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January 9, 2019

By: The Pet Business Professor

According to John Gibbons, president of A GPS for Pet Businesses, 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 U.S. BLS. It was a spectacular year for the industry, with the three largest segments registering double digit increases while services spending fell less than one percent. 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 money 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.

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 number of earners and education fell in the ranking.

 

  • Race/Ethnic – White, not Hispanic (87.0%) This is the 2nd 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 fifth 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%.
  • # 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.
  • 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!
  • 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.
  • 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 5th from 8th place. 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!
  • Age – 35>64 (65.8%) This group moved up in share of spending from 7th to 6th. 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 5th.
  • 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 3rd to 7th 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 3rd to 6th place.
  • 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 8th to 7th in share of spending. They also increased their performance to 128.1%, which still ranks third in importance.
  • # Earners – “Everyone Works” (61.9%) 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 5th to 9th.  Their performance fell from 115.2% to 107.8%. 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.
  • 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.

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 five to six, 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 money. 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.

See the full report here.

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