May 8, 2019

By: The Pet Business Professor

According to John Gibbons, president of A GPS for Pet Businesses, the US BLS just released their Mid-Year Update of the Consumer Expenditure Survey covering the period 7/1/2017 to 6/30/2018. The report shows Pet Food Annual Spending at $31.36B (Food & Treats). The following observations were prepared from calculations based upon data from that report and earlier ones.

Here are the current numbers:

• Mid 2018: $31.36B; ↑$2.92B (+10.2%) from Mid-17. The net +$2.92B in Mid 2018 came from:

• Jul>Dec 2017: Up $2.67B from 2016

• Jan>Jun 2018: Up $0.25B from 2017

2017 was a great year for Pet Food Spending. The 1st half was up $1.94B and this trend grew stronger with a $2.67B increase in the 2nd half. However, the increase slowed markedly in the 1st half of 2018. We have noted in previous reports that Pet Food spending has been on a roller coaster since 2000, with 2 years up, followed by a flat or even declining year. This up and down “ride” has been driven by a succession of Food trends. 2011 saw the movement to “Natural” begin. This trend and spending increased through the 1st half of 2013. Then another change took place. The market had become much more competitive. Prices flattened out then began to fall in the 2nd half of 2013. Consumers began to look for value and they obviously found it as spending fell -$2.34B in the 2nd half, producing a net drop of -$1.22B for the year. 2013 was a game changer for this segment as it began an extended period of deflation which continued through 2018. Midway through 2018, Pet Food prices were still 2.3% lower than in 2013.

In the 2nd half of 2014 spending turned sharply up. This was the beginning of the movement to Super Premium which was initiated by the 25>34-year-old Millennials. In 2015 this trend took off, especially with the Boomers, as spending rose $5.4B. At the same time, the Pet Food spending of the 25>34 yr olds dropped. At first, we thought they had rolled back their upgrade. However, it turns out they were leading the way in another element of the trend to Super Premium – value shopping. For consumers, the Super Premium upgrade movement consisted of 3 stages:

1. Trial – The consumer considers the benefits vs the high price and decides to try it out. Usually from a retail outlet.

2. Commitment – After a period of time, the consumer is satisfied and is committed to the food.

3. Value Shop – After commitment, the “driver” is to find a cheaper price! In today’s competitive market there are an increasing number of options. Some super premium brands are moving to the mass market. Retailers are developing super premium private label and of course, the internet has become a big player.

See full report here.

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