U.S. Pet Market Outlook, 2016-2017

Chapter 1: Executive Summary

Introduction

Scope and Methodology

Report Methodology

Market Performance

Pet Industry Picks Up Pace

Table 1-1 U.S. Pet Market Retail Sales by Category, 2011-2015(in billions of dollars)

Market Share by Category and Animal Type

Reduced Spending Remains the New Normal for Some

Table 1-2 Level of Agreement with Statement: “I am spending less on pet products because of the economy,” 2011-2016 (percent)

Older Pets

Small Dog Trend

Higher-Income Households Crucial to Industry

Human/Animal Bond a Key Catalyst

Humanization

Digital Usage

Industry Trends

Market Structure

M&A and Investment Activity

Veterinary Services Inside Pet Superstores

Mobile Clinics Encroaching on Veterinarian Turf

Innovation in the Pet Industry

Natural Food Dominates the Pet Food Market

Retail Trends

Ubiquity of Pet Products

The Demand for Discounts

Table 1-3 Level of Agreement with Statement: “I look out for lower prices, special offers, and sales on pet products,” 2013-2016(percent)

Purchase Trends by Channel

Walmart Has Largest Draw Among Pet Product Shoppers

Pet Ownership Trends

Pet Ownership at 56% of U.S. Households

Table 1-4 Household Penetration Rates for Selected Pet-Owning Classifications, 2011-2015 (percent of and number of U.S. households in millions)

Dog and Cat Ownership Rates by Age

Table 1-5 Dog or Cat Ownership Rates by Age Bracket, 2009-2015(percent of U.S. households)

Multiple Pet Ownership Trends

Boomers and Millennials

Chapter 2 Highlights

Chapter 2: Market Trends

Market Performance

Pet Industry Picks Up Pace

Table 2-1 U.S. Pet Market Retail Sales by Category, 2011-2015(in billions of dollars)

Table 2-2 U.S. Pet Market Retail Sales Annual Change by Category,2011-2015 (percent change over previous year)

Table 2-3 Projected Total U.S. Retail Sales of Pet Products and Services, 2015-2020 (in billions of dollars)

Table 2-4 Projected U.S. Pet Market Retail Sales by Category,2016-2020 (in billions of dollars)

Table 2-5 U.S. Pet Market Compound Annual Growth Rates by Category: 2010-2015 vs. 2015-2020 (percent)

Market Share by Category and Animal Type

Table 2-6 Category Share of U.S. Pet Market Retail Sales: 2010, 2015,2020 (percent)

Table 2-7 Category Share of U.S. Pet Market Retail Sales by Animal

Type: Dog, Cat, Other, 2015 (percent)

Share of Pet Product Sales by Channel

Table 2-8 Share of U.S. Retail Channel Sales of Pet Products by Channel Classification, 2015 (percent)

IRI-Tracked Channels See Gains

Table 2-9 IRI-Tracked Sales of Pet Products: Total and by Food and Nonfood Category and Segment, December 2015 (in millions of dollars, units and pounds)

Pet Food Keeps Rolling in Pet Specialty Channels

Table 2-10 Retail Dollar Sales of Pet Food in Pet Specialty, Veterinary and Farm/Feed Channels, 2015 (in billions of dollars)

Pet Food Sales Trends in Natural and Specialty/Gourmet Supermarkets

Table 2-11 Retail Dollar Sales of Pet Food and Pet Care in the Natural Supermarket and Specialty/Gourmet Channels, 2014 vs. 2015(in millions of dollars)

Market Drivers

Consumers Optimistic About Economy, Depending on Whom You Ask

Table 2-12 Pet Owners: Overview by Change in Financial Situation Compared with 12 Months Ago, 2012-2015 (percent and index for U.S. pet-owning households)

Table 2-13 Pet Owners: Overview by Expectations for Personal

Financial Situation Over the Next 12 Months, 2012-2015(percent and index for U.S. pet-owning households)

Reduced Spending Remains the Norm for Some

Table 2-14 Level of Agreement with Statement: “I am spending less on pet products because of the economy,” 2011-2016 (percent)

Consumers Tend to Consider Pet Products Too Expensive

Table 2-15 Level of Agreement with Statement: “Many pet products are becoming too expensive,” 2011-2016 (percent)

Pet Owners’ Monthly Spend

Table 2-16 Amount Spent on Pet Products in Last 30 Days, February 2016 (percent by spending bracket)

Table 2-17 Pet Food Purchasing by Price Level, 2014-2016 (percent of dog owners vs. cat owners)

Pet Ownership and Population Trends

Table 2-18 Household Penetration Rates for Selected Pet-Owning Classifications, 2011-2015 (percent of and number of U.S. households in millions)

Give Me Shelter

Pet Owners Downsize

Table 2-19 Size of Pet Dogs, 2012-2016 (percent of dog owners)

Table 2-20 Size of Most Recently Acquired Pet Dog, 2014-2016(percent of dog owners)

The Market for Senior, Weight Management and Special Needs Products

Figure 2-1 Share of U.S. Retail Sales of Senior, Weight Management and Special Needs Pet Products by Category, 2015 (percent)

Older Pets

Table 2-21 Age of Dogs and Cats, 2016 (percent of pet owners)

Failing to Recognize a Weight Problem

Table 2-22 Agreement with Statement: “I have an overweight dog/cat,”2015 vs. 2016 (percent)

Industry Banks on Higher-Income Households

Table 2-23 Share of Total U.S. Pet Market Expenditures: $70K+ vs.Under $70K Income Households, 2001-2014 (percent)

Table 2-24 $70K+ Household Share of U.S. Pet Market Expenditures:By Category, 2009-2014 (percent)

Human/Animal Bond a Key Catalyst

Table 2-25 Pet Food Purchasing by Price Level, 2014-2016 (percent of dog owners vs. cat owners)

Table 2-26 Agreement with Statement: “My dog or cat has a positive impact on my physical health,” 2016 (percent)

Table 2-27 Agreement with Statement: “I enjoy purchasing pet products that pamper my dog or cat,” 2016 (percent)

Table 2-28 Level of Agreement with Pampering Statements, 2016(percent)

Humanization

Classroom Pets

Digital Usage

Table 2-29 Technologies Used in the Last Seven Days, Pet Owners Vs. Non-Pet Owners

All for a Good Cause

Table 2-30 Level of Agreement with Statement: “The participation by pet product retailers in pet welfare and rescue causes and events plays a significant role in where I buy pet products,” 2014-2016 (percent)

Table 2-31 Level of Agreement with Statement: “The participation by pet product brands in pet welfare and rescue causes and events plays a significant role in which brands I buy,” 2014-2016 (percent)

Table 2-32 Agreement with Statement: “I have contributed time or money to pet welfare or rescue causes,” 2015 vs. 2016 (percent of dog owners vs. cat owners)

Chapter 3 Highlights

Chapter 3: Industry Trends

Introduction

Market Structure

M&A and Investment Activity

Petco Stirs Up Rumors, Then Lands with New Private Equity Firm

Mars PetCare Adds to Veterinary Portfolio

Mars PetCare Buys Whistle

More Veterinary Practices Consolidate

Petco, Blue Buffalo IPO Filings Offer Glimpse into Operations

Table 3-1 Blue Buffalo’s Net Sales and Growth, 2010-2015(in millions of dollars and percent change)

Jaguar Animal Health Runs to Public Markets

Oasmia Debuts on NASDAQ

Sanofi and Boehringer Ingelheim in Talks Over Merial

Bayer Could Consider Sale

Nestlé Purina Acquires Merrick

Wellpet Acquires Sojos

Dechra Acquires Putney

Patterson Buys Animal Health International

Distributor Consolidation Continues

Other Deals

Pet Services

Retailers and Vets Continue to Add Services

Veterinary Services Led by Banfield and VCA

Veterinary Services Inside Pet Superstores

Table 3-2 Percentage of Dog or Cat Owners Who Have Taken Pets to a Pet Superstore for Veterinary Services in Last 12 Months, 2016

Veterinary Visit Statistics

Table 3-3 Percentage of Dog and Cat Owners Who Have Visited Vet in Last 12 Months, 2016

Oral Care Services

Figure 3-1 Level of Agreement with Statement: “I am concerned about the dental hygiene/breath odor of my pets,” 2015 (percent)

Mobile Clinics Encroaching on Veterinarian Turf

Table 3-4 Percentage of Dog or Cat Owners Who Have Visited a Mobile Veterinary Clinic in Last 12 Months, 2016

Fairness to Pet Owners Act

Pet Specialty Chains Bank on Non-Medical Services

Table 3-5 PetSmart and Petco Sales of Pet Services, 2001-2015(separately and combined, in millions of dollars)

Table 3-6 Percentage of Dog or Cat Owners Who Have Taken Pets to a Pet Superstore for Non-Medical Pet Services in Last 12 Months,2016 (percent)

Top Service Types

Table 3-7 Top Pet Service Types: Last 12 Months vs. Last 30 Days,2016 (percent of dog owners vs. cat owners)

Innovation in the Pet Industry

Pet Products

New Product Roundup

Preventive Health Benefits of Pet Food Emphasized

Table 3-8 Level of Agreement with Statement: “High-quality dog foods/cat foods are effective for preventive health care,”2014-2016 (percent)

Product Safety Drives Purchase Decisions

Table 3-9 Level of Agreement with Statement: “Fear of pet food contamination/ product safety is a key consideration in the dog foods/cat foods I buy,” 2014-2016 (percent of dog owners vs. cat owners)

Table 3-10 Level of Agreement with Statement: “I am concerned about the safety of the dog food, dog treat, and dog chew products (or cat food and treat products) that I buy,” 2014-2016 (percent of dog owners vs. cat owners)

Figure 3-2 Level of Agreement with Statement: “I consider natural and organic pet foods to be safer than regular pet foods,” 2016 (percent)

Natural Food Dominates the Pet Food Market

Figure 3-3 Level of Agreement with Statement: “Natural/organic brandpet products are often better than standard national brand products,”2012 vs. 2014 vs. 2016 (percent of pet owners)

Interpreting Natural

Pet Food Leaders

Grain-Free and Other Free-Of Claims

Table 3-11 Dog and Cat Owners Currently Using Pet Food, By Free-Of Claim, 2015 (percent)

What’s New in Ancestral

Proteins

Table 3-12 Agreement with Statement: “My dog/cat needs a highquality protein diet,” 2016 (percent of dog owners vs. cat owners)

Senior, Weight Management and Special Needs Products Near $3.8 Billion

Figure 3-4 Share of U.S. Retail Sales of Senior, Weight Management and Special Needs Pet Products by Category, 2015 (percent)

Diets for Every Pet Type

Home-Cooked Pet Food

Food Toppers

Treat Trends

Oral Care Products

Trends in Non-Dog/Cat Pet Food

Holiday-Themed Pet Products and Services on the Rise

Table 3-13 Agreement with Statement: “Over the recent Christmas/ Winter Holiday season, my dog(s)/cat(s) got special gifts or treats,”2015 vs. 2016 (percent of dog owners vs. cat owners)

The Nonfood Pet Supplies Market

Pet Supply Sales Has Multiple Drivers

The Pet Medications Market

Multi-Tier Market: Veterinary, Pet Specialty, and Mass

Figure 3-5 Share of U.S. Retail Sales of Pet Medications by Distribution Channel, 2015 (percent)

Lightweight Now Heavyweight in Litter Category Pet Travel

Table 3-14 Travel Activities of Dog and Cat Owners in Last 12 Months,2016 (percent of dog owners vs. cat owners)

Crates, Carriers, and Pet Shelters

Chapter 4 Highlights

Chapter 4: Retail Trends

Ubiquity of Pet Products

The Demand for Discounts

Table 4-1 Level of Agreement with Statement: “I look out for lower prices, special offers, and sales on pet products,” 2013-2016(percent)

Spending More on Pet Products

Table 4-2 Level of Agreement with Statement: “I am willing to pay more for pet food products that are healthier for my pets,” 2015 (percent)

Coupon Use Goes Down

Figure 4-1 Percent Who Use Pet Food Coupons: Dog Owners vs.Cat Owners, 2010- 2015 (percent)

Consumer Loyalty Levels Off

Table 4-3 Channel Loyalty in Pet Product Purchasing: All Channels,2008-2015 (percent and number)

Table 4-4 Share of Customer Base Who Are Channel-Loyal by Leading

Retail Channels or Pet Superstore Chains, 2009-2015 (percent)

Table 4-5 Channel-Loyal Customer Base for Pet Products by Leading

Retail Channel or Pet Superstore Chain, 2009-2015 (number in thousands)

Pet Product Purchasing Rates by Channel

Table 4-6 Household Purchasing Overview for Pet Products by Retail Classification: U.S. Households Overall vs. Dog or Cat Owners, 2015 (number and percent)

Purchase Trends by Channel

Table 4-7a Purchasing Rates for Pet Products by Selected Retail Channels and Pet Superstore Chains, 2011-2015 (percent)

Table 4-7b Purchasing Base for Pet Products by Selected Retail Channels or Pet Superstore Chains, 2011-2015 (U.S. dog or

Walmart Draws Top Percentage of Pet Product Shoppers

Table 4-8 Channel Choices for Pet Product Shopping, Last Three\ Months: Pet Food, Pet Medications, Other Pet Supplies, 2015 vs.2016 (percent of pet product buyers)

Private Label Gains Overall

Table 4-9 IRI-Tracked Sales of Private Label Pet Products: Total and by Category and Segment, 2015 (in millions of dollars, units and pounds)

Table 4-10 Private-Label Share of IRI-Tracked Sales of Pet Products:

Total and by Food Category and Segment, 2014 vs. 2015 (percent)

National Brands Outpace Private Label

Table 4-11 IRI-Tracked Sales of Branded Pet Products: Total and by

Category and Segment, 2015 (in millions of dollars, units and pounds)

The Mass-Market

Walmart and Pets

Table 4-12 Walmart.com’s Top-Selling Pet SKUs

Target’s Bullseye Mascot Returns to Spotlight

Pet Specialty Chains

PetSmart and Petco’s Sales Close in on $12 Billion

Table 4-13 PetSmart and Petco Sales and Number of Stores,2001-2015 (aggregated, in units and millions of dollars)

The Strategy of Exclusivity

Small Format Stores Designed with Millennials in Mind

Other Pet Specialty Players

Selling at Supermarkets

Wholesale Clubs

Drugstores/Convenience Stores

Online Sales

Table 4-14 Level of Agreement with Statement: “I am buying pet products online more than I used to,” 2011-2016 (percent)

Table 4-15 Time Frame for Most Recent Online Purchase of Pet Products, 2012-2016 (percent of pet owners)

Other Retail Markets

The Pet Professionals

Natural Supermarkets

Dollar Stores

Agricultural/Feed-Seed Stores

Home Improvement Stores and Hardware Stores

Luxury Retailers

Food Co-ops

Chapter 5 Highlights

Chapter 5: Pet Ownership Trends

Pet Ownership at Almost 56% of U.S. Households

Table 5-1 Household Penetration Rates for Selected Dog- or Cat- Owning Classifications, 2010-2015 (percent of U.S. households)

Table 5-2 Household Populations for Selected Dog- or Cat-Owning Classifications, 2010-2015 (thousands of U.S. households)

Table 5-3 Household Penetration Rates for Selected Pet-Owning Classifications, 2011-2015 (percent of and number of U.S.households in millions)

Dog and Cat Ownership Rates by Age

Table 5-4 Dog or Cat Ownership Rates by Age Bracket, 2009-2015(percent of U.S. households)

Multiple Pet Ownership Trends

32% of Pet Households Keep Multiple Types

Table 5-5 Multiple Pet Ownership by Animal Type, 2010 vs. 2015(percent of pet-owning households)

Table 5-6 Ownership of Multiple Pets of a Single Type, 2011 vs. 2015(percent of U.S. households who own a given type of pet)

Boomers and Millennials

Table 5-7 Household Penetration Rates for Selected Pet-Owning Classifications: By Generational Cohort, 2015 (percent of U.S. households)

Table 5-8 Household Populations for Selected Pet-Owning Classifications: By Generational Cohort, 2015 (number of U.S. households in thousands)

Table 5-9 Indexes for Selected Pet-Owning Classifications: By

Generational Cohort, 2015 (U.S. households)

Table 5-10 Indexes for Dog or Cat Ownership: By Age Cohort, 2011vs. 2015 (U.S. households)

Table 5-11 Total U.S. Population Growth for Selected Age Brackets,2015-2060 (in thousands)

Table 5-12 Share of Total U.S. Population Growth for Selected Age Brackets, 2015-2060 (in percent)

Household Composition

Table 5-13 Dog/Cat Ownership Rates by Household Composition,2009-2015 (percent)

Table 5-14 Share of Total Dog/Cat Owners by Household Composition,2009-2015 (percent) Dog vs. Cat Households

Table 5-15 Dog Ownership Rates by Household Composition,2009-2015 (percent)

Table 5-16 Share of Total Dog Owners by Household Composition,2009-2015 (percent)

Table 5-17 Cat Ownership Rates by Household Composition,2009-2015 (percent)

Table 5-18 Share of Total Cat Owners by Household Composition,2009-2015 (percent)

Pet Ownership Grows Among Minorities

Table 5-19 Change in Pet Market Consumer Base: White Non-Hispanics vs. Minorities, 2011 vs. 2015 (number and percent of U.S. dog- or cat-owning households)

Table 5-20 Dog and Cat Ownership Trends by Race/Ethnicity, 2009-2015 (percent and number of U.S. dog- or cat-owning households)

Table 5-21 Dog vs. Cat Ownership Trends by Race/Ethnicity, 2011 vs. 2015 (percent and number of U.S. dog- or cat-owning households)

Table 5-22 Demographic Snapshot of the U.S. Population, 2014

Table 5-23 Projected Population Growth of Hispanics, 2015-2060(in thousands)

Pet Owner Psychographics

Health and Medical Related Sentiments and Practices

Table 5-24 Selected Health & Medical Psychographics: Dog Owners vs. Cat Owners vs. Other Pet Owners, 2015 (percent and index)

Table 5-25 Selected Health & Medical Psychographics: Dog or Cat

Owners Overall vs. Purchasers of Selected Superpremium Pet Brands, 2015 (percent and index)

“Green” Sentiments and Practices

Table 5-26 Selected Sustainability Related Psychographics: Dog Owners vs. Cat Owners vs. Other Pet Owners, 2015 (percent and index)

Table 5-27 Selected Sustainability Related Psychographics: Dog or Cat Owners Overall vs. Purchasers of Selected Superpremium Pet Brands, 2015 (percent and index)

Media, Marketing and Channel Related Sentiments and Practices

Table 5-28 Selected Media and Marketing Related Psychographics:Dog Owners vs. Cat Owners vs. Other Pet Owners, 2015 (percent and index)

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