Retail Channel Monthly $ Update – May Final & June Advance

In May 2020  the Retail market began its recovery after hitting bottom in April. The road back has been long and complex and Consumer spending behavior continues to evolve. In this report we will track the changes, migration between channels and the retail recovery 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 – about 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.

We will begin with the Final Retail Report for May and then move to the Advance Retail Report for June. Remember, the retail impact of the pandemic began in March 2020, peaked in April, then recovery started in May. We will compare 2021 to both 2020 and 2019 to document the progress that the retail market has made towards a full recovery.

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 2020 and 2019
  • Current YTD change – % & $ vs 2020 and 2019
  • Monthly and Year To Date $ will also be shown for each group/channel

First, the May Final. Retail hit bottom in April 2020 but began recovery, hitting record $ in December. In January & February $ fell but they skyrocketed in March, setting a new all time $ record. In April $ fell a bit but they rebounded in May to yet another record high. Here are the major retail groups. (All Data is Actual, Not Seasonally Adjusted)

The final total is $2.9B less than the Advance report projected a month ago. All groups but Restaurants were down slightly. The specifics were: Relevant Retail: -$2.2B Auto: -$1.1B; Restaurants: +$1.2B; Gas Stations: -$0.8B. Sales vs April were up in all but Auto and Total Retail $ set a new all-time record. Total $ales broke $600B for the 1st time in December and has now done it 4 times. Auto has the strongest recovery and is in fact prospering – annual YTD growth rate since 2019 is +12.9%. Except for the spending dip by Auto vs April, all but Restaurants were positive in all other measurements. Restaurants are still slightly negative vs 2019 but the Retail recovery is strong.

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

  • Overall– 7 of 11 channels were down vs April but 10 were up vs May 2020 and 10 vs May 2019. In YTD $, 10 were up vs 2020 and 10 vs 2019. 9 were up vs both. May was the 3rd biggest month in history for Relevant Retail.
  • Building Material Stores – Their amazing lift continues. The ongoing surge came as a result of pandemic spending patterns developed in 2020. Consumers began focusing on their homes. Now we’re into the 2021 Spring lift for both Building and Farm stores . Sporting Goods stores are not in this group but have a similar spending pattern. Sales took off in May, hit a record peak in December and continued strong into 2021, peaking in March. May $ fell slightly again but are +30.6% vs 2020 and +49.5% vs 2019. YTD they are still +53% vs 2019.
  • Food & Drug – Supermarkets were +$77.7B in 2020. $ are down vs April and YTD 2020 due to last year’s binge buying. They are still up 14% vs May 2019 and YTD 2019. Drug Stores ended up +$17B (+5.7%) for 2020. Their $ fell in April and May after a setting a record in March. All other measurements are positive and YTD $ are +7.2%.
  • General Merchandise Stores – $ in all channels fell in Jan & Feb then spiked in March. In April, sales in all but $ stores declined but they bounced back in May. Discount Store were having problems before the pandemic, but they have strongly recovered, +8.5% YTD vs 2019. Clubs/SuperCtrs and $ Stores remain strong. These channels promote value. Their success vs both 2020 and 2019 reinforces its importance in Consumer spending decisions.
  • Office, Gift & Souvenir Stores– $ increased slightly from April and were +79% vs May 2020. The pandemic hit them hard. They are still down vs 2019 – monthly and YTD. Recovery is a long way off, but things are improving.
  • Internet/Mail Order – Although $ dropped again in May the pandemic continues to foster this channel’s growth. In May of 2019, their YTD growth rate was +13.0%. In May 2021, it is +20.4% – a 56.4% increase.
  • 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>24% of total $). Pet Stores were usually essential, but most stores were not. In May 2020 they began their recovery. Their 2020 total sales were up +11.6%. Their May $ hit $10B for the 1st time to set a new all-time record. YTD sales are +32.7% vs 2020 and +38.6% vs 2019. Very strong!

The Relevant Retail Segment began recovery in May, reached a record level in December, then $ fell in Jan & Feb. Sales turned up again in March, fell slightly in April then bounced back in May. Almost all channels are showing growth. The key drivers are the Internet, SuperCtrs/Clubs/$ Stores and Hdwe/Farm.

Now, here are the Advance numbers for June.

2020 was a memorable year for both its traumas and triumphs. In April & May we experienced the 2 biggest retail spending drops in history, but the problems actually began in March. Retail sales began to recover in June and in October, YTD Total Retail turned positive for the 1st time since February. In December, Total Retail broke the $600B barrier – a historic first. Sales fell from their December peak in both January and February but still set monthly sales records. Then they took off again in March, setting a new monthly sales record of $633B. April sales were down slightly but they took off again in May to set yet another spending record, $641.5B. June brought another slight dip in this rollercoaster ride but was still the 3rd biggest $ month in history. All but Gas Stations were down vs May, but all the major groups were positive in all other measurements. The big news is that for the 1st time YTD Restaurant $ were positive versus 2019 – just barely, +0.1%. Some other areas of the economy are still suffering, some spending behavior has changed and inflation has become a factor in some increases. However, consumers are back spending money and the overall Retail marketplace has strongly recovered.

Total Retail – In March, Total Retail hit $633.1B, a record for the most spending in any month in any year. In April, $ales dipped to $625.5B but were still $218.3B more than April 2020 – a record increase, which was more than double the size of last year’s record drop. In May, sales set another new record, $641.5B. In June sales dipped slightly to $631.1B, but it was still the 3rd biggest month in history. Moreover, the current YTD average annual sales growth rate since 2019 is 9.0%, the strongest ever in records going back to 1992. Total Retail has not just recovered. It is stronger than ever.

Restaurants – This group finally has no negative measurements vs 2020 or 2019. Last February YTD sales were up 8.1% vs 2019. The Pandemic changed that. Restaurants started to close or cease in person dining in March and sales fell -$33.3B (-52.5%) compared to March 2019. Sales bottomed out in April at $30.1, the lowest April sales since 2003. Sales started to slowly increase in May but never reached a level higher than 88% compared to the previous year. 2021 started off slowly. Through February, YTD sales were down -16.7% from pre-pandemic 2020 and -10.0% from 2019. In March sales took off and grew steadily in April and May. Sales dipped slightly in June but were still strong vs 2019 & 2020. YTD their $ are ahead of 2020 and exceeded 2019 by 0.5B (+0.1%). Their recovery is gaining strength.

Auto (Motor Vehicle & Parts Dealers)   – Staying home causes your car to be less of a focus in your life. Sales began to fall in March and hit bottom in April. Auto Dealers began combating this “stay at home” attitude with fantastic deals and a lot of advertising. It worked. They finished 2020 up 1% vs 2019 and have returned to a strong positive pattern in 2021. The “attitude” grew amazingly positive in March and slowed only slightly in April>June as sales exceeded $137B in all 4 months, by far the 4 biggest months in history. To show how well consumers responded to their campaign you just need to look at the data. This group has exceeded $110B in monthly sales only 12 times in history. 10 of those occurred after the onset of the pandemic.  YTD Avg Annual Growth Since 2019 = +13.2% – the best performance of any big group.

Gas Stations – Gas Station $ales have been a mixed bag. If you drive less, you visit the gas station less often. Sales turned down in March 2020 and reached their low point in April. They moved up but generally stayed about 15% below 2019 levels for the rest of 2020. In February they were still behind 2020 in monthly and YTD $ but ahead of 2019 in both measurements. In March, sales skyrocketed. They increased slightly in April, May and June and were 37.4% above June 2020. They have been positive in all measurements vs both 2019 and 2020 since March. Their comeback continues but there is another factor that must be considered – inflation. Gas prices can be pretty volatile. They dipped in the first 2 months of the pandemic but then returned to more normal levels for the balance of 2020. They began strongly inflating in 2021. In fact, the June 2021 prices were 45% above June 2020. That means that the 37.4% year over year $ lift in June was actually a decrease in the amount of gas sold. YTD Annual Avg Growth Rate Since 2019 = +3.1%

Relevant Retail – Less Auto, Gas and Restaurants – This is what we consider the “core” of U.S. retail and has traditionally accounted for about 60% of Total Retail Spending. When you look at the individual channels in this group, you see a variety of results due to many factors – non-essential closures, binge buying, online shopping and a consumer focus on “home”. However, overall, April 2020 was the only month in which spending in this group was down vs 2019. Monthly $ales exceeded $400B for the first time ever in December ($407B). They finished 2020 up $260B, +7.1%. Their performance was the only reason that Total Retail was able to finish 2020 with positive numbers, +0.5%. Sales fell in January and February but set monthly records. In March they turned sharply up again, then dipped slightly in April but May brought the 3rd highest $ of all time. June saw another slight $ decline but they are still up $40.8B, +12.3% vs June 2020 and  +$298.8B, +16.5% YTD. We should note that that while December 2020 is still #1, March ($374.7B), April ($366.8B), May ($376.7B) and June ($371.5B) of 2021 are four of the six highest monthly totals of all time. It is also important that the Relevant Retail group has posted positive numbers versus last year and YTD for every month since April 2020 and their average YTD growth rate since 2019 now stands at +10.2%. Through June all but one channel have now turned positive in all measurements vs both 2020 and 2019. However, the primary drivers throughout the pandemic were and continue to be Nonstore, Grocery, SuperCenters/Clubs/$ Stores plus a seemingly never ending “spring lift” from Hardware/Farm and Sporting Goods.

Now let’s look at what is happening in the individual retail channels to see where the $ are coming from. June $ were down slightly from May and none of the increases were “off the charts”. However, it was still the 5th largest month in history for Relevant Retail outlets. The groups are less defined than in the Final Monthly reports and we will look across the whole market, not just pet relevant outlets.

Sales in 7 of 13 channels were down vs May but all were up vs June 2020, vs June 2019 and YTD vs 2020. Only 1 was down YTD vs 2019. (Relevant Retail YTD Avg Annual Growth Rate since 2019 = +10.2%)

After hitting bottom in April 2020, Relevant Retail has now beaten the previous year’s $ for 14 consecutive months. The group set an all-time record of $407B in December and finished 2020 +$260B vs 2019. 2021 started strong, with record sales in every month. March > June were 4 of the 6 biggest of all time. Essential channels are still the primary drivers:

  • Nonstore Retailers – The biggest driver. Online shopping continues to grow in # of households and in $.
  • Food & Beverage – Grocery– Restaurant $ are improving but consumers continue to eat & drink more at home.
  • Bldg Materials/Garden/Farm– Their “Spring” lift continues unabated as consumers focus on their home.
  • SuperCtrs/Club/Value/$ Strs – They keep the GM channel positive. Value is still a major consumer priority.

Regarding the Individual Large Channels (Includes YTD Avg Annual Growth Rate since 2019)

General Merchandise Stores – Sales fell in June but all other numbers are positive. YTD Department Stores $ remain up vs 2020 but down vs 2019. They were having problems before the Pandemic. After dipping to +7.5% in February, the growth rate by Club/SuperCtr/$ stores has remained near the current 8.4%. These stores are still the key to this channel.

  • YTD Avg Annual Growth: All GM = +6.8%; Dept Stores = -0.9%; Club/SuprCtr/$ = +8.4%

Food and Beverage, plus Health & Personal Care Stores – Sales in Grocery were down in March>May from 2020 – No surprise, as these were 2020 binge months. In June they beat 2020 $. The Health, Personal Care group finished 2020 at +1.8%. 2021 has started even better. With strong March > June sales, YTD they are +10.7% vs 2020 and +9.5% vs 2019.

  • YTD Avg Annual Growth: Grocery = +6.7%; Health/Drug Stores = +4.6%

Clothing and Accessories; Electronic & Appliances; Home Furnishings – March > June have been spectacular for all these channels. The increase in Clothing Stores vs June 2020 was not “off the chart” but was still +49.4%. Although all of these groups were down vs May they remain positive in all measurements vs 2020 or 2019 for the 4th consecutive month.

  • YTD Avg Annual Growth: Clothing = +3.6%; Electronic/Appliance = +2.5%; Furniture = +10.1%

Building Material, Farm & Garden & Hardware – Their Spring lift began on time in 2020 and has never stopped. They have greatly benefited from consumers focusing on their home needs. They finished 2020 +53B (+13.8%). Sales took off in March, set a record in April then dipped slightly in May & June. They are +18.3% YTD. Avg Annual Growth = +14.6%

Sporting Goods, Hobby and Book Stores – Book & Hobby stores are open but Sporting Goods stores have driven the lift in this group. Consumers turned their attention to personal recreation and sales in Sporting Goods outlets took off. The group ended 2020 +5.5% vs 2019. The growth accelerated in 2021. January > June set monthly records and March had the most $ of any non-December month in history. June YTD they are +44.6% vs 2020. Avg Annual Growth = +17.5%

All Miscellaneous Stores – Pet Stores were deemed essential but most other stores were not, so closures hit this group particularly hard. Sales hit bottom at -$3.8B in April then began to rebound. They finished with a strong December and ended 2020 down $1.0B, -0.7%. In March sales took off and the channel set a new all-time monthly record of $14.39B in May. However, they beat that record in June with $14.41B. Their YTD sales are now 31.9% above 2020 and 25.1% more than 2019. Their recovery has become very real. YTD Avg Annual Growth = +11.9%

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV. The pandemic accelerated the movement to online retail. In February 2020 NonStore $ were +8.6% YTD. In December monthly sales exceeded $100B for the 1st time. They ended 2020 at +21.4%, +$162.9B. This was 63% of the total $ increase for Relevant Retail Channels. Their 2020 performance far exceeded their 12.9% increase in 2019 and every month in 2021 has produced record $. June was +2.0% vs May and +12.0% vs 2020. Their YTD $ are +19.1%. YTD Avg Annual Growth = +18.5%

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded with their regular store sales.

Recap – 2020 was quite a year. April & May had the 2 biggest year over year sales decreases in history while December sales broke $600B for the first time. 2021 may become even more memorable. March>June became the 4 biggest Retail $ales months in history with the 4 largest year over year monthly sales increases ever. The total increase was +$608B, almost quadruple (3.87 times) the -$157B decrease from March>June 2020. At yearend 2020, Restaurants, Auto and Gas Stations were still struggling but Auto had largely recovered. Relevant retail had segments that also struggled but overall, they led the way for Total Spending to finish the year +0.5% vs 2019. 2021 has grown even more positive. The Auto Segment is setting sales records. Gas Stations, with help from inflation, is all positive vs 2020 and 2019 and thanks to a great June, so are Restaurants. The details show that the recovery in Relevant retail has become real for virtually all channels and monthly sales continue to set records. Retail has recovered but one question remains, “How high can the $ go?”

 

 

U.S. Pet Services Spending (Non-Vet) $7.84B (↓$0.97B): 2020 Mid-Year Update

The US BLS released their Mid-Year Update of the Consumer Expenditure Survey covering the period from 7/1/2019 to 6/30/2020. In our analysis of Pet Supplies Spending, we saw the drop in spending sparked by tariffs had now reach 18 months. However, Pet Food Spending turned up, first in the 2nd half of 2019, as it recovered from the FDA warning on grain free dog food. Then it had a huge lift in the 1st half of 2020 as many Pet Parents “panic” bought food due to the onset of the pandemic. Now we turn our attention to Pet Services. The Mid-year numbers show that spending in this segment was $7.84B, down $0.97B (-11.0%) from the previous year. Up until 2018, this segment was known for consistent, small growth. In 2018, increased outlets and competitive prices brought on a wave of new users and spending increased +$1.95B. Spending remained near this new high normal until we reached 2020. March closures due to the pandemic drove spending down $0.78B in the first half so that Pet Services spending returned to the Mid-Year 2018 level. This deserves a closer look. First, we’ll review recent Services spending history since 2014.

Here are the 2020 Mid-Year Specifics:

Mid-Year 2020: $7.84B; ↓$0.97B (-11.0%) vs Mid-Yr 2019

  • Jul > Dec 2019: ↓$0.19B
  • Jan > Jun 2020: ↓$0.78B

Pet Services is by far the smallest industry segment. However, except for 2010 and 2011, the period immediately following the Great Recession, it had consistent annual growth from 2000 through 2016. Spending in Food and Supplies have been on a roller coaster ride during that period. Services Spending more than tripled from 2000 to 2016, with an average annual growth rate of 7.6%. Spending in the Services Segment is the most discretionary in the industry and is more strongly skewed towards higher income households. Prior to the great recession, the inflation rate averaged 3.9% with no negative impact. The recession affected every industry segment, including Services. Consumers became more value conscious, especially in terms of discretionary spending. Services saw a slight drop in spending in both 2010 and 2011, but then the inflation rate fell to the 2+% range and the segment returned to more “normal” spending behavior. In mid-2016 inflation dropped below 2% and continued down to 1.1% by the end of 2017. This was primarily due to increased competition from free standing businesses but also an increase in the number of Pet Stores and Veterinary Clinics offering pet services. While prices still went up slightly, there were deals to be had and consumers shopped for the best price. There was no decrease in purchase frequency. Consumers just paid less so spending fell slightly. In the 2nd half of 2017 spending turned up again. More Consumers began to take advantage of the value and convenience of the increased number of outlets offering Services. This deeper market penetration caused Services Spending to take off in 2018, up $1.95B, by far the biggest annual increase in history. Prices turned up again in the first half of 2019, increasing  2.8% from 2018. However, Services spending inched up $0.09B. In the 2nd half of 2019 Value shopping again came to the forefront as spending fell -$0.19B. Then came 2020 and the pandemic. Many of these nonessential businesses were forced to close and spending fell -$0.78B to $7.84B, the same as Mid-Year 2018.

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

The graphs that follow we compare spending for the 12 months ending 6/30/20 to the previous 12 months. The graphs also include the 2019 yearend $, so you can see spending changes in the 2nd half of 2019 and the 1st half of 2020.

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

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

Mid-yr Total Spending Change: $6.02B – $6.43B = Down -$0.41B (Note green outline = increase; red outline = decrease)

  • 2nd half of 2019: Subtract Mid-19 ($6.43B) from Total 2019 ($6.47B) = Spending was up $0.04B in 2nd half of 2019.
  • 1st half of 2020: Subtract Total 2019 ($6.47B) from Mid-20 ($6.02B) = Spending was down -$0.45B in 1st half of 2020.

  • We again added an Over/Under $100 measurement. You see how Services Spending is skewed towards higher incomes. The halfway spending point is probably about $125K so 20% of CUs spend 50% of Services $. $70K+ had a slight uptick in the 2nd half of 2019 due to $50>$150K. All other big groups trended down in both halves.
  • The two individual groups below $50K declined in both halves. The $30>$50K had the biggest drops and finished down -$0.41B (-41.4%). They gave back most of a 47% increase a year earlier from a spending surge by Retirees.
  • The middle income $50 to $100K showed the least impact of any group. Spending by the $50>$70K was virtually unchanged in both halves. The $70>$100K group had a small lift in the 2nd half of 2019 and showed almost no impact due to the pandemic so they were the only group to finish positive for the year, +$0.11B (+9.8%).
  • The two over $100K groups had the biggest pandemic impact in $, -$0.44B but for the year they actually gained slightly in share of Services $, moving up to 61.0% from 60.2%.
  • Income is the single biggest factor in choosing the discretionary convenience of Pet Services and it appears that the start of the pandemic has made it even stronger.

Now, Services’ Spending by Age Group.

  • There are a multitude of spending patterns, and none are tied specifically to young or old.
  • Last year the 55>64 yr old Boomers had the only overall decrease. This year the 25>34 year olds had the only increase. It was minor and their spending was flat in the 1st half of 2020. Overall, it was quite a turnaround.
  • The 45>64 and 75+ groups had the same pattern with a lift in the last half of 2019, followed by a drop in the first half of 2020. The 35>44 yr and 65>74 groups were down in both halves, but the Gen Xers were down -$0.58B, -32%.
  • The continuing decrease by the 35>44 group is significant . They are now down -$0.75B (-37.5%) from 2018’s $2B.

Now let’s look at what is happening in Pet Services spending at the start of 2020 across the whole range of demographics. In our final chart we will list the biggest $ moves, up and down by individual segments in 11 demographic categories. Remember, the pandemic drop in the 1st half of 2020 was -$0.78B, a big change from +$0.09B in 2019.

Obviously, 2020 has not started out well, due to pandemic closures. In 4 of the 11 categories, all segments spent less on Services. Also, the $ changes from the losers are overwhelming larger than the positives of the winners. The -$0.78B decrease in Pet Services came from 72 of 82 demographic segments (88%) spending less. The negative impact of the pandemic on the Services segment was extremely widespread.

There is only one usual winner – Self Employed and one usual loser – Singles. However, there are many surprises:

Winners:

  • Under 25 yrs
  • High School Grads
  • Rural
  • Gen Z

Losers:

  • Mgrs/Professionals
  • BA/BS Degree
  • Homeowners w/Mtge
  • Gen X

Like the Supplies segment, the younger groups are providing the only positives. However, the groups are much more defined. We also should note than while the <25 group had the only 1st half lift by any age group, the 25>34 year olds had the only Mid-Yr 12 month lift for any age group and held their Services spending ground in the 1st half of 2020.

The 1st half 2020 positives are coming from specific groups of the youngest Americans, – <25 yrs old, Gen Z (mostly singles) and young, small families – 3 people, Oldest Child 6>17. 4 person CUs also increased spending in 2020 and Millennials were only down slightly -$0.01B. The importance of the younger groups continues to grow as the Baby Boomers must ultimately “pass the torch”.

In 2018 the Services segment reached a new level of prominence in the Pet Industry. In 2019 spending dropped slightly. Then came the pandemic and spending fell sharply. How did we get to this point and what comes next?

We have noted that by 2017 the number of outlets offering Pet Services had radically increased. This created a highly competitive market and the inflation rate dropped to near record lows. Value conscious consumers saw that deals were available, and they took advantage of the situation. However, they didn’t increase the frequency of purchase. They just paid less. This drove overall Pet Services spending down in the 1st half of 2017. The segment started to recover in the 2nd half but not enough to prevent the first annual decrease in Pet Services spending since 2011. However, it was a start. In 2018, more consumers started to recognize the convenience offered by more outlets. The latest big food upgrade was also winding down. The result was that Services started a deeper penetration into the market, especially in the younger groups. The < 45 groups spent $1.47B more on Services in 2018, 74% of the total $1.95B increase in the segment. After such a big lift, a slight downturn in 2019 was not unexpected and it happened, -$0.1B. Then came 2020. Many Services outlets were deemed nonessential and forced to close due to the pandemic. Services Spending fell -$0.78B.

What will happen in the 2nd half of 2020? There was no national mandate so re-openings were dependent upon local decisions. It’s likely that we will see a further decline. One thing hasn’t changed. Pet Services have become an important option that is exercised by an increasing number of Pet Parents. Now, in 2021 America has “opened up”. The Services segment should rebound strongly. We’ll get the full year 2020 data in September and the 1st half of 2021 in May 2022.

U.S. PET SUPPLIES SPENDING $16.28B (↓$1.43B): MID-YR 2020 UPDATE

In our analysis of Pet Food spending, we saw that spending grew in the 2nd half of 2019 then skyrocketed in the beginning of 2020 largely due to Pandemic Panic buying. There was no Panic in Pet Supplies and spending continued its steady decline from its 2018 peak. Mid-Year 2020 Pet Supplies spending was $16.28B, down $1.43B (-8.1%). The continuing spending drop in 2020 puts spending in this segment below the level of 3 years ago in Mid-Yr 2017. The following chart should put the recent spending history of this segment into better perspective.

Here are this year’s specifics:

  • Mid Yr 2020: $16.28B; ↓$1.43B (-8.1%) from Mid Yr 2019. The -$1.43B came from:
    • Jul > Dec 2019: ↓$0.90B
    • Jan > Jun 2020: ↓$0.54B

Like Pet Food, Pet Supplies spending has been on a roller coaster ride. However, the driving force is much different. Pet Food is “need” spending and has been powered by a succession of “must have” trends. Pet Supplies spending is largely discretionary, so it has been

impacted by 2 primary factors. The first is spending in other major segments. When consumers ramp up their spending in Pet Food, like upgrading to Super Premium, they often cut back on Supplies. However, it can go both ways. When they value shop for Premium Pet Food, they take some of the saved money and spend it on Supplies. The other factor is price. Pet Supplies prices reached their peak in September of 2009. Then they began generally deflating and in March 2018 were down -6.7% from 2009. Although it is not a hard and fast rule, Price inflation in this largely discretionary segment can retard sales, usually by reducing the frequency of purchase. On the other hand, price deflation generally drives Supplies spending up. Innovation can “trump” both of these influencers. If a new “must have” product is created, something that significantly improves the pet parenting experience, then consumers will spend their money. The perfect example of this is the successive waves of new food trends. Unfortunately, we haven’t seen much significant innovation in the Supplies segment recently.

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

In the first half of 2018 Pet Food spending slowed to +$0.25B. Supplies’ prices switched from deflation to inflation but were only up 0.1% versus the first half of 2017. During this period Supplies Spending increased by $1.23B. Prices began to climb in the second half of 2018 due to impending new tariffs in September. By June 2019 they were 3.4% higher than 2018. The impact of the tariffs on the Supplies segment was very clear. Spending became flat in the second half of 2018, then took a nosedive in the 1st half of 2019, -$2.09B. Prices stayed high for the rest of 2019 and spending fell an additional -$0.9B. In 2020 prices turned up again through March before plummeting, -3.8% by June. Spending dropped an additional -$0.54B. Initially, the pandemic had no positive impact on Supplies spending. We expect that to change in the second half. More time with their pets and lower prices usually means more Supplies spending.

Let’s take a closer look at the data, starting with the two most popular demographic measures – age and income. The graphs that follow will show both the current and previous 12 months $ as well as 2019 yearend. This will allow you to track the spending changes between halves.

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

Here’s how you get the change for each half using the $50>70K group as an example:

Mid-yr Total Spending Change: $1.58B – $2.43B = Down $0.85B (Note: green outline = increase; red outline = decrease)

  • 2nd half of 2019: Subtract Mid-19 ($2.43B) from Total 2019 ($1.93B) = Spending was down $0.50B in 2nd half of 2019.
  • 1st half of 2020: Subtract Total 2019 ($1.93B) from Mid-20 ($1.58) = Spending was down $0.35B in 1st half of 2020.

  • I added an under/over $100K measurement to the graph. As you can see, the share of Supplies spending “flips” based upon the $70>$100K group. That means that the “break even” dividing line is probably slightly above the average CU income of $83.8K. The Supplies $ of CUs above average, 33% is equal to the 67% of CUs below average.
  • There are only 2 spending patterns in the individual segments – drops in both halves or increases in both halves.
  • The decrease in Supplies Spending was widespread across income groups. Both over and under $70K trended down while over $100K was basically flat. The two segments with increases were an unlikely pair – $150K+ and $30>$50K. The higher income group is to be expected but the lower income group is a surprise. $30>50K is the income range for Retirees but it’s not them. It is likely driven by the younger crowd.
  • The spending movement, whether up or down, is gradual. In most cases the $ changes in each half are very close.
  • The two factors, high prices and the onset of the pandemic had very little impact on the over $100K group. It was basically “business as usual”. The biggest negative came from the <$30K and the $50>$70K groups. Their spending fell -$1.43B, likely due to a reduced purchase frequency. There’s no Supplies binge spending yet. Maybe that will come in the 2nd half of 2020 with the big drop in prices?

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

  • Generally, the over 35 group spent less while under 35 spent a little more but there was a mix of patterns.
  • The <25 and 25>34 year olds had opposite patterns for the halves. If there was any “binge” pet supplies spending due to the pandemic, it came from the 25>34 year old Millennials.
  • The 35>54 yr olds, Gen X, were down in both halves, probably due to value shopping and slightly reduced frequency.
  • The 55> group also had a mixture. The 75> were down in both halves. The Boomers were divided. The 65>74 yr olds had a small pandemic lift while spending dropped sharply for the 55>64 group. This drop was correlated to helping to pay for their huge panic buy of Pet Food.

Now let’s look at what is happening in Supplies spending at the start of 2020 across the whole range of demographics. In our final chart we will list the biggest $ moves, up and down by individual segments in 11 demographic categories.

  • The first thing that you notice is that the biggest decreases are radically larger than the biggest increases.
  • The decrease is widespread but not as bad as last year when in 5 of the 11 categories all segments spent less on Supplies. In the 1st half, 27 segments, 33% spent more. This is up from 22 in the 2nd half of 2019 and much better than 8 last year. There’s a long way to go but things are slowly improving in the Supplies segment.
  • There are some “usual suspects” in the winners – Mgrs/Professionals & Adv College Degree and losers – Singles & Blue Collar. There are also some surprise winners – $30>49K & Hispanic and losers – BA/BS & Suburban. However, most of the winners & losers reflect the young vs old pattern that we saw in the age analysis.
  • The young positives are reflected in these winners – 25>34, Center City, 4 people, Married, oldest child 6>17, 2 earners and of course, Millennials. The older losers are no earner singles, homeowner w/no mtge, 55>64, suburban and of course, Baby Boomers.
  • Here’s a hidden positive. Minorities were +$0.12B in the 1st half. African Americans were down slightly, -$0.01B but Asians and Hispanics spent $0.13B more.

The 24 month Spending winning streak for Supplies which began in the second half of 2016 came to an end in the second half of 2018. During that time spending on Pet Supplies increased $4.97B (+33.5%). It was also widespread across America. Of 82 separate demographic segments, only 1 spent less on Supplies in that period – the Greatest Generation. This 92+ year old group has now become too small to be accurately measured.

What are the market conditions that affect Supplies spending? We have to first note that the world changed for Supplies because of the great recession. Prices have generally deflated since then and spending in the segment became more sensitive to changes in price. Prices go up…spending drops, usually due to reduced purchase frequency. Prices go down… spending turns up. This situation did not exist prior to the recession.

The other factor is spending in other segments, especially Food. Pet spending comes out of “one bucket”. A big increase in one segment can result in a cut back in others and big savings can generate more spending. The recent upgrade to Super Premium Food was such a big $ commitment that it magnified this effect.

In 2018, something new was added – outside influence. The FDA warning on grain free dog food had an immediate, negative impact on the Food segment. For Supplies, it was added tariffs. Prices in the Supplies segment began to turn up in the Spring. By June 2019, they were 3.4% higher than 2018. Supplies spending flattened out then plummeted in the 1st half of 2019. Prices stabilized at the high level and Supplies $ continued to fall. Then came the start of the pandemic. This spurred huge panic buying in food but not supplies. In fact, the huge lift in Food probably contributed to Supplies continued decline. I expect Supplies to rebound strongly in the 2nd half . We’ll get the data in September.

Retail Channel Monthly $ Update – April Final & May Advance

In May 2020  the Retail market began its recovery after hitting bottom in April. The road back has been long and complex and Consumer spending behavior continues to evolve. In this report we will track the changes, migration between channels and the retail recovery 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 – about 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.

We will begin with the Final Retail Report for April and then move to the Advance Retail Report for May. Remember, the retail impact of the pandemic began in March 2020, peaked in April, then recovery started in May. We will compare 2021 to both 2020 and 2019 to document the progress that the retail market has made towards a full recovery.

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 2020 and 2019
  • Current YTD change – % & $ vs 2020 and 2019
  • Monthly and Year To Date $ will also be shown for each group/channel

First, the April Final. Retail hit bottom in April but began recovery, hitting record $ in December. In January & February $ fell but were still records for those months. Sales skyrocketed in March, setting a new all time $ record. In April $ fell a bit but it were still the 2nd best in history. Here are the major retail groups. (All Data is Actual, Not Seasonally Adjusted)

The final total is $9.1B more than the Advance report projected a month ago. Led by Relevant Retail, all groups were up. The specifics were: Relevant Retail: +$5.8B Auto: +$1.9B; Restaurants: +$1.2B; Gas Stations: +$0.2B. Sales vs March were mixed but Total Retail $ were still the 2nd highest of all time. Total $ales broke $600B for the 1st time in December and has now done it 3 times. Auto has the strongest recovery and is in fact prospering – annual YTD growth rate since 2019 is +12.8%. Except for the spending dips by 2 groups vs March, all but Restaurants were positive in all other measurements. Restaurants are still slightly negative vs 2019 but the Retail recovery is strong.

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

  • Overall– 8 of 11 channels were down vs March but 9 of 11 were up vs April 2020 and 10 vs April 2019. In YTD $, 10 were up vs 2020 and 10 vs 2019. 9 were up vs both. April was down vs March, but still strong.
  • Building Material Stores – Their amazing lift continues. The ongoing surge came as a result of pandemic spending patterns developed in 2020. Consumers began focusing on their homes. Now we’re moving into the 2021 Spring lift, with Farm Stores again leading the way. Sporting Goods stores are not in this group but have a similar spending pattern. Sales took off in May, hit a record peak in December and continued strong into 2021, peaking in March. April $ fell slightly but are +124% vs 2020 and +58% vs 2019. YTD they are even +53% vs 2019.
  • Food & Drug – Supermarkets were +$77.7B in 2020. $ are down vs March and YTD 2020 due to last year’s binge buying. They are still up over 13% vs April 2019 and YTD 2019. Drug Stores ended up +$17B (+5.7%) for 2020. Their $ fell in April after a setting a record in March. All other measurements are positive and YTD $ are +5.8%.
  • General Merchandise Stores – $ in all channels fell in Jan & Feb then spiked in March. In April, sales in all but $ stores declined. Discount Store were having problems even before the pandemic, but now even they seem to have largely recovered, +8.7% YTD vs 2019. Clubs/SuperCtrs and $ Stores remain strong. These channels promote value. Their success vs both 2020 and 2019 reinforces its importance in Consumer spending decisions.
  • Office, Gift & Souvenir Stores– $ declined slightly from March but were +159% vs April 2020. The pandemic hit them hard. They are still down vs 2019 – monthly and YTD. Recovery is a long way off, but things are improving.
  • Internet/Mail Order – Although $ dropped in April the pandemic continues to accelerate this channel’s growth. In April of 2020, their YTD growth rate was +17.1%. In April 2021, it is +25.4% – a 48.5% increase.
  • 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>24% of total $). Pet Stores were usually essential, but most stores were not. In May 2020 they began their recovery. Their 2020 total sales were up +11.6%. Although April $ were down from March, YTD sales are +31.4% vs 2020 and +46.9% vs 2019. This rivals the Internet. It’s looking good!

The Relevant Retail Segment began recovery in May, reached a record level in December, then $ fell in Jan & Feb. March sales set a record for the month, then the $ fell slightly in April. Almost all channels are showing growth. Currently the key drivers are the Internet, SuperCtrs/Clubs/$ Stores and Hdwe/Farm. Now, here are the Advance numbers for May.

2020 will always be a memorable year for both its traumas and triumphs. In April & May we experienced the 2 biggest retail spending drops in history, but the problems actually began in March. Retail sales began to recover in June and in October, YTD Total Retail turned positive for the 1st time since February. In December, Total Retail broke the $600B barrier – a historic first. While sales fell from their December peak, monthly sales records were set in both January and February. Then they took off again in March, breaking $600B again while setting a new monthly sales record of $633.1B. April sales were down slightly but were the second highest in history. Restaurant $ were down slightly from 2019. This was the only negative vs 2020 or 2019 for any group. In May, Auto had a slight, -0.1% decrease from April. All other groups increased sales. The result was yet another Total Retail spending record, $644.4B. Restaurants were still down slightly YTD vs 2019. Once again, this was the only negative for any big group vs 2020 or 2019. Some other areas of the economy are still suffering, and some spending behavior has changed but the overall Retail marketplace has strongly recovered.

Total Retail – In March, Total Retail hit $633.1B, a record for the most spending in any month in any year. In April, $ales dipped to $616.7B but were still $218.4B more than April 2020 – a record increase, which was more than double the size of last year’s record drop. That brings us to May. As we said, sales set another new record, $644.4B. Moreover, the current YTD average annual sales growth rate since 2019 is 8.7%, the strongest ever in records going back to 1992. Total Retail has not just recovered. It is stronger than ever.

Restaurants – This is the only big group with any negative measurements vs 2020 or 2019 . Last February YTD sales were up 8.1% vs 2019. The Pandemic changed that. Restaurants started to close or cease in person dining in March and sales fell -$33.3B (-52.5%) compared to March 2019. Sales bottomed out in April at $30.1, the lowest April sales since 2003. Sales started to slowly increase in May but never reached a level higher than 88% compared to the previous year. 2021 started off slowly. Through February,  YTD sales were down -16.7% from pre-pandemic 2020 and -10.0% from 2019. In March sales took off and grew steadily in April and May. Sales in both months exceeded 2019. YTD their $ are ahead of 2020 but still $6.3B (-2.0%) behind 2019. They are not “there yet” but their recovery is gaining strength.

Auto (Motor Vehicle & Parts Dealers)   – Staying home causes your car to be less of a focus in your life. Sales began to fall in March and hit bottom in April. Auto Dealers began combating this “stay at home” attitude with fantastic deals and a lot of advertising. It worked. They finished 2020 up 1% vs 2019 and have returned to a strong positive pattern in 2021. The “attitude” grew amazingly positive in March and slowed only slightly in April & May as sales exceeded $143B in all 3 months, by far the 3 biggest months in history. To show how well consumers responded to their campaign you just need to look at the data. This group has exceeded $110B in monthly sales only 11 times in history. 9 of those occurred after the onset of the pandemic.  YTD Avg Annual Growth Since 2019 = +13.0% – the best performance of any big group.

Gas Stations – Gas Station $ales have been a mixed bag. If you drive less, you visit the gas station less often. Sales turned down in March 2020 and reached their low point in April. They moved up but generally stayed about 15% below 2019 levels for the rest of 2020. In February they were still behind 2020 in monthly and YTD $ but ahead of 2019 in both measurements. In March, sales skyrocketed. They increased slightly in April and May and were 56.7% above May 2020. They have been positive in all measurements vs both 2019 and 2020 since March. Their comeback continues but there is another factor that must be considered – inflation. Gas prices can be pretty volatile. They dipped in the first 2 months of the pandemic but then returned to more normal levels for the balance of 2020. They began strongly inflating in 2021. In fact, the May 2021 prices were 56.9% above May 2020. That means that 100% of the 56.7% year over year lift in May came from higher prices. Analyzing retail can be complicated. YTD Annual Avg Growth Rate Since 2019 = +2.9%

Relevant Retail – Less Auto, Gas and Restaurants – This is what we consider the “core” of U.S. retail and has traditionally accounted for about 60% of Total Retail Spending. When you look at the individual channels in this group, you see a variety of results due to many factors – non-essential closures, binge buying, online shopping and a consumer focus on “home”. However, overall, April 2020 was the only month in which spending in this group was down vs 2019. Monthly $ales exceeded $400B for the first time ever in December ($407B). They finished 2020 up $260B, +7.1%. Their performance was the only reason that Total Retail was able to finish 2020 with positive numbers, +0.5%. Sales fell in January and February but set monthly records. In March they turned sharply up again, then dipped slightly in April but May brought the 2nd highest $ of all time. Currently, they are up $56.0B, +17.4% vs May 2020 and  +$260.2B, +17.5% YTD. We should note that that while December 2020 is still #1, March ($374.7B), April ($366.8B) and May ($378.9B) of 2021 are three of the five highest monthly totals of all time. It is also important that the Relevant Retail group has posted positive numbers versus last year and YTD for every month since April 2020 and their average YTD growth rate since 2019 now stands at +10.0%. Through May virtually all channels have now turned positive vs both 2020 and 2019. However, the primary drivers throughout the pandemic were and continue to be Nonstore, Grocery, SuperCenters/Clubs/$ Stores plus a never ending “spring lift” from Hardware/Farm and Sporting Goods.

Now let’s look at what is happening in the individual retail channels to see where the $ are coming from. May beat both April and March, and you will see that one of the increases vs 2020 was again literally “off the charts”. The groups are less defined than in the Final Monthly reports and we will look across the whole market, not just pet relevant outlets.

Sales in 10 of 13 channels were up vs April and 11 were up vs May 2020 $. Only 1 was down vs 2020 YTD while a different channel was down vs 2019 numbers. (Relevant Retail YTD Avg Annual Growth Rate since 2019 = +10.0%)

After hitting bottom in April 2020, Relevant Retail has now beaten the previous year’s $ for 13 consecutive months. The group set an all-time record of $407B in December and finished  2020 +$260B vs 2019. 2021 started strong, with record sales in every month. March > May ranked #2, #4 & #5 of all time. Essential channels are still the primary drivers:

  • Nonstore Retailers – The biggest driver. Online shopping continues to grow in # of households and in $.
  • Food & Beverage – Grocery– Restaurant $ are improving but consumers continue to eat & drink more at home.
  • Bldg Materials/Garden/Farm– Their “Spring” lift continues unabated as consumers focus on their home.
  • SuperCtrs/Club/Value/$ Strs – They keep the GM channel positive. Value is still a major consumer priority.

Regarding the Individual Large Channels (Includes YTD Avg Annual Growth Rate since 2019)

General Merchandise Stores – Sales bounced back in May and all numbers are positive. Department Stores $ remain up vs 2020 but down vs 2019. They were having problems before the Pandemic. After dipping to +7.5% in February, the growth rate by Club/SuperCtr/$ stores has remained near the current 8.7%. These stores are still the key to this channel.

  • YTD Avg Annual Growth: All GM = +6.9%; Dept Stores = -1.8%; Club/SuprCtr/$ = +8.7%

Food and Beverage, plus Health & Personal Care Stores – Sales in Grocery were down in March>May from 2020 – No surprise, as these were 2020 binge months – especially March. The Health, Personal Care group finished 2020 at +1.8%. 2021 has started even better. With strong March > May sales, YTD they are +11.2% vs 2020 and +9.3% vs 2019.

  • YTD Avg Annual Growth: Grocery = +6.7%; Health/Drug Stores = +4.5%

Clothing and Accessories; Electronic & Appliances; Home Furnishings – March, April and May have been spectacular for all these channels. The increase vs May 2020 was again literally off the chart for Clothing. All of these groups were up vs April and remain positive in all measurements vs 2020 or 2019 for the 3rd consecutive month.

  • YTD Avg Annual Growth: Clothing = +2.7%; Electronic/Appliance = +2.3%; Furniture = +10.2%

Building Material, Farm & Garden & Hardware – Their Spring lift began on time in 2020 and has never stopped. They have greatly benefited from consumers focusing on their home needs. They finished 2020 +53B (+13.8%). Sales took off in March, set a record in April then dipped slightly in May. They are +21.1% YTD vs 2020. Avg Annual Growth = +15.0%

Sporting Goods, Hobby and Book Stores – Book & Hobby stores are open but Sporting Goods stores have driven the lift in this group. Consumers turned their attention to personal recreation and sales in Sporting Goods outlets took off. The group ended 2020 +5.5% vs 2019. The growth accelerated in 2021. January > May set monthly records and March had the most $ of any non-December month in history. May YTD they are +55.2% vs 2020. YTD Avg Annual Growth = +17.3%

All Miscellaneous Stores – Pet Stores were deemed essential but most other stores were not, so closures hit this group particularly hard. Sales hit bottom at -$3.8B in April then began to rebound. They finished with a strong December and ended 2020 down $1.0B, -0.7%. In March sales took off and the channel set a new all-time monthly record of $14.3B in May. Their YTD sales are now 33.2% above 2020 and 24.0% more than 2019. It appears that their recovery has become very real. YTD Avg Annual Growth = +11.4%

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV. The pandemic accelerated the movement to online retail. In February 2020 NonStore $ were 8.6% YTD. In December monthly sales exceeded $100B for the 1st time. They ended 2020 at +21.4%, +$162.9B. This was 63% of the total $ increase for Relevant Retail Channels. Their 2020 performance far exceeded their 12.9% increase in 2019 and every month in 2021 has produced record $. May was -0.2% vs April but still +8.2% vs 2020 and YTD $ are +21.0%. YTD Avg Annual Growth = +18.2%

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded with their regular store sales.

Recap – 2020 was quite a year. April & May had the 2 biggest year over year sales decreases in history while December sales broke $600B for the first time. 2021 may become even more memorable. March>May became the 3 biggest $ales months in history with the 3 largest year over year monthly sales increases ever. The total increase was +$513B, almost triple (2.93 times) the -$175B decrease from March>May 2020. At yearend 2020, Restaurants, Auto and Gas Stations were still struggling but Auto had largely recovered. Relevant retail had segments that also struggled but overall, they led the way for Total Spending to finish the year +0.5% vs 2019. 2021 has started out even more positive. The Auto Segment is setting sales records. Gas Stations $, with help from inflation, are now all positive and YTD Restaurant $ are only slightly below 2019. As documented in the report, the recovery in Relevant retail has become real for virtually all channels and monthly sales continue to set records. Retail has recovered. The new question is, “How high can the $ go?”

U.S. PET FOOD SPENDING $37.96B (↑$9.06B): MID-YEAR 2020 UPDATE

Overview of Pandemic Impact on the Survey & Data

The Pandemic has had a tremendous impact on consumers. It also impacted information gathering, including the Consumer Expenditure Survey which is managed by the US BLS and conducted by Census Bureau personnel. After March 8th nothing was done in person. In person Interviews moved online or to phone calls. Hard copy diaries were no longer collected. This process was also moved online or to phone calls where consumers read their diaries to agents over the phone. This had little impact on the interview reports. Initially there was a 5% drop in the response rate but that soon returned to normal. The Diary collection was a different story. The response rate plummeted by 50%. The US BLS immediately added additional households to the survey to make up for nonrespondents. Things improved as consumers and workers adjusted to the new normal, but the initial months were difficult. Through conscientious selection of participants, the US BLS was able to generate unbiased results. The variation for Total Spending in the 2020 report was 0.94% which is actually better than 2019’s 1.2%. That’s not to say that there were not some exceptions. Pet Food was one. The variation is within acceptable levels but is still substantially higher than 2019. We will address this in the Pet Food spending report that follows.

To put Pet Food spending into better perspective, let’s look at the impact of COVID on Consumer income & spending.

INCOME – Avg CU income $83.9K, +3.3%; 61% of the increase did occur in the 2nd half of 2019.

  • Total U.S. Income – $11.0T, Up $318B (+3.0%); 2nd Half 2019 was +$254B; 1st Half 2020 was +$64B.

SPENDING – Avg CU Spending – $61.7K, Down -1.1%; 2nd Half 2019 was +1.0%; 1st Half 2020 was -2.0%  

  • Total U.S. Spending – $8.1T, Down $116B (-1.4%); 2nd Half 2019 was +$108B; 1st Half 2020 was -$224B.

#CUs – 131.4M, Down 403K, -0.3% from a year ago but down 873K, -0.7% from the yearend 2019 all-time high of 132.2M. The onset of the Pandemic slowed the increased in income, but spending flipped negative, which is not unexpected.

Now Pet Food Spending

The report shows Pet Food (& Treat) Annual Spending at $37.96B, up $9.06B (+31.4%). The following charts and observations were prepared from calculations based upon data from that report and earlier ones. The first chart will help put the $37.96B into historical perspective and truly show you the roller coaster ride that is Pet Food Spending.

Here are the current numbers:

  • Mid 2020: $37.96B; $9.06B (+31.4%) from Mid-2019. The net +$9.06B in Mid 2020 came from:
    • Jul>Dec 2019: Up $2.30B from
    • Jan>Jun 2020: Up $6.76B from 2019.

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

The spending drops in 2013 and 2016 were driven by pet parents value shopping for their recently upgraded pet food.

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

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

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

Let’s look at Pet Food spending by the 2 most popular demographic measures – age & income. The graphs are divided into larger groups than usual. This helps to mitigate any reporting anomalies. They still show both the current and previous 12 months $ as well as 2019 yearend. This will allow you to track the spending changes between halves.

The first graph is Income, which has been shown to be the single most important factor in increased Pet Spending. Here’s how you get the change for each half using the $70K+ group as an example:

$70K+ Mid-yr Total Spending Change: $25.10B – $16.82B = Up $8.28B (green outline = increase; red outline = decrease)

  • 2nd half of 2019: Subtract Mid-19 ($16.82) from Total 2019 ($19.01B) = Spending was up $2.19B in 2nd half of 2019.
  • 1st half of 2020: Subtract Total 2019 ($19.01B) from Mid-20 ($25.10B) = Spending was up $6.09B in 1st half of 2020.

  • We see 2 distinct spending patterns. Both have a small increase in the 2nd half of 2019 which is then followed either by a bigger lift or a drop in the 1st half of 2020. The $50>$100K group is the driving force behind the 1st half drop and it was big enough to bring the whole <$100K group down.
  • Perhaps the most obvious fact is the spending disparity due to income. Prior to the Super Premium era, $70K was the “halfway point” in Pet Food spending. In 2013 the under $70K group accounted for 67.8% of CUs and 51.3% of Pet Food spending (Performance: Share $/Share CUs = 75.7%). In the Mid-year 2019 report they had fallen to 59.1% of CUs and 41.8% of Pet Food $ (Performance = 70.7%). In this year’s report their share of CUs continued to drop to 57.0% but their share of Pet Food $ plummeted to 33.9% (Performance = 59.5%). Today’s true halfway point is probably about $120K but I added an under/over $100K measurement to get closer to the halfway point.
  • < $70K > Surprisingly, the Pet Food spending patterns for both groups are the same. Both show a small lift in the second half of 2019 as spending begins to recover from the negative impact of the FDA warning. A larger lift then happens in the 1st half of 2019. The FDA recovery continued but we also see the panic spending due to the onset of the pandemic. Obviously, this binge buying came mostly from higher incomes, who could more easily afford it.
  • < $50K This lowest income group closely matches the spending pattern of the highest income, $100K+ group. While income is increasingly becoming the most important factor in Pet Food Spending, it is not the only factor.
  • $50 > $100K – This middle income group was going along fine, recovering from the FDA warning in the 2nd half of 2019. Then came the pandemic and their spending dropped in the 1st half of 2020. The -$2.31B decrease was big enough to drive their spending for the 12 month period down -$1.85B (-20.0%). Based upon the numbers for <$70K and <$50K groups this drop in spending was equally divided between $50>$70K and $70>$100K. Even in “normal” times these low to middle income groups face a lot of pressure trying balance their manifold responsibilities with their take home pay.
  • $100K+ High income is increasingly becoming “where it’s at” in all Pet Spending. In Mid-2020, it went through the roof for Pet Food, +$9.2B (+80.6%). This is where the binge buying of Super Premium Foods happened.
  • < $100K > Although the actual halfway point for this year’s Pet Food spending is probably about $120K, $100K is much closer than $70K. The $100K+ group has 28.3% of CUs but 54.3% of Food $. (Performance = 191.9%) That’s great performance but 1 year ago it was 149.0%, which is not too bad. If we go back to 2013, the $100K+ group had 18.3% of CUs and 28.7% of Pet Food $. (Performance = $156.3%) This shows that the spending pattern has always been there. However, the single biggest factor is the growth in number of CUs. Since 2013 that has increased by 14.1 million, +61.4%. When you break the $100K income barrier, you spend more on your pets and Super Premium Pet Foods are a great “opportunity” for your added disposable income.

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

Once again, we have bundled segments into larger groups to mitigate the impact of any larger percentages of variation that may be present in smaller segments.

  • We have 3 groups and 3 different patterns so age has a definite impact on spending behavior.
  • Under 35 – This group had a -$0.65B (-13.1%) drop in spending. The drop was basically equal in both halves of the 12 month period. However, most was driven by the <25 group, especially in the 1st half of 2020. Both the 25>34 and <25 groups spent a little less per CU, which may be due to value shopping, but the decline in spending was primarily due to a 2 million decrease in <25 CUs. 83% of this drop (1.7M) occurred in the 1st half of 2020. They likely moved back home with their parents and took their pets with them. This would explain part of the big lift in the 55+ group. Also, the 55+ yr olds likely spent more on premium foods.
  • 35 > 54 – This is the highest income group, but they also have the highest level of career and family responsibilities. They were finishing their FDA recovery in the 2nd half of 2019, +$1.09B. Then came COVID and Pet Food $ dropped -$1.43B. Their income was unaffected, but they dialed back their total CU spending by 2.7% and Pet Food by 11.6%. Much of the 1st half pet food drop was undoubtedly due to value shopping, likely on the internet.
  • 55 and older – This group, which includes all Baby Boomers, had a spending lift in both halves. The $1.52B increase in the second half of 2019 was largely driven by the ongoing recovery from the FDA warning. The spectacular $8.53B lift in the 1st half of 2020 came from a variety of factors. First and foremost was undoubtedly the panic buying of Super Premium pet foods. Remember, these are primarily Baby Boomers, the first Pet Parents. This type of reaction is to be expected. The other factors were a 2.1 million (+4%) increase in CUs and the 2+ million younger CUs who probably moved back home with their parents, bringing their pets with them. The increase was driven by the 55>64 year olds who have the highest income and were best able to handle the situation.
  • Spending in the under 55 group was up slightly in the 2nd half of 2019 but down in the 1st half of 2020. The over 55 group was up in both halves and were the only driver of the massive 1st half increase.

That gives us the “big picture” for our 2020 Mid-year update of Pet Food spending. In a “normal” year we would drill down into the performance of individual segments. However, the variations caused by the initial pandemic information gathering problems show up in individual segments, especially smaller ones. This has less impact on the total numbers but makes comparing segment performance within categories difficult.

The big lift in the 1st half of 2020 may be a little overstated but it comes as no surprise. We all saw pictures of empty shelves from consumers panic buying certain essential items. In the Pet Industry there is no more essential item than Pet Food and the current preference is for Super Premium. It isn’t called Super Premium for no reason. It costs a lot and usually comes in smaller quantities so stocking for a possible emergency can mean spending big bucks.

It also is no surprise that Boomers are behind the big lift. Their unwavering devotion to their Pet Children is what largely built today’s Pet Industry. In my research of the data, I came across an interesting correlation. The overall variation in sampling for Pet Food spending was within acceptable guidelines. The problem showed up in some individual segments.

Here are a few with exceptionally high Pet Food spending and high variation:

  • 55>64 Yr olds (Boomers)
  • Married Couple, oldest child over 18
  • Self-Employed
  • 2 Earners
  • Income $100>150K
  • Live in area <2500 pop.

Based upon our past knowledge, a CU with these characteristics is basically the ultimate Pet Food spending household. These are Super Pet Parents. They are beyond conscientious regarding their pets so it would be expected that they would be the mostly likely to respond to a survey conducted under the difficult circumstances caused by the pandemic. This could give their big $ Pet Food spending a disproportionate share of the sample and significantly drive up the mean. We should also note that this big variation was in Pet Food and not widespread in their responses. The variation in Total Spending was low for these segments with a high of 3.27%. All others were below 2.5%. This means that the US BLS and Census Bureau successfully conducted a survey that was demographically representative with no overall bias. The pet food spending may be a little high, but it is extremely likely that there was a big lift in the 1st half of 2020.

We are left with the usual answer in the Pet Industry…It was the Boomers. They get the credit for the big lift and possibly the “blame” for the big variation.

Even with new techniques, the sampling response returned to a more normal level in the 2nd half of 2020. We look forward to seeing the full year data for 2020 in September.

PET PRODUCT $ALES ACROSS U.S. RETAIL CHANNELS The Migration of “Pet Parents” – 1992 to 2017

Pets, Pet Food and Supplies sales have shown tremendous retail growth since 1992. According to the Economic Census, which is conducted every 5 years by the U.S. Census Bureau, retail sales totaled $51.32 Billion in 2017 – up from $8.2 Billion in 1992. The spectacular growth was fueled by Americans’ growing love and commitment to their pets. 67% of U.S. Households have a pet – twice as many as have a child under 18.

While the love was growing in our hearts, the sales of pet products were growing at retail. It was not a simple journey –straight to the top. It involved expansion to a variety of different outlets and consumer migration between channels driven by their search for value, convenience and selection.

In this report we will use detailed data from the Economic Census to update our ongoing analysis through 2017.

Here is a visual look at the growth since 1992. I have also included a line on the graph which is adjusted for “petflation” and gives us a better indication of the actual increase in the amount of product sold.

Retail Growth 1992 to 2017

  • 1992 > 2017: Up $43.12B (+525.9%); Avg Growth = 7.6%
    • 1992 > 2012: Up $32.27B (+394.8%); Avg Growth = 8.3%
    • 2012 > 2017: Up $10.85B (+26.8%); Avg Growth = 4.9%

Real Growth 1992 to 2017 (Adjusted for petflation – Pet Food & Supplies CPI)

  • 1992 > 2017: Up $25.16B (+306.8%); Avg Growth = 5.8%
    • 1992 > 2012: Up $17.78B (+216.8%); Avg Growth = 5.9%
    • 2012 > 2017: Up $7.38B (+28.4%); Avg Growth = 5.1%

Note: Most of the growth (76.3%) in Pets, Pet Food and Supplies has been real growth. Pet Products Prices increased 53.8% in the 25 years from 1992 to 2017 compared to an increase of 74.6% in the Total U.S. CPI and a 138.6% increase in Pet Services Prices (Vet & Non-Vet combined) in just the 20 years from 1997 to 2017.

Pricing in Pet Products was an issue from 2007 to 2009 when prices jumped 17% in just two years, in the heart of the recession. Consumers started searching for value. This was a key point in Pet Products channel migration. On the flip side, from 2012 > 2017 Pet Products prices fell -1.25%. Although the growth rate during this period was down from the long term average, the increase in the amount of Pet Products purchased was actually greater than the $ increase.

We’ll stay with the total market and look at some key factors that have affected the overall growth since 1992.

Here’s how each factor changed during each of the five year measurements since 1992.

1992 to 1997 – No growth in outlets or in retailers’ share of overall market. The big growth was increased store volume due to increased consumer product demand – which was filled by expanded departments and bigger pet stores.

1997 to 2002– A 27% increase in number of outlets and a 15% increase in per store volume pushed sales up 45%. A huge increase in the representation of Pet in the overall market as it became available in stores doing over 35% of total retail.

2002 to 2007 – Store count continues to grow – up 18% and the per/store volume goes up even faster – +21%. Sales are up 43%. The overall Retail Market Share of outlets selling products remains stable at 35%.

2007 to 2012 – Another 18,000 stores (+14%) and a huge increase in per store volume (+32.4%). Consumers have started shopping intensely for value since the recession…and they found it as sales increased 50%. It was also easier to find products in a store, as outlets doing 47% of the total U.S. Retail market stocked pet supplies in 2012.

2012 to 2017 – Sales Growth slowed markedly to 26.8%. There were 12.600 more stores but +7.8% was much less than in the past. Pet Products stocking stores also loss share of the overall market but are still over 43%. It looks like this drop occurs regularly every 10 years. The $ lift was primarily due to a 17.7% increase in $ales per store – still relatively strong.

1992 to 2017 – Sales Now $51.3B; Up $43.1B (+525.9%)

  • 160,282 “pet” outlets; Up 74,101 (+86.0%)
  • Outlets stocking “pet” do 43.4% of U.S. Retail.
  • Pet Products do 3.5% of an outlet’s total sales.
  • Pet Products = 1.5% of Relevant Retail; 0.7% in 1992

Now, let’s see how the consumers decided to divide up their Pet Products $.

PET PRODUCTS SALES AND MARKET SHARE BY RETAIL CHANNEL

This chart shows the shows in detail the # of outlets, total pet product $ and market share of the retail channels and segments stocking pet products from 1992 to 2017. Use it as a reference point. Additional charts will follow.

99.3% of Pet Products Sales are done by 5 major Retail Channels. Let’s look at their market share from 1992 to 2017.

Drug Stores were included for historical reference. In 1992, they had a bigger share than Nonstore and Hdwe/Farm combined. Now their $ and share are below Gas Stations. 5 Major channels account for 99.3% of Pet Products $.

Observations

Drug and Health Stores – They were once a small, but notable force in Pet Products sales. However, except for an uptick in 2012, their share of Pet Products $ has generally declined. Their Pet Products Sales are now basically impulse or convenience purchases, a pattern similar to that for Gas Stations and Convenience Stores.

Hardware and Farm – Early growth came from the Farm Store segment. Hardware jumped on board in 2002 and pushed the market share up to 5.4%, capturing 40% of this channel’s pet business. The overall share stayed fairly stable from 2002 to 2012 then plunged in 2017 due to huge drop in Hdwe/Home Centers Pet Products $. While Farm Stores $ have consistently grown since 1992, Hdwe/Home Ctrs have been on a true roller coaster ride since 2002.

Food and Beverage – Supermarkets account for 98% of the business in this channel. In 1992 Supermarkets were the #1 Pet channel, with 42.1% of the business. They increased their business 9.5% in 1997. Unfortunately, overall “Pet” sales took off – up 55%, so their market share fell 30%. Sales stagnated in 2002 and actually dropped in 2007. Needless to say, their market share continued to plummet – down 73% from the 1992 high. Where did the business go? – just about everywhere else, but primarily to General Merchandise Stores and Pet Stores. Then from 2007 to 2012 they executed a remarkable turnaround.  The number of Supermarkets carrying pet products increased by over 70%. They more than doubled their pet sales and gained back 3.6 points in market share. However, 2012 to 2017 brought another turnaround – a negative one. The number of Supermarkets carrying Pet Products fell -12.5% and their Pet Products $ dropped -$725M (-12.2%). Their market share is at an all-time low of 10.2%, which is 76% below 1992. Some of the business may have been lost to SuperCtrs/Clubs or even Pet Stores, but most probably migrated to the Internet.

Nonstore Retailers – This channel includes both mail order and the internet. The increases in pet products $ have been truly astronomical. Sales in 2017 are 100 times what they were in 1992 and their Market share is up over 1500%. Since 2007 and especially since 2012 the growth has been fueled by the internet. In the years up to and including 2012 the internet/mail order share of Pet Products $ mirrored their share of Total Retail $. However, they have stepped up in Pet Products since then. Internet/Mail order now sells 18.8% of Pet Products $, compared to 16.1% of total relevant retail $.

Pet Stores – In 1992 Pet Stores were the second largest retail channel selling pet products. The category caught fire. Big Box Pet Super Stores were developed and built to offer the consumer the wider selection that they sought. In 1997, due to the growth of chains, Pet Stores moved into the #1 position with a 40.5% share of the business. The proliferation of Super Stores resulted in the closing of a number of smaller Independents, so the number of stores and market share dipped slightly to 38.0% in 2002. They were still #1 but now they were being strongly pursued by General Merchandise Stores – not Supermarkets.  More Super Stores, along with a continued high consumer demand, brought their market share back up to 39.0% in 2007. They had maintained the #1 status with a market share of 38 – 40% for over 10 years. Then…the recession happened, and consumers became focused on value. Their store count was the same and sales grew but their market share fell 5.9 points (-15.1%). On the surface, it appears that the bulk of the business went to Grocery and Internet/Mail-order but almost every major channel and a few minor players got a piece of their lost share. Things certainly changed in the period from 2012 to 2017 as the world, including retail began to move increasingly online. Pet Stores not only held their ground, but they also actually had a slight gain in share. They capitalized on Pet Parents desire for personal interaction in pet products purchases along with their desire for the convenience of one stop shopping. More Pet Stores began offering grooming services and some even added Veterinary services. They will never beat Internet product prices, but you can’t get your dog groomed online!

Minor Players – Although their combined market share is under 1%, the widespread appeal of Pets has brought in retailers from a variety of other “Specialty” channels – Home Goods (Furniture), Value Clothing Stores, Sporting Goods, Gift…to name a few. Although their selection is generally limited, they do broaden the consumer availability of certain pet product categories in the overall U.S. Retail Market. The success or failure of their venture into the Pet Products world is usually dependent upon the overall success of the individual retailer. If they are attracting consumers and their business is growing, then they may have some success with Pet. After all it appeals to 67% of U.S. households.

General Merchandise Stores – Currently they are hanging on as the #1 major channel in Pet Products sales. This group enjoyed strong to spectacular growth from 1992 to 2007. The number of outlets grew from 10K to 37K (+250%); sales grew $8B to $9.5B (+533%); market share grew from 19.1% to 35.3% (+83.9%). From 2007 to 2012, the number of outlets continued to grow, and sales increased to $14.2B (+49.5%) but their market share actually fell 0.1%…Yet, they still took over the #1 position in Pet…by just matching the overall market increase. From 2012 to 2017, their number of outlets and sales grew but couldn’t keep up with the internet, so their share fell. There were also some changes within the segments in terms of product mix and classification. This is a large and complex channel and deserves a closer look.

All Department Stores – Stores have been classified as either Traditional Department Stores, like Macy’s or J.C. Penney or Discount Department Stores, like Wal-Mart or Target. For the Economic Census that has changed.

Traditional Department Stores Although they do 8% of this channel’s overall business, they are basically a nonentity in Pet Products. These stores have consistently loss market share as they have done little to meet the consumer’s changing “needs” – including failing to recognize and embrace the Pet Phenomenon in the U.S.

Discount Department Stores – This segment is the one that started the decline in traditional Department Stores. In terms of Pet Market Share, these stores were at their peak in 1992. The commitment to SuperCenters and the rise of Club Stores started their decline. Sales continued to increase until 2002 and there was even a little uptick in market share between 2002 and 2007. From 2007 to 2012 sales flattened out and the number of outlets fell. In 2012 they were surpassed by the Dollar/Value stores in Pet Products’ market share. Between 2012 and 2017 the corporate owners decided to revise the product mix in many of these outlets. The continued growth in sales by Super Centers convinced them to add increasing quantities of fresh groceries to the product mix. Although the fresh offering is not as extensive as Super Centers it became significant. For the Economic Census, it was decided to eliminate the Discount Department Store Classification. Most of the existing outlets were classified as Super Centers. Those with an insignificant fresh grocery segment were lumped in with All Department Stores which included the traditional stores. The result was that Pet Product sales in the all department stores segment now mirrored that of the traditional stores – essentially zero.

SuperCenters & Warehouse Club Stores – This segment has been a retail winner since it came into play in the 90’s. It has shown consistent, even spectacular growth and in every measuring period its % increase in Pet Products $ has surpassed even the impressive growth rate of the overall Pet Products market. In 2007 they moved up in rank to #2, behind only Pet Stores in sales. Their pet products sales and share growth slowed from 2012>2017 and much of the growth from 2012 to 2017 must be attributed to the reclassification of many Discount Department stores. In fact, in 2012 the combined Pet Products $ share of SuperCtr/Clubs and Discount Dept Stores was 29.6%. In 2017, the share of all stores classified as SuperCtr/Club outlets was 27.0%. Like almost everyone else, this group lost $ to the internet.

$ Stores/Value Retailers – This channel was originally occupied by 5&10¢ Stores. They faded and were replaced by these Value Retailers. Since 1997, the store count and Pet Product sales have gone up dramatically. Their appeal and their share of the total market has grown markedly since the recession. In terms of number of outlets selling Pet Products, in 2017 they passed Supermarkets to take over the top spot. Their sales and market share also grew so they now rank #5 in Pet Products sales. Unlike most channels, they gained ground, in the internet wave.

Speaking of the internet wave, let’s take a closer look at the specifics for 2012>2017. First, the major channels Here’s the 2017 market share by Channel: (Arrows show if they are up , down and by how much in share from 2012)

  • GM Strs: 33.6% ↓1.6
  • Pet Stores: 33.3% ↑0.2
  • Nonstore Retailers: 19.0% ↑9.5
  • Food & Bev (Groc): 10.4% ↓4.6
  • Hdwe & Farm: 3.0% ↓2.3
  • All Other: 0.7% ↓1.2

Only Pet Stores held their ground and even gained a little in the Internet tsunami.

Now let’s look at the individual segments in terms of 2017: (Same rules as above)

  • Pet Stores: 33.3% ↑0.2
  • SuperCtrs/Club: 27.0% ↑2.9
  • Internet/MailOrder: 18.8% ↑9.6
  • Supermarkets: 10.2% ↓4.5
  • $ Value Strs: 6.5% ↑0.9
  • Farm Stores: 2.6% ↓0.5
  • Gas/Convenience: 0.5% ↓0.3
  • Hardware: 0.3% ↓1.9
  • Drug Stores: 0.3% ↓0.7
  • Other Nonstore: 0.2% ↔0.0
  • Furniture/Home: 0.1% ↓0.2
  • All Dept Strs: 0.03% ↓5.47

 The story is a bit more complex, and the specifics can be a little bit misleading. The gain by SuperCtrs/Clubs was largely due to the assimilation of many Discount Department Stores into this channel. The combined share of these two channels was 27.0% in 2017. That’s down -2.6% from 29.6% in 2012. There was also another winner – $ Value Stores. Consumers love the value and convenience of these outlets and they continue a rapid expansion in numbers.

The move to the internet is definitely a trend. Let’s look at some major trends that have impacted and continue to affect Pet Product Sales over the 25 years from 1992 to 2017.

There are 3 driving forces in consumer spending behavior:

  • Value (quality + price) – Looking for a deal.
  • Convenience – Make shopping easy.
  • Selection – They want choices. 

With that in mind, let’s look at the trends indicated by our analysis:

  1. The biggest trend is Value. It has shown consistent growth in importance and has been the single biggest factor since 2007. The channels that focus on Value are SuperCtr/Clubs, $ Stores and Internet/Mail order. They are definitely winning.
  2. One Stop Shopping is all about convenience. This is the second biggest driver and explains the ongoing success of SuperCtr/Clubs and the Internet. Supermarkets began this trend in the late 1970s by radically expanding their Gen Mdse sections in an effort to fulfill this consumer need.
  3. Groceries in the store. In 1992 consumers bought most pet products where they shopped for groceries – Supermarkets. In 1997 Supermarkets lost the top spot to Pet Stores. The GM Channel was also growing at this time and SuperCtr/Clubs also offered full grocery sections. Since 2012, consumers have come full circle and once again buy most Pet Products where they shop for groceries.
  4. The rise of Pet Super Stores and chains took off in the 90s. Their huge selection of Pet Products had a great appeal to the new generation of Pet Owners – Now Pet Parents. Pet Stores became the single biggest channel for Pet Products sales in 1997. Their success caused other channels to expand their Pet Sections. Pet Stores lost some ground in 2012 but they held onto the top spot and even gained share in 2017 by offering more Pet Services in store. They appealed to the consumer with 1 stop pet shopping.
  5. Internet – Their success should be no surprise. The game plan for online retailers exactly fits the consumers “wish list”. Great Prices! Shop without leaving home. Plus, a nearly unlimited selection

Summary

The underlying cause behind migration is evolution. In the migration of Pet Products there are two key evolutions taking place. The first is the evolution of Pet Owners to Pet Parents. Pet Parents are much more concerned about fulfilling the wants and needs of their Pet Children. This transformation took hold in the 90’s and accelerated during the early 2000’s when Pet Parents increasingly personified their pets. They began reading labels, became increasingly concerned about nutrition and now generally transfer human needs to their pet children. This movement continues to grow stronger.

The other evolution occurred in the retail marketplace and with all consumers. Consumers became less brand driven in their purchasing behavior and more concerned about value, convenience and selection. The great recession further cemented Value at the top. Online shopping was growing far before the pandemic moved it to the retail forefront.

We see the migratory results of the ongoing evolutions in our analysis.  In the 90s Pet Super Stores grew rapidly because they offered an unparalleled, broad selection of products to the ever increasing number of Pet Parents who were ready, willing and able to buy. Their success caught the attention of other retailers who expanded their Pet Products offerings. SuperCenters and Clubs were also growing strong at this time because these huge stores offered great Value and 1 stop shopping for groceries and a wide selection of GM categories, including Pet.

Everyone wants value but sometimes you don’t want to fight the crowds  – $/Value Stores are the answer. Great everyday prices plus brand name “close outs” in a small footprint store that is easy to navigate. Plus, they carry Pet Products. They continue to add stores and currently have more outlets stocking pet items than any other channel.

That brings us to the Internet, our most recent and largest migration, +9.6% gain in share. Want a bigger selection…. Go online. No one can build a store big enough to stock the selection of products available online…and with no brick and mortar overhead…you can get great value. Plus, you can shop for the best price and get what you want without ever leaving your easy chair…talk about convenient.

At this point, Pet Products have grown in importance and spread across the U.S. retail landscape. Consumer $ales are $51.3B, +525% from 1992. They are available in 160K outlets, up from 86K in 1992. They also account for 1.5% of Total Relevant Retail $, compared to 0.7% in 1992. The migration will continue. Brick ‘n Mortar Businesses need to adapt in the current internet surge. They must have an online presence and offer delivery and same day pickup in store/curbside if possible. Pet Stores have a unique advantage as they can offer pet services and personal interaction with Pet Parents and their pets – which can’t happen online. We’ll see how everyone adapts and what changes the next chapter brings.

Retail Channel Monthly $ Update – March Final & April Advance

It has been a full year since the Retail market bottomed out in April 2020, so this month’s retail update is particularly significant. Consumer spending behavior continues to evolve. In this report we will track the changes, migration between channels and the retail recovery 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 – about 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.

We will begin with the Final Retail Report for March and then move to the Advance Retail Report for April. Remember, the maximum retail impact of the pandemic occurred in April 2020, but it began in March. We will compare 2021 to both 2020 and 2019 to document the progress that the retail market has made towards a full recovery.

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 2020 and 2019
  • Current YTD change – % & $ vs 2020 and 2019
  • Monthly and Year To Date $ will also be shown for each group/channel

First, the March Final. Retail hit bottom in April but began recovery, hitting record $ in December. In January & February $ fell but were still records for those months. Sales skyrocketed in March, beating December for a new all time $ record. Here are the major retail groups. (All Data is Actual, Not Seasonally Adjusted)

The final total is $2.0B more than the Advance report projected a month ago. All Groups but Relevant Retail were up. The specifics were: Auto: +$1.7B; Restaurants: +$0.9B; Gas Stations: +$0.8B; Relevant Retail: -$1.2B. All groups were up vs February and Total Retail set a new monthly record of $629.9B. Total $ales broke $600B for the first time in December and set individual monthly records in both January and February thanks to strong performances by Relevant Retail and Auto. In March, all groups contributed to the new monthly record and all, but Restaurants were positive in all measurements. Restaurants are still slightly negative vs 2019 and YTD but overall, Retail is strongly recovering.

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

  • Overall– All 11 channels were up vs February and 10 of 11 were up vs March 2020 and March 2019. In YTD $, 10 were up vs 2020 and 9 vs 2019. March was a strong month, both overall and in the details.
  • Building Material Stores – Their amazing lift continues. The ongoing surge came as a result of pandemic spending patterns developed in 2020. Consumers began focusing on their homes. They’re still showing 20+% increases, with Farm Stores leading the way with 30+% increases in all measurements. Sporting Goods stores are not in this group but have a similar spending pattern. Sales took off in May, hit a record peak in December and continued strong into 2021, spiking in March. Compared to 2019, they are +67.6% vs March and +51.6% YTD
  • Food & Drug – Supermarkets finished 2020 up +$77.7B. Sales are up vs February but down vs the March 2020 binge. They are up YTD vs 2019 but about even with 2020. Drug Stores ended up +$17B (+5.7%) for 2020. Their $ fell in January and February but March $ set a new record. All measurements are positive and YTD $ are +3.0%.
  • General Merchandise Stores – $ in all channels had been falling from their December peak but sales in March grew 25% from February. Discount Department Store were having problems even before the pandemic, but they led the way in the March lift, +34.9% vs February. Clubs/SuperCtrs and $ Stores remain strong. These channels promote value. Their success in all measurements reinforces its importance in Consumer spending decisions.
  • Office, Gift & Souvenir Stores– March brought a big $ lift…finally. They were hard hit by the pandemic and still have negative numbers vs 2019 – monthly and YTD. Recovery is still a long way off but might be on the horizon.
  • Internet/Mail Order – The pandemic has accelerated this channel’s growth. Last March they were up 12.5% YTD vs 2019. This year they are up 46.6%. The pandemic lift spending pattern basically doubled the rate of increase.
  • 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>24% of total $). Pet Stores were usually essential, but most stores were not. Stores began reopening in May and the $ grew. Their 2020 total sales were up +11.6%. March YTD sales are +$4.8B (+23.2%) vs 2020 and +$7.6B (+42.8%) vs 2019. Recovery is here and with continuing growth!

The Relevant Retail Segment began recovery in May, reached a record level in December, then $ fell in January & February. March set a new monthly record and virtually all members of this group are showing growth. Currently the key drivers are the Internet, SuperCtrs/Clubs/$ Stores and Hdwe/Farm. Now, here are the Advance numbers for April.

2020 will always be a memorable year for both its traumas and triumphs. In April & May we experienced the 2 biggest retail spending drops in history, but the problems actually began in March. Sales increased slightly from February but were $34.1B less than March 2019. Retail sales began to recover in June and in October, YTD Total Retail turned positive for the 1st time since February. In December, Total Retail broke the $600B barrier – a historic first. While sales fell from their December peak, monthly sales records were set in both January and February. Then they took off again in March, breaking $600B again while setting a new monthly sales record of $627.9B. April sales were down slightly but were the second highest in history. April Sales from all the major groups were close to March $. YTD Restaurant $ were down slightly from 2019. This is the only negative vs 2020 or 2019 for any group. In April of 2020 Retail sales fell $100B from 2019, the biggest monthly year over year drop in history. In March 2021 sales were up $152B over 2020. In April, the increase over 2020 was $209B. Certain retail segments and other areas of the economy are still suffering, and spending habits have changed but the overall Retail marketplace has recovered and is stronger than ever.

Total Retail – In March, Total Retail set a record for the most spending in any month in any year. In April, $ales dipped by -$13.2B (-2.1%) to $616.7B but were still $209.5B (51.4%) more than April 2020 – a new record increase, double the size of last year’s record drop. If you compare the YTD 2021 spending to 2019, you see an increase of $334.8B (+17.4%). That is an average annual spending increase of 8.4%. If you just looked at these strong topline growth numbers, you would not suspect that a retail spending crisis had ever happened. Always look below the surface.

Restaurants – This is the only big group with any negative measurements. Last February YTD sales were up 8.1% vs 2019. The Pandemic changed that. Restaurants started to close or cease in person dining in March and sales fell -$33.3B (-52.5%) compared to March 2019. Sales bottomed out in April at $30.1, the lowest April sales since 2003. Sales started to slowly increase in May but never reached a level higher than 88% compared to the previous year. 2021 started off slowly. Through February,  YTD sales were down -16.7% from pre-pandemic 2020 and -10.0% from 2019. In March sales took off. They grew slightly in April but were more than double April 2020 and even ahead of 2019. YTD their $ are ahead of 2020 but still $10.8B (-4.4%) behind 2019. They are not “there yet” but their recovery is strengthening.

Auto (Motor Vehicle & Parts Dealers)   – Staying home causes your car to be less of a focus in your life. Sales began to fall in March 2020 and hit bottom in April. Auto Dealers began combating this “stay at home” attitude with fantastic deals and a lot of advertising. It worked. They finished 2020 up 1% vs 2019 and have returned to a strong positive pattern in 2021. The “attitude” grew amazingly positive in March and slowed only slightly in April as sales exceeded $142B in both months, by far the 2 biggest months in history. To show how well consumers responded to their campaign you just need to look at the data. This group has exceeded $110B in monthly sales only 10 times in history. 8 of those occurred after the onset of the pandemic.  YTD Avg Growth Since 2019 = +12.6% – the best performance of any big group.

Gas Stations – Gas Station $ales have been a mixed bag. If you drive less, you visit the gas station less often. Sales turned down in March 2020 and reached their low point in April. They moved up but generally stayed about 15% below 2019 levels for the rest of 2020. In February they were still behind 2020 in monthly and YTD $ but ahead of 2019 in both measurements. In March, sales skyrocketed. They increased only slightly in April but were 77.4% above the April 2020 “bottom”. They have been positive in all measurements vs both 2019 and 2020 since March. Their comeback continues but there is another factor that must be considered – inflation. Gas prices can be pretty volatile. They dipped in the first 2 months of the pandemic but then returned to more normal levels for the balance of 2020. They began strongly inflating in 2021, peaking in April. The April 2021 prices were 49.6% above April 2020. That means that 64% of the 77.4% year over year lift came from just higher prices. Analyzing retail can be complicated. YTD Avg Growth = +2.9%

Relevant Retail – Less Auto, Gas and Restaurants – This is what we consider the “core” of U.S. retail and has traditionally accounted for about 60% of Total Retail Spending. When you look at the individual channels in this group, you see a variety of results due to many factors – non-essential closures, binge buying, online shopping and a consumer focus on “home”. However, overall, April 2020 was the only month in which spending in this group was down vs 2019. Monthly $ales exceeded $400B for the first time ever in December ($407B). They finished 2020 up $260B, +7.1%. Their performance was the only reason that Total Retail was able to finish 2020 with positive numbers, +0.5%. Sales fell in January and February but continued to set monthly records. In March they turned sharply up again but dipped slightly in April. Currently, they are up $80.1B, +28.5% vs April 2020 and  +$195.5B, +16.8% YTD. We should note that March ($371.8B) and April ($361.0B) spending were the third and fourth highest monthly totals of all time, trailing only December 2020 and December 2019. We should also note that the Relevant Retail group has posted positive numbers versus last year and YTD for every month since April 2020 and their average YTD growth rate since 2019 now stands at +9.8%. Through April virtually all channels have now turned positive vs 2020 and 2019. However, the primary drivers throughout the pandemic were and continue to be Nonstore, Grocery, SuperCenters/Clubs/$ Stores plus a never ending “spring lift” from Hardware/Farm and Sporting Goods.

Now let’s look at what is happening in the individual retail channels to see where the $ are coming from. April was not as big as March, but you will see that some of the increases vs 2020 are literally “off the charts”. The groups are less defined than in the Final Monthly reports and we will look across the whole market, not just pet relevant outlets.

Sales in only 2 of 13 channels were up vs record March $ but Only 1 channel was down vs March 2020 $ and 2020 YTD. A different channel was down vs 2019 numbers. (Relevant Retail YTD Avg Annual Growth Rate since 2019 = +9.8%)

After hitting bottom in April 2020, Relevant Retail has now beaten the previous year’s $ for 12 consecutive months. The group set an all-time record of $407B in December and finished  2020 +$260B vs 2019. They started 2021 strong, with record sales in every month including #3 and #4 all time in March & April. Essential channels are still the primary drivers:

  • Nonstore Retailers – The biggest driver. Online shopping continues to grow in # of households and in $.
  • Food & Beverage – Grocery– Restaurant $ are improving but consumers continue to eat & drink more at home.
  • Bldg Materials/Garden/Farm– Their “Spring” lift continues unabated as consumers focus on their home.
  • SuperCtrs/Club/Value/$ Strs – They keep the GM channel positive. Value is still a major consumer priority.

Regarding the Individual Large Channels (Includes YTD Avg Annual Growth Rate since 2019)

General Merchandise Stores – Even though sales dropped in April, all other numbers remain positive. Department Stores $ remain up vs 2020 but down vs 2019. They were having problems before the Pandemic. The growth by Club/SuperCtr/$ stores has slowed to +7.4% in April, down from +14.7% in January but these stores are still the key.

  • YTD Avg Annual Growth: All GM = +5.7%; Dept Stores = -2.9%; Club/SuprCtr/$ = +7.4%

Food and Beverage, plus Health & Personal Care Stores – Sales in Grocery were down in March and April from 2020 – No surprise, as these were 2020 binge months – especially March. The Health, Personal Care group finished 2020 at +1.8%. 2021 has started even better. With a strong March & April, YTD they are +7.8% vs 2020 and +8.5% vs 2019.

  • YTD Avg Annual Growth: Grocery = +6.6%; Health/Drug Stores = +4.2%

Clothing and Accessories; Electronic & Appliances; Home Furnishings – March & April have been spectacular for all these channels. The increases vs April 2020 were literally off the chart for Electronics and Clothing. All of these groups are now positive in all measurements vs 2020 or 2019.

  • YTD Avg Annual Growth: Clothing = +0.6%; Electronic/Appliance = +2.0%; Furniture = +10.4%

Building Material, Farm & Garden & Hardware – Their Spring lift began on time in 2020 and it has never stopped. They have greatly benefited from consumers turning their focus to their home needs. They finished 2020 +53B (+13.8%). Sales took off in March and increased in April. They are +32.9% vs April 2020 and +25.5% YTD. Avg Annual Growth = +15.2%

Sporting Goods, Hobby and Book Stores – Book & Hobby stores are open but Sporting Goods stores have driven the lift in this group. Consumers turned their attention to personal recreation and sales in Sporting Goods outlets took off. The group ended 2020 +5.5% vs 2019. The growth accelerated in 2021. January > April set monthly records and March had the most $ of any non-December month in history. In April they are +59.4% vs 2020. YTD Avg Annual Growth = +17.2%

All Miscellaneous Stores – Pet Stores were deemed essential but most other stores were not, so closures hit this group particularly hard. Sales hit bottom at -$3.8B in April then began to rebound. They finished with a strong December and ended 2020 down $1.0B, -0.7%. In March and April sales took off. April sales were only up 0.6% from March but +87.4% from April 2020. Remember, only 2 channels had a March>April increase. Their YTD sales are now 30.4% above 2020 and 27.0% more than 2019. It appears that their recovery has become very real. YTD Avg Annual Growth = +12.7%

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV businesses. The COVID-19 crisis accelerated the movement to online retail. In February 2020 NonStore $ were 8.6% YTD. In December monthly sales exceeded $100B for the 1st time. They ended 2020 at +21.4%, +$162.9B. Their increase was 63% of the total $ increase for Relevant Retail Channels. Their 2020 performance far exceeded their 12.9% increase in 2019 and every month in 2021 has produced record $. April is +14.2% vs 2020 and YTD $ are +20.8%. YTD Avg Annual Growth = +18.7%

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded with their regular store sales.

Recap – 2020 was quite a year. April & May had the 2 biggest year over year sales decreases in history while December sales broke $600B for the first time. 2021 may become even more memorable. April and March had the 2 biggest year over year monthly sales increases in history. The total increase was +$361B for these 2 months, more than twice the -$175B decrease in the 3 months from March>May 2020. In 2021, March and April also took the top 2 spots for monthly sales. At yearend 2020, Restaurants, Auto and Gas Stations were still struggling but Auto had largely recovered. Relevant retail had segments that also struggled but overall, they led the way for Total Spending to finish the year +0.5% vs 2019. 2021 has started out even more positive. The Auto Segment is setting sales records. Gas Stations $ are now all positive and YTD Restaurant $ are only slightly below 2020 and 2019. As documented in the report, the recovery in Relevant retail has become real for virtually all channels and monthly sales continue to set records. Retail recovery is here…now!

Comparing the Spending Demographics of the Industry Segments – SIDE BY SIDE

The first six reports of our Pet Spending Demographics analysis have been very detailed, data driven and intense. We looked at the industry as a whole and each of the individual Industry segments separately. Recent years have seen some turmoil. 2017 was a year of Value and consumers responded with a $9.8B Pet spending increase. In 2018 we saw the very real impact of outside influence on the industry as the FDA warning on grain free dog food caused an immediate $2.3B drop in spending in the second half. New tariffs also flattened spending in Supplies in the second half. However, there was some good news. Veterinary Spending grew slightly but Services had a record increase. That brought us to 2019. Food had a strong rebound, but the impact of the Tariffs really hit home. Supplies $ fell a record $2.98B. Services had a small decrease but essentially remained stable at their new higher spending level. Veterinary $ also had another small increase but a high inflation rate actually caused the amount of Veterinary Services to fall. The result was a net decrease of 0.2% in Total Pet $. So, the turmoil continued but so did the youth movement. There were some exceptions, but Pet Spending continued to move away from Baby Boomers and towards the younger groups, especially Gen X.

We have often referenced the similarities and differences in spending between Total Pet and the individual industry segments. Total Pet Spending is a sum of the parts and not all parts are equal. In this final report we are going to put the segments side by side to make the parallels, differences and changes from 2018 more readily apparent. We will address:

  • “The big spenders” – those groups which account for the bulk of pet spending.
  • The best and worst performing segments in each of twelve demographic categories
  • The segments with the biggest changes in spending $ – both positive and negative
  • And of course, the “Ultimate Spending CUs”

The emphasis is on “visual” side by side comparisons to allow you to quickly compare the industry segments. We’ll try to minimalize our comments. You can always reference one of the specific reports for more details. We’ll also break the charts up into smaller pieces that are demographically related to make the comparison more focused and easier.

Before we get started, let’s take a look at the current market share of the industry segments. The following 2 charts show the 2019 share of spending for each segment and the evolution over the past 27 years. 1992 was the last year that the Food Segment accounted for 50% of Total Pet Spending. By the way, Total Pet Spending was $16.2B in 1992. We have come a long way – +384%; annual growth rate of 6.01%. This will help put our comparisons into better perspective.

Food: 39.8%; Up from 36.7%

Supplies: 21.4%; Down from 25.2%

Veterinary: 27.8%; Up from 27.0%

Services: 11.0%; Down from 11.1%

The Food segment rebounded to almost 40% of Pet $. Back in 2015 it was 43.5%, the highest level since 1998. At the same time, Pet Supplies fell to 21.4%, the lowest level since 2002. This is at least a short term reversal of the most visible long term industry trend – the decline of Food share as Supplies gained in importance. This began in the 90’s when Pet Owners became Pet Parents. At the same time, Pet Chains and Super Stores came to the forefront and there was a big Pet Product expansion into the Mass Market. In 2019 Veterinary spending had a slight gain, but it has been the most stable through the years. After the big lift in 2018, Services held onto to their new level of importance. Food trends and the impact of petflation on Supplies have put the Product segments on a roller coaster ride in recent years.

Now let’s get started with a look at the “Big Spenders”. The following 2 charts will compare the market share and performance in all Pet Industry segments by the groups responsible for the bulk of the spending in 10 demographic categories. These are the groups that we identified in our Total Pet analysis to generate at least a 60% market share of spending. As you recall, in Pet Services, we had to alter two groups slightly to better target the spending. However, to have a true side by side comparison we need to use the same groups for all. The market share dips below 60% in 2 cases, to a low of 57.0%. This lowest share is related to Veterinary CU Composition and is primarily due to a spectacular year by Singles. The other is in Services and reflects the urban nature of the segment. Even the low point is within 5% of our target and 96% of all measurements meet or exceed the 60% requirement, so the comparison is very valid.

The chart makes it especially easy to compare performance across categories. Remember, performance levels above 120% show a very high level of importance for this category in terms of increased spending. Unfortunately, it also indicates a high spending disparity among the segments within the category. There are 2 charts, each with 5 categories.

  • White, Non-Hispanic – This group has an 84+% market share in every Segment. Minorities account for 31.4% of CUs but only 9 to 15% of spending in any segment. Factors: Lower income for Hispanics and African Americans and lower Pet ownership in Asians and African Americans. They had a slight share gain in Total with larger gains in Services and especially Food. Veterinary was unchanged but the Supplies share plummeted, replacing Food on the bottom.
  • Homeowners – Homeownership is very important in Pet Ownership and subsequently in all Pet Spending. It also increases with age. This group’s share of Total Pet bounced back after falling below 80% for the first time in 2018. Veterinary again held its ground, but Food and Services had share increases of 4%. Supplies lost 3 points in share and is now the only segment under 80%. Homeowners with or w/o a Mtge were up in Food and down in Supplies. Their results were mixed in the Service segments. Renters spent less in all segments but Veterinary.
  • 2+ People in CU2 is the magic number in pet ownership. This year, all segments but Food fell in share and performance because Singles had another good year. This group is still under 120% because spending peaked at 3 person CUs in all segments, but Services (2 person CUs) then went down in 4+ CU’s. In both Service segments the performance of 5+ person CUs is actually worse than singles.
  • Associates Degree or Higher – Higher education often correlates with higher income and we see a similar spending pattern. The group grew in size but fell in share and performance in all segments, but Services. The biggest decrease in share (-2.8%) and performance (-7.7%) came in Veterinary, while Services gained 3.7% in share. Spending became a little more balanced in terms of Education in all but the most discretionary segment – Services.
  • Everyone WorksIncome is important, and the # of Earners became more important in 2019, with one exception – Services. The difference in Services came from a big lift from Single, No Earner. Younger CUs have more earners and pet spending has been skewing towards the younger generations. Note: 2 Segments have reached the 120% level.

  • All Wage & Salary Earners – Incomes vary widely in this group, so performance tends to be lower. However, all segments, but Services gained in share and performance. The biggest gains came in Food and Veterinary. The Food increase was driven by White Collar while the Veterinary lift came from all workers while their “Bosses” spent less.
  • Over $70K Income INCOME MATTERS MOST IN PET SPENDING! As spending becomes more discretionary the importance of income increases. Food still has the lowest share and performance but had the biggest gains. The only segment with decreased share and performance was Veterinary. Veterinary spending became more income balanced while Food went in the opposite direction.
  • 35 to 64 yrs – Includes the 3 highest income segments. This group increased both share and performance In Total Pet due to Food where performance reached 120%. Supplies had a minimal increase but both Services segments fell with Services performance falling below 120%. All ages in the group spent more on Food but the results were mixed for other segment. Overall, the best performance came from the 35>44 yr olds, followed by 55>64.
  • All Suburban – Most Pet $ are spent here and they gained ground in all segments but Supplies. The biggest driver in their performance was the bigger Suburbs, 2500>. The biggest lift was in Services where performance broke 100% for the 1st time. Rural, Central City and Suburbs <2500 all decreased spending in Total Pet and 3 of 4 Segments.
  • Married Couples – Marriage has been important to spending in all segments. In 2019 it became less important in all segments but Food. The biggest drops came in Supplies and Veterinary. In fact, Veterinary share fell below 60% and performance below 120%. Overall, couples only did the worst but also remember that Singles had a strong year.

Now we’ll drill a little deeper to look at the Best and Worst performing segments in each category. Color Highlighted cells are different from Total Pet; * = New Winner/Loser; ↑↓ = 5+% Performance Change from 2018. We will divide the categories into related groups. First, those related to Income.

  • IncomeIncome matters, and its importance is growing in the Product Segments. The disparity between first and last place increased by 30% in Food but doubled in Supplies. The Veterinary winner dialed down from $200k> in 2018 and the disparity decreased by 16%. The gap in Services is still astronomical but down 6% from 2018. The changes in Veterinary helped to decrease Total Pet disparity by 8% but the difference is still huge in this category.
  • # Earners More earners = more income. 2 Earners became the magic number which reflects the importance of Gen X and Millennial CUs. In Supplies, 3 Earners, the highest income group, won. The disparity grew in Food but fell in Veterinary. However, the number of Earners gained in importance in all segments but Services.
  • Occupation Self-Employed and Mgrs & Professionals are #1 and #2 in CU income and expenditures. They again occupy all the top spots. The bottom spots are again occupied by either Retirees or Blue Collar workers. The disparity is growing in Food while decreasing in all other segments and Total Pet. However, this category still clearly reinforces the importance of income in Pet Spending.

Next are demographics of which we have no control – Age, Generation and Racial/Ethnicity

  • Racial/Ethnic – As expected, White Non-Hispanics are the top performer in all segments and now African Americans occupy all the bottom slots. They have the lowest income and only 25% own Pets. The disparity is large and growing in all areas but Supplies. It is not growing in Supplies because Whites spend the most and had the biggest drop.
  • AgeThe highest income 45>54 yr olds are the top performers in all but Veterinary. They took over the leadership in Pet Spending in 2018. Last year the loser in all categories was 75+. They were largely replaced by the youngest group. Once again, the disparity is growing in Food and shrinking in Veterinary.
  • GenerationBoomers still rule Food. All else belongs to Gen X. The only change from 2018 is that Millennials dialed back their Services spending. The vast majority of 35>54 yr-olds are Gen Xers so you can see the ties to the Age data.

  • EducationWinning and losing is closely tied to more and less Education which generally correlates with income. The only difference is in Supplies where the performance became a little more balanced.
  • CU CompositionMarried Couples Only are still on top in 2 categories. The biggest change was the rise of couples with an oldest child 18>. Single Parents had a terrible year and are now at the bottom in all segments.
  • CU Size– 3 is now the top number in Pet but 2>4 are all strong. Performance drops off at both ends, 1 or 5+ CUs.

  • Housing – Homeowners w/Mortgage and Renters are the perennial winner and loser.
  • Area– Suburbs <2500 population perform the best except for the new winner, Suburbs 2500> in Services. In terms of worst performer, it is Central City in Food and Total Pet, but Rural in all other segments.
  • Region – 3 different winners, with the Northeast a surprise in Total. The South is again the overall worst performer.

Here are two summary charts. The first compares the averages.

The big change in Food is immediately apparent. In the past, the performance difference grew as you moved from Food to Supplies to Services and spending became more discretionary. In 2019, the difference between winners and losers in Food increased by 34%. The Supplies difference was down minimally. Services fell 5% and the disparity in Veterinary was down 10%. Spending became more balanced in every segment but Food. The increase in Food was so large that it pushed the Total Pet disparity up 1%.

  • Food – In Food the best and worst are actively moving apart – much less balanced in more demographics.
  • Supplies – Despite a big drop in $, the relative performance in Supplies remained rather stable.
  • Veterinary – The performance of both winners and losers fell significantly, but the gap narrowed about 10%.
  • Services – The performance of the Best and Worst both declined but they still moved a little closer together.

This chart shows the number of new winners/losers.

Total Pet had few changes, especially in losers. Total Pet is a sum of the segments. This can mitigate or even cancel out extreme differences in segments. Always look below the surface.

  • Pet Food had a large increase in spending, a complete reversal from 2018. However, there were only 7 changes, which is the same as last year when spending fell sharply in the second half.
  • Supplies is the most stable. A record drop in $ produced very little change in top or bottom performance.
  • The Veterinary spending increase was minimal but a 46% change in winners/losers is evidence of some turmoil.
  • Services had a decrease in $ and but their performance change was 29%, the same as Food.

Now, let’s look at the Demographic Segments with the Biggest Changes in $. We’ll truly see some differences between the Industry Segments. We have color highlighted differences from Total Pet. Plus:

  • Boxed w/green = Winner/Loser same as 2018
  • ↕ = Flipped from 1st to Last or vice versa

First, the Income related categories.

  • Income – There was no clear pattern with 4 different winners but 3 were under $40K. There were 3 different losers but 4 earned less than $70K. It appears that the biggest changes – up or down, came from lower income segments.
  • # Earners1 Earner, 2+ CUs had another bad year, losing in 4 areas. 2 Earners had the best year, with 3 wins. Singles had an OK year. They had 2 wins – split between 1 and No Earner. Of course, 1 Earner, Singles did lose in Services.
  • Occupation A bad year for the “bosses” in every area but Food. Self-Employed won in Food and Mgrs & Professionals lost in every area but Food. Retirees had 1 win and 1 loss. Most of the winning came from lower level wage earners. All this indicates a move towards more demographically balanced spending.

Now the Age and Racial/Ethnic Categories

  • Racial Ethnic White, non-Hispanics won in all but Supplies, where they were the big loser. They spent the most on discretionary Supplies, so this is no surprise. The other 4 losers were split between Hispanics and African Americans, the lowest income groups. African Americans had the smallest decrease in Supplies because they never spent much.
  • Age There were 4 different winners, with 75+ being a big surprise. 4 losers were evenly split between 35>44 and 45>54 as they dialed back from 2018. The 35>44 group flipped to last in 2 areas. The <25 group did lose in Food.
  • GenerationThe younger groups continue to excel, winning in 4 areas. The oldest generation did have the biggest increase in Services. Boomers lost Total Pet and Veterinary while those born before 1946 came in last in Food. Gen X did finish last in 2 areas including a flip from 1st in Services. However, they are still the biggest Pet Spenders.

Now, here are more Demographic Categories in which the consumers can make choices.

  • EducationA College degree is better, but we had 2 winners without one, including those without a HS Diploma. Also, 3 losers had at least an Associates degree. It appears that spending is becoming a little more balanced.
  • CU Comp. – 2019 was about all adult CUs. Married Couples Only had another bad year but they did flip in Food. Singles won in Veterinary and Total. Married CUs with kids won and lost in Services and Single Parents lost in Food.
  • CU Size It was a good year for 1 person CUs and bad for 2 people. The other wins/losses were split between 3 & 5+.

  • HousingHomeowners w/o Mortgage won twice, flipping from last both times. Homeowners w/Mtge are on top in 2 categories but lost Supplies. Renters won in Supplies but lost 3 times. It was a little more mixed than usual.
  • Area4 of the 5 the winners are over 2500 pop with big Suburbs winning 3. Central City won Supplies with the smallest decrease but lost in 3 areas, including 2 flips. Small Suburbs, <2500 won Food but lost Veterinary. The Suburbs ruled but we should note that Rural was a No Show. In 2018 they lost in 3 areas and in 2017 they won in 2.
  • Region The Northeast won 3, all flips, but lost Services. The Midwest had the opposite story – 3 losses and 1 win with 3 flips. The South flipped to 1st in Food but lost Supplies. What about the West? They were the best performer in Supplies and Services and last year won Food. They were up in 3 areas and down in 2 but the changes were small.

The next chart compares the number of repeats, “flips” and new segments among the 12 winners and 12 losers for each category. The idea is to look for patterns in the data that cross segments. Let’s take a look.

  • Segments were either up or down…by a lot or a little. There seems to be a different pattern in those segments with an overall increase vs those with a decrease, regardless of the size of the change.
  • In terms of repeats, you see more stability in Food/Vet ($ ↑) than in Supplies/Services ($ ↓).
  • There are also twice as many flips in the segments with a decrease in $. Supplies had the biggest decrease in $ and the most flips from 1st to last (50%). Only 12% of segments in Food or Vet flipped to last. Food rebounded from a big drop in 2018 but only 3 segments flipped from last to first so the $ didn’t come from most of last year’s losers.
  • You can see how the combined segments made Total Pet stable – the most repeats, few flips and the least new.

Next, there were so many positive contributors that in each individual report we recognized 6 segments that didn’t win but still performed so well that they deserved Honorable Mention. I reviewed that list again and came up with segments that won Honorable Mention in more than one segment. Here are the “SUPER Honorable Mentions” for 2019…

You can immediately see that it was an unusual year as 3 segments made the list, even with small decreases in Supplies. Another trend is obvious. All received honorable mention in Veterinary spending. This segment became more balanced in multiple categories. All of the segments on the list are generally “low profile” but contributed notably to the industry. One group deserves special notice. The $70>79K segment actually had the biggest increase in Total Pet $ of any income group. They did it with a strong performance in all segments, including a +11.8% increase in Food.

Although the results were mixed, with numerous individual changes, I saw these trends of note:

  1. Youth Movement – The Boomers continue to fade as the Gen Xers step up, with the Millennials close behind.
  2. Sub-Urbanization – Center City flips every year with the $ change. The Suburbs are the key. Suburbs <2500 are the top performers but the Suburbs 2500> spend the most and are the only area that increased $ every year since 2016.
  3. “2” is a less “Magic” number – Singles again had the biggest spending increase, and 3 Person CUs are the best performer in Total Pet and all segments but Services.
  4. Changes in spending balance – The performance gap between the best and worst narrowed in both Services segments. However, the disparity in Pet Food grew by 34%. That’s not good in this truly necessary segment.
  5. Income is still the most important factor – While the gap between best and worst narrowed in Services and Veterinary, it widened in Products, especially Food. The best performer is always $150K+ while the worst is <$30K.

And Finally, What you have all been waiting for…

THE ULTIMATE 2019 PET SPENDING CUs – Side by Side

Color Highlighted cells are different from Total Pet; * = New in 2019

Methodology – The segments are chosen because they have the highest annual CU spending of any segment in the category. They may or may not have the most total dollars. That would depend upon the number of CUs in the group.

Final Comment – These “winners” further reinforce the key factors in increased pet spending:

  • Marriage – A commitment to another person demonstrates that you can make a commitment to your pet “children”.
  • CU Size – The “magic” number has changed from 2 to 3.
  • Homeownership – Owning and controlling your own space has long been a key factor in Pet Parenting.
  • More space – Small suburbs near a big metro area offer the convenience of the city, plus room for more pets.
  • Income Matters Most – High Income, A High Paying Occupation, A College Degree, At Least 2 Earners. These are characteristics present in all of the Ultimate Pet Spending CUs.
  • Generation– The Boomers have officially passed the torch to Gen X. Age Note: All 45>54 and 60% of 35>44 are Gen Xers.

I hope that this Visual Comparison helped you to get a “satellite view” of Pet Industry Spending in 2019. Please refer back to the individual segment reports to get more details.

Retail Channel Monthly $ Update – February Final & March Advance

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 – about 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.

We will look at the latest release of both reports. We will begin with the Final Retail Report from February and then move to the Advance Retail Report for March. Remember, February 2020 was pre-pandemic, but in March the impact began. We will continue to compare 2021 to both 2020 and 2019 to track the ongoing evolution of the retail market.

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 2020 and 2019
  • Current YTD change – % & $ vs 2020 and 2019
  • Monthly and Year To Date $ will also be shown for each group/channel

First, the February Final. Retail hit bottom in April then began to recover, hitting record $ in December. January & February $ fell but were monthly records. Here are the major retail groups. (All Data is Actual, Not Seasonally Adjusted)

The final total is $1.7B more than the Advance report projected a month ago. All Groups were up slightly but most of the positive change came from Auto: +$1.0B; Restaurants: +$0.5B; Relevant Retail: +$0.1B; Gas Stations: +$0.1B. All groups were down vs January, but Total Retail still set a February record. Total $ales broke $600B for the first time in December and continued to set monthly records in both January and February thanks to strong performances by Relevant Retail and Auto. Restaurants and Gas Stations continue to struggle although Gas Stations are now above both monthly and YTD 2019 $. Throughout the pandemic, Relevant Retail has been the driving force in the recovery.

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

  • Overall– All 11 channels were down vs January. However, 9 of 11 were up vs February 2020 and 2019 and all but one were up in YTD $ vs 2020 and 2019. 2021 continues its strong start.
  • Building Material Stores – Their strong lift continues. The ongoing surge came as a result of pandemic spending patterns developed in 2020. Consumers began focusing on their homes. They’re still showing double digit % increases. Farm Stores are leading the way, with 20+% increases in all measurements. Sporting Goods stores are not in this group, but they have a similar spending pattern. Sales took off in May, hitting a record peak in December. The lift continued into 2021. They are up 21.0% vs February 2020 and +28.8% YTD.
  • Food & Drug – Supermarkets finished 2020 up +$77.7B. Sales dipped slightly in both January and February but are still +8.4% YTD vs 2020. Drug Stores ended up +$17B (+5.7%) for 2020. Their $ also fell in January and February but are still +4.7% YTD vs 2020.
  • General Merchandise Stores – $ in all channels continue to fall from their December peak. Discount Department Store $ in February were down vs 2020 and 2019. In fact, their YTD $ are now essentially even with 2020. This shows that this channel was having problems even before the Pandemic. The growth slowed in Clubs/SuperCtrs and $ Stores. Combined, they were up 3.0% vs February 2020. However, their YTD sales are still up 8.8%.
  • Office, Gift & Souvenir Stores– Sales dropped again in February. They have negative numbers in all measurements. Recovery is a long way off.
  • Internet/Mail Order – The pandemic has accelerated this channel’s growth. Last February they were up 10.3% YTD vs 2019. This year they are up 29.0%. The pandemic lift spending pattern almost tripled the rate of increase.
  • 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>24% of total $). Pet Stores were usually essential, but most stores were not. Stores began reopening in May and the $ grew. Their 2020 total sales were up +11.6%. February YTD sales are +$1.6B (+11.6%) vs 2020. However, that is down from 2020 when they were +$2.5B (+21%) vs 2019.

The Relevant Retail Segment began recovery in May and reached a record level in December. $ plummeted in January & February but still set monthly records. Almost all members of this group are showing growth, but the key drivers are the Internet, Supermarkets, SuperCtrs/Clubs/$ Stores and Hdwe/Farm. Now, here are the Advance numbers for March.

2020 will always be a memorable year for both its traumas and triumphs. In April & May we experienced the 2 biggest retail spending drops in history, but the problems actually began in March. Sales increased slightly from February but were $34.1B less than March 2019. Retail sales began to recover in June and in October, YTD Total Retail turned positive for the 1st time since February. In December, Total Retail broke the $600B barrier – a historic first. While sales fell from their December peak, monthly sales records were set in both January and February. Then they took off again in March, breaking $600B again while setting a new monthly sales record of $627.9B. A March lift in sales from February is pretty normal but this is the first time in records going back to 1992 that March sales have exceeded those from the previous December. All of the major groups increased sales from February and Restaurants were the only group to register any negatives vs 2020 or 2019. As we progressed through 2020 and now into 2021, we have seen real evidence of the strength and resiliency of the U.S. Retail Market.

Total Retail – As we said, the Total Retail $ for March set a record for the most spending in any month in any year. The $627.9B was up $134.8B (+27.3%) from February and $146.4B (30.1%) more than March 2020. If you compare the YTD 2021 spending to 2019, you see an increase of $232.4B (+15.7%). That is an average annual spending increase of 7.6%. If you just looked at these topline numbers, you would not suspect that a spending crisis had ever happened. Always look below the surface.

Restaurants – This is the only big group with any negative measurements. Last February YTD sales were up 8.1% vs 2019. The Pandemic changed that. Restaurants started to close or cease in person dining in March and sales fell -$33.3B (-52.5%) compared to March 2019. Sales bottomed out in April at $30.1, the lowest April sales since 2003. Sales started to slowly increase in May but never reached a level higher than 88% compared to the previous year. 2021 did not start off well. Through February,  YTD sales were down -16.7% from pre-pandemic 2020 and -10.0% from 2019. That brings us to March. Sales took off, up $14.2B, 28.2% from February and 35.2% from March 2020. They reached $64.0B, the highest level since December of 2019. However, the $ were still down vs March 2019 and YTD $ were still below both 2020 and 2019. We’ll see how their recovery progresses in April. YTD Avg Growth Since 2019 = -3.8%

Auto (Motor Vehicle & Parts Dealers)   – Staying home causes your car to be less of a focus in your life. Sales began to fall in March and hit bottom in April. Auto Dealers began combating this “stay at home” attitude with fantastic deals and a lot of advertising. It worked. They finished 2020 up 1% vs 2019 and have returned to a strong positive pattern in 2021. The “attitude” grew amazingly positive in March as sales reached $145.2B. This was by far the biggest month in history. It beat the former leader, July 2020, by $28B. To show how well consumers responded to their campaign you just need to look at the data. This group has exceeded $110B in monthly sales only 9 times in history. 7 of those occurred after the onset of the pandemic.  YTD Avg Growth Since 2019 = +11.1%

Gas Stations – Gas Station $ales are a mixed bag. Obviously, if you drive less, you visit the gas station less often. Sales turned down in March 2020 and reached their low point in April. They moved up but generally stayed about 15% below 2019 levels for the rest of 2020. In February they were still behind 2020 in monthly and YTD $ but ahead of 2019 in both measurements. In March, sales skyrocketed to $45.6B, 28.4% more than February and a 35.7% increase over March 2020. They turned positive in all measurements vs both 2019 and 2020. It looks like they are beginning their comeback. However, there is another factor that must be considered – inflation. Gas prices can be pretty volatile. They dipped in the first 2 months of the pandemic but then returned to more normal levels for the balance of 2020. They began inflating in 2021 and spiked in March. The March 2021 prices were 22.5% above March 2020. That means that 63% of the 35.7% year over year lift came from just higher prices. Analyzing retail can be complicated. YTD Avg Growth = +3.0%

Relevant Retail – Less Auto, Gas and Restaurants – This is what we consider the “core” of U.S. retail and has traditionally accounted for about 60% of Total Retail Spending. When you look at the individual channels in this group, you see a variety of results due to many factors – non-essential closures, binge buying, online shopping and a consumer focus on “home”. However, overall, April 2020 was the only month in which spending in this group was down vs 2019. Monthly $ales exceeded $400B for the first time ever in December ($411B). They finished 2020 up $251B, +6.8%. Their performance was the only reason that Total Retail was able to finish 2020 with positive numbers, +0.6%. Sales fell in January but continued to set monthly records through February. In March they turned sharply up again, +22.6% from February. Currently, they are up $55.1B, +17.3% vs March 2020 and  +$113.1B, +12.7% YTD. The $373B spending in March is the third highest monthly total of all time, trailing only December 2020 and December 2019. We should also note that the Relevant Retail group has posted positive numbers versus last year and YTD for every month since April 2020 and their average YTD growth rate since 2019 now stands at +9.3%. More channels are turning positive, but the primary drivers continue to be Nonstore, Grocery, SuperCenters/Clubs/$ Stores plus a never ending “spring lift” from Hardware/Farm and Sporting Goods. 

Now let’s look at what is happening in the individual retail channels. March was a spectacular month. 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. We will continue to track 2021 monthly and YTD sales vs both 2020 and 2019.

Sales in all 13 channels were up vs February. 11 channels beat March 2020 $ and 12 beat March 2019 $. In YTD $ales, all channels beat 2020 and 10 were ahead of 2019. (Relevant Retail YTD Avg Annual Growth Rate since 2019 = +9.3%)

After hitting bottom in April 2020, Relevant Retail has now beaten the previous year’s $ for 11 consecutive months. The group set an all-time record of $410.9B in December and finished  2020 +$250.9B vs 2019. They have also started 2021 strong, with record sales in every month. Essential channels are still primarily responsible for the continued lift:

  • Nonstore Retailers – The biggest driver. Online shopping continues to grow in # of households and in $.
  • Food & Beverage – Grocery– Restaurant $ are improving but consumers continue to eat & drink more at home.
  • Bldg Materials/Garden/Farm– Their “Spring” lift continues unabated as consumers focus on their home.
  • SuperCtrs/Club/Value/$ Strs – They keep the GM channel positive. Value is still a major consumer priority.

Regarding the Individual Large Channels (Includes YTD Avg Annual Growth Rate since 2019)

General Merchandise Stores – Sales surged up from February producing all positive numbers overall. Department Stores $ were up vs 2020 but down vs 2019. They were having problems before the Pandemic. The growth by Club/SuperCtr/$ stores has slowed to +2.5% in March, down from +9.6% in January but these stores are still the key.

  • YTD Avg Annual Growth: All GM = +5.7%; Dept Stores = -4.3%; Club/SuprCtr/$ = +7.7%

Food and Beverage, plus Health & Personal Care Stores – Sales in Grocery were up 9.8% from February but down 16.6% from 2020 – No surprise, as March 2020 was a binge month. The Health, Personal Care group finished 2020 at +1.7%. 2021 has started even better. With a strong March, YTD they are +4.2% vs 2020 and +8.2% vs 2019.

  • YTD Avg Annual Growth: Grocery = +6.3%; Health/Drug Stores = +4.0%

Clothing and Accessories; Electronic & Appliances; Home Furnishings – March was a spectacular month for all these channels. Home Furnishings is now positive in all measurements. Electronic & Appliance had a strong March but still remains slightly below 2019 in YTD $. Clothing Stores more than doubled their 2020 $ but are still -5.4% YTD vs 2019.

  • YTD Avg Annual Growth: Clothing = -2.7%; Electronic/Appliance = -0.2%; Furniture = +8.5%

Building Material, Farm & Garden & Hardware – Their Spring lift began on time in 2020 and it has essentially never stopped. They have greatly benefited from consumers turning their focus to their home needs. They finished 2020 +53B (+13.8%). In March sales took off, +43.5% from February, +32.4% vs 2020 and +20.9% YTD. Avg Annual Growth = +13.0%

Sporting Goods, Hobby and Book Stores – Book & Hobby stores are open but Sporting Goods stores have driven the lift in this group. Consumers turned their attention to personal recreation and sales in Sporting Goods outlets took off. The group ended 2020 +5.5% vs 2019. The growth accelerated in 2021. January & February set monthly sales records, but March had the most $ of any non-December month in history, +78.2% vs 2020. YTD Avg Annual Growth = +15.1%

All Miscellaneous Stores – Pet Stores were deemed essential but most other stores were not, so closures hit this group particularly hard. Sales hit bottom at -$3.8B in April then began to rebound. They finished with a strong December and ended 2020 down $1.0B, -0.7%. January sales were +6.9% vs 2020 but February sales were down -0.01% vs 2020. In March Sales took off. They were +27.3% from February, +30.3% from March 2020. Their YTD sales are now 13.7% above 2020 and 22.1% more than 2019. It appears that their recovery has gained traction. YTD Avg Annual Growth = +10.5%

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV businesses. The COVID-19 crisis accelerated the movement to online retail. In February 2020 NonStore $ were 8.6% YTD. In December monthly sales exceeded $100B for the 1st time. They ended 2020 at +21.9%, +$173.9B. Their increase was 69% of the total $ increase for Relevant Retail Channels. Their 2020 performance far exceeded their 12.9% increase in 2019 and they started off 2021 even better. March is +30.7% vs 2020 and YTD $ are +27.8%. YTD Avg Annual Growth = +19.2%

Note: Almost without exception, online sales by brick ‘n mortar retailers are recorded with their regular store sales.

Recap – 2020 was quite a year. April & May had the 2 biggest year over year sales decreases in history while December sales broke $600B for the first time. Restaurants, Auto and Gas Stations suffered the most. Auto had recovered by yearend but Gas Stations and Restaurants were still struggling. Relevant retails had segments that also struggled but overall, they led the way for Total Spending to finish the year +0.6% vs 2019. 2021 started out even more positive, especially in March when Total Spending of $627.9B broke the record set in December – an unheard feat for March. Auto also set a spending record in March. Gas Stations $ are now all positive and YTD Restaurant $ are only slightly below 2020 and 2019. The recovery in Relevant retail has also become much more widespread and monthly sales continue to set records. We’ll see if the trends continue but the Retail economy has come back strong.

 

 

2019 Veterinary Spending was $21.80B – Where did it come from…?

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

Things changed in 2017 as Veterinary pricing had an all-time record low inflation rate.  Consumers responded with a 7.2% increase in visit frequency and spent $2.5B more on Veterinary Services. In 2018 inflation began to return to more normal levels. Visit frequency fell slightly -0.2%, but Consumers spent $0.56B more (+2.7%). However, the inflation rate was 2.6% so virtually all of the lift was from increased prices. In 2019 the situation got worse. Consumers spent $0.58B (+2.7%) more but inflation was 4.14%. This means that there was an actual decrease in the amount of Veterinary Services purchased in 2019. In this report we’ll look deeper into the situation.

We’ll start with the groups who were responsible for the bulk of Veterinary spending in 2019 and the $0.58B increase. The first chart details the biggest pet Veterinary spenders for each of 10 demographic categories. It shows their share of CU’s, share of Veterinary spending and their spending performance (Share of spending/share of CU’s). We immediately note a difference in performance – 6 of 10 groups perform above 120%. This is the same as 2018 and equal to Total Pet. Supplies leads with 7 and Food & Services trail with 5. This means that these big spenders are performing well but it also signals that there is a large disparity between the best and worst performing segments. Income is clearly the biggest factor in Veterinary Spending.  The categories are presented in the order that reflects their share of Total Pet Spending which highlights the differences of the categories.

  1. Race/Ethnic – White, not Hispanic (90.9%) the same as 2018. This group accounts for the vast majority of spending in every segment., but a 91% share is extraordinary. Their 132.6% performance rating now ranks #2 in terms of importance in Veterinary Spending demographics and reflects the spending disparity. Hispanics, African Americans and Asians account for 31% of U.S. CU’s, but they only spend 9% of Vet $. Asians and African Americans have a significantly lower percentage of pet ownership and African Americans have the lowest average CU income.
  2. Housing – Homeowners (83.2%) down from (83.4%) Homeownership is a major factor in pet ownership and spending in all industry segments. In terms of importance to Veterinary spending, their 130.5% performance rating, down from 131.4%, keeps homeownership in 4th place. The slight decrease in share and performance was driven by a small $0.11B decrease in spending by Homeowners w/o Mtge and a lift by renters. We should note that Homeownership is not as important to Veterinary Spending as it once was. In 2015 their share was 88.4% with performance of 141.8%.
  3. # in CU – 2+ people (75.0%) down from (81.6%) This group, which is 70% of U.S. CUs, lost significant share and their performance fell from 115.7% to 107.4%. Their rank in terms of importance in Veterinary Spending fell from 7th to last. Only 1 & 3 person CUs spent more. Much of the big loss in share and performance was driven by  a $1.54B (+39.5%) spending increase by singles.
  4. Education – Associates Degree and Higher (73.5) down from (76.3%) Income generally increases with education. It is also important in understanding the need for regular Veterinary care. Performance also fell from 140.0% to 132.3%. Education became weaker as it fell from 2nd to 3rd in importance in Vet spending. Those with an Advanced College degree spent $1.14B more but couldn’t overcome a -$1.31B decrease from BA/BS and Associates Degrees.
  5. # Earners – “Everyone Works” (70.4%) up from (66.5%) In this group, all adults in the CU are employed. Their Performance also grew to 120.3% up from 115.1% and they joined the 120+% club, ranked #6. The gains come from a $2.13B increase from working singles and 2 Earner CUs. All other segments but No Earner, Singles spent less.
  6. Occupation – All Wage & Salaried (67.3%) up from (66.5%) and their performance only increased from 108.3% to 110.3%. The gains were small because the results were mixed. Inside the group, Managers & Professionals spent $0.59B less, while lower level White Collar and Blue Collar Workers spent $1.22B more. Outside the group, Retirees spent $0.50B more but the Self-Employed spent -$0.57B less.
  7. Income – Over $70K (66.3%) down from (68.2%) The performance of the $70K> group fell significantly from 169.2% to 159.8%. However, higher income is still the most important factor in increased Vet spending. $70K> spent -$0.03B less while <$70K spent $0.60B more. However, the results were mixed. <$30K: up $0.58B; $30>50K: -$0.19B; $50>70K: +$0.21B; $70>100K: +$0.48B; $100>150K: -$0.59B; $150>200K +$0.44B; $200K>: -$0.36B
  8. Age – 35>64 (63.2%) down from (66.1%) Their performance also fell from 124.9% to 120.7% but Age remained 5th in terms of importance. All the turmoil was within the group. 35>44 yr olds spent $1.23B more but the 45>64 yr olds spent $1.48B less. A $0.72B increase by the 65+ group also contributed to the decreases in share and performance.
  9. Area – Suburban (63.6%) up from (63.2%) Suburban CU’s are the biggest spenders in every segment. They gained a little in share and in performance, which was 114.4%, up from 113.9%. The gains were entirely due to a $1.34B increase by the large suburbs. 2019 was about population. <2500 (Urban & Rural): -$1.11B; 2500>: +$1.69B
  10. CU Composition – Married Couples (57.0%) down from (60.6%) Previously, Married Couples had a 60+% market share and 120+% performance in all segments. That ended in 2019 as their performance also fell to 116.7% from 122.2% and they dropped out of the 120+% club. Married Couples Only spent $1.04B less but those with an oldest child over 6 also were down $0.25. This, in combination with a $1.54B increase by Singles, caused the losses.

Although performance fell, Higher income is still by far the biggest single factor in Veterinary spending. We see the impact of this in many groups as it often contributes to the big spending disparity between segments. The most notable change was that Married Couples were replaced by # Earners in the 120+% performance club.

Now, we’ll look at 2019’s best and worst performing Veterinary spending segments in each category.

Almost all of the best and worst performers are those that we would expect. However, there are 11 that are different from 2018. This is much more than the (7) in Food & Services and (5) in Supplies. This suggests some spending turmoil even though there was no big change in $, up or down. The changes from 2018 are “boxed”. We should note:

  • Income – Down from the $200K> group in 2018. 1st and last are also a little closer together, 15%.
  • Earners – New, but not unexpected, winner and loser. However, the gap between the two is 32% lower in 2019.
  • Occupation – 2018: Self -Employed; 2019: Mgrs & Professionals. They are the 2 highest income segments.
  • Education – Back to the usual winner and loser but the gap between the two also narrowed slightly, 8%.
  • Age – In a surprise, the 35>44 year olds took over from the highest income group, 45>54. The loser also flipped from the oldest to the youngest, not a big surprise. By the way, only CUs in the 35>64 age range perform above 100%.
  • CU Composition – It was a good year for Married Couples with an Oldest Child over 18 and Singles. The Married group held their ground in spending but became the top performer and Singles got off the bottom.
  • # in CU – 3 and 1 person CUs were the only groups to increase Veterinary spending. Singles had the biggest lift, but they still have a long way to go. The 5+ CUs finished on the bottom for the second year in a row.
  • Region – Northeast won again – 5 straight years. The South has finished last for 4 years in a row.

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

We saw some turmoil in performance, but not here. There were 8 repeats and only 4 segments flipped from 1st to last or vice versa. Last year they had 2 repeats and 10 flips. Veterinary was the calmest segment in $ change. There were some surprise winners – Tech/Sls/Clerical, <$30K, Millennial/Gen Z and losers – Mgrs/Profess, $100>149K, 45>54. There were also surprising repeats W: 35>44 & Singles; L: Boomers & Married Couple only. Here are the specifics:

  • CU Composition – The winner and loser are both repeats.
    • Winner – Singles – Veterinary: $5.45B; Up $1.54B (+18.6%)                                       2018: Singles
    • Loser – Married, Couple Only – Veterinary: $5.73B; Down $1.04B (-7.8%)             2018: Married, Couple Only
    • Comment – Singles had another strong year while Married, Couple Only CUs had another bad one. In CUs with children, only those with an oldest child under 6 had an increase.
  • # in CU – 1 Person CUs were the repeat winner in this category too.
    • Winner – 1 Person – Veterinary Spending: $5.45B; Up $1.54B (+18.6%)                                 2018: 1 Person
    • Loser – 2 People – Veterinary Spending: $8.23B; Down $1.34B (-8.3%)                                  2018: 3 People
    • Comment: The winning numbers were 1 and 3, with a total increase of $2.04B. CUs of all other sizes spent $1.47B less. Most of the big drop by the 2 person group was driven by Married, Couple Only CUs.
  • Area Type – The winner and loser are new, but both are Suburban.
    • Winner – Suburbs 2500> – Veterinary Spending: $11.21B; Up $1.34B (+13.8%)                   2018: Central City
    • Loser – Suburbs <2500 – Veterinary Spending: $2.66B; Down $0.88B (-32.2%)                  2018: Rural
    • Comment – There was a clear spending break at a population of 2500. Those areas with a population over 2500 spent $1.69B more. Those under 2500 spent $1.11B less.
  • Age – In a bit of a surprise, the 35>44 are repeat winners.
    • Winner – 35>44 yrs – Veterinary Spending: $5.06B; Up $1.23B (+28.3%)                         2018: 35>44 yrs
    • Loser – 45>54 yrs – Veterinary Spending: $4.16B; Down $1.25B (-11.9%)                            2018: 55>64 yrs
    • Comment: The highest income group, 45>54 yr olds, are somewhat of a surprise loser. Last year, Veterinary spending by age group was up and down, a spending rollercoaster. In 2019 it was more defined. The 45>64 yr olds spent $1.48B less. All other age groups, younger and older, spent $2.06B more.
  • # Earners – Both the winner and loser are new, but not surprising.
    • Winner – 2 Earners – Veterinary Spending: $9.75B; Up $1.22B (+27.5%)                          2018: 1 Earner, Single
    • Loser – 1 Earner, 2+ CU – Veterinary Spending: $3.11B; Down $1.05B (-19.4%)              2018: No Earner, 2+ CU
    • Comment – Income is of primary importance to increased Veterinary Spending and in 2019, the number of earners took on added significance. All single CUs spent more but in 2+ person CUs, only those with 2 earners increased Veterinary spending.
  • Education – Those with an Advanced College Degree flipped from last to first.
    • Winner – Adv. College Degree – Veterinary Spending: $6.53B; Up $1.14B (+12.6%)             2018: BA/BS Degree
    • Loser – Associates Degree – Veterinary Spending: $2.10B; Down $0.66B (-8.5%)      2018: Adv. College Degree
    • Comment – Another spending rollercoaster – < HS: Up $0.23B; HS Grad: Down -$0.14B; HS Grad w/some College: Up $0.65B; Associates/BA/BS Degrees: Down -$1.31B; Advanced College Degree: Up $1.14B.
  • Occupation – A new winner and loser with the “Bosses” on the bottom.
    • Winner – Tech/Sales/Clerical – Veterinary Spending: $3.70B; Up $0.87B (+43.5%)         2018: Self-Employed
    • Loser – Mgrs & Professionals – Veterinary Spending: $7.77B; Down $0.59B (-15.0%)      2018: Retired
    • Comment – The highest income groups – Self-Employed and Mgrs & Professionals spent $1.16B less. However, the lower income groups – Retirees, Blue Collar workers and Tech/Sls/Clerical spent $1.71B more.
  • Generation – Millennials/Gen Z edge out Gen X for the win – a payback for last year?
    • Winner – Born after 1980 – Veterinary: $5.18B; Up $0.78B (+15.9%)                                 2018: Gen X
    • Loser – Baby Boomers – Veterinary: $7.48B; Down $0.72B (-17.7%)                                   2018: Baby Boomers
    • Comments – The Boomers held on to the bottom spot. This year the spending was clearly divided. The younger groups, Gen X and Millennials spent more while the older generations spent less.
  • Region – A second consecutive dual flip in this category.
    • Winner – Northeast – Veterinary Spending: $5.08B; Up $0.75B (+19.0%)                      2018: Midwest
    • Loser – Midwest – Veterinary Spending: $4.62B; Down $0.39B (-7.2%)                           2018: Northeast
    • Comment – The South finished second for the 3rd consecutive year. Only the Midwest spent less.
  • Housing – The winner and loser held their positions.
    • Winner – Homeowner w/Mtge – Veterinary: $12.45B; Up $0.55B (+10.5%)        2018: Homeowner w/Mtge
    • Loser – Homeowner w/o Mtge – Veterinary: $5.69B; Down $0.11B (-7.7%)           2018: Homeowner w/o Mtge
    • Comment – Only Homeowners w/o Mtge spent less. This decrease comes when Retirees and the over 65 group spent more. Much of it may have been driven by slightly younger CUs who have paid off their mortgage.
  • Income – In a total surprise the under $30K group flipped from last to first.
    • Winner – <$30K – Veterinary Spending: $2.37B; Up $0.58B (+13.7%)                              2018: $150K>199K
    • Loser – $100>149K – Veterinary Spending: $3.91B; Down $0.59B (-29.9%)                     2018: <$30K
    • Comment – Our final spending rollercoaster – <$30K: Up $0.58B; $30>50K: Down $0.19B; $50>99K: Up $0.69B; $100>149K: Down $0.59B; $150>199K: Up $0.44B; $200K>: Down $0.36B.
  • Race/Ethnic – White, non-Hispanics stayed on top and maintained their overwhelming dominance in this segment.
    • Winner – White, Not Hispanic – Veterinary: $19.83B; Up $0.52B (+3.8%)               2018: White, Not Hispanic
    • Loser – African American – Veterinary: $0.57B; Down $0.26B (-31.1%)                     2018: Asian Americans
    • Comment – Only African Americans spent less but this comes after a 60% increase last year. High inflation has caused a reduction in visit frequency. This has often produced big annual $ swings in low income minorities.

We’ve now seen the winners and losers in terms of increase/decrease in Veterinary Spending $ for 12 Demographic Categories. 2019 saw continued slow growth in Veterinary spending. With 8 segments holding their position from 2018 and only 4 flipping from first to last or vice versa, 2019 was much calmer than 2018. Most of the winners were not unexpected but there were some surprises like <$30K, 35>44 and Singles. The “youth movement” also continued as Gen X and Millennials both spent more.  However, there were also “hidden” segments that didn’t win but made a significant contribution to the 2019 spending increase. These groups don’t win an award, but they certainly deserve….

HONORABLE MENTION

Married CUs with an oldest child <6 were the only CU with kids to spend more. Spending became more balanced in Education & Income which is reflected by the performance of HS Grads w/some College and the $70>99K groups. It wasn’t just the younger groups who spent more. The 75+ yr olds were up $0.39B (+35.2%). All the lower income occupations spent significantly more on Veterinary Services, including Blue Collar Workers, +$0.35B (+12.3%). Hispanics bounced back with a 27% increase after a 19% drop in 2018. 57% of 96 demographic segments spent more, down slightly from 63% last year.

Summary

2016 and 2017 produced a combined increase of $3.6B in Veterinary Spending as inflation moved to record low levels. In 2018 we had the Baby Boomer Spending “Bust” which especially impacted Food and Veterinary. The Boomers spending continued to fall in 2019. Fortunately, Gen X and Millennials stepped up to produce a small. 2.7% increase in both years. Overall, Veterinary Spending became a little more balanced in Income, Age, Education and the size and makeup of CUs.

Veterinary spending did become a little more balanced in terms of Income and Education, but these 2 categories are still of primary importance in terms of increased spending, Both had an up and down rollercoaster spending pattern between segments. Let’s look at the final result. To compare groups, we will look at performance. (Share Vet $/Share CUs)

Income: Performance increases with income and reaches the “break even” point (100%) at $70K+. CU’s over $70K (41.5%) account for 66.3% of Veterinary $. Performance =  159.8%. Performance for <$70K = 57.6%. That’s a difference of 100.2%. Spending may be more balanced but that is still a huge disparity.

Higher Education: Performance increases with Education but doesn’t reach 100% until you have a BA/BS degree. College Grads, 44.4% of CUs, account for 63.9% of Veterinary $. Performance = 144.1%. Performance for <College Grads= 64.8%. The difference is 79.3%. The disparity is not as bad as Income but still huge. Equality in both categories is a long way off.

The performance of other big spending groups is also very important in the Veterinary segment. We identified six demographic categories with high performing large groups. (There were 7 for Supplies, 5 for Services and Food).  Consumers have no control over Race/Ethnicity or Age but in addition to Income and Education, Homeownership and # Earners are also important factors in Veterinary spending. Actually, all 6 of these groups are tied to income and their high performance demonstrates that there are still big spending disparities among segments within these categories.

There were some changes of note. Marriage lost ground as Singles increased their spending and # Earners became significantly more important, which relates to both income and the strong performance by the younger generations.

2019 saw another small spending increase (+2.7%) for Veterinary Services. 57% of all segments increased spending but with a 4.14% inflation rate, the amount of Veterinary Services actually decreased . The lift was again driven by Gen Xers and Millennials which was reflected in the strong performance of segments like Singles, Tech/Sls/Clerical, 2 Earners and 35>44 yr olds. While spending became a little more balanced, the importance of income to spending in this segment was still very apparent. That brings us to 2020. The COVID-19 pandemic has had the greatest negative impact on lower income groups. We’ll see if that works to increase the Income disparity in Veterinary Spending.

Finally – The “Ultimate” Veterinary Services Spending Consumer Unit consists of 3 people – a married couple and their 18 yr old child. They are at the top of the 35 to 44 age range. They are White, but not of Hispanic origin. At least one of them has an Adv. College Degree. Both are Mgrs/Professionals and their total income is $150>$200K. They live in a small suburb, adjacent to a big city in the Northeastern U.S. and are still paying off the mortgage on their home.