U.S. PET SUPPLIES SPENDING $24.38B (↑$6.96B): MID-YR 2022 UPDATE

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In our analysis of Pet Food spending, we saw that spending had returned to strong normal growth after the up & down due to the pandemic. Supplies had a different pattern. 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. In 2021 Pet Supplies spending took off, especially in the 2nd half. The increase slowed significantly in the 1st half of 2022. High inflation may have been a factor in the slowed increase but spending is still at a record $24.38B. The following chart should put the recent spending history of this segment into better perspective.

Here are this year’s specifics:

Mid 2022: $24.38B, ↑$6.96B (+40.0%) from Mid 2021.

The +$6.96B came from: Jul > Dec 2021: ↑$6.39B; Jan > Jun 2022↑$0.57B

The lift was huge and 92% of it came from the $6.39B increase in the 2nd half of 2021, by far 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, 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. While deflation generally drives Supplies spending up. A new “must have” product can “trump” both of these influencers. 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 combination caused Supplies $ to fall $2.1B. In 2016 consumers value shopped for Food, saving $2.99B. Supplies spending stabilized then increased by $1B in the 2nd half when prices fell sharply. Consumers spent some of their “saved” money on Supplies. Supplies prices continued to deflate through 2017. Food spending increased $4.61B in 2017 but this generally came from older CUs, less focused on Supplies. The result was a $2.74B increase in Supplies spending.

In the 1st half of 2018 Pet Food spending slowed, +$0.25B. Supplies’ prices began inflating but were only +0.1% vs 2017. During this period Supplies Spending increased $1.23B. Inflation grew in the 2nd 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 Supplies was very clear. Spending flattened in the 2nd half of 2018, then plummeted 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 record resurgence as consumers “caught up” on the Supplies purchases that had been delayed due to the pandemic. Supplies spending increased +$8.65B in 2021, 20% above their 2018 peak. Sales passed $24B in  Mid-yr 2022 but the YOY 1st half increase slowed to +$0.57B. Inflation in Supplies took off at the beginning of 2022 so it may once again be a factor.

Here’s what Pet Supplies inflation looked like in Mid-2022:

  • Mid-Yr 22 vs 21: 5.6% • 2nd Half 21 vs 20: 3.9%       • 1st half 22 vs 21: 7.4%

You can see that the rate doubled in early 2022, which could have been a factor in the lower increase. However, 81% of the 40% spending increase was real. Inflation increased to 8.0% in the 2nd half of 2022 which made the 2022 annual YOY rate 7.7%. We’ll see if Pet Parents continue to spend at the same level despite record high prices.

Now, 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 2021 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 group as an example:

Mid-yr Total Spending Change: $7.12B – $6.90B = Up $0.22B (Note: green outline = increase; red outline = decrease)

  • 2nd half of 2020: Subtract Mid-21 ($6.90B) from Total 2021 ($7.53B) = Spending was up $0.63B in 2nd half of 2021.
  • 1st half of 2022: Subtract Total 2021 ($7.53B) from Mid-22 ($7.13) = Spending was down $0.41B in 1st half of 2022.

  • You see that there are 2 basic patterns. The groups over $100K had increases in both halves, with the largest lift coming in the 2nd half of 2021. The under $100K also had spending increases during the 2nd half of 2021 but they were small. In the 1st half of 2022, spending for all lower income groups but $30>50K fell vs 2021. The drop was large enough for $50>70K that it had the only overall mid-year decrease in spending of any group.
  • It is very obvious from the chart that Supplies spending has moved to the higher incomes, especially the $150K> group. Over $100K has 31.4% of CUs but accounts for 58.7% of Supplies $. That’s a performance level of 186.7%. However, the $150K> is even stronger with 16.7% of CUs generating 40.3% of Supplies spending – performance: 241.3%. The highest performance for any group under $100K is from $70>100K at 85.2% but the averages were: <$100K = 60.2%; <$70K = 53.7%. The halfway point in Supplies spending is an income of $124K. That’s 36% higher than the level for Food. Pet Supplies spending is very much driven by income.

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

  • There were 3 spending patterns. For 55> and 25>34 spending grew in both halves. The high-income 35>54 groups had a lift in the 2nd half of 21 then a small drop in 22. The <25 group had the only overall drop in spending.
  • The 2 biggest lifts came from 35>44, +$3.44B and 55>64, +$1.67B. Most of their increases came in the 2nd half of 21.
  • A big factor in the lower increase in 22 was that all but <25 had big spending increases in the 1st half of 21.
  • Supplies spending skews a little younger. The halfway point is 47 yrs old, a little younger than Food at 53 but in the middle of the highest income groups. Income is the biggest driver.

Now let’s look at what happened in Supplies spending at the start of 2022 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.

  • Although the overall lift was small, the biggest increases are still radically larger than the biggest decreases.
  • The increase/decrease was mixed across the marketplace but 68% of segments spent more. There was no category in which all segments spent more. Last year there were 7. In 2020 there were 5 in which all segments spent less.
  • Many of the winners are the “usual suspects”, like $150K>, Mgrs/Professionals & 2 Earners but there are a couple of surprises – Associates degree & Center City.
  • In regard to the losers, $30>49K, Asians, 1 Earner, Singles and Renters are not unexpected but Gen X, 45>54 and those with BA/BS Degree are definitely surprises.
  • Perhaps the biggest trend is that the Baby Boomers are now catching up. The younger groups “bought in” earlier on Supplies. The wins by 55>64, Homeowners w/o Mtges, Married, w/child over 18 support the Boomers’ win.
  • The importance of high income in Supplies spending is reinforced. $150K> had the biggest 2022 lift of any segment as well as a $4B lift in the 2nd half of 2021. One way to overcome strong inflation is to make more money.

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 annual increase in history. At the end of 2021 and throughout 2022, inflation came back into the picture with the highest YOY increases in history. The ongoing lift in Supplies spending slowed in the 1st half of 2022 but that spending was going against a record increase in 2021. There was some impact on lower incomes, but the high incomes remained strong. Inflation continued to grow in the 2nd half of 2022. We’ll see if its impact on spending increases.