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May 22, 2019

By: The Pet Business Professor

According to John Gibbons, president of A GPS for Pet Businesses, mid-year 2018 pet supplies spending was $19.81B, up $2.38B (+13.6%). This comes on the heels of a $2.59B increase in the previous 12 months. Pet supplies spending is now at the highest level since 2009, prior to the great recession.

Here are this year’s specifics:

  • Mid Yr 2018: $19.81B; ↑$2.38B (+13.6%) from Mid Yr 2017. The +$2.38B came from Jul > Dec 2017: ↑$1.15B and Jan > Jun 2018: ↑$1.23B

Like pet food, pet supplies spending has been on a roller coaster ride. However, the driving force is much different. Pet food is “need” spending and has been powered by a succession of “must have” trends. Pet supplies spending is largely discretionary, so it has been impacted by 2 primary factors. The first is spending in other major segments. When consumers ramp up their spending in pet food, like upgrading to super premium, they often cut back on supplies. However, it can go both ways. When they value shop for premium pet food, they take some of the saved money and spend it on supplies. The other factor is price. Pet supplies prices reached their peak in September of 2009. With a few brief exceptions they have been generally deflating since then – down -5.3% from 2009 at the end of 2017. Although it is not a hard and fast rule, price inflation in this largely discretionary segment can retard sales, usually by reducing the frequency of purchase. On the other hand, price deflation generally drives supplies spending up. Innovation can “trump” both of these influencers. If a new “must have” product is created, something that significantly improves the pet parenting experience, then consumers will spend their money. The perfect example of this is the successive waves of new food trends. Unfortunately, we haven’t seen much significant innovation in the supplies segment recently.

Recent history gives a perfect example of the supplies roller coaster. In 2014 supplies prices dropped sharply, while the movement to super premium food was barely getting started – supplies spending went up $2B. In 2015, consumers spent $5.4B more on pet food. At the same time, pet supplies prices went up 0.5%. This was a “killer” combination as supplies spending fell $2.1B. In 2016 consumers value shopped for food, saving $2.99B. Supplies spending stabilized by mid-year then increased by $1B in the second half when prices fell sharply. Consumers spent some of their “saved” money on supplies. Supplies prices continued to deflate throughout 2017. Food spending increased $4.61B in 2017 but this came from a limited group, generally older CUs, less focused on supplies. The result was a $2.74B increase in supplies spending. This appeared to be somewhat of a break with the overall pattern of trading money between segments.

That brings us to the first half of 2018. The spending increase in pet food slowed to +$0.25B. However, supplies’ prices switched from deflation to inflation. Prices increased 0.6%, but not until May so most of the spending in the 1st half was already done. During this period supplies spending increased by $1.23B so there was no major impact from the upturn in prices. Although, we should note that the less price sensitive over $150K group accounted for $0.91B of the increase. If the supplies segment could become less sensitive to minor inflation and increased spending in other segments it would be great news for manufacturers and retailers, encouraging stronger, stable growth like the last 24 months.

Pet supply spending by income:

  • The increase in supplies spending was widespread across income groups. The only yearly decrease came from the $70>100K group. They were down in both halves. They did have a big increase in food spending during this time so they may have been dialing back their supplies spending.
  • The biggest increase came from the over $150K group. Their $1.54B lift (+40.2%) accounted for 65% of the segment’s total increase while they only have 11.9% of the CU’s. However, we also should note that this group is gaining members faster than any other income segment. Their CU count is up 13.9% from a year ago.
  • There are 2 other minor dips in spending. Pet supplies spending fell -$0.06B in the second half of 2017 for the upper middle income $100>150K group and by -$08B in the first half of 2018 for lower middle income $50>70K group.
  • Another interesting situation is the remarkably even distribution of supplies spending among the under $100K groups. In fact, the under $50K group spent $5.7B while the $50>100K group only spent $5.3B. However, the <$50K group accomplished this with 47.6% of the CU’s in the U.S., while the $50>100K group only has 27.6%. There is no doubt that money matters in supplies spending.

Pet supply spending by age:

  • This is very consistent. Every age group had an overall increase and an increase in each half. The groups from 25>64 each increased supplies spending by approximately a $0.5B. The older and younger groups had smaller increases.
  • Obviously, the factors affecting pet supplies spending in the last 12 months were relatively evenly dispersed across America, at least in the 25 to 64 year olds.

The supplies segment had a great 12 months and 2018 is off to a good start but the “winning streak” is actually 24 months. It began in the second half of 2016. Since then, spending on pet supplies has increased $4.97B (+33.5%). It has also been widespread across America. Of 82 separate demographic segments, only 1 has spent less on supplies in the last 24 months – the greatest generation. The reason for this decline is unfortunate but can’t be helped. The number of CU’s for these 91+ year old Americans has decreased by over 40% during the period.

A new food trend may be starting but the lift may be minimal in 2018. Of bigger concern is inflation. Supplies prices turned up in May and by year end had increased +2.3%. We have not seen anything like this since the pre-recession, price glory days of 2009 when prices increased (+3.2%). Unless price sensitivity has gone away, this does not bode well for supplies spending in the second half of 2018. We will have to wait and see. We’ll get the data in September.   

See the full report here.

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