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2020 Veterinary Spending Hit $24.85B: Where Did It Come From?


John Gibbons, the Pet Business Professor and president of A GPS for Pet Businesses, has been examining the demographics of 2020 Pet Spending. 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.

Things changed in 2017 as low inflation spurred a 7.2 percent increase in visit frequency and a $2.5 billion increase in spending. In 2018 inflation returned to more normal levels. Consumers spent $0.56 billion more (+2.7 percent). However, the inflation rate was 2.6 percent so virtually all of the lift was from increased prices. In 2019, the situation got worse. Consumers spent $0.58 billion (+2.7 percent) more but inflation was 4.14 percent. This means that there was an actual decrease in the amount of Veterinary Services purchased. In 2020 the pandemic hit and consumers concentrated on needs.

For pet parents, that meant that they became focused on Pet Food and Veterinary Services. As a result, Veterinary spending grew $3.05 billion (+14.0 percent).

We’ll start our analysis with the groups who were responsible for the bulk of Veterinary spending in 2020 and the $3.05 billion increase. The first chart details the biggest pet Veterinary spenders for each of 10 demographic categories. It shows their share of CUs, share of Veterinary spending and their spending performance (Share of spending/share of CUs). In terms of performance – six of 10 groups perform above 120 percent, the same as 2018 and 2019. This is more than Supplies & Services with five but much less than Food (eight). This means that these big spenders are performing well but it also signals that there is still a large disparity between the best and worst performing demographics in the “needed” segments. Income remains the biggest factor in Veterinary Spending, but Education is also important as College Grads is a different group from Total Pet. The categories are in the order that reflects their share of Total Pet Spending.

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  1. Race/Ethnic – White, not Hispanic (87.2%) down from 90.9%. This group accounts for the vast majority of spending in every segment, but they lost significant share in 2020. Their 127.5 percent performance is also down from 132.6 percent and they fell from second to third in importancein Veterinary Spending but still reflects the spending disparity. Minorities did narrow the gap in 2020. Hispanics and African Americans spent 50 percent more while the spending by Asians almost tripled.
  2. Housing – Homeowners (83.1%) down from 83.2%. Homeownership is a major factor in pet ownership and spending in all industry segments. In terms of importance to Veterinary spending, their 126.3 percent performance rating is down from 130.5 percent, but they held on to fourth place. The slight decrease in share and performance came from a bigger percentage increase from Renters as they fell in numbers while homeownership grew. We should note that Homeownership is not as important to Veterinary Spending as it once was. In 2015 their share was 88.4 percent with performance of 141.8 percent.
  3. # in CU– 2+ people (77.9%) up from 75.0%. This group, which is 70% of U.S. CUs, gained share and their performance grew from 107.4 percent to 111.0 percent. Their rank in terms of importance in Veterinary Spending moved up from last to eighth. Spending by Singles and four-person CUs was flat while two-, three- and five-person CUs had big gains.
  4. Area – Suburban & Rural (67.1%) down from 68.7%. Suburban CU’s are the biggest spenders in every segment. Rural had a great year and was added to hit the 60% goal. Performance still fell to 106.4 percent, from 107.9 percent. The decreases in share and performance came because Suburbs 2500> were up only 3.2 percent while Center City was +19.8 percent.
  5. # of Earners – “Everyone Works” (69.7%) down from 70.4%. In this group, all adults in the CU are employed. Their performance fell from 121.5 percent to 120.3 percent and they fell in rank from No. five to No. six. Only No Earner, Singles spent less. The small drop in share and performance were due to a huge lift by two+ people CUs with one or no earner.
  6. CU Composition – Married Couples (58.6%) up from 57.0%. Their performance also grew to 120.8 percent from 116.7 percent and they returned to the 120+ percent club at No. 6. Until 2019, Married Couples had a 60+ percent market share and 120+ percent performance in all segments. Only Married Couples with an oldest child <6 spent less. The gains came because the spending by singles was essentially flat, only +0.6 percent.
  7. Income – Over $70K (63.4%) down from 66.3%. The performance of the $70K> group fell significantly from 159.8 percent to 145.8 percent. However, higher income is still the most important factor in increased Vet spending. Only the $50>99K group spent less. The spending by the <$50K group grew by 37.0 percent. Those making $100K> also spent 16.4 percent more. The key factor in the big changes in share and performance was a 9.8 percent drop by the $70>99K group.
  8. Age – 35>64 (60.1%) down from 63.2%. Their performance also fell from 120.7 percent to 112.7 percent and they dropped out of the 120 percent club. Only <25 and 35>44-year-olds spent less. All other groups had double-digit percentage increases. The drop by 35>44-year-olds in conjunction with a 52.1 percent lift by 25>34-year-olds caused the big loss in share and performance.
  9. Education – College Grads (61.3%) down from 63.9%. Income generally increases with education. It is also important in understanding the need for regular Veterinary care. Performance also fell from 144.1 percent to 131.2 percent. Education lost share and performance but moved up to second from third in importance. Only those without a HS diploma spent less. The big drop in share and performance came from a 48.2 percent lift by HS Grads without a BA/BS. Veterinary Services are very important. The pandemic caused this need to become recognized by more education levels.
  10. Occupation – All Wage & Salaried (68.1%) up from (67.3%). Their performance only increased from 110.3 percent to 110.7 percent. Tech/Sls/Clerical and Retirees spent less while most of the lift was driven by Managers & Professionals. However, the largest percentage increase was from the Self-Employed. This combination slowed the gains. It also reinforces that “the bosses” ruled in 2020.

Spending did become a little more balanced but Higher income remains 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 change was that the 35>64-year-old age group fell out of the 120+ percent club due to a big lift by the 25>34-year-olds.

Now, we’ll look at 2020’s best and worst performing Veterinary Spending segments in each category.

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Almost all of the best and worst performers are those that we would expect. However, there are seven that are different from 2019. This is the same as Services but much more than the three in Supplies and much less than the 10 in Food. This suggests some spending turmoil. The changes from 2019 are “boxed.” We should note:

  • Income – The winner and losers are the expected groups but they are 30 percent closer together.
  • # of Earners – New, but not unexpected, winner and loser. They have the highest and lowest incomes.
  • Occupation – Once again, it’s all about income.
  • Age – The highest income group, 45>54 year-olds returned to the top. Despite a strong showing by the 25>34 group, only those from 35>74 perform above 100 percent.
  • Race/Ethnic; Education; Housing – The usual winners and losers but the performance gap narrowed a bit.
  • Area – A fundamental change in the loser based upon population. Last year it was Rural. This year it’s Center City.
  • Region – After winning for five straight years, the Northeast was replaced by the West at the top. The West is also the only region performing above 100 percent. The South has now finished last for five years in a row.
  • CU Composition – No change here but again the performance gap narrowed a little, 10 percent.
  • # in CU – Only two- and three-person CU’s perform above 100 percent. We have seen spending movement to larger CUs. This is very apparent in Veterinary as the five+ group spent 67 percent more and moved up a little after two years at the bottom.
  • Generation – The loser flipped from the oldest to the youngest and the performance gap widened by 30 percent.

It’s time to “Show You the Money.” Here are segments with the biggest spending changes in Veterinary Spending.

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We saw some turmoil in performance. There was even more here. There were four repeats and 10 segments flipped from first to last or vice versa. Last year they had eight repeats and four flips. There were some surprise winners – 25>34-year-olds and Center City but no surprise losers. In fact, in fouir categories all segments spent more. You should also note the increases were significantly larger than the decreases and 85 percent of 96 demographic segments spent more. Here are the specifics:

  • Occupation – The winner and loser flipped with the “Bosses” returning to the top.
    • Winner – Mgrs & Professionals– Veterinary Spending: $9.87B; Up $2.11B (+27.1%)                      2019: Tech/Sales/Clerical
    • Loser – Tech/Sales/Clerical – Veterinary Spending: $3.42B; Down $0.27B (-7.4%)                          2019: Mgrs & Profess.
    • Comment – The highest income groups – Self-Employed and Managers & Professionals accounted for 90 percent of the increase. Blue Collar workers did spend $0.41 billion more but Retirees spent a little less, -0.04 billion (-1.0 percent).
  • Region – The Northeast flipped from first to last. They have now flipped for three consecutive years.
    • Winner – West – Veterinary Spending: $7.01B; Up $2.08B (+42.1%)                                                    2019: Northeast
    • Loser – Northeast – Veterinary Spending: $4.10B; Down $0.98B (-19.3%)                                         2019: Midwest
    • Comment – The South finished second for the fourth consecutive year. All but the Northeast had double digit percentage gains.
  • Race/Ethnic – Both groups held their spots as White, non-Hispanics maintained their dominance in this segment.
    • Winner – White, Not Hispanic – Veterinary: $21.67B; Up $1.85B (+9.3%)                                       2019: White, Not Hispanic
    • Loser – African American – Veterinary: $0.87B; Up $0.30B (+51.8%)                                               2019: African Americans
    • Comment– In 2019 only African Americans spent less. In 2020 everyone spent more. This shows that pet parents’ commitment to the health and well-being of their pet children is widespread across all racial/ethnic groups.
  • Housing – Homeowners w/Mtges held their position at the top.
    • Winner – Homeowner w/Mtge – Veterinary: $14.06B; Up $1.62B (+13.0%)                                    2019: Homeowner w/Mtge
    • Loser – Renter – Veterinary: $4.19B; Up $0.53B (+14.5%)                                                                      2019: Homeowner w/o Mtge
    • Comment – Every segment spent more and in fact, Homeowners w/Mtges had the lowest percentage increase. They won because they account for 56.6 percent of all Veterinary spending.
  • # in CU – Both the winner and loser flipped.
    • Winner – 2 People – Veterinary Spending: $9.73B; Up $1.50B (+18.3%)                                              2019: 1 Person
    • Loser – 1 Person – Veterinary Spending: $5.48B; Up $0.03B (+0.6%)                                                   2019: 2 People
    • Comment: Again, all groups spent more. Four-person CUs and singles had increases under 2 percent while everyone else was in double digits, led by 5+ CUs who were up 67 percent.
  • Generation – Baby Boomers flipped from last to first as they focused on their Pets’ needs – Food & Veterinary.
    • Winner – Baby Boomers – Veterinary: $8.93B; Up $1.45B (+19.4%)                                                  2019: Millennials
    • Loser – Gen Z – Veterinary: $0.20B; Down $0.06B (-22.5%)                                                                  2019: Baby Boomers
    • Comments – After two years at the bottom Boomers returned to the top. Millennials also had a good year, +$1.1 billion. Gen Z was the only generation to spend less.
  • Area Type – Center City is a bit of a surprise and the big suburbs flipped from first to last.
    • Winner – Center City – Veterinary Spending: $8.17B; Up $1.35B (+19.8%)                                       2019: Suburbs 2500>
    • Loser – Suburbs 2500> – Veterinary Spending: $11.57B; Up $0.36B (+3.2%)                                   2019: Suburbs <2500
    • Comment – All groups also spent more. The question became “How much more?” With 33 percent of the spending and a 20 percent percent increase, Center City won. Suburbs 2500> have 47 percent of spending but were only +3 percent. By the way, Rural was +80 percent.
  • CU Composition – Married Couple Only flipped from last to first.
    • Winner – Married, Couple Only – Veterinary: $7.04B; Up $1.31B (+22.9%)                                2019: Singles
    • Loser – Married, Oldest Child <6 – Veterinary: $0.95B; Down $0.21B (-18.2%)                          2019: Married, Couple Only
    • Comment – After a $0.72 billion increase in 2019, the loser was the only segment to spend less. Single Parents spent 68 percent more but 63 percent of the total spending  increase came from Married Couples Only and those with a child over 18.
  • # Earners – Both the winner and loser are new, but not surprising.
    • Winner – 3+ Earners – Veterinary Spending: $3.26B; Up $1.15B (+54.2%)                                     2019: 2 Earners
    • Loser – No Earner, Single – Veterinary Spending: $1.45B; Down $0.51B (-26.1%)                        2019: 1 Earner, 2+ CU
    • Comment – The winner and loser have the highest and lowest incomes and No Earner, Singles were the only group to spend less. Income is of primary importance to increased Veterinary Spending and # of Earners is important. However, not every adult has to work. One-earner, two+ person CUs was only beaten by $0.03 billion.
  • Income – $100>149K flipped from last to first.
    • Winner – $100>149K – Veterinary Spending: $5.04B; Up $1.14B (+29.1%)                                    2019: <$30K
    • Loser – $70>99K – Veterinary Spending: $3.74B; Down $0.41B (-9.8%)                                          2019: $100>149K
    • Comment – Two groups spent less, $50>69K & $70>99K. Last year we had a definite spending rollercoaster. It’s still here in 2020, but with bigger groups. <$50K: +$1.82 billion; $50>99K: -$0.48 billion; $100K>: +$1.69 billion.
  • Age – In a bit of a surprise, the 25>34-year-olds won while 35>44 flipped from first to last.
    • Winner – 25>34 yrs – Veterinary Spending: $3.74B; Up $1.11B (+42.2%)                                       2019: 35>44 yrs
    • Loser – 35>44 yrs – Veterinary Spending: $4.47B; Down $0.59B (-11.6%)                                       2019: 45>54 yrs
    • Comment: Two groups spent less, the 35>44-year-olds and the <25 group. Everyone else had double digit percentage increases. The 25>34-year-old group is only fourth in income and fifth in Veterinary spending performance so their win is unexpected. Apparently, they were motivated by the pandemic. Their Services Spending were flat but they spent a lot more in all other segments.
  • Education – Those with an Advanced College Degree held their spot at the top.
    • Winner – Adv. College Degree – Veterinary Spending: $7.41B; Up $0.88B (+13.4%)                 2019: Adv. College Degree
    • Loser – <High School Grads – Veterinary Spending: $0.34B; Down $0.14B (-29.4%)                2019: Associates Degree
    • Comment – Only those without a HS Diploma spent less. College grads were up $1.29B (+9.3 percent). However, those with a HS Diploma but not a BA/BS spent $1.89 billion (+25.6 percent) more so the lift was widespread.

We’ve now seen the winners and losers in terms of increase/decrease in Veterinary Spending for 12 Demographic Categories. The 2020 pandemic brought strong  growth in Veterinary spending. However, there was some turmoil as only four segments held their spot from 2019 while 10 flipped from first to last or vice versa, but with almost no surprising winners. The surprise was in how widespread the spending lift was. In four categories, no segments spent less and overall, 85 percent of all demographic segments spent more. This means that there were “hidden” segments that didn’t win but made a significant contribution to the $3 billion increase. These groups don’t win an award, but they certainly deserve …

HONORABLE MENTION

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Center City won but Rural came in second – the opposite ends of the population spectrum. Income matters as Self-Employed finished second dto Managers & Professionals. However, spending became a little more balanced in both Income and Education which is reflected by the performance of the $30>39K, one-Earner, two+CU and HS Grads w/some College groups. It also wasn’t all about Baby Boomers and Gen X. The younger Millennials certainly stood up with a $1 billion increase in spending. There are many more groups that could be included as 82 of 96 segments (85 percent) spent more on Veterinary Services. That is significantly better than 57 percent in 2019 and 63 percent in 2018. So 2020 was a good year!

Summary

2016 and 2017 produced a combined increase of $3.6 billion in Veterinary Spending as inflation moved to record low levels. In 2018 we had the Baby Boomer Spending “Bust” which especially impacted Food and Veterinary. The Boomers spending continued to fall in 2019. Fortunately, Gen X and Millennials stepped up to produce a small. 2.7 percent increase in both years. In 2020 the pandemic focused Pet Parents on the needed segments. This drove a $3 billion increase in Veterinary Spending. Boomers and Millennials led the way, but the lift was widespread as 85 percent of demographic segments spent more.

There was some turmoil in the segment, but the net result is that spending became a little more balanced in most demographic categories. In general, the size of the increases far exceeded the size of the decreases. In fact, in four categories all segments increased spending. Income and Education remain of primary importance in terms of increased spending.

Income: Performance generally increases with income and reaches it’s highest level, nearly 200 percent at $150K>. The “halfway” point (50 percent) occurred at $70>99K in 2020. This is the first time that the halfway point has fallen below $100K. Spending may be more balanced, but you can see that there is still a huge disparity.

Higher Education: Performance increases with Education but doesn’t reach 100 percent until you have a BA/BS degree. The performance of HS Grads with an Associate Degree or at least some college is now over 90 percent. Those with a College Degree perform at 131 percent. The disparity is not as bad as Income but still big. Equality in both categories is a long way off.

The performance of other big spending groups is also very important in the Veterinary segment. We identified six demographic categories with high performing large groups. (There were five for Supplies and Services but eight for Food).  Consumers have no control over Race/Ethnicity but in addition to Income and Education, Homeownership, # of Earners and Marriage are also important factors in Veterinary spending. All groups but Marriage are tied to income and their high performance demonstrates that there are still big spending disparities among segments within these categories.

There were some changes of note. Marriage returned to prominence while a strong year by the 25>34-year-olds drove the performance of the 35>64 age group significantly down.

In 2019 Veterinary spending increased +2.7 percent while prices rose 4.14 percent – a net decrease in the amount of Services. In 2020 spending grew +14.0 percent while inflation was 3.7%. That’s over 10 percent in real growth, a very positive situation. Also, although Boomers and Millennials drove the lift, increases were widespread across demographics making Veterinary spending more balanced. In 2021, the overall U.S. economy has largely recovered. We’ll see if Pet Parents continue to spend heavily on Veterinary Services.

Finally – The “Ultimate” Veterinary Services Spending Consumer Unit consists of three people – a married couple and their 18-year-old child. They are 45 to 54 years old. They are White, but not of Hispanic origin. At least one of them has an Advanced College Degree. Both are Managers/Professionals and their child also works. Their total income is $150>$200K. They live in a small suburb, adjacent to a big city in the Western U.S. and are still paying off the mortgage on their home.

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