Archive for category: Pet Market

Veterinary Services is the 2nd largest segment in the Pet Industry. For years, high inflation has been a problem in the segment. Spending grew 24.0% from 2014>2019. Prices rose 17.4%, an avg of 3.3%. This caused a reduction of visit frequency and only 28% of the growth was “real” (avg annual growth +1.3%). In late 2020 & 2021, COVID focused Pet Parents on their “children’s” needs, including Veterinary Services. In 2021 Veterinary Spending reached  $32.67B, up $7.82B (+31.5%) from 2020. Inflation was high at 4.2% but 87% of the growth was real. In this report, we’ll take a closer look at the demographics behind the 2021 numbers. (Note: All 2021 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 2021 was $244.51 up 29.1% from $189.35 in 2020. (Note: A 2021 Pet CU (68%) Spent $359.57) More specifically, the increase in Veterinary spending came as a result of:

• 1.8% more CU’s
• Spending 11.9% more $
• 15.4% more often

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

The big drop in the first half of 2015 coincided with the upgrade to Super Premium Foods – Trading $. Then consumers began value shopping for Premium Foods and the savings freed up $ for Veterinary Services. Spending began to climb until it flattened out at the beginning of 2017. In 2017, inflation slowed markedly in the second half and spending took off. In 2018 prices turned up again and consumers essentially held their ground through 2019. The initial reaction to COVID in 2020 was a drop in spending but the “need focused” consumers then drove a huge increase through 2021.

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

Veterinary Spending has become even more strongly driven by income. Spending by the <$70 group was essentially flat and $30>70K actually spent less. By far the biggest lift, +$4.3B, came from $150K> group. The 50/50 spending break point in $ also grew significantly from $96K in 2020 to $113K in 2021, an 18% increase.

National: $244.51 per CU (+29.1%) – $32.67B – Up $7.82B (+31.5%)

• Over $150K (15.8% of CUs) – $534.38/CU (+42.3%) $11.26B, Up $4.30B (+61.8%) This highest income group is the biggest Veterinary Spender as 15.8% of CUs generated 34.5% of 2021 $ and 55% of the increase from 2020.
• $100>150K (14.2% of CUs) – $360.90/CU (+34.9%) $6.84B, Up $1.80B (+35.6%) Spending by this middle/upper income group slowed in 2019 due to inflation, but it took off in 2020>21 as they reacted strongly to their pet needs.
• $70K>100K (14.8% of CUs) – $268.25/CU (+41.0%) $5.31B, Up $1.57B (+41.9%) Spending grew steadily from 2016>19. In 2020 pandemic monetary pressures caused them to spend less but they had a strong rebound in 2021.
• $30K>70K (29.7% of CUs) – $152.41/CU (+1.8%) $6.04B, Down $0.07B (-1.1%) From 2016 to 2020 their spending pattern was remarkably similar to the big spending $150K+ group. That changed in 2021 as they were the only group to spend less in Vet $ while $150K> had the biggest lift. They also fell from 2^nd to 3^rd in total Veterinary spending.
• Under $30K (25.5% of CUs) $94.06/CU (+4.9%) $3.21B, Up $0.21B (+7.2%) This group is very price sensitive. Except for a big spending dip in 2018, they have slowly but consistently increased Veterinary spending. They are now 32% ahead of their 2016 Veterinary Services $, although 56% of the increase was due to inflation.

Now, here is Veterinary Spending by Age Group

Every group spent more but the biggest lifts came from the 55>64 & 35>44 groups. Both spent $2+B more than in 2020.

National: $244.51 per CU (+29.1%) – $32.67B – Up $7.82B (+31.5%)

• <25 (4.9% of CUs) – $63.90/CU (-2.2%) – $0.42B – Up $0.09B (+28.2%) The biggest factor in the lift by this youngest group was that they moved out of their parents homes. 31.1% more CUs spent 2.5% more $ …4.6% less often.
• 25>34 (15.7% of CUs) – $237.68/CU (+33.5%) – $5.00B – Up $1.26B (+33.7%) The commitment of these Millennials to their pets is growing. After being stable from 2017>19, the pandemic caused Veterinary spending to take off In 2020 and the lift continued in 2021 due to increased frequency. 0.2% more CUs spent 4.2% more $ …28.2% more often.
• 35>44 (17.2% of CUs) – $285.97/CU (+42.6%) – $6.55B – Up $2.08B (+46.5%) In 2019, these mostly Gen Xers radically increased their spending and became #1 in Veterinary $. In 2020 spending decreased and they fell to 3^rd place. In 2021 they had the biggest % increase and moved up to #2. 2.8% more CUs spent 16.0% more $ …22.9% more often
• 45>54 (16.7% of CUs) – $273.46/CU (+23.4%) – $6.09B – Up $1.08B (+21.6%) This group has the highest income, but value is important. In 2017, the slowed inflation caused them to spend significantly more money. In 2018, prices turned up and continued to inflate in 2019. Spending dropped precipitously to their 2016 level and they lost the top spot in Veterinary $. 2020 brought a big spending lift which continued into 2021. However, their 2021 increase didn’t match the 35>44 & 54>64 groups so they fell to #3. 1.5% fewer CUs spent 16.3% more $…6.1% more often
• 55>64 (18.5% of CUs) – $309.26/CU (+42.4%) – $7.65B – Up $2.20B (+40.4%) This group was the leader in Veterinary Spending prior to 2015. In 2015 they upgraded to Super Premium Food and Vet Spending fell. In 2016 inflation slowed and they regained the top spot. In 2018 Veterinary prices began to strongly inflate again. Their spending fell and continued down into 2019. In 2020 their frequency fell but they spent a lot more, so they moved back to the top in Veterinary Spending. They maintained this position in 2021 due to a more balanced increase in both the amount and frequency of purchases. 1.4% fewer CUs spent 22.8% more $ …15.9% more often
• 65>74 (16.1% of CUs) – $225.67/CU (+12.7%) – $4.85B – Up $0.75B (+18.4%) This group is growing and is now all Boomers so they are committed to their pets. In 2020 their visit frequency fell due to the pandemic, but they spent 37% more $. In 2021 they spent 5% less but much more often. 5.1% more CUs spent 5.1% less $ …18.8% more often
• 75> (10.9% of CUs) – $144.36/CU (+21.4%) – $2.10B – Up $0.34B (+19.6%) 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 their spending has grown every year. Although the pandemic hit them hard, they still took care of their pets with increased Veterinary spending through 2021. 1.4% fewer CUs spent 14.3% more $…6.2% more often

Now, let’s take a look at some other key demographic “movers” behind the 2021 Veterinary Spending numbers.

Veterinary spending increased by $7.82B (+31.5%) in 2021. Even with a high 4.2% inflation rate, 87% of the growth was real. 2021 had widespread positivity. 90 of 96 demographic segments (93.8%) spent more on Veterinary Services while only 6 segments spent less. In 9 categories all segments spent more. There was also less turmoil as only 3 flipped from first to last or vice versa while 8 segments maintained their position from 2020.

Virtually all of the “winners” are often found at the top. The only one that is somewhat of a surprise is Millennials, but in recent years they have become more concerned about Veterinary care for their Pet “children”. Their income exceeded the national average for the 1^st time in 2020 and continues to grow so they are more able to afford the ever inflating cost of Veterinary Services.

There are also no big surprises in the “losers” group. The surprise is, and it’s a big one, that 9 of the 12 “losers” earned their spot at the bottom because they had the smallest spending increase in their category. That is very real proof of just how great 2021 was for the Veterinary Segment.

In our earlier analysis we saw that the increase was widespread across Income and Age groups. All age groups spent more and only 1 income group, $30>69K spent less and it was only -1.1%. In fact, the drop by the $30>69K group was driven by those with an income from $30>49K. The $50>69K segment had a 42% spending increase. The lift was widespread beyond Age and Income. In 9 categories all segments spent more. Besides the income category only Generations and CU composition had any segments that spent less on Veterinary Services. The segments were Single Parents and the Silent/Greatest Generations. This is not a surprise as both have low incomes and high life pressures

In recent years there had been a strong youth movement in Veterinary Spending from the <45 crowd. That changed in 2020 as the 45> groups accounted for 94% of the segment’s $3B increase. In 2021 the older crowd held on but their share of the record $7.8B increase fell to 56% – a little more balanced.

Generations is still the most popular demographic measurement. Baby Boomers fueled the growth of the Pet Industry and are still the leaders in Food and Veterinary $. However, in 2021 big increases in Services and Supplies pushed Gen X to the top in Total Pet $. Boomers have led the way in Veterinary $ for years but their lead is narrowing. As recently as 2017 their Veterinary spending was greater than all of the younger generations combined. In 2021 the younger groups spent 72% more than the Boomers. Boomers will remain a force in the industry for years to come. but the “torch” is slowly but surely being passed as Veterinary and Total Pet spending becomes demographically widespread.

Except for a small decline in 2017, Non-Vet Pet Services had shown slow but 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, spending plummeted -$1.73B in 2020 due to COVID closures and restrictions. 2021 brought a strong recovery as spending grew by $2.21B (+32.0%) a new record and hit $9.1B, also a record. In this report we will drill down into the data to see what groups drove the recovery. (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 2021 was $68.13, up from $52.53 in 2020. (Note: A 2021 Pet CU (68%) Spent $100.19)

More specifically, the 32.0% increase in Total Pet Services spending came as a result of:

• 1.8% more households
• Spending 9.18% more $
• 18.78% more often

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

After the big lift in 2018, spending essentially flattened out in 2019. 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%. However, inflation grew even stronger, 2.5+% and in the 2^nd half of 2019 spending declined for the 1^st time in 18 months. The 2020 pandemic brought restrictions and closures which drove spending radically down. In 2021 the recovery began and accelerated in the 2^nd half of the year. Now, let’s look at some specific demographics of 2021 Services spending.

First, by Income Group.

Like 2018, all groups spent more in 2021. However, the biggest lifts came from higher incomes, $100K+. The <$70K groups had small increases and in fact, their 2021 spending was basically even with 2016. The 2021 50/50 dividing line in $ for Services was $133K. That is up from $123K last year and from $125K in 2019. It is still by far the highest of any segment. It is readily apparent that income is overwhelmingly the primary driver in Pet Services spending.

• <30K (25.5% of CU’s) – $22.47 per CU (+14.3%) – $0.77B, Up $0.11B (+16.8%) – This segment is getting smaller and money is tight, so Services spending is less of an option. The lift did push their Services $ up to their 2016>18 level.
• $30>70K (29.7% of CU’s) – $38.53 per CU (+7.2%) – $1.53B, Up $0.06B (+4.2%) – In 2020, they had the only increase and finished second in $ to the $150K> group. In 2021 they fell to 3rd place but they are the only group to spend more in both 2020 & 2021.
• $70>100K (14.8% of CU’s) – $52.60 per CU (+25.6%) – $1.04B, Up $0.22B (+26.4%) – The spending of this middle income group had slowly but consistently grown since 2016. Then came the pandemic and the $ plummeted in 2020, even falling below 2016. They rebounded somewhat in 2021 but the $ are still below 2018 & 2019.
• $100>150K (14.2% of CU’s) – $97.92 per CU (+55.7%) – $1.86B, Up $0.67B (+56.6%) – They had strong consistent growth from 2016>19. In 2020 they had the biggest drop, -40%. They came back in 2021 but below 2018 & 2019 $.
• $150K> (15.8% of CU’s) – $185.52 per CU (+24.5%) – $3.91B, Up $1.15B (+41.6%) – They moved steadily down after peaking in 2018. Spending took off in 2021. Their CU Services spending is now 2 to 9 times more than other groups.

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

All age groups but 45>54 spent more on Services in 2021. This highest income group fell from the top spot, which they had occupied since 2019 to #3. The biggest lifts came from 35>44 and 55>64 year-olds. Here are the specifics:

• 75> (10.9% of CU’s) – $31.76 per CU (+37.5%) – $0.46B – Up $0.12B (+35.6%) This group has the greatest need for pet services, but money is always an issue. In 2019 they had the biggest increase. In 2020 they gave it all back. In 2021 spending surged with a big increase in frequency. 1.4% fewer CU’s spent 4.2% more $, 32.0% more often.
• 65>74 (16.1% of CU’s) – $63.47 per CU (+33.3%) – $1.36B – Up $0.39B (+40.1%). This group is also very value conscious and growing in numbers. From 2016 to 2019 their spending was very stable. In 2020 it fell 20% due to a big drop in frequency. In 2021 they came back strong. 5.1% more CU’s spent 11.2% more $, 20.0% more often.
• 55>64 (18.5% of CU’s) $84.25 per CU (+58.5%) – $2.09B – Up $0.75B (+56.3%) After a big drop in 2017, they began to slowly increase Services spending. A big drop in frequency drove spending down in 2020 but they had a strong recovery and took the top spot in Pet Services $ in 2021. 1.4% fewer CUs spent 28.5% more $, 23.4% more often.
• 45>54 (16.7% of CU’s)- $75.57 per CU (+0.3%) – $1.68B – Down $0.02B (-1.2%) This highest income group was #1 in Services $ until 2016. They regained the top spot in 2019 and held on in 2020 despite a 20% drop in frequency. In 2021 they increased frequency but $ fell and they are now #3. 1.5% fewer CU’s spent 8.4% less $, 9.4% more often.
• 35>44 (17.2% of CU’s) – $89.32 per CU (+56.9%) – $2.05B – Up $0.78B (+61.3%) Spending exploded in 2018 with a $1B increase pushing them to #1. In 2019 and 2020 spending fell. In 2021 they had the largest increase and moved up to #2 in Services $. 2.8% more CU’s spent 18.6% more $,32.3% more often.
• 25>34 (15.7% of CU’s) – $60.85 per CU (+15.1%) – $1.28B – Up $0.17B (+15.4%) This group of Millennials “found” the Services segment in 2018. Their spending slowly fell in 2019 & 2020 but reached a record high in 2021 due solely to a big increase in frequency. 0.2% more CU’s spent 6.0% less $, 22.5% more often.
• <25 (4.9% of CU’s) – $27.44 per CU (-15.4%) – $0.18B – Up $0.02B (+10.9%) After 2018 spending fell and stabilized. In 2021 CUs radically increased but frequency plummeted. 31.1% more CU’s spent 46.7% more $, 42.4% less often.

In 2020, 62% of the $1.7B decrease in Services $ came from the 55> groups. In 2021, only 45>54 yr-olds spent less and the biggest increase was from the 35>44 group. However, the groups over 55 years old accounted for $1.26B (57%) of the record $2.21B increase. The old folks had a strong pandemic recovery.

Finally, here are some key demographic “movers” that drove the big lift in Pet Services Spending in 2021. The segments that are outlined in black “flipped” from 1^st to last or vice versa from 2020. A red outline stayed the same.

You see the turmoil in 2021 as no segment held its position and 10 of 12 categories had at least 1 flip. However, unlike 2020 the turmoil was positive as 9 segments flipped from last to first and 5 categories had no segments that spent less on Services. In fact, 86 of 96 segments (90%) spent more on Services. This beat the previous best of 88% in 2018 and was a big change from 2020 when 79% spent less.

You see from the graph that the biggest positives were all substantially larger than the biggest decreases. This speaks to the strength and widespread nature of the lift in $ in the segments. We should also note that regardless of Race/Ethnicity, your housing arrangements, the number of people in your household, the region of the country or the type of area that you lived in, you spent more on Pet Services. That’s a pretty all-encompassing lift.

9 of the winners flipped from last to 1^st. This shows that the big Services spenders understandably lost the most due to pandemic restrictions and closures. However, they bounced back strong because Pet Services are a regular part of their Pet Parenting. The winners also demonstrate the importance of income to Services. While this segment has become more demographically widespread, higher incomes dominate. 8 of the 12 winners are either 1^st or 2^nd in income in their categories. The only winner that is somewhat of a surprise is 35>44 yr olds. Usually 45+ yr-old groups dominate.

Almost all of the losers are not unexpected. Once again, if we look at income, 8 of 12 are at or near the bottom in income in their category. 2 are not – the 45>54 yr-olds and Asians have the highest income in their category. Asians are not a surprise loser. Apparently, cultural differences cause them to spend less on their Pets than other Racial/Ethnic groups. The high-income 45>54 yr-olds are a surprise. They have been at or near the top in Services spending for years. In 2021 they finished 3^rd. It looks like they may have value shopped for a better price.

With 90% of demographic segments spending more on Services, the recovery was strong and widespread. There are no truly unique patterns, but one trend should be noted. Income is becoming even more important in Services spending. The 50/50 income dividing line in Services spending is now up to $133,000. That is 50% more than the average CU income and 90% more than the median income. 25% of CUs account for 50% of Services $ and 72% of the $2.2B lift.

Overview – After the huge lift 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. That changed with the pandemic in 2020. Like many retail services segments, Pet Services outlets were deemed nonessential and subject to restrictions This resulted in a radically reduced frequency of visits and was the biggest reason behind the 20% drop in spending.

2021 brought a strong recovery with the biggest increase in history. The segments that were hit the hardest by the pandemic generally had the strongest recovery. However, the recovery had a widespread demographic reach. In recent years, with the increasing humanization of our pets, Pet Services have become more important to Pet Parents and the Pet Industry. For Pet retail outlets, offering Services provides a key point of differentiation and a reason to shop in their store. You can’t get your dog groomed on the internet. Like other segments Services has experienced strong inflation in 2022. In the past, this has minimally impacted this income driven segment. We’ll see what 2022 brings.

 

 

 

After the pandemic turmoil in 2020, there was a strong recovery in 2021. Total Pet spending had a record increase and reached $99.98B, up $16.23B (+19.4%). Food spending fell after the record “panic” increase in 2020 but the other essential segment, Veterinary had record growth. The discretionary segments – Supplies & Services were hit hard by the pandemic. In 2021, Pet Parents gave them the attention they deserve…and a lot more. Here are the specifics:

• Pet Food – $34.41B; Down $2.44B (-6.6%)
• Pets & Supplies – $23.81B; Up $8.65B (+57.0%)
• Veterinary – $32.67B; Up $7.82B (+31.5%)
• Pet Services – $9.10B; Up $2.20B (+32.0%)

The industry truly is a “sum” of its integral segments, and each segment has very specific and often very different buying behavior from the many consumer demographic segments. For this reason, we’re going to analyze each of the industry segments first. This will put the final analysis of Total Pet’s Record Spending into better perspective. Note: The numbers in this report come from or are calculated by using data from the current and past US BLS Consumer Expenditure Surveys. In 2021, this was gathered by the U.S. Census Bureau from over 42,000 interviews and spending diaries. The final data was then compiled and published by the US BLS.

We will start with the largest Segment, Pet Food (and Treats). In 2021 Pet Food Spending totaled $34.41B in the U.S., a $2.44B (-6.6%) decrease from 2020. The current trend in high priced, super premium foods magnifies the results of any changes in consumer purchasing behavior. In earlier research we discovered a distinct, long-term pattern in Pet Food Spending. In 2018 we broke the pattern due to outside influences – 1^st the FDA warning, then with COVID in 2020. Here is Pet Food Spending since 1997 in full Retail Dollars and adjusted for inflation.

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

For 20 years, Pet Food was driven by short term trends. A new food trend catches the consumers’ attention and grows …for 2 years. Then sales plateau or even drop…and move to the next “must have”. After 2014, the changes  became more pronounced and the situation got more complicated due to a number of factors starting with the move to high priced super premium foods, but including increased competition, especially from the internet, and behavioral changes, like increased value shopping. In 2018, outside influences came into prominence. The first was the FDA warning on Grain Free dog food. This caused many Pet Parents to back away from certain foods. When the warning was determined to be bogus, the Food segment began recovery. Then came COVID. Fear of possible shortages caused certain groups to binge buy food. Now, that’s over. With the spending dip in 2021 after 2 years of increases, perhaps the spending pattern is back on track. Now, let’s take a closer look at spending since 2014.

First, some specifics behind the $2.44B (-6.6%) decrease to $34.41B. In 2021, the average U.S. Household spent a total of $258.09 on Pet Food. This was an -7.9% decrease from the $280.38 spent in 2020, which doesn’t exactly “add up” to the -6.6% decrease in total Food Spending. With additional data provided from the US BLS, here is what happened.

• 1.5% more U.S. CUs
• Spent 12.7% less $
• 5.5% more often

By the way, if 68% of U.S. CUs are pet parents then their annual Pet Food Spending is $379.54. Here’s a rolling history.

2014 marks the beginning of the Super Premium era. It began in the 2^nd half of 2014 with the 25>34-year-old Millennials making the 1^st move. In 2015 the Baby Boomers got on board in a big way, producing a $5.42B increase in spending, the biggest lift in history at the time. 2016 saw a spending change that was accelerated by the high prices of Super Premium Pet Foods. After consumers upgraded to a more expensive pet food, their #1 priority became, “Where can I buy it for less?” Value Shopping on the internet was a major contributing factor in the big spending drop in 2016.

2017 was an up year which should have been due to a “must have” trend. However, a closer look at the data showed that the $4B increase in Pet Food spending in 2017 came not from a new trend but from a deeper demographic penetration of Super Premium foods. Value shopping in a highly competitive market, especially on the internet had made Super Premium pet foods more accessible to a broad swath of consumers.

Like Pet Food, human behavior has changed over the years in regard to our pets. In the 90’s, Pet Owners became Pet Parents. Then, after 2000 we began truly humanizing our pets which is very accurately reflected in the evolution of Pet Food. We became more focused on fulfilling the health needs of our pets, beginning with the first move to premium foods in 2004. This radically increased after the Melamine scare in 2007. Now consumers read pet food labels, research ingredients and expect their pet foods to meet the same quality standards as the best human foods. This was very evident in 2018. It should have been a year of increased spending but the consumers’ reaction to the FDA grain free warning threw the pattern out the window. In 2019 the warning lost credibility. Pet Food spending stabilized in the 1^st half of the year and then grew by $2.3B in the 2^nd  half. Some Pet Parents began to return to the topline Super Premium Foods while others opted for even more expensive varieties. Also, new groups got on board the Super Premium Express.

After the 2019 recovery came the pandemic of 2020. There is nothing more necessary to a Pet Parent than pet food. This spurred binge buying, especially in the 1^st half of the year and drove the biggest annual spending increase in history. However, binge buying doesn’t increase usage, so spending has fallen in 2021. Another factor was the ongoing strong search for value & convenience which drove many consumers online. Consumers spent less per purchase which reflects the end of the binge as well as their search for value. There were 1.5% more CUs and they bought more frequently. The increase in frequency came from more regularly scheduled deliveries but some pet parents also downsized their purchases to lower the price. When you put all these factors together, the small drop in spending is not a surprise.

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

Now let’s look at some specific 2021 Pet Food Spending Demographics. First, we’ll look at income. Prior to 2014 it was a less dominant factor in Food spending. However, the move to Super Premium has brought it more to the forefront. In 2015 the spending of the over $70K group exceeded the <$70K for the first time. In 2021, $70K> had a big drop in $ but was still 71% more than <$70K. The $100>150K had the biggest decrease while <$30K, $70>100K and $150K> actually spent more. Due to the recent movement to higher income groups, we now also report spending over/under $100K. In 2015, the 50/50 divide on Pet Food spending was about $70K. In 2019 it was $87K. In 2020 it was about $107K, breaking the $100K barrier for the first time. In 2021 it fell to $92K, about 5% more than the average CU income but 30% more than the median income. Higher income is still important in Pet Food spending. The chart below shows the annual spending for the major income groups from 2016 > 2021. This should put the 2021 numbers into better perspective.

Before we get into the details for 2021, we should note the uniqueness of 2017. With competitive pricing on Super Premium Foods and the consumers’ commitment to pet health, 2017 was the only year since 2015 with spending growth in every major income group. Since then, we have seen the major impact on various groups by outside influences. In mid-2018 it was the FDA grain free warning and in 2020 it was the pandemic.

2021 National Numbers: $258.09 per CU (-7.9%); $34.41B; Down $2.44B (-6.6%); 2016>2021 – Up $7.91B (+29.8%)

The spending pattern was mixed. The spending by the <$70K groups was stable. There was a huge drop by the 2020 binge buying $100>150K group which was somewhat mitigated by lifts from $70>100K & $150K> groups.

Here are 2021 specifics:

• Under $30K: (25.5% of CU’s) – $142.61 per CU (-3.0%) – $4.67B – Up $0.06B (+1.3%). Obviously, this group is very price sensitive. It was also strongly impacted by the pandemic. The number of CU’s was up 4.2% in 2021 after steadily declining for years. In 2020, CUs were down 18.8% from 2015. They don’t have a lot of $ to spend but they did do some binge buying in 2020. Their spending lift in 2021 was entirely due to more CUs. They are still fully committed to their Pets. This is evidenced by the fact that they spend 1.02% of their Total CU expenditures on their pets, including 0.43% on Pet Food. The national averages are: Total: 1.12%; Food: 0.39%.
• $30K>$70K: (29.7% of CU’s) – $194.37 per CU (+0.2%) – $8.03B – Down $0.14B (-1.7%). They are also very price sensitive and 2021 didn’t make things any better. Their average income was unchanged from 2020 to 2021 while the national average increased by 3.7%. They had a 1.9% decrease in the number of CUs which negated their slight increase in CU spending. The Pet Food spending within this big group was definitely mixed. The $30>39K group lost 7% in CUs and radically decreased spending, -$1.0B (-33.3%). The $40>49K group fell -4.5% in numbers but they increased their CU spending by 2.8%. However, their $ still fell by -$0.04B. Now, the most positive group, $50>69K. They gained 3.5% in CUs but spent 25.5% more per CU on Pet Food. These 2 factors pushed their Total Pet Food Spending up $0.90B (+30.0%). It was a big lift but not enough to overcome the decreases from $30>49K.
• $70K>$99K: (14.8% of CU’s) – $313.68 per CU (+54.4%) – $6.21B – Up $2.45B (+65.4%). This group has a regular up/down spending pattern. They got “on board” with Super Premium food in 2017 but they became very sensitive to outside influences – the FDA warning in 2018 and COVID in 2020. However, they came back strong from both. They are middle income, with family responsibilities and under considerable monetary pressure.
• $100>150K (14.2% of CU’s) – $289.71 per CU (-62.0%) – $5.46B – Down $8.92B (-62.1%). This group was the driver in the 2020 panic, binge buying of Food in 2020. It was an emotional reaction, but they had the $ to do it. They are “eating down” the excess inventory as the 2021 drop was $1.7B more than the 2020 lift. However, they are still spending the money “saved” on Food on their pets, with a 36+% spending lift in all other industry segments.
• $150K> (15.8% of CU’s) – $485.93 per CU (+68.6%) – $10.05B – Up $4.12B (+69.5%). This group shows that there were strong pandemic recoveries for some groups as their Pet Food CU spending grew by 68.6%. They also illustrate the growing importance of income in Pet Spending – the higher the better. They had by far the biggest increase in Pet Food $ but they also were responsible for 87% of the $16.2B increase in Total Pet spending.

The 2020 pandemic had a slightly positive impact on the <$70K income groups. However, except for the binge buying by the $100>150K group, it was negative for higher incomes. 2021 spending was down because there was not a repeat in the binge but all groups but <$40K & $100>150K spent more per CU on Pet Food in 2021. In fact, the $70>100K & $150K> groups combined to spend $6.6B more on Pet Food in 2021 than in 2020. We should also note that Pet Food spending is up $3.22B from pre-pandemic 2019, +10.3%, a growth rate of 5.0%, which is close to the 5.3% from 2014>19.

Now, Spending by Age Group…

2021 National Numbers: $258.09 per CU (-7.9%); $34.41B; Down $2.44B (-6.6%); 2016>2021 – Up $7.91B (+29.8%)

The overall assessment appears simple. The 55>64 yr-old, young Boomers spent less, while all other groups spent more.

• 55>64 (18.5% of CU’s) – $275.79 per CU (-52.7%) – $6.75B – Down $7.89B (-53.9%). This group (all Baby Boomers) has been at the forefront of recent major spending swings. In 2015 they upgraded to Super Premium. In 2016 they shopped for a better price. In 2017 they led a deeper penetration of the upgrade. In 2018 they had a -$3.5B reaction to the FDA warning. They began to recover in 2019 but then came 2020, which saw a huge lift in spending. There were 3 major contributing factors. First was panic, binge buying due to pandemic. They also were still recovering from the FDA warning. Finally, the pandemic caused the loss of over 2 million <25 CUs. Many of them moved back with their parents bringing their pets with them. That brought us to 2021. There was no repeat of the panic buy and they “ate up” some of the extra stock. Many of their kids moved out again. Together this caused a big drop in $.
• 45>54 (16.7% of CU’s) – $292.68 per CU (+18.3%) – $6.58B – Up $1.12B (+20.6%). This group is #1 in income and total CU expenditures. Up until 2015 they were #1 in Pet Food spending. They bought premium food but didn’t “buy in” to Super Premium until 2017. They were negatively impacted by the FDA warning, but they rebounded stronger than any other group. In 2020, their spending dropped significantly. Although some may have dialed back their purchases. It is likely that most found value and cheaper prices by buying on the internet. In 2021, they opted for even more expensive food, spending 24% more per purchase which produced a 20.6% increase in $.
• 65>74 (16.1% of CU’s) – $291.80 per CU (+17.5%) – $6.13B – Up $0.93B (+17.8%). This group is now all Baby Boomers and growing. They are Boomers so their Pets are a major priority. They spend 1.27% of their total CU expenditures on their pets, the highest percentage of any group. They are also the only group to spend more on Food every year since 2016. They are starting to retire but many are still working (0.6 per CU). Their income was up 5.4% vs 2020, compared to a national increase of 3.7%. They obviously spent some of the extra money on their pets.
• 35<44 (17.2% of CU’s) – $249.89 per CU (+27.9%) – $5.62B – Up +$1.24B (+28.3%). They are primarily young Gen Xers. They are 2^nd in income and CU spending but have the biggest families. Their spending pattern matches the older Gen Xers but is usually less volatile. They spent 17.9% more 8.5% more often for the 2^nd biggest increase in $.
• 25>34 (15.7% of CU’s) – $225.51 per CU (+1.3%) – $4.91B – Up +$0.12B (+2.6%). In recent years the spending pattern of these Millennials has foreshadowed the overall market for the following year. In pandemic 2020 they spent 22.3% more but just essentially held their ground in 2021. They spent 12.9% more, 10.2% less often.
• 75> (10.9% of CU’s) – $261.20 per CU (+85.3%) – $3.76B – Up +$1.76B (+88.3%). Both the effort and the expense of Pet Parenting become issues as we reach 75+. However, they remain committed to their Pets. They got fully on board with Super Premium Pet Food in 2021. They spent 87.8% more per purchase, 1.2% less often.
• <25 (4.9% of CU’s) – $98.30 per CU (+31.6%) – $0.66B – Up +$0.27B (+68.2%). Many of this group that had moved back in with their parents, left home again. This is apparent as 27.8% more CUs bought Pet Food 47.3% more often.

In 2020 the 55>64 yr old Boomers binge bought Pet Food. As a result, in 2021 they had a big drop in spending, which was the only decrease by any age group. The Pandemic caused more Pet Parents to focus on the health & wellbeing of their Pet Children. The result is that there is an even broader commitment to high quality, Super Premium Pet Food.

We going to drill deeper, but a little differently than we normally do. The pandemic had a major impact on Pet Food, with the 2020 binge buying by some groups followed by an inevitable big drop in 2021. We have noted that despite the decrease in 2021 $, the average growth rate from 2019>21 was 5.0%, just about equal to the 5.3% rate from 2014>19. We will identify the segments with the biggest change from pre-pandemic 2019 to post-pandemic 2021.

The first thing that you notice is that the biggest increases are radically larger than the biggest decreases. That’s always a good indication of progress. Also, we should note that whether you rent or own your home, you spent more on Pet Food after the pandemic than you did before.

About half of the winners are the “usual suspects”:

• Advanced College Degree
• West
• White, Not Hispanic
• $200K> Income
• 2 People
• Homeowners w/Mtge

However, some are surprises:

• Retired
• Center City
• No Earner, 2+ CUs
• 75> yrs old

These winners indicate another impact of the pandemic. We focused on home and family, including our Pet Children. Our #1 pet concern became their health & wellbeing. Even low-income groups committed to high quality pet food.

Among the “losers”, you see some of the groups that binge bought Pet Food in 2020 in fear that it might become unavailable:

• Self-Employed
• Married, Child 18>
• $100>149K
• 55>64
• Boomers

Each of these groups increased 2020 Pet Food Spending by an average of $7.7B, +118% over 2019. Panic, Binge buying of Pet Food doesn’t get repeated and it doesn’t increase usage. It only increases your backup stock. When you think of the situation, it’s amazing that they got back to a spending level in 2021 relatively close to that of 2019.

The pandemic was a traumatic event for everyone. However, the Pet Food segment has essentially returned to the strong growth rate that it’s had since 2014. Now, we just need a hot new trend to further “fuel the growth fire”.

Pet Food Retail prices are surging. Changes in the price manufacturers charge for a product obviously impact the retail price for consumers. However, it is not always a direct correlation and often there is a significant delay in the response. The retailers who sell high demand products like Pet Food are under intense competitive pressure.

In this brief report we will update the changes in the Producer Price Index (PPI) for Pet Food to see how they match up to the changes in the retail CPI from May 2020 to August 2022. Pre-pandemic December 2019 is used as the base number in all graphs to facilitate comparisons.

The first graph plots the PPI pricing path of Dog & Cat Food and Other Pet Food vs the Pet Food Retail CPI.

• Pricing remained essentially stable for all groups through most of 2020. The first change was that the PPI for Non-Dog/Cat Pet Food began moving up in November. This lift has continued but this small category has little impact on overall Pet Food Retail Prices.
• The Dog & Cat Food PPI moved up sharply in July 2021 then essentially stabilized until the end of the year. This turned Retail Prices up slightly, only +1.6% vs 2019 by December 2021.
• In 2022, the Dog & Cat PPI turned up in Jan/Feb, stabilized in Mar/Apr, rose sharply in May/June, then grew slowly in Jul/Aug. Pet Food Retail prices began growing in February. This increase accelerated in March and continues through August. The Retail inflation rate for Pet Food is now 67% of the PPI increase for Dog & Cat Food. In February it was 31.6% and only 25.4% back in December 2021. This gap is definitely narrowing as the Retail price increases are more closely matching the increase in manufacturing costs. By the way, the increase for Other Pet Foods is a meteoric +33.7% vs 2019. This is huge but as you will see later in the report, it is not the biggest increase in any Pet Food category.

Obviously, it takes a while for a rise in the PPI to impact retail prices. Also, as we saw in most of 2020 and in the 2^nd half of 2021, stability in the PPI usually generates stability in Retail prices.

Dogs & Cats “rule” the pet food segment just like they “rule” the overall Pet Industry. However, the lift in prices for manufacturing Food for Other Pets has now gotten so large that it is having an impact in pushing Pet Food Retail Prices up.

We will now drill a little deeper into the “ruling” Dog & Cat Food categories. We will look at the individual PPI history for Dog Food and Cat Food and the 2 largest sub-categories in each – Dry/Semi-moist and Canned. Using December 2019 as a base, our chart will track and compare the Pet Food CPI and the PPI history for all groups from May 2020 to August 2022. The US BLS is now releasing timely data on these specific categories so that it can be compared to the most recent numbers from the big groups…

• The PPI for all categories was essentially unchanged from December 2019 until October 2020. At that time manufacturers’ prices in the Canned Dog Food category moved up 1.1%.
• In October 2020 Pet Food retail reached bottom in their deflationary movement. The price increase in Canned Dog Food slowed overall Pet Food deflation and essentially stabilized prices near the 2019 level.
• Both the individual PPIs and the overall Pet Food CPI plateaued from November 2020 through May 2021.
• All prices moved up slightly in June 2021, but the PPIs took off in July. The Pet Food CPI also was above December 2019 for the 1^st time since February 2020.
• Canned Dog Food led the skyrocketing PPI prices in July 2021 but all categories had a significant increase. The increase continued in August, but the CPI unexpectedly dipped slightly below December 2019.
• The PPIs for all groups essentially stabilized from September through December 2021 while the Pet Food CPI began to increase, especially from Nov>Dec.
• In January 2022, the PPIs for all but Canned Dog Food turned up again. Their increase accelerated in February, with Canned Cat Food skyrocketing up to +13.6%, almost equal to the overall increase by Canned Dog Food. The Pet Food CPI moved up slightly in January and then inflation took off in February.
• The PPIs stabilized again in March, but we should note that prices for Canned Dog Food have been stable since August, after the spectacular Jun>August lift. While manufacturing prices stabilized, inflation in Pet Food Retail began accelerating
• In May/June all PPIs took off, with the biggest lift in the period since 2019. They stabilized in July but grew again in August. The Retail Pet Food prices have grown steadily since March. There is usually a timing delay from the PPI to the CPI as it takes time for the impact to work its way from manufacturer to retailer to consumer. The big PPI lift in June probably means that Retail Pet Food prices will continue to increase.
• We see that the Canned Food categories have significantly more pricing volatility than Dry Food for both Dogs and Cats. Canned Dog Food led the way in the PPI lift and ended up with by far the biggest increase of any category in the Pet Food segment, +38.8%. Canned Cat Food finished 2^nd in Dog/Cat at +25.4%.
• However, when you look at how these individual PPIs compare to the overall PPI for Dog or Cat, it is readily apparent that Canned Cat Food has a much larger share of total Cat Food than Canned Dog Food has of Total Dog Food.

In terms of what will happen in the future, we turn again to our first chart. The PPI for Dog/Cat Food was stable through April but turned sharply up again in May/June and continues to grow. When Mfg prices rise, Distributors & Retailers must look closer at their product mix. For items that cost more, they can raise prices, accept lower margins or some combination of both. It’s likely that rising manufacturing prices will cause Retail Pet Food inflation to continue to grow. We need the PPIs to flatten for the CPI to stop increasing. We hope that any supply chain issues will be fixed, returning Pet Food Retail and Manufacturing to a more price competitive market.