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. In May the CPI was up 8.6% vs 2021, beating the previous high of 8.5% in March. Food at Home (groceries) prices continue to surge, up 11.9% over 2021. That’s 3 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 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%. The gap narrowed in March & April as Petflation accelerated to 97.6% of the national rate. In May, Inflation in the overall market became stronger. However, thanks to a price drop in Veterinary, Petflation stabilized, and the gap widened – 8.1% for Pet vs 8.6% for the national rate. Let’s look a little deeper. 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 May 2020 to May 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. (Note: the April Peak for Veterinary is also highlighted.)

The pandemic really hit home in April/May. Even the national CPI deflated for 2 months, but not the Services segments. There are 2 different patterns between the Services and the Products segments. 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, but the patterns became mixed. Services paused in March and Veterinary dropped in May. Supplies prices have essentially plateaued while inflation in Food is accelerating. 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 through May 2022. 65% of the overall 13.7% increase since 2019 occurred in the last 12 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. 90% of the 8.4% increase 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. Prices have essentially plateaued at this new, higher level since February.
• 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 got stronger in 2022, slowed a little in March, turned up in April and then slowed a bit in May – basically an every other month pattern
• 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 with total inflation since 2019 reaching +15.5% in April. In May prices fell but they are still ahead of the National CPI.
• 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 in all segments. In May inflation is slowing in all but Food.

Next, we’ll turn our attention to the Year over Year inflation rate change for the month of May 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 8.6% vs 2021 with the Grocery increase now hitting 11.9%. There are some small positives. Only 3 of 9 categories had increases over 1% from last month, the same as April but down from 5 in March…. And Veterinary Services prices actually fell 1.0% from April. There is a little hope.

• U.S. CPI – Prices are up 1.1% from last month. In April the increase was 0.6%. May Inflation was +8.6%. The targeted rate is <2%. We remain 4+ times higher than the “target”. Inflation is getting worse, and it accelerated again in May.
• Pet Food – Prices are up 1.6% vs April and 9.1% vs May 2021. The YOY increase is being measured against a deflationary year, but that increase is more than triple the pre-pandemic 2.8% increase from 2018 to 2019.
• Food at Home – Prices are up 1.3% from March. The increase from 2021 is 11.9%, which is the largest increase in any month since 12.3% in April 1979 and the largest May monthly increase since 16.6% in 1974. Inflation for this category since 2019 is the highest of any category on the chart and is 28% more than the national CPI.
• Pets & Supplies – Prices grew 0.1% from April but they are slightly below March’s record high. They now have the lowest monthly increase over 2021 of any industry segment, and the lowest increase since 2019.
• Veterinary Services – May prices fell 1.0% from April. They are up 7.4% from 2021 but now trail Pet Food in the Pet Industry. They also lost the lead in the increase since 2019 with 16.9% compared to Food at home at 18.1%.
• Medical Services – Prices sharply increased at the start of the pandemic in 2020 but then inflation slowed and returned to a more normal rate in 2021. It appears to be turning strongly up again in 2022.
• Pet Services – Inflation slowed in 2020 but began to grow in 2021 & 2022. Prices are up 0.5% from April and 7.4% from May 2021, beating the record 6.5% increase in February and double the rate of 2019 & 2020. However, we should note that a big part of the record May lift was due to a 0.9% drop in prices from April to May 2021.
• Haircuts & Other Personal Services – Prices are +0.5% from April and 6.2% from 2021. They are +15.6% since 2019.
• Total Pet – Inflation is strong and is 3+ times the rate of last year. Veterinary prices fell and Supplies prices plateaued which helped keep overall Petflation steady at +8.1%. In the past, inflation has caused a reduction in 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 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 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 U.S. CPI by 19.5%. You can see the impact of supply chain issues.
• Pets & Pet Supplies – Prices have plateaued at a new record level since February. Although the 2021>22 increase is being measured against a deflationary 2021, it is very significant and 2^nd to Veterinary in the Pet Industry segments.
• Veterinary Services – Has the most 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 the rate has slowed since and has now essentially returned to near pre-pandemic levels.
• Pet Services – February set a record for the biggest year over year monthly increase in history. The rate slowed in March, turned up again in April then set a new record in May. The current YTD increase of 6.1% remains 2^nd only to 6.4% in 2009. 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 in April/May. The YTD rate is now down slightly from 2020>21 but still 79% more than 2018>19. Consumers are paying 14.9% more than in 2019. This usually reduces the frequency.
• 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. Food prices continued to climb as Supplies pricing stabilized and Veterinary prices dropped. The net was a YTD CPI increase vs 2021 for Total Petflation of 6.7%, 82% of the extraordinarily high 8.2% overall rate. It was only 72.5% of the National rate in March.

Inflation is strong in the Pet Market. Will it impact spending? Let’s put it into perspective. The 6.7% YTD increase in Total Pet is far below the 9.6% record set in 2009 but 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 as many categories are 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. Hopefully, Supplies prices will stabilize and begin to deflate. Eliminating the special tariffs implemented in September 2018 would be a big help. However, we’ll just have to wait and see the impact of the continued strong Petflation.

Next, we will look at Pet Services. It is by far the smallest Segment and after a $1.73B, 20.1% decrease, it got a lot smaller and returned to the level of 2016 – 2017. After the great recession, Services’ annual spending slowly but steadily increased. During this time, the number of outlets offering Services strongly grew as brick ‘n mortar retailers looked for a way to combat the growing influence of online outlets. After all, you can certainly buy products, but you can’t get your dog groomed on the Internet. This created a highly price competitive market for Pet Services. In 2017 there was a slight increase in visit frequency, but Pet Parents just paid less. This resulted in a 1.0% decrease in Services spending. In 2018 consumer behavior changed as a significant number decided to take advantage of the increased availability and convenience of Pet Services and spending literally took off, +$1.95B (+28.9%), by far the biggest increase in history. In 2019 Pet Parents, especially the younger ones, value shopped, and spending turned down $0.10B. That brought us to 2020 and the onset of the pandemic. Because Services outlets were often deemed nonessential, they were subject to restrictions and closures. This drove the huge drop in spending.

We’ve seen that the pandemic caused binge buying in Food, while it slowed the more discretionary Supplies segment. Services  spending is arguably the most discretionary of any Pet Expenditure. Let’s look deeper into 2020 demographics.

Let’s start by identifying the groups most responsible for the bulk of Services spending in 2020 and the $1.73B decrease. The first chart details the biggest Pet Services spenders for each of 10 demographic categories. It shows their share of CU’s, share of Services spending and their spending performance (Share of spending/share of CU’s). In order to better target the bulk of the spending we had to alter the groups in two categories – education and area. The performance level should also be noted as 5 of 10 groups have a performance level above 120%. This is the same as Supplies and Total Pet but less than the 6 for Veterinary and far less than the 8 for Food. Last year they also had only 5 over 120%, down from their peak of 7 in 2018. This indicates that there continues to be a little less disparity between the best and worst performing segments in 2020. Although performance is down from 2019, Income is still the biggest factor in Services Spending. The categories are presented in the order that reflects their share of Total Pet $ which highlights the differences of the 8 matching groups. One big difference is that higher education is a much bigger factor in Services $.

1. Race/Ethnic – White, not Hispanic (87.9%) up from 87.3%.This big group accounts for the vast majority of spending in every segment. Services Spending became slightly less diverse in terms of race and ethnicity in 2020 as their performance grew from 127.4% to 128.5% and they remained in 4th place in terms of importance.
2. Housing – Homeowners (78.3%) down from 84.5%. Homeownership is a big factor in spending in all industry segments. The Homeowners’ share of Services fell to the lowest level of any segment in 2020. Their performance plummeted from 132.6% to 119.3% and they dropped out of the 120+% club. Plus, Renters spent 10.5% more.
3. # in CU – 2+ people (78.3%) up from 75.9% The share for 2+ CU’s is over 75% for all segments and Services is now 2^nd to Food’s 82.5%. Their performance also increased from 108.7% to 111.6% and they moved up to 8^th from 9^th in importance. Only 4 person CUs spent more. 2+ CUs primarily gained ground because Singles had a 50% bigger drop.
4. Area – City/Suburbs >2500 (83.3%) down from 87.1% in share, while performance fell from 106.9% to 102.7%, last place. Services is an Urban Segment so it makes sense that they would be the most impacted by pandemic related restrictions and closures. Led by Rural, the areas under 2500 population actually spent more on Services.
5. # Earners – “Everyone Works” (69.9%) up from (67.6%) All adults in the CU are employed. Income is important so a high market share is expected. Their performance grew to 122.0% from 115.6% and they rejoined the 120% club at #5. Only CUs with 3+ Earners spent more. However, when all adults in a CU work, Services become more needed.
6. CU Composition – Married Couples (62.8%) up from 61.4%. Married couples are a big share of $ and have 120+% performance in all segments. Their performance increased to 129.4% from 125.7% and they moved up from 5th to 3rd in terms of importance to Services spending. In 2020, kids were the key. Only Married Couples with children over 6 and Single Parents spent more.
7. Income – Over $70K (69.2%) down from 75.0% This group’s performance rating is 159.2%, down markedly from 180.7%. However, CU income is still the single most important factor in increased Pet Services Spending. Only the $50>69K and $150>199K income groups spent more. With a $ drop due to closures and restrictions, it’s to be expected that the group that spent the most pre-pandemic would shoulder the brunt of the negative impact.
8. Age – 35>64 (62.5%) up from 61.2%. Their performance grew minimally from 117.0% to 117.1% All age groups spent less. The <35 group had the smallest drop, -$0.06B. The 35>64 yr-olds spent -$0.97B less and the $ for 65+ fell -$0.70. The big drop by the oldsters combined with the small drop by the youngsters kept things on par with 2019.
9. Education – College Grads (68.5%) down from 72.2% Income generally increases with education. Services spending moves up with each increasing level of education. College Grads spend the most so they were most impacted by the pandemic. Performance fell from 162.6% to 146.6% but a college education is still the 2nd most important factor.
10. Occupation– All Wage & Salaried (66.8%) down from 69.8% – Only Self-Employed spent more. All white and blue collar work groups along with Retirees had a 20+% drop in Services’ spending. As expected, the high income Managers & Professionals who regularly spend the most on Services had the biggest drop, -$0.76B. All Wage & Salaried workers’ performance rating decreased from 114.5% to 108.7%. Services spending became a little more balanced in terms of Occupation but for the wrong reason.

We changed 2 of the groups for Services – Education and Area, to better target the biggest spenders. We should also note that Income is still more important to spending in Services than in any other segment but # Earners was the only income related category to gain in importance. Marriage also grew in importance but spending became a little more balanced in most categories with gains by renters and larger CUs.

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

Most of the best and worst performers are not a surprise. There are 7 that are different from 2019 – 3 of the best and 4 of the worst, the same as last year. The 3 new winners are more family oriented. The high income Gen Xers, including 45>54 yr-olds stayed on top but you can see a move away from the oldest Americans. 75+ yr-olds, those Born before 1946 and No Earner, singles all moved to the bottom. Changes from 2019 are “boxed”. We should note:

• Income is even more important to Pet Services. While the 283.8% Performance by the $150K> group is about the same as last year’s 284.3%, it is still the best performance by any group in any Industry segment.
• # Earners – Winner and loser are new. They are the segments with the highest and lowest incomes. Not a surprise.
• Generation – Gen X retained Top Spot and the oldest group, born before 1946 replaced Millennials at the bottom. Gen X had the only 100+% performance but the younger groups all improved while the older groups lost ground.
• Age – 45>54, the highest income group. is by far the best performer. All groups from 25>64 perform at 100+%. The lowest performers were at both ends of the age spectrum.
• Area –Suburbs 2500> kept the lead in $ and performance. Services is an Urban segment but the gap narrowed a bit in 2020. Suburbs 2500> performed at 109.3, up from 106.9%. Areas <2500 performed at 88.3%, up from 69.6%.
• CU Composition – Children mattered in 2020. Married couples with children and even Single Parents spent more on Services. Marriage is the key. Married Couples only and those with children of any age all perform over 100%.

In Pet Services spending performance, income is still the major factor. After the youth movement in 2018, spending skewed towards older groups in 2019. This was reversed in 2020 as the younger groups basically held their ground while the older CUs drove the big decrease.

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

The pandemic closures and restrictions drove Pet Services Spending down $1.73B. In this chart you immediately see a difference from last year. In 2020 there were 3 categories in which all segments spent less on Services. In 2019, there were none. In 2019 the changes by the winner and loser tended to cancel the other out. In 2020, the changes by the losers were radically larger than the winners. The tumult that began in 2019 continued in 2020. Again, there were only 2 repeats and 8 of 24 segments switched from first to last or vice versa. In 2019 there were 9 flips. Here are the specifics:

• # in CU – Both the winner and loser are new.
  • Winner – 4 People – Pet Services Spending: $1.19B; Up $0.15B (+14.2%)                                  2019: 5+ People
  • Loser – 2 People – Pet Services Spending: $2.49B; Down $1.10B (-30.6%)                                2019: 3 People
  • Comment: The winners in both 2019 and 2020 reflect the growing strength of the younger generations.
• CU Composition – Married, oldest child 6>17 kept their spot at the top.
  • Winner – Married, Oldest Child 6>17 – Services: $1.31B; Up $0.15B (+12.5%)                       2019: Married, Oldest Child 6>17
  • Loser – Married, Couple Only – Services: $1.80B; Down $0.95B (-34.6%)                                2019: Married, Oldest Child <6
  • Comment – This reflects the strength of the 25>54 year olds. It also demonstrates the importance of “family”, especially children. All married groups with children over 6 spent more. The loser was more likely to be older.
• Housing – Renters flipped from last to first and were the only segment to spend more.
  • Winner – Renter – Services: $1.48B; Up $0.14B (+10.5%)                                                                  2019: Homeowner w/o Mtge
  • Loser – Homeowner w/Mtge – Services: $3.80B; Down $1.16B (-23.4%)                                      2019: Renter
  • Comment – Homeowners w/mtge spend the most so they have the most to lose and they did.
• Occupation – Mgrs & Professionals, the biggest Services spenders were again the group with the biggest decrease.
  • Winner–– Self-Employed – Pet Services Spending: $0.71B; Up $0.14B (+24.3%)                          2019: Retired
  • Loser – Mgrs & Professionals – Pet Services Spending: $2.79B; Down $0.76B (-21.4%)             2019: Mgrs & Profess.
  • Comment – The highest income Self-Employed group spent more in every industry segment.
• Area Type – Big Suburbs flipped from 1^st to last. It’s the 1^st time since 2016 that Center City didn’t either win or lose.
  • Winner – Rural – Pet Services Spending: $0.38B; Up $0.13B (+50.7%)                                            2019: Suburbs 2500>
  • Loser – Suburbs 2500> – Pet Services Spending: $3.33B; Down $0.95B (-22.2%)                        2019: Center City
  • Comment – Rural was the only group to spend more on Services but they increased spending in all segments.
• Income – The winner flipped from last to first.
  • Winner – $50 to $69K – Pet Services Spending: $0.74B; Up $0.12B (+18.6%)                                2019: $30>39K
  • Loser – $100 to $149K – Pet Services Spending: $1.19B; Down $0.79B (-40.0%)                            2019: $50 to $69K
  • Comment – Last year we had an up/down spending rollercoaster in income groups. In 2020 only $50>69K & $150>199K spent more. The winning $50>69K group only spent more on Services. The losing group cut back on the more discretionary Supplies and Services to help fund their $9.6B increase in Food & Veterinary.
• Generation – Gen Z is a surprise, but they had an increase because many are just beginning as Pet Parents.
  • Winner – Gen Z – Services: $0.13B; Up $0.07B (+118.8%)                                                                    2019: Born <1946
  • Loser – Boomers – Services: $2.19B; Down $0.59B (-21.3%)                                                                2019: Gen X
  • Comment – Boomers had the biggest decrease, but it was only slightly larger than Gen X or those born before 1946. Gen Z spent more but the drop by Millennials was minimal, only -$0.16B, 9% of the total decrease.
• Education – College Degree flipped from 1^st to last.
  • Winner – HS Grads – Pet Services Spending: $3.30B; Up $0.05B (+8.9%)                                        2019: Adv. College Degree
  • Loser – Adv. College Degree – Services Spending: $0.93B; Down $1.04B (-31.7%)                        2019: HS Grad w/some College
  • Comment – Only those with no college courses, including those w/o a high school diploma spent more. They only account for 10.6% of Services $ but that’s up significantly from 7.4% in 2019.
• # Earners– Like the Occupation category, the 2 highest income groups provided both the winner and the loser.
  • Winner – 3+ Earners – Pet Services Spending: $0.57B; Up $0.04B (+56.0%)                                  2019: No Earner, Single
  • Loser – 2 Earners – Pet Services Spending: $2.25B; Down $0.85B (-14.4%)                                     2019: 1 Earner, Single
  • Comment – All but 3+ Earner CUs spent less. No Earner, Singles had the biggest % decrease, -44.7%.
• Race/Ethnic – Both the 2019 winner and loser flipped.
  • Winner – Hispanic – Services: $0.52B; Down $0.01B (-2.6%)                                                            2019: White, Not Hispanic
  • Loser – White, Not Hispanic – Services: $6.06B; Down $1.47B (-19.6%)                                        2019: Hispanic
  • Comment– All groups spent less. Hispanics are 2^nd in spending but the total minority share of Services $ is 12.1%.
• Age – The 75+ yr olds flipped from 1^st to last.
  • Winner – <25 yrs – Pet Services Spending: $0.16B; Down $0.03B (-14.3%)                                     2019: 75+ yrs
  • Loser – 75+ yrs – Pet Services Spending: $0.34B; Down $0.42B (-55.1%)                                           2019: 35>44 yrs
  • Comment: In 2018, all age groups spent more on Services. In 2019 all groups under 45 yrs old spent less, while all groups over 45 spent more. In 2020 all age groups spent less but the <35 group was down only -$0.06B while the 35>64 yr olds were -$0.97B and the 65+ group spent -$0.7B less.
• Region – The Midwest lost and has now flipped for three consecutive years.
  • Winner – South – Pet Services Spending: $2.65B; Down $0.30B (-10.2%)                                       2019: Midwest
  • Loser – Midwest – Pet Services Spending: $1.23B; Down $0.59B (-32.5%)                                       2019: Northeast
  • Comment – In 2018 all regions spent more. In 2019 it was only the Midwest and West. In 2020 all spent less.

We’ve seen the winners and losers in terms of change in Services Spending $ for 12 Demographic Categories. Income still matters and the younger groups, especially those with children have come to the forefront. Spending has become more balanced but for the wrong reasons. Here’s some data which shows the monumental change from the 2018 peak.

• Sales:
  • 2018: $8.72B
  • 2019: $8.62B
  • 2020: $6.89B
• % Segments Spending More:
  • 2018: 88%
  • 2019: 49%
  • 2020: 21%
• Avg Biggest Increase:
  • 2018: $1.04B
  • 2019: $0.25B
  • 2020: $0.05B
• Avg Biggest Decrease:
  • 2018: -$0.02B
  • 2019: -$0.27B
  • 2020: -$0.89B

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

HONORABLE MENTION

As you see on the chart, sometimes we had to include both 2^nd and the 3^rd place finishers to reach our 6 positive segment goal. Higher income is important, but the results were mixed in 2020. The $50>69K group won but there were also positive performances by the $150>199K and $30>39K groups. In a reversal from last year, CUs with kids spent more unless you were married and your oldest child was under 6. This also included single parents. The only area spending increase came from Rural areas but urban areas with a population of 100>249K also posted an increase. A College Degree is more important in Services Spending than in any other industry segment. In 2020 those with only a High School diploma and those who didn’t finish high school were the only 2 education segments to spend more on Services. Only 21% of all demographic segments spent more on Services so our choices for Honorable Mention were limited.

Summary

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

2020 brought the pandemic and Services outlets were often deemed nonessential so they were subject to restrictions and closures. Services are definitely needed by some groups. However, for most demographics, Services are a convenience and spending is very discretionary in nature. The reduced availability and the pandemic driven focus on the “needed” segments – Food and Veterinary caused a 20% drop in Services $. High Income is still important in Services spending, but we saw mixed results in 2020. However, the $70K> group still has its highest performance in Services.

Performance is an important measurement. There were 5 categories with high performing big groups, the same as 2019. This is equal to Supplies, but less than Veterinary (6) & Food (8). This indicates a little less disparity in Services Spending.

1. Income
2. Higher Education
3. CU Composition
4. Race/Ethnicity
5. # Earners

The Housing category dropped out and was replaced by # of Earners. These changes were caused by the spending again skewing a little younger. The younger crowd is more likely to have all adults in the CU working. They also are more like to rent than own their home. Renters had the only increase in the Housing segment and pushed Homeownership below the 120% marker. While Spending did move a little younger, Gen X and Boomers are still the top 2 spenders.

A radical increase in the number of outlets caused a competitive market which broadened the appeal of Services and drove a record increase in 2018. Value shopping caused a small decrease in 2019 but Services stayed at the new “normal” level. The pandemic changed all that. Outlets closed and people stayed home so DIY became the new trend even in Pet Services. Services did become more demographically balanced, but it was due to the huge drop in spending by those who normally spent the most, not by any big increases. As Retail America recovers from the 2020 pandemic, we assume that many services outlets will re-open. However, to get back to the previous high level of spending, Pet Parents will also have to move away from DIY and back to “I need help with my pet children, and I have the money to pay for it.” Services were hit the hardest by the pandemic in 2020. We’ll see what happens in 2021.

At Last – The “Ultimate” Pet Services Spending Consumer Unit consists of 4 people – a married couple with 2 kids. The oldest child is 6>17. They are White, but not of Hispanic origin. At least one of them has an advanced College Degree. They are 45 to 54 years old and both work in their own business which generates an income of over $200K. They live in a large suburb of a metropolitan area of 2.5>5 MM in the Western U.S. and are still paying off their mortgage.

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.