, ↑$0.87B (+4.6%) from…
  • Food ↑$0.02B
  • Supplies ↓$0.30B
  • Services ↑$0.01B
  • Veterinary ↑$1.14B

This lower income group essentially maintained their spending level in Food and Services. They did spend 7% less on Supplies but they had a 23% increase in Veterinary, which drove their overall spending lift.

• $70>$99K – (15.0% of CUs); CU Pet Spending: $552.88, -25.1%; Tot $: $10.64B, ↓$3.52B (-24.9%) from…
  • Food ↓$2.15B
  • Supplies ↓$0.54B
  • Services ↓$0.42B
  • Veterinary ↓$0.41B

This middle income group had the biggest negative pandemic reaction with double digit % drops in every segment

• $100K>$149K– (14.4% of CUs); CU Pet Spend: $1239.36, +54.2%; Tot $: $23.37B, ↑$8.45B (+56.6%) from
  • Food ↑$8.46B
  • Supplies ↓$0.36B
  • Services ↓$0.79B
  • Veterinary ↑$1.14B

They were the Star of the income groups in 2015 and 2017. In 2016, they were the worst performers. In 2018 & 2019 their Total $ were stable. The 2020 pandemic obviously motivated them. They drove most of the binge buying on Food and much of the lift in Veterinary. They are very reactive and have the money to take action.

• $150K> – (14.1% of CUs); CU Pet Spending: $1038.91, -14.8%; Total $: $19.84B, ↓$1.55B (-7.2%) from…
  • Food ↓$1.26B
  • Supplies ↓$0.36B
  • Services ↓$0.49B
  • Veterinary ↑$0.56

The results in this big group were also mixed. The $200K> group was up +0.6% due to drops in the discretionary Supplies & Services segments which were overcome by slightly greater increases in Food & Veterinary. The $150>199K group drove the overall spending in the high income group down for the 1^st time in my records going back to 2013. They spent 1% (0.06B) more on Supplies, Services & Veterinary but $1.7B less on Food. Income is becoming increasingly important in Pet spending but the behavior can vary between the higher income groups.

• < $100K – (71.5% of CUs); CU Pet Spending: $435.56, -0.7%; Total $: $40.54B, ↓$1.59B (-3.8%) ..
  • Food ↓$1.56B
  • Supplies ↓$0.93B
  • Services ↓$0.45
  • Veterinary ↑$1.35

The spending dividing line was clearly $50K. All Groups Under $50K: +$2.98B; All groups from $50>99K: -$4.57B

• >$100K – (28.5% of CUs); CU Pet Spending: $1127.64, +12.0%; Total $: $43.20B, ↑$6.90B (+19.0%) from…
  • Food ↑$7.20B
  • Supplies ↓$0.72B
  • Services ↓$1.28B
  • Veterinary ↑$1.69B

We have detailed the variations but the net result is that their focus was on Pet Needs. We added the over/under $100K measurement because of the growing importance of income. For the 1^st Time >$100K $ exceeded 50%.

Income Recap –  The top 2 drivers in consumer spending behavior are value (quality + price) and convenience. That makes income , especially disposable income very important in Pet Spending. We also often see motivation in the opportunity brought by new product development. In 2020 we saw the results from perhaps the biggest human motivator – fear. This was the driver in the pandemic binge buying of pet food. Although the spending was mixed, the key results were the big drop from $70>99K and the huge lift from $100>149K. This combination was instrumental in driving the 50/50 $ divide up to $103K. That’s up considerably from $94K in 2019. Even with spending increases from the lower income groups, CU income continues to grow in importance in Total Pet Spending.

Next let’s look at 2020 Total Pet Spending by Age Group

Basically, a Generational Divide. Boomers & Millennials spent more. Everyone else spent less.

Nationally: · Total Pet: ↑$5.31B   · Food: ↑$5.65B  · Supplies: ↓$1.65B  · Services: ↓$1.73B  · Veterinary: ↑$3.05B

• <25 – (3.8% of U.S. CUs); CU Pet Spending: $283.19, -15.8%; Total $: $1.44B, ↓$1.06B (-42.3%) from…
  • Food ↓$0.37B
  • Supplies ↓$0.31B
  • Services ↓$0.03B
  • Veterinary ↓$0.35B

The biggest factor was a loss of 2M CUs (-31%) as they moved back home with their parents or grouped together.

• 25-34 – (16.0% of U.S. CUs); CU Pet Spending: $586.67, +28.7%; Total $: $12.42B, ↑$2.56B (+26.0%) from…
  • Food ↑$0.87B
  • Supplies ↑$0.62B
  • Services ↓$0.03B
  • Veterinary ↑$1.11B

These Millennials have often led the way in new food trends. Now they have stepped up in trying times. Services spending was essentially the same as 2019 but they spent over 20% more in all other segments, even Supplies.

• 35-44 – (17.0% of CUs); CU Pet Spending: $594.82, -11.0%; Total $: $13.29B, ↓$1.56B (-10.5%) from…
  • Food ↓$0.61B
  • Supplies ↓$0.07B
  • Services ↓$0.30B
  • Veterinary ↓$0.59B

This group has the largest families and is in the middle of building their careers. This makes them very sensitive to and cautionary in times of change. They are big in Supplies and that essentially didn’t change. However, they had double digit % decreases in all the other segments.

• 45-54 – (17.2% of U.S. CUs); CU Pet Spending: $690.80, -9.3%; Total $: $15.47B, ↓$1.54B (-9.0%) from…
  • Food ↓$1.63B
  • Supplies ↓$0.45B
  • Services ↓$0.31B
  • Veterinary ↑$0.85B

This group has the highest income and occupied the top spot in CU Pet Spending in 2019. In 2020 they fell to a distant second. They had double digit % decreases in 3 segments. The $0.85B increase in Veterinary Services was likely them making up for a $1B decrease in Veterinary procedures in 2019.

• 55-64 – (19.1% of U.S. CUs); CU Pet Spending: $962.48, +33.0%; Total $: $24.15B, ↑$6.36B (+35.8%) from…
  • Food ↑$7.09B
  • Supplies ↓$1.26B
  • Services ↓$0.37B
  • Veterinary ↑$0.90B

These younger Baby Boomers are especially reactive. They were the primary drivers behind the binge spending on Pet Food. They cut back spending on Supplies and reduced the frequency in Services but spending in the other “necessary” segment, Veterinary, grew 20%. The result was a 35.8% increase in Total Pet $.

• 65-74 – (15.6% of U.S. CUs); CU Pet Spending: $592.19, +3.5%; Total $: $12.44B, ↑$1.02B (+9.1%) from…
  • Food ↑$0.32B
  • Supplies ↑$0.11B
  • Services ↓$0.28B
  • Veterinary ↑$0.87B

This group is growing, +3.7% and now are all Baby Boomers. They are careful with their money, but their commitment to their pets is very apparent. They had a reduced frequency in Services but spending in all other segments grew, especially in Veterinary and Food, the “needed” segments.

• 75> – (11.2% of U.S. CUs); CU Pet Spending: $326.03, -10.5%; Total $: $4.73B, ↓$0.48B (-9.3%) from…
  • Food ↓$0.02B
  • Supplies ↓$0.29B
  • Services ↓$0.42B
  • Veterinary ↑$0.25B

Pet Parenting is more difficult, and money is tight for these oldest Pet Parents, but their commitment is still there. No binge spending, but they held their ground in Food. They cut back on Supplies and Services but had a 17% increase in Veterinary Services $ which kept their overall decrease in Total Pet under 10%.

Age Group Recap: There was an age spending pattern in Total Pet, but it was basically divided by generation. Boomers and Millennials spent $8.35B more. Everyone else spent $3.04B less. Pet Food spending had the same pattern. Other segments had different patterns. In Supplies only the 25>34 and 65>74-year-olds spent more. In Veterinary, only the <25 and 35>44-year-olds spent less. Unfortunately, Services was more consistent as all age groups spent less.

Next, we’ll look at the biggest winner and loser in each demographic category. In some cases, a clear spending pattern is evident. In those situations, segments are bundled together to reflect their shared spending behavior.

Key Demographic “Movers” for 2020.

In 2019, 50 of 96 Demographic Segments (52%) spent more on their Pets but spending fell -$0.16B (-0.2%). In 2020 only 46 of these 96 segments (48%) spent more but Total Pet Spending increased by $5.31B (+6.8%). This is very unusual to say the least. 6 segments flipped from 1^st to last or vice versa and 3 segments held their spot. These are not unusual numbers. What you do see in the chart is the huge difference between the most positive and most negative segments. This suggests that the lift was very targeted. From our earlier segment analysis, we know that the driving force behind the lift was Pet Food spending, especially the binge buying that occurred in the 1^st half of 2020. Let’s look at some specifics.

There are a few usual winners like:

• Homeowners
• White, Not Hispanic
• 2 Earners
• Self Employed

We should note that all racial/ethnic segments spent more which is always a good sign for the industry. There were also some winning segments that are periodically on top, whenever they are strongly motivated by events/trends:

• $100>149K
• < 2500 Population
• 55>64-year-olds
• Baby Boomers

That means that there were still some unexpected winners, like:

• Married, Oldest child 18>
• 4 people
• Less than College Grads

Now let’s look at the downside. The “usual” losers were:

• Singles
• Renters
• No Earner, Singles

This low number means that there must have been quite a few surprises, like:

• Large Suburbs
• 2 People
• 35>44
• Gen X
• College Grads

Recap: After a slight downturn in 2019, Pet Spending turned up in 2020. There is no doubt that the onset of the COVID-19 pandemic was the major factor in the turnaround. It produced mixed results among the industry segments. Services took a big negative hit due to restrictions and closures in nonessential outlets. Consumers, including Pet Parents, focused their attention and spending on the most needed Products and Services. In the Pet Industry this resulted in a 10% drop in Supplies $ but strong lifts in spending for Veterinary Services and especially Pet Food. The Pet Food $ were even stronger because Pet Parents feared possible shortages like what happened to many other essential products. This caused some very select demographics to binge buy an extra $6.77B in the 1^st half of 2020. Although the 25>34-year-olds participated in this lift, the key drivers were the 55>64-year-old Baby Boomers. Boomers have a history of strong reactions to trends and outside factors. The 55>64-year-olds also have the highest income of any Boomer group so they had both the “will” and the “way” (money) to binge spend for the welfare of their pet children… and in 2020, they did!

 

Except for a small decline in 2017, Non-Vet Pet Services has shown 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, prices were also strongly increasing. In the 2^nd half of 2019 spending turned down and then plummeted in 2020 due to COVID. The final $ were $6.89B, down $1.73B (-20.1%). In this report we will drill down into the data to see what groups were most impacted. (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 2020 was $52.53, down from $65.22 in 2019. (Note: A 2020 Pet CU (67%) Spent $97.34)

More specifically, the 20.1% decrease in Total Pet Services spending came as a result of:

• 0.8% less households
• Spending 3.40% less $
• 16.62% less often

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

You can see that after the big lift in 2018, spending essentially flattened out in 2019, similar to the pattern in 2016-17. 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%. By the 2^nd half of 2019, it made an impact as spending declined for the 1^st time in 18 months. The 2020 pandemic brought restrictions and closures which drove spending radically down. Now, let’s look at some specific demographics of 2020 Services spending.

First, by Income Group.

In 2018, all groups spent more. In 2019, only the middle income group, $70>150K, spent more. In 2020 they had the biggest decrease, and their spending is now below the level in 2015. The only increase came from the $30>70K group, which is the only group earning under $150K which spent more than they did in 2015. The 50/50 dividing line in $ for Services was $123K. That is down from $125K in 2019 but still by far the highest of any segment.

• <30K (25.4% of CU’s) – $19.66 per CU (-0.1%) – $0.66B, Down $0.05B (-6.7%) – This segment is getting smaller and money is tight, so Services spending is less of an option. Their Services $ fell even farther below 2015.
• $30>70K (31.1% of CU’s) – $35.95 per CU (+3.0%) – $1.47B, Up $0.01B (+0.9%) – In 2019 they had the biggest decrease. In 2020, they had the only increase and finished second in $ to the $150K> group.
• $70>100K (15.0% of CU’s) – $41.87 per CU (-35.6%) – $0.82B, Down $0.42B (-33.7%) – The spending of this middle income group had slowly but consistently grown since 2016. Then came the pandemic and the $ plummeted in 2020, falling even below the previous low point in 2016.
• $100>150K (14.4% of CU’s) – $62.88per CU (-42.0%) – $1.19B, Down $0.79B (-40.0%) – They had shown the strongest, most consistent growth since 2016. Then came 2020, when they had the biggest decrease, down 40.%.
• $150K> (14.1% of CU’s) – $149.07 per CU (-19.6%) – $2.76B, Down $0.49B (-15.0%) – They have moved steadily down since peaking in 2018. The pandemic drop in 2020 was -$0.49B, but they are still slightly above 2015 $.

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

All age groups spent more on Services in 2018. In 2019, the groups under 45 spent less on Services while those 45 or older spent more. In the 2020 pandemic, everyone spent less but all stayed above 2015 $. Here are the specifics:

• 75> (11.2% of CU’s) – $23.09 per CU (-55.0%) – $0.34B – Down $0.42B (-55.1%) 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 basically gave it all back, with the biggest drops in spending and frequency. 0.2% fewer CU’s spent 28.5% less $, 37.1% less often.
• 65>74 (15.6% of CU’s) – $47.60 per CU (-25.0%) – $0.97B – Down $0.28B (-22.2%). This group is also very value conscious and growing in numbers. From 2016 to 2019 their spending was very stable. In 2020 it plunged by over 20% primarily due to a big decrease in frequency. 3.7% more CU’s spent 5.7% less $, 18.9% less often.
• 55>64 (19.1% of CU’s) $53.15 per CU (-23.4%) – $1.33B – Down $0.37B (-21.7%) After a big drop in 2017, they began to slowly increase Services spending. In 2019, they moved up to the #2 spot in Services spending. A big drop in frequency drove spending down in 2020 but they are still #2. 2.2% more CU’s spent 1.9% less $, 21.9% less often.
• 45>54 (17.2% of CU’s)- $75.38 per CU (-16.5%) – $1.70B – Down $0.31B (-15.2%) This highest income group was the leader in Services $ until 2016. They regained the top spot in 2019 and held on in 2020 despite a 20% drop in frequency which drove spending down -$0.31B. 1.5% more CU’s spent 5.2% more $, 20.6% less often.
• 35>44 (17.0% of CU’s) – $56.91 per CU (-18.8%) – $1.27B – Down $0.30B (-18.9%) Spending exploded in 2018 with a $1B increase pushing them to #1. In 2019 they spent $1.6B more on Veterinary and Food and cut back on Services and Supplies. In 2020 both their spending and frequency fell. 0.1% fewer CU’s spent 8.9% less $, 10.9% less often.
• 25>34 (16.0% of CU’s) – $52.85 per CU (-1.9%) – $1.11B – Down $0.03B (-3.0%) This group of Millennials “found” the Services segment in 2018 with a 36% increase in $. Their spending has slowly fallen since then. In 2020, their 3% decrease was primarily driven by a -9.7% drop in frequency. 1.2% less CU’s spent 8.6% more $, 9.7% less often.
• <25 (3.8% of CU’s) – $32.44 per CU (+24.6%) – $0.16B – Down $0.03B (-14.3%) After 2018 this group returned to being a very minor player. 31% fewer CUs is significant. 31.2% fewer CU’s spent 19.7% less $, 55.1% more often.

In 2019, when overall Services spending fell $0.1B, the over 45 age group spent $0.51B more. The situation was reversed in 2020 as they spent -$1.38B less, 79.8% of the total $1.73B drop in Services spending.

Finally, here are some key demographic “movers” that drove the big drop in Pet Services Spending in 2020. The segments that are outlined in black “flipped” from 1^st to last or vice versa from 2018. The red outline stayed the same.

In 2018 the Services spending increase was very widespread with (88%) of all segments spending more. 6 of 12 demographic categories had no segments that spent less on Services in 2018. 2019 was very different and reflected the slight decrease in spending for the segment. All categories had segments that spent less on Services and 49 total segments (51%) had decreased Services $ from 2018. In 2020, the situation got markedly worse as 76 segments (79%) spent less and in 3 categories, no segments spent more.

You see from the graph that the biggest negatives were all substantially larger than the small increases. This speaks to the severity and widespread nature of the loss in $ in the segment. There was also considerable turmoil in Services spending. 3 groups maintained their position but 7 flipped from 1^st to last or vice versa.

There was only 1 “usual” winner – Self-Employed, which have the highest income in their category. There were some winners that were definitely a surprise – Renters, Rural, $50>69K Income, Gen Z, High School Grads, Hispanic and Under 25 years old. That means that more than half of the winners were not expected.

In terms of “usual” losers, there really were none in 2020. The losing segments are where we find these usual winners:

• 2 People
• Married Couple Only
• Homeowner w/Mtge
• Managers & Professionals
• Suburban
• $100>149K
• College Degree
• 2 Earners
• White, Not Hispanic

This actually makes some sense. The drop in spending was largely due to restrictions and closures caused by the COVID Pandemic. This would most impact the groups that usually spent the most and would produce the biggest decreases.

In our earlier analysis, we didn’t see any truly distinct spending patterns. The only lift in any age or income group, and it was miniscule, was from the $30>69K income group. However, it is significant that they are the only income group under $150K that didn’t spent less in 2020 than they did in 2015. The 50/50 spending point moved down slightly from $125 to $123 but that is somewhat deceptive. The highest income group, $150K> actually gained ground. This group has 14.1% of CUs but did 40.1% of the Services spending in 2020. That’s up from 37.7% in 2019.

After the huge lift in spending 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.

There is no doubt that the Covid pandemic with widespread closures and “staying at home” had a big impact on this most discretionary Pet Industry segment. However, 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 or even in a Mass Market retailer. We expect this segment to come back strong in 2022.