According to John Gibbons, president of A GPS for Pet Businesses, due to adrop 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 segmentexceeded this pace as spending reached $19.8B, up $1.22B (6.6%). (Note: Allnumbers in this report come from or are calculated by using data from the USBLS Consumer Expenditure Surveys)
The first half of 2018 continued an upturn in supplies spending which began inthe second half of 2016. However, in the second half of the year, spendingflattened out. In this report we’ll “drill down” into the data to try todetermine what and who are “behind” the lift and subsequent pause in 2018 petsupplies spending.
In 2018, the average household spent $150.62 on supplies, up 5.4% from $142.90in 2017 (Note: A 2018 pet CU (67%) spent $224.81). This doesn’t exactly matchthe 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 beenall 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 nowconsidered commodities, so price is the main driver behind consumer purchasingbehavior. When prices fall, consumers are more likely to buy more. When theygo up, consumers spend less and/or buy less frequently.
2014 was the third consecutive year of deflation in supplies as prices reacheda level not seen since 2007. Consumers responded with a spending increase ofover $2B. Prices stabilized and then moved up in 2015. In 2015 we saw how thediscretionary aspect of the supplies segment can impact spending in anotherway. Consumers spent $5.4B for a food upgrade and cut back onsupplies—swapping money. This, in conjunction with inflation, caused suppliesto suffer as consumers spent 4.1% less, but they bought 10% less often. Thatdrop in purchase frequency drove $1.6B (78%) of the $2.1B decrease in suppliesspending.
In 2016, supplies’ prices flattened out and consumers value shopped for theirupgraded food. Supplies spending stabilized and began to increase in thesecond half. In 2017 supplies prices deflated, reaching a new post-recessionlow. The consumers responded with a huge $2.74B increase in supplies spendingthat was widespread across demographic segments. An important factor in thelift was an increase in purchase frequency which was within 5% of the 2014rate.
In 2018 prices started to move up in April and rapidly increased later in theyear 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 inspending. That gives us an overview of the situation.
Supplies spending started out strong in 2018. In the 1st half, 67 of 82demographic segments (82%) spent more. Then came the 2nd half. Pricesincreased by 1.7% and only 38 segments (44%) had a spending increase over ayear ago. By year end, 64 segments spent more on supplies (78%). The 2nd halfnumbers were not all bad. Only 5 segments that started out negative ended upon the plus side for the year. However, 8 segments that were positive in the1st 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 spendingin both halves. However, 24 of them 80% had a smaller increase in the secondhalf. The inflation had a broad impact.
The spending decrease was -$0.01B in the 2nd half of 2018. In a couple ofcases 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 insupplies spending – income and age:
Income – Supplies spending is very price sensitive. Strong inflation causeslow income and financially pressured groups to spend less: <$50K (46% ofCU’s), 2+CU’s with 1 or no earners, retirees,
Age – Perhaps, it is because they are less focused on “need” and have amore expansive and active “take” on pet parenting than their oldercounterparts, but supplies spending has always skewed towards the youngergroups. The spending in both halves of 2018 by 25>44 yr olds, millennials and2+ unmarried adults reinforces this observation.
2018 definitely validates the price sensitivity of supplies. After 24 monthsof consistent, strong growth, +$4.97B, spending turned down in the second halfof 2018. The most likely cause – 1.7% inflation, driven by tariffs. What comesnext? Inflation continued into 2019 growing another 1.7% in the first half. Infact, supplies’ prices in the 1st half of 2019 were 3.4% above the same periodin 2018. This doesn’t bode well for supplies money in 2019, but we’ll have towait and see.
Source: Pet Age
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