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October 9, 2019

By: The Pet Business Professor

According to John Gibbons, president of A GPS for Pet Businesses, due to a drop in pet food spending, total pet spending moved up only slightly to $77.13B in 2018, a $1.47B (1.9%) increase from 2017. The supplies segment exceeded this pace as spending reached $19.8B, up $1.22B (6.6%). (Note: All numbers in this report come from or are calculated by using data from the US BLS Consumer Expenditure Surveys)

The first half of 2018 continued an upturn in supplies spending which began in the second half of 2016. However, in the second half of the year, spending flattened out. In this report we’ll “drill down” into the data to try to determine what and who are “behind” the lift and subsequent pause in 2018 pet supplies spending. 

In 2018, the average household spent $150.62 on supplies, up 5.4% from $142.90 in 2017 (Note: A 2018 pet CU (67%) spent $224.81). This doesn’t exactly match the 6.6% total $ increase. Here are the specific details:

  • 1.1% more CU’s
  • Spent 4.8% more money
  • 0.6% more often

Since the great recession, spending trends in the supplies segment have been all about price—the CPI. Although many supplies are needed by pet parents, when they are bought and how much you spend is often discretionary. Additionally, many of the product categories in this segment are now considered commodities, so price is the main driver behind consumer purchasing behavior. When prices fall, consumers are more likely to buy more. When they go up, consumers spend less and/or buy less frequently. 

2014 was the third consecutive year of deflation in supplies as prices reached a level not seen since 2007. Consumers responded with a spending increase of over $2B. Prices stabilized and then moved up in 2015. In 2015 we saw how the discretionary aspect of the supplies segment can impact spending in another way. Consumers spent $5.4B for a food upgrade and cut back on supplies—swapping money. This, in conjunction with inflation, caused supplies to suffer as consumers spent 4.1% less, but they bought 10% less often. That drop in purchase frequency drove $1.6B (78%) of the $2.1B decrease in supplies spending.

In 2016, supplies’ prices flattened out and consumers value shopped for their upgraded food. Supplies spending stabilized and began to increase in the second half. In 2017 supplies prices deflated, reaching a new post-recession low. The consumers responded with a huge $2.74B increase in supplies spending that was widespread across demographic segments. An important factor in the lift was an increase in purchase frequency which was within 5% of the 2014 rate.

In 2018 prices started to move up in April and rapidly increased later in the year due to the impact of new tariffs. By December, supplies prices were 3.3% higher than a year ago. This explains the initial growth and pull back in spending. That gives us an overview of the situation.

Supplies spending started out strong in 2018. In the 1st half, 67 of 82 demographic segments (82%) spent more. Then came the 2nd half. Prices increased by 1.7% and only 38 segments (44%) had a spending increase over a year ago. By year end, 64 segments spent more on supplies (78%). The 2nd half numbers were not all bad. Only 5 segments that started out negative ended up on the plus side for the year. However, 8 segments that were positive in the 1st half ended up spending less for the year because of the 2nd half. Plus, some of the effect of inflation was hidden. And 30 segments increased spending in both halves. However, 24 of them 80% had a smaller increase in the second half. The inflation had a broad impact.

The spending decrease was -$0.01B in the 2nd half of 2018. In a couple of cases the behavior was clearly divided. 

  • Education: College Grads +$0.30B; <College -$0.31B
  • Age: 25>44 +$0.32B; 45> -0.32B

The 2nd half numbers strongly reinforce the importance of two demographics in supplies spending – income and age:

Income – Supplies spending is very price sensitive. Strong inflation causes low income and financially pressured groups to spend less: <$50K (46% of CU’s), 2+CU’s with 1 or no earners, retirees, <college grads, married couples with children, 4 person CU’s. These groups all have monetary concerns. While $100>149K, 3 earners, college grads, homeowners with a paid off mortgage that aren’t retirees are generally under less financial pressure.

AgePerhaps, it is because they are less focused on “need” and have a more expansive and active “take” on pet parenting than their older counterparts, but supplies spending has always skewed towards the younger groups. The spending in both halves of 2018 by 25>44 yr olds, millennials and 2+ unmarried adults reinforces this observation.

2018 definitely validates the price sensitivity of supplies. After 24 months of consistent, strong growth, +$4.97B, spending turned down in the second half of 2018. The most likely cause – 1.7% inflation, driven by tariffs. What comes next? Inflation continued into 2019 growing another 1.7% in the first half. In fact, supplies’ prices in the 1st half of 2019 were 3.4% above the same period in 2018. This doesn’t bode well for supplies money in 2019, but we’ll have to wait and see.

See the full report here.

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