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February 13, 2019

By: The Pet Business Professor

According to John Gibbons, president of A GPS for Pet Businesses, after putting the segments side by side to make the parallels and differences more readily apparent, 2017 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 money. 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.

  • 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 number 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 dollars 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%.

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

 

  • 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 money between segments.
  • Boomers Bounce Back – The lift was driven by older age groups, especially the 55>64 yr olds.
  • Premium Penetration – Pet parents want what’s best for their pet children. Premium food became more accessible.
  • Pet Parenting Increase – A likely increase in pet parents in the same low/middle income CUs that upgraded in food.
  • More balanced spending – In income, occupation, number 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.
  • 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 money.

See full report here.

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