Spending, CPI, demographics of overall market

Retail Channel Monthly $ Update – November Final & December 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 – approximately 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

We will look at the latest release of both reports. We will begin with the Final Retail Report from November and then move to the Advance Retail Report for December. We will track the consumers’ evolving behavior in terms of channel migration but importantly, in this report, we will get the initial comparison between yearend $ for 2020 vs 2019.

Both reports include the following:

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

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

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

First, the November Final. U.S. Retail hit bottom in April then began to recover. November $ were down from October, but still growing vs 2019. Here are the major retail groups. (The Data in all graphs is Actual, Not Seasonally Adjusted)

The final total is $2.7B less than the Advance report projected a month ago. The groups were up and down but most of the reduction came from Relevant Retail: -$3.0B; Restaurants: +$0.4B; Auto: -$0.3B; Gas Stations: +$0.2B. All groups but Relevant Retail were down after the October Total Retail $ peak. However, YTD Total $ales grew more positive vs 2019 thanks to another strong month from Relevant Retail and an OK month by Auto. The Auto segment is almost equal to 2019 $, but Restaurants and Gas Stations are down -$210B. Relevant Retail remains the only positive group in YTD sales.

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

  • Overall– $ in 6 of 11 groups were up vs October and 9 were up vs November 2019 and YTD. That’s pretty good.
  • Building Material Stores – Their “Spring” lift continued through Summer and now into Fall. While sales peaked in June, they’re still showing double digit % increases vs 2019. Sporting Goods stores are not included in this group, but they have a similar Spring lift pattern. Their sales took off in May, peaked in June but have continued to grow vs 2019. In June, their YTD $ vs 2019 turned positive and by November they were up 15.4%.
  • Food & Drug – Supermarket $ slowed in Aug/Sep turned up in October then flattened in November. They are +$71.6B YTD. Drug Stores $ dipped in August, grew in Sep/Oct, then fell again in November. They’re +$14B YTD.
  • General Merchandise Stores – $ in Clubs/SuperCtrs slowed in September then grew in Oct/Nov. They are now +$30.8B vs 2019. $ Stores sales slowed from June>Sept but grew in Oct/Nov and are now +12.4% vs 2019. Discount Dept. store sales were slowing before the pandemic. This trend continues despite their November lift.
  • Office, Gift & Souvenir Stores – A 28% drop after a 20% October lift . Recovery is long way off.
  • Internet/Mail Order – The pandemic has accelerated this channel’s growth vs 2019. Sales hit another new peak in November. Many consumers have discovered online shopping and the behavior is likely to become habitual.
  • A/O Miscellaneous – This is a group of small to midsized specialty retailers – chains and independents. It includes Florists, Art Stores and Pet Stores (22 to 24% of total $). Pet Stores were usually essential, but most stores were not. The others began reopening in May and the number grew in June which produced an increase vs 2019. Sales peaked in July but have remained stable and strong vs 2019. In fact, YTD sales are up +10.2%.

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

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

Total Retail – Total Retail spending hit a record $620B in December, up $74B from November and $28.7B from 2019. In February YTD 2020 sales were up $60B, +6.6%. Then came COVID-19. We hit bottom at -$112B YTD in May and began moving in the right direction. We broke even in October and are now up $40.2B, but still down -$20B from February.

Restaurants – Spending grew +$0.9B from November but was -$13.7B (-21%) below December 2019. Sales hit bottom in April due to forced closures. Re-openings began in May but have been mixed due to a virus resurgence. YTD $ales have stayed about 20% behind last year. January and February, normally the 2 slowest months, are on top in 2020. In February YTD sales were up $9B. They finished 2020 -$149B, (-19.5%). Delivery/pickup couldn’t make up the difference.

Automobile & Gas Stations – When you are staying home your car becomes less of a focus in your life. Auto Dealers began combating this attitude with fantastic deals and a lot of advertising. Monthly $ turned positive versus 2019 in June and have stayed that way. Sales dipped in November but rose spectacularly in December. They are now +1.1% YTD vs 2019. Gas Station $ales hit bottom in April and have been up and down ever since. However, YTD sales have remained consistently about 16% below 2019. At yearend they are -$79.6B (-15.9%). People are still not driving as much.

Relevant Retail – Less Auto, Gas and Restaurants – Many non-essential businesses shuttered their doors in March but there was a rash of binge/panic buying for “necessities”, especially groceries, which drove spending up $19B. April brought a full month of closures and an end in binge buying, spending dropped $34B from March. In May, the overall market began to reopen so spending began to move in the right direction and growth continued through July. $ales fell in Aug/Sept but turned up again in Oct/Nov. We should note that the monthly June>November $ were larger than all months in 2019 but December. In December 2020, spending skyrocketed, up $57B from November and $33B from 2019. The Relevant Retail group now has posted positive numbers versus last year and YTD for 8 consecutive months and is up $255.1B YTD (+6.9%) vs 2019. In May when the streak began, it was up +2.7%. The primary drivers were Nonstore, Grocery, SuperCenters/Clubs & $ Stores plus an “extended” spring lift from Hardware/Farm and Sporting Goods.

Now let’s look at what is happening in the individual retail channels across America. In December, consumer spending in the relevant retail market passed $400B for the first time. 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.

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

After April’s widespread closures there was a retail surge in May. Things truly opened up in June & July and sales continued to increase. In August/September, they slowed. Growth started again in October/November and took off in December. Relevant Retail is up $255.1B vs 2019. Essential channels are responsible for the YTD lift vs 2019, primarily:

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

Regarding the Individual Large Channels

General Merchandise Stores – Sales grew vs November but not vs 2019 because Department Stores continue to fade, down -20% vs December 2019. Club/SuperCtr/$ stores are still the big positive force. In April consumers dialed back their panic buying and spending on discretionary items was also down significantly. Since May we have seen sales return to a more normal, strong pattern in these big and small value stores, including a 6% increase vs December 2019.

Food and Beverage, plus Health & Personal Care Stores – The Grocery segment is still strong and growing, +$76.4B YTD, due to the continuing big drop in restaurant sales. Monthly Sales increased in the Health, Personal Care group. Their $ have been up vs 2019 since June and YTD turned positive vs 2019 in August. Drug Store $ growth has been a key factor.

Clothing and Accessories; Electronic & Appliances; Home Furnishings – Except for September, monthly sales have grown every month since May. All groups increased sales vs November with Clothing & Accessories leading the way at +50.1%. All 3 channels are down significant percentages in YTD sales. Clothing Stores are the worst performers. In December they were down 12.1% vs December 2019 and 26.4% YTD. Together, these groups are down $91B vs 2019.

Building Material, Farm & Garden & Hardware – Sales peaked in late spring, as usual. However, this channel continues to benefit from consumers turning their focus to their home needs, including house and yard repair and improvements. This has extended their “Spring” lift indefinitely? $ were up 21.9% vs December 2019 and up +$53.7B (+14.0%) YTD.

Sporting Goods, Hobby and Book Stores – Book and Hobby stores are open and sales in Sporting Goods stores have taken off as Consumers are seeking more recreation. Sales exploded in December with the most monthly $ in 4 years, up 35.8% vs last month and 17.2% vs December 2019. In April, their YTD $ were -$3.4B. This deficit was wiped out in September and through December, YTD sales were +$5.7B (+4.5%). Their holiday lift far exceeded 2019.

All Miscellaneous Stores – This group is mostly small to medium specialty stores – both chains and independents. Pet Stores are essential but most other stores are not, so closures hit this group particularly hard. Sales hit bottom at -$3.8B in April then began to rebound in May and grew through July when they finally beat the monthly sales for 2019. In Aug>Sept sales plateaued. They turned up in October, down in November, then up strong in December. In February, they were up $2.6B YTD. At yearend they are down -$1.6B, a difference of $4.2B. Recovery will have to come in 2021.

NonStore Retailers – 90% of the volume of this group comes from Internet/Mail Order/TV businesses. The COVID-19 crisis has only accelerated the ongoing movement to online retail. In February NonStore was up 8.6% YTD. In December monthly sales were the highest for any month in history and the 1st month to exceed $100B. They are now up 22.1%, +$176.0B YTD. Their increase is 69% of the total $ increase for Relevant Retail Channels. They are the clear leader, and their performance far exceeds their 12.9% annual increase in 2019. 2020 was a key waypoint for NonStore Retailers.

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

Recap – April and May saw the 2 biggest year over year monthly sales declines in history. Restaurants, Auto and Gas Stations increased sales from May through July, but results have been mixed since then. All were down in September, up in October, down in November and finally up in December. The Auto segment passed 2019 YTD $ in December but Restaurants and Gas Stations are still struggling. The Relevant Retail segment has been the only true positive. Sales slowed in Aug>Sep. but then began grow again, hitting a record high in December. Their Monthly and YTD sales vs 2019 are now up for 8 consecutive months. Overall, they are +$255B YTD but for some segments in this group there is still a long way to go. Total Retail Sales peaked in December setting a new monthly $ record. In October Total Retail passed 2019 YTD $ and is now up +$40.2B (+0.6%) vs 2019. The growth has continued despite a surge in the virus. However, this will be a long battle. We will continue to monitor the data and provide you with regular updates.

 

 

 

 

2019 U.S. Pet Spending by Racial/Ethnic Groups

87.6% of the $77.44B that we spent on our companion animals in 2019 was done by 68.6% of the 132.2 million financially independent Consumer Units. These “majority” CU’s are White, Not Hispanic. That means that the 41.6 million CU’s – 31.4%, which are Racial or Ethnic minorities, generated only 12.4% of Total Pet Spending.

This disparity is evidence of yet another inequity in our society. In this report, we will drill deeper to get more specifics on the Pet Spending by Hispanics (All Races), African Americans and Asians. The U.S. is growing more ethnically diverse every day, so this is a situation and an opportunity which needs to be investigated.

Note: All the numbers are calculated from or taken directly from the Annual US BLS Consumer Expenditure Survey.

Let’s get started by looking at the Racial/Ethnic make-up of the U.S.

  • The White, Not Hispanic group also includes Native Americans and Pacific Islanders.
  • All the growth in number of CU’s came from minorities, +874K while White CU’s decreased by -73K.
  • In 2015 the White, Not Hispanic group fell below 70% of the total CU’s for the 1st time. It continues to decline.
  • Asians – smallest share, but the most growth, +2.4%.
  • African Americans, the second largest minority had the biggest increase in numbers.
  • The Hispanic growth slowed slightly but they are still the largest minority group.

Now let’s take a look at some of the characteristics that we have found to be important in pet spending behavior.

  • CU Size – Hispanics have by far the largest CU’s, 28% higher than average. However, in 2019, only 1 and 3 person CU’s spent more on their pets. 4+ people CU’s were down $1.1B
  • # Children under 18 – In 2019 Married couples with children spent less with 2 exceptions – oldest child, either under 6 or over 18. Note: With significantly more children per CU than Whites, the minority share of CU’s is sure to grow. This is especially true for Hispanics, even without immigration.
  • # Earners– It is more likely that all the adults work in Hispanic or Asian families. With over 40% more kids than Asians and a much lower income, this could be tough for Hispanics.
  • Homeownership – Homeowners account for 81.4% of all Pet Spending. The percentage of Hispanics and African Americans that own homes is 34>40% less than Whites. Both are also twice as likely to live in a Center City than in the suburbs. Asians are also likely to be Center City dwellers. The rate of pet ownership is lower in Center Cities.
  • Education is an important factor in Pet spending. it generally means higher income and helps in determining value in premium foods and Vet Services. Asians are the leaders. Hispanics have the lowest % of post High School education.

Next, we’ll compare each to the National Avg in Income, Spending, Pet Spending and Pet Share of Total $pending. CU National Averages: Income – $82,852; Total Spending – $62,949; Pet Spending – $593.51; Pet Share – 0.943%

  • Asian Americans make and spend the most money…but not on their pets. This may be due to cultural differences.
  • African Americans and Hispanics have lower incomes, but their overall spending is relatively in line. However, they spend significantly less on their pets. This is especially true of African Americans and indicates a significantly lower rate of pet ownership. A consumer survey from HUD on emergency disaster planning found this number to be 24%.
  • The spending of White Americans is very much tied to income, except where their pets are concerned, then…$$$.

It’s time to look at actual $ spent. We’ll begin with each industry segment which will put the Total Pet $ into better perspective. We will look at 2019 $ as well as a 6 year history. There is a huge disparity in $ between Whites and Minorities but there are also significant differences in key demographic characteristics among the minority groups that affect their spending. We will use multiple graphs to drill deeper into the data. First, Recent Pet Food History…

The graph shows the overall Pet Food Spending history from 2014 to 2019. You see that the White, Not Hispanic group mirrors the Super Premium spending waves, both up and down. On the other hand, Total Minority spending showed steady growth in the premium era until 2019. Their big drop in 2019 could be a late reaction to the 2018 FDA warning. From 2014>2019:

  • Pet Food $ were up $7.12B (+30.0%)
  • White, Not Hispanics were up $6.28B (+30.1%)
  • Minorities were up $0.84B (+26.2%) – Note: In 2018, at their peak, they were up $1.63B (+50.8%).

Until 2019, Minorities showed steady growth in Pet Food Spending during the Super Premium era. They may be slower to react to food trends. Their biggest lift came in 2018 which may parallel the overall lift in 2017 due to a deeper penetration of the upgrade. The 2019 drop may be a late reaction to the FDA warning. Let’s take a closer look at 2019 and the spending history of specific minorities.

In 2019 we saw an overall rebound in Pet Food spending after the drop in 2018 due to the reaction to the FDA warning on grain free dog food. However, this pattern was not true for minorities. All groups were down in 2019. For Hispanics and African Americans, Pet Food spending fell significantly – double digit %. This was probably due to a slower reaction to the 2018 FDA warning. Spending also decreased for the high income, highly educated Asian group. This minor decrease was likely a result of value shopping. The overall minority decrease drove the White CU share of spending up to 88.2%, second only to their share of Veterinary spending. Here are the specifics:

2019 National: Avg CU spent – $236.26 (+$16.34); 2019 Total Pet Food Spending: $31.19B, Up $2.35B (+8.1%)

  • White, Not Hispanic – Avg CU spent – $300.59 (+$32.22); 2019 Total Food Spending: $27.14B, Up +$3.13B (+13.0%)
    • There are large subsets in this group which react quickly and strongly to trends in Pet Food.
  • Total Minorities – Avg CU spent – $97.10 (-$18.88); 2019 Total Food Spending: $4.05B, Down -$0.79B (-16.3%)
    • Total minorities had consistent growth for 4 years. A delayed reaction to the FDA warning generated a big drop.
  • Hispanic – Avg CU spent – $121.06 (-$27.89); 2019 Total Food Spending: $2.30B, Down -$0.44B (-16.1%)
    • They had the biggest $ drop after a big lift in 2018. Both are delayed reactions to the 2017 lift and 2018 drop.
  • African Americans – Avg CU spent – $64.67 (-$17.86); 2019 Total Food Spending: $1.05B, Down -$0.32B (-23.4%)
    • Spending began to fall in 2018. Their higher education may have made some more aware of the FDA warning.
  • Asians – Avg CU spent – $108.45 (-$1.84); 2019 Total Food Spending: $0.70B, Down -$0.02B (-3.0%)
    • High Income but low pet ownership. Their spending is susceptible to trends but tends to be more stable.
  • 2019 Performance = Share of Spending/Share CU’s. Shows if groups are “earning their share”:
    • White, Not Hispanic – 126.9%; Minorities – 41.3%; Hispanics – 54.4%; Asians – 47.0%; African Americans – 25.8%.
    • Note: In 2018: Whites – 120.5%; Minorities – 48.0%; Hispanics – 71.0%; Asians – 53.3%; African Americans – 37.0%
  • Spending History – From 2014 to 2019, U.S. Pet Food Spending increased $7.12B (+ 29.6%). There were 2 big spending drops – 2016 & 2018, but 3 major Super Premium waves – 2015, 2017, 2019, that produced this increase:
    • White, Not Hispanic: + $6.28B (+30.1%) Their spending is reflected in the National Pattern.
    • Total Minorities: +$0.84 (+26.2%) Minorities “bought in” to the upgrade but each has a different story.
    • Hispanics: +$0.50B (+27.8%) Their spending basically lags 1 year behind the National pattern and peaked at +52.2% in 2018.
    • African Americans: +$0.13B (+14.1%) They are the only group with 3 consecutive years of increases. Their spending peaked at +65.2% in 2017 then began to fall through 2019, probably in reaction to the FDA warning.
    • Asians: +$0.21B (+42.9%) Had 2 consecutive declining years – 2016 & 2017. Generally small changes but had a big lift in 2018 which peaked their spending at +46.9%.

Although their distinctly different demographics produced different patterns, all minorities have made some level of commitment to upgrading their Pet Food. Now, let’s turn our attention to Pet Supplies. First, 2014>2019 Spending

The graph shows the overall Pet Supplies Spending history from 2014 to 2019. Pet Supplies spending is more discretionary than Food, so it reacts more to price changes. You see major spending dips in 2015 and 2019 due to inflation.  The White, Not Hispanic group mirrors the National pattern.  However, Total Minority spending dropped in both 2018 & 2019. This reflects their price sensitivity as inflation began at mid-year 2018. Overall, from 2014>2019:

  • Pet Supplies $ were down -$0.19B (-1.1%)
  • White, Not Hispanics were down -$0.57B (-3.9%)
  • Minorities were up $0.39B (+17.7%)

Minority Supplies spending reflects their focus on “essential” supplies. The more discretionary items are the most impacted by price swings. Note: White, Not Hispanic Spending peaked in 2018, +16.5%; Minorities, +33.2% in 2017.

Now, let’s take a closer look at 2019 and the spending history of specific minorities.

Prices started up in April of 2018. By the end of 2019 they had inflated 5.7%, the most since the great recession. This had a big impact as discretionary Supplies spending has become more price sensitive to today’s “value conscious” consumers of all income levels. All RacialEthnic groups spent less but the biggest % drops were in the higher income groups. The lower income groups, Hispanics and especially African Americans are more focused on “essential” supplies and less likely to indulge in more discretionary purchases. Minorities have their largest share of $ in Supplies. This is largely due to the lack of major product trends in the segment and their commitment to essential products. Here are the specifics:

2019 National: Avg CU spent – $127.15 (-$23.47); 2019 Total Pet Supplies Spending: $16.81B, Down $2.98B (-15.1%)

  • White, Not Hispanic – Avg CU spent – $156.87 (-$31.35); 2019 Supplies Spending: $14.23B, Down -$2.86B (-16.7%)
    • There are large subsets in this group which react quickly and strongly to inflation/deflation.
  • Total Minorities – Avg CU spent – $62.30 (-$4.45); 2019 Supplies Spending: $2.59B, Down -$0.13B (-4.8%)
    • Rising prices drove spending in all groups down.
  • Hispanic – Avg CU spent – $79.97 (-$5.91); 2019 Supplies Spending: $1.43B, Down -$0.08B (-5.0%)
    • They buy more discretionary supplies but are price sensitive. As prices began to rise in 2018, spending dropped.
  • African Americans – Avg CU spent – $45.80 (-$1.31); 2019 Supplies Spending: $0.79B, Down -$0.01B (-0.6%)
    • Their low income limits their discretionary purchases, so the rising prices had little impact on spending.
  • Asians – Avg CU spent – $57.44 (-$8.80); 2019 Supplies Spending: $0.36B, Down -$0.05B (-11.2%)
    • Low pet ownership, high income… but value conscious. Their $ also started to drop as prices started up in 2018.
  • 2019 Performance = Share of Spending/Share CU’s. Shows if groups are “earning their share”:
    • White, Not Hispanic – 123.4%; Minorities – 49.0%; Hispanics – 62.9%; Asians – 45.2%; African Americans – 36.0%.
    • Note: In 2018: Whites – 125.0%; Minorities – 48.0%; Hispanics – 57.0%; Asians – 44.0%; African Americans – 31.3% The lowest income groups spent less but gained share and improved performance because the Supplies spending drop was in the most discretionary categories, which they are less likely to buy.
  • Spending History – From 2014 to 2019, U.S. Supplies Spending fell $0.19B (-1.1%). Despite a deflationary spending increase wave from 2016>2018, two spending drops in 2015 and 2019, caused by inflation produced a net decrease.
    • White, Not Hispanic: -$0.57B (-3.9%) They reflect and drive the National Pattern. $ Peaked at +16.5% in 2018.
    • Total Minorities: +$0.39 (+17.7%) More focused on necessities, but price matters. $ peaked at +33.2% in 2017.
    • Hispanics: +$0.19B (+15.3%) With deflating prices, they expanded their discretionary Supplies purchases, peaking at +30.6% in 2017. However, when prices turned up in 2018, their spending turned down.
    • African Americans: +$0.13B (+19.7%) Surprisingly, the spending changes from 2014>2019 of this lowest income group exactly match the national pattern but are much less volatile because they are focused on essentials.
    • Asians: +$0.05B (+16.1%) Their spending also matched the national pattern until 2018. They have the highest income but are value conscious as $ began to drop when prices turned up in 2018. 2017 Peak was +90.3%

All minorities have a commitment to essential supplies. Discretionary spending increases with income, but all groups are sensitive to some degree to the ongoing deflation/inflation trends in this segment.

Now, let’s turn our attention to Non-Vet Services. First, an overview of 2014>2019 Spending

The graph shows the overall Pet Services Spending history from 2014 to 2019. Services spending is the most discretionary of any segment, so it is very dependent upon income. The two slight spending dips in 2017 and 2019 are the only decreases since the great recession. We should also note that spending increased every year for White, not Hispanics. Drops were caused by Minorities.

Overall, from 2014>2019:

  • Pet Services $ were up $2.95B (+52.0%)
  • White, Not Hispanics were up $2.53B (+50.6%)
  • Minorities were up $0.42B (+62.7%)

With a big expansion in outlets, Services became more accessible. This ultimately drove the huge lift in 2018. Minorities $ peaked at +89.6%. The 2017 dip was due to value shopping. In 2019, rising inflation was a factor for lower income CUs.

Now, let’s take a closer look at 2019 and the spending history of specific minorities.

An increased number of outlets boosted competition and made Services more accessible and convenient for all groups. After a period of low inflation, prices turned up in May of 2018. By the end of 2019 they had inflated 5.6%, double the “normal” rate. It had less of an impact on the higher income groups, whose primary focus is convenience. However, the lower income groups, Hispanics and African Americans, saw double digit drops in Services Spending in 2019.

Here are the specifics:

2019 National: Avg CU spent – $65.22 (-$1.14); 2019 Total Pet Services Spending: $8.62B, Down $0.10B (-1.1%)

  • White, Not Hispanic – Avg CU spent – $83.06 (+$0.91); 2019 Services Spending: $7.53B, Up +$0.08B (+1.0%)
    • They held their ground at the new high level even as prices inflated.
  • Total Minorities – Avg CU spent – $26.28 (-$4.85); 2019 Services Spending: $1.09B, Down -$0.18B (-14.2%)
    • Rising prices drove spending down in low income groups, which are 85% of all minorities.
  • Hispanic – Avg CU spent – $29.68 (-$7.06); 2019 Services Spending: $0.53B, Down -$0.12B (-17.6%)
    • They have higher discretionary spending but are price sensitive. Rising prices caused a sharp drop in spending.
  • African Americans – Avg CU spent – $18.08 (-$5.90); 2019 Services Spending: $0.31B, Down -$0.10B (-22.9%)
    • Their low income limits their discretionary purchases, so the rising prices had a big impact on spending.
  • Asians – Avg CU spent – $39.17 (+$4.36); 2019 Services Spending: $0.25B, Up +$0.04B (+15.3%)
    • Low pet ownership, but the highest income. They appreciate the convenience – a big increase in $ in 2019.
  • 2019 Performance = Share of Spending/Share CU’s. Shows if groups are “earning their share”:
    • White, Not Hispanic – 127.4%; Minorities – 40.3%; Asians – 60.1%; Hispanics – 45.5%; African Americans – 27.7%.
    • Note: In 2018: Whites – 123.8%; Minorities – 46.9%; Asians – 52.5%; Hispanics – 55.4%; African Americans – 36.1% Income truly matters in Services spending. Strong inflation caused a significate drop in share and performance for the lower income minorities while the higher income groups gained ground.
  • Spending History – From 2014 to 2019, U.S. Services Spending grew $2.95B (+52.0%). A radically increased number of outlets offering Services made them more accessible and drove sales up in all groups.
    • White, Not Hispanic: $2.53B (+50.6%) A huge share of $ and the only group to increase spending every year.
    • Total Minorities: +$0.42B (+62.7%) Strong growth but price matters. $ peaked at +89.6% in 2018.
    • Hispanics: +$0.25B (+89.3%) They radically expanded their Services purchases. Their spending exactly matched the national pattern, peaking at +132% in 2018 but when prices turned up in 2018, their spending fell sharply.
    • African Americans: +$0.05B (+19.2%) Their spending grew spectacularly from 2015 to 2018, +95.2%. Then prices turned up which had the biggest impact on this lowest income group. Services $ dropped -22.9%.
    • Asians: +$0.12B (+92.3%) They obviously appreciate the increased convenience of Services and they have the money to pay for it. Their Services $ increased +178% from 2017 to 2019.

All Pet Parents appreciate and want the convenience of Pet Services. However, it is the most discretionary of all the industry segments, so income is a definite factor in spending behavior patterns.

Now, let’s look at Veterinary Services. Here is an overview of 2014>2019 Veterinary Spending.

The graph shows the Veterinary Services Spending history from 2014 to 2019. Veterinary spending is a necessary expenditure, but a high inflation rate has made it more dependent upon income. Spending has only fallen once since 2014 and that was driven by minorities. In fact, Minority spending fell in 3 of the last five years but increased every year for White, not Hispanics.

Overall, from 2014>2019:

  • Veterinary $ were up $4.22B (+24.0%)
  • White, Not Hispanics were up $4.55B (+29.8%)
  • Minorities were down -$0.32B (-13.9%)

The growth in this segment has slowed since 2017. You can see the impact of rising prices on Minority spending. There was an inflation spike in 2015 which caused the only overall decrease and the biggest $ drop for minorities.

Now, let’s take a closer look at 2019 and the spending history of specific minorities.

Strong inflation has resulted in a reduction in the frequency of Veterinary visits since the great recession. Much of the segment’s growth has just come from higher prices. In 2019 inflation reached 4.14% so the amount of Veterinary Services actually declined from 2018. The strongly rising prices especially impacted the lowest income group, African Americans. Even though spending in 2019 increased +2.7% for White, Not Hispanics they also had a net decrease in the amount of Veterinary Services. The only “true” gains came from Hispanics and Asians.

Here are the specifics:

2019 National: Avg CU spent – $164.88 (+$3.37); 2019 Veterinary Services Spending: $21.80B, Up $0.58B (+2.7%)

  • White, Not Hispanic – Avg CU spent – $218.65 (+$5.93); 2019 Veterinary Spending: $19.83B, Up +$0.52B (+2.7%)
    • Another small gain in dollars, keeping their string of annual increases intact.
  • Total Minorities – Avg CU spent – $26.28 (-$4.85); 2019 Veterinary Spending: $1.98B, Up +$0.06B (+3.1%)
    • A small gain due to increased spending by Hispanics and Asians. Minorities also had 0.9M more CUs.
  • Hispanic – Avg CU spent – $65.75 (+$13.06); 2019 Veterinary Spending: $1.18B, Up +$0.12B (+27.3%)
    • Inflation and delayed frequency has caused a spending roller coaster. 2019 was an “up” year.
  • African Americans – Avg CU spent – $32.97 (-$15.92); 2019 Veterinary Spending: $0.57B, Down -$0.26B (-31.1%)
    • Their low income contributes to even bigger swings in spending. The strong inflation caused a big decrease.
  • Asians – Avg CU spent – $35.91 (+$8.61); 2019 Veterinary Spending: $0.23B, Up +$0.06B (+34.7%)
    • They have high income but rising prices have produced a perfect annual up/down spending pattern.
  • 2019 Performance = Share of Spending/Share CU’s. Shows if groups are “earning their share”:
    • White, Not Hispanic – 132.6%; Minorities – 28.8%; Hispanics – 39.9%; Asians – 21.8%; African Americans – 20.0%.
    • Note: In 2018: Whites – 131.7%; Minorities – 29.3%; Hispanics – 32.6%; Asians – 16.9%; African Americans – 30.3% Once again the change in frequency made the biggest difference. 2019 brought a big $ drop by African Americans which couldn’t be overcome by significant gains from other minorities. It is somewhat surprising that in a “need” category like Veterinary, White, Not Hispanics have their biggest share of the $. Veterinary care is needed by Pet Parents, but the frequency has become more discretionary.
  • Spending History – From 2014 to 2019, Veterinary Spending rose $4.22B (+24.0%). White, not Hispanics have shown consistent growth. Minorities have been on an up & down spending rollercoaster ride which even produced an overall small decrease in spending for the whole Veterinary segment in 2015.
    • White, Not Hispanic: +$4.55B (+29.8%) Over 90% of the business and annual growth since 2014.
    • Total Minorities:-$0.32B (-13.9%) 2 ups and 3 downs since 2014. After 2014, $ peaked at -12.2% in 2017.
    • Hispanics: +$0.62B (+110.7%) They have an up and down pattern but their spending more than doubled. This is great but somewhat deceptive. The frequency variation has caused some extremely high peaks and big drops with lower income groups. Hispanics Veterinary $ fell -$1.23B, -68.7% from 2013>2014, likely from a big drop in frequency.
    • African Americans: -$0.97B (-63.0%) Also up and down spending changes but they have yet to recover from the 55% spending drop in 2015. A spike in Veterinary prices along with frequency issues likely caused that decrease.
    • Asians: +$0.02B (+9.5%) Their spending turned sharply down in 2018. Inflation and reduced visit frequency even affected this highest income group. 2017 Peak was +95.2%

Income matters but inflation affects all income levels. In this necessary segment, Pet Parents don’t stop spending they just cut back on the frequency. White, Not Hispanics have a higher income and the highest level of Pet ownership. The result is that they dominate this segment with over 90% of the spending.

Now, let’s look at Total Pet. Here is an overview of 2014>2019 Spending.

The graph shows the Total Pet Spending history from 2014 to 2019. Each Segment has a different story. The two drops in Total Pet Spending are tied to Food Value Shopping in 2016 and Supplies inflation in 2019. The White, Not Hispanic group mirrored the National pattern until 2019. Total Minority spending dropped in both 2015 & 2019. Their 2019 decrease was large enough that it drove the whole industry down. Overall, from 2014>2019:

  • Total Pet $ were up $14.12B (+22.0%)
  • White, Not Hispanics were up $12.79B (+22.9%)
  • Minorities were up $1.33B (+15.9%)

The Total Pet spending pattern for Whites and Minorities only matched in 2017 & 2018 when both spent more. In the other years they were opposites. Spending peaked for Minorities in 2018 at 28.2%.

Now, let’s take a closer look at 2019 and the spending history of specific minorities.

There were a lot of things going on in 2019. The two biggest factors were the rebound in Pet Food spending after the FDA warning and the high inflation in Supplies prices. The reaction to these and other trends in the industry varied among Racial Ethnic groups. However, income may be the most important demographic difference. The two highest income groups, Whites and Asians spent more on their pets in 2019. However, it wasn’t enough to overcome spending decreases by the lower income groups, Hispanics and African Americans. Here are the specifics:

2019 National: Avg CU spent – $593.51 (-$4.90); 2019 Total Pet Spending: $78.44B, Down $0.16B (-0.2%)

  • White, Not Hispanic – Avg CU spent – $759.17 (+$7.72); 2019 Total Pet Spending: $68.73B, Up +$0.87B (+1.3%)
    • They had a huge drop in Supplies but increased $ in other segments, especially Food, with a +$3.1B spending rebound from the 2018 FDA warning.
  • Total Minorities – Avg CU spent – $232.65 (-$31.38); 2019 Total Pet Spending: $9.71B, Down -$1.03B (-9.6%)
    • Spending drops by the lower income groups, African Americans and Hispanics, especially in Food and Services, produced a small decrease in Total Pet Industry spending.
  • Hispanic – Avg CU spent – $296.46 (-$27.80); 2019 Supplies Spending: $5.44B, Down -$0.38B (-6.5%)
    • Their decrease was primarily driven by a big drop in Food, a delayed reaction to the 2018 FDA warning.
  • African Americans – Avg CU spent – $161.52 (-$40.49); 2019 Total Pet Spending: $2.73B, Down -$0.68B (-19.9%)
    • Spending was down in all segments, with the biggest drops in Food and Veterinary.
  • Asians – Avg CU spent – $240.97 (+$2.33); 2019 Supplies Spending: $1.54B, Up +$0.03B (+2.0%)
    • Lifts in Services and Veterinary Services overcame drops in Food and Supplies.
  • 2019 Performance = Share of Spending/Share CU’s. Shows if groups are “earning their share”:
    • White, Not Hispanic – 127.8%; Minorities – 39.4%; Hispanics – 51.2%; Asians – 41.0%; African Americans – 26.6%.
    • Note: In 2018: Whites – 125.0%; Minorities – 44.2%; Hispanics – 55.4%; Asians – 41.0%; African Americans – 33.6% The lowest income groups, especially African Americans, loss considerable ground in 2019.
  • Spending History – From 2014 to 2019, Total Pet Spending grew $14.12B (+22.0%). This period saw a series of up and down spending waves in Food, Supplies and Services. The annual growth was +4.1%, which is considerably below the 7.7% industry average since 1960.
    • White, Not Hispanic:+$12.79B (+22.9%) They drive Pet Spending with only 1 small drop in 2016.
    • Total Minorities: +$1.33 (+15.9%) Different patterns. $ peaked at +28.2% in 2018. Exceeding the rate of Whites.
    • Hispanics: +$1.57B (+40.6%) They have the highest % growth and are the only group that spent more every year from 2015 to 2018. Spending fell in 2019 in all segments but Veterinary. They peaked at +50.4% in 2018.
    • African Americans: -$0.65B (-19.2%) They are the only group with a decrease. This is primarily due to the big drop in Veterinary in 2015. However, they have the lowest income – the biggest factor in Pet Spending. Their spending peaked at +0.9% in 2018, but spending was up 39.2% from 2015.
    • Asians: +$0.41B (+36.3%) They have the highest income, but their spending has been in an up then down pattern every year since 2014. This shows that there are other factors besides income affecting Pet spending.

In 2019 income truly mattered in Pet Spending. However, from 2014>2019 all groups but African Americans increased Pet Spending. Now, we’re going to look a little closer at the most accurate comparison, Spending Performance.

Spending performance is determined by dividing a group’s share of Total $ spent by their share of total U.S. CUs. This factors in both changes in $ spent and in the number of CU so it accurately accounts for the ongoing evolution of both the Pet Industry and U.S. Society.

The graph below shows the annual Total Pet Spending performance of all Racial/Ethnic groups from 2015 to 2019. Total Pet $ grew 15.8% during this time but Minority Pet $ grew 22.3% as they climbed up from their 2015 low point. They were aided by a +7.6% increase in CUs compared to only +1% for whites. It was a tumultuous time in the industry with two down years and big spending swings in many segments. Some of the key industry trends behind those swings were:

  • Food: 2015 – the first wave of Super Premium; 2016 – Value Shopping; 2017 – Deeper market penetration of Super Premium; 2018 – FDA warning on grain free dog food; 2019 – Rebound from FDA warning.
  • Supplies: 2015 – Cut back on Supplies to pay for upgraded Food; 2016>2018 Prices deflated so spending grew; 2019 – Tariffs cause strong inflation and spending dropped like a rock.
  • Services – 2015>2017 rapid expansion of outlets increases availability and competitive pressure, so spending fell in 2017; 2018 – Availability “hits home” and spending explodes. 2019 brings value shopping and spending falls slightly.
  • Veterinary – Inflation continues, which reduces visit frequency. Consumers just pay more so Spending goes up.

CU # Change 2015>2019

Whites: +0.9M (+1.0%); Share: 69.9% > 68.6%

All Minorities: +2.9M (+7.6%); Share: 30.1% > 31.4%

Hispanics: +1.2M (+7.1%); Share: 13.0% > 13.6%

African Americans: +1.0M (+6.3%); Share: 12.7% > 13.1%

Asians: +0.7M (+12.7%); Share: 4.4% > 4.8%

  • White, Not Hispanic – This group is slowly growing in numbers but losing ground in share of CUs. They are the overwhelming, dominant force in the Pet Industry with 87.6% of Total Pet $ and at least 84.6% of each segment. They have large subgroups, so they are impacted by trends. However, their performance is still up vs 2015.
  • Total Minorities – 2019 was a bad year for lower income minorities. Minorities performance had been improving but now it is essentially at the same level as 2015.
  • Hispanics – They are the largest minority, with the biggest increase in numbers. Like Whites, they have an up and down performance pattern, but it is the exact opposite. They have lower income and the lowest level of education. It appears likely that they have a slower reaction to industry trends. 2019 was bad for them but they are the only minority group with improved performance over 2015.
  • African Americans – The second biggest group with the second largest increase in numbers. They have by far the worst performance. Almost all the cards are demographically stacked against them in pet spending. They have the lowest income and rate of homeownership. They are the most likely to live in a center city, 50+%. In their family life, they are the least likely to be married and most likely to live alone. Also, 32% of all single parent households are African Americans. There is one anomaly, education. Education is usually tied to income. Their lowest income level does not match their level of education – income discrimination? In 2019 their performance fell below 2015.
  • Asians – Their CUs are growing, but their performance is down the most from 2015. They have high income and all the key demographics for pet spending. However, they have low pet ownership primarily due to cultural differences.

Our takeaway from this analysis is that Hispanics are likely to continue to make progress. Asians will need to become more Americanized in their pet ownership to drive spending. African Americans may need some assistance or at least an equal opportunity. While their demographic issues are not caused by the Pet Industry, we certainly see their impact. The situation of African Americans is a big problem and a big opportunity – both for our society and the Pet Industry.

 

 

 

 

 

 

 

 

 

 

2019 Total Pet Spending was $78.44B – Where did it come from…?

Total Pet Spending in the U.S. was $78.44B in 2019, a -$0.16B (-0.02%) decrease from 2018. These figures and others in this report are calculated from data in the annual Consumer Expenditure Survey conducted by the US BLS. 2019 was essentially a “flat” year for the industry, on the surface. However, when you look at each segment there was a certain amount of turmoil. Pet Food spending rebounded after the 2018 FDA warning on grain free dog food but the new tariffs on Supplies really hit home across almost all demographics and the $ plummeted. Services spending dipped slightly after the record lift in 2018. Veterinary spending had another small increase, but it was all due to inflation. 2019 Pet Spending certainly deserves a closer look.

The first question is, “Who is spending most of the $78+ billion dollars?” There are of course multiple answers. We will look at Total Pet Spending in terms of 10 demographic categories. In each category we will identify the group that is responsible for most of the overall spending. Our target number was to find demographic segments in each category that account for 60% or more of the total. To get the finalists, we started with the biggest spending segment then bundled related groups until we reached at least 60%.

Knowing the specific group within each demographic category that was responsible for generating the bulk of Total Pet $ is the first step in our analysis. Next, we will drill even deeper to show the best and worst performing demographic segments and finally, the segments that generated the biggest dollar gains or losses in 2019.

In the chart that follows, the demographic categories are ranked by Total Pet market share from highest to lowest. We also included their share of total CU’s (Financially Independent Consumer Units) and their performance rating. Performance is their share of market vs their share of CU’s. This is an  important number, not just for measuring the impact of a particular demographic group, but also in measuring the importance of the whole demographic category in Spending. All are large groups with a high market share. A performance score of 120+% means that this demographic is extremely important in generating increased Pet Spending. I have highlighted the 6 groups with 120+% performance.

The only group change from 2018 is that $70K> replaced $50K> as spending skewed towards higher incomes in 2019. However, there were changes in the numbers and rankings. Everyone Works, Homeowners and Suburban gained in share, ranking and performance. Married Couples and 2+ CUs fell in ranking and in all measurements. Education’s rank didn’t change but they lost share and decreased performance while 35>64 yr olds, Whites and Wage Earners gained in these 2 areas.

  1. Race/Ethnic – White, not Hispanic (87.6%) This is the 2nd largest group and accounts for the vast majority of Pet Spending. Their performance rating increased to 127.8% and they now rank #2 in terms of importance in Pet Spending demographic characteristics. However, they are in a virtual tie with Homeowners. Although this demographic, along with age, are 2 areas in which the consumers have no control, spending disparities within the group are enhanced by differences in other areas like Income, CU Composition and homeownership. There are also apparently cultural differences which impact Pet Spending. Asian Americans are first in income, education and spending but last in Pet Spending as a percentage of total spending – 0.33% vs a national average of 0.94%.
  2. Housing – Homeowners (81.4%) Controlling your “own space” has long been a key to larger pet families and more pet spending. 2019 was a bad year for renters, as their pet spending fell -$1.3B. Homeowners spent $1.14B more and the group’s performance rose to 127.7%, keeping them in 3rd place in terms of importance for increased pet spending. The homeownership rate is growing in the younger CUs but most of the pet spending lift in the group is coming from older people who have paid off their homes, whether they are retired or still working.
  3. # in CU – 2+ people (78.2%) Singles have the lowest performance of any group, but they continued to gain ground in 2019. This gain along with a drop in spending by 2 person CU’s caused the overall performance of 2+ CUs to drop to 112.0%. In the group, only 3 Person CUs spent more but 5+ person CUs remain the only one performing under 100%.
  4. Education – Associates Degree or Higher (68.4%) Higher Education level is usually tied to higher income and Pet spending. It can also be a key factor in recognizing the value in product improvements. 2019 was a mixed bag. HS Grads and those with Advanced Degrees spent $2.26B more while those with a BA/BS or Associates degree spent $1.97B less. These groups all spent more on Food and less on Supplies. The big difference was a $1.31B drop in Vet $ by the BA/BS/Assoc. group. Overall spending for the Assoc & Higher group fell -$0.97B and their performance fell from 127.5% to 123.1% – from 2nd to 5th. However, Education remains an import factor in Pet Spending.
  5. # Earners – “Everyone Works” (68.4%) These are CUs of any size where all adults are employed. This group’s share ranking jumped from 7th to 5th. Their performance increased from 110.3% to 117.0%, ever closer to 120%. These big gains came from a $4.4B increase by 2 earner and working single CUs. It shows a growing tie with income and also indicates the overall youth movement in pet spending. Gen X and Millennial CUs have more working adults.
  6. Occupation – All Wage & Salary Earners (65.0%) – An interesting year – Blue Collar & lower level White Collar workers spent more, while their bosses spent less. Overall, the group spent more but gained share largely because of big spending drops by self employed and retirees. Their performance also grew to 106.5%, but is still the lowest of any group. It remains below 110% because there is a big spending (and income) disparity within the group.
  7. Income – Over $70K (64.3%) With a big spending drop in the $50>69K group, a new higher dividing line made sense. Money increasingly matters in Pet Spending. With a performance rating of 155.0%, CU income is the single most important factor in increased Pet Spending. This performance is even up from 153.7% in 2018. This was largely driven by a -$1.7B spending drop in the $30>69K range, along with a strong lift from those earning $70>99K, +$1.2B.
  8. Age – 35>64 (63.3%) The 45>54 yr olds spent -$0.71B less but the other groups made that up. They primarily gained share because of a -$0.77B spending drop by the under 35 group. Their performance also increased from 119.5% to 121.0%. They are now officially included in the “120% Club” but are still ranked 6th in overall importance.
  9. Area – Suburban (61.9%) Homeownership is high and they have the “space” for pets. Their share of pet spending continues to grow. Their performance also increased from 110.0 to 111.3%. The gain in share and performance was due to a good year for Suburbs 2500> pop. All areas <2500, both rural and suburban, along with Center Cities had a bad year. Rural and Center Cities combined spending was down -$0.78B, which drove up Suburban performance.
  10. CU Composition – Married Couples (60.7%) With or without children, two people, committed to each other, is an ideal situation for Pet Parenting. In 2019, due in large part to a second consecutive big drop in spending by married couples only CU’s, this group fell from 9th to 10th in share of spending. A big spending lift by singles also contributed to a decrease in performance from 125.2% to 124.3%. However, they are still ranked 4th in importance.

Total Pet Spending is a sum of the spending in all four industry segments. The “big demographic spenders” listed above are determined by the total pet numbers. Although the share of spending and performance of these groups may vary between segments, in only 1 case does any group’s share of spending fall below 60%, 57.0% Married Couples, Services $. In the Services segment analysis, we also altered 2 groups to better reflect where most of the business is coming from.

The group performance is a very important measure. Any group that exceeds 120% indicates an increased concentration of the business which makes it easier for marketing to target the big spenders. Although Income over $70K is the clear winner, there are other strong performers. The high performance in 6 groups also indicates the presence of segments within these categories that are seriously underperforming. These can be identified and targeted for improvement.

Now, let’s drill deeper and look at 2019’s best and worst performing segments in each demographic category.

Most of the best and worst performers are just who we would expect and there are only 5 that are different from 2018. Changes from 2018 are “boxed”. We should note:

  • Income is important in Pet Spending, which is shown by the 209.2% performance by the $200K> group . However, all income groups over $70K have 124+% performance and it increases with income.
  • # Earners – After 2 years, 2 Earners is back on top. Gen X and Millennial CUs are the most likely to have 2 workers.
  • Age – The 45>54 yr olds maintained their lead over the 55>64 yr old Boomers but the under 25 group returned to the bottom because of a strong year by the oldest Americans.
  • Region – With a strong year in Food and Veterinary, the Northeast replaced the usual winner, the West, at the top.
  • CU Composition/Number – The performance of Married, Couple Only fell again and they were replaced by older married couples with a child. The “magic” CU number also moved up from 2 to 3.

Most expected winners are still doing well. The “new” winners reflect the growing strength of Gen X. In the next section we’ll look at the segments who literally made the biggest difference in spending in 2019.

We’ll “Show you the money”! This chart details the biggest $ changes in spending from 2018.

There was more stability in 2019. There are 24 Winners and Losers. 5 Winners and 4 Losers are repeats from 2018. Only 3 held their spot in 2018. In 2019, only 4 segments switched from winner to loser or vice versa. In 2018 it was 13.

  • # Earners – The 2018 Winner and Loser kept their positions and their $ change (+ or -) increased in 2019.
    • Winner – 2 Earners – Pet Spending: $33.95B; Up $2.81B (+9.0%)                      2018: 2 Earners
    • Loser – 1 Earner, 2+ CU – Pet Spending: $13.27B; Down -$3.55B (-21.1%)        2018: 1 Earner, 2+ CU
    • Comment – Income is growing in importance in Pet spending as is the # of earners in a CU.
  • CU Composition – Singles continued their strong growth while Married, Couple Only had another big $ decrease.
    • Winner –– Singles – Pet Spending: $17.08; Up $2.09B (+14.0%)                                 2018: Singles
    • Loser – Married, Couple Only – Pet Spending: $22.91B; Down -$1.67B (-6.8%)      2018: Married, Couple Only
    • Comment – 2 other groups are suffering – married with an oldest child 6>17 and single parents. Couples with younger or older children spent more, as did 2+, all adult CUs.
  • # in CU – Again, no change from 2018. The winner and loser stayed on their existing path.
    • Winner – 1 Person – Pet Spending: $17.08B; Up $2.09B (+14.0%)                  2018: 1 Person
    • Loser – 2 People – Pet Spending: $31.00B; Down -$2.36B (-7.1%)                   2018: 2 People
    • Comment: Although 2 people CUs still spend the most, 39.5% of all Pet $, 2 is losing some of its “magic”. Only 1 and 3 person CUs spent more in 2019. All other sizes spent less.
  • Income – There were no repeats or flips here but the winner & loser remain correlated to income level.
    • Winner – $70 to $99K – Pet Spending: $14.15B; Up $1.23B (+9.5%)               2018: $150 to $199K
    • Loser – $30 to $39K – Pet Spending: $5.05B; Down -$0.69B (-12.0%)            2018: Under $30K
    • Comment – All income groups under $70K spent less, -$1.90B. Because of a total spending decrease from the $100>149K segment due to Supplies & Veterinary $, the $70K> group couldn’t quite make up the difference.
  • Region – After 2 years at the top, the Midwest flipped to the bottom and the Northeast flipped to the top.
    • Winner – Northeast – Pet Spending: $14.99B; Up $1.14B (+8.3%)                  2018: Midwest
    • Loser – Midwest – Pet Spending: $16.62B; Down -$1.13B (-6.4%)                   2018: Northeast
    • Comment – In 2018 the Northeast was the only region with a decrease in Total Pet $. In 2019 they were the only region to spend more. They offset the Midwest but couldn’t quite make up for -$0.17B from the South and West.
  • Education – BA/BS flipped to the bottom while Advanced Degrees took over the top spot.
    • Winner – College Degree – Pet Spending: $20.95B; Up $1.00B (+5.0%)       2018: BA/BS Degree
    • Loser – BA/BS Degree – Pet Spending: $23.83B; Down -$1.30B (-5.2%)       2018: HS Grad w/some College
    • Comment – Education matters in Pet Spending but 2019 was a “mixed bag”. Those with Advanced Degrees spent more but so did HS Grads with no degree. Assoc/BA/BS degrees along with < HS grads all spent less.
  • Housing – Homeowners w/o Mtge flipped from last to first.
    • Winner – Homeowner w/o Mtge – Pet Spending: $20.79B; Up $0.99B (+5.0%)      2018: Homeowner w/Mtge
    • Loser – Renter – Pet Spending: $14.58B; Down -$1.29B (-8.1%)                                   2018: Homeowner w/o Mtge
    • Comment – All Homeowners spent more. Renters actually had their first spending decrease since 2014>15.
  • Race/Ethnic – White, Not Hispanics (87.6% of all Pet $) won again, but their spending lift was not quite big enough.
    • Winner – White, Not Hispanic – Pet Spending: $68.73B; Up $0.87B (+1.3%)       2018: White, Not Hispanic
    • Loser – African American – Pet Spending: $2.73B; Down -$0.68B (-19.9%)          2018: Asian American
    • Comment – Whites and Asians spent more but couldn’t overcome a big drop by Hispanics and African Americans.
  • Occupation – No repeats and an unexpected winner.
    • Winner –– Technical, Sales, Clerical – Pet Spending: $13.15B; Up $0.87B (+7.1%)        2018: Self-Employed
    • Loser – Managers & Professionals – Pet Spending: $25.15B; Down -$1.34B (-5.0%)     2018: Blue Collar Workers
    • Comment – Along with the lower level White Collar winners, Blue Collar workers also spent more on their pets, while their “bosses”, Managers & Professionals, spent less.
  • Age – A new winner and loser. Both are surprising!
    • Winner – 75+ yrs – Pet Spending: $5.21B; Up $0.73B (+16.3%)               2018: 35>44 yrs
    • Loser – 45>54 yrs – Pet Spending: $17.01B; Down $0.71B (-4.0%)         2018: 55>64 yrs
    • Comment: Spending was on an Age Roller Coaster in 2019. Under 34 – Down -$0.77B; 35>44 – Up $0.39B; 45>54 – Down -$0.71B; 55>64 – Up $0.29B; 65>74 – Down -$0.08B; 75+ – Up $0.73B.
  • Area Type – After 1 year on top, Central City flipped back to the bottom.
    • Winner – Suburbs 2500> – Pet Spending: $36.16B; Up $0.70B (+2.0%)       2018: Central City
    • Loser – Central City – Pet Spending: $23.07B; Down -$0.52B (-2.2%)            2018: Rural
    • Comment – Suburbs 2500> have the biggest share of Pet $, 46.1%. They were also the only area with an increase.
  • Generation – Both Generations held their spots at the top and bottom of the Total Pet spending change ladder.
    • Winner Gen X – Pet Spending: $25.75B; Up $0.59B (+2.4%)                               2018: Gen X
    • Loser – Baby Boomers – Pet Spending: $28.73B; Down -$0.88B (-3.0%)            2018: Baby Boomers
    • Comment – While the pace slowed, the Boomer Bust and spending growth by Gen X continued.

We’ve seen the best overall performers and the “winners” and “losers” in terms of increase/decrease in Total Pet Spending $ for 12 Demographic Categories. Now, here are some segments that didn’t win an award, but they deserve….

HONORABLE MENTION

Let’s start with Married, Oldest child <6. They are the repeat best performer in this “almost” group. Their spending has increased $1.58B (+76.7%) since 2017, quite an accomplishment. This group is generally younger and evidence of the increasing commitment of younger Americans to their Pet Children. That brings us to our 2nd repeat on this list. The Millennial/Gen Z group also gets honorable mention again for their $0.58B spending increase. Gen X only beat them out for the top spot by $0.01B. Overall, Singles have gotten a lot of accolades for their 2019 performance, but I have added one of their subgroups – 1 Earner, singles to the honor roll. They provided 78% of the Singles’ total Increase. We can’t forget another high income group. $150>199K was up $0.78B (+8.6%). College Grads win the awards, but Pet Parenting is widespread. High School grads with no college spent $0.68B (+7.7%) more in a tumultuous year. Finally, most pet spending is done by “white collar” workers and bosses, but there are a lot of Blue Collar pet parents too. In a flat year, they spent $0.81B (+6.8%) more on their pet children.

Summary

To properly review 2019, we must put it into context with recent history. Total Pet Spending peaked in 2018 at $78.60B, a $14.28B, 22.2% increase from 2014. However, it was not a steady rise, Total spending actually fell in 2016 and each segment had at least one down year. There were a number of factors driving both the growth and tumult within the industry. Two big positives were the movement to super premium pet foods and the rapid expansion of the number of outlets offering pet services. On the downside were value shopping, trading $ between segments and outside influences like the FDA dog food warning and tariffs. Pricing, inflation/deflation was also a negative/positive factor in some cases.

That brought us to 2019. The industry had another small decrease, -$0.16B (-0.2%) which was largely driven by a huge drop in spending in Supplies caused by Tarifflation. This affected virtually every demographic segment and caused Supplies $ to fall below 2014. Services spending also fell slightly as consumers value shopped. The good news was Pet Food bounced back from the impact of the 2018 FDA warning to reach a new record high. Veterinary $ also increased 2.7%. Unfortunately, this was entirely due to a 4.1% increase in prices. The amount of Vet Services actually decreased.

There was one change in the big demographic groups responsible for most pet spending as the <$70K income group replaced the <$50K group. Income is becoming even more important in Total Pet Spending, which is reinforced by performance. The number of most influential big groups remains 6, but income truly stands alone at the top.

In the best/worst performing segments, 3 Person and 2 Earner CUs became #1 and Gen X stayed on top, more validation of the ongoing youth movement. A surprise was the Northeast, taking over from the West, the usual winner.

The biggest $ changes saw far less turmoil than in 2018. 9 segments held their position, compared to 3 in 2018, while just 4 switched from 1st to last or vice versa. There were 13 “flips” in 2018. Singles continued their strong growth, and many winners were the “usual suspects: but there were 5 surprises – 75+ yr olds, $70>99K, Northeast, Homeowners w/o Mtges and Tech/Sales/Clerical. This was a mixture of both younger and older Americans. Of note, Baby Boomers spending continued to fall. Gen X and Millennials spent more but couldn’t quite make up the difference. Race/Ethnicity also was a factor in 2019. White, not Hispanics spent $0.87 more but Hispanics and African Americans spent $1.06B less. To get to the heart of 2019 Pet Spending, we will continue our analysis by drilling down into the individual segments.

But before we go…The “Ultimate” Total Pet Spending Consumer Unit in 2019 consists of 3 people – a married couple with a child over 18. They are in the 45 to 54 age range. They are White, but not Hispanic. At least one of them has an Advanced College Degree. The parents work in their own business and are doing well  – over $200K. They’re still paying off their house located in a small suburb of a metropolitan area with a population of about 4,000,000 in the Northeast.

 

 

 

Retail Channel Monthly $ Update – October Final & November 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 – approximately 2 weeks after month end. The Monthly Final Report includes data from all respondents, so it takes longer to compile the data – about 6 weeks. Although the sample size for the Advance report is smaller, the results over the years have proven it to be statistically accurate with the final monthly reports. The biggest difference is that the full sample in the Final report allows us to “drill” a little deeper into the retail channels.

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

Both reports include the following:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Regarding the Individual Large Channels

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

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

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

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

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

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

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

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

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

 

 

 

 

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

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

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

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

GENERATIONS DEFINED

Gen Z: Born after 1996

In 2019, Age under 23

Millennials: Born 1981 to 1996

In 2019, Age 23 to 38

Gen X: Born 1965 to 1980

In 2019, Age 39 to 54

Baby Boomers: Born 1946 to 1964

In 2019, Age 55 to 73

Silent/Greatest: Born before 1946

In 2019, Age 74+

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

Now let’s look at some key CU Characteristics

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Now, Veterinary Services

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

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

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

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

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

 

 

 

 

 

 

 

 

 

Retail Channel Monthly $ Update – September Final & October Advance

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

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

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

Both reports include the following:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Regarding the Individual Large Channels

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

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

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

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

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

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

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

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

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

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

 

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Key Demographic “Movers” for 2019.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

 

 

 

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

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

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

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

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

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

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

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

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

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

Now, here is Veterinary Spending by Age Group

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

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

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

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

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

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

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

That means that there were also some Surprises:

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

First, by Income Group.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

 

 

 

Retail Channel Monthly $ Update – August Final & September Advance

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

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

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

Both reports include the following:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Regarding the Individual Large Channels

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

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

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

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

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

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

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

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

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