Global Pet Expo 2021: Despite the Challenges, 2020 Was A Banner Year for the Pet Industry
March 31, 2021: The pet industry in the U.S. reached $103.6 billion in retail sales in 2020, exceeding the $100 billion mark for the first time and experiencing growth of 6.7% over 2019. The American Pet Products Association (APPA) released the figures during the virtual Global Pet Expo, held March 24-26, 2021.
Like some human categories (e.g. canned foods and toilet paper), pet products experienced a period of what the APPA terms “emotional stockpiling” at the beginning of the crisis in the U.S., followed by a steep drop in sales of 20% in April as consumers used what they had purchased and faced product shortages when they tried to replenish. From May through December, however, sales grew strongly and steadily. “The fourth quarter saw unprecedented growth in all channels,” said Celeste Powers, president of the Pet Industry Distributors Association.
Almost all product categories grew significantly during the year, although services such as grooming, dog walking, and boarding saw a 21.4% decline during the stay-at-home era.
Categories on the rise in the pet industry over the past two years included those with a significant licensing presence. For example, pet beds were up 35.3% in 2020 versus 2018, decorative collars up 62%, leashes up 34.6%, and toys up 16.6%. Sixty-nine percent of dog owners purchased toys for their pets in 2020, up from 63% in 2018, APPA’s research found, as did 67% of cat owners, up from 59% two years earlier.
The Global Pet Expo offered research and insights into how the industry fared in the past year, along with the consumer trends driving sales, many of which are expected to stick in the years ahead.
Pandemic Leads to More Pet Ownership—and Spending
The share of households owning pets increased to 57% in 2020, from 54% in 2019, according to Packaged Facts. In addition to households getting a pet for the first time, many pet owners have purchased additional pets, often diversifying their menagerie, for example by adding a cat or a small animal to the household along with an existing dog.
More than three-quarters (76%) of pet owners said their pets helped reduce their stress levels in the past year, according to APPA research. More than 70% have spent more time with their pets and more than 60% felt they were bonding more with their pets.
That close connection translates to continued purchases of pet products, even during economically uncertain times. Thirty percent of pet owners spent more on their pets in 2020 than 2019, according to APPA, with 10% saying they spent less and 60% saying they spent the same. Almost three-quarters (73%) of pet owners, including those with financial concerns, do not plan to make changes to their pet’s diet in the future, and only 20% said they planned to spend less on pet food.
Pet supplies outside food and medicine—the sector where the bulk of licensing activities lie—face a slightly higher risk for decreased spending going forward, according to Julie Springer, APPA research analyst. Twenty-eight percent of consumers said they plan to spend less on those items. Millennials and Gen X are the two groups most likely to worry about finances and to see pet supplies as discretionary, although they were also the most likely to spend more on pets during 2020.
Pet Parents and Premiumization
Consumers have long considered their pets part of their family. Seventy-seven percent of pet owners strongly agree that pets are part of the family and purchase differently from those who don’t agree, according to David Sprinkle, research director at Packaged Facts.
Many product trends arise from the fact that consumers want their pets to have the same products and services they do:
• Premium foods: Natural and organic products and other healthier choices for pets have been seeing growth for several years, just as they have for humans, said Amy Kerr, director of business development and client development for pets at SPINS, a research and consulting service for independent retailers and specialty brands, which entered the pet category in August 2020.
Some of the other food categories with growth trajectories to watch, according to SPINS, include plant-based options; animal products outside of the traditional beef and chicken, such as venison, elk, turkey, and bison; and human-grade products that are less processed, have visible ingredients, and often are fresh, frozen, or freeze-dried. These can include soups, stews, purees, patés, and more, often packaged in jars, pouches, or other containers typical for human foods, rather than in cans.
NielsenIQ measures similar trends. Some of the food categories that are showing the fastest growth, as measured by the number of manufacturer claims, include meal enhancers (up 5.9%), dehydrated foods (10.7%), refrigerated/fresh products (20.7%), frozen items (15%), and freeze-dried raw foods (7%), according to Sam Smith, NielsenIQ’s client manager.
Health and wellness: Dollar sales in the pet care and wellness category in total were up 20% in specialty stores in 2020, with grooming and bathing, vitamins and supplements, and flea and tick products all up double digits, according to SPINS. Growth categories include antioxidant and immunity (up 4.9% in specialty channels), gut health (up 3.5%), and anti-inflammatories (up 2.6%), with interest also evident in skin and coat health and brain health (e.g., DHA, flax seed, and fish oil).
One indicator of the strength of the health and wellness trend: a recent Petco remodel in South Miami featured new branding positioning Petco as “the health + wellness company,” with the store’s assortment and layout supporting that image throughout, according to Dave Bolen, founder of the Bolen Group.
Stress management: In 2020, 51% of pet owners purchased calming products—diffusers, collars, sprays, toys, etc.—for their dogs and 51% did the same for their cats, up from 22% and 19% in 2018, respectively, according to APPA research. And 35% of dog owners and 31% of cat owners purchased CBD products, a new category in this year’s survey, in 2020. Treats were the top CBD category, followed by shampoo, oil tinctures, powders, and sprays. The top reason for the purchase was to treat anxiety and stress, followed by arthritis and other types of pain.
Smith at NielsenIQ, who estimated growth for CBD at 50.5% in 2020, on a small base of $11.7 million, notes that CBD products have a high price per pound of $37.83. NielsenIQ’s research found that consumers paid $32.96 on CBD per trip, on average, and had a robust repeat purchase rate of 20% for a pricy and niche category that still has some stigma associated with it.
• Gifts: Gifts purchased for pets also increased during the pandemic, APPA found, for occasions like Christmas and birthdays and for no occasion at all. The recipients included all types of animals; 58% of fish owners bought a gift for their pet, for example. Pet parents give their pets gift cards as well.
• Comfort: This has been a theme for many years. “We’re trying to do for our pet in part what our pets do for us,” says Sprinkle. He cited the licensed La-Z-Boy Pet line (from exhibitor Petmate, which acquired the license in 2018) as an example of this trend; it features items such as fold-out sofa beds and chaises.
All of these trends have contributed to the premiumization of the pet category. Prices in the pet food sector, for example, have grown 34.8% over the last decade, according to Jared Koerten, head of pet care research for Euromonitor International. This is largely due to consumers trading up to higher-quality and higher-priced products.
Retail Trends: Omnichannel Gains Traction
Every distribution channel in the pet industry experienced sales growth in 2020, but ecommerce far outpaced the rest and took share from other retail tiers. In 2020, Internet-based shopping accounted for 30% of sales in the pet category, according to Euromonitor, which forecasts that share to rise to 53% by 2024.
Bolen’s estimates show similar trends. While all channels saw a hefty increase in sales in 2020, ecommerce grew to account for 29% of the market in the U.S. in 2020 compared to 23% in 2019, he said. Other segments lost share, including grocery and mass, which declined from 41% to 38%, and specialty pet, which dropped from 26% to 23%. Farm and fleet stores retained their 8% share.
Almost half of pet owners (47%) said their online purchasing of pet products increased in 2020, with 21% saying it increased “a lot,” APPA found. The increase held true for 58% of millennials, 56% of Gen Z consumers, 45% of Gen X, and 33% of baby boomers.
The online landscape includes a variety of delivery methods, including curbside pickup, buy online/pick up in store (BOPIS), subscriptions, third-party delivery from the store, and direct-shipped orders. Subscription services, along with loyalty and membership programs, have become increasingly important in the pet space. Seventy percent of sales at the big specialty ecommerce site Chewy come from its Autoship program, Koerten says, while 50% of Europe-based global site Zooplus’ sales are from Subscribe & Save customers.
Bolen identifies DTC as a major growth channel in the years to come. With a dozen or so major players currently, from Just Food for Dogs to The Farmer’s Dog, this sector saw sales growth of more than 100% in 2020 to $250 million.
While pet-related services declined during the pandemic, experts expect them to come back big in 2021 and 2022. Most are hard to replicate online, so retailers have developed safe alternatives such as curbside drop-off and pick-up of the pet, online booking, and flex scheduling. “Pandemic or not, the fur is growing,” says Andrew Kim, founder and CEO of Healthy Spot, a 21-store retailer in California.
“It’s hard to groom a dog through the Internet,” adds Jeff David, CEO of Independent Pet Partners, owner of the Loyal Companion, Chuck & Don’s, Kriser’s, and Natural Pawz specialty chains. One service that has been working online, he said, is training. Consumers have embraced training sessions on Zoom, even asking grandparents, cousins, or others who take care of their pets to join the call.
While consumers are trading up to premium purchases, they continue to want value for money, and this is part of what is propelling many retailers’ increased focus on private labels. Chewy, for example, has said it wants 50% of its accessory sales over time to be attributable to private-brand products, according to Bolen. And Zooplus has seen its private-label sales grow 331% in the past five years, according to Koerten.
Several retailers are also increasing their focus on private label in the pet department. Petco has developed and prominently merchandises a number of private labels across the store; Tractor Supply has established its own premium pet brand, 4health; and Walmart relaunched its Pure Balance pet food brand, to name a few examples.
Supply Chain: Challenges to Continue
The pet food and product supply chain faced a number of challenges throughout the year, similar to other industries. Manufacturers had a hard time shifting production quickly enough to meet spikes and freefalls in demand early in the pandemic; many have been dealing with worker shortages due to COVID and other factors, which continue today; and there were spot shortages in packaging, especially early on, as bottles were rerouted for hand sanitizer and corrugated cardboard for delivery packages.
Some researchers have estimated that supply has been 70% of demand in some food categories at times throughout the year.
Delays in shipping continue today, due in part to shortages in ground transportation equipment, said Steve King, APPA’s president and CEO. In addition, fewer ships and containers than normal are available, with many awaiting unloading at clogged ports. Container prices have tripled since the start of COVID, with freight inflation expected to continue through the year, and lead times for imported products have doubled to 120 days. The growing demand in pet products from May through December, and beyond, has exacerbated these challenges. King predicted that supply chain issues will continue into 2022.
Meanwhile, retailers have been reluctant to add new lines and take inventory risks, although they have maintained higher-than-normal inventory levels on key items to minimize out-of-stock situations, according to Powers.
That said, the outlook for industry-wide sales in 2021 is positive. The APPA projects a growth rate of 5.8% in 2021, higher than the 3% to 4% historical average and not too far below the 6.7% achieved in the record sales year of 2020.
See our related post in RaugustReports for a look at the Global Pet Expo virtual exhibitors that highlighted licensed products.