2016 Pet Food Spending was $26.5B- Where did it come from…?

2016 Pet Food Spending was $26.5B- Where did it come from…?

As we continue to drill ever deeper into the demographic Pet spending data from the US BLS, we have now reached the level of individual Industry segments. We will begin with Pet Food, the largest and arguably most influential of all. In other reports we have noted the trendy nature of Pet Food Spending – 2 years up then spending goes flat or turns downward for a year. 2015 and 2016 were prime examples of this. Pet Food Spending increased by $5.4B in 2015 as a significant group of consumers upgraded to higher priced Super Premium Foods. In 2016 they started looking for the best deal and their spending fell $2.99B (-10.1%). However, the $26.5B spent on Pet Food in 2016 was still $2.4B (10%) higher than 2014. The segment is just taking a pause in its upward climb.

Let’s see what and more specifically, which groups were most responsible for the bulk of Pet Food spending and the $2.99B downturn. The first chart details the biggest pet food spenders for each of 10 demographic categories. It shows their share of CU’s, share of pet products spending and their spending performance (Share of spending/share of CU’s). Although their share of the Pet Food $ may be different from their share of the Total Pet $, all of the big spending groups are the same. The categories are presented in the order that reflects their share of Total Pet Spending. This highlights the differences in importance. In Pet Food spending, higher education is less important while the wage and salary earners have a slightly higher share of the business. We should also note that, like Total Pet Spending, Income is the highest performing demographic characteristic. Another big difference is that Total Pet had 5 groups performing above 120%. Pet Food had only 4. This indicates that Pet Food spending and Pet ownership are spread more evenly across demographic segments. Pet Products also had only 4 groups over 120%. This reflects the influence of the Pet Food Segment which accounts for 63% of Total Products spending and 39% of all Pet Spending.

  1. Race/Ethnic – White, not Hispanic (85.5%) This large group accounts for the vast majority of spending in every segment. With a 122.5% performance rating, this category ranks #4 in terms of importance in Pet Food Spending demographic characteristics. While Hispanics, African Americans and Asian American account for over 30% of U.S. CU’s, they only spend 15% of Pet Food $. Pet ownership is relatively high in Hispanic American households. However, it is significantly lower for African Americans and Asian Americans. This is very evident in Food Spending.
  2. # in CU – 2+ people (81.2%) The share of market for 2+ CU’s is very close for all segments. Their overall Food performance of 116.1% is relatively high because singles perform so poorly. It doesn’t reach 120% because performance decreases as the number of people in the CU increases, falling to 78.5% for CU’s with 5 or more people. However, the old adage about Pet Spending is still true, “It just takes two.”
  3. Housing – Homeowners (79.9%) Homeownership is a huge factor in pet ownership and more pet spending. At 128.0% performance, homeownership ranks 2nd in terms of importance for increased pet Food spending. However, the share of market fell from 83% in 2015. This came as a result of a big spending increase by Renters, which can in turn be linked directly to Millennials, who had a both a big spending increase and a low % of homeownership.
  4. Income – Over $50K (67.5%) With a performance rating of 134.9%, CU income is the single most important factor in increased Pet Food Spending. However, the over $50K income group has its smallest market share in the Food Segment. Since Pet Food is a “must buy” for Pet Parents, this is evidence that pet ownership is common across all income levels. The anomalies of behavior that we had in Total Pet – Older Americans spend more on their pets than their income would suggest and the higher income, Asian Americans spend much less – are magnified in the Pet Food segment. However, Higher Income still generally generates Higher Pet Food Spending.
  5. Occupation – All Wage & Salary Earners (64.8%) – The high market share and a low performance of 106.3% show that Pet ownership is widespread across all occupations and at the same time, reflects the substantial Pet Food spending which is done by the Self-employed and retired groups.
  6. # Earners – “Everyone Works” (63.7%) In this group, all adults in the CU are employed. This group’s high share of Pet Food $ reinforces the importance of income in pet Food spending. However the group’s performance is 110.7%, which is considerably lower than that of the income category. This is a reminder that CU’s with 2+ people and only one earner and retired people have a lot of pets and spend a lot of money on Food – 36% of Total $.
  7. Age – 35>64 (63.1%) Driven by the Baby Boomers move to Super Premium, the 45>74 year age group dominated the spending in 2015. In 2016, virtually everyone started value shopping. The 35>44 age group spent less on Food but their decrease was smaller than the 65>74 year olds. This moved the bulk of the spending to the 35>64 group, but the “victory” margin was small. The 116.5% performance level was considerably less than last year’s 135.8%. This shows that spending is becoming more evenly spread across age groups. Plus, the 25>34 yr olds really stepped up.
  8. CU Composition – Married Couples (61.9%) Pet parenting and marriage both represent strong commitments. With a performance of 127.3% marriage is in third place in terms of importance to Pet Food spending.
  9. Education – Associates Degree or Higher (58.6%) Pet Food Spending generally increases with education. However, with a market share below 60% and a performance level of 113.3%, higher education is much lower in importance in Food spending. It’s a very real indication that we learn the benefits of Pet ownership very early in life.
  10. Area – Suburban (58.1%) Suburban households are still the biggest Food spenders, but a market share of only 58.1% and a low performance of 105.9% indicate that an increasing number of pets are finding homes in Central Cities.

The biggest spending groups for Pet Food are the same as those for Total Pet and Pet Products. However, Pet food generally has a slightly lower market share and performance. This is showcased by the fact that there are only 4 groups with performance above 120%. Increased income still is the biggest driver of Pet Food Spending but the drop in performance by the higher education group is one of the best examples of the demographic diversity in pet ownership.

Now, we’ll look at 2016’s best and worst performing Pet Food spending segments in each category.

Even as we drill down to the Industry segment level, most of the best and worst performers are the ones that we would expect. In Pet Food spending, there are only 6 that are different from 2015 but that is 1 more than for Pet Products and 3 more than for Total Pet. From this point on we will start to see more and more differences between the Industry Segments. Changes from 2015 are “boxed”. We should note:

  • Income is growing more important in every segment. Food is no exception. The 188.3% Performance by the $200K> group is up 3.9% from last year but it is still by far this group’s lowest performance in any segment. The performance breakeven point for Food is about $50K, but it truly accelerates for incomes over $100K.
  • # Earners – Money matters and 2 or more earners generally means higher income. This year 2 Earner CU’s just edged out the 3 Earner CU’s for the top spot.
  • Occupation – Mgrs. & Professionals also passed last year’s winner – Self-employed. Both have higher incomes. There was a big increase in the number of service workers but their spending rate didn’t keep up. so they fell to last place.
  • Age – The performance of the Under 25 group fell in 2016 while the Over 75 group increased from 39% to 56%.
  • CU Composition – Married Couples only repeated as the best performing group. Last year, Singles were the worst performing group but in 2016, financial pressures drove the performance of Single Parents to the bottom.
  • Region – The South had a good year while the West, the perennial winner had a bad one. The Northeast finished last again, but their performance radically improved from 75.7% in 2015, which was largely due to Central Cities.

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

There are no repeats – winners or losers, from 2015. After the big lift in 2015, the best way to describe 2016 was topsy-turvy. In 6 cases the 2015 winner became this year’s loser. In 5 cases the opposite occurred. This includes three categories where both switched. There are also some surprise winners, like Renters and Central Cities. It is at this level where the demographic uniqueness of the different industry segments truly shows up. Here are the specifics:

  • Area Type – Central Cities went from last to first in Food and actually had a big spending increase in every segment.
    • Winner – Central City – Pet Food Spending: $7.35B; Up $1.36B (+22.8%)
      • 2015: All Suburban
    • Loser – Suburbs <2500 – Pet Food Spending: $4.05B; Down $1.55B (-27.7%)
      • 2015: Central City
    • Comment – The small Suburbs (<2500) still spent the most per CU on Food but in 2016 they spent 25.9% less.
  • Occupation – The biggest drops came from retired persons and the self-employed who both had big lifts in 2015.
    • Winner – Tech, Sales & Clerical – Pet Food Spending: $4.68B; Up $1.15B (+32.6%)
      • 2015: Mgrs. & Professionals
    • Loser – Retired– Pet Food Spending: $4.40B; Down $1.35B (-23.5%)
      • 2015: Operators & Laborers
    • Comment – The Tech, sales & clerical group increased their CU spending on Pet Food by 22.8%. That put them above the national CU spending average for the first time and generated the biggest $ increase by any occupation, despite a decrease of 4% in CU’s. Mgrs. & Professionals spent slightly more, but not enough.
  • Age – Value shopping for premium Pet Food in 2016 moved the 55>64 age group from Big Winner to Big Loser.
    • Winner – 25>34 yrs – Pet Food Spending: $3.70B; Up $0.71B (+23.8%)
      • 2015: 55>64 yrs
    • Loser – 55>64 yrs – Pet Food Spending: $7.41B; Down $2.61B (-26.0%)
      • 2015: 25>34 yrs
    • Comment: Only 2 age groups had increased spending on Pet Food and they were at almost the opposite ends of the spectrum – 25>34 yrs and the over 75 group. In 2015, they both spent significantly less on Pet Food while almost all other groups were showing big increases. It looks like they are either ahead of or behind the curve.
  • CU Composition – The winner is a surprise. The big changes usually come from a married demographic segment.
    • Winner – Unmarried, 2+ Adults – Food: $4.51B; Up $0.62B (+15.9%)
      • 2015: Married Couple Only
    • Loser – Married Couple Only – Food: $8.83B; Down $1.29B (-12.8%)
      • 2015: Married All Children <18
    • Comment – Unmarried, 2+ adults and married couples with their oldest child under 6 were the only segments in this category to have an increase. This is further evidence of the positive impact of the 25>34 age group.
  • Education – College graduates must be the best at value shopping for Food. They spent $2.66B less than in 2015.
    • Winner – Associates Degree – Pet Food Spending: $3.18B; Up $0.37B (+13.2%)
      • 2015: All College Grads
    • Loser – Adv. College Degree – Pet Food Spending: $5.48B; Down $1.36B (-19.9%)
      • 2015: HS Grad or less
    • Comment – CU’s with an Associates’ Degree or a HS diploma and some college credits were the only segments with increased spending on Pet Food. In 2016 both more and less education meant reduced spending.
  • Income – Value shopping for Food created turmoil at all income levels. Only the $70>99K group spent more on food.
    • Winner – $70 to $99K – Pet Food Spending: $4.98B; Up $0.35B (+7.7%)
      • 2015: $100 to $149K
    • Loser – $50 to $69K – Pet Food Spending: $3.84B; Down $1.06B (-21.7%)
      • 2015: $70 to $99K
    • Comment – The winner and loser are adjacent income tiers. Apparently, a few $ more can make a big difference.
  • Housing – In 2015, all segments spent more on Food. In 2016, there is only one and the least likely of the group.
    • Winner – Renters – Pet Food Spending: $5.33B; Up $0.32B (+6.3%)
      • 2015: Homeowner w/o Mtge
    • Loser – Homeowner w/o Mtge – Pet Food Spending: $6.28B; Down $2.79B (-30.8%)
      • 2015: Renter
    • Comment – Another big position switch with Renters. The loser reflects the big decrease in spending by retirees.
  • Race/Ethnic – The White, Non-Hispanics share of Food spending is over 85%. A double digit % decrease means Big $.
    • Winner – Hispanic – Pet Food Spending: $2.17B; Up $0.29B (+15.2%)
      • 2015: White. Not Hispanic
    • Loser – White, Not Hispanic – Pet Food Spending: $22.6B; Down $3.41B (-13.1%)
      • 2015: Hispanic
    • Comment – All Racial/Ethnic groups spent more on food in 2015. In 2016, it was only the Hispanics and African Americans. While African Americans had a slightly smaller $ increase, +$0.17B, their spending rose by a strong 17%. After a spending drop in 2014, both of these groups have now produced 2 consecutive years of increases.
  • # in CU – It’s simple. In 2016 4 was the “magic” number. Only 4 people CU’s had increased Pet Food spending.
    • Winner – 4 People – Pet Food Spending: $3.65B; Up $0.25B (+7.2%)
      • 2015: 2 People
    • Loser – 2 People – Pet Food Spending: $11.70B; Down $1.27B (-9.8%)
      • 2015: 5+ People
    • Comment: In 2015 the biggest spending growth came from 2 or 3 people CU’s. In 2016, the combined Pet Food spending for these 2 groups fell by $2.49B. The increase in spending from the 4 person CU does correlate to the performance of Millennials, specifically the 25>34 yrs age group.
  • Region – Last year’s winner is this year’s biggest loser. Out West, it was all about Value shopping for Food.
    • Winner – South – Pet Food Spending: $11.01B; Up $0.18B (+1.7%)
      • 2015: West
    • Loser – West – Pet Food Spending: $5.69B; Down $2.52B (-30.7%)
      • 2015: Northeast
    • Comment – The South also had a 1% increase in CU’s which contributed to the increase.
  • # Earners – More earners means more income and spending, right? In 2016 the magic number for Pet Food was 1.
    • Winner – 1 Earner, Single – Pet Food Spending: $3.3B; Up $0.02B (+0.5%)
      • 2015: 2 Earners
    • Loser – No Earner, 2+ in CU – Pet Food Spending: $2.03B; Down $1.35B (-40.0%)
      • 2015: 2+ in CU with 1 Earner
    • Comment – The loser is understandable. There were only 2 segments with increased spending in this category – 1 earner singles and 1 earner CUs with 2+ people. However, their combined increase was only $0.03B – $30 million dollars. If this sounds odd, remember a no earner CU was the winner for Pet Products spending.

We’ve now seen the “winners” and “losers” in terms of increase/decrease in Pet Food Spending $ for 11 Demographic Categories. The results reinforce that it was an “unusual” year. There were 22 groups named as winners or losers. 11 of them, 50% occupied the exact opposite position this year as they did in 2015. This produced some truly surprising winners, like Central Cities and renters. The contribution made by the Millennials was also very evident across multiple demographic categories. Of course, not every good performer can be a winner and some of these “hidden” segments should be recognized for their outstanding performance. They don’t win an award but they deserve….

Honorable Mention

Pet Food spending was down $2.99B in 2016. In fact only 19 of 82 Demographic segments posted an increase. We have already named a number of these in our report. We want to add a few more that also deserve credit for their performance. These 5 weren’t the best performers or groups with the biggest $ increase. However, together they generated an increase of $1.4B in Pet Food spending. Some, like the 75+ group and African Americans may be a bit of a surprise but all deserve credit for their increase in Food $.

Summary

In 2015 and 2016 we saw significant changes in Pet Food spending behavior which reinforced the importance and impact that the Food segment has on the Total Industry and the other segments. In a very real demonstration of the humanization of our Pets, in 2015 a large group of Pet Parents chose to upgrade their Pet Food to super premium. This generated a $5.4B increase in spending. However, it came with a price. To help pay for this they chose to cut back their spending on Supplies and Veterinary Services by $2.6B. In 2016 the biggest driver in U.S. consumer spending came to the forefront – price. Consumers began to shop for the best price on their premium food – in other retail outlets and the internet. How widespread was this obsession? Very! In fact 63 of 82 demographic segments -77% – reduced their Food spending by $2.99B. However, Pet Parents didn’t just pocket the savings. They spent most of it, $2.5B in other segments.

Any analysis of Pet Food spending is always very important because of the unique nature of the segment. While some elements of Pet Food spending, like the form and quality, are very discretionary, it is the only Industry Segment that is an absolute spending necessity. If you are a Pet Parent, you must buy food for your pet children. Also, since your pet needs food every day, you must buy it regularly. The purchase frequency far exceeds other segments and in fact, every week over 20,000,000 U.S. households buy pet food and/or treats.

Because it is an absolute necessity, the spending behavior on Pet Food is perhaps the most important reflection of the percentage of pet ownership across a demographic category. The performance of the bulk of the spenders is also very important. We identified three demographic categories with high performing large groups. (There were 4 for Total Pet)

  • Income
  • Homeownership
  • CU Composition

Increased income, homeownership and being married all generate increased pet food spending and all are categories in which the consumer can exercise some control. The disparity in performance of segments within these categories allows industry participants to more effectively target both their best customers and… those most in need of improvement.

The Value shopping in 2016 did cause some turmoil and the age group skewed a little younger this year but there was relatively little change in the best and worst performing individual segments. The big changes occurred in $. There were some surprising winners – 25>34 yrs, Central City and Renters, to name a few. Two of the biggest trends noted in our analysis are:

  1. Millennials (25>34) are growing up in their Pet Food Spending behavior.
  2. The U.S. continues to become more urbanized every day and we are taking our pets with us into the City.

Finally – The “Ultimate” Pet Food Spending Consumer Unit is down to 2 – a married couple, alone since their last child finally moved out. They are in the 55 to 64 age range. They are White, but not of Hispanic origin. At least one of them has an advanced College Degree. They gave up their own business in favor of managers’ salaries that total over $200K. They relocated to the South from the West, but still live in a small suburb, adjacent to a big city and have a mortgage.