Information by segment as defined by USBLS

Tracking Pet Food Pricing: The PPI (Mfg) vs CPI (Retail) – August Update

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

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

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

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

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

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

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

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

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

Petflation 2022 – August Update: Prices increase to +10.1% above 2021

Inflation continues to make headlines. There have been year over year increases in the monthly Consumer Price Index (CPI) larger than we have seen in decades. August prices fell -0.04% from July, but the CPI was still up +8.3% vs 2021, down from +8.5% last month. Food at Home (groceries) prices continue to surge, up 13.5% over 2021. That’s 6 straight months of double-digit YOY monthly percentage increases. These are the first 10+% increases since 1981. As we have seen in recent years, even minor price changes can affect consumer pet spending, especially in the more discretionary pet segments, so we will continue to publish monthly reports to track petflation as it evolves in the marketplace.

Total Pet prices were 4.1% higher in December 2021 than in December 2020, while the overall CPI was up 7.0%. The gap narrowed as Petflation accelerated and reached 96.7% of the national rate in June. National inflation has slowed since July but Petflation has increased, passing the National rate in July and is +10.1% in August. This is 21.7% higher than the national rate of 8.3% and the 2nd highest Petflation rate ever, trailing only +10.3% in January 2009. We need to look a little deeper into the numbers. This and future reports will include:

  • A rolling 24 month tracking of the CPI for all pet segments and the national CPI. The base number will be pre-pandemic December 2019 in this and future reports, which will facilitate comparisons.
  • Monthly comparisons of 22 vs 21 which will include Pet Segments and relevant Human spending categories. Plus
    1. CPI change from the previous month
    2. Inflation changes for recent years (20>21, 19>20, 18>19)
    3. Total Inflation for the current month in 2022 vs 2019
    4. Average annual Year Over Year inflation rate from 2019 to 2022
  • YTD comparisons
    1. YTD numbers for the monthly comparisons #2>4 above

In our first graph we will track the monthly change in prices for the 24 months from August 2020 to August 2022. We will use December 2019 as a base number in this and future reports so we can track the progress from pre-pandemic times through an eventual recovery. Inflation is a complex issue. This chart is designed to give you a visual image of the flow of pricing. You can see the similarities and differences in patterns between segments and compare them to the overall U.S. CPI. The current numbers plus those from 12 and 24 months earlier are included as are the year-end numbers for 2020 & 2021.This will give you some key waypoints for comparisons. (Note: Some key peaks and valleys are also highlighted.)

The pandemic hit home in early 2020. In August, the national CPI was only +1.1% and Pet prices briefly stopped deflating. There are 2 different patterns between the Services and the Products segments. Veterinary and Services prices generally inflated after mid-2020, similar to the overall CPI. Food and Supplies prices generally deflated until late 2021. After that time, Petflation took off. Pet Food prices consistently increased but the other segments had mixed patterns until July, when prices in all segments increased. In August Petflation accelerated, especially in the Products segments.

  • U.S. CPI – The inflation rate was below 2% through 2020. It turned up in January 2021 and continued to grow until flattening out in Jul/Aug 2022. 44% of the overall 15.3% increase since 2019 happened from Jan>June 2022.
  • Pet Food – Prices stayed generally below December 2019 levels from April 2020 to September 2021, when they turned up. There was a sharp increase in December but 88% of the 13.0% increase has happened since January.
  • Pet Supplies – Supplies prices were high in December 2019 due to the added tariffs. They then had a “deflated” roller coaster ride until mid-2021 when they returned to December 2019 prices and essentially stayed there until 2022 when they turned sharply up reaching a new all-time pricing high in January, beating the 2009 record. Prices plateaued from February to May but turned up in June. The CPI flattened in July but turned up in August.
  • Pet Services – Normally inflation is 2+%. Perhaps due to closures, prices increased at a lower rate in 2020. In 2021 consumer demand increased but there were fewer outlets. Inflation grew in 2021 with the biggest lift in Jan>Apr. Inflation was stronger in 2022 but got on a rollercoaster in March, now with slight increases in Jul/Aug.
  • Veterinary – Inflation has been generally consistent in Veterinary. Prices began rising in March 2020 and increased through 2021. Then a pricing surge began in December which pushed them past the overall CPI. In May prices fell and stabilized in June. Then strong increases in July & August again put them above the National CPI.
  • Total Pet – The blending of the different segment patterns made the Pet Industry appear calm. That ended in December 2021 as prices surged in all. After mixed up and downs, in Jul/Aug inflation grew in all segments.

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

Overall, Prices were basically flat vs July but were up 8.3% vs August 2021. The Grocery increase is now 13.5% which is a big negative but there is another area of concern. Only 3 of 9 categories had increases over 1% from last month, but they are all “Pet”. The National CPI rate is slowing but Petflation, especially in Products, is getting worse.

  • U.S. CPI – Prices are down 0.04% from July. The YOY increase is +8.3%, down from +8.5% in June. The targeted inflation rate is <2% so we are still 4 times higher than the “target”. However, a 2nd slight decline is a good start.
  • Pet Food– Prices are +1.7% vs July and 13.1% vs August 21. The YOY increase is being measured against a time when prices were at 2019 levels, but that increase is over 3 times the pre-pandemic 3.9% increase from 2018 to 2019.
  • Food at Home – Prices are up 0.7% from June. The increase from 2021 is 13.5%, which is the largest increase in any month since 13.6% in March 1979 and the largest August monthly increase since 23.4% in 1973. Inflation for this category since 2019 is the highest of any category on the chart and is 45% more than the national CPI.
  • Pets & Supplies – Prices grew 1.5% from July to a new record high. They moved up to 2nd from 3rd in terms of monthly increase over 2021 for industry segments but still have the lowest increase since 2019.
  • Veterinary Services – August prices grew 0.8% from July. They are up +10.0% from 2021 and now trail only Food in the Pet Industry. They also remain 2nd in the increase since 2019 with 17.8% compared to Food at home at 22.3%.
  • Medical Services – Prices sharply increased at the start of the pandemic in 2020 but then inflation slowed and fell to a low rate in 2021. In 2022 prices are turning sharply up again, +30% vs the pre-pandemic 2018>19 rate.
  • Pet Services – Inflation slowed in 2020 but began to grow in 2021/22. Prices are +0.1% from July and +5.7% vs 2021. Prices are still below the May peak but have turned up in July & August after falling in June.
  • Haircuts & Other Personal Services – Prices are +0.7% from July and +4.4% from 2021. They are +15.7% since 2019.
  • Total Pet – Petflation is strong, 4 times the rate of last year and is again ahead of the National CPI. All segments increased prices in August, but inflation is primarily being driven by Food & Veterinary. Inflation can cause reduced purchase frequency in Supplies, Services and Veterinary. Super Premium Food has been generally immune as consumers are used to paying big bucks and it is needed every day. We’ll see if consumers are willing to pay the new high prices for food and buy the more discretionary products/services at the same frequency as they did in the past.

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

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

  • U.S. CPI – The current increase is still almost double the average increase from 2019>2022, but almost 4 times the average annual increase from 2018>2021. Inflation is a big problem that started recently.
  • Pet Food – Inflation is growing stronger, especially after deflation in the 1st half of 2021.
  • Food at Home – The 2022 YTD inflation beat the U.S. CPI by 32.5%. You can see the impact of supply chain issues.
  • Pets & Pet Supplies – Prices have been at record levels since January. Although the 2021>22 increase is being measured against a deflationary 2021, it is significant and just slightly behind Veterinary & Food in the Pet Industry.
  • Veterinary Services – Trails only Food at Home in inflation since 2019 and is the only segment on the chart with a 3+% inflation rate each year throughout the pandemic and recovery. No matter what, just charge more.
  • Medical Services – Prices went up significantly at the beginning of the pandemic, but inflation slowed in 2021. In 2022 there is another pricing surge as the inflation rate is 39% higher than pre-pandemic 2018>19.
  • Pet Services – February & May set records for the biggest year over year monthly increases in history. Prices seem to be becoming more stable, but the current August YTD increase of 6.0% is still the largest in history. Demand has grown for Pet Services while the availability has decreased, a formula for inflation.
  • Haircuts & Personal Services – The services segments, essential & non-essential were hit hardest by the pandemic. After a small decrease in March, prices turned up again. The YTD rate is just behind 2020>21 but still 89% more than 2018>19. Consumers are paying 15% more than in 2019. This usually reduces the purchase frequency.
  • Total Pet – We have seen basically two different inflation patterns. After 2019, Prices in the Services segments continued to increase, and the rate accelerated as we moved into 2021. The product segments – Food and Supplies, were on a different path. They generally deflated in 2020 and didn’t return to 2019 levels until mid-year 2021. Food prices began a slow increase, but Supplies remained stable until we neared yearend. In 2022, everything changed as Food and Supplies prices turned sharply up. Food prices continued to climb. Supplies pricing stabilized then grew in Jun>Aug. The Services segments have had some ups & downs, but both are inflating now. The net was a August YTD CPI increase vs 2021 for Total Petflation of 7.7%, 92.8% of the high 8.3% National rate. It was only 72.5% in March.

Petflation is growing stronger. Will it impact spending? Let’s put it into perspective. The 7.7% current YTD increase in Total Pet is far below the 8.9% record set in 2009 but 5 times larger than the 1.5% avg since then. Although pet spending continues to move to higher income groups, the impact of inflation varies by segment. Supplies is the most affected as many categories are price sensitive. Super Premium Food has become widespread because the perceived value has grown. Higher prices generally just push people to value shop. Veterinary prices have strongly inflated for years, resulting in a reduction in visit frequency. Spending in the Services segment is driven by higher incomes, so inflation is less impactful. We’ll just have to wait and see the overall impact on Pet Spending of the continued strong Petflation.

Petflation 2022 – July Update: Prices increase to +9.1% above 2021

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. July prices fell -0.01% from June, but the CPI was still up +8.5% vs 2021, down from +9.1% last month. Food at Home (groceries) prices continue to surge, up 13.1% over 2021. That’s 5 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, so we will continue to publish monthly reports to track petflation as it evolves in the marketplace.

Total Pet prices were 4.1% higher in December 2021 than in December 2020, while the overall CPI was up 7.0%. The gap narrowed as Petflation accelerated and reached 96.7% of the national rate in June. In July national inflation slowed a bit to 8.5% but Petflation accelerated to 9.1%, 7% higher than the national rate. This latest surge indicates that we should look a little deeper into the numbers. This and future reports will include:

  • A rolling 24 month tracking of the CPI for all pet segments and the national CPI. The base number will be pre-pandemic December 2019 in this and future reports, which will facilitate comparisons.
  • Monthly comparisons of 22 vs 21 which will include Pet Segments and relevant Human spending categories. Plus
    1. CPI change from the previous month
    2. Inflation changes for recent years (20>21, 19>20, 18>19)
    3. Total Inflation for the current month in 2022 vs 2019
    4. Average annual Year Over Year inflation rate from 2019 to 2022
  • YTD comparisons
    1. YTD numbers for the monthly comparisons #2>4 above

In our first graph we will track the monthly change in prices for the 24 months from July 2020 to July 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 Old April Peak for Veterinary is also highlighted.)

The pandemic hit home in early 2020. In July, the national CPI was only +0.8% and Pet prices deflated until August. There are 2 different patterns between the Services and the Products segments. Veterinary and Services prices generally inflated after mid-2020, similar to the overall CPI. Food and Supplies prices generally deflated until late 2021. After that time, Petflation took off. Pet Food prices consistently increased but the other segments had mixed patterns until this month. While the increase in Supplies was minimal, prices in all segments increased in July.

  • U.S. CPI – The inflation rate was below 2% through 2020. It turned up in January 2021 and continued to grow until flattening out in July 2022. 44% of the overall 15.3% increase since 2019 happened from Jan>June 2022.
  • Pet Food – Prices stayed generally below December 2019 levels from April 2020 to September 2021, when they turned up. There was a sharp increase in December but 86% of the 11.1% increase has happened since January.
  • Pet Supplies – Supplies prices were high in December 2019 due to the added tariffs. They then had a “deflated” roller coaster ride until mid-2021 when they returned to December 2019 prices and essentially stayed there until 2022 when they turned sharply up reaching a new all-time pricing high in January, beating the 2009 record. Prices plateaued from February to May but turned up in June. The CPI flattened in July but at a new record high.
  • 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 but has been on a rollercoaster since March, turning up again in July.
  • Veterinary – Inflation has been generally consistent in Veterinary. Prices began rising in March 2020 and increased through 2021. Then a pricing surge began in December which pushed them past the overall CPI. In May prices fell and stabilized in June. July saw another increase which again put them above the National CPI.
  • Total Pet – The blending of the different segment patterns made the Pet Industry appear calm. That ended in December 2021 as prices surged in all segments. After mixed up and downs, in July inflation grew in all segments.

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

Overall, Prices were basically flat vs June but were up 8.5% vs July 2021. The Grocery increase is now 13.1% which is a big negative but there is another small positive. Only 2 of 9 categories had increases over 1% from last month, down radically from 5 in March. With the slight drop in the National CPI vs last month there is hope for the future.

  • U.S. CPI – Prices are down 0.01% from June. The YOY increase is +8.5%, down from +9.1% in June. The targeted inflation rate is <2% so we are still 4 times higher than the “target”. However, the slight decline is a good start.
  • Pet Food– Prices are +1.2% vs June and 10.9% vs July 2021. The YOY increase is being measured against a time when prices were at 2019 levels, but that increase is almost 3 times the pre-pandemic 3.7% increase from 2018 to 2019.
  • Food at Home – Prices are up 1.4% from June. The increase from 2021 is 13.1%, which is the largest increase in any month since 13.6% in March 1979 and the largest July monthly increase since 13.9% in 1974. Inflation for this category since 2019 is the highest of any category on the chart and is 38% more than the national CPI.
  • Pets & Supplies – Prices grew only 0.03% from June but still set a new record high. They fell from 2nd to 3rd in terms of monthly increase over 2021 for industry segments and still have the lowest increase since 2019.
  • Veterinary Services – July prices grew 0.8% from June. They are up +9.3% from 2021 and now trail only Food in the Pet Industry. They also remain 2nd in the increase since 2019 with 17.1% compared to Food at home at 21.4%.
  • Medical Services – Prices sharply increased at the start of the pandemic in 2020 but then inflation slowed and fell to a more normal rate in 2021. In 2022 prices are turning sharply up again, +55% vs the pre-pandemic 2018>19 rate.
  • Pet Services – Inflation slowed in 2020 but began to grow in 2021/22. Prices are +0.3% from June and +5.6% vs 2021. Prices are still below the May peak but have turned up again after falling in June.
  • Haircuts & Other Personal Services – Prices are +0.2% from June and +4.3% from 2021. They are +15.4% since 2019.
  • Total Pet – Petflation is strong, 3 times the rate of last year and is now ahead of the National CPI. Prices in All segments increased in July, but inflation is primarily being driven by Food & Veterinary. Inflation can cause reduced purchase frequency in Supplies, Services and Veterinary. Super Premium Food has been generally immune as consumers are used to paying big bucks and it is needed every day. We’ll see if consumers are willing to pay the new high prices for food and buy the more discretionary products/services at the same frequency as they did in the past.

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

The increase from 2021 to 2022 is the biggest for 7 of 9 categories. The average annual increase since 2019 is over 3% for all but Pet Food & Pet Supplies. This is due to deflation in the 1st half of 2021.

  • U.S. CPI – The current increase is almost 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 the 1st half of 2021.
  • Food at Home – The 2022 YTD inflation beat the U.S. CPI by 27.7%. You can see the impact of supply chain issues.
  • Pets & Pet Supplies – Prices have been at record levels since January. Although the 2021>22 increase is being measured against a deflationary 2021, it is significant and is 2nd only 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 inflation slowed in 2021. In 2022 there is another pricing surge as the inflation rate is 38% higher than pre-pandemic 2018>19.
  • Pet Services – February & May set records for the biggest year over year monthly increases in history. Prices seem to be becoming more stable, but the current July YTD increase of 6.0% is still the largest in history. Demand has grown for Pet Services while the availability has decreased, a formula for inflation.
  • Haircuts & Personal Services – The services segments, essential & non-essential were hit hardest by the pandemic. After a small decrease in March, prices turned up again. The YTD rate is now equal to 2020>21 but still 96% more than 2018>19. Consumers are paying 15% more than in 2019. This usually reduces the purchase frequency.
  • Total Pet – We have seen basically two different inflation patterns. After 2019, Prices in the Services segments continued to increase, and the rate accelerated as we moved into 2021. The product segments – Food and Supplies, were on a different path. They generally deflated in 2020 and didn’t return to 2019 levels until mid-year 2021. Food prices began a slow increase, but Supplies remained stable until we neared yearend. In 2022, everything changed as Food and Supplies prices turned sharply up. Food prices continued to climb. Supplies pricing stabilized then grew in June/July. The Services segments have had some ups & downs, but both are inflating in July. The net was a July YTD CPI increase vs 2021 for Total Petflation of 7.4%, 89.2% of the high 8.3% National rate. It was only 72.5% in March.

Petflation is growing stronger. Will it impact spending? Let’s put it into perspective. The 7.4% July YTD increase in Total Pet is far below the 8.9% record set in 2009 but 5 times larger than the 1.5% avg since then. Although pet spending continues to move to higher income groups, the impact of inflation varies by segment. Supplies is the most affected as many categories are price sensitive. Super Premium Food has become widespread because the perceived value has grown. Higher prices generally just push people to value shop. Veterinary prices have strongly inflated for years, resulting in a reduction in visit frequency. Spending in the Services segment is driven by higher incomes, so inflation is less impactful. We’ll just have to wait and see the overall impact on Pet Spending of the continued strong Petflation.

U.S. Pet Services Spending (Non-Vet) $7.44B (↓$0.40B): 2021 Mid-Year Update

The US BLS released their Mid-Year Update of the Consumer Expenditure Survey covering the period from 7/1/2020 to 6/30/2021. In our analysis of Pet Supplies Spending, we saw an incredibly strong rebound from the 2-year decline caused by inflation then the pandemic. However, Pet Food Spending took the opposite route. Spending fell sharply in the 1st half of 2021 compared to the extra food that Pet Parents had “panic” bought due to the fear of pandemic induced shortages. Now we turn our attention to Pet Services. The Mid-year numbers show that spending in this segment was $7.44B, down $0.40B (-5.1%) from the previous year. Up until 2018, this segment was known for consistent, small growth. In 2018, increased outlets and competitive prices brought on a wave of new users and spending increased +$1.95B. Spending remained near this new high normal until we reached 2020. Closures due to the pandemic drove spending down $1.73B by yearend, essentially returning to the level of 2017. In 2021 things opened up and spending began to rebound. This deserves a closer look. First, we’ll look at Services spending history since 2014.

Here are the 2021 Mid-Year Specifics:

Mid-Year 2021: $7.44B, ↓$0.40B (-5.1%) vs Mid-Yr 2020

Jul > Dec 2020: ↓$0.95B          Jan > Jun 2021: ↑$0.55B

Pet Services is by far the smallest industry segment. However, except for 2010 and 2011, the period immediately following the Great Recession, it had consistent annual growth from 2000 through 2016. Spending in Food and Supplies have been on a roller coaster ride during that period. Services Spending more than tripled from 2000 to 2016, with an average annual growth rate of 7.6%. Spending in the Services Segment is the most discretionary in the industry and is more strongly skewed towards higher income households. Prior to the great recession, the inflation rate averaged 3.9% with no negative impact. The recession affected every industry segment, including Services. Consumers became more value conscious, especially in terms of discretionary spending. Services saw a slight drop in spending in both 2010 and 2011, but then the inflation rate fell to the 2+% range and the segment returned to more “normal” spending behavior. In mid-2016 inflation dropped below 2% and continued down to 1.1% by the end of 2017. This was primarily due to increased competition from free standing businesses but also an increase in the number of Pet Stores and Veterinary Clinics offering pet services. While prices still went up slightly, there were deals to be had and consumers shopped for the best price. There was no decrease in purchase frequency. Consumers just paid less so spending fell slightly. In the 2nd half of 2017 spending turned up again. More Consumers began to take advantage of the value and convenience of the increased number of outlets offering Services. This deeper market penetration caused Services Spending to take off in 2018, up $1.95B, by far the biggest annual increase in history. Prices turned up again in the first half of 2019, increasing  2.8% from 2018. However, Services spending inched up $0.09B. In the 2nd half of 2019 Value shopping again came to the forefront as spending fell -$0.19B. Then came 2020 and the pandemic. Many of these nonessential businesses were forced to close and spending fell precipitously, -$1.73B to $6.89B, about the same as yearend 2017. In 2021 things opened up again and spending bounced back, +$0.55B vs the 1st 6 months of 2020. However, there’s still a long way to go.

Let’s take a closer look at some spending demographics – Age and Income.

In the graphs that follow we compare spending for the 12 months ending 6/30/21 to the previous 12 months. The graphs also include the 2020 yearend $, so you can see spending changes in the 2nd half of 2020 and the 1st half of 2021.

The first graph is for Income, the single most important factor in increased Pet Spending, especially in Services.

Here’s how you get the change for each half using the Over $70K group as an example:

  • Mid-yr Total Spending Change: $5.04B – $6.02B = Down -$0.98B (Note green outline = increase; red outline = decrease)
    • 2nd half of 2020: Subtract Mid-20 ($6.02B) from Total 2020 ($4.77B) = Spending was down $1.25B in 2nd half of 2020.
    • 1st half of 2021: Subtract Total 2020 ($4.77B) from Mid-21 ($5.04B) = Spending was up +$0.27B in 1st half of 2021

  • With the Over/Under $100K measurement, you see how Services Spending is a little less skewed towards higher incomes. The halfway spending point is about $115K so about 25% of CUs spend 50% of Services $. The overall <$70K group grew consistently in both halves reflecting the pattern of all under $70K income groups.
  • As we noted, all individual groups below $70K had steady growth. The $50>$70K led the way with a $0.29B (+46.7%) increase for the year and $0.17B lift in the 1st half of 2021.
  • The middle to high income $70 to $150K groups had the biggest negative pandemic impact as spending fell $1B in the 2nd half of 2020. The $ increased slightly, +$0.1B in the 1st half of 2021 but they were still -$0.89B for the year.
  • The over $150K group has 14.6% of the CUs but accounts for 39.2% of Services $. This is actually a larger share than the 37.6% that they had in pre-pandemic 2019. The pandemic had a minimal impact on this group.
  • With gains from all the <$70K groups and big losses from the $70>150K groups, Services spending has become a little more balanced in regard to income. However, income, especially when it is over $150K, remains the single biggest factor in the discretionary spending in the Services segment.

Now, Services’ Spending by Age Group.

  • Basically the 25>44 yr-olds spent more while everyone else spent less.
  • Although their lift was minor this year, 25>34 are the only group with 2 consecutive mid-year increases.
  • The 35>44 group had by far the biggest increase. They were up +$0.32B (+25.6%) for the year with a +$0.3B lift in the 1st half of 2021. They were the only group with increases in both halves.
  • The older groups, 45>, continue to be the most negatively impacted by the pandemic. All spent less for the year and their increase in the 1st half of 2021 was minimal.
  • All groups but 75+ did have a spending lift in the 1st half of 2021. Hopefully, the increase will grow in the 2nd

 Now let’s look at what is happening in Pet Services spending at the start of 2021 across the whole range of demographics. In our final chart we will list the biggest $ moves, up and down by individual segments in 11 demographic categories. Remember, the lift in the 1st half of 2021 was +$0.55B, a big change from -$0.78B drop in 2020.

2021 has started much better than 2020 as the market begins to open up. In the Income category all segments spent more. Last year there were 4 categories in which all segments spent less on Services. Also, the $ changes from the winners are overwhelming larger than the negatives of the losers. The +$0.55B decrease in Pet Services came from 64 of 82 demographic segments (78%) spending more. Last year 88% spent less. The recovery is beginning and becoming more widespread.

The usual winners have overwhelmingly returned but there are a couple of surprises:

  • $50>69K
  • 2+ Adults, No Kids

Most of the Losers are also expected. Here are the surprises:

  • Self-Employed
  • Suburbs 2500>
  • Married, Couples Only

The younger groups are driving the 1st half lift which is demonstrated by the performance of Millennials, 35>44 yr-olds, 2 Earners and 2+ Adults, No Kids. The younger groups also had the best performance in the 1st half of 2020. Their importance continues to grow as the Baby Boomers must ultimately pass the torch.

Spending is turning up again. Let’s review how we got to this point and speculate on what comes next.

Except for the trauma caused by the Great Recession which hit Services in 2010>11, from 2000 to 2016 the Services segment had slow but consistent growth. The number of outlets also was increasing. Services were gaining in popularity and many retail pet stores were looking for a competitive edge over the growing pet product sales of online retailers. Afterall, you can buy product, but you can’t get your dog groomed on the internet. By 2017 the number of outlets offering Pet Services had radically increased. This created a highly competitive market and the inflation rate dropped to near record lows. Value conscious consumers saw that deals were available, and they took advantage of the situation. However, they didn’t increase the frequency of purchase. They just paid less. This drove overall Pet Services spending down in the 1st half of 2017. The segment started to recover in the 2nd half but not enough to prevent the first annual decrease in Pet Services spending since 2011. However, it was a start. In 2018, more consumers started to recognize the convenience offered by more outlets. The latest big food upgrade was also winding down. The result was that Services started a deeper penetration into the market, especially in the younger groups. The < 45 groups spent $1.47B more on Services in 2018, 74% of the total $1.95B increase in the segment. After such a big lift, a slight downturn in 2019 was not unexpected and it happened, -$0.1B. Then came 2020 and COVID. Although the consumer use of Services was becoming increasingly widespread, many Services outlets were deemed nonessential and were subject to pandemic restrictions and closures. Services Spending fell -$0.78B in the 1st half and -$0.95B in the 2nd half. This was a -$1.73B (-20.1%) decrease for the year and nearly wiped out the big gain made in 2018.

In 2021, things have opened up and Services spending began to rebound with a +$0.55B lift in the 1st half. What will happen in the 2nd half of 2022? Pet Services have become an important option that is exercised by an increasing number of Pet Parents. The growth in this segment should continue as we return to a new “normal”. We’ll get the yearend 2021 data in September

U.S. PET SUPPLIES SPENDING $17.42B (↑$1.14B): MID-YR 2021 UPDATE

In our analysis of Pet Food spending, we saw that spending plummeted in the 1st half of 2021 compared to the panic buying at the beginning of the pandemic. Supplies took the opposite route. At the beginning of 2020, Supplies Spending was down due to Tarifflation. The pandemic caused consumers to focus on needs so Supplies $ continued its steady decline from its 2018 peak reaching a low point below 2016. In 2021, that all changed. Supplies Prices had been steadily deflating and Consumers finally responded. Mid-Year 2021 Pet Supplies spending was $17.42B, up $1.14B (+7.0%). The following chart should put the recent spending history of this segment into better perspective.

Here are this year’s specifics:

Mid Yr 2021: $17.42B; $1.14B (+7.0%) from Mid Yr 2020.

The +$1.14B came from:

Jul > Dec 2020: ↓$1.12B        Jan > Jun 2021: ↑$2.26B

We should note that while the overall lift was relatively low, the lift in the 1st half of 2021 was the biggest YOY 6 month increase in history. Like Pet Food, Pet Supplies spending has been on a roller coaster ride, but the driving force is much different. Pet Food is “need” spending and has been powered by a succession of “must have” trends and the emotional response to the Pandemic. Supplies spending is largely discretionary, so it has been impacted by 2 primary factors. The first is spending in other major segments. When consumers ramp up their spending in Pet Food, like upgrading to Super Premium, they often cut back on Supplies. However, it can go both ways. When they value shop for Premium Pet Food, they take some of the saved money and spend it on Supplies. The other factor is price. Before breaking the record in 2022, Pet Supplies prices reached their peak in September of 2009. Then they began deflating and in March 2018 were down -6.7% from 2009. Price inflation in this segment can retard sales, usually by reducing the frequency of purchase. On the other hand, price deflation generally drives Supplies spending up. Innovation can “trump” both of these influencers. If a new “must have” product is created, something that significantly improves the pet parenting experience, then consumers will spend their money. Unfortunately, we haven’t seen much significant innovation in the Supplies segment recently.

Recent history gives a perfect example of the Supplies roller coaster. In 2014 Supplies prices dropped sharply, while the movement to Super Premium Food was barely getting started – Supplies spending went up $2B. In 2015, consumers spent $5.4B more on Pet Food. At the same time, Pet Supplies prices went up 0.5%. This was a “killer” combination as Supplies spending fell $2.1B. In 2016 consumers value shopped for Food, saving $2.99B. Supplies spending stabilized by mid-year then increased by $1B in the second half when prices fell sharply. Consumers spent some of their “saved” money on Supplies. Supplies prices continued to deflate throughout 2017. Food spending increased $4.61B in 2017 but this came from a limited group, generally older CUs, less focused on Supplies. The result was a $2.74B increase in Supplies spending. This appeared to be somewhat of a break with the overall pattern of trading $ between segments.

In the first half of 2018 Pet Food spending slowed to +$0.25B. Supplies’ prices switched from deflation to inflation but were only up 0.1% versus the first half of 2017. During this period Supplies Spending increased by $1.23B. Prices began to climb in the second half of 2018 due to impending new tariffs in September. By June 2019 they were 3.4% higher than 2018. The impact of the tariffs on the Supplies segment was very clear. Spending became flat in the second half of 2018, then took a nosedive in the 1st half of 2019, -$2.09B. Prices stayed high for the rest of 2019 and spending fell an additional -$0.9B. In 2020 prices turned up again through March before plummeting, -3.8% by June. However, due to the pandemic focus on “needs”, spending dropped an additional -$0.54B. The situation not only didn’t change in the 2nd half, it worsened as the $ fell an additional -$1.12B. However, 2021 brought a new beginning as Supplies spending increased +$2.26B over the 1st half of 2020 and reached a level above pre-pandemic yearend 2019.

Let’s take a closer look at the data, starting with two of the most popular demographic measures – age and income. The graphs that follow will show both the current and previous 12 months $ as well as 2020 yearend. This will allow you to track the spending changes between halves.

The first graph is for Income, which has been shown to be the single most important factor in increased Pet Spending, especially in Pet Supplies and both of the Service segments.

Here’s how you get the change for each half using the $70K>100K group as an example:

Mid-yr Total Spending Change: $2.76B – $2.65B = Up $0.11B (Note: green outline = increase; red outline = decrease)

  • 2nd half of 2020: Subtract Mid-20 ($2.65B) from Total 2020 ($2.32B) = Spending was down $0.33B in 2nd half of 2020.
  • 1st half of 2021: Subtract Total 2020 ($2.32B) from Mid-21 ($2.76) = Spending was up $0.44B in 1st half of 2021.

  • Comparing the under/over $100K to the under/over $70K shows that the share of Supplies spending “flips” based upon the $70>$100K group. That means that the “halfway” dividing line is probably slightly above the average CU income of $84.7K. The Supplies $ of CUs with above average income, 33% is equal to the 67% of CUs below average.
  • The spending patterns <$70K are mixed. For $70K> they are same, with a dip at yearend but a bounce back in 2021.
  • The increase in Supplies Spending was widespread across income groups but the bulk of the lift came from lower incomes, especially <$30K and $50>70K. The two segments with decreases were an unlikely pair – $150K+ and $30>$50K. They had the only increases last year. In both cases the spending decrease was due to a big drop in Supplies $ in the 2nd half of 2020.
  • The spending movement is generally up but only 2 segments had increases in both halves, <$30K & $50>70K.
  • Inflation/deflation has less impact on the $100K> group. The negative impact of the pandemic didn’t happen for them until the 2nd half of 2020 but they largely recovered. The biggest positives came from the <$30K and the $50>$70K groups. In 2020, their spending fell -$1.43B, due to a reduced purchase frequency. In 2021 they increased frequency and spending as they returned to a near normal level. We’ll see if the lift continues in the 2nd half of 2021.

Now let’s look at Pet Supplies spending by Age Group.

  • There were 2 primary patterns. For 45> spending fell in the 2nd half of 2020, then rebounded in 2021. For the 25>44 yr-olds, spending grew in both halves. The <25 group had a big drop in the # of CUs in 2020 which affected spending.
  • The 25>34 year olds had strong growth in both halves.
  • Spending by the 54>64 yr olds decreased the most in the 2nd half of 2020 and their rebound fell a little short. They also fell from the top spot in Supplies spending to #3.
  • The 65> group was the most stable. Spending fell slightly in the 2nd half of 2020 but turned positive in 2021.

Now let’s look at what happened in Supplies spending at the start of 2021 across the whole range of demographics. In our final chart we will list the biggest $ moves, up and down by individual segments in 12 demographic categories.

  • It’s obvious that the biggest increases are radically larger than the biggest decreases, the complete opposite of 2020.
  • The increase is widespread which is very apparent as all segments in 7 categories spent more. In 2020 there were 5 categories in which all segments spent less. This reinforces that the 1st half of 2021 increase was the biggest ever.
  • Most of the winners are the “usual suspects”, like Mgrs/Professionals & Adv College Degree but there are a couple of surprises – $50>69K & 2+ Adults, No Kids.
  • In regard to the losers, African Americans & Center City are not unexpected but when all segments in 7 categories spent more there are very few true losers.
  • The Age category is a great example of the widespread lift. The 2 groups with a decrease in spending from Mid-yr 2020, <25 and 55>64 both spent more in the 1st half of 2021. Plus 55>64 had the biggest increase.
  • The Housing category is also of particular interest. Not only did all segments spend more in the 1st half of 2021, they all spent at least $0.5 billion more than they did in 2020.

The 24 month Spending winning streak for Supplies which began in the second half of 2016 came to an end in the second half of 2018. Pet Supplies increased $4.97B (+33.5%) and the lift was widespread. Only 1 of 82 demographic segments, spent less on Supplies – the Greatest Generation. This group is now too small to be accurately measured.

Since the Great Recession the Supplies segment has become commoditized and very sensitive to inflation/deflation. Plus, since most categories are discretionary, Supplies spending can be affected by spending changes in other segments as Pet Parents trade $. In 2018, the Pet Industry was introduced  to a new “game changer” – outside influence. The FDA warning on grain free dog food caused a big decrease in food spending but the government also radically increased tariffs which drove Supplies prices up and spending down, a record $2.98B.

However, we weren’t done yet. That brought us to 2020 and a new, totally unexpected outside influence, the COVID pandemic. This affected all facets of society, including the Pet Industry. Consumers, including Pet Parents, focused on needs rather than wants. In the Pet Industry, this meant that their attention was drawn to Food and Veterinary Services. This led to a huge lift in Pet Food $ due to binge buying but also a big increase in Veterinary spending. The more discretionary segments, Supplies and Services, suffered. Services had an extra handicap. Many outlets were not considered essential, so they were subject to restrictions and closures. Supplies were still available, but many were considered optional by consumers so spending continued to decline throughout 2020. By yearend, $ had reached the lowest level since 2015. This all happened while prices continued to deflate. That brought us to 2021. The retail economy had largely recovered and spending patterns were returning to “normal”. This was also true in Pet Supplies. Pet Parents opened their wallets and  bought the Pet Supplies that they had been holding back on for a year. The result was the biggest YOY 6 month increase in history. We don’t know what the 2nd half will bring but Pet Supplies are back!

 

Petflation 2022 – June Update: Prices increase to +8.8% above 2021

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 June the CPI was up 9.1% vs 2021, beating the previous high of 8.6% in May. Food at Home (groceries) prices continue to surge, up 12.2% over 2021. That’s 4 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, Petflation stabilized and the gap widened a bit to 94%. However, inflation in the Products segments surged in June and the gap decreased to 96.7%, again virtually equal to 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 June 2020 to June 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 hit home in early 2020. The national CPI was only +0.3% and Pet prices deflated until August. There are 2 different patterns between the Services and the Products segments. Veterinary and Services prices generally inflated after mid-2020, similar to the overall CPI. Food and Supplies prices generally deflated until late 2021. After that time, inflation took off, but the patterns became mixed. Services paused in March and fell in June. Veterinary dropped in May. Supplies prices plateaued then surged in June 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 June 2022. 44% of the overall 15.3% increase since 2019 occurred in the last 6 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 but 81% of the 9.8% increase has happened since January.
  • 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 plateaued from February to May, but turned up in June, reaching a new record high.
  • 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 but then prices fell in June.
  • 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. Prices peaked at +15.5% in April. In May prices fell and stabilized in June which pushed them below the National CPI.
  • Total Pet – The blending of the different segment patterns made the Pet Industry appear calm. That ended in December 2021 as prices surged in all segments. In June inflation is slowing in Services but growing in Products.

Next, we’ll turn our attention to the Year over Year inflation rate change for the month of June 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 9.1% vs 2021 with the Grocery increase now hitting 12.2%. There are some small positives. Only 3 of 9 categories had increases over 1% from last month, the same as April & May but down from 5 in March…. And Non-Veterinary Services prices actually fell 0.7% from May. There is a little hope.

  • U.S. CPI – Prices are up 1.4% from last month. In May the increase was 1.1%. June Inflation was +9.1%. The targeted rate is <2%. We remain 4+ times higher than the “target”. Inflation is getting worse, and it accelerated again in June.
  • Pet Food – Prices are up 1.3% vs May and 10.3% vs June 2021. The YOY increase is being measured against a deflationary year, but that increase is almost 4 times the pre-pandemic 2.8% increase from 2018 to 2019.
  • Food at Home – Prices are up 1.0% from May. The increase from 2021 is 12.2%, which is the largest increase in any month since 12.3% in April 1979 and the largest June monthly increase since 15.1% in 1974. Inflation for this category since 2019 is the highest of any category on the chart and is 25% more than the national CPI.
  • Pets & Supplies – Prices grew 0.9% from May and set a new record high. They now have the 2nd highest monthly increase over 2021 of any industry segment, but still have the lowest increase since 2019.
  • Veterinary Services – June prices grew 0.2% from May. They are up 7.5% from 2021 but now trail Food & Supplies in the Pet Industry. They also remain 2nd in the increase since 2019 with 16.9% compared to Food at home at 19.7%.
  • 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. In 2022 prices are turning sharply up, +71% vs the pre-pandemic 2018>19 rate.
  • Pet Services – Inflation slowed in 2020 but began to grow in 2021/22. Prices are -0.7% from May and +6.3% vs 2021. Prices are now below April and appear to be stabilizing, at least for a short period.
  • Haircuts & Other Personal Services – Prices are +0.3% from May and +6.3% from 2021. They are +15.8% since 2019.
  • Total Pet – Inflation is strong and is 3+ times the rate of last year. Service segments prices are becoming stable while the Product segments prices are growing. This is driving Petflation up. 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 22.9%. You can see the impact of supply chain issues.
  • Pets & Pet Supplies – Prices have been at record levels since January. Although the 2021>22 increase is being measured against a deflationary 2021, it is significant and tied for 1st with 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 inflation slowed in 2021. In 2022 there is another pricing surge as the inflation rate is 36% higher than pre-pandemic 2018>19.
  • Pet Services – February & May set records for the biggest year over year monthly increases in history. Prices seem to be becoming more stable, but the current June YTD increase of 6.1% is the largest in history. Demand has grown for Pet Services while the availability has decreased, a formula for inflation.
  • Haircuts & Personal Services – The services segments, essential & non-essential were hit hardest by the pandemic. After a small decrease in March, prices turned up again. The YTD rate is now equal to 2020>21 but still 93% more than 2018>19. Consumers are paying 15% more than in 2019. This usually reduces the purchase frequency.
  • Total Pet – We have seen basically two different inflation patterns. After 2019, Prices in the Services segments continued to increase, and the rate accelerated as we moved into 2021. The product segments – Food and Supplies, were on a different path. They generally deflated in 2020 and didn’t return to 2019 levels until mid-year 2021. Food prices began a slow increase, but Supplies remained stable until we neared yearend. In 2022, everything changed as Food and Supplies prices turned sharply up. Food prices continued to climb. Supplies pricing stabilized then grew in June. The Services segments have had decreases but are becoming more stable. The net was a June YTD CPI increase vs 2021 for Total Petflation of 7.1%, 85.5% of the extraordinarily high 8.3% overall rate. It was only 72.5% in March.

Inflation is strong in the Pet Market. Will it impact spending? Let’s put it into perspective. The 7.1% June YTD increase in Total Pet is far below the 8.9% 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. We’ll just have to wait and see the overall impact on Pet Spending of the continued strong Petflation.

U.S. PET FOOD SPENDING $31.56B (↓$6.40B): MID-YEAR 2021 UPDATE

The pandemic had a huge impact on consumers. They stayed home and focused on needs, rather than wants. This behavior was very evident in the Pet Industry as the “needed” segments – Food and Veterinary Services, had big $ increases while the spending in the more discretionary segments – Supplies and Non-Vet Services fell. There were other factors that amplified these differences. Services outlets were often deemed non-essential, so they were subject to widespread restrictions and closures. Food had a completely different path. During the early stages of the pandemic, consumers often binge bought essential products to have a backup supply in case there were outages. This behavior applied to Pet Food, which is the only absolutely essential Pet Industry Segment. The result was a $6.8B increase in spending over the 1st half of 2019. It should be noted that Pet Food spending was down in the 1st half of 2019 because the segment was still feeling the impact of the “untrue” FDA warning on grain free dog food. However, the lift was still the biggest year over year increase in history.

Pet Parents maintained this extra supply of pet food throughout the balance of 2020. As we moved into 2021, there were still some outlets that were suffering but most channels had recovered, and the overall Retail Market was prospering. This caused a change in Pet Food spending. Pet Parents obviously didn’t binge again and, in a few situations, even had their pets start to “eat down” the extra supply of food to return to their previous level of home “inventory”. They also increasingly moved to internet purchasing with regular deliveries. As a result, Pet Food Spending fell -$6.4B (-16.9%) in the 12 month period ending 6/30/21 over the previous year and -$5.3B vs the 1st 6 months of 2020.

As you know, the pandemic also caused problems in information gathering for the data collected by the US BLS for the annual Consumer Expenditure Survey (CEX), especially in the Diary method which is used for Pet Food. Those were resolved in 2020 and everything returned to a “new normal”.

Now, let’s get started with our Pet Food spending update for Mid-Year 2021. Pet Food (& Treat) Annual Spending was $31.56B, down -$6.40B (-16.9%). The following charts and observations were prepared from calculations based upon data from the current CEX report and earlier ones. The first chart will help put the $31.56B into historical perspective and truly show you the roller coaster ride that continues in Pet Food Spending.

Here are the current numbers:

        Mid 2021: $31.56B; ↓$6.40B (-16.9%) from Mid-2019. The net -$6.40B in Mid 2021 came from:

  ◦  Jul>Dec 2020: Down $1.12B from 2019.            Jan>Jun 2021: Down $5.29B from 2020.

Historical research has shown that Pet Food spending has been on a roller coaster since 2000, with 2 years up, followed by a flat or even declining year. This up and down “ride” has been driven by a succession of Food trends. The most recent were “Natural” in 2011 and “Super Premium” in 2014. Another factor was added in 2013 – deflation. As consumers opted for higher quality, more expensive pet food, competition became more intense, with the Internet now becoming a key player. 2013 was a definitely a game changer for this segment as it began an extended period of deflation which continued through 2018. Midway through 2018, Pet Food prices were still 2.3% lower than in 2013.

The spending drops in 2013 and 2016 were driven by pet parents value shopping for their recently upgraded pet food. As it turns out, 2014 brought out yet another new factor in Pet Food spending. For over 30 years Baby Boomers have been the leaders in the Pet Food, both in spending and in adopting new products. They still spend the most, but it turns out that the 25>34 year old Millennials led the movement to Super Premium in late 2014. The older groups, especially Boomers followed in 2015 and spending rose $5.4B. At the same time, the Pet Food spending of the 25>34 yr olds dropped. At first, we thought they had rolled back their upgrade. However, it turns out they were leading the way in another element of the trend to Super Premium – value shopping. The Boomers once again followed their lead and spending fell -$2.99B in 2016. For consumers, the Super Premium upgrade movement consisted of 3 stages:

  1. Trial – The consumer considers the benefits vs the high price and decides to try it out. Usually from a retail outlet.
  2. Commitment – After a period of time, the consumer is satisfied and is committed to the food.
  3. Value Shop – After commitment, the “driver” is to find a cheaper price! – The Internet, Mass Market, Private label

This brought us to 2017. Time for a new “must have” trend. That didn’t happen but the competitive pricing situation brought about another change. Recent food trends have been driven by the higher income and higher education demographics. However, the “value” of Super Premium was established and now more “available”. Blue Collar workers led a new wave of spending, +$4.6B, as Super Premium more deeply penetrated the market. After the big lift in 2017, 2018 started off slowly, +$0.25B. Then came the FDA warning on grain free dog food. Many of the recent Super Premium converts immediately rolled back their upgrade and spending fell -$2.51B. This 2018 decrease broke a 20 year spending pattern. In the 1st half of 2019, Pet Food spending remained stable at the new lower level. In the second half of 2019 we started to see a recovery from the overreaction to the FDA warning and spending increased by $2.3B. Then came 2020. The recovery was continuing but a new outside influence was added which had a massive impact on U.S. consumers – the COVID-19 pandemic. In March nonessential businesses were closed. This also produced a wave of panic buying in some truly essential product categories. In the Pet Industry there is only 1 truly essential category – Pet Food. Coupled with the FDA “recovery” and the ongoing movement to Super Premium, this produced an incredible $6.76B lift in Pet Food Spending in the 1st half of 2020. Spending fell in the 2nd half of 2020 and plummeted in the 1st half of 2021. Pet Parents didn’t binge again and some even began using up the stockpile that they panic bought in the early days of COVID.

Let’s look at Pet Food spending by the 2 most popular demographic measures – income & age group. They both show the current and previous 12 months $ as well as 2019 and 2020 yearend. This will allow you to track the spending changes between halves and to see where we started, in pre-pandemic yearend 2019. The first graph is Income, which has been shown to be the single most important factor in increased Pet Spending.

Here’s how you get the change for each half of the 20>21 mid-yr numbers using the under $100K group as an example:

  • <$100K Mid-yr Total Spending Change: $17.79B – $17.35B = Up $0.44B (green outline = increase; red outline = decrease)
  • 2nd half of 2020: Subtract Mid-20 ($17.35) from Total 2020 ($16.53B) = Spending was down $.82B in 2nd half of 2020.
  • 1st half of 2021: Subtract Total 2020 ($16.53B) from Mid-21 ($17.79B) = Spending was up $1.26B in 1st half of 2021.

Note: The green/pink fill in the 20/21 numbers indicates if they are up/down vs Yearend 2019.

  • We see 2 distinct spending patterns in the individual groups. The <$50K and the especially the $100>149K groups both binge bought Food in the pandemic so there was a steep spending drop in 2021. The middle income $50>99K and over $150K groups cut spending in the pandemic then began recovery in 2021.
  • Perhaps the most obvious fact is the spending disparity due to income. Prior to the Super Premium era, $70K was the “halfway point” in Pet Food spending. In 2013 the under $70K group accounted for 67.8% of CUs and 51.3% of Pet Food spending. Due to the rise of Super Premium, they lost the lead in 2015 as $70K> spent 50.8% of Pet Food $. In 2020, the binge buying of Pet Food by $100>150K pushed the $100K> group to the top at 55.1%. Then the big drop in 2021 flipped $70K> back into the lead at 60.8%. The halfway point in Pet Food spending is still high but is again below $100K.
  • < $70K > Surprisingly, the Pet Food spending patterns for both groups are the same, but the changes are more pronounced in the higher income group because they had the $ to finance more binge buying. Both show a 2020 COVID lift and a 2021 drop. Also, both groups returned to a spending level above 2019 yearend $.
  • < $100K > The spending patterns of these 2 groups are different in every way. Spending for the <$100K group fell during 2020 then bounced back in 2021 but is slightly below 2019. The $100K> massively binge bought in 2020 so there was a huge decrease in the 1st half of 2021 but they still finished slightly ahead of 2019 $. Both are being driven by a pattern of one subgroup. For the <$100K group it is $50>99K income. For $100K> it is $100>149K.
  • < $50K Both the <$30K and $30>49K have a pattern like the $100>149K but the binge buying was limited due to lower income. However, both did finish the 1st half of 2021 slightly ahead of 2019. While income is the most important factor in Pet Food Spending, it is not the only factor.
  • $50 > $100K – This income group was the most negatively affected by the pandemic. Spending dropped in 2020 for both the $50>69K and $70>99K groups. They bounced back a little in 2021 but didn’t reach the 2019 level. They are under financial pressure in normal times. COVID undoubtedly made things even tougher. The drops and even the failure to return to 2019 $ were probably largely due to value shopping, especially on the internet. However, some CUs may have downgraded their Food. The biggest swings occurred in the middle income $70>99K group.
  • $100K>149K – High income is increasingly becoming “where it’s at” in Pet Spending. In the 1st half of 2020 spending went through the roof. This group drove virtually all of the binge buying of Super Premium Foods. That also made them responsible for most of the current big drop. They did end up slightly above 2019 $.
  • $150K > Their Pet Food spending also fell in 2020. It was most likely due to value shopping and moving to the internet as a primary source. Their spending came back strong in 2021, 10% above 2019. It’s likely that they broadened the range of food & treats purchased and may have upgraded to even more expensive food.

Now let’s look at Pet Food spending by Age Group.

  • Each group had a unique pattern but there is one basic difference. 55>74 binge bought Food. Everyone else didn’t.
  • < 25 – Their spending fell in 2020 but then bounced back in 2021 but not to the 2019 level. The pandemic had a unique impact on them. The number of CUs fell by 2.1M in 2020 as many moved back home with their parents taking their pets with them. In 2021, 1.2M set up a separate H/H again but that’s still significantly less than pre-pandemic. Their movement also helped enhance the spending lift & drop by the 55>64 yr-olds.
  • 25>34 – No binge buying. They value shopped but likely upgraded their food and even added pets to their family which produced the only steady growth since mid-year 2020.
  • 35 > 44 – Their spending drop in 2020 was probably due to increased value shopping, especially on the internet. When things truly opened up in 2021, they opened their wallets and spending exceeded 2019 $ by 12%.
  • 45 > 54 and – They have the highest income, so their spending pattern is somewhat unusual. Their Pet Food spending continued to drop throughout 2020. It turned up in 2021 but was still 15% below 2019. They are an unlikely group to downgrade. They probably focused on savings and convenience and turned to the internet.
  • 55>64 – This group is mostly Boomers, the most emotional Pet Parents. Binge buying food was an emotional response to the pandemic. They have the highest income of any Boomer group so they had the will and means to drive the binge. The movement of their children to & from home also contributed. Ultimately, they are now down 19% from 2019.
  • 65 > 74 – This group is mostly Boomers but with lower income. Their pattern has similar ups and downs to the 55>64 yr-olds but with far smaller swings. There is one difference. Their 2021 numbers exceed 2019.
  • 75> – COVID had virtually no impact on spending. They are committed pet parents as they had a 30% $ lift over 2019.

That gives us the “big picture” for our 2021 Mid-year update of Pet Food spending. Now we’ll take a closer look at the start of 2021. However, rather than compare it to 1st half of 2020 to see the big negative swings, we’ll compare it to the 1st half of 2019 and document the biggest changes since then. This will show how close that we are to a “normal” year.

The first thing that you notice is that the biggest increases are generally much larger than the biggest increases. We should also note that all Housing segments spent more in 2021 than in 2019.

  • There are a number of usual winners, like $150K>, Managers, White, Not Hispanic, BA/BS, 2 People and Gen X. There are also some surprises like No Earner 2+ CUs, Center City and the Northeast.
  • When we look at the losers we see a few familiar names, African Americans, HS Grads & Singles. However, five of the big losers binge bought Food in 2020 so naturally they had a huge drop in 2021. They are Self-employed, 55>64, Areas <2500, Married, Oldest Child 18> and Boomers. They haven’t recovered as yet. Perhaps they will in the 2nd half.
  • It’s a good sign that despite the 2 radical swings we are still $1.5B ahead of the time before the pandemic turmoil began in 2020 and continued into early 2021.

The spending drop was huge in the 1st half, but not unexpected. The huge lift in Pet Food $ in the 1st half of 2020 was an emotional reaction to the pandemic. The retail inventory of many “necessary” items like toilet paper and hand sanitizers was wiped out. Consumers wanted to ensure that they had them at home in case of supply chain issues. In the Pet Industry, there is no more necessary product than Pet Food. The lives of our Pet Children depend on it. With the widespread commitment to Super Premium Food, buying a safety stock produced a huge lift in $. It was clearly an emotional reaction. When it comes to emotion related to pets, there is one group that leads the way, Baby Boomers. In the 90s, they were the 1st group to be defined as Pet Parents and they have increasingly personified their Pet Children ever since. The huge lift was amplified by additional demographic factors. A high income of $100>149K drove the lift. The 55>64 yr-old Boomers have the highest income of their group. This gave them the means to buy the extra Food. Areas <2500 population generally have more pets but fewer retail outlets. This would increase their fear of product shortages. However, the pandemic increasingly came under control in 2021, bringing a desire to return to a new normal. No binge buying. Some began a return to more normal levels of backup, and many arranged regular deliveries. All of these contrbuted to the big drop in Pet Food spending in the 1st half of 2021. I expect a strong lift in the 2nd half. We’ll get the data in September.

Tracking Pet Food Pricing – The PPI (Mfg) vs CPI (Retail)

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

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

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

  • Pricing remained essentially stable for all groups through most of 2020. The first change was that the PPI for Non-Dog/Cat Pet Food began moving up in November. This lift has continued but this small category has little impact on overall Pet Food Retail Prices.
  • The Dog & Cat Food PPI moved up sharply in July 2021 then essentially stabilized until the end of the year. This turned Retail Prices up slightly, only +1.6% vs 2019 by December 2021.
  • In 2022, the Dog & Cat PPI turned up in Jan/Feb, stabilized in Mar/Apr, then rose sharply in May. Pet Food Retail prices began growing in February. This increase accelerated in March and continues through May. The Retail inflation rate for Pet Food is now 66% of the PPI increase for Dog & Cat Food. In February it was 31.6% and only 25.4% back in December 2021. This gap is definitely narrowing as the Retail price increases are more closely matching the increase in manufacturing costs. By the way, the increase for Other Pet Foods is a meteoric +31.6% vs 2019. This is huge and by far the biggest increase in any Pet Food category, but it is only 29% of the 109% increase in the Gasoline PPI over the same period.

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

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

We will now drill a little deeper into the “ruling” Dog & Cat Food categories. We will look at the individual PPI history for Dog Food and Cat Food and the 2 largest sub-categories in each – Dry/Semi-moist and Canned. Our chart will track and compare the Pet Food CPI and the PPI history for all groups from December 2019 to March 2022. The detailed data release for these specific groups is 2 months behind the overall PPI release.

  • The PPI for all categories was essentially unchanged from December 2019 until October 2020. At that time manufacturers’ prices in the Canned Dog Food category moved up 1.1%.
  • In October 2020 Pet Food retail reached bottom in their deflationary movement. The price increase in Canned Dog Food slowed overall Pet Food deflation and essentially stabilized prices.
  • Both the individual PPIs and the overall Pet Food CPI plateaued from November 2020 through May 2021.
  • All prices moved up slightly in June 2021 but the PPIs took off in July. The Pet Food CPI also was above December 2019 for the 1st time since February 2020.
  • Canned Dog Food led the skyrocketing PPI prices in July 2021 but all categories had a significant increase. The increase continued in August, but the CPI unexpectedly dipped slightly below December 2019.
  • The PPIs for all groups essentially stabilized from September through December 2021 while the Pet Food CPI began to increase, especially from Nov>Dec.
  • In January 2022, the PPIs for all but Canned Dog Food turned up again. Their increase continued in February, with Canned Cat Food skyrocketing up to +12.7%, almost equal to the overall increase by Canned Dog Food. The Pet Food CPI moved up slightly in January and then inflation took off in February.
  • The PPIs stabilized again in March, but we should note that prices for Canned Dog Food have been stable since August, after the spectacular Jun>August lift. While manufacturing prices have stabilized, inflation in Pet Food Retail is accelerating. From our 1st chart we know that this trend continued through May.
  • Once again, we see that there is obviously a timing delay from the PPI to the CPI. It takes time for the impact to work its way from manufacturer to retailer to consumer.
  • We also see that the Canned Food categories have significantly more pricing volatility than Dry Food for both Dogs and Cats. While Canned Dog Food led the way in the PPI lift and ended up with the biggest increase, +13.3%, Canned Cat Food finished a close second at +12.7%.
  • However, when you look at how these individual PPIs compare to the overall PPI for Dog or Cat, it is readily apparent that Canned Cat Food has a much larger share of total Cat Food than Canned Dog Food has of Total Dog Food.

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

Petflation 2022 – May Update: Prices stay at +8.1% above 2021

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 2nd 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 2nd 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.

2020 Veterinary Spending was $24.85B – Where did it come from…?

Now we will turn our attention to the final Industry Segment – Veterinary Services. For years, Veterinary Services prices have had high inflation. This has resulted in CU income becoming the most dominant factor in spending behavior and a reduction in visit frequency. Consumers paid more, just used Veterinary Services less often.

Things changed in 2017 as low inflation spurred a 7.2% increase in visit frequency and a $2.5B increase in spending. In 2018 inflation returned to more normal levels. Consumers spent $0.56B more (+2.7%). However, the inflation rate was 2.6% so virtually all of the lift was from increased prices. In 2019 the situation got worse. Consumers spent $0.58B (+2.7%) more but inflation was 4.14%. This means that there was an actual decrease in the amount of Veterinary Services purchased. In 2020 the pandemic hit and consumers concentrated on needs. For Pet Parents, that meant that they became focused on Pet Food & Veterinary Services. As a result, Veterinary spending grew $3.05B, (+14.0%).

We’ll start our analysis with the groups who were responsible for the bulk of Veterinary spending in 2020 and the $3.05B increase. The first chart details the biggest pet Veterinary spenders for each of 10 demographic categories. It shows their share of CU’s, share of Veterinary spending and their spending performance (Share of spending/share of CU’s). In terms of performance – 6 of 10 groups perform above 120%, the same as 2018 & 2019. This is more than Supplies & Services with 5 but much less than Food (8). This means that these big spenders are performing well but it also signals that there is still a large disparity between the best and worst performing demographics in the “needed” segments. Income remains the biggest factor in Veterinary Spending, but Education is also important as College Grads is a different group from Total Pet. The categories are in the order that reflects their share of Total Pet $.

  1. Race/Ethnic – White, not Hispanic (87.2%) down from 90.9%. This group accounts for the vast majority of spending in every segment, but they lost significant share in 2020. Their 127.5% performance is also down from 132.6% and they fell from 2nd to 3rd in importance in Veterinary Spending but still reflects the spending disparity. Minorities did narrow the gap in 2020. Hispanics & African Americans spent 50% more while the spending by Asians almost tripled.
  2. Housing – Homeowners (83.1%) down from 83.2% Homeownership is a major factor in pet ownership and spending in all industry segments. In terms of importance to Veterinary spending, their 126.3% performance rating is down from 130.5%, but they held on to 4th place. The slight decrease in share and performance came from a bigger % increase from Renters as they fell in numbers while homeownership grew. We should note that Homeownership is not as important to Veterinary Spending as it once was. In 2015 their share was 88.4% with performance of 141.8%.
  3. # in CU– 2+ people (77.9%) up from 75.0% This group, which is 70% of U.S. CUs, gained share and their performance grew from 107.4% to 111.0%. Their rank in terms of importance in Veterinary Spending moved up from last to 8th. Spending by Singles and 4 person CUs was flat while 2, 3 & 5 person CUs had big gains.
  4. Area – Suburban & Rural (67.1%) down from 68.7% Suburban CU’s are the biggest spenders in every segment. Rural had a great year and was added to hit the 60% goal. Performance still fell to 106.4%, from 107.9%. The decreases in share and performance came because Suburbs 2500> were up only 3.2% while Center City was +19.8%.
  5. # Earners – “Everyone Works” (69.7%) down from 70.4% In this group, all adults in the CU are employed. Their Performance fell from 121.5% to 120.3% and they fell in rank from #5 to #6. Only No Earner, Singles spent less. The small drop in share and performance were due to a huge lift by 2+ People CUs with 1 or no earner.
  6. CU Composition – Married Couples (58.6%) up from 57.0% Their performance also grew to 120.8% from 116.7% and they returned to the 120+% club at #6. Until 2019, Married Couples had a 60+% market share and 120+% performance in all segments. Only Married Couples with an oldest child <6 spent less. The gains came because the spending by singles was essentially flat, only +0.6%.
  7. Income – Over $70K (63.4%) down from 66.3% The performance of the $70K> group fell significantly from 159.8% to 145.8%. However, higher income is still the most important factor in increased Vet spending. Only the $50>99K group spent less. The spending by the <$50K group grew by 37.0%. Those making $100K> also spent 16.4% more. The key factor in the big changes in share and performance was a 9.8% drop by the $70>99K group.
  8. Age – 35>64 (60.1%) down from 63.2% Their performance also fell from 120.7% to 112.7% and they dropped out of the 120% club. Only <25 & 35>44 yr olds spent less. All other groups had double digit % increases. The drop by 35>44 yr-olds in conjunction with a 52.1% lift by 25>34 caused the big loss in share and performance.
  9. Education – College Grads (61.3%) down from 63.9% Income generally increases with education. It is also important in understanding the need for regular Veterinary care. Performance also fell from 144.1% to 131.2%. Education lost share and performance but moved up to 2nd from 3rd in importance. Only those without a HS diploma spent less. The big drop in share and performance came from a 48.2% lift by HS Grads without a BA/BS. Veterinary Services are very important. The pandemic caused this need to become recognized by more education levels.
  10. Occupation – All Wage & Salaried (68.1%) up from (67.3%) but their performance only increased from 110.3% to 110.7%. Tech/Sls/Clerical and Retirees spent less while most of the lift was driven by Managers & Professionals. However, the largest percentage increase was from the Self-Employed. This combination slowed the gains. It also reinforces that “the bosses” ruled in 2020.

Spending did become a little more balanced but Higher income remains the biggest single factor in Veterinary spending. We see the impact of this in many groups as it often contributes to the big spending disparity between segments. The most notable change was that the 35>64 age group fell out of the 120+% club due to a big lift by the 25>34 yr olds.

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

Almost all of the best and worst performers are those that we would expect. However, there are 7 that are different from 2019. This is the same as Services but much more than the 3 in Supplies and much less than the 10 in Food. This suggests some spending turmoil. The changes from 2019 are “boxed”. We should note:

  • Income – The winner & losers are the expected groups but they are 30% closer together.
  • Earners – New, but not unexpected, winner and loser. They have the highest and lowest incomes.
  • Occupation – Once again, it’s all about income
  • Age – The highest income group, 45>54 yr-olds returned to the top. Despite a strong showing by the 25>34 group, only those from 35>74 perform above 100%.
  • Race/Ethnic; Education; Housing – The usual winners and losers but the performance gap narrowed a bit.
  • Area – A fundamental change in the loser based upon population. Last year it was Rural. This year it’s Center City.
  • Region – After winning for 5 straight years, the Northeast was replaced by the West at the top. The West is also the only region performing above 100%. The South has now finished last for 5 years in a row.
  • CU Composition – No change here but again the performance gap narrowed a little, 10%.
  • # in CU – Only 2 & 3 person Cu’s perform above 100%. We have seen spending movement to larger CUs. This is very apparent in Veterinary as the 5+ group spent 67% more and moved up a little after 2 years at the bottom.
  • Generation – The loser flipped from the oldest to the youngest and the performance gap widened by 30%.

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

We saw some turmoil in performance. There was even more here. There were 4 repeats and 10 segments flipped from 1st to last or vice versa. Last year they had 8 repeats and 4 flips. There were some surprise winners – 25>34 yr-olds & Center City but no surprise losers. In fact, in 4 categories all segments spent more. You should also note the increases were significantly larger than the decreases and 85% of 96 demographic segments spent more. Here are the specifics:

  • Occupation – The winner and loser flipped with the “Bosses” returning to the top.
    • Winner – Mgrs & Professionals– Veterinary Spending: $9.87B; Up $2.11B (+27.1%)                      2019: Tech/Sales/Clerical
    • Loser – Tech/Sales/Clerical – Veterinary Spending: $3.42B; Down $0.27B (-7.4%)                          2019: Mgrs & Profess.
    • Comment – The highest income groups – Self-Employed and Mgrs & Professionals accounted for 90% of the increase. Blue Collar workers did spend $0.41B more but Retirees spent a little less, -0.04B (-1.0%).
  • Region – The Northeast flipped from 1st to last. They have now flipped for 3 consecutive years.
    • Winner – West – Veterinary Spending: $7.01B; Up $2.08B (+42.1%)                                                    2019: Northeast
    • Loser – Northeast – Veterinary Spending: $4.10B; Down $0.98B (-19.3%)                                         2019: Midwest
    • Comment – The South finished 2nd for the 4th consecutive year. All but the Northeast had double digit % gains.
  • Race/Ethnic – Both groups held their spots as White, non-Hispanics maintained their dominance in this segment.
    • Winner – White, Not Hispanic – Veterinary: $21.67B; Up $1.85B (+9.3%)                                       2019: White, Not Hispanic
    • Loser – African American – Veterinary: $0.87B; Up $0.30B (+51.8%)                                               2019: African Americans
    • Comment– In 2019 only African Americans spent less. In 2020 everyone spent more. This shows that Pet Parents’ commitment to the health & wellbeing of their Pet Children is widespread across all racial/ethnic groups.
  • Housing – Homeowners w/Mtges held their position at the top.
    • Winner – Homeowner w/Mtge – Veterinary: $14.06B; Up $1.62B (+13.0%)                                    2019: Homeowner w/Mtge
    • Loser – Renter – Veterinary: $4.19B; Up $0.53B (+14.5%)                                                                      2019: Homeowner w/o Mtge
    • Comment – Every segment spent more and in fact, Homeowners w/Mtges had the lowest percentage increase. They won because they account for 56.6% of all Veterinary spending.
  • # in CU – Both the winner and loser flipped.
    • Winner – 2 People – Veterinary Spending: $9.73B; Up $1.50B (+18.3%)                                              2019: 1 Person
    • Loser – 1 Person – Veterinary Spending: $5.48B; Up $0.03B (+0.6%)                                                   2019: 2 People
    • Comment: Again, all groups spent more. 4 Person CUs and singles had increases under 2% while everyone else was in double digits, led by 5+ CUs who were up 67%.
  • Generation – Baby Boomers flipped from last to first as they focused on their Pets’ needs – Food & Veterinary.
    • Winner – Baby Boomers – Veterinary: $8.93B; Up $1.45B (+19.4%)                                                  2019: Millennials
    • Loser – Gen Z – Veterinary: $0.20B; Down $0.06B (-22.5%)                                                                  2019: Baby Boomers
    • Comments – After 2 years at the bottom Boomers returned to the top. Millennials also had a good year, +$1.1B. Gen Z was the only generation to spend less.
  • Area Type – Center City is a bit of a surprise and the big suburbs flipped from 1st to last.
    • Winner – Center City – Veterinary Spending: $8.17B; Up $1.35B (+19.8%)                                       2019: Suburbs 2500>
    • Loser – Suburbs 2500> – Veterinary Spending: $11.57B; Up $0.36B (+3.2%)                                   2019: Suburbs <2500
    • Comment – All groups also spent more. The question became “How much more?” With 33% of the $ and a 20% increase, Center City won. Suburbs 2500> have 47% of $ but were only +3%. By the way, Rural was +80%.
  • CU Composition – Married Couple Only flipped from last to 1st.
    • Winner – Married, Couple Only – Veterinary: $7.04B; Up $1.31B (+22.9%)                                2019: Singles
    • Loser – Married, Oldest Child <6 – Veterinary: $0.95B; Down $0.21B (-18.2%)                          2019: Married, Couple Only
    • Comment – After a $0.72B increase in 2019, the loser was the only segment to spend less. Single Parents spent 68% more but 63% of the total $ increase came from Married Couples Only and those with a child over 18.
  • # Earners – Both the winner and loser are new, but not surprising.
    • Winner – 3+ Earners – Veterinary Spending: $3.26B; Up $1.15B (+54.2%)                                     2019: 2 Earners
    • Loser – No Earner, Single – Veterinary Spending: $1.45B; Down $0.51B (-26.1%)                        2019: 1 Earner, 2+ CU
    • Comment – The winner and loser have the highest and lowest incomes and No Earner, Singles were the only group to spend less. Income is of primary importance to increased Veterinary Spending & # of earners is important. However, not every adult has to work. 1 Earner, 2+ Person CUs was only beaten by $0.03B.
  • Income – $100>149K flipped from last to first.
    • Winner – $100>149K – Veterinary Spending: $5.04B; Up $1.14B (+29.1%)                                    2019: <$30K
    • Loser – $70>99K – Veterinary Spending: $3.74B; Down $0.41B (-9.8%)                                          2019: $100>149K
    • Comment – Two groups spent less, $50>69K & $70>99K. Last year we had a definite spending rollercoaster. It’s still here in 2020, but with bigger groups. <$50K: +$1.82B; $50>99K: -$0.48B; $100K>: +$1.69B.
  • Age – In a bit of a surprise, the 25>34 yr-olds won while 35>44 flipped from 1st to last.
    • Winner – 25>34 yrs – Veterinary Spending: $3.74B; Up $1.11B (+42.2%)                                       2019: 35>44 yrs
    • Loser – 35>44 yrs – Veterinary Spending: $4.47B; Down $0.59B (-11.6%)                                       2019: 45>54 yrs
    • Comment: Two groups spent less, the 35>44 yr-olds and the <25 group. Everyone else had double digit percentage increases. The 25>34 group is only 4th in income and 5th in Veterinary spending performance so their win is unexpected. Apparently, they were motivated by the pandemic. Their Services $ were flat but they spent a lot more in all other segments.
  • Education – Those with an Advanced College Degree held their spot at the top.
    • Winner – Adv. College Degree – Veterinary Spending: $7.41B; Up $0.88B (+13.4%)                 2019: Adv. College Degree
    • Loser – <High School Grads – Veterinary Spending: $0.34B; Down $0.14B (-29.4%)                2019: Associates Degree
    • Comment – Only those without a HS Diploma spent less. College grads were up $1.29B (+9.3%). However, those with a HS Diploma but not a BA/BS spent $1.89B (+25.6%) more so the lift was widespread.

We’ve now seen the winners and losers in terms of increase/decrease in Veterinary Spending $ for 12 Demographic Categories. The 2020 pandemic brought strong  growth in Veterinary spending. However, there was some turmoil as only 4 segments held their spot from 2019 while 10 flipped from first to last or vice versa, but with almost no surprising winners. The surprise was in how widespread the spending lift was. In 4 categories, no segments spent less and overall, 85% of all demographic segments spent more. This means that there were “hidden” segments that didn’t win but made a significant contribution to the $3B increase. These groups don’t win an award, but they certainly deserve….

HONORABLE MENTION

Center City won but Rural came in second – the opposite ends of the population spectrum. Income matters as Self-Employed finished 2nd to Managers & Professionals. However, spending became a little more balanced in both Income & Education which is reflected by the performance of the $30>39K, 1 Earner, 2+CU and HS Grads w/some College groups. It also wasn’t all about Baby Boomers and Gen X. The younger Millennials certainly stood up with a $1B increase in spending. There are many more groups that could be included as 82 of 96 segments (85%) spent more on Veterinary Services. That is significantly better than 57% in 2019 and 63% in 2018. 2020 was a good year!

Summary

2016 and 2017 produced a combined increase of $3.6B in Veterinary Spending as inflation moved to record low levels. In 2018 we had the Baby Boomer Spending “Bust” which especially impacted Food and Veterinary. The Boomers spending continued to fall in 2019. Fortunately, Gen X and Millennials stepped up to produce a small. 2.7% increase in both years. In 2020 the pandemic focused Pet Parents on the needed segments. This drove a $3B increase in Veterinary $. Boomers & Millennials led the way, but the lift was widespread as 85% of demographic segments spent more.

There was some turmoil in the segment, but the net result is that spending became a little more balanced in most demographic categories. In general, the size of the increases far exceeded the size of the decreases. In fact, in 4 categories all segments increased spending. Income and Education remain of primary importance in terms of increased spending.

Income: Performance generally increases with income and reaches it’s highest level, nearly 200% at $150K>. The “halfway” point (50%) occurred at $70>99K in 2020. This is the 1st time that the halfway point has fallen below $100K. Spending may be more balanced, but you can see that there is still a huge disparity.

Higher Education: Performance increases with Education but doesn’t reach 100% until you have a BA/BS degree. The performance of HS Grads with an Associate Degree or at least some college is now over 90%. Those with a College Degree perform at 131%. The disparity is not as bad as Income but still big. Equality in both categories is a long way off.

The performance of other big spending groups is also very important in the Veterinary segment. We identified six demographic categories with high performing large groups. (There were 5 for Supplies and Services but 8 for Food).  Consumers have no control over Race/Ethnicity but in addition to Income and Education, Homeownership, # Earners & Marriage are also important factors in Veterinary spending. All groups but Marriage are tied to income and their high performance demonstrates that there are still big spending disparities among segments within these categories.

There were some changes of note. Marriage returned to prominence while a strong year by the 25>34 yr-olds drove the performance of the 35>64 age group significantly down.

In 2019 Veterinary spending increased +2.7% while prices rose 4.14% – a net decrease in the amount of Services. In 2020 spending grew +14.0% while inflation was 3.7%. That’s over 10% in real growth, a very positive situation. Also, although Boomers and Millennials drove the lift, increases were widespread across demographics making Veterinary spending more balanced. In 2021, the overall U.S. economy has largely recovered. We’ll see if Pet Parents continue to spend heavily on Veterinary Services.

Finally – The “Ultimate” Veterinary Services Spending Consumer Unit consists of 3 people – a married couple and their 18 yr old child. They are 45 to 54 years old. They are White, but not of Hispanic origin. At least one of them has an Adv. College Degree. Both are Mgrs/Professionals and their child also works. Their total income is $150>$200K. They live in a small suburb, adjacent to a big city in the Western U.S. and are still paying off the mortgage on their home.