Retail Channel Monthly $ Update – October Final & November Advance

/in /by

Time for our monthly update on U.S. retail sales by channel. The current COVID-19 crisis has caused turmoil in the Retail Marketplace. Consumer spending behavior has changed and continues to evolve. In this report we will track the changes and migration between channels. We will do that with data from two reports provided by the U.S. Census Bureau.

The Reports are the Monthly Retail Sales Report and the Advance Retail Sales Report. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – approximately 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

To get the full picture in our monthly channel update we will look at the latest release of both reports. We will begin with the Final Retail Report from October and then move to the Advance Retail Report for November. This will also allow us to better track the consumers’ evolving spending behavior in terms of channel migration.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports and we fill focus on Pet Relevant Channels

The information will be presented in detailed charts to facilitate visual comparison between groups/channels of:

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2019
  • Current YTD change – % & $ vs 2019
  • Monthly and Year To Date $ will also be shown for each group/channel

First, the October Final report. The retail market hit bottom in April then began to recover. October saw a new peak and $ are still growing vs 2019. Here are the major retail groups. (The Data in all graphs is Actual, Not Seasonally Adjusted)

The final total is $1.0B less than the Advance report projected a month ago. All groups were slightly down. Relevant Retail: -$0.4B; Restaurants: -$0.3B; Auto: -$0.2B; Gas Stations: -$0.2B. All groups were up vs September and monthly Total Sales exceeded the previous peak in July. Driven by an exceptionally strong month from Relevant Retail and Auto, YTD Total $ales turned positive for the first time since February. The Auto segment is closing in on 2019 $ but Restaurants and Gas Stations are down -$192B. Relevant Retail remains the only positive group in YTD sales.

Now, let’s see how some Key Pet Relevant channels were doing in October.

  • Overall – $ in 10 of 11 groups were up vs September and 9 were up vs October 2019 and YTD. A strong month.
  • Building Material Stores – Their “Spring” lift continued through Summer and now into Fall. While sales peaked in June, they’re still showing double digit % increases vs 2019. Sporting Goods stores are not included in this group, but they have a similar Spring lift pattern. Their sales took off in May, peaked in June but continued to grow vs 2019. In June, their YTD $ vs 2019 turned positive and by October they were up 14.9%.
  • Food & Drug – After slowing in August & September, Supermarket $ were up again in October and are +$66.9B YTD. Drug Stores $ dipped in August but came back stronger in September and October. They’re +$12.4B YTD.
  • General Merchandise Stores – $ in Clubs/SuperCtrs bounced back after slowing in September and are up $28.5B vs 2019. $ Stores sales slowed from June>Sept but grew again in October and are now +12.6% vs 2019. Discount Dept. store sales were slowing before the pandemic. This trend has continued despite their small lift.
  • Office, Gift and Souvenir Stores – A big lift but still below 2019 $. They were hit hard and have a long way to go.
  • Internet/Mail Order – The pandemic has accelerated this channel’s growth vs 2019. Sales hit a new peak in October. Many new consumers have discovered online shopping and the behavior is likely to become habitual.
  • A/O Miscellaneous – This is a group of small to midsized specialty retailers – chains and independents. It includes Florists, Art Stores and Pet Stores (22 to 24% of total $). Pet Stores were usually essential, but most stores were not. The others began reopening in May and the number grew in June which produced an increase vs 2019. Sales peaked in July but have stabilized and remain strong vs 2019. In fact, YTD sales are up +10.3%.

The recovery began in May and accelerated in June>July as even more businesses began to re-open. The Relevant Retail Segment was positive in all measurements in May>July. In August>September $ slowed but were still strong vs 2019. In October sales grew to a new peak. The key drivers in the positive numbers vs 2019 remain the Internet, Supermarkets, SuperCtrs/Clubs/$ Stores and Hdwe/Farm.  How are things progressing? Here are the Advance numbers for November.

April and May were the 2 biggest spending drops in history. In June, monthly sales increased for the first time since February and continued to grow in July. $ fell in Aug/Sept. but in October, all groups spent more, turning YTD Total Retail positive for the 1st time since February. $ dipped in November but not vs 2019 so the YTD $ vs 2019 increased.

Total Retail – Total Retail spending fell -$7.3B vs October but was up $13.5B vs November 2019. In February 2020 sales were up $60B, +6.6% YTD versus 2019. Then came COVID-19. We hit bottom at -$112B in May and began moving in the right direction. We broke even in October and are now up $14.5B in November but still down -$44.5B from February.

Restaurants – Spending fell -$6.5B from October and -$12.0B vs November 2019. $ales usually drop in November, but not -11.4%. Things remain Topsy Turvy. January and February, normally the 2 slowest months, are on top in 2020. In February YTD sales were up $9B. Then came the forced closures. Re-openings began in May but have run into problems with a resurgence of the virus. Delivery/Pickup can’t make up the difference as spending is now down $135.8B YTD.

Automobile & Gas Stations – When you are staying home your car becomes less of a focus in your life. Auto Dealers began combating this attitude with fantastic deals and a lot of advertising. Monthly $ turned positive versus 2019 in June and have maintained this pace. Although sales dipped in November, this group is now +0.01% YTD vs 2019. Gas Station $ales increased in May>July but fell in August & September. They turned up again in October but were down 10.4% in November. This group is now -$75.4B YTD. People are still not driving as much, for commuting or road trips.

Relevant Retail – Less Auto, Gas and Restaurants – Many non-essential businesses shuttered their doors in March but there was also a rash of binge/panic buying for “necessities” and a big lift in groceries as consumers focused on home cooking which drove spending up $19B. April brought a full month of closures and an end in binge buying, spending dropped $34B from March. In May, the overall market began to reopen so spending began to move in the right direction and this growth continued through July. $ales fell in Aug/Sept but turned up again in Oct/Nov. We should note that the monthly June>November $ are larger than all months in 2019 but December. The primary drivers have been Nonstore, Grocery and SuperCenters/Clubs & $ Stores along with an “extended” spring lift from the Hardware/Farm and Sporting Goods channels. The Relevant Retail group now has posted positive numbers versus last year and year to date for 7 consecutive months and is up $225.6B YTD (+6.8%) vs 2019. In May when the streak began, it was up +2.7%.

Now let’s look at what is happening in the individual retail channels across America. In November, consumer spending in the relevant retail market grew even more positive versus 2019. Let’s see where the $ came from. These groups are less defined than in the Final Monthly reports and we will look across the whole market, not just pet relevant outlets.

In October 11 of 13 channels beat last months $. In November it was down to 9. In September & October 10 channels beat the same month in 2019. This number dipped to 9 in November. In YTD $, 8 are showing an increase, the same as in September & October. The YTD decreases are coming from channels that are primarily nonessential businesses.

After April’s widespread closures there was a retail surge in May. Things truly opened up in June & July and sales continued to increase. In August & September, they slowed then grew again in October & November. Relevant Retail Channels are up $225.6B vs 2019. The essential channels are responsible for the YTD lift vs 2019, primarily:

  • Nonstore Retailers – Even more consumers are online shopping.
  • Food & Beverage, especially Grocery– Restaurant $ are still down so consumers continue to eat & drink at home.
  • Bldg Materials/Garden/Farm– A big Spring lift continues into the Summer/Fall as consumers focus on their home.
  • SuperCtrs/Club/Value/$ Strs – Sales slowed in April but came back in May and continue to grow vs 2019. This group turned the whole Gen Mdse channel positive. It clearly shows that value is still a consumer priority.

Regarding the Individual Large Channels

General Merchandise Stores – Sales grew as we move into the Christmas lift for GM. However, sales for both Regular and Discount Department were fading before the crisis. Club/SuperCtr/$ stores are still the big positive force. In April consumers dialed back their panic buying and spending on discretionary items was also down significantly. Since May we have seen consumer spending return to a more normal, strong pattern in the big and small stores that promise value.

Food and Beverage, plus Health & Personal Care Stores – Although $ were flat, the Grocery segment is still strong, +$70.9B YTD, due to the continuing big drop in restaurant sales. Monthly Sales fell in the Health, Personal Care group but have been up vs 2019 since June. Since August, the YTD $ have been positive. Drug Store $ growth was a key factor.

Clothing and Accessories; Electronic & Appliances; Home Furnishings – Except for September, monthly sales have grown every month since May. All groups increased sales vs October with Electronics/Appliances leading the way at +23.2%. All 3 channels are down significant percentages in YTD sales. Clothing Stores are by far the worst performers. In November they were down 19.2% vs November 2019 and 28.5% YTD. Together, these groups are down $85B vs 2019.

Building Material, Farm & Garden & Hardware – Sales peaked in late spring, as usual. However, this channel continues to benefit from consumers turning their focus to their home needs, including house and yard repair and improvements. This has extended their “Spring” lift into the Fall. $ were up 17.2% vs November 2019 and up +$47.6B (+13.4%) YTD.

Sporting Goods, Hobby and Book Stores – Book and Hobby stores are open and sales in Sporting Goods stores have taken off as Consumers are seeking outdoor recreation. Sales reached a new peak in November, up 10.1% vs last month and 14.0% vs November 2019. The $ exceeded all months in 2019, but December. In April YTD $ were -$3.4B. This deficit was wiped out in September and through November, YTD sales were +$3.0B (+4.3%). Their holiday lift has begun.

All Miscellaneous Stores – This group is mostly small to medium specialty stores – both chains and independents. Pet Stores are essential but most other stores are not, so closures hit this group particularly hard. Sales hit bottom at -$3.8B in April then began to rebound in May and grew through July when they finally beat the monthly sales for 2019. In Aug>Sept sales plateaued. They turned up in October but are down again in November. In February, this group was up $2.6B YTD. Through November they are down -$2.7B, a difference of $5.3B. Recovery will be a long journey.

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV businesses. The COVID-19 crisis has only accelerated the ongoing movement to online retail. In February NonStore was up 8.6% YTD. In November monthly sales were the highest for any month in history and they are now up 22.6%, +$158.5B YTD. Their increase is 70% of the total $ increase for Relevant Retail Channels. They are the clear leader, and their performance far exceeds their 12.9% annual increase in 2019. 2020 has become a key turning point for NonStore Retailers.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded along with their store sales in their regular channel. Whether they are up or down, their online sales are included in the totals.

Recap – April and May saw the 2 biggest year over year monthly sales declines in history. Restaurants, Auto and Gas Stations increased sales from May through July, but results have been mixed since then. All were down in September, up in October and down again in November. The Auto segment drew even in YTD $ vs 2019 in November but Restaurants and Gas Stations are still struggling. The Relevant Retail segment has been the only true positive. Sales slowed in Aug>Sep. but then began grow again, peaking in November. Their Monthly and YTD sales vs 2019 are now up for 7 consecutive months. Overall, they are +$225B YTD but for some segments in this group there is still a long way to go. Total Retail Sales peaked in October. Although $ dropped in November, Total Retail continued to exceed 2019. YTD Total Retail is now up +$14.5B (+0.3%) vs 2019. Unfortunately, the virus is surging, and retail restrictions are being reimposed in many areas. This will be a long battle. We will continue to monitor the data and provide you with regular updates.

 

 

 

 

2019 U.S. Pet Spending by Generation – Gen X CUs Still Spend the Most

/in /by

In 2019 Americans spent $77.44B on our companion animals, 0.94% of $8.3 Trillion in total expenditures. Pet Spending was down $0.16B (-0.2%), a marked change from 2 years of increases. There were a number of factors affecting pet spending in 2019. Food rebounded after the 2018 FDA warning on grain free dog food drove spending down. Tariffs on Supplies really hit home causing a huge drop in spending . Veterinary Services again had a small increase, but it was entirely driven by inflation. After the biggest lift in history, Services spending plateaued in 2019.

In this report we will look at how these factors and others affected the Pet Spending for today’s most “in demand” demographic measurement – by Generation. In 2019, we’ll see Gen Z for the first time and the oldest generations will be consolidated into 1 group. Using data from the US BLS Consumer Expenditure Survey we’ll look for answers.

We’ll start by defining the generations and looking at their share of U.S. Consumer Units (CUs are basically Households)

GENERATIONS DEFINED

Gen Z: Born after 1996

In 2019, Age under 23

Millennials: Born 1981 to 1996

In 2019, Age 23 to 38

Gen X: Born 1965 to 1980

In 2019, Age 39 to 54

Baby Boomers: Born 1946 to 1964

In 2019, Age 55 to 73

Silent/Greatest: Born before 1946

In 2019, Age 74+

  • Baby Boomers still have the largest number of CU’s at 43.1M and 32.6% of the total but they are losing ground. In fact, they have 1.9M fewer CU’s than in 2016.
  • The Oldest Generations will continue to lose CUs primarily due to death or movement to permanent care facilities.
  • Gen X has the second most CUs and are the most stable.
  • Millennials have the largest number of individuals, but they rank only third in the number of CU’s. Now, Gen Z appears for the first time. Together, these 2 youngest generations are growing fast, up 1.9M CUs in 2019.

Now let’s look at some key CU Characteristics

One significant change was the increase in homeownership. This was driven by the Gen Xers and Millennials and overcame a drop by Boomers. Separated from Gen Z, Millennial CU size also grew.

  • CU Size – CUs with 2+ people account for 69.8% of all U.S. CUs (down from 70.5% in 2018) and 78.2% of pet $ (down from 80.9% due to a spending drop by 2 person CUs and a lift by singles). Millennials are actively building their H/Hs. However, CU size, with all the related responsibilities, still peaks with the Gen Xers and then starts dropping. The Boomers are the last group with 2+ CUs but that will inevitably fade.
  • # Children < 18 – 27.9% of U.S. CU’s have children and they generate 29.0% of Pet Spending. Although Married Couples with children spent slightly less, CUs with children continue to earn their share. However, the story is more complex. Single parents spent $1.04B less, but the biggest decrease again came from Married Couple only CUs – down -$1.67B. Other “adults only” CUs, of any size spent significantly more on their pets, +$2.77B. Singles led the way with +$1.64B. Overall, there was no change in the # of children per CU in 2019 but there were changes within groups. Millennials, now separated from Gen Z, reported more children as did Gen X, while the number for Boomers was down. The Married with Children group tends to skew younger, but singles have higher numbers at both ends of the age range.
  • # Earners – While not as important as income, Pet spending is also tied to the number of earners in a CU. In 2019, 2+ person, 2 Earner CUs spent 52% more on their pets than 1 Earner CUs. As the chart shows, the “earning” is being done in America by the younger groups, peaking with Gen X and dropping significantly with the aging Boomers.
  • Homeownership – Owning and controlling your own space has been a major factor in increased Pet Ownership and spending. Driven by the younger groups, homeownership increased to 63.74% from 63.48%. There was a clear spending divide. Led by those with no Mtges (+$0.99B), Homeowners spent $1.13B more on their pets while Renters spent $1.29B less. As a result, the homeowners share of Total Pet Spending grew from 79.8% to 81.4%. One key to increased Pet Spending in 2019 was a paid off mortgage.
    • Gen Z are now the most common renters in society. Homeownership by Millennials has moved up to 43% but it is still only 67% of the national average and about 3/4 of the rate of Gen Xers and Boomers when they were the same age.
    • Gen Xers have been above the national avg since 2018 and Homeownership continues to increase with age.

Next, we’ll compare the Generations to the National Avg.:

In Income, Total CU Spending, Total Pet Spending and the Pet Share of Total CU Spending

CU National Avg: Income – $82,852; Total CU Spending – $62,949; Total Pet Spending – $593.51; Pet Share – 0.94%

  • Income – The Gen Xers are the leaders, but the gap narrowed with a 0.3% decrease. The Boomers earn 19% less but are the only other group to exceed the national avg. Income drops radically in the oldest group as they retire, and Gen Z is just getting started. Millennials’ income grew 12.8% but is less than the Boomers and only 75% of Gen Xers.
  • Total Spending – The Gen Xers make the most and spend the most but it’s not out of line with their income. Boomers also spend more than the average but their after tax income still supports it. The oldest & youngest groups are actually deficit spending in relation to their after tax The Millennials’ spending increased 8.2%, twice as much as Gen Xers. With increases in CUs, Income and Spending, the retail importance of Millennials is growing.
  • Pet Spending – Only 2 groups exceed the national average and for the second consecutive year, Gen X holds the top spot. Millennials are 3rd but are 26% below Boomers and 33% below Gen X. The oldest and youngest groups trail.
  • Pet Spending Share of Total Spending – The national number fell from 0.98% to 0.94%. The drop was due to a 10% decrease from Millennials/Gen Z and a 3% decrease from the oldest group. Gen X held their ground and Boomers are still the only group to spend more than 1% of their total on their pets. However, the most significant change is that in 2018 every group spent at least 0.92% of their total CU spending on their pets. In 2019 this minimum is down to 0.82%, with the youngest groups leading the way down.

Now, let’s look at Total Pet Spending by Generation in terms of market share as well as the actual annual $ spent for 2015 through 2019. The 2019 numbers are boxed in red (decrease) or green (increase) to note the change from 2018.

  • Boomers are still the biggest force in Pet Spending, but their share continues to fall – 36.6% from 46.8% in 2017.
  • There are definite age-related patterns which are readily apparent in the bar graph. Spending in the oldest group is relatively low and falling. In contrast, the two youngest groups are showing consistent year after year growth. The Boomers are in the middle. They still have the biggest share but are also the most likely group to have a strong reaction to trends, especially in this era of super premium foods. With their tremendous buying power, this can cause major spending swings impacting the whole industry. There was no swing in 2019 as their $ were down again.
  • In 2019, the Boomers spending fell -$0.88B and Silent/Greatest was down -$0.46. The Gen Xers and Millennials/Gen Z stepped up again, +$1.17B. However, they fell a little short.
  • Boomers – Ave CU spent $669.25 (-$2.78); 2019 Total Pet spending = $28.73B, Down -$0.88B (-3.0%)
    • 2015>2019: Down $3.42B; Their roller coaster stopped as spending continued down, now -10.6% from 2015.
  • Gen X – Ave CU spent $727.05 (+$18.73); 2019 Total Pet Spending = $25.75B, Up $0.59B (+2.4%)
    • 2015>2019: Up $7.49B; Their annual Pet spending growth since 2015 has been strong and consistent. Their increase of $7.49B in that time was just slightly behind Millennial/Gen Z.
  • Millennials + Gen Z – Ave CU spent $471.43 (-$15.42); 2019 Total Pet Spending = $17.50B, Up $0.58B (+3.4%)
    • 2015>2019: Up $7.77B; Their spending growth pattern since 2015 mirrors Gen X. However, they have the biggest increase in $, $7.77B, +80%.
      • Millennials Only – Ave CU spent $493.61; 2019 Total Pet Spending= $16.43B
      • Gen Z Only – Ave CU spent $280.09; 2019 Total Pet Spending= $1.07B
  • Silent + Greatest – Ave CU spent $388.85 (-$17.73); 2019 Total Pet Spending = $6.46B, Down $0.45B (-6.5%)
    • 2015>2019: Down $1.15B; They still spend a relatively high amount on their pets, but age is becoming a factor.

The older generations, including Boomers may be starting to fade as 2019 spending for both groups was below 2015. The younger generations are consistently increasing their annual spending which bodes well for the future.

Let’s look at the individual segments. First, Pet Food…

  • The trendy nature of Pet Food is more pronounced for the Boomers. In the older generations, pet ownership is fading. The younger groups are showing more consistent growth and Gen X led the way in the 2019 Food rebound.
  • The Millennials’ have led the way in food trends, including value shopping and they are the only group with an annual increase every year since 2015.
  • Boomers – Ave CU spent $294.51 (+$29.78); 2019 Pet Food spending = $12.56B, Up $0.78B (+6.6%)
    • 2015>2019: Down $3.01B– Spending plummeted in reaction to the FDA warning. The 2019 rebound fell far short.
  • Gen X – Ave CU spent $284.18 (+$50.13); 2019 Pet Food spending = $10.03B, Up $1.71B (+20.5%)
    • 2015>2019: Up $2.77B If this highest income group reacted to the FDA, it was to further upgrade their food.
  • Millennials + Gen Z – Ave CU spent $161.85 (-$12.91); 2019 Pet Food Spending $6.13B, Up $0.08B (+1.4%)
    • 2015>2019: Up $2.39B They are the only group with increased spending every year since 2015. They are growing in numbers and in their commitment to their pets. Since 2014 they have been the pioneer in food upgrades.
      • Millennials Only – Ave CU spent $171.55; 2019 Pet Food spending = $5.79B
      • Gen Z Only – Ave CU spent $34.76; 2019 Pet Food spending = $0.34B
  • Silent/Greatest – Ave CU spent $152.69 (-$10.70); 2019 Pet Food spending = $2.48B, Down $0.22B (-8.1%)
    • 2015>2019: Down $0.67B; They remain committed to their pets, but their numbers are starting to fade.

Pet Food Spending is driven by trends. In 2018, the FDA warning for grain free dog food created a turmoil. Boomers dialed back to more regular food. The younger groups were less affected. In 2019 It looks like Gen Xers may have upgraded to even more expensive varieties which helped fuel the big $ rebound. Now, let’s look at Supplies Spending.

  • Boomers still have the largest share but even with a $1.8B drop in spending, the younger groups have a big “presence” in Supplies. Gen Xers and Millennials/Gen Z together account for 55.8% of Supplies spending.
  • Baby Boomers – Ave CU spent $136.81 (-$20.00); 2019 Pet Supplies spending = $5.90B, Down $0.96B (-14.0%)
    • 2015>2019: Down $0.04B; Spending peaked 2017, then headed down probably due to the impact of tariffs.
  • Gen X – Ave CU spent $154.17 (-$38.03); 2019 Pet Supplies spending = $5.47B, Down $1.35B (-19.8%)
    • 2015>2019: Up $0.90B; Gen Xers generally perform best in Supplies and they are the leader in CU spending, but they too were affected by tariffs. They also further upgraded their Food and partially paid for it with Supplies $.
  • Millennials + Gen Z – Ave CU spent $118.17 (-$12.96); 2019 Pet Supplies spending = $4.34B, Down $0.23B (-5.0%)
    • 2015>2019: Up $1.11B; Supplies are still Millennials’ best performing segment. In 2016 they cut spending to fund increases in Food and Veterinary. They came back strong, +$1.8B by 2018 and were the least impacted by tariffs.
      • Millennials Only – Ave CU spent $118.64; 2018 Pet Supplies spending = $3.92B
      • Gen Z Only – Ave CU spent $114.01; 2018 Pet Supplies spending = $0.42B
  • Silent + Greatest – Ave CU spent $65.13 (-$23.94); 2019 Pet Supplies spending = $1.10B, Down $0.45B (-28.9%)
    • 2015>2019: Down $0.22B; Spending has been slowly increasing but this $ conscious group was hit hard by tariffs.

In 2016 most Consumers value shopped for the super premium food that they had upgraded to in 2015 and spent some of the saved money on Supplies. Supply prices dropped in 2017 and everyone under 72 years spent more! Late 2018 saw added tariffs. Boomers dialed back their purchase frequency. Everyone else was either unaffected or bought more, early. In 2019 the sharply rising prices drove spending down in all groups.

Next, we’ll turn our attention to the Service Segments. First, Non-Veterinary Pet Services

  • Gen Xers kept the top spot. The oldest group had the biggest increase, but the Gen X/Millennial share is still 56.0%.
  • Baby Boomers – Ave CU spent $64.50 (+1.51); 2019 Pet Services spending = $2.78B, Up $0.03B (+1.0%)
    • 2015>2019: Up $0.31B; Boomers still need Services. They held their ground after trending down for 2 years.
  • Gen X – Ave CU spent $85.60 (-$8.62); 2019 Pet Services spending = $3.04B, Down $0.31B (-8.1%)
    • 2015>2019: Up $0.92B; After the big lift in 2018, it’s likely that they looked for and found a better price.
  • Millennials + Gen Z – Ave CU spent $50.43 (-$4.28); 2019 Pet Services spending = $1.85B, Down $0.05B (-2.8%)
    • 2015>2019: Up $1.83B; Value shopping is also likely. The drop was less than Gen X because of 5+% more CUs.
      • Millennials Only – Ave CU spent $54.34; 2019 Pet Services spending = $1.80B
      • Gen Z – Ave CU spent $15.47; 2019 Pet Services spending = $0.06B
  • Silent + Greatest – Ave CU spent $56.38 (+$15.13); 2019 Pet Services spending = $0.95B, Up $0.24B (+33.0%)
    • 2015>2019: Up $0.31B; They definitely have a need. In 2019, they found the money.

This segment has always found a way to grow every year – until 2017. The small drop in spending was caused by An extremely competitive environment. Consumers increased frequency but paid less. In 2018, the increased number of outlets really hit home, especially for the younger groups and spending exploded. Value and Convenience in 2019 resulted in Gen Xers and Millennials looking for and finding a better deal while the oldest group “got on board”.

Now, Veterinary Services

  • Boomers are still the biggest spenders in this segment, but again they only lead Gen Xers because of more CUs.
  • The younger groups both have a consistently growing commitment to this Pet Parenting responsibility. The combined Veterinary spending of Millennials/Gen Z and Gen Xers has increased $6.23B (+101%) since 2015.
  • Boomers – Ave CU spent $173.43 (-14.07); 2019 Veterinary spending= $7.48B, Down $0.72B (-8.8%)
    • 2015>2019: Down $0.69B; Except for the lift in 2017, spending was consistent at $8B. In 2019, it turned down.
  • Gen X – Ave CU spent $203.10 (+$15.25); 2019 Veterinary spending= $7.21B, Up $0.54B (+8.1%)
    • 2015>2019: Up $2.90B; Since 2016, their Veterinary spending has exceeded the national CU Average. In 2018, they took over the top spot in CU spending. In 2019 they widened their lead over the Boomers.
  • Millennials + Gen Z– Ave CU spent $140.98 (+$14.73); 2019 Veterinary Spending $5.18B, Up $0.78B (+17.7%)
    • 2015>2019: Up $3.33B; Their CU spending is up 118% since 2015. Veterinary has become a much bigger priority.
      • Millennials Only – Ave CU spent $149.08; 2019 Veterinary spending = $4.92B
      • Gen Z Only – Ave CU spent $68.60; 2019 Veterinary spending = $0.25B
  • Silent + Greatest – Ave CU spent $114.65 (+$1.77); 2019 Veterinary spending $1.93B, Down $0.02B (-1.2%)
    • 2015>2019: Down $0.85B; Money is a priority, but so is their pets’ health. The $ decrease is just from fewer CUs.

Gen Xers and Millennials have consistently increased their commitment to Veterinary Services. In 2015, their share of Veterinary Spending was 36%. It is now 55.7% – a 55% increase. This is a big, fundamental change in spending behavior.

One last chart to compare the share of spending to the share of total CU’s to see who is “earning their share”.

  • Gen X Performance – Total: 122.3%; Food:119.7%; Supplies:121.3%; Services:131.2%; Veterinary:123.2%
    • In 2019 the Gen Xers kept the top spot in performance. They again “earned their share” in every industry segment as well as Total Pet. They have increased their Total Pet Spending every year since 2015. During this time, their spending has become more balanced and their performance has improved. The only reason that they are not the leaders in Total $ is that the Boomers have more CUs. Gen Xers range in age from 39 to 54 so they are just entering the peak earning years. Expect their commitment and pet spending to continue to grow.
  • Baby Boomers Performance–Total: 112.3%; Food:123.4%; Supplies:107.6 %; Services:98.9%; Veterinary: 105.2%
    • Boomers led the way in building the industry and are still the “top dogs” in $. They earn their share and in fact, are the still the spending leader in Total Pet and every segment but Services. However, their CU numbers are beginning to fall – down 1.9M (-4%) since 2016. Their Spending fell again, in 2019 but nothing like the record $6.5B drop in 2018. They should hold the lead in Pet $ for several more years and be a major force for many more, but the Gen Xers and then Millennials are preparing to take their turn at the top.
  • Millennials Performance – Total: 83.8%; Food:74.3%; Supplies:93.3%; Services:83.3%; Veterinary:90.4%
    • Like the Gen Xers, Millennials have increased their pet spending every year since 2015. Their spending is more evenly balanced, and performance has improved. They are growing in CU numbers but their future as the Pet Parenting spending leaders is still a long way off. They need increased income and a more stable home situation. They are educated and well connected. Indications are that they may lead the way in adopting new trends, especially in food. Their progress is good news, but in reality, their leadership is still more than a decade away.
  • Silent/Greatest Performance – Total: 64.6%; Food:62.4%; Supplies:51.2%; Services:86.4%; Veterinary:69.5%
    • Pet Parenting is more challenging in old age, but they remain committed. 0.88% of their total spending is on pets.
  • Gen Z Performance – Total: 48.7%; Food:38.6%; Supplies:89.7%; Services:23.7%; Veterinary:41.6%
    • They are just beginning so the numbers are low. Next year we’ll get the first measurement of their progress.

Baby Boomers are still the Pet $ leaders, but Gen Xers, followed by Millennials are ultimately the future of the industry. Both groups seem ready, willing and able to take their turn at the top. As these groups have risen, Pet Spending has become more balanced across the generations. This bodes well for the continued strong growth of the industry.

 

 

 

 

 

 

 

 

 

Retail Channel Monthly $ Update – September Final & October Advance

/in /by

Time for our monthly update on U.S. retail sales by channel. The current COVID-19 crisis has caused turmoil in the Retail Marketplace. Consumer spending behavior has changed and continues to evolve. In this report we will track the changes and migration between channels. We will do that with data from two reports provided by the U.S. Census Bureau.

The Reports are the Monthly Retail Sales Report and the Advance Retail Sales Report. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – approximately 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

This means to get the full picture in our monthly channel update we need to look at the latest release of both reports. We will begin with the Final Retail Report from September and then move to the Advance Retail Report for October. This will also allow us to better track the consumers’ evolving spending behavior in terms of channel migration.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports and we fill focus on Pet Relevant Channels

The information will be presented in detailed charts to facilitate visual comparison between groups/channels of:

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2019
  • Current YTD change – % & $ vs 2019
  • Monthly and Year To Date $ will also be shown for each group/channel

First, the September Final report. The retail market hit bottom in April then began a slow recovery. Sales $ peaked in July but are growing vs 2019. Here are the major retail groups. (The Data in all graphs is Actual, Not Seasonally Adjusted)

The final total is $2.8B more than the Advance report projected a month ago. Auto $ were the same as projected. Everyone else was up. Relevant Retail: +$2.5B; Restaurants:+$0.1B; Gas Stations:+$0.2B. $ales were still down from the  peak in all groups. However, driven by Relevant Retail, +$38B and Auto, +$14B, monthly sales were up $38B vs 2019.

An August > September decline in sales is normal. In 2019 the drop was -9%. In 2020 the drop was much smaller, only -3% , which is a good sign for a retail recovery. However, all groups but Relevant Retail are still down YTD vs 2019.

Now, let’s see how some Key Pet Relevant channels were doing in September.

  • Overall – $ in 7 of 11 groups were down vs August, but 10 of 11 were up vs September 2019 and 9 were up YTD.
  • Building Material Stores – This group has their biggest annual lift in Spring. This is unchanged and even stronger. While sales peaked in June, they’re still showing strong increases vs 2019. Although Sporting Goods stores are not included in this group, they have a similar Spring lift pattern. Their sales took off in May, peaked in June but continued to grow vs 2019. In June, their YTD $ vs 2019 turned positive and by September they were up 13.1%.
  • Food & Drug – $ fell in August & September but Supermarkets are maintaining incredibly strong growth vs 2019. Drug Stores $ bounced back after a decline in August and remain positive compared to 2019.
  • General Merchandise Stores – $ in Clubs/SuperCtrs stabilized in June and fell in September but are still strong vs 2019. Despite slowed sales in June>Sept, $ Stores are showing exceptional strength vs 2019. Discount Dept. store sales were generally slowing before the pandemic. This trend has continued despite a small Summer lift.
  • Office, Gift and Souvenir Stores – They were slow to re-open. $ grew but now are stable. They were hit hard.
  • Internet/Mail Order – The pandemic has accelerated this channel’s growth vs 2019. Sales peaked in August, but the crisis has introduced many new consumers to online shopping and the behavior is likely to become habitual.
  • A/O Miscellaneous – This is a group of small to midsized specialty retailers – chains and independents. It includes Florists, Art Stores and Pet Stores (22 to 24% of total $). Pet Stores were usually essential, but most stores were not. The others began reopening in May and the number grew in June which produced an increase vs 2019. Sales peaked in July but stabilized and remain strong vs 2019. In fact, YTD sales are up +10.2%.

The recovery began in May and continued in June and July as even more businesses began to re-open. The Relevant Retail Segment turned positive in all measurements in May and stayed that way through July. In August & September, sales fell but remained strong vs 2019. The key drivers in the positive numbers vs 2019 were the Internet, Supermarkets, SuperCtrs/Clubs/$ Stores and Hdwe/Farm.  How are things progressing? Here are the Advance numbers for October.

April and May were the 2 biggest spending drops in history. In June, monthly sales turned positive for the first time since February. The recovery continued in July but flattened out in Aug/Sept. In October, all groups spent more than in September. This lift turned YTD Total Retail positive for the 1st time since February.

Total Retail – Total Retail spending rose +$23.1B vs September and was up +6.0% vs October 2019. In February 2020 sales were up $60B, +6.6% YTD versus 2019. Then came COVID-19. Hopefully, we hit bottom at -$112B in May. We began moving in the right direction and finally broke even in October up $1.1B YTD but still down -$59B from February.

Restaurants – Spending increased +$2.7B from September but was still down -$8.0B vs October 2019. Things remain Topsy Turvy. August is usually their biggest $ month of the year. January and February, normally the 2 slowest months, are on top in 2020. In February YTD sales were up $9B. Then came the forced closures. Re-openings began in May but ran into problems in the Summer. Delivery/Pickup can’t make up the difference as spending is now down $123.5B YTD.

Automobile & Gas Stations – When you are staying home your car becomes less of a focus in your life. Auto Dealers began combating this attitude with fantastic deals and a lot of advertising. Monthly $ turned positive versus 2019 in June and have maintained this pace through October. The result is that this group is now only down -0.3% YTD vs 2019. Gas Station $ales increased in May>July over the previous month but fell in August & September. Sales turned up again in October but remain (-$67.8B YTD) People are still not driving as much, for commuting or road trips.

Relevant Retail – Less Auto, Gas and Restaurants – Many non-essential businesses shuttered their doors in March but there was also a rash of binge/panic buying for “necessities” and a big lift in groceries as consumers focused on home cooking which drove spending up $19B. April brought a full month of closures and an end in binge buying, spending dropped $34B from March. In May, the overall market began to reopen so spending began to move in the right direction. In June and July, the $ growth continued. $ fell in August & September but turned up again in October. We should note that the monthly June>October $ are larger than all months in 2019 but December. The primary drivers have been Nonstore, Grocery and SuperCenters/Clubs & $ Stores along with a big spring lift from the Hardware/Farm and Sporting Goods channels. The Relevant Retail group now has posted positive numbers versus last year and year to date for 6 consecutive months and is up $195.1B YTD (+6.5%) vs 2019. In May when the streak began, it was up +2.7%.

Now let’s look at what is happening in the individual retail channels across America. In October, consumer spending in the relevant retail market grew even more positive versus 2019. Let’s see where the $ came from. These groups are less defined than in the Final Monthly reports and we will look across the whole market, not just pet relevant outlets.

In September only 3 channels beat last months $. In October it was up to 11. In September, 10 channels beat September 2019. This number held in October. In YTD numbers, 8 are showing an increase – the same as September. The YTD decreases are coming from channels that are primarily nonessential businesses.

After a full month of stay at home and widespread closures there was a surge in May. Things truly opened up in June and July and sales continued to increase. In August and September, they slowed then grew again in October. Relevant Retail Channels are up $195.1B vs 2019. The essential channels are responsible for the YTD lift vs 2019, primarily:

  • Nonstore Retailers – Even more consumers are online shopping.
  • Food & Beverage, especially Grocery– Restaurant $ are still down so consumers continue to eat & drink at home.
  • Bldg Materials/Garden/Farm– A big Spring lift continues into the Summer/Fall as consumers focus on their home.
  • SuperCtrs/Club/Value/$ Strs – Sales slowed in April but came back in May and continue to grow vs 2019. This group turned the whole Gen Mdse channel positive. It clearly shows that value is still a consumer priority.

Regarding the Individual Large Channels

General Merchandise Stores – Regular Department stores are reopening which has cut the losses for total Department Stores as Discount Department stores continue to slowly fade. Club/SuperCtr/$ stores provided the big positive force. In April consumers dialed back their panic buying and spending on discretionary items was also down significantly. Since May we have seen consumer spending return to a more normal pattern in the big and small stores that promise value.

Food and Beverage, plus Health & Personal Care Stores – The Grocery segment is still driven by increased Food sales due to a slow restart by restaurants, up 10.3%, +$5.9B in October. Monthly Sales in the Health, Personal Care group have been up vs 2019 since June. Since August, the YTD $ have been positive. Drug Store $ growth was a key factor.

Clothing and Accessories; Electronic & Appliances; Home Furnishings – Except for September, monthly sales have grown every month since May. Home Furnishing was the only group with a decrease vs September, but they have had 5 consecutive monthly increases vs 2019. All 3 channels are down significant percentages in YTD sales. Clothing Stores are by far the worst performers. In October they were down 11.3% vs October 2019 and 30.0% YTD.

Building Material, Farm & Garden & Hardware – Sales peaked in the Spring. However, this channel continues to benefit from consumers turning their focus to their home needs, including house and yard repair and improvements. This has extended their Spring lift to Summer/Fall. $ were up 17.0% vs October 2019 and up +$42.9B (+13.2%) YTD.

Sporting Goods, Hobby and Book Stores – Book and Hobby stores are open and sales in Sporting Goods stores have taken off as Consumers again sought outdoor recreation. Although October sales fell again from their June peak, they were up 14.1% vs October 2019. YTD sales were down $3.4B in April. In September, this deficit was wiped out and through October YTD sales were +$1.8B (+2.8%).

All Miscellaneous Stores – This group is mostly small to medium specialty stores – both chains and independents. Pet Stores are essential but most other stores are not, so closures hit this group particularly hard. Sales began to rebound in May and grew through July when they finally beat the monthly sales for 2019. In Aug>Sept sales plateaued then turned up in October. Back In February, this group was up $2.6B YTD. Through July,  they were down -$3.2B but moving in the right direction. The lift in October has put them back on track, -$2.4B. However, they still have a long road ahead.

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV businesses. The COVID-19 crisis has only accelerated the ongoing movement to online retail. In February NonStore was up 8.6% YTD. In October they reached a new monthly sales peak for the year and they are up 21.9%, +$137.2B YTD. Their increase is 70% of the total $ increase for Relevant Retail Channels. They are the clear leader, and their performance far exceeds their 12.9% annual increase in 2019. Since much of their annual increase comes from holiday sales, 2020 could be another great year for NonStore Retailers.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded along with their store sales in their regular channel. Whether they are up or down, their online sales are included in the totals.

Recap – April and May saw the 2 biggest year over year monthly sales declines in history. Restaurants, Auto and Gas Stations increased sales from May through July. By September, all had decreased sales but $ turned up again in October. The Auto segment is almost back to even in YTD vs 2019 but Restaurants and Gas Stations are still struggling. The Relevant Retail segment has been the only true positive. Sales turned up in October after slowing in Aug>Sep. Monthly and YTD sales vs 2019 are up for 6 consecutive months. However, for some segments in this group there is still a long way to go. Total Retail reached a new $ peak in October and edged past YTD 2019, +$1.1B (+0.02%). Now the virus is resurging, and retail restrictions may be reimposed in many areas. This is going to be a long battle with no end in sight.

We will continue to monitor the data and provide you with regular updates.

 

 

2019 U.S. TOTAL PET SPENDING $78.44B…Down ↓$0.16B

/in /by

In 2019 Total Pet Spending in the U.S. was $78.44B, a $0.16B (0.2%) decrease from 2018. This decrease comes after 2 years of increases. As usual there were many factors behind the numbers, including some outside the control of the industry. Pet Food bounced back after the 2018 FDA warning regarding grain free dog food. However, the new tariffs on supplies had a huge negative impact on spending. Veterinary prices continued to rise. Spending was up slightly but the amount purchased by consumers actually fell. The Services segment $ declined slightly but essentially held its ground at the new high level established by record spending in 2018. Here are the $ changes:

  • A $2.35B (+8.1%) increase in Food
  • A $2.98B (-15.1%) decrease in Supplies
  • A $0.58B (+2.7%) increase in Veterinary
  • A $0.10B (-1.1%) decrease in Services

Let’s see how these numbers blend together at the household (CU) level. In any given week, 27.1 Million U.S. CU’s (1/5) spent money on their Pets – food, supplies, services, veterinary or any combination – down from 27.2M in 2018.

In 2019, the average U.S. CU (pet & non-pet) spent a total of $593.51 on their Pets. This was a small -0.8% decrease from the $598.41 spent in 2018. However, this doesn’t “add up” to a 0.2% decrease in Total Pet Spending. With additional data provided from the US BLS, here is what happened.

  • 0.6% more CU’s
  • Spent 0.1% more $
  • 0.9% less often

If 67% of U.S. CU’s are pet parents, then their annual CU Total Pet Spending was $885.84. Now, let’s look at the recent history of Total Pet Spending. The rolling chart below provides a good overview. (Note: All numbers in this report come from or are calculated by using data from the US BLS Consumer Expenditure Surveys – The 2016>2019 Totals include Veterinary Numbers from the Interview survey, rather than the Diary survey due to high variation)

  • We should note a 3 year pattern since 2010. 2 years of increases (yr 1 the largest) followed by a small decrease.
  • In 2014-15, the Food upgrade began, but early in 2015 consumers were trading $ in other segments to pay for it.
  • In 2016, they were intensely value shopping for super premium foods. They started spending some of this saved money on Supplies and Veterinary Services, but not quite enough as spending fell slightly for the year.
  • In 2017, spending took off in all but Services, especially in the 2nd half. Consumers found more $ for their Pets.
  • In 2018 a spectacular lift in Services overcame the FDA issue in Food, tariffs on Supplies and inflation in Veterinary.
  • In 2019 a bounce back in Food and small lift in Veterinary couldn’t overcome the drop in Supplies from “tarifflation”.

Now we’ll look at some Demographics. First, 2019 Total Pet Spending by Income Group

Spending was down under $70K but mixed in the higher income groups, with $100>150K down and the others up.

Nationally: · Total Pet: ↓$0.16B· Food: ↑$2.35B  · Supplies: ↓$2.98B  · Services: ↓$0.10B  · Veterinary: ↑$0.58B

  • < $70K – (58.5% of U.S. CUs); CU Pet Spending: $364.24, -4.9%; Total $: $27.98B, ↓$1.90B (-6.4%) ..
    • Food ↓$0.63B
    • Supplies ↓$1.62B
    • Services ↓$0.26B
    • Veterinary ↑$0.60B

Money matters a lot to this group, especially to those on the low end. You can see the impact of inflation in Supplies and Services. The drop in Food spending is a late reaction to the FDA warning by Retirees ($30>39K). The big lift in Veterinary comes mosstly from the <$30K group who were catching up after a big decrease in 2018.

  • >$70K – (41.5% of U.S. CUs); CU Pet Spending: $913.12, -0.2%; Total $: $50.46B, ↑$1.74B (+3.6%) from…
    • Food ↑$2.97B
    • Supplies ↓$1.37B
    • Services ↑$0.16B
    • Veterinary ↓$0.03B
  • This group continues to grow, up 3.5% in 2019. This accounted for almost all of their spending increase. They also show that income remains the single biggest factor in Pet Spending. 41% of U.S. CUs spent 64% of Total Pet $. They led the recovery in Food but were still impacted by Supplies prices. Services $ were up but Vet $ were flat.
  • < $30K – (27.0% of U.S. CUs); CU Pet Spending: $262.84, +1.4%; Total $: $9.13B, ↓$0.34B (-3.6%) from…
    • Food ↓$0.23B
    • Supplies ↓$0.63B
    • Services ↓$0.07B
    • Veterinary ↑$0.58B

This lowest income group demonstrated their price sensitivity again in 2019. However, they are committed to their pets which is shown by their rebound in Vet Spending, +$0.58B, after a -$0.7B drop in 2018.

  • $30>$70K – (31.5% of CUs); CU Pet Spending: $448.48, -9.2%; Total $: $18.85B, ↓$1.56B (-7.6%) from…
    • Food ↓$0.40B
    • Supplies ↓$0.99B
    • Services ↓$0.19B
    • Veterinary ↑$0.02B

This low to middle income group is also by necessity price sensitive. You see this in the drops in Supplies and Services. The drop in Food $ comes from Retirees’ ($30>39K) delayed reaction to the FDA warning. They did eke out a small, but second consecutive annual increase in Vet $. They are also committed to their pets.

  • $70>$99K – (14.5% of CUs); CU Pet Spending: $737.70, +10.0%; Tot $: $14.15B, ↑$1.23B (+9.5%) from…
    • Food ↑$0.62B
    • Supplies ↓$0.02B
    • Services ↑$0.15B
    • Veterinary ↑$0.48B

This upper middle income group had a minimal negative reaction in Supplies and strong increases in all other segments. They were the best performing Pet Spending income group in 2019.

  • $100K>$149K– (13.8% of CUs); CU Pet Spend: $803.77, -8.1%; Tot $: $14.92B, ↓$0.42B (-2.7%) from…
    • Food ↑$0.74B
    • Supplies ↓$0.67B
    • Services ↑ $0.10B
    • Veterinary ↓$0.59B

They were the Star of the income groups in 2015 and 2017. In 2016, they were the worst performers. 2018 saw increases in all segments but food. 2019 brought big increases in Food & Services while Vet & Supplies fell. Veterinary is a surprise. They have the money to fulfill their needs or wants, but are still very “value” conscious.

  • $150K> – (13.3% of CUs); CU Pet Spending: $1219.98, -1.5%; Total $: $21.38B, ↑$0.93B (+4.5%) from…
    • Food ↑$1.61B
    • Supplies ↓$0.67B
    • Services ↓$0.09B
    • Veterinary ↑$0.08

Money Matters! They are the proof. They are the best performing income group in Total Pet Spending with 13.3% of U.S. Households generating 27.3% of all Pet $. They are also the only income group to increase annual Pet Spending every year since 2015. In fact they have furnished 69% of the Pet Industry’s $10.7B spending increase since 2015. This group is also growing. They added 0.8 million CUs in 2019, a 5.0% increase. In fact, their $0.93B increase was driven by the additional CUs. It does demonstrate that pet spending grows with consumers’ income, especially once you reach the $150K+ level.

Income Recap –  The top 2 drivers in consumer spending behavior are value (quality + price) and convenience. That makes income , especially disposable income very important in Pet Spending. Overall we see a big difference in pet spending behavior at the opposite ends of the income spectrum. The <$30K group has been trending down and is now below their 2015 $. On the other hand, the $150K+ group has increased Pet Spending every year since 2015. In 2019 the increase/decrease spending dividing line is basically $70K. This line is somewhat deceptive and not rigid. While the recovery in Food was only in the $70K+ groups, tarifflation drove Supplies spending down in all groups. <$70K also spent less on Services but so did the $150K+ group. Veterinary spending increased in every income level but $100>150K CUs. 2019 Total Pet Spending was definitely mixed when we look closer at the income groups.

Next let’s look at 2019 Total Pet Spending by Age Group

Totally mixed results. The groups literally flipped up or down with every change in 10 year segment.

Nationally: · Total Pet: ↓$0.16B · Food: ↑$2.35B  · Supplies: ↓$2.98B  · Services: ↓$0.10B  · Veterinary: ↑$0.58B

  • <25 – (5.5% of U.S. CUs); CU Pet Spending: $336.22, -5.4%; Total $: $2.50B, ↓$0.29B (-10.5%) from…
    • Food ↓$0.36B
    • Supplies ↑$0.20B
    • Services ↓$0.13B
    • Veterinary ↑$0.002B

This youngest group dialed back spending on Food & Services which produced their 1st Total Pet decrease in 5 yrs.

  • 25-34 – (16.1% of U.S. CUs); CU Pet Spending: $455.67, -6.8%; Total $: $9.86B, ↓$0.48B (-4.7%) from…
    • Food ↑$0.10B
    • Supplies ↓$0.65B
    • Services ↓$0.04B
    • Veterinary ↑$0.11B

These Millennials broke a 5 year pattern of increases. The drop was driven by Supplies. The other segments were relatively stable. Many are just starting households, so the fast rising Supplies’ prices were a big turnoff.

  • 35-44 – (16.9% of CUs); CU Pet Spending: $668.50, +1.3%; Total $: $14.85B, ↑$0.39B (+2.7%) from…
    • Food ↑$0.40B
    • Supplies ↓$0.82B
    • Services ↓$0.43B
    • Veterinary ↑$1.23B

This group has the largest families and is in the middle of building their careers. This makes them very sensitive to value. You see this with the drops in the inflating, discretionary segments, Supplies & Services. However, they have a growing commitment to their pets which is evident from the big lifts in Food & Veterinary Spending.

  • 45-54 – (16.8% of U.S. CUs); CU Pet Spending: $761.74, -1.0%; Total $: $17.01B, ↓$0.71B (-4.0%) from…
    • Food ↑$1.20B
    • Supplies ↓$0.75B
    • Services ↑$0.09B
    • Veterinary ↓$1.25B

This group has the highest income and occupies the top spot in CU Pet Spending. In 2018 they were briefly the leaders in Total Pet $ but they fell to #2 in 2019 because of a $2B decrease in Veterinary and Supplies spending. They are not “out of the running” yet. They had the biggest increase in Food $. We’ll see what 2020 brings.

  • 55-64 – (18.6% of U.S. CUs); CU Pet Spending: $723.79, +2.0%; Total $: $17.79B, ↑$0.29B (+1.7%) from…
    • Food ↑$0.81B
    • Supplies ↓$0.35B
    • Services ↑$0.07B
    • Veterinary ↓$0.23B

These younger Baby Boomers are especially reactive in Food trends, up or down. They are committed to their Pets but value is also an important factor. They reacted negatively to inflated prices in the Supplies and Veterinary segments but still appreciated the convenience of Services. The result was a small increase in Total Pet $.

  • 65-74 – (14.9% of U.S. CUs); CU Pet Spending: $572.02, -2.7%; Total $: $11.21B, ↓$0.08B (-0.7%) from…
    • Food ↑$0.09B
    • Supplies ↓$0.50B
    • Services ↑$0.008B
    • Veterinary ↑$0.33B

This group is growing, +2.1%. Many are retired and now 90% are Baby Boomers. They are careful with their money, but their commitment to their pets is very apparent as 1.04% of their total spending is on their companion animals. Their strong reaction to Supplies Price Inflation overcame small increases in every other segment.

  • 75> – (11.2% of U.S. CUs); CU Pet Spending: $364.25, +9.5%; Total $: $5.21B, ↑$0.73B (+16.3%) from…
    • Food ↑$0.11B
    • Supplies ↓$0.11B
    • Services ↑$0.34B
    • Veterinary ↑$0.39B

Pet Parenting is more difficult, and money is tight for these oldest Pet Parents, but their commitment is still there. They were negatively impacted by Supplies price increases but increased their spending in the other segments. The lift was especially strong in both Service segments and pushed them to the biggest increase in Total Pet $.

Age Group Recap: There was an age spending pattern, but it was unusual. Over age 25, spending flipped up or down with every change in 10 year age group. This produced an unusual winner, 75+ year olds and an unusual loser, the high income, 45>54 year olds. There were some patterns within segments. Everyone over 25 spent more on Food and less on Supplies. The drop in Services came from those under 45. Veterinary Spending increased in all age groups except the 45>64 year olds.

Next, we’ll look at the biggest winner and loser in each demographic category. In some cases, a clear spending pattern is evident. In those situations, segments are bundled together to reflect their shared spending behavior.

Key Demographic “Movers” for 2019.

In 2019, 50 of 96 Demographic Segments (52%) spent more on their Pets. Usually, this would produce an increase, but the size of the drops outweighed the increases, so spending fell -$0.16B (-0.2%). Let’s look at some specifics:

CU Size – 2+ are the “usual” winners but not in 2019. Singles and 3 person CU’s produced the only positives.

# of Earners – More earners usually means more income and increased pet spending. That was partially true in 2019 as 2 earners led the way. However, the results were mixed in other CUs with 1 earner, 2+ CUs finishing on the bottom.

CU Composition – An unusual result – with Singles the clear winner. They tend to be in the younger or older age groups. Married, with children CUs had mixed results. The big surprise was Married Couples only CUs, normally strong performers, were at the bottom along with Single Parents who are no strangers to the bottom of the spending ladder.

Income – While the $100>149K group spent less, the major income dividing line in Pet Spending was over/under $70K.

Generations – The results were split among age groups within generations. The older Millennials and younger Gen Xers spent more as did younger Boomers and those  born before 1940. This couldn’t quite make up for the drop in spending by the older Boomers and the younger Silent Generation. Generational spending reflects the mixed bag in Total Pet $ in 2019. However, Boomers’ pet spending was down for the second consecutive year.

Region – The Northeast spent more. All other regions spent less. Although the only significant drop was in the Midwest.

Housing – Another clear divide – Homeowners ↑$; Renters ↓$

Education – Another reflection of turmoil – Adv Degree ↑$; BA/BS ↓$. Note: Less than College Grads were up $0.14B.

Racial/Ethnic – A clear racial/ethnic divide – White, not Hispanic were up +1.3%. African Americans and Hispanics combined were down -11.4%, with 65% of the decrease coming from African Americans. Note: Asians were +1.6%.

Occupation – A reversal of expectations – Lower level white collar employees spent more while their bosses spent less.

Age– As noted: Age groups had no clear pattern. 45>54 yr old Gen Xers were down while the oldest group spent more.

Area – Another simple divide: Suburbs over 2500 population, which account for 45% of CUs and 46% of Total Pet $ spent more. All other areas – Center City, Small Suburbs and Rural spent less.

Finally: Pet Spending turned slightly down in 2019. The driver was the truly widespread drop in Supplies Spending as we saw the full impact of added tariffs hit home. There was some good news as Food began recovery from the 2018 FDA grain free warning and Veterinary again posted a small increase. Also, while Services spending was down slightly, the segment held its ground at its new elevated level. 2019 Pet Spending was a truly mixed bag with few clear trends.

 

 

 

 

2019 U.S. VETERINARY SERVICES SPENDING $21.80B…UP ↑$0.58B

/in /by

Veterinary Services is the 2nd largest segment in the Pet Industry. High inflation, 3.5+%, caused a reduction in Veterinary visits from 2014>2016. In 2017 inflation slowed markedly (+2.2%) and consumers responded. In 2018 prices turned upward (+2.6%) and spending plateaued. In 2019 inflation was up +4.1% and Veterinary Spending reached $21.80B – Up $0.58B (+2.7%) from 2018. However, considering inflation, “real” spending was actually down -1.4%. In this report, we’ll take a closer look at the demographics behind the 2019 numbers. (Note: All 2019 numbers in this report come from or are calculated by using data from the US BLS Consumer Expenditure Interview Survey, rather than their Diary report. The low frequency of Veterinary Visits is still generating an exceptionally high variation on the data collected by the Diary method. Interview seems to be a more logical and accurate way to track Veterinary Service Expenditures.)

Let’s get started. Veterinary Spending per CU in 2019 was $164.88, up slightly from $161.51 in 2018. (Note: A 2019 Pet CU (67%) Spent $246.09) More specifically, the increase in Veterinary spending came as a result of:

  • 0.6% more CU’s
  • Spending 0.5% less $
  • …2.6% more often

We’ll take a closer look. But first, the chart below gives an overview of recent Veterinary Spending.

The big spending drop in the first half of 2015 coincided with the upgrade to Super Premium Foods – Trading $. Then consumers began value shopping for Premium Foods. The subsequent savings freed up $ for Veterinary Services. Spending began to climb until it flattened out at the beginning of 2017. In 2017, Veterinary inflation slowed markedly in the second half. The result was that spending literally “took off”. In 2018 prices turned up again. Consumers responded by essentially “holding their ground” through 2019. There is some price sensitivity in Veterinary Services Spending.

Now, let’s look at Veterinary spending by some specific demographics. First, here is a chart by Income Group

Although not as pronounced as Pet Services, Veterinary Spending is driven by income, 2019 was “mixed”. The only decrease came from the $100>150K income group and the biggest lifts were from <$30K & $70>100K.

National: $164.88 per CU (+2.1%) – $21.8B – Up $0.58B (+2.7%)

  • Over $150K (13.3% of CUs) – $365.23/CU (-3.6%) $6.40B, Up $0.08B (+1.3%) This highest income group is the biggest driver in Veterinary Spending as 13.3% of CUs generated 29% of 2019 $. Their $ were basically flat in 2019.
  • $100>150K (13.8% of CUs) – $214.43/CU (-17.8%) $3.91B, Down $0.59B (-13.1%) This middle/upper income group reacted strongly to the slowed inflation rate in 2017 but as prices turned up, their spending slowed then fell in 2019.
  • $70K>100K (14.5% of CUs) – $217.10/CU (+12.9%) $4.15B, Up $0.48B (+13.1%) Their spending has steadily grown since 2016. In 2019, they had the 2nd biggest increase overall and largest of any over $70K group.
  • $30K>70K (31.5% of CUs) – $119.35/CU (-1.8%) $4.97B, Up $0.02B (+0.5%) This is the 2nd largest group in Veterinary $ and their spending pattern is remarkably similar to the big spending $150K+ group. Vet $ were flat in 2019.
  • Under $30K (27.0% of CUs) $66.43/CU (+39.8%) $2.37B, Up $0.58B (+32.3%) This group is very price sensitive. After an increase in all segments in 2017, they dialed back their pet spending on Food and Veterinary Services in 2018. They recovered 75% of the Veterinary drop in 2019 but are still 25% below their Veterinary Spending in 2015.

Now, here is Veterinary Spending by Age Group

The drop came from 45>64 yr olds while the younger and older groups spent more.

National: $164.88 per CU (+2.1%) – $21.8B – Up $0.58B (+2.7%)

  • <25 (5.5% of CUs) – $92.98/CU (+3.8%) – $0.68B – Up $0.002B (+0.3%) This youngest group is getting serious about the responsibilities of Pet Parenting. While spending was flat in 2019, It is up +134% since 2015. 3.4% fewer CUs spent 9.9% more $ 5.5% less often.
  • 25>34 (16.1% of CUs) – $123.75/CU (+4.6%) – $2.63B – Up $0.11B (+4.2%) The commitment of these Millennials to their pets is growing. Their Veterinary $ ticked up in 2019 after being stable for 2 years. 0.3% fewer CUs spent 0.2% less $ …but 4.8% more often.
  • 35>44 (16.9% of CUs) – $226.62/CU (+30.2%) – $5.06B – Up $1.23B (+32.2%) In 2018, these mostly Gen Xers significantly ramped up their spending on Veterinary Services. This commitment accelerated in 2019 as they moved to the top in Veterinary spending. 1.5% more CUs spent 25.9% more $ …3.4% more often
  • 45>54 (16.8% of CUs) – $186.75/CU (-20.5%) – $4.16B – Down $1.25B (-23.2%) This group has the highest income, but value is still a big driver. In 2017, the radically slowed inflation caused them to spend significantly more money and more often. In 2018, prices turned up and continued to inflate in 2019. They hit a wall as spending dropped precipitously and they fell from the top spot in Veterinary $ and even below their 2015 numbers. 3.3% fewer CUs spent 19.1% less $…1.8% less often
  • 55>64 (18.6% of CUs) – $185.24/CU (-5.2%) – $4.55B – Down -$0.23B (-4.8%) This group is all Baby Boomers and was the leader in Veterinary Spending prior to 2015. In 2015 they upgraded to Super Premium Food and Vet Spending fell. In 2016 they began to spend more again on Veterinary Services. In 2017, as inflation significantly slowed, they regained the top spot… but not for long. In 2018 Veterinary prices began to strongly inflate again. Their spending fell and continued the downward spiral into 2019. 0.3% more CUs spent 4.2% less $…1.0% less often
  • 65>74 (14.9% of CUs) – $163.32/CU (+9.1%) – $3.22B – Up $0.33B (+11.3%) This group is growing in numbers and very price sensitive. 90% are Boomers so they are committed to their pets. Despite rising prices, they significantly increased the frequency of purchase and their spending grew. 2.1% more CUs spent 3.0% less $…12.4% more often
  • 75> (11.2% of CUs) – $101.63/CU (+25.3%) – $1.50B – Up $0.39B (+35.2%) This group of oldest Pet Parents has a strong commitment to their pets – in 2015 a $1B increase in Veterinary Spending. In 2016, they upgraded their food. In 2017 they increased spending in Food, Supplies and Services. In 2018, they turned their attention back to Veterinary and in 2019 they had increases in all but Supplies. 7.9% more CUs spent 14.9% more $…9.1% more often

Now, let’s take a look at some other key demographic “movers” behind the 2019 Veterinary Spending numbers.

Veterinary spending increased by $0.58B (+2.7%) in 2019. However, considering the 4.1% inflation rate, the amount of Veterinary Services was actually down 1.4% for the year. 2019 was a “mixed positive bag”. 56 of 96 demographic segments (57.3%) spent more on Veterinary Services while 40 segments spent less. There was less turmoil than in the other segments as only 4 flipped from first to last or vice versa while 7 segments maintained their position from 2018.

There were also some of the “usual” winners and losers. On the winning side were Homeowners with mortgages, White, Not Hispanic CUs, Advance College Degrees, 2 Earners and Suburban Areas over 2500 Population.

The “usual” losers were fewer in number and included: Single Parents, African Americans and Homeowners w/o Mtges.

That means that there were also some Surprises:

  • Winners: Singles, 1 Person, 35>44 yr olds, Millennials/Gen Z, <$30K, Tech/Sls Clerical Workers
  • Losers: 2 People, Suburban <2500, 45>54 yr olds, Mgrs & Professionals, $100>149K, Boomers.

In our earlier analysis we saw evidence in spending increases by income and by age groups. This data reinforces those results. Although the lift was relatively widespread by income, the bulk of the lift was coming from lower incomes.

  • Singles/1 Person
  • Tech/Sls/Clerical
  • Millennials/Gen Z
  • Under $30K

These winners reflect the strength of lower income groups in Veterinary Spending in 2019.

The trend in age groups was a drop in the 45>64 yr olds, with a lift in the older and especially the younger groups. These winning groups tend to be younger. Those marked with an * tend to be either younger or older.

  • * Single/1 Person
  • 35>44 yr Olds
  • 2 Earners
  • Millennials/Gen Z
  • Tech/Sls/Clerical
  • * Under $30K

You can see that the Age spending trend is clearly reflected in the details.

One of the biggest trends of note is the ongoing decline in Baby Boomer Veterinary Spending. This group, which fueled the growth of the Pet Industry has now had the biggest decline in Veterinary Spending for 2 consecutive years.

The Younger groups are definitely stepping up in Pet Spending. The 35>44 yr olds took over the top spot in Veterinary spending in 2019. However, it is even more important to note that the groups born after 1964 – Gen X/Millennial/Gen Z have increased their Veterinary Spending by over $3B since 2017. The Boomers are the biggest Pet Spenders because of their numbers and will be a force in the industry for years to come, but the “torch” is slowly but surely being passed.

 

2019 U.S. PET SERVICES SPENDING $8.62B…Down ↓$0.10B

/in /by

Except for a small decline in 2017, Non-Vet Pet Services has shown consistent growth in recent years. In 2018, that changed as spending grew a spectacular $1.95B to $8.72B. The number of outlets offering Pet Services has grown rapidly and consumers have opted for the convenience. However, prices were also strongly increasing. In the 2nd half of 2019 spending turned down. The final 2019 $ were $8.62B, down $0.1B (-1.1%). In this report we will drill down into the data to see what groups caused this slight decline . (Note: All numbers in this report come from or are calculated by using data from the US BLS Consumer Expenditure Surveys)

Services’ Spending per CU in 2019 was $65.22, down from $66.36 in 2018. (Note: A 2019 Pet CU (67%) Spent $97.34)

More specifically, the 1.1% decrease in Total Pet Services spending came as a result of:

  • 0.6% more households
  • Spending 2.39% less $
  • 0.69% more often

The chart below gives a visual overview of recent spending on Pet Services

You can see that after the big lift in 2018, spending essentially flattened out in 2019, similar to the pattern for the 18 months from mid-2016 through 2017. The increased availability and convenience of Services has radically driven up the spending on Services. This happened despite a return to a more normal inflation rate, +2.4%, as more people opted to use Pet Services and to do it more often. However, inflation grew even stronger, +2.5%. By the 2nd half of 2019, it made an impact as spending declined for the 1st time in 18 months. Now, let’s look at some specific spending demographics.

First, by Income Group.

In 2018, all income groups increased spending. In 2019 the middle income group, $70>150K, spent more but the lower, <$70K, and upper, $150K+ spent less. Most of the decrease (74%) came from the <$70K group and spending by the <$30K group actually fell below the level in 2015.

  • <30K (28.7% of CU’s) – $19.68 per CU (-3.7%) – $0.70B, Down $0.07B (-8.9%) – This segment is getting smaller and money is tight, so Services spending is less of an option. In 2019 their Services $ fell to 9% below 2015.
  • $30>70K (31.0% of CU’s) – $34.90 per CU (-13.5%) – $1.45B, Down $0.19B (-11.4%) – This group had the biggest decrease in Total Pet spending and Services $. Like the Supplies segment, their spending pattern mirrors $150K+.
  • $70>100K (14.5% of CU’s) – $65.00 per CU (+13.5%) – $1.24B, Up $0.15B (+13.8%) – Their spending has slowly but consistently grown since 2016. They had the biggest $ increase in Services and Total Pet. Note: They were the only group with an increase in spending per CU.
  • $100>150K (13.8% of CU’s) – $108.40 per CU (-0.2%) – $1.98B, Up $0.10B (+5.5%) – They have shown the strongest, most consistent growth since 2016. Total Pet spending was down but Services and Pet Food spending were up.
  • $150K> (13.3% of CU’s) – $185.43 per CU (-7.5%) – $3.25B, Down $0.09B (-2.8%) – They have a couple of minor spending dips, including 2019. However, this is who spends the big bucks on Services – up over $1B since 2015.

Now, let’s look at spending by Age Group.

All age groups spent more on Services in 2018. In 2019 there was a clear dividing line. The groups under 45 spent less on Services (Big loser: 35>44, -$0.43B) while those 45 or older spent more. (Big winner: 75+, +$34B) Here are the specifics:

  • 75> (11.2% of CU’s) – $51.36 per CU (+67.4%) – $0.76B – Up $0.34B (+80.5%) This rapidly growing group has the greatest need for pet services, but money is always an issue. In 2019 their income grew 8.1% and they spent a lot of this extra money on more Pet Services. 7.9% more CU’s spent 57.9% more $, 6.0% more often.
  • 65>74 (14.9% of CU’s) – $63.45 per CU (-1.4%) – $1.25B – Up $0.01B (+0.7%). This group is also very value conscious. They are also growing in numbers. In 2019 it looks like they value shopped and found some deals, so they eked out a small gain. 2.1% more CU’s spent 4.3% less $, 3.0% more often.
  • 55>64 (18.6% of CU’s) $69.38 per CU (+3.6%) – $1.70B – Up $0.07B (+4.0%) After a big drop in 2017, they began to slowly increase Services spending. In 2019, frequency fell, but they moved up to the #2 spot in Services spending, due in large part to the big decrease by the 35>44 yr olds. 0.3% more CU’s spent 9.5% more $, 5.4% less often.
  • 45>54 (16.8% of CU’s)- $90.23 per CU (+8.4%) – $2.01B – Up $0.09B (+4.8%) This highest income group was the leader in Services $ until 2016. They spent a lot more in 2018 and the growth continued in 2019 due to a big increase in frequency. The result: They are back to #1 in Services $. 3.3% fewer CU’s spent 4.3% less $, 13.3% more often.
  • 35>44 (16.9% of CU’s) – $70.09 per CU (-22.8%) – $1.57B – Down $0.43B (-21.7%) Spending exploded in 2018 with a $1B increase. In 2019 they spent $1.6B more on Veterinary and Food. They got some of those $ by cutting back on the more discretionary segments, Services and Supplies. 1.5% more CU’s spent 19.4% less $, 4.3% less often.
  • 25>34 (16.1% of CU’s) – $53.87 per CU (-3.0%) – $1.14B – Down $0.04B (-3.3%) This group of Millennials “found” the Services segment in 2018 with a 36% spending increase. In 2019, like their 35>44 yr old brethren, they also dialed back their discretionary spending on Services and Supplies. 0.3% less CU’s spent 3.5% more $, 6.3% less often.
  • <25 (5.5% of CU’s) – $26.04 per CU (-38.3%) – $0.19B – Down $0.13B – (-40.4%) After the big lift in 2018 this small, youngest group returned to being a very minor player. 3.4% fewer CU’s spent 40.6% less $, 3.9% more often.

Finally, here are some other key demographic “movers” that helped to plateau Pet Services Spending in 2019. The segments that are outlined in black “flipped” from 1st to last or vice versa from 2018. The red outline stayed the same.

In 2018 the Services spending increase was very widespread with (88%) of all segments spending more. 6 of 12 demographic categories had no segments that spent less on Services in 2018. 2019 was very different and reflected the slight decrease in spending for the segment. All categories had segments that spent less on Services and 49 total segments (51%) had decreased Services $ from 2018.

There was other evidence of the spending balance which resulted in the plateauing of Services spending. 5 segments flipped from 1st to last and 5 segments flipped from last to first. Only 1 group maintained their position – White, not Hispanics had the biggest increase in the racial/ethnic category.

There were only 2 other “usual” winners – Suburbs 2500> and those with Advanced College Degrees. In terms of “usual” losers, Renters and Hispanics are often at the bottom of Pet Spending ladders.

In our earlier analysis, we saw a very distinct pattern in the spending by age group. Americans 45 and over, led by the 75+ group, spent more on Services. Those under 45, driven down by the 35>44 year olds, spent less. Let’s see how those two patterns are reflected in the chart above.

First, the lift by the older group is evident from these winners:

  • Homeowners w/o Mtge
  • 75+ yrs old
  • No earner, Single
  • Born before 1946
  • Retirees
  • $30>39K (avg income of Retirees)

That’s half of the twelve winners. Now, the decrease by the younger group in these losers:

  • 35>44 yrs old
  • Gen X
  • Married, Oldest Child <6
  • 2 Earners (usually younger CUs)
  • Renters (most likely <45 yrs)
  • $50>69K (avg income of <35 yrs)

The pattern for the younger groups is also reinforced by the details.

There is 1 winner that seems to be out of place, the 5+ CU. Shouldn’t that be a younger CU, with kids? It turns out the largest CUs are Other Married Couples – Extra Adults, no kids. Their average age is 51 and they spent more on Services.

Once again, we are reminded that you must drill below the surface to find the true story.

After the huge lift in spending in 2018, Services spending plateaued in 2019. There were a lot of ups and downs, but overall the segment remained essentially stable at its new elevated level of spending. The young group will undoubtedly come back as their pet spending tends to be more volatile in each segment. It is very encouraging to see the increased spending by the fast growing older segment. This bodes well for the future.

COVID-19 presents the greatest uncertainty for 2020. The pandemic with widespread closures and “staying at home” likely had a big impact on this predominantly “nonessential” Pet Industry segment. We’ll get the first indication in the mid-year report published in May 2021.

 

 

 

 

Retail Channel Monthly $ Update – August Final & September Advance

/in /by

Time for our monthly update on U.S. retail sales by channel. The current COVID-19 crisis has caused turmoil in the Retail Marketplace. Consumer spending behavior has changed and continues to evolve. In this report we will track the changes and migration between channels. We will do that with data from two reports provided by the U.S. Census Bureau.

The Reports are the Monthly Retail Sales Report and the Advance Retail Sales Report. Both are derived from sales data gathered from retailers across the U.S. and are published monthly at the same time. The Advance Report has a smaller sample size so it can be published quickly – approximately 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

This means to get the full picture in our monthly channel update we need to look at the latest release of both reports. We will begin with the Final Retail Report from August and then move to the Advance Retail Report for September. This will also allow us to better track the consumers’ evolving spending behavior in terms of channel migration.

Both reports include the following:

  • Total Retail, Restaurants, Auto, Gas Stations and Relevant Retail (removing Restaurants, Auto and Gas)
  • Individual Channel Data – This will be more detailed in the “Final” reports and we fill focus on Pet Relevant Channels

The information will be presented in detailed charts to facilitate visual comparison between groups/channels of:

  • Current Month change – % & $ vs previous month
  • Current Month change – % & $ vs same month in 2019
  • Current YTD change – % & $ vs 2019
  • Monthly and Year To Date $ will also be shown for each group/channel

We’ll start with the August Final report. The retail market hit bottom in April then began a slow recovery, which peaked in $ in July. Here are the major retail groups. (The Data in all graphs is Actual, Not Seasonally Adjusted)

The final total is $0.8B more than the Advance report projected a month ago. All but Restaurants (-$0.2B) were up slightly from projections. Relevant Retail: +$0.5B; Auto:+$0.2B; Gas Stations:+$0.2B. $ales were down from the July peak in all but restaurants. However, driven by Relevant Retail, +$18B and Auto, +$2B, monthly sales were up $1.5B vs 2019.

The Spring Lift is usually over by July but the COVID crisis has pushed the timing back as monthly sales continue to beat 2019 into August. However, all but Relevant Retail continue to be down YTD vs 2019.

Now, let’s see how some Key Pet Relevant channels were doing in August.

  • Overall – Sales in 8 of 11 groups were down vs July, but 9 of 11 again showed increases vs same month in 2019.
  • Building Material Stores – This group has their biggest annual lift in Spring. This is unchanged and even stronger. While sales peaked in June, they’re still showing strong increases vs 2019. Although Sporting Goods stores are not included in this group, they have a similar Spring lift pattern. Their sales took off in May, peaked in June but continued to grow vs 2019. In June their YTD $ vs 2019 turned positive and by August they were up 9.9%.
  • Food & Drug – Despite dips in June & August, Supermarkets are maintaining incredibly strong growth vs 2019. Drug Stores $ slowed in August after strong growth in June and July but remain positive compared to 2019.
  • General Merchandise Stores – Sales in Clubs/SuperCtrs slowed in June but bounced back and are still strong vs 2019. Despite slowed sales in June>August, $ Stores are showing exceptional strength vs 2019. Discount Dept. store sales were generally slowing before the pandemic. This trend has continued despite a small Summer lift.
  • Office, Gift and Souvenir Stores – They were slow to re-open. Sales are growing, but this group was hit hard.
  • Internet/Mail Order – The pandemic has accelerated this channel’s growth vs 2019. Sales peaked in July, but the crisis has introduced many new consumers to online shopping and the behavior is likely to become habitual.
  • A/O Miscellaneous – This is a group of small to midsized specialty retailers – chains and independents. It includes Florists, Art Stores and Pet Stores (22 to 24% of total $). Pet Stores were usually essential, but most stores were not. The others began reopening in May and the number grew in June which produced an increase vs 2019. Sales peaked in June but were still strong vs 2019 which pushed YTD sales up to +9.4%.

The recovery began in May and continued in June and July as even more businesses began to re-open. The Relevant Retail Segment turned positive in all measurements in May and stayed that way through July. In August, sales fell vs July but were still strong vs 2019. The key drivers in producing positive numbers vs 2019 were the Internet, Supermarkets, SuperCtrs/Clubs/$ Stores and Hdwe/Farm.  How things are progressing? Here are the Advance numbers for September.

April and May were the 2 biggest spending drops in history. In June, monthly sales turned positive for the first time since February. In July the recovery continued. However, it flattened out in Aug/Sept leaving Total Retail still down -$37B YTD.

Total Retail – Total Retail spending fell -$15.5B vs August but was up +7.1% vs September 2019. In February 2020 sales were up $60B, +6.6% YTD versus 2019. Then came COVID-19. Hopefully, we hit bottom at -$112B in May. We began moving in the right direction but have stalled in September, still -$37B YTD and -$97B from February.

Restaurants – The Spending lift ended, down -$1.8B from August and -$8.6B vs September 2019. Things remain Topsy Turvy. August is usually their biggest $ month of the year. January and February, normally the 2 slowest months, are on top in 2020. In February YTD sales were up $9B. Then came the forced closures. Re-openings began in May but ran into problems in the Summer. Delivery/Pickup can’t make up the difference as spending is now down $115.5B YTD.

Automobile & Gas Stations – When you are staying home your car becomes less of a focus in your life. Auto Dealers, both new and used, began combating this attitude with some fantastic deals and a lot of advertising. Monthly $ turned positive versus 2019 in June and have maintained this pace through September. Although sales are down $14.5B YTD, they are up $34.4B vs 2019 in the last 4 months. Gas Station $ales increased in May, June and July over the previous month, but fell in August & September (-$61.9B YTD) People are still not driving as much, for commuting or road trips.

Relevant Retail – Less Auto, Gas and Restaurants – Many non-essential businesses began to shutter their doors in March but there was also a rash of binge/panic buying for “necessities” and a big lift in groceries as consumers focused on home cooking which drove spending up $19B. April brought a full month of closures and an end in binge buying, spending dropped $34B from March. In May, the overall market began to reopen so spending began to move in the right direction. In June and July the $ growth continued but fell in August & September. However, the monthly June>September $ are larger than all months in 2019 but December. The primary drivers have been Nonstore, Grocery and SuperCenters/Clubs & $ Stores along with an enhanced spring lift from the Hardware/Farm and Sporting Goods channels. The Relevant Retail group now has posted positive numbers versus last year and year to date for 5 consecutive months and is up $154.9B YTD (+5.8%) vs 2019. In July it was up +4.9%.

Now let’s look at what is happening in the individual retail channels across America. In September, consumer spending in the relevant retail market grew even more positive versus 2019. Let’s see where the $ came from. These groups are less defined than in the Final Monthly reports and we will look across the whole market, not just pet relevant outlets.

In July, 11 of 13 channels beat last month’s $. In September it was down to only 3. In July, 10 channels beat July 2019. In August, this number was down to 7. By September, the number was back to 10. However, in YTD numbers, 8 are still showing an increase.  The YTD decreases are coming from channels that are primarily nonessential businesses.

After a full month of stay at home and widespread closures there was a surge in May. Things truly opened up in June and July and sales continued to increase. In August and September, they slowed slightly but YTD Relevant Retail Channels are up $154.9B vs 2019. The essential channels are responsible for the YTD lift vs 2019, primarily:

  • Nonstore Retailers – Even more consumers are online shopping.
  • Food & Beverage, especially Grocery– Restaurant $ are still down so consumers continue to eat & drink at home.
  • Bldg Materials/Garden/Farm – A big Spring lift continues through the Summer as consumers focus on their home.
  • SuperCtrs/Club/Value/$ Strs – Sales slowed in April but came back in May and continue to grow vs 2019. This group turned the whole Gen Mdse channel positive. It clearly shows that value is still a consumer priority.

Regarding the Individual Large Channels

General Merchandise Stores – Regular Department stores are reopening which has cut the losses for total Department Stores as Discount Department stores continue to slowly fade. Club/SuperCtr/$ stores provided the big positive force. In April consumers dialed back their panic buying and spending on discretionary items was also down significantly. Since May we have seen consumer spending return to a more normal pattern in the big and small stores that promise value.

Food and Beverage, plus Health & Personal Care Stores – The Grocery segment is still driven by increased Food sales due to a slow restart by restaurants, up 10.5%, +$5.8B in September. Monthly Sales in the Health, Personal Care group are up vs 2019 since June. In August and September, the YTD $ turned positive. Drug Store $ growth was a key factor.

Clothing and Accessories; Electronic & Appliances; Home Furnishings – After four consecutive months of growth, Sales Slowed in September. Home Furnishing is the best performer with a slight increase vs August and 3 consecutive monthly increases vs 2019. However, all 3 channels are down significant percentages in YTD sales. Clothing Stores are by far the worst performers. In September they were down 12.0% vs September 2019 and 32.6% YTD.

Building Material, Farm & Garden & Hardware – Sales peaked in the Spring. However, this channel continues to benefit from consumers turning their focus to their home needs, including house and yard repair and improvements. This has increased and extended their Spring lift to Summer. $ were up 23.4% vs September 2019 and up +$37.3B (+12.8%) YTD.

Sporting Goods, Hobby and Book Stores – Book and Hobby stores are open and sales in Sporting Goods stores have taken off as Consumers again sought outdoor recreation. Although September sales fell again from their June peak, they were up 18.3% vs September 2019. YTD sales were down $3.4B in April. In September, this deficit was wiped out as YTD $ were +$0.6B (+1.1%).

All Miscellaneous Stores – This group is mostly small to medium specialty stores – both chains and independents. Pet Stores are essential but most other stores are not, so closures hit this group particularly hard. Sales began to rebound in May and grew through July when they finally beat the monthly sales for 2019. In August and September sales were mixed. Back In February, this group was up $2.6B YTD. Through July,  they were down -$3.2B but moving in the right direction. After a Slow August they are again moving back on track, -$2.7B. However, they have a long road ahead.

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV businesses. The COVID-19 crisis has only accelerated the ongoing movement to online retail. In February NonStore was up 8.6% YTD. Despite falling -4.2% from the July $ peak, they are up 20.5%, +$114.3B YTD. Their increase is 74% of the total $ increase for Relevant Retail Channels. They are the clear leader, and their performance far exceeds their 12.9% annual increase in 2019. Since much of their annual increase comes from holiday sales, 2020 could be another great year for NonStore Retailers.

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded along with their store sales in their regular channel. Whether they are up or down, their online sales are included in the totals.

Recap – April and May saw the 2 biggest year over year monthly sales declines in history. Restaurants, Auto and Gas Stations increased sales from May through July. By September, all had decreased sales. The Auto segment is  showing positive monthly numbers vs 2019 but Restaurants and Gas Stations are still struggling. The Relevant Retail segment has been the only true positive. Although August/September sales were lower than July, monthly and YTD sales vs 2019 are up for 5 consecutive months. However, for many segments in this group there is still a long way to go. In July Total Retail was positive for the second consecutive month but it has turned down since then. We saw a resurgence of the virus and retail restrictions were reimposed in many areas, which contributed to sales declining from July. This is going to be a long battle with no end in sight. We will continue to monitor the data and provide you with regular updates.

 

 

 

 

2019 U.S. PET SUPPLIES SPENDING $16.81B…DOWN ↓$2.98B

/in /by

Total Pet spending fell slightly to $78.44B in 2019, a $0.16B (-0.2%) decrease from 2018. The Supplies segment was  the driving force in this decrease as spending dropped to $16.81B, down $2.98B (-15.1%). (Note: All numbers in this report come from or are calculated by using data from the US BLS Consumer Expenditure Surveys)

After flat spending in the 2nd half of 2018, spending turned sharply down in the 1st half of 2019 then continued to decline in the 2nd half. 2019 wiped out 60% of a 24 month $5B gain in this segment. In this report we’ll “drill down” into the data to try to determine what and who are “behind” the huge drop in 2019 Pet Supplies Spending.

In 2019, the average household spent $127.15 on Supplies, down 15.6% from $150.62 in 2018. (Note: A 2019 Pet CU (67%) Spent $189.78) This doesn’t exactly match the -15.1% total $ decrease. Here are the specific details:

  • 0.6% more CU’s
  • Spent 2.9% less $
  • 13.1% less often

Let’s start with a visual overview. The chart below shows recent Supplies spending history.

Since the great recession, spending trends in the Supplies segment have been all about price – the CPI. Although many supplies are needed by Pet Parents, when they are bought and how much you spend is often discretionary. Additionally, many of the product categories in this segment are now considered commodities, so price is the main driver behind consumer purchasing behavior. When prices fall, consumers are more likely to buy more. When they go up, consumers spend less and/or buy less frequently.

2014 was the third consecutive year of deflation in Supplies as prices reached a level not seen since 2007. Consumers responded with a spending increase of over $2B. Prices stabilized and then moved up in 2015.

In 2015 we saw how the discretionary aspect of the Supplies segment can impact spending in another way. Consumers spent $5.4B for a food upgrade and cut back on Supplies – swapping $. This, in conjunction with inflation, caused supplies to suffer as consumers spent 4.1% less, but they bought 10% less often. That drop in purchase frequency drove $1.6B (78%) of the $2.1B decrease in Supplies spending.

In 2016, supplies’ prices flattened out and consumers value shopped for their upgraded food. Supplies spending stabilized and began to increase in the second half. In 2017 supplies prices deflated, reaching a new post-recession low. The consumers responded with a huge $2.74B increase in Supplies spending that was widespread across demographic segments. An important factor in the lift was an increase in purchase frequency which was within 5% of the 2014 rate.

In 2018 prices started to move up in April and rapidly increased later in the year due to the impact of new tariffs. By December, Supplies prices were 3.3% higher than a year ago. This explains the initial growth and pull back in spending.

In 2019 we saw the full impact of the tariffs. Prices continued to increase. By yearend they were up 5.7% from the Spring of 2018 and spending plummeted -$2.98B. The major factor in the drop was a 13.1% decrease in purchasing frequency.

That gives us an overview of the situation. Now let’s look at the “who” behind the numbers. First, we’ll look at spending by income level, the most influential demographic in Pet Spending.

National: $127.15 per CU (-15.6%) – $16.81B – Down $2.98B (-15.1%).

In 2019 the Supplies spending decrease was widespread across income groups.

  • <$30K (27.0% of CU’s)- $56.56 per CU (-19.3%) $2.02B– Down $0.63B (-23.6%). This group is very price sensitive as is evidenced by the big drop in CU spending. This, in combination with 5% fewer CUs put them below 2015 $.
  • $30K>70K (31.5% of CU’s)- $102.57 per CU (-20.7%) $4.27B- Down $0.99 (-18.8%). This big, lower income group closely matches both the national pattern and that of the $150K+ group. The tariff prices had a big impact. Until 2019 they were the leader in Total Supplies Spending $.
  • $70>$100K (14.5% of CU’s) – $149.41 per CU (-1.0%) – $2.86B- Down $0.02B (-0.8%). This middle-income group has been very consistent in Supplies spending which continued in 2019, as they had by far the smallest decrease.
  • $100K>$150K (13.8% of CU’s) – $171.00 per CU (-22.2%) – $3.12B- Down $0.67B (-17.7%). This higher income group is also price sensitive as they had the biggest % drop in CU spending which was mitigated by 6% more CUs.
  • $150K> (13.3% of CU’s) – $259.55 /CU (-17.1%) – $4.55B- Down $0.67B (-12.9%). The $150>199K group had the biggest drop, but $200K+ CUs also spent less. Money matters in Supplies, but strong inflation can impact anyone.

The $70>99K group had a very small decrease and the $30>39K group actually spent $0.09B more on Supplies. However, 2019 demonstrated that price is a key factor to almost everyone in a discretionary segment like Supplies.

Now, we’ll look at spending by Age Group.

National: $127.15 per CU (-15.6%) – $16.81B – Down $2.98B (-15.1%).

It’s simple. All groups over 25 yrs old spent less on Supplies. The under 25, “Gen Z” CUs spent more. Here are the details.

  • 55>64 (18.6% of CU’s) $162.59 /CU (-8.4%) – $3.99B – Down $0.35B (-8.1%). In 2017 these Boomers found the lowest Supplies prices since 2007 very alluring. They got on board. When prices turned sharply up in the 2nd half of 2018, the growth stalled. Spending fell in 2019 as 0.3% more CU’s spent 2.9% more on Supplies, 11.0% less often. However, they were the only group to spend more per transaction and became #1 in Total Supplies $.
  • 45>54 (16.8% of CU’s) $168.54 per CU (-13.8%) – $3.76B – Down $0.75B (-16.7%). Until 2019, this highest income age group had been the leader in Supplies spending since 2007. Fewer CU’s (-3.3%) spent 5.6% less on supplies, 8.7% less often. They did have the smallest drop in frequency, but fewer CUs cost them the top $ spot.
  • 35>44 (16.9% of CU’s) $144.96 per CU (-21.3%) – $3.24B; Down $0.82B (-20.1%) This group is second in income and overall expenditures but also has the biggest families. After 3 strong years, the sharply rising prices had a big impact, especially in frequency. 1.5% more CU’s spent 4.3% less $, 17.8% less often.
  • 25<34 (16.1% of CU’s) $102.62 per CU (-22.7%) – $2.18B; Down $0.65B (-22.9%). After trading Supplies $ for upgraded Food and Vet Care in 2016, these Millennials turned their attention back to Supplies. The rising prices hit them hard and 2019 spending is below 2015. 0.3% fewer CU’s spent 8.9% less on supplies, 15.1% less often.
  • 65>74 (14.9% of CU’s) $94.11 per CU (-22.9%) – $1.86B –Down $0.50B (-21.2%). This older group is very price sensitive. When prices turned up in 2018, they immediately cut back on spending. This continued into 2019 and they are also now below 2015 $. 2.1% more CU’s spent 8.8% less, 15.4% less often.
  • 75> (11.2% of CU’s) $62.72 per CU (-17.3%) – $0.93B, Down $0.11B (-10.8%). This group is truly price sensitive as they spend 12% more than they earn. They began to cut back on spending in the 2nd half of 2018 and this behavior continued throughout 2019. 7.9% more CU’s spent 3.0% less, 14.8% less often.
  • <25 (5.5% of CUs) $118.29/CU (+34.1%) $0.87B- Up $0.20B (+29.5%) 3.4% fewer CUs spent 26.9% more $, 5.7% more often. The lift came in the 2nd half and may be due to indulgence. They spent more on Supplies than Food.

The impact of the price increase was also readily apparent in this category. Only the smallest group. <25 yrs, spent more.

Next, let’s take a look at some other key demographic “movers” in 2019 Pet Supplies Spending. The segments that are outlined in black “flipped” from 1st to last or vice versa from 2018. The red outline stayed the same.

The widespread impact of the increased prices due to the added tariffs is immediately apparent. In 9 of the 12 demographic categories all segments spent less on Supplies in 2019. It gets even worse. There are 96 separate segments in the complete demographic database. The 3 “winning” segments with plus $ on the chart are the only positives in the entire group. That means that 96.9% of all demographic segments spent less on Supplies in 2019.

6 Segments flipped from first to last and there are other typical big spenders also on the bottom, like Managers & Professionals, Gen X and 2 person CUs.

On the “winning” side there are some extreme rarities like those with no High School Diploma, Service Workers, African Americans, under 25 years old and “Other” Married Couples. The $30>39K group is an occasional winner because this is the average income of Retirees. However, in 2019 Retirees spent 19.5% less on Supplies.

There is really no in depth analysis needed. The skyrocketing “Tarifflation” drove Supplies Spending down across all of America. According to US BLS historical data, Supplies spending has decreased in 15 years since 1984. However, the $2.98B drop in 2019 is the biggest in history, by 21%. Tariffs are paid for by American consumers, except when they choose not to buy or slow their frequency, then American businesses pay.

 

 

 

 

2019 U.S. PET FOOD SPENDING $31.19B…Up ↑$2.35B

/in /by

In 2019 The Pet Industry was a mixed bag. Total spending fell slightly to $78.44B, down $0.16B (-0.2%). Food recovered from the impact of the FDA grain free warning. Veterinary had another modest increase and the Services segment was basically stable. The big downside was Supplies, where we saw the full impact of tariffs. Here are the specifics:

  • Pet Food – $31.19B; Up $2.35B (+8.1%)
  • Pets & Supplies – $16.81B; Down $2.98B (-15.1%)
  • Veterinary – $21.80B; Up $0.58B (+2.7%)
  • Pet Services – $8.62B; Down $0.10B (-1.1%)

The industry truly is a “sum” of its integral segments and each segment has very specific and often very different buying behavior from the many consumer demographic segments. For this reason, we’re going to analyze each of the industry segments first. This will put the final analysis of Total Pet Spending into better perspective. Note: The numbers in this report come from or are calculated by using data from the current and past US BLS Consumer Expenditure Surveys. In 2019, this was gathered by the U.S. Census Bureau from over 42,000 interviews and spending diaries. The final data was then compiled and published by the US BLS.

We will start with the largest Segment, Pet Food (and Treats). In 2019 Pet Food Spending totaled $31.19B in the U.S., a $2.35B (+8.1%) increase from 2018. This was the 4th largest increase in history. It’s interesting that 3 of the 4 greatest $ increases and the 2 biggest $ decreases have all occurred in the last 5 years. The current trend in high priced, super premium foods magnifies the results of any changes in consumer purchasing behavior. As you recall, in earlier research we discovered a distinct, long term pattern in Pet Food Spending. In 2018 we broke that pattern. We’ll see what develops in the future. Take a look at Pet Food Spending since 1997 in full Retail Dollars and adjusted for inflation.

The pattern began in 1997. Retail Pet Food Spending increases for 2 consecutive years then reaches a plateau year or even drops. There was a notable exception in the period from 2006 to 2010. During this time, there were two traumas which directly impacted the Pet Food Retail market. The first was the Melamine recall, which resulted in radically increased prices as consumers insisted on made in USA products with all USA ingredients. The second affected everyone – the great Recession in 2009. This was the first time that annual U.S. retail spending had declined since 1956. The net result was that the plateau period was extended to include both 2009 and 2010.

Pet Food seems to be driven by short term trends. A new food trend catches the consumers’ attention and grows…for 2 years. Then sales plateau or even drop…and we’re on to the next “must have”. The changes became more pronounced in recent years and the whole situation has gotten even more complicated since 2014. Due to an unprecedented level of competition, Food prices deflated through 2018. Then they jumped up +2.9% in 2019, the biggest increase since 2009.

After consumers choose to upgrade to a more expensive pet food, their #1 priority becomes, “Where can I buy it for less?” The internet entered this battle in a big way and “value shopping” was a major contributing factor in the big spending drop in 2016 and its influence continues to grow.

In 2017, according to the 20-year pattern, we should have been beginning a new trend. There was the expected lift in Pet Food spending but what was the new “must have” type! There were some possible candidates, but nothing stood out. A deeper dive into the data showed that the $4B increase in Pet Food spending in 2017 didn’t come from a new trend. It came from a deeper demographic penetration of Super Premium foods. Value shopping in a highly competitive market, especially on the internet had made Super Premium pet foods more accessible to a broad swath of consumers.

Like Pet Food, human behavior has changed over the years in regard to our pets. In the 90’s, Pet Owners became Pet Parents. Then, after the turn of the century we began truly humanizing our pets. This movement is very accurately reflected in the evolution of Pet Food. We became increasingly more conscious of fulfilling the health needs of our pets, beginning with the first move to premium foods in 2004. This ramped up considerably after the Melamine scare in 2007. Now consumers read pet food labels, research ingredients and expect their pet foods to meet the same quality standards as the best human foods. This was very evident in 2018. It should have been a year of increased spending but the consumers’ reaction to the FDA grain free warning threw the pattern out the window.

In 2019 Pet Food spending posted a strong recovery. Let’s look at some specifics to see where the lift came from. In 2019, the average U.S. Household (pet & non-pet) spent a total of $236.26 on Pet Food. This was an 7.4% increase from the $219.92 spent in 2018. This doesn’t exactly “add up” to the 8.1% increase in total Food Spending. With additional data provided from the US BLS, here is what happened.

  • 0.7% more U.S. households
  • Spent 12.2% more $
  • 4.2% less often

By the way, if 67% of U.S. CU’s are pet parents then their annual Pet Food Spending is $352.63. Let’s look at a rolling history of Pet Food Spending since 2013.

Pet Food Spending fell in 2013 and continued down in the first half of 2014. This corresponds to the beginning of a  general deflation which continued through 2018 in this segment. During deflation, in a “need” category like Food, you don’t buy more, you just spend less. The spectacular lift in Pet Food Spending beginning in the second half of 2014 came from a fundamental change in spending behavior. Consumers began to buy more Super Premium Food and Med/Supplements in Treat form, all of which cost more.

An increasing number of consumers chose to upgrade their Pet Food and spending peaked in 2015. Then spending began to fall in the first half of 2016 and the decline intensified in the second half. At first it appeared that consumers were backing down on the upgrade. As it turns out, they were just applying the #1 driver in their buying behavior since the great recession – price (75%). They began shopping for value and there were plenty of bargains to be found.

In 2017 Pet Food spending registered the second largest increase in history. It was time to begin a new “trend”, but this big lift was unusual. Usually the biggest increase comes in the 2nd year of a cycle. There also was no clear product focus.

Looking deeper into the data we discovered that it was not a new food trend. It was a deeper demographic penetration of Super Premium. Higher education and higher income have driven recent food trends. However, the highly price competitive market had made these high-priced foods more accessible to Blue Collar workers and those without college degrees. Baby Boomers in these groups, with their strong commitment to their pets, responded in a big way, +$3.8B.

After such a big lift in year 1, the 2018 increase was expected to be small and the first half started out that way, +$0.25B. Then the bottom dropped out in the second half of the year as spending fell -$2.51B, the biggest half year decrease in history. In July of 2018, the FDA issued a warning about the possible connection between DCM and grain free dog food. This was frightening and one suggestion was to move back to standard foods, which apparently many people did.

In the beginning of 2019 Total Pet Food spending stabilized as some doubts were raised about the validity of the warning. In the second half of the year Food Spending increased +$2.3B. Some Pet Parents began to return to the topline Super Premium Foods. In some cases, they opted for even more expensive varieties. We also saw some new groups get on board the Super Premium “Express”.

The growth of Pet Food spending since 2014 reflects the rise of Super Premium but also another trend – the spectacular increase in the number and use of Pet Medications and Supplements, which are often produced in the form of treats. Together, the strength of these 3 Pet Food product subcategories reflect the Pet Parents’ absolute number 1 current concern – the health, wellbeing and safety of their Pet Children, which starts with the quality of their food.

Now let’s look at some specific 2019 Pet Food Spending Demographics. First, we’ll look at income. Prior to 2014 it was a less dominant factor in Food spending. However, the move to Super Premium has brought it more to the forefront. In 2017, with competitive pricing and the consumers’ commitment to pet health, Super Premium drove spending growth in every major income group. In 2018 we had the FDA warning which affected almost all groups. In 2019 the category recovered to 2017 levels, but income once again became a key factor in the rebound. In this chart we will show the annual spending from 2015 through 2019. This will put the 2019 numbers into better perspective.

2019 National Numbers: $236.26 per CU (+7.4%); $31.19B; Up $2.39B (+8.1%); 2015>2019 – Up $1.70B (+5.8%)

There is a clear income divide which is even more defined than the graph indicates. All groups below $40K spent less. All over $40K spent more. Prices inflated 2.9% which may have impacted low income groups.

Here are 2019 specifics:

  • Under $30K: (27.0% of CU’s) – $120.17 per CU (-0.7%) – $4.04B – Down $0.23B (-5.3%). Obviously, this group is very price sensitive. It is also getting smaller. The number of CU’s was down 5.4% in 2019 and 13.1% since 2015. This decrease masks the true food situation. While their Total Food spending is lower than 2015, their Avg CU spending on food is unchanged. The Total is being driven down by the declining number of CUs. Even this lowest income group remains committed to their pets.
  • $30K>$70K: (31.5% of CU’s) – $191.66 per CU (-5.4%) – $8.15B – Down $0.40B (-4.7%). The spending for this group usually matches the national pattern. However, they broke it in 2019. Retirees’ average income is $30>39K. Their Food spending drop due to the FDA warning was slow – 2019, rather than 2018. They are a large, fast growing group. The $40>69K group was up +$0.40B. $30>39K spent -$0.80B less, turning the whole large group negative.
  • $70K>$99K: (14.5% of CU’s) – $306.19 per CU (+13.3%) – $5.90B – Up $0.62B (+11.8%). The Pet Food Spending for this group had been very stable. In 2017, this changed as they got “on board” with the Super Premium Pet Food upgrade. They also became more sensitive, reacting to the FDA warning in 2018, then bouncing back in 2019.
  • $100K>$149K: (13.8% of CU’s) – $309.94 per CU (+8.5%) – $5.92B – Up $0.74B (+14.2%) They have a high income but also large families, so they are very value conscious. Their spending matches the national pattern. You can see their sensitivity to trends/changes by their large annual swings in spending.
  • $150K> (13.3% of CU’s) – $409.78 per CU (+18.4%) – $7.19B – Up $1.61B (+29.0%). 91% are college grads so they saw the value of Super Premium food very early. They were the only group to spend more on Pet Food in 2018. Their reaction to the FDA warning was to buy even more expensive food and this behavior is growing in 2019.

In 2018, the decrease in Pet Food spending was widespread across incomes. In fact, groups totaling 83.9% of all U.S. households spent less on Pet Food. In 2019, the “rebound” spending increase only happened for households with incomes above $40K, 61.4%. As we have fully moved into the era of Super Premium, Pet Food spending is becoming more tied to income. Now, Spending by Age Group…

2019 National Numbers: $236.26 per CU (+7.4%); $31.19B; Up $2.39B (+8.1%); 2015>2019 – Up $1.70B (+5.8%)

For Pet Food spending, the youngest group was on the outside, with the only spending decrease. They gave back their big lift in 2018. The three highest income age groups (35>64) spent $2.41B more, led by the 45>54 Gen Xers.

  • 45>54 (16.8% of CU’s) – $316.22 per CU (+23.7%) – $7.09B – Up $1.20B (+20.4%) This group is #1 in income and total CU expenditures. Up until 2015 they were #1 in Pet Food spending. They bought premium food but didn’t “buy in” to Super Premium until 2017. They were negatively impacted by the FDA warning, but they rebounded stronger than any other group. In fact, they took the lead in average CU Pet Food spending.
  • 55>64 (18.6% of CU’s) – $306.58 per CU (+13.6%) – $7.54B – Up $0.81B (+12.0%). This group (all Baby Boomers) has been at the forefront of recent major spending swings. In 2015 many of them upgraded to Super Premium. In 2016 this group looked for and found a better price. In 2017 they led a deeper penetration of the upgrade. In 2018 they had a -$3.5B reaction to the FDA warning. They spent more in 2019 but their comeback was far short. In fact, their Pet Food spending in 2019 is -$2.48B (-24.8%) below 2015. They only spent the most Food $ because of more CUs.
  • 35<44 (16.9% of CU’s) – $226.83 per CU (+7.7%) – $4.99B – Up $0.40B (+8.8%) They are 2nd in income and CU spending but have the biggest families. Value shopping is a way of life and their spending pattern tends to be less volatile. They opted in for Super Premium in 2017, held their ground in 2018 and are back on a growth track in 2019.
  • 65>74 (14.9% of CU’s) – $251.14 per CU (-0.2%) – $4.89B – Up $0.09B (+1.8%). This group is 90% Boomers and growing (+2.1%). They are starting to retire but many are still working (0.7 per CU). They tend to lag behind in response to industry trends. Pets are a priority as they spend 1.04% of their total CU expenditures on their pets.
  • 75> (11.2% of CU’s) – $148.54 per CU (+2.5%) – $2.02B – Up $0.11B (+5.9%). Both the effort and the expense of Pet Parenting become issues as we reach 75+. However, they remain committed to their Pets and high quality food.
  • 25>34 (16.1% of CU’s) – $175.43 per CU (-3.9%) – $3.91B – Up +$0.10B (+2.5%) In recent years their spending pattern has foreshadowed the overall market for the following year. Their spending lift in 2018 predicted the overall increase in 2019. However, the 2020 projection is questionable. They spent less per CU. The 2019 increase came only from more CUs. Another situation should be noted. They are the most stable in spending. That is surprising.
  • <25 (5.5% of CU’s) – $98.91 per CU (-26.9%) – $0.76B – Down -$0.36B (-32.4%) After a spectacular 2018, they radically cut spending and the number of CUs fell -3.3%. It appears that fewer Gen Zers are moving out from their parents homes. Except for 2018, their pet food spending has been consistently low. In 2019 they were one of only 2 groups that actually spent less than they did in 2015.

The situation in the age groups is even simpler than in the income groups. Every group over 25 (94.5%) spent more on Pet Food in 2019. The other significant event was that the title for top Pet Food spending CU was passed from young Baby Boomers to old Gen Xers. The Boomers will inevitably fade but it will take a long time. Look at the ongoing strong performance by the 65>74 year olds. Next year this group will be 100% Boomers.

We need to drill deeper. Let’s take a look at the segments with the biggest change in spending in 12 categories. The segments that are outlined “flipped” from 1st to last or vice versa from 2018. The red outline stayed the same.

2017 was a spectacular year of growth as Super Premium became very demographically widespread across America. The impact of the FDA grain free warning was very apparent in 2018. It was the year of the “flip” as 11 of 12 winning segments in 2017 became the biggest losers in 2018. There were 4 others who moved from last to first. Only the South maintained their position at the bottom of the Regions.

2019 looked a lot more normal. There was not a strict recovery of 2018 losses as only 3 segments moved from last to first. Of note, the South finally made it to the top. Only 2 flipped from first to last and 4 maintained their position – 3 at the top and 1 on the bottom. The 2019 lift in Food spending was widespread as 75% of 96 demographic segments posted an increase. The winners and losers included plenty of the “usual suspects”:

Winners: White-Not Hisp, 2 Earner, Homeowner w/Mtg, <2500 pop., Self-employed, $150>199K & Married Couple Only

Losers: Hispanic, Renters, Ctr City, Oldest Generation, Less than HS Grads, <25 yrs, 5+ People, Single Parents

On the “up” side we should also note High School Grad Only as winners. This is further evidence that Super Premium is reaching even deeper into the marketplace. We also should give credit to Gen Xers (45>54 yr olds) for taking the lead in increased spending and average spent per CU.

We also see evidence of the lag time in spending behavior for Retirees ($30>39K). They had a negative reaction to the FDA warning in 2019. Virtually everyone else reacted in the second half of 2018.

2019 was a strong year as spending returned to more normal behavior. We’ll see what happens in the 2020 pandemic.

 

 

 

 

 

 

2019 Pet Spending – A First Look!

/in /by

The US BLS just released the data from their annual Consumer Expenditure Survey. I have almost completed building the detailed pet database from 35 separate files and have started the analysis, but I wanted to give you a brief first look.

In 2019 Total Pet Spending was $78.44B, down -$0.16B (-0.2%) from 2018. This is a very minor decrease following a huge $11.31B increase from 2016 to 2018.

Total Pet Spending is the sum of the individual segments. As we have seen so many times before they can have extremely different patterns. 2019 is no exception.

In this brief first look we will show you a graph of the recent spending history for Total Pet and then each individual segment. That should help put the 2019 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…

The $ growth has been strong since 2013 but we seem to have a new pattern emerging – 2 years up, followed by a small decrease. In 2016 the drop was -$0.46B and in 2019 it was -$0.16B. The $ peaked mid-year 2018 at $79.83B. We seemed to be on the verge of breaking the $80B barrier then came the FDA grain free dog food warning and tariffs on Supplies. However, it appears that a recovery is beginning in the second half of 2019. 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. At mid-year 2018 it looked like 2018 was on track for a small but expected increase. However, the 2nd half changed all that. In July, the FDA issued a warning on grain free dog food. Spending fell $2.51B, driving sales down $2.26B for the year and  breaking the pattern of the last 15 years. As the consumer fear died down, spending stabilized in the first half of 2019 then strongly recovered to “pre-warning” levels by the end of 2019. 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 the second half of 2018, in anticipation of new tariffs Pet Supplies prices began to rise. The tariffs were implemented in September and by yearend Supplies prices had risen 3.5%. Sales flattened in the second half of 2018 then plummeted -$2.98B in 2019 as prices continued to rise – up 5.7% from 2018 by yearend. By the end of 2019 Supplies had “given back” 60% of the $5B gained from mid-2016 to mid-2018. 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. In 2019 spending fell slightly -$0.10B but essentially held its ground at the new elevated level. 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 slowed in recent years which spurred $3B in spending increases in 2016-2017. In 2018, Vet spending rose $0.56B (+2.7%). Prices were up 2.6% so the amount of Veterinary Services in 2018 was unchanged from 2017. In 2019 sales increased +$0.58B (+2.7%). Unfortunately, prices jumped 4.1% so that there was a net decrease in the amount of Veterinary Services in 2019.

Comments

From a historical perspective, the decrease in Total Pet Spending was the 11th in the 35 years since 1984. However, the industry has done pretty well despite an occasional drop. In 1984 Total Pet Spending was $9.56B. That means that it has grown 720% in 35 years – an annual growth rate of 6.2% – not too bad.

We should also note another situation that I addressed in a recent report – Racial/Ethnic disparities in the Pet Industry. The report cited 2018 data which showed that White, not Hispanics accounted for 86.3% of all Pet Spending. In 2019 the situation worsened as they now account for 87.6%. Here are the specifics:

    • White, not Hispanic: $68.73B; Up $0.87B (+1.3%)
    • Hispanic: $5.44B; Down $0.38B (-6.5%)
    • Black/African American: $2.73B; Down $0.68B (-19.9%)
    • Asian: $1.54B; Up $0.02B; (+1.6%)

One reason that the Industry had a negative year was that the increase by White, not Hispanics was not big enough to overcome the spending drop by Hispanics and Blacks. The decrease was especially large for Black Americans.

Yet more evidence that this problem should be addressed, for the benefit of everyone.

That wraps it up for this brief preview of Pet Spending in 2019. 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 96 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?

Even with an occasional “bump in the road” the Pet Industry is solid, but it is also complex. You have to look beneath the surface numbers to find out what is truly happening. Stay tuned for detailed, analytical updates.