62 billion reasons to take a closer look at pet industry sales. Is all what it seems?

The American Pet Products Association (APPA) predicts that American pet owners will spend $62.75 billion dollars on pet products in 2016. This is nearly $2.5 billion more than in 2015, and almost $15 billion more than was spent in 2010. Sales have doubled in less than 15 years. Few industries can bark about such consistent increases in revenue.

But what is driving this growth, and how do marketers capitalize on it for customers without falling into the “numbers trap?”

APPA’s breakdown of pet product purchases in 2015 (with expected 2016 numbers) is enlightening:

Food $23.05 billion ($24.01 predicted in 2016) Supplies/OTC medicine $14.28 billion ($14.98 billion) Vet care $15.42 billion ($15.92 billion) Live animal purchases $2.12 billion ($2.11 billion) Pet services: grooming & boarding $5.41 billion ($5.73 billion)

If predictions for 2016 hold true, literally every sector of the pet industry will have proven to be bulletproof, with the worst-case scenario being that live pet sales hold fast. How many industries can boast this across-the-board increase? And how is it possible?

Four reasons for pet-industry success

Market Research Insights and Business Intelligence projects more than $91 billion in sales for pet products and services by 2019. The industry’s regular expansion over such an extended period is unprecedented. Market Research cites a few specific reasons for the uninterrupted growth.

  • Pets are getting older
  • Pets are getting fatter
  • Smart, innovative people are flocking to the pet industry
  • High-income pet owners are important targets
  • Understand where you are and what your segment is facing
  • Listen to consumers
  • Become intimately familiar with consumer behavior trends

A January 2015 Market Research report showed that “39 percent of dog owners have a dog aged 7 and older, while 43 percent of cat owners have a cat in the oldest age bracket.” Thanks to more advanced veterinary care, better nutrition and knowledgeable, involved pet owners, cats and dogs are simply living longer. Senior pets typically need specialized care and/or services, and products geared toward senior pets often come with a premium price tag.

The January 2015 Market Research survey found that only “11 percent of dog owners and 20 percent of cat owners think they have an overweight pet, when in reality, just over half of American dogs are overweight, and 58 percent of cats are overweight.” With the myriad health issues that can plague overweight cats and dogs, it’s only a matter of time before these numbers match up, and as pet owners come to the realization that their pets are obese, we could see an uptick in “specialty diet” food sales.

A variety of pet start-ups opened in 2015, and the trend looks like it’s going to keep rolling at a tail-wagging pace. There seems to be a specialty product or service for every conceivable need or want, and many of these are boutique services that command premium prices that don’t deter pet owners. Which brings us to…

Market Research says that in 2016, “three-fifths of pet market spending will come from this group. High-income pet owners are also expected to be a driving force behind premiumization products, as they seek out the best products for their furry friends.” When 60 percent of a market comes from people who may not have financial concerns, the sky is the limit.

But it’s not all tail wags and dog biscuits…

On the surface, everything looks great in the pet health industry. More money is being spent. Pets are living longer, more robust lives. The growth is constant.

BUT.

There’s always a “but” behind that wagging tail, isn’t there? When you really crunch the numbers, not everything is awesome. While the APPA projects a 3.86 percent increase in overall industry sales, once you factor inflation into the mix, the growth drops to 2.86 percent. On the one hand, growth is growth, right? However, 2.86 percent isn’t as much growth as there had been in recent years, and certainly behind the 4.4 percent that had been projected for 2016. So, while it could be worse, the fact that the industry’s growth is slowing could be concerning . However, there are a few tangible reasons (rising vet services costs and falling food prices), for this potential stall, and they somewhat cancel each other out.

Vet prices up; food prices down

The area that is most concerningly affected by inflation is in the veterinarian space. Years of non-stop rising prices for vet services have fewer people taking their cats and dogs to the doc.

According to Pet Business Professor, prices for veterinary services skyrocketed in the first half of 2016, shooting 4 percent closer to the moon. PBP muses that fewer people are using fewer services, which causes higher prices. Again, if this trend continues, no one will win. Continued higher prices will mean even fewer trips to the vet, which will lead to even higher prices…It’ll be like a dog chasing its tail. And eventually, that dog will get tired and crash.

Further complicating the issue is the fact that there’s been deflation in some sectors, and … that’s not good, either.

The same PBP study shows that food prices have continued to fall for the second straight year, and they’re down 0.3% from this point in 2015. It’s a good thing for consumers; cheaper food means that you can feed more (see item 2, above). However, when prices drop, manufacturers and suppliers face additional pressure; they now have to produce and sell more to meet the same bottom line. It’s the age-old conundrum about supply and demand: Consumers love a healthy supply, while manufacturers look for strong demand.

So how do we remain successful while balancing the line?

Listen, understand and communicate

As pet-health industry marketers, how can we maintain our footing during price changes and changes in retail spending that impact the industry overall and our clients’ business specifically? It’s not that complicated, and it’s certainly simpler than everything we’ve discussed so far!

With proper research into your customers’ wants and needs, and recognition of the trends that are the result of those wants and needs, it becomes easy to turn this knowledge into products that satisfy your customers on both a practical and emotional level. In short, apply these findings to your business to make solid decisions. With knowledge, you can position current products to move no matter the state of the industry, and you can prepare for innovations of new ones that solve problems your customers don’t even know they had.

You need to know what value means to your customers. If you know this, you know what, when and where they’ll spend, and most importantly , why they’ll spend.