Archive for category: Pet Market

The first six chapters of this Pet Spending Demographics report have been very detailed, data driven and intense. We looked at the industry as a whole and each of the individual Industry segments separately. In 2017 we saw movement toward more balanced spending in terms of Income and Higher Education and a definite spending migration to lower populated areas in both Rural and Suburban settings. There was another change in consumer behavior that we should note.  In 2015 and again in 2016, we saw how shifts in spending behavior in one major category, Pet Food, can negatively (2015) or positively (2016) impact the spending in others. Consumers, in effect, traded $. In 2017, this was not a major factor. Price deflation in Food and Supplies in conjunction with extraordinarily low inflation in the Services segments, made 2017 a year of “Consumer Value” in the Pet Industry. Remember, Value is the #1 driver in Consumer spending behavior. Consumers recognized the opportunity and took advantage of it by spending $9.84B (14.6%) more on their Pet Children. It was a year for the record books.

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

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

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

Before we get started, let’s take a look at the current market share of the industry segments. The following 2 charts show the 2017 share of spending for each segment and the evolution over the past 25 years. 1992 was the last year that the Food Segment accounted for 50% of Total Pet Spending. By the way, Total Pet Spending was $16.2B in 1992. We have come a long way – +377%; annual growth rate of 6.45%. This will help put our comparisons into better perspective.

Food: 40.3%; Up from 39.4%

Supplies: 24.1%; Up from 23.5%

Veterinary: 26.8%; Down from 26.9%

Services: 8.8%; Down from 10.2%

The Food segment reached the 40% level again. In 2015 it was 43.5%, the highest level since 1998. Supplies also gained ground while both Services segments lost share. The Veterinary segment didn’t keep pace with the Products increase. The 10.2% share for Services in 2016 was the highest since 2006, but 2017 brought some turmoil and a drop in share.

As we look at the migration, both Services segments have maintained a relatively stable share. The big change was in products. The 90’s brought “Pet Parents”, the rise of Pet Chains and Super Stores and a big expansion in the Mass Market. Retailers filled their shelves with Supplies and Consumers filled their Homes. The recent move to more premium foods has allowed the Food Segment to regain a little ground.

Now let’s get started with a look at the “Big Spenders”. The following 2 charts will compare the market share and performance in all Pet Industry segments by the groups responsible for the bulk of the spending in 10 demographic categories. These are the groups that we identified in our Total Pet analysis to generate at least a 60% market share of spending. As you recall, in the Service segments, we had to alter some groups slightly to better target the spending. However, to have a true side by side comparison we need to use the same groups for all. The market share dips below 60% in 4 situations, to a low of 55%. All these relate to Food, which is yet more evidence that pet parenting is demographically widespread. Even the low point is within 8% of our target and 92% of all measurements meet or exceed the 60% requirement, so the comparison is very valid.

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

• White, Non-Hispanic – This group has an 84+% market share in every Segment. Minority groups account for 31.5% of CUs but only 10 to 16% of spending in any category. Factors: Lower incomes for Hispanics and African Americans and lower Pet ownership in Asians and African Americans. This group loss share in Veterinary and Supplies, with Supplies replacing Food at the bottom. Food and Services gained share and increased performance.
• 2+ People in CU – 2 is the magic number in pet ownership. The performance is remarkably even across all segments. Last year share and performance peaked with Food, then moved down through Supplies and Services. Veterinary took over the top spot in Share and Performance. All performances but Services increased because Singles had a bad year. This group is still under 120% because spending tends to go down in larger CU’s, especially 5+.
• Homeowners – Homeownership is very important in Pet Ownership and subsequently in all Pet Spending. It also increases with age. Supplies had a big increase in share and performance due to a spending lift by older Americans. Food also gained slightly for the same reason. The Services segments were basically unchanged.
• Over $50K Income – INCOME MATTERS MOST IN PET SPENDING! Pet Food still has the “lowest” high performance. Pet Ownership remains very common across lower incomes. The importance of income just increases as spending in industry segments becomes more discretionary – like Supplies and Services, or higher priced – like Veterinary Services. This group had gains in share and performance in all segments but Supplies. However, the gains, especially in Food, were largely fueled by middle and even lower middle-income groups.
• All Wage & Salary Earners – This group had the lowest performance of any group because Income varies widely and Self-employed and Retirees are significant contributors to Pet Spending. The group made gains in all but the Supplies Segment, which were driven by increases from lower income workers and a spending drop from the Self-employed.

• 35 to 64 yrs – Includes the 3 highest income segments. In 2016, share and performance were almost even across all segments. A big lift in Food and Supplies spending by the 55>64 yr olds drove up those segments and performance exceeded 120% for the first time. The 45>54 yr olds pushed an increase in Veterinary. However, a big lift in Services spending by the 65+ group combined with a decrease from 45>64 yr olds dropped performance below 120%.
• Associates Degree or Higher – Higher education often correlates with higher income. We see spending performance very similar to Income but even more pronounced. In 2017 the importance of Education was dialed back a little in the Services segments but remained stable in Supplies. The big change was in Food where the advantage almost vanished. This came as a result of a big spending lift from one segment – HS Grads w/some College.
• Married Couples – Being married makes a huge difference in spending in all segments. A minimum performance of 126% says it all. In 2017 their high performance became virtually even across all segments as they dialed back on Services but gained over 4 share points in Supplies.
• Everyone Works – Income is important, but the # of Earners became markedly less important in 2017 with a big drop in share and performance across the board. This was driven by a big year from 1 Earner, 2+ CUs and Retirees.
• All Suburban – Most Pet $ are spent here but the share and performance of this group has become more volatile. In 2016 they loss ground due to a big across the board spending lift by Central City. In 2017, they held their place in Supplies and Veterinary but lost share to Rural Areas in Food and Services. Food Performance fell below 100%.

Now we’ll drill a little deeper to look at the Best and Worst performing segments in each category. Color Highlighted cells are different from Total Pet; * = New Winner/Loser; ↑↓ = 5+% Performance Change from 2016. We will divide the categories into related groups. First, those related to Income.

• Income – Highest Income = Highest Performance. Lowest Income = Lowest performance. Income matters and it matters most in the nonfood segments. The performance and disparity are astronomical in the service segments. In most cases the winning performance is dropping, but so is the losing one. Gains are being made in the mid-range.
• # Earners – More earners = more income. Once again, income is even more important to the nonfood segments. However, 1 Earner, 2+ CUs had a great year. They won and even improved on the winning performance in 2016.
• Occupation – Mgrs & Professionals moved to the top in income and performance in 2 segments and Total Pet. Blue-Collar was the unexpected winner in Food, which is becoming more balanced. The Blue-Collar group also improved their performance in other segments, even in a losing cause.

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

• Racial/Ethnic – As expected, White Non-Hispanics are the top performer in all segments. African Americans have the lowest average income and the lowest percentage of pet ownership of any group.
• Age – The 55>64 group led in Food & Total. The highest income group, 45>54 won Supplies and took over Veterinary from the 55>64 group. The 65>74 yr olds don’t have a high income but do have an increasing need for Services.

• Education – Winning and losing has been closely tied to more and less Education, except for 2017, in Pet Food.
• CU Composition – It was the year for Married Couples Only who turned their focus to their Pet Children. Although you can’t see it here directly, Single parents had a good year and got off the bottom in 2 segments and Total Pet.
• CU Size– It was absolutely the year of “2”. However, the woes of “1” continued.

• Housing – Homeowners w/Mortgage and Renters are the perennial winner and loser.
• Area– The winners are all areas <2500 population. Rural had a huge year in Food. The Services segment also had a surprise winner. Services Spending usually skews more urban. Central City dialed spending back after a great 2016.
• Region – The West as usual has the most wins. Spending in the South “headed South”.

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

It is immediately apparent that the difference grows as you move from Food to Supplies to Services. Spending becomes more discretionary. Additionally, while the difference between winners and losers in Total Pet is virtually unchanged from 2016, it grew larger in the Products segments and shrank in the Services segments. This is somewhat unexpected.

• Food – The high performance by some unexpected winners significantly drove up performance while the losing numbers were stable, so the disparity grew.
• Supplies – In Supplies the lift was more universal so the relative performance remained stable. A slight lift (<5%) by the winners combined with a slight decline by the losers produced a larger difference.
• Veterinary – No big changes but the winners and losers moved a little closer together.
• Services – The turmoil in the market shows. The big users saved money and the small users were attracted to spend. The net result was they moved a little closer. However, the difference is still huge.

This chart shows the number of new winners/losers.

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

• Pet Food had a major lift driven by unusual sources. It shows in their number of new winners.
• Pet Supplies had an almost universal increase. This produces very little change in top or bottom performance.
• The Veterinary spending increase also came from many of the usual groups.
• The Services segment was in a negative turmoil which resulted in a lot of changes, especially at the top.

Now, let’s look at the Demographic Segments with the Biggest Changes in $. We’ll truly see some differences between the Industry Segments. Only 9 of 110 segments are repeats. We have color highlighted differences from Total Pet and…

• Boxed w/green = Winner/Loser same as 2016
• ↕ = Flipped from 1^st/Last in 2016 or vice versa

First, the Income related categories.

• Income – Winners: Looks like $100K+ was a key. The $40>69K win reflects the “blue-collar wave” in Food Spending.
  • Losers: <$40K lost 4 of 5. Income matters. The $150>199K loss is may be tied to the big drop by Self-employed.
• # Earners – Winners – 1 Earner, 2+ CUs. In 2017 the number of Earners became much less important.
  • Losers: From No Earner to 3+ Earners – a mixed bag. Of note, 3 losing CUs were singles.
• Occupation – The Blue-collar wave also increased spending enough in other segments to win Total Pet. We see the result of the decrease in CUs and spending by Self-employed. Mgrs & Professionals moved to the top in 3 segments.

Now the Age and Racial/Ethnic Categories

• Racial Ethnic – The biggest, most impactful spending group, White, non-Hispanics made a strong comeback. African Americans, due to a combination of low pet ownership and low income are often the losers. This year, the high income (also low pet ownership) Asians didn’t lose any segment but apparently were consistent low spenders.
• Age – The 55>64-yr old Boomers came back in a big way. They cut back (or got a better price) on Services but finished 1^st or second in every other segment. The 75+ group won Services but lost Veterinary. The <25 group lost 2 segments and total but in 2 of 3 cases, including Total Pet Spending, they actually had a spending increase.

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

• Education – College mattered less in Food but not other segments. Also, the HS Grads w/some College spent $1.17B more in other segments. This parallels the Blue-Collar pattern. Assoc. Degree flipped after a big year in 2016.
• CU Comp. – In 2017, it was Married Couples only or at least Adults Only. Not a good year for younger families.
• CU Size – It’s Simple: 2 was the number in 2017. Overall 1 came in last but still spent more in Total Pet than last year.

• Housing – Homeowners are back on top, although most winners have paid off their mortgage. This reflects the fact that much of the increase was driven by older CUs. Renters were strong in 2016 due to urbanization. Not in 2017.
• Area – Central City ruled in 2016 but in 2017 we saw a spending movement to areas <2500 pop., Rural or Urban. The larger Suburbs are also back on top in both Supplies and Veterinary. Only Services saw a decrease in any area.
• Region – The Midwest either won or lost. Also, it was a good year for the Northeast. The West or South are the usual winners, but not in 2017. However, like the Area category, every region spent more in all but Services.

I hope that this Visual Comparison helped you to get a “satellite view” of Pet Industry Spending in 2017. Please refer back to the earlier chapters to get more details.

There is another situation that we should address. 2017 was a spectacular year for the Pet Industry, with big spending increases in every segment but Services. There were so many contributors that in each individual chapter we recognized 6 segments that didn’t win but still performed so well that they deserved Honorable Mention. I reviewed that list again and came up with segments that won Honorable Mention in more than one segment. Here are the “SUPER HMs”.

• Retirees – Honorable Mention (HM) in 3 segments and Total – Need we say more?
• $40>69K – They had Honorable Mention in 2 segments and Total, but in Pet Food, they won for biggest increase.
• Single Parents – With financial challenges, they are usually at or near the bottom. Not in 2017 – 3 HM awards.
• A/O 2+ Adult Only CUs – 2 HMs, including Total so they performed well in more than just Food.
• 5+ People CUs – Even with large CUs and multiple children, Consumers still spend Pet $. 2 HMs, including Total Pet.
• HS Grad w/some College – They won the Food Segment and Total Pet plus had 2 segment HMs – quite a year!

Although there are numerous individual changes, I saw these trends of note:

1. Value – There was great value in every segment and consumers responded. The 2017 increase was actually greater than Total Pet Spending in 1984. Because of the value, consumers essentially stopped trading $ between segments.
2. Boomers Bounce Back – The lift was driven by older age groups, especially the 55>64 yr olds.
3. Premium Penetration – Pet Parents want what’s best for their pet children. Premium Food became more accessible.
4. Pet Parenting Increase – A likely increase in Pet Parents in the same low/middle income CUs that upgraded in Food.
5. More balanced spending – in Income, Occupation, # of earners and Education. The groups in the middle and even some lower groups stepped up across numerous segments. Income still matters but the “bar” got a little lower.
6. De-urbanization – 2016 was the year of Pet spending Urbanization. In 2017 the situation switched around. The best performance and biggest lifts came from low population areas- <2500. More space. More room for Pets and More $pending!

And Finally…..

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Now we will move to the Service Segments – first up is Veterinary Services. We’ll see some big differences from the Product Segments. For years, Veterinary Services prices have had high inflation. This has resulted in CU income becoming the most dominant factor in spending behavior and a reduction in visit frequency. Consumers paid more, just used Veterinary Services less often. The high inflation and prices also resulted in consumers trading Veterinary $ in reaction to big spending changes in other segments, primarily Pet Food.

We have noted that 2017 was different. It was a year of Value. This was also true in the Veterinary segment. While prices did not deflate, inflation hit an all time record low rate. Consumers reacted by spending $2.56B (+14.1%) more on Veterinary Services. The best news was that half of the increase came from an increase in frequency of visits, +7.2%.

Let’s see which groups were most responsible for the bulk of Veterinary spending in 2017 and the $2.56B increase. The first chart details the biggest pet Veterinary spenders for each of 10 demographic categories. It shows their share of CU’s, share of Veterinary spending and their spending performance (Share of spending/share of CU’s). The differences from the product segments are immediately apparent. In order to better target the bulk of the spending we have altered the groups in three categories – income, occupation & age. Another big difference is the performance – 7 of 10 groups perform above 120%. This down from 8 in 2016 but is more than Supplies – 6 and Food – 5. This means that these big spenders are truly performing well but it also signals that there is a far larger disparity between the best and worst performing segments. Income is clearly the biggest factor in Veterinary Spending.  The categories are presented in the order that reflects their share of Total Pet Spending which highlights the differences of the 7 matching categories.

1. Race/Ethnic – White, not Hispanic (90.0%) down from (92.0%) This group accounts for the vast majority of spending in every segment., but a 90% share is extraordinary. The 131.4% performance rating ranks #3 in terms of importance in Veterinary Spending demographics and reflects the spending disparity. Hispanics, African Americans and Asians account for 31.5% of U.S. CU’s, but they only spend 10% of Vet $. Asians and African Americans have significantly a lower percentage of pet ownership and African Americans have the lowest average CU income.
2. # in CU – 2+ people (84.1%) up from (79.4%) They had a big gain in share and their performance increased from 112.9% to 118.0%. The performance increase moved them up in importance from last to 8^th. The gain in share was driven by increased spending by 2 and 3-person CUs while the performance increase came from a spending drop by Singles. This widened the disparity between segments.
3. Housing – Homeowners (82.5%) up from (81.7%) Homeownership is a major factor in pet ownership and spending in all industry segments. In terms of importance to increased Veterinary spending, the 131.2% performance rating keeps homeownership in 4th place. Both the share of market and performance increased slightly in 2017. This was driven by a big increase in spending by Homeowners without a Motgage. We should note that Homeownership is not as important to Veterinary Spending as it once was. In 2015 their share was 88.4% with performance of 141.8%.
4. Education – Associates Degree or Higher (73.8) down from (74.1%) Income generally increases with education. It is also important in understanding the need for regular Veterinary care. Market share was down slightly as was performance, which dropped from 143.2% to 137.4%. However, it is still the 2nd most important factor in Vet spending. The drops were primarily due to a 27.6% increase from HS Grads w/some College – largest in the category.
5. Age – 45>74 (66.7%) up from (63.3%) Although the younger groups have made Veterinary Spending more of a priority, in 2017 a slight drop by the 35>44 yr olds combined with a lift from the 65>74 group resulted in a change in age range for the big group. This along with a big spending lift from the 45>64 age range generated the increase in share. The performance had an even bigger increase, going from 121.0% to 129.8%. This moved the importance of Age in increased Veterinary Spending up from 7^th place to 5^th.
6. Occupation – I’m the Boss (65.9%) up from (64.4%) –“I’m the Boss” includes Mgrs & Professionals, Self-employed and Retirees and has a bigger market share than all wage and salary earners. In 2017, all of the “regular” workers spent more but Mgrs/Professional and Retirees drove the increase. The share gain was minimal due to a spending drop from Self-employed. Even with 129.0% performance. They fell from 5^th to 6th in importance.
7. # Earners – “Everyone Works” (65.9%) down from (69.2%) In this group, all adults in the CU are employed. Even with a loss, the market share of Veterinary $ is the largest share for this group in any segment. Performance fell to 115.0% from 120.1%, which dropped them out of the 120% club. The drop came as a result of a huge increase from 1 Earner, 2+ CUs, with some help from No Earner, 2+ CUs.
8. Income – Over $70K (65.0%) up from (63.0%) We changed this group from over $50K because Veterinary Spending is so affected by CU income and the $70K level is where the behavior changes. Although the $50>69K had a 27.3% increase, the Over $70K produced 79% of the increase ($2B). The 169.1% performance clearly shows that higher income is THE most important factor in increased Vet spending.
9. CU Composition – Married Couples (63.8%) up from (61.3%) Married couples have a big market share and 120+% performance in all segments. They gained share due to a big increase from Couples only and a drop from singles. Other categories did better so a performance of 128.9% caused them to fall from 6th to 7^th place in importance.
10. Area – Suburban (62.9%) up from (62.3%) Suburban CU’s are the biggest spenders in every segment. They gained in share– taken from Central Cities, but fell a little in performance to 113.1%. due to a 41% increase from Rural Areas.

We changed 3 of the spending groups for Veterinary to better target the biggest spenders. Higher income is by far the biggest single factor in Veterinary spending. We see the impact of this in many groups as it often contributes to the big spending disparity between segments. The most notable changes were that the # of Earners became less important and spending skewed a little older.

Now, we’ll look at 2017’s best and worst performing Veterinary spending segments in each category.

Almost all of the best and worst performers are those that we would expect. However, there are 5 that are different from 2016. This is more than Supplies (3) but less than Food (7). However, 4 of the 5 changes were in just two categories. This indicates a greater stability in the overall market spending performance. The changes from 2016 are “boxed”. We should note:

• Income – The 286.0% Performance by the $200K> group is down from last year’s 325.3% but is still very high. The low inflation rate may be closing the disparity gap a little, at least in the middle-income groups.
• Occupation – Mgrs & Professionals took over as the highest income occupation from the Self-employed. It makes sense that they would become the best performers in Veterinary Spending. Blue-Collar workers, with the lowest income of any working group, remain at the bottom with their performance staying in the 60+% range.
• Age – The 45>54-year olds, the group with the highest income, are back on top. They just edged out the 54>64-year olds for the win. The worst performing spot switched from the youngest Americans, <25, to the oldest, 75+.
• CU Composition – It was a strong year for Married Couples Only in all segments, but they had their biggest % increase in Veterinary, +30.6%. Singles had the opposite kind of year and replaced Single Parents on the bottom.
• # in CU –In 2017, the performance of 2 Person CU’s increased from 130.5% to 139.4%. The gap between them and Singles increased from 61% to 80%. Only 2 and 3 Person CUs perform above 100%.
• Region – Northeast won again – 3 straight years and passed 120%. The West is the only other region to exceed 100%

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

2017’s increase of $2.6B built on the $1B lift in 2016. While 16 winners and losers changed, this was much less than in any other segment. 4 segments flipped from 1^st to last or vice versa, once again an industry low. With the exception of Self-employed, there were no real surprises. In 4 categories, all segments spent more. Last year there were none. This appears to be a sign of more stable growth. Here are the specifics:

• # in CU – 2 and 3 Person CUs drove the spending lift.
  • Winner – 2 People – Veterinary: $9.85B; Up $2.04B (+26.1%)
    • 2016: 4 People
  • Loser – Single – Veterinary: $3.29B; Down $0.45B (-11.9%)
    • 2016: 3 People
  • Comment: 4 Person CUs also spent more. Only 5+ CUs and Singles spent less.
• Race/Ethnic – With a 90% share of total Veterinary $, any % increase by White, non-Hispanics means big $.
  • Winner – White, Not Hispanic – Veterinary: $18.60B; Up $1.93B (+11.6%)
    • 2016: White, Not Hispanic
  • Loser – African American – Veterinary: $0.52B; Up $0.16B (+44.5%)
    • 2016: African Americans
  • Comment – All groups in this category spent more on Veterinary Services. While White, non-Hispanics drove the $, the minority groups drove the percentage increase. Combined they spent 43.1% more.
• CU Composition – Married Couples Only had a big year in spending, including Veterinary.
  • Winner – Married, Couple Only – Veterinary: $7.34B; Up $1.72B (+30.6%)
    • 2016: Married, Oldest Child 6>17
  • Loser – Single – Veterinary: $3.29B; Down $0.45B (-11.9%)
    • 2016: Single
  • Comment – It was definitely a mixed spending bag in this category. In addition to Singles, Married Couples with an oldest child over 18 or under 6 spent less. Those with an oldest child between 6 and 17 spent more along with single parents. However, you can make a case that 2017 was a year focused on “Adults only”. CU’s with 2+ Adults, married and unmarried spent $2.75B more on Veterinary Services.
• Occupation – Mgrs. & Professionals continue to lead the way.
  • Winner – Mgrs. & Professionals– Veterinary: $7.98B; Up $1.38B (+20.8%)
    • 2016: Mgrs & Professionals
  • Loser – Self-Employed – Veterinary: $1.47B; Down $0.44B (-31.8%)
    • 2016: Retired
  • Comment – Only Self-Employed spent less and about one third of their decrease came as a result of fewer CUs. Retirees spent $1B more and even Blue-Collar workers had a 10% increase.
• Area Type – All Areas spent more but the larger Suburbs, over 2500 pop., were the $ leader.
  • Winner – Suburbs >2500 – Veterinary: $9.84B; Up $1.24B (+14.4%)
    • 2016: Central City
  • Loser – Central City – Veterinary: $5.69B; Up $0.27B (+4.9%)
    • 2016: Rural
  • Comment – Rural CUs spent 41% more. In fact, areas under 2500 pop. had a combined increase of $1B.
• Housing – All Segments had increased spending, but Homeowners w/o a Mtge won the race.
  • Winner – Homeowner w/o Mtge – Veterinary: $6.29B; Up $1.24B (+24.5%)
    • 2016: Renter
  • Loser – Renter – Veterinary: $3.62B; Up $0.31B (+9.3%)
    • 2016: Homeowner w/Mtge
  • Comment – The big lift in spending by Retirees was a major factor in the increase by Homeowners w/o Mtge. Homeowners w/Mtge had a $1B increase after a -$0.9B drop in 2016. Renters flipped to last but still spent more.
• Education – Those with a BA/BS Degree led the way and are up $1.58B since 2015.
  • Winner – BA/BS Degree – Veterinary: $7.15B; Up $1.22B (+20.6%)
    • 2016: Associates Degree
  • Loser – Associates Degree – Veterinary: $2.21B; Down $0.08B (-3.4%)
    • 2016: Adv. College Degree
  • Comment – Associates Degree flipped from first to last but the drop was minor. Only one other segment had a decrease, < HS Grads. HS Grads w/some College had the biggest percentage increase, up 27.6%.
• # Earners – 2 Earner CUs narrowly edged out 1 Earner, 2+ CUs for the win.
  • Winner – 2 Earners – Veterinary: $8.79B; Up $1.18B (+24.1%)
    • 2016: 2 Earners
  • Loser – 1 Earner, Single – Veterinary: $2.02B; Down $0.39B (-16.2%)
    • 2016: 1 Earner, 2+ CU
  • Comment – The 1 Earners, 2+ CU group finished second but had a great year, up $1.13B (+42.9%). The No Earner, 2+ CUs were also up an impressive 24.1%. It wasn’t a good year for singles. Single CUs with 1 earner or No earner were the only segments with decreased spending. This data shows why the number of Earners in a CU mattered less in 2017 and why the “Everyone Works” group fell out of the 120% performance club for Veterinary spending.
• Age – In 2017, the highest income group, 45 to 54 yr. olds had the biggest increase.
  • Winner – 45>54 yrs – Veterinary: $5.23B; Up $1.15B (+28.3%)
    • 2016: 35>44 yrs
  • Loser – 75+ yrs – Veterinary: $0.80B;Down $0.15B (-15.7%)
    • 2016: 75+ yrs
  • Comment: The Veterinary spending increase was widespread as the 35>44 group had the only other minor decrease, -3%. The Under 35 age range had a second consecutive increase. However, overall Veterinary spending “spun” a little older as the 45>74-year olds were up $2.17B, 84.9% of the overall increase.
• Income – In 2017, $100 to $149K was the winner. This victory usually belongs to an even higher income group.
  • Winner – $100 to $149K – Veterinary: $4.32B; Up $0.93B (+27.4%)
    • 2016: $200K>
  • Loser – $30 to $39K – Veterinary: $1.30B; Down $0.24B (-15.4%)
    • 2016: $40 to $49K
  • Comment – The only other group to spend less was $200K+, a bit of a surprise, to say the least.
• Region – The Northeast flipped from last to first and all groups had an increase.
  • Winner – Northeast – Veterinary: $4.66B; Up $0.87B (+22.9%)
    • 2016: West
  • Loser – Midwest – Veterinary: $4.20B; Up $0.37B (+9.7%)
    • 2016: Northeast
  • Comment – The South was a close second, up $0.85B.

We’ve now seen the winners and losers in terms of increase/decrease in Veterinary Spending $ for 11 Demographic Categories. 2017 had strong growth in Veterinary spending, with fewer surprises than we saw in the products segments. Most of the winners were expected. However, while doing our analysis we saw indications that the growth was becoming somewhat more widespread. First and foremost of these, was the fact that 4 categories had no segments that spent less. However, there were also “hidden” segments that didn’t win but made a significant contribution to a successful 2017. These groups don’t win an award, but they certainly deserve….

HONORABLE MENTION

These segments all earned recognition. It is especially great to see the big increase from Single Parents. The other segments all testify to a deeper penetration of the $2.56B lift in Veterinary spending in many categories. In fact, only 18 of 99 segments spent less on Veterinary Services. That means that 82% spent more. We also have suggested that 1 Earner, 2+ CUs, HS Grads w/some College and the $40>69K income group were likely candidates to have increased Pet Ownership. An Increase in Veterinary spending supports that idea.

Summary

In 2015 and 2016 we saw a flip flop in Veterinary Spending – down the first year then up the next, as consumers traded $ with the Pet Food segment. In 2017 we had a unique situation in the industry. It was a year of value in all segments and the consumers took advantage of the situation. In the Veterinary segment we saw record low inflation. Consumers increased both the $ spent and visit frequency. This produced a $2.56B (14.1%) increase.

Veterinary services and spending should be a definite need, like Food, but there are many indications that it is becoming more discretionary and determined by income. It is very obvious when we look at performance. (Share Vet $/Share CUs)

<$30K – 41.0%

$30>50K – 62.5%

$50>70K – 80.9%

$70>99K – 111.7%

$100>149K – 164.5%

$150>199K – 218.3%

$200K> – 286.0%

The “break even” point (100%) occurs at $70K+. CU’s over $70K (38.4%) account for 65% of Veterinary $. In 2017 this group grew in numbers and gained share. Performance fell minimally from 170% to 169% due to a strong performance by the $40>69K group but there were no big changes like we saw in Food.

The performance of other big spending groups is also very important in the Veterinary segment. We identified seven demographic categories with high performing large groups. (There were only 6 for Supplies and 5 for Food) .  Consumers have no control over Race/Ethnicity or Age but in addition to Income, Education, Homeownership, Occupation and Marriage are important factors in Veterinary spending. The high performance in these groups also demonstrates the big spending disparities among segments within these categories.

We saw very little change in these groups. There were 3 changes of note. The “Everyone Works” group lost market share and dropped out of the 120% club due to a strong year from 1 Earner – 2+ CUs and Retirees. The 2+ CU group had increased performance and disparity due to a strong year for 2 & 3 person CU’s and bad performance by singles. Veterinary spending also skewed older in 2017 so the big group changed from 35>64 to 45>74.

2017 was a strong year for the Veterinary segment and relatively balanced. 82% of all segments increased spending and in 4 categories all segments spent more. However, the biggest increases came from expected sources – 2 Person CUs, Married Couple Only, Mgrs & Professionals, White, Non-Hispanics, Homeowners w/Mtge. There were some good performances from groups that showed that gains were also being made in the middle ground. 1 Earner- 2+CUs, HS Grads w/some College, $40>69K and less populated areas (<2500) spent more on Veterinary Services. Our analysis of Food and Supplies suggested increased pet ownership in these groups. The Veterinary data supports that premise.

Finally – The “Ultimate” Veterinary Services Spending Consumer Unit consists of 2 people – a married couple only. They are in the 45 to 54 age range. They are White, but not of Hispanic origin. At least one of them has an advanced College Degree. Both of them work in Managerial positions and their total income exceeds $200K. They live in a small suburb, adjacent to a big city in the Northeastern U.S. and are still paying off the mortgage on their home.

 

 

 

 

As we continue to drill ever deeper into the demographic Pet spending data from the US BLS, we have now reached the level of individual Industry segments. We will start with Pet Food, the largest and arguably most influential of all. Previously we have noted the trendy nature of Pet Food Spending – 2 years up then spending goes flat or turns downward for a year. In 2015 Pet Food Spending increased by $5.4B as a significant group of consumers upgraded to higher priced Super Premium Foods. In 2016 they value shopped and spending fell $2.99B. In 2017, spending increased by $4.61B (+17.4%). Indications from our Pet Products spending analysis are that this was driven by a deeper market penetration of premium foods along with increased pet ownership. Let’s take a closer look.

First, we’ll see which groups were most responsible for the bulk of Pet Food spending and the $4.61B lift. The first chart details the biggest pet food spenders for each of 10 demographic categories. It shows their share of CU’s, share of pet Food spending and their spending performance (Share of spending/share of CU’s). Although their share of the Pet Food $ may be different from their share of the Total Pet $, all the big spending groups are the same. The categories are presented in the order that reflects their share of Total Pet Spending. This highlights the differences in importance. In Pet Food spending, higher education is far less important. Also, while Income is still the highest performing demographic characteristic, it and the other associated categories, like occupation and # of earners carry less weight in Food spending. Another big difference is that Total Pet had 6 groups performing above 120%. Pet Food had only 5. This indicates that Pet Food spending and Pet ownership is spread more evenly across demographic segments. Pet Products also had only 5 groups over 120%. This reflects the influence of the Pet Food Segment which accounts for 63% of Total Products spending and 40% of all Pet Spending.

1. Race/Ethnic – White, not Hispanic (86.6%) – up from 85.5%. This large group accounts for the vast majority of spending in every segment. With a 126.4% performance rating, this category ranks #4 in terms of importance in Pet Food Spending demographic characteristics. While Hispanics, African Americans and Asian American account for over 31% of U.S. CU’s, they only spend 13% of Pet Food $. Pet ownership is relatively high in Hispanic households. However, it is significantly lower for African Americans and Asian Americans. This is very evident in Food Spending.
2. # in CU – 2+ people (82.4%) – up from 81.2%.The share of market for 2+ CU’s is very close for all segments. Their overall Food performance of 115.6% is relatively high because singles perform so poorly. 2 Person households are the “runaway” performance leader but the 2+ group performance doesn’t reach 120% because all 3+ CU’s underperform…slightly. Their lowest performance rating is 91%, which is not bad. The old adage about Pet Spending is still true, “It just takes two.”
3. Housing – Homeowners (80.9%) – up from 79.9%. Homeownership is a huge factor in pet ownership and more pet spending. At 128.6% performance, homeownership ranks 2nd in terms of importance for increased pet Food spending. Their share of market broke the 80% barrier again in 2017, up from 79.9% in 2016. This came as a result of a big spending increase by Homeowners w/o Mortgages.
4. Income – Over $50K (70.5%) – up from 67.5%. With a performance rating of 136.9%, CU income is the single most important factor in increased Pet Food Spending. However, the over $50K income group has its smallest market share and lowest performance in the Food Segment. Since Pet Food is a “must buy” for Pet Parents, this is evidence that pet ownership is common across all income levels. Much of the lift in share is coming from middle-income segments which could indicate a probable spreading of the food upgrade and possibly increased pet ownership.
5. Age – 35>64 (67.8%) – up from 63.1%. The biggest lift came from the 55>64-yr old Boomers. The 35>54-yr old Gen Xers also had a strong contribution. Overall, they gained 4.7% in share and their performance skyrocketed from 116.5% to 127.0%. This put them back in the top 5 at #3. This further identifies the potential owners of the Food upgrade and new Pet Parents.
6. Occupation – All Wage & Salary Earners (67.7%) – up from 64.8% – The increase in market share was largely driven by a big spending increase by Blue-Collar workers and a drop from Self-Employed. Although performance increased to 110.8% it is still below 120%, which shows that Pet Food spending is widespread across all occupations and at the same time, reflects the substantial Pet Food spending by Retirees. This provides even more specifics regarding the Food upgrade and new Pet Parents.
7. CU Composition – Married Couples (62.5%) – up from 61.9%. While they gained a little in share, their performance of 126.3% fell from 3^rd to 5^th place. This reflects the growing importance  of other demographic categories.
8. # Earners – “Everyone Works” (58.4%) – down from 63.7%. The huge drop in share by this group shows that while income remains important in relation to Pet Food spending, everyone working in a CU matters much less. Their performance fell to 101.9% from 110%. This reflects a great year by 1 Earner – 2+ CU’s and Retirees, who now account for 42% of this category’s Food spending.
9. Area – Suburban (55.4%) down from 58.1%. Suburban households are still the biggest Food spenders, but they loss share and their performance fell to par, 99.6% due to a stellar year by Rural and an only fair year by Suburbs >2500.
10. Education – Associates Degree or Higher (55.4%) – down from 58.6%. Pet Food Spending generally increases with education. However, things evened out in 2017. They loss share and performance fell from 113.3% to 102.4%. This provides additional candidates for the drivers behind the expanded food upgrade and new pet ownership trends.

The big spenders for Pet Food are the same as those for Total Pet and Pet Products but generally have a lower market share and performance. Pet Food spending was up $4.6B in 2017. We have strong initial indications that much of the lift came from a deeper penetration in terms of premium food and even increased pet ownership. Income is still important, but Occupation, # of Earners and Higher Education became markedly less so. Let’s drill deeper.

Now, we’ll look at 2017’s best and worst performing Pet Food spending segments in each category.

Even as we drill down to the Industry segment level, many of the best and worst performers are the ones that we would expect. In Pet Food spending, there are  7 that are different from 2017, which is 4 more than for Total Pet. It is the same number as Pet Products but only 3 are “matches”. From this point on we will start to see more and more differences between the Industry Segments. Changes from 2016 are “boxed”. We should note:

• Income is important in every segment. However, the 178.7% Performance by the $200K> group is down from 188% last year and is by far this group’s lowest performance in any segment. The midrange groups are stepping up.
• # Earners – 2 or more earners generally means higher income. This year 1 Earner, 2+ CU’s took the top spot. This is another sign that Food spending is becoming more income balanced.
• Occupation – Blue-Collar workers is a big surprise. Retirees came in last but had a $1B increase. It is also extremely significant that the performance gap from 1^st to last has been cut in half from 2016.
• Education – HS Grads w/some College is yet another indicator of more balanced spending.
• Age – The 55>64-yr old Boomers, along with Gen Xers are performing best.
• CU Composition – Married Couples won for the 3^rd straight year. Single parents got off the “bottom”.
• Area – Rural areas had a truly great year and were the only group with 200+% performance.

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

There are no repeats – winners or losers, from 2016. 9 of the 22 segments (41%) flipped from 1^st to last or vice versa. The surprise performance winners, Blue-Collar, HS Grads w/some College, 1 Earner – 2+CU’s and Rural are all here. Plus, the lower middle-income group, $40>69K also showed us the money. It is at this level where the demographic uniqueness of the different industry segments truly shows up. Here are the specifics:

• Race/Ethnic – The White, Non-Hispanics share of Food spending is over 85%. A big % increase means Big $.
  • Winner – White, Not Hispanic – Pet Food Spending: $26.94B; Up $4.34B (+19.2%)
    • 2016: Hispanic
  • Loser – Hispanic – Pet Food Spending: $2.12B; Down $0.05B (-2.3%)
    • 2016: White, Not Hispanic
  • Comment – The winner and loser flipped. African Americans spent 28.6% more on Food, but 94% of the increase came from White, non-Hispanics. Both Hispanics and Asian Americans spent less on Pet Food in 2017. However, their combined decrease only totaled -$0.07B, -3%.
• Occupation – A surprise winner, Blue-Collar! Only Self-Employed and the Tech, Sales & Clerical segment spent less.
  • Winner – Blue-Collar Workers – Pet Food Spending: $8.22B; Up $3.98B (+93.9%)
    • 2016: Tech, Sales, Clerical
  • Loser – Self-Employed – Pet Food Spending: $1.63B; Down $0.53B (-24.3%)
    • 2016: Retired
  • Comment – Here is where the Blue-Collar influence truly shows up. While a 93% increase seems spectacular, it only amounts to a $12 monthly spending increase for existing CU’s. If a number of new Pet Parents were added, the increase would fall to well below $10. The big decrease by the Self-Employed also reflects a 9% drop in CU’s. As these CU’s “went out of business” most migrated to other occupations or retired which affected other categories.
• Housing – In 2017, all segments spent more on Food.
  • Winner – Homeowners w/o Mtge – Food: $10.19B; Up $03.91B (+62.2%)
    • 2016: Renters
  • Loser – Homeowners w/Mtge – Food: $14.97B; Up $0.08B (+0.6%)
    • 2016: Homeowners w/o Mtge
  • Comment – Homeowners w/o Mtge flipped from last to first while spending for those with mortgages was basically flat. Although the rate of increase slowed for Renters in 2017, it still continued to climb in double digits.
• # in CU – It’s simple. In 2017 “2” was the magic number, generating 67% of the increase.
  • Winner – 2 People – Pet Food Spending: $14.81B; Up $3.11B (+26.5%)
    • 2016: 4 People
  • Loser – 3 People – Pet Food Spending: $4.20B; Down $0.10B (-2.4%)
    • 2016: 2 People
  • Comment: Both singles and CU’s with 5 or more people also increased Food spending. The only segments with a decrease were 3 or 4 person CU’s. However, they only fell a total of -$0.16B, -2%.
• Age – The 55>64-yr old group flipped from last to first.
  • Winner – 55>64 yrs – Pet Food Spending: $10.24B; Up $2.83B (+38.2%)
    • 2016: 25>34 yrs
  • Loser – <25 yrs – Pet Food Spending: $0.62B; Down $0.20B (-23.9%)
    • 2016: 55>64 yrs
  • Comment: Although the 55>64-yr old were the biggest drivers, they got over $1.5B in help from the 35>54-yr olds. In fact, all age groups over 35 increased their spending on Pet Food. All groups under 35 spent less, although the only significant drop came from the under 25 segment.
• Education – HS Grads w/some College, a surprise and an indication of more educational equality in food spending.
  • Winner – HS Grad w/some College – Food Spending: $9.11B; Up $2.79B (+44.0%)
    • 2016: Assoc. Degree
  • Loser – Assoc. Degree – Food Spending: $2.88B; Down $0.30B (-9.4%)
    • 2016: Adv. College Degree
  • Comment – We can’t leave out College Grads – +$1.9B. In fact, all education levels but those with Associates Degrees spent more on Food. Their decrease comes after a 35% lift in 2016 and may just be from value shopping.
• # Earners – 1 Earner, 2+ CU’s are often under financial pressure. In 2017 they were the big spenders.
  • Winner – 1 Earner, 2+ CU – Pet Food Spending: $8.64B; Up $2.62B (+43.5%)
    • 2016: 1 Earner, Single
  • Loser – 2 Earners – Pet Food Spending: $11.09B; Down $0.28B (-2.4%)
    • 2016: No Earner, 2+ CU
  • Comment – The loser is a bit of a surprise as all segments, but 2 Earner CU’s registered an increase in Pet Food spending. The drop was minor, only -2%, so it is probably part of everyone’s continuing search for a better price.
• Area Type – All segments had an increase but Rural was spectacular.
  • Winner – Rural – Pet Food Spending: $6.16B; Up $2.42B (+64.8%)
    • 2016: Central City
  • Loser – Central City – Pet Food Spending: $7.71B; Up $0.35B (+4.8%)
    • 2016: Suburbs <2500
  • Comment – Central Cities had an increase but flipped from 1^st to last. Biggest growth – all areas under 2500 pop.
• CU Composition – A strong year for “2”, especially Married Couple Only, who flipped from last to first.
  • Winner – Married Couple Only – Food: $11.11B; Up $2.27B (+25.7%)
    • 2016: Unmarried, 2+ Adults
  • Loser – Married, Oldest Child <6 – Food: $0.60B; Down $0.46B (-43.6%)
    • 2016: Married Couple Only
  • Comment – Married Couples with the oldest child <6 was the only segment in this category to have a decrease. This group is usually younger and often under financial pressure. They dialed back their spending in 3 segments.
• Income – Pet Food spending moved down the income ladder as the $40>69K segment led the way.
  • Winner – $40 to $69K – Pet Food Spending: $7.50B; Up $2.09B (+38.6%)
    • 2016: $70 to $99K
  • Loser – $150 to $199K – Pet Food Spending: $1.74B; Down $0.68B (-28.1%)
    • 2016: $50 to $69K
  • Comment – The $30>39K group also spent less on Food in 2017. The winner is a surprise, but so is the loser. The $150>199K correlates with the income of the Self-Employed who dropped out, which explains some of the loss.
• Region – Last year’s winner is this year’s biggest “loser”.
  • Winner – Midwest – Pet Food Spending: $7.13B; Up $1.57B (+28.2%)
    • 2016: South
  • Loser – South – Pet Food Spending: $6.92B; Up $0.87B (+7.9%)
    • 2016: West
  • Comment – All regions were up. The South flipped from 1^st to last but are still performing at 99.6%.

We’ve now seen the “winners” and “losers” in terms of increase/decrease in Pet Food Spending $ for 11 Demographic Categories. Some winning segments in $, like Blue-Collar workers, HS Grads w/some College, 1 Earner- 2+ CUs and the $40 to  $69K income group reinforce our initial observations of increased demographic spending equality as a result of a spread of the premium food upgrade and even the addition of new pet households. We have recognized 11 “winning” segments that drove the $4.61B increase in Pet Food Spending. However, not every good performer can be a winner. Some “hidden” segments should be recognized for outstanding performance. They don’t win an award, but they get…

HONORABLE MENTION

Some of the Honorees, like 5+ CUs, Adults only 2+ CUs and Retirees further support just how wide and deep that the increased spending penetrated the market. Others like 3+ Earners, $100>149K income and CUs with Advanced College degrees show that spending increases also occurred with many of the “usual suspects”.

The Pet Food Spending increase was truly widespread. In fact, only 17 of 99 demographic segments spent less on Pet Food in 2017. That means that 83% spent more.

Summary

After the big spending drop in 2016, 2017 brought a $4.6B increase in Pet Food Spending. This fit right into the pattern of two years up followed by a flat or declining year. However, the 2017 Spending lift was different from the $5.4B increase in 2015. In 2017 we didn’t see consumers trading out $ in other segments to spend on upgraded Food. Both the Supplies and Veterinary segments also had double digit growth.

The increase in 2015 was driven by a movement to upgrade to super premium pet food by a substantial portion of consumers. These consumers were generally more educated, often worked as managers or were self-employed and had higher incomes. In 2016 this group began value shopping for their new food and found great deals online and in some stores, which drove spending down. That brought us to 2017. There was an extremely competitive environment with increased availability and value everywhere on these high-quality foods. This attracted the attention of a different group of consumers. The benefits of upgraded food are apparent to most Pet Parents. Now, they became a viable option for a much larger group. The upgrade “epidemic” spread to HS Grads w/some College, blue-collar workers and even to low middle income groups. It also primarily “infected” those 35 and over, especially the 55 to 65-yr olds.

Although the penetration also increased in some of the traditional groups such as managers/professionals and those with advanced College degrees, it was primarily driven by more balanced spending in a number of demographic categories. Income, homeownership and marriage remain the most important factors in Pet Food Spending. However, the amount of necessary income has been dialed back and your occupation and the number of earners in the CU has become far less important. Higher Education has also become less of a factor. There was another trend of note. Pet Food Spending sought “more space” as Rural areas and Suburbs with a population of under 2500 had a banner year.

Any analysis of Pet Food spending is always very important because of the unique nature of the segment. It is the only Industry Segment that is an absolute spending necessity. If you are a Pet Parent, you must buy food for your pet children and buy it regularly. In fact, every week over 21,000,000 U.S. households buy pet food and/or treats.

Because it is an absolute necessity, the spending behavior on Pet Food is perhaps the most important reflection of the percentage of pet ownership across a demographic category. We have focused on the spread of the premium upgrade as the driver behind the increase. However, there may have been an additional trend at work. The APPA reported an increase in Pet H/Hs from 65% to 68%. The radical increase in Pet Food spending by the segments that we have noted can support both a food upgrade and new pet H/Hs…and help identify the likely new pet parents.

Finally – This year’s “Ultimate” Pet Food Spending Consumer Unit is 2 people – a married couple, alone since their last child moved out and took “his” dog. They are in the 55 to 64 age range. They are White, but not of Hispanic origin. Neither attended College but both received special job training. Only “Dad” still works (too much) at a nearby power plant. With overtime, he will break $100K. Their house is in a rural area in the Midwest and they have a mortgage. They got back in the Pet Parenting “business” after their son left home by adopting a pair of dogs from a local shelter.

 

Total Pet Spending in the U.S. reached $77.13B in 2017, a $9.84B (14.6%) increase from 2016. These figures and others in this report are calculated from data in the annual Consumer Expenditure Survey conducted by the US BLS. It was a spectacular year for the industry, with the 3 largest segments registering double digit increases while Services spending fell less than 1%. The key factor in this consumer buying surge was value. Super Premium foods became more accessible in both location and price. Supply prices deflated, and both Service segments had record low inflation rates. Although the Service Segment spending fell, there was an increase in purchase frequency. Consumers just paid less. Consumers saw great value and they acted on it. This great success raises some interesting questions and deserves a closer look.

The first question is, “Who is spending most of the $77+ 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 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 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 2017.

In the chart that follows, the demographic categories appear in ranked order 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. These are all large groups with a high market share. A performance score over 120% means that this demographic measure is extremely important in generating increased Pet Spending. I have highlighted the 6 groups with 120+% performance. This is up from 5 in 2016, as the 35>64 yr old age group joined the club.

The groups are the same as in 2016, but some rankings have changed. All Wage Earners, 35>64 yr olds and Married Couples gained in importance while # Earners and Education fell in the ranking.

1. Race/Ethnic – White, not Hispanic (87.0%) This is the 2^nd largest group and accounts for the vast majority of Pet Spending. They increased their performance rating to 127%. This category now ranks #4 in terms of importance in Pet Spending demographic characteristics, up from 5^th in 2016. Although we should note that this demographic, along with age, are the 2 areas in which the consumers have no control. Spending disparities 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 rank first in income, education and spending but they rank last in Pet Spending as a percentage of total spending – 0.36% vs a national average of 0.99%.
2. # in CU – 2+ people (82.7%) It just takes two. Singles have the lowest performance of any group. If you put 2 people together, pets very likely will follow. Their overall performance of 116.0% is lower than expected because performance decreases as the number of people in the CU increases, falling to 85.9% for CU’s with 5+ people.
3. Housing – Homeowners (81.4%) Controlling your “own space” has long been the key to larger pet families and more pet spending. At 129.4% performance, homeownership still ranks 2nd in terms of importance for increased pet spending. The homeownership rate for Millennials is substantially lower than previous generations when they were the same age. However, it increased from 35% to 37% in 2017. This is definitely good news. Keep it up!
4. Income – Over $50K (72.9%) Although Pet Parenting is common in all income groups, money does matter. With a performance rating of 141.6%, CU income is the single most important factor in increased Pet Spending. Their performance increased from 140.1% in 2016. However, the increase was driven by the whole range of middle income groups from $50K to $150, not just the elite $150+K.
5. Occupation – All Wage & Salary Earners (65.8%) – Pet ownership is widespread across all segments in this group. In the past spending has been strongly  skewed towards white collar workers. In 2017, the blue-collar workers stepped up. In share, the group moved up to 5^th from 8^th Their performance increased to 107.7% but is still low. It remains below 110% because there is still spending disparity within the group and retirees also had a great year!
6. Age – 35>64 (65.8%) This group moved up in share of spending from 7^th to 6^th. Although the younger groups have increased their spending in recent years, this group of Boomers and Gen Xers was dominant in 2017. Their performance increased substantially from 118.6% to 123.2% and they joined the elite 120+% group – ranked 5^th.
7. Education – Associates Degree or Higher (64.5%) Income generally increases with education level and so does Pet spending. Education can also be a key factor in recognizing the value in product improvements, like super premium foods. In 2017 this higher educated group fell from 3^rd to 7^th in share of pet spending. This drop in ranking was due to another segment making a major move. In 2017, High School Grads with some College substantially increased their Veterinary spending but more importantly, they bought into Super Premium Foods in a big “blue wave”. I use this metaphor because there was a corresponding food spending lift by blue-collar workers. Higher Education is still an important factor in spending but the group performance dropped from 127.5% to 120.1% – from 3^rd to 6^th place.
8. CU Composition – Married Couples (63.4%) With or without children, two people, committed to each other, is an ideal situation for Pet Parenting. In 2017, primarily due to married couples only CU’s, this group moved up from 8^th to 7^th in share of spending. They also increased their performance to 128.1%, which still ranks third in importance.
9. # Earners – “Everyone Works” (62.0%) This is a composite of CU’s, regardless of size, where all adults are employed. This group’s ranking in share of overall pet spending fell from 5^th to 9^th. Their performance fell from 115.2% to 108.2%. Retirees and CU’s with 2+ people and only one earner have a significant share of Pet spending and both these groups had a great year, which caused this group to lose ground in all areas – despite a $3B spending increase.
10. Area – Suburban (59.8%) Homeownership is high and they have the “space” for pets. Their share of spending fell slightly from 60.2%. Their performance also fell from 109.7 to 107.6%. The relatively low performance shows how widely spread pet parenting is in all areas. The drop in share and performance was due to a spectacular year by CU’s in Rural areas, in every industry segment, but especially Food.

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, every one of them generates a minimum of 55.1% of the spending in every segment. As we analyze individual segments, some of the groups will change 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 $50K is the clear winner, Homeowners and Married couples are also strong performers. The exceptionally high performance in all six 120+% 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 2017’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 3 that are different from 2016. Changes from 2016 are “boxed”. We should note:

• Income is very important, which is shown by the 238.5% performance. What is not seen is the radically improved performance from the groups from $40k to $150K as Pet Spending increased across a wide range of incomes.
• Occupation – Managers and Professionals returned to the top spot for the first time since 2014. The Self-employed loss 9% in CU’s and their income and pet spending plummeted. Blue-collar workers are still at the bottom, but their performance increased from 71% to 88% so the difference between the top and bottom narrowed.
• CU Composition – Married couple only is the winner for a second consecutive year and their performance is getting stronger. However, the big news is that Single Parents moved up and out of the “loser” spot.
• # in CU – It just takes 2 and 2 is by far the best performing CU number, regardless if they are married or unmarried.
• Region – The West is perennially on top. The loser changes almost every year but 92% performance is not too bad.

There was very little change in the “players”, so most expected segments are doing well. In the next section we’ll look at the segments who literally made the biggest difference in the success of 2017.

We’ll “Show you the money”! This chart details the biggest $ changes in spending from 2016.

In this section we will truly see the difference between 2017 and 2016. There are 22 Winners and Losers. None are repeats. In 8 cases the segments actually switched from the biggest increase to the biggest decrease or vice versa.

• Race/Ethnic – The vast majority of Spending comes from the White, Not Hispanic group…and 85% of the increase.
  • Winner – White, Not Hispan – Spending: $67.14B; Up $8.36B (+14.2%)
    • 2016: Hispanic
  • Loser – Asian – Pet Spending: $1.62B; Up $0.37B (+29.4%)
    • 2016: White, Not Hispanic
  • Comment – All groups spent more. Asian Americans increased their Pet Spending by 29.4% and still came in last!
• # in CU – 2 People is a logical winner. They have more time and money to focus on their pets.
  • Winner – 2 People – Pet Spending: $35.32B; Up $6.87B (+24.2%)
    • 2016: 4 People
  • Loser – 1 Person – Pet Spending: $13.35B; Up $0.23B (+1/8%)
    • 2016: 3 People
  • Comment: All segments spent more on their pets , but 2 People CU’s generated 70% of the increase. Last year’s winner, 4 People CU’s, came within $0.01B of flipping from first to last. However, Singles “won”.
• Housing – The biggest segment, Homeowners w/Mtge hasn’t won since 2015.
  • Winner – Homeowner no Mtge – Spent: $23.18B; Up $5.64B (+32.2%) 
    • 2016: Renter
  • Loser – Renter – Pet Spending: $14.32B; Up $0.73B (+5.3%)
    • 2016: Homeowner w/Mtge
  • Comment – Renters flipped. Homeowners w/o Mtge had a lift in all segments. Retirees were a factor.
• Earners – More earners generally mean a higher income and more Spending, but not this year.
  • Winner – 1 Earner, 2+ CU – Pet Spending: $18.04B; Up $5.44B (+43.2%)
    • 2016: 2 Earners
  • Loser – No Earner, Single – Pet Spending: $4.60B; Up $0.04B (+0.9%)
    • 2016: 1 Earner, 2+ CU
  • Comment – After 2 years of the same Winner and Loser, the 1 Earner, 2+ CU group finally turned it around, in a big way. Even the low-income Single, No Earner group eked out an increase.
• CU Composition – Up or down, the big changes usually come from some sub-segment of married couples.
  • Winner – Married, Couple Only – $26.30; Up $5.30B (+25.2%)
    • 2016: 2+ Unmarried Adults
  • Loser – Married, oldest child <6 – $2.06B; Down -$0.54B (-20.8%)
    • 2016: Married Oldest Child >18
  • Comment – 2017 was the year of “2” and Married Couples with no human children, regardless of age, are showing a tremendous commitment to their pet “children”.
• Occupation – Pet Parents are widespread across occupations, but white-collar workers usually drive spending.
  • Winner – Blue-Collar Workers – Spending: $14.6B; Up $4.36B (+42.5%)
    • 2016: Mgrs & Professionals
  • Loser – Self-Employed – Pet Spending: $5.41B; Down -$1.12B (-17.1%)
    • 2016: Retired
  • Comment – In 2017 the Blue-Collar workers were the big movers, largely due to a huge increase in Pet Food spending as they upgraded to super premium.
• Age – The 55>64 yr olds definitely turned it around.
  • Winner – 55>64 yrs – Pet Spending: $21.44B; Up $4.07B (+23.5%)
    • 2016: 35>44 yrs
  • Loser – <25 yrs – Pet Spending: $1.98B; Up $0.12B (+6.6%)
    • 2016: 55>64 yrs
  • Comment: Every age group spent more in 2017, but the 45>64 group accounted for 65% of the increase.
• Education – The Associates Degree CU’s went from first to last and were the only group to spend less in 2017.
  • Winner – HS Grad, some College – Spent: $16.47B; Up $3.96B (+31.7%)
    • 2016: Assoc. Degree
  • Loser – Assoc. Degree – Pet Spending: $7.81B; Down -$0.39B (-4.8%)
    • 2016: Adv. College Degree
  • Comment – This year’s winner, High School Grads with Some College, demonstrates that Education has become less of a factor in Pet Spending, at least in some segments.
• Area Type – All groups spent more, but Rural CU’s, the smallest group, led the way, spending more in all segments.
  • Winner – Rural – Pet Spending: $10.04B; Up $3.43B (+51.9%)
    • 2016: Central City
  • Loser – Central City – Pet Spending: $20.93B; Up $0.78B (+3.9%)
    • 2016: Suburbs >2500
  • Comment – The biggest trend was that areas under 2500 pop., rural or urban, generated 61% of the increase.
• Income – Only the $30>39K group spent less.
  • Winner – $100 to $149K – Pet Spending: $15.02B; Up $3.32B (+28.4%)
    • 2016: $200K>
  • Loser – $30 to $39K – Pet Spending: $4.95B; Down -$0.93B (-13.8%)
    • 2016: $100 to $149K
  • Comment – The $100>149K group flipped from last to first but there were also strong increases in the mid-range income groups. Bundled together, the $40>99K income range increased spending by $5.17B.
• Region – Regions vary in size and demographics, but all spent more and had at least a $1.9B increase.
  • Winner – Midwest – Pet Spending: $16.43B; Up $2.92B (+21.6%)
    • 2016: South
  • Loser – West – Pet Spending: $18.56B; Up $1.93B (+11.6%)
    • 2016: Midwest
  • Comment – The Midwest flipped positions but the segments in this category are always changing positions.

We’ve now seen the best overall performers and the “winners” and “losers” in terms of increase/decrease in Total Pet Spending $ for 11 Demographic Categories. Not every good performer can be a winner but some of these “hidden” segments should be recognized for their outstanding performance. In such a great year, there were a number of candidates, but I limited my choices to 6. They don’t win an award, but they deserve….

HONORABLE MENTION

The 2017 performance of these groups doesn’t require a detailed explanation. The numbers on the chart demonstrate just how demographically widespread and significant the 2017 pet spending lift truly was.

Single Parents climbed out of the hole of being the perennial worst performer in their group. African Americans finished last in performance but still had a 30.7% increase. 2 Person CU’s “ruled” in 2017, but the biggest group, 5+ People was also up 30.3%. The $200K group was the best performer and the $100>150K group had the biggest increase, but the income range from $40>69K also spent $3.2B (26.8%) more in 2017. The focus was on the great year that was had by both Managers and Professionals and Blue-Collar workers, but Retirees also had a $2.95B increase. Finally, the spotlight was definitely on married couples only, but the 2+ Adults only group also did pretty well with a $2.7B increase. The good news was truly widespread. In fact, only 9 of 99 distinct demographic segments had a decrease. That means that 91% spent more.

Summary

2015 and 2016 brought turmoil to the market. There was a lift in spending in 2015 as many consumers upgraded to Super Premium foods, but they cut back on spending in other segments to help pay for it. In 2016 they began value shopping for food online and in stores. They used some of the money saved on food to spend on other segments, but not enough, as total spending fell slightly. Then came 2017, when the market was rampant with values. The Services segment saw increased purchase frequency, but consumers paid less. Other Segments had double digit increases and the movement to premium foods made a much deeper penetration across the market.

In 2017, on the surface, big changes weren’t immediately apparent. The demographic groups responsible for most of Total Pet Spending were the same as those in 2016. However, there were changes in their spending share rankings. The number of Earners and Higher Education became less important, while Marriage and Everyday Workers increased their influence. These were indications of a movement towards more spending equality in certain demographic categories.

In terms of performance, the most influential demographic big spending groups increased from 5 to 6, with the Top Three being Income, Home Ownership and Marriage. Knowing the demographic segments in these categories allows industry participants to more effectively target their best customers and… those most in need of improvement.

There was also very little change in the best and worst performing individual demographic segments. The most noticeable changes occurred in $. There were some surprising winners and “near winners” – Rural, Blue-Collar, HS Grads w/some College, $40>69K and Single Parents, to name a few. The most noticeable spending trends seem to be a movement towards more egalitarian spending in terms of income, education and occupation, along with significant growth in less densely populated areas. As always, to get to the heart of the matter and to more actionable data you must “drill down”. This will become even more apparent as we turn our analysis to the individual industry segments.

But before we go…The “Ultimate” Total Pet Spending Consumer Unit in 2017 consists of 2 people – a married couple, alone. They are in the 55 to 64 age range. They are White, but not of Hispanic origin. At least one of the them has an advanced College Degree. They both work as managers and are doing well  – over $200K. They’re working to pay off their house located in a lovely, small suburb of  a metropolitan area with a population of about 2,000,000 in the West.

 

The internet has become a huge part of our lives, affecting all aspects of our behavior, not the least of which is retail spending. U.S. consumer spending is driven by value, convenience and selection. This is a near perfect match of the “game plan” of the internet. As a result, the evolution of the retail market is accelerating as increasing numbers of consumers, across an ever broadening range of demographics, migrate to internet retailers. Brick ‘n mortar retailers are well aware of this movement and continue to increase their commitment to the .com divisions of their businesses.

In this report we will take a closer look at the total E-commerce business in the U.S. This includes sales from non-store retailers as well as the internet sales from the .com divisions of companies who derive most of their business from brick ‘n mortar outlets. We accomplish this by combining data from 4 separate reports published by the U.S. Census Bureau.

In 2017, E-Commerce sales were $449.9B, up $60.8B (+15.6%). The first chart will put those numbers into a historical perspective. In 2000, the Total Retail economy – less restaurants, was $3.0 Trillion. By 2017, it had increased 70.1% to $5.1 Trillion – an annual growth rate of 3.2%. During the same period, E-commerce sales increased by over 1500% – an annual growth rate of 17.8% – nothing short of spectacular. As you will see, the report is very “chart intensive”. This makes the data easier to digest and often reduces the need for commentary as the conclusions are visually very obvious.

The increase has been very consistent since the millennium, with the only slow down coming in 2008 and 2009 as a result of the Great Recession. However, while e-commerce growth notably slowed, we should remember that the total retail economy actually decreased in 2009 for the first time since 1956. 2010 and the years since the recession have shown strong increases in E-commerce as the new “value conscious” consumers looked to the internet for savings. Perhaps even more significant than the spectacular growth in dollars, is the growth in overall market share. Since 2000, E-commerce has moved from insignificance – less than 1%, to a 9% “force” in the retail market.

We see the annual dollars but are they consistent year round? Is there a pattern to E-commerce sales? The following graph shows what the sales looked like by calendar year quarter in 2017.

Changes in share from 2016

4^th Quarter – Up 0.2%;    2^nd Quarter – Up 0.1%;

3^rd Quarter – Down 0.1%;  1^st Quarter – Down 0.2%

The 4^th quarter holiday lift for 2017 was +38%, up from +33% in 2016. However, the quarterly spending pattern seen in the chart above has been remarkably consistent, within 1%, for every year since 2000, with one exception. The 4^th quarter of 2008 was only 28% of the year’s total. Consumer anxiety over the impending economic crisis reduced holiday spending that year. However, the pattern returned to “normal” in 2009.

Now let’s take a more detailed look at E-commerce sales. Last year the Census Bureau started breaking the E-commerce $ down by retail channel so we can see how the brick ‘n mortar companies are doing in their online battle with non-store retailers. Because of the detailed nature of the data, there is a lag time. This chart documents 2016 $ales.

In 2016, E-Commerce Sales increased $48.7B (+14.3%) over 2015 so it was another strong year for online shopping. Every channel but Health & Drug stores increased their E-commerce $, but only 4 channels gained in share. These “winners” are boxed in green. All 4 of these retail channels are very important to the Pet Industry. In the last Economic Census, they accounted for 65% of all Pet Products sales in the U.S. Here are their E-commerce specifics:

• Food & Beverage Stores – E-Comm. – $3.9B; Up $1.7B (+63.1%) – Share of e-commerce went from 0.4% to 1.0%. This huge percentage increase is a foreshadowing of even bigger things to come.
• Bldg/Hdwe/Gard/Farm – E-Comm. – $9.8B; Up $1.5B (+18.1%) – They gained 0.1% in share. It demonstrates that E-commerce is an option for all retail channels.
• Gen Merchandise – E-Comm. – $27.6B; Up $5.0B (+22.1%) – The internet is perhaps the single biggest threat to this channel. They are responding, gaining 0.5% in share.
• Non-Store Online Retlrs – E-Comm. $227.6B (+17.9%) – They started it all and continue to set the pace,+1.8% share.

Let’s also take a closer look at another channel of interest to the Pet Industry.

• Misc (Office, Florist, Gift, PET) – E-Comm. $13.9B (+2.2%) – This channel ranks 5^th in share of E-commerce business among brick ‘n mortar outlets but they loss 0.4% in share. Pet Stores increasingly offer an E-commerce option but recently their emphasis has been on increasing services, like grooming, which are not available online.

In 2016, Non-store retailers won the online “battle for the bucks” with their brick ‘n mortar rivals by a margin of 58.5% to 41.5%. Let’s look at recent history to see how this war is going.

The E-commerce sales for primarily brick ‘n mortar businesses increased $65B (+67.0%) between 2011 and 2016 but their share of total E-commerce sales fell from 48.6% to 41.5% – a 14.6% decrease. Brick ‘n mortar stores, from major chains down to independent retailers have increased their emphasis in online sales but they are not keeping pace with their non-store competition. In addition to not being as experienced in this market, another handicap that they often faced was that consumers were required to pay local sales taxes on purchases in any state in which the seller has a physical facility – retail outlets, offices or a warehouse/distribution center. No change in this for 2017, but in 2018 the U.S. Supreme Court reversed a previous ruling so the future competition may take place on a more level playing field.

Business success is usually dependent upon commitment. Just how important are E-commerce sales to any given retail channel? This final chart shows the E-commerce share of the 2016 total sales for each relevant retail channel.

The E-Commerce share of their total $ increased for 8 of 11 channels. Miscellaneous and Auto Parts stores both maintained their share but Health/Drug Stores loss ground. The single biggest gainer was Electronics/Appliances, +2.3% in share. The internet is a great place to shop for electronics. Two other significant gainers are General Merchandise (+0.7%) and Food & Beverage stores (+0.3%). These 2 channels account for 28% of the $5 Trillion retail market so any increase is very significant. Plus, there are undoubtedly more gains in E-Commerce still to come from these retailers.

Of particular interest to the Pet Industry are Miscellaneous Stores, which includes pet stores. While they ranked 5^th in total E-commerce sales $, they finished in 2nd place for brick ‘n mortar channels in terms of the E-commerce share of the total channel’s business. The commitment to E-commerce is still strong in this channel.

Also note, traditional mail order and TV are not dead. They still account for 32% of the sales of all non-store retailers. However, it is E-commerce that is changing the retail marketplace and sales growth is still strong:

• 2017: +15.6%;
• YTD September 2018: +15.3%.

In this rapidly evolving environment, retailers must either adapt or face extinction. It’s their decision.