Pet Spending 2018 – A First Look!

On Tuesday, September 10th, the US BLS released the data from their Consumer Expenditure Survey. While I’m still building the detailed database from 33 separate files, I thought that I would give you a brief first look.

In 2018 Total Pet Spending was $78.6B, up $1.47B (+1.9%) from 2017. This is a pretty tame increase, but it follows a huge 14.3% lift in 2017 so it is not completely unexpected. It is difficult to maintain that kind of pace. However, the average growth rate over the last 2 years is 8.1%, which is slightly above the annual growth rate of the Industry since 1960 (7.9%).

Total Pet Spending is the sum of the individual segments. As we have seen so many times before they can have extremely different patterns. 2018 is no exception.

In this brief first look we will show you a graph of the recent spending history for Total Pet and each individual segment. That should help put the 2018 numbers into perspective. After each graph, I will include a very brief comment. The detailed analysis will follow in future posts. I just thought that you should see the topline data as soon as possible. First, Total Pet…

There have been a couple 6 month declines but the annual growth has been pretty consistent. There has only been one 12 month period that has registered decreased sales. That occurred in 2016 and the total drop was only $0.46B. It is disappointing that at Mid-Year 2018, we seemed on the way to breaking the $80B mark in 2018. However, the second half of 2018 wrote a different ending to the story. Now, let’s turn to the largest segment, Pet Food & Treats… 

Pet Food spending has been on a roller coaster for a number of years, driven by successive product trends. Since 2003 Pet Food has consistently had 2 successive years of spending increases followed by a down or flat year. After the 1st half, it looked like 2018 was on track for a small, but expected increase. However, the 2nd half changed all that. Spending fell $2.51B, driving sales down $2.26B for the year and  breaking the pattern of the last 15 years. Now, we’ll look at Pets & Supplies…

Since the Great Recession, Pet Supplies prices have generally been deflating as many categories have become commoditized. The segment is very price sensitive. Price deflation drives spending up while even a low inflation rate depresses sales. In 2018 Pet Supplies prices went up 1%, which was the biggest increase since 2009. However, sales still went up $1.22B. This combination also last happened in 2009. However, when you look at the graph, you see that spending actually fell $0.01B in the 2nd half of 2018. This makes sense as the inflation rate grew during the year. By December, prices were up 3.3% versus 2017. Now Non-Vet Services…

Pet Services is the smallest industry segment and has long been known for slow, but consistent growth. In the graph, you can see that this pattern was broken in 2017. The number of outlets offering Services began to increase sharply during this time and pricing became more competitive. At first this didn’t increase consumer usage of Services and Pet Parents were shopping for value. Apparently, this changed in 2018 and more consumers “got the message”. Spending increased by $1.95B. This is more than twice as big as the previous largest increase in the 34 years that the US BLS has been keeping records on this segment. Now, on to our final segment, Veterinary Services…

Except for 2015, Veterinary Services has grown consistently through the years. The problem has been a high inflation rate, which has slowed the frequency of consumer visits while increasing prices. The inflation rate has slowed in recent years which spurred $3B in spending increases in 2016-2017. In 2018, Vet spending was up $0.56B (+1.9%). Unfortunately, prices were up 2.6% so there was a net decrease in the amount of Veterinary Services in 2018.

That wraps it up for this brief preview of Pet Spending in 2018. In future reports we will drill deeper and deeper into the data for each segment and ultimately Total Pet. Our goal will be to determine the who, what and why behind the numbers. We will look at spending from the perspective of 82 segments in 12 demographic categories and even include the frequency of purchase as a factor. Who is spending most of the money? Which groups had the biggest changes in spending – up or down. What are the best performing demographic segments?

The Pet Industry is solid but complex. You have to look beneath the surface numbers to find out what is truly happening. Stay tuned for detailed, analytical updates.