Americans see their pets as family – and are spending more cash on them

10 July 2018 Consulting.us

As people increasingly humanize their pets, spending on them is set to grow. A new report from consultancy EY-Parthenon examines how Americans view their pets, while also investigating what categories in the pet industry are growing, as well as where Americans will purchase their pet supplies in the future.

People are increasingly humanizing their pets, seeing them as a furry little member of the family, and predisposing them to spend more money on fancy food, treats, clothing, and any number of premium services like grooming, pet spas, and what have you. This means a potentially explosive market for the $70 billion US pet industry. According to the American Pet Products Association, the US pet industry has grown from $17 billion in 1994 to $70 billion last year – and trends seem to point to good times ahead for the industry.

Pets are extremely popular among millennials, who have higher rates of pet ownership than other age brackets. 75% of Americans in their 30s have dogs, while over half have cats, according to research firm Mintel. This compares to an overall rate of 50% dog ownership and 35% cat ownership in the US.Americans see pets as familySome psychologists point to high millennial pet ownership as a reflection that they see them as sort of child surrogates. In contrast to previous generations, millennials are delaying having babies, buying homes, buying cars etc. But they’re not delaying having pets, and those pets are more frequently seen as a part of the family, whether they’re a baby replacement or not.

A recent survey from management consultancy EY-Parthenon reinforces the increasingly ‘human’ way that Americans view their pets. According to the survey, 72% of Americans consider their pets to be family. A further 96% say they let their pets sleep inside the house, while a further 32% say they let their pet sleep on a human bed.Pet expenditures by year, pet expenditures by categoryEY-Parthenon’s parsing of APPA data has also revealed that pet expenditures are increasing steadily, especially in other services like pampering and wellness. In the chart above, ‘other services’ grew to over $6 billion. According to data from Wakefield Research, three-quarters of millennials said that they are more likely to ‘splurge’ on their pets than themselves – which will mean more expensive treats, more fancy natural food, and more trips to the doggy spa.

In the chart above, we can also observe higher expenditures on food from 2010 to 2017. Though it could partially reflect increasing rates of pet ownership, the increase also could reflect a greater propensity of owners to buy better, more expensive, natural and/or organic food for their pets. EY-Parthenon highlights that premium and natural food segments present especially promising opportunities for new entrants and brand building.

Curiously, though 7 in 10 respondents to a Mintel survey said that adopting a shelter animal is the best way to get a pet, live animal purchases increased steadily from 2010 to 2017. This trend may slow, however, as people align pet adoption with their social values, eschewing puppy mills in the way that an increasing amount of millennials avoid ‘unethical’ meat and embrace vegetarianism and veganism.Pet supplies shopping expected to shift increasingly to ecommerceEY-Parthenon also highlights the way changing way that people will buy their more expansive and premium pet supplies in the future. Though 78% of people prefer to shop in a physical store, the consultancy expects e-commerce’s share to continue growing in the future. In the chart above, sourced from Euromonitor data, e-commerce share of pet supply purchase is projected to double from 2016 to 2021. EY-Parthenon links the expected growth to improving shipping economics as well as consumer convenience factors.

The consultancy also predicts that grocery stores, mass merchandisers (Walmart), and warehouse clubs (Sam’s Club, Costco) will increase the shelf space they have devoted to pet food and supplies. This will include an increasing share of premium and private label products in the pet food and supplies category.

Profile

More news on

×

US grocery sector in store for further hard discounter expansion

01 April 2019 Consulting.us

Hard discounters offer customers bulk food at low prices in an unassuming shopping environment. German firms Aldi and Lidl have considerable clout in Europe, and in recent years have globally expanded their store footprints. Aldi is well-positioned in the US, garnering high-level support from consumers, while Lidl, which entered in 2017, has quickly built a strong reputation. As the rollout of the discounters continues, local brands face stiff competition.

Competition among supermarkets has heated up in recent years as consumers increasingly sought out discounters and moved away from hyperstores. German discounters Aldi and Lidl in particular have asserted their dominance across global markets with the former opening of hundreds of new stores and the latter entering the US market in 2017.

New analysis by Bain & Company analyzes how far the rise of discounters has affected grocers in the US market. The report, titled "How US Grocers Are Standing Up to Europe’s Hard Discounters," is based on a survey of 17,400 consumers, among other data sources.

Hard discounters NPS

To better understand the impact of hard discounters Aldi and Lidl on the US market, the firm’s recent survey of consumers asked respondents about their grocery shopping habits using the Net Promoter Score function. The Net Promoter Score measures how likely it is that a consumer will recommend a product, service, or brand to friends and family. 

In terms of the regular grocery shopping trip, hard discounters have managed to top the market at 43 points, with supermarkets around seven points behind. Mass merchants have the lowest score in the category at around 20 points. For big stock-ups, hard discounters, with their large bulk offering and appeal, score 60 points – well above that of warehouse clubs (45) and supermarkets (38). The analysis shows that even for quick trips for a couple of items, hard discounters top the score at around 10, compared to six for supermarkets and negative scores for warehouse clubs and mass merchants. The only category in which the hard discounter segment performs relatively poorly is buying prepared foods for today – at 25 compared to 50 for warehouse clubs and 35 for supermarkets.

Aldi customer advocacy

Aldi, which has been in the US market since 1976, has resonated strongly with consumers, coming in the top three for NPS for consumer advocacy. The company has managed to increase its position on last year by nine points, arriving at 55 – 15 points behind the leader. Aldi was noted in particular for its delivery of “best everyday low prices” and “best value for the money.” Lidl, a relative newcomer to the market, has a middle-of-the-road score.

Consumer advocacy is crucial to success within grocery

The success of discounters generating high consumer advocacy scores, according to the Bain, mean they are likely to show strong performance in the future, The firm notes that promoters purchase more than twice as frequently as detractors, with 70% of promoters shopping two times a month or more compared to detractors at 32%. The firm also found that the average monthly amount spent among promoters is almost three times as high as detractors, at $111 against $39. Promoters additionally tend to be more loyal to their chosen company, netting 28% of the total wallet compared to 11% for detractors.

“Lidl and Aldi are just beginning to flex their competitive muscles,” Mikey Vu, a partner with Bain & Company’s Retail Practice and a coauthor of the report, said. “What we’re seeing is that US grocers can effectively stand up to these hard discounters, but that they need to remain vigilant and innovate in strategic areas to keep their edge.”