Channel Trends in the Omnichannel Era

APPA Member Services Market Access Webinar

David Sprinkle Research Director, Packaged Facts

pet products market growth (and why) internet and retail shopping patterns online vs. specialty/mass shopper demographics online product purchasing patterns website leaders by percentage draw online market share projections

Channel Trends in the Omnichannel Era

2013 % change vs. 2012

2014 % change vs. 2013

2015 % Change vs. 2014

2016 % change vs. 2015

2017 % change vs. 2016

Retail Channel Pet Food/Treats

5.3% 2.4% 3.9% 4.9% 4.9%

Retail Channel Pet Supplies

4.7% 2.8% 6.8% 7.1% 3.2%

U.S. Pet Market Retail Sales Annual Change by Category, 2013-2017

Source: Packaged Facts, U.S. Pet Market Outlook, 2018-2019 (March 2018)

Pet Food/Treats (all pets): $28B-$33B Pet Supplies (all pets): $14B-$17B

Source: Packaged Facts, U.S. Pet Market Outlook, 2018-2019 (March 2018)

Source: Packaged Facts, U.S. Pet Market Outlook, 2018-2019 (March 2018)

Source: Packaged Facts, U.S. Pet Market Outlook, 2018-2019 (March 2018)

Source: Packaged Facts, U.S. Pet Market Outlook, 2018-2019 (March 2018)

BLS CES on Share of Total Pet Market Expenditures

$70K+ % of Total Spending

< $70K % of Total Spending

2016 60.3% 39.7%

2015 56.3 43.7

2014 53.7 46.3

2013 52.0 48.0

2012 53.9 46.1

2011 50.4 49.6

2010 51.1 48.9

2009 52.1 47.9

2008 55.6 44.4

2007 55.0 45.0

2006 52.0 48.0

2005 49.2 50.8

2004 47.1 52.9

2003 40.0 60.0

Packaged Facts January 2018 Pet Owner Survey

My dog has a positive impact on my physical health

Do Not Agree 7%

Somewhat agree 39%

Strongly agree 54%

My dog has a positive impact on my mental health

Do Not Agree 6%

Somewhat agree 33%

Strongly agree 61%

My cat has a positive impact on my physical health

Do Not Agree 13%

Somewhat agree 38%

Strongly agree 49%

My cat has a positive impact on my mental health

Do Not Agree 9%

Somewhat agree 31%

Strongly agree 59%

pet products market growth internet and retail shopping patterns online vs. specialty/mass shopper demographics online product purchasing patterns website leaders by percentage draw 0nline market share projections

“I am buying pet products online more than I used to” Packaged Facts National Pet Owner Surveys

2012 2013 2014 2015 2016 2017 2018

Strongly Agree 6% 8% 11% 15% 18% 20% 24%

Somewhat Agree 12 14 14 18 19 20 16

No Opinion/ Not Applicable

19 23 25 20 20 19 27

Somewhat Disagree 20 18 15 17 14 13 20

Strongly Disagree 43 38 35 29 29 27 12

Retail Shopping Channels for Pet Products, 2010-2017 (% of dog/cat owners)

2010 2011 2012 2013 2014 2015 2016 2017

SUPERMARKETS 43% 44% 43% 43% 43% 41% 47% 46%

PETSMART 32% 34% 32% 34% 34% 33% 36% 36%

PETCO 22% 23% 25% 25% 25% 26% 27% 26%

DISCOUNT STORES 28% 26% 26% 24% 25% 22% 26% 24%

ONLINE 6% 7% 7% 6% 9% 9% 13% 17%

OTHER PET STORES 12% 12% 12% 14% 12% 11% 16% 15%

VETERINARIANS 16% 15% 14% 14% 14% 15% 15% 12%

WHOLESALE MEMBERSHIP CLUB 10% 9% 12% 10% 11% 9% 12% 11%

DRUGSTORES/ C-STORES 4% 5% 6% 6% 6% 6% 5% 7%

Source: Packaged Facts, U.S. Pet Market Outlook, 2018-2019 (March 2018); Simmons Market Research National Consumer Surveys. Copyright: 2018

Retail Shopping Channels for Pet Products, 2010-2017 (% of dog/cat product owners)

Source: Packaged Facts, U.S. Pet Market Outlook, 2018-2019 (March 2018); Simmons Market Research National Consumer Surveys. Copyright: 2018

6%

17%

2010 2011 2012 2013 2014 2015 2016 2017

SUPERMARKETS PETSMART PETCO

DISCOUNT STORES ONLINE OTHER PET STORES

VETERINARIANS WHOLESALE MEMBERSHIP CLUB DRUGSTORES/ CONVENIENCE STORES

Dog/Cat-Owning HH Customer Base for Pet Product Shopping

Retail Classification

2013 2017

Total (000)

% Dog/Cat Households

Total (000)

% Dog/Cat Households

Core Mass Market 37,293 66% 42,355 66%

Pet Superstores/Stores 32,303 57% 33,686 53%

Online 3,523 6% 10,951 17%

Veterinarians 8,843 16% 7,705 12%

60%

54%

36%

20%

12%

11%

9%

2%

8%

My own past experience with pet foods

Veterinarian’s advice

Word-of-mouth from pet owners I know

Websites

Staff recommendations at local/ind. pet stores

Staff recommendations at pet store chains

Blogs, social media

Endorsements from celebrities I trust

Other

Best information sources for choosing pet foods and nutrition products?

Packaged Facts January 2018 Pet Owner Survey

Cross-Channel Shopping for Pet Products, 2017 (index for dog/cat owners)

Source: Simmons Market Research National Consumer Surveys. Copyright: 2018

Supermkts Discount Club PetSmart Other Pet Petco Vets Online

DISCOUNT STORES 100 104 94 88 95 130 101

DRUG/C-STORE 143 183 107 147 174 193 128 178

ONLINE 81 101 127 152 160 163 166

PETCO 91 95 130 175 147 111 163

PETSMART 93 94 112 125 175 125 152

OTHER PET STORES 77 88 129 125 147 161 160

SUPERMARKETS 100 80 93 77 91 116 81

VETERINARIANS 116 130 145 125 161 111 166

WHOLESALE CLUB 80 104 112 129 130 145 127

Average Index 98 112 117 128 133 138 135 141

pet products market growth internet and retail shopping patterns online vs. specialty/mass shopper demographics online product purchasing patterns website leaders by percentage draw online market share projections

who shops for pet products

online

Source: Simmons Market Research National Consumer Survey, Fall 2017. Copyright: 2018

179

168

168

157

154

135

128

128

126

125

120

Owned Condo or Co-Op

Age 25-34

Asian (Non-Hispanic)

AGE 18-34 (Gen Z/Millennials)

Northeast

College Grad or More

Household Income: $150K+

Kind of Residence: Rented Apartment

Never Married

Age 18-24

Household Income: $100K-$149K

Online vs. Pet Superstores

179

168

157

154

135

128

103

152

143

124

128

130

101

144

125

107

121

112

Kind of Residence: Owned Condo or Co-Op

Asian (Non-Hispanic)

AGE 18-34 (Gen Z/Millennials)

Northeast

College Grad or More

Household Income: $150K+

PETSMART

PETCO

ONLINE

Online vs. Mass Market

179

168

157

154

135

128

128

126

120

64

60

107

93

91

120

78

108

87

*89

*58

73

85

82

111

90

97

89

Kind of Residence: Owned Condo or Co-Op

Asian

AGE 18-34 (Gen Z/Millennials)

Northeast

College Grad or More

Kind of Residence: Rented Apartment

Household Income: $150K+

Never Married

Household Income: $100K-$149K

DISCOUNT STORES

SUPERMARKETS

ONLINE

pet products market growth internet and retail shopping patterns online vs. specialty/mass shopper demographics online product purchasing patterns website leaders by percentage draw online market share projections

Packaged Facts National Pet Owner Survey, February/March 2018

Online Purchasing of Dog Consumable Products Within Last 12 Months, 2018 (among dog owners who buy pet products online)

44%

43%

30%

22%

19%

18%

17%

17%

12%

10%

Dry Pet Food

Pet Treats/Chews

Flea & Tick Medications

Pet Grooming Supplies

Pet Oral Care (including dental treats/chews)

Wet Pet Food (canned or pouch)

Pet Vitamins/Nutritional Supplements

Heartworm Medications

Flea & Tick Collars

Pet Clean-Up, Odor Control, & Training Aids

Packaged Facts National Pet Owner Survey, February/March 2018

Online Purchasing of Dog Durable Products Within Last 12 Months, 2018 (among dog owners who buy pet products online)

45%

17%

16%

14%

10%

8%

6%

3%

3%

3%

Toys

Collars/harnesses

Beds

Leashes

Bowls

Apparel/fashion accessories

Crates/other housing

Carriers

Automatic waterers

Automatic feeders

Packaged Facts National Pet Owner Survey, February/March 2018

Online Purchasing of Cat Consumable Products Within Last 12 Months, 2018 (among cat owners who buy pet products online)

43%

37%

34%

28%

25%

16%

10%

9%

6%

6%

Dry Pet Food

Cat Litter

Wet Pet Food (canned or pouch)

Pet Treats/Chews

Flea & Tick Medications

Pet Grooming Supplies

Flea & Tick Collars

Pet Vitamins/Nutritional Supplements

Pet Oral Care (including dental treats/chews)

Pet Clean-Up, Odor Control, & Training Aids

Packaged Facts National Pet Owner Survey, February/March 2018

Online Purchasing of Cat Durable Products Within Last 12 Months, 2018 (among cat owners who buy pet products online)

34%

18%

18%

12%

8%

7%

6%

6%

3%

1%

1%

1%

Toys

Litter boxes

Litter box accessories

Bowls

Automatic waterers

Beds

Collars/harnesses

Carriers

Automatic feeders

Crates/other housing

Apparel/fashion accessories

Leashes

pet products market growth internet and retail shopping patterns online vs. specialty/mass shopper demographics online product purchasing patterns website leaders by percentage draw 0nline market share projections

Online Purchasing of Pet Products Within Last 12 Months: By Website, 2018

Source: Packaged Facts, U.S. Pet Market Outlook, 2018-2019 (March 2018)

55%

31%

15%

13%

11%

8%

6%

5%

2%

2%

2%

Amazon.com

Chewy.com

PetSmart.com

Petco.com

Walmart/Sams Online

eBay.com

1800PetMeds.com

Target.com

DrsFrosterSmith.com

Costco.com

PetCareRx.com

pet products market growth internet and retail shopping patterns online vs. specialty/mass shopper demographics online product purchasing patterns website leaders by percentage draw 0nline market share projections

12.5%

20%

2017 2018 2020 2022

U.S. Retail Sales of Pet Products: Current and Projected Share, 2017-2022P

Pet Specialty Chain Discount Stores/Supercenters

Food Store All Internet

Independent Pet Channel Wholesale Club

Farm/Feed Dollar

Note: Internet includes online sales of omnichannel players.

Source: Packaged Facts, U.S. Pet Market Outlook 2018-2019 (March 2018)

Online growth will benefit from:

growing role of e-commerce/home delivery in consumer shopping overall

heavy Internet shoppers in/aging into prime pet ownership years

strength of Amazon and Chewy

omni-channel strategies of B&M retailers and specialty brands

"endless shelf" brand & SKU selections in age of product customization

unlimited company/brand info in age of “transparency”

convenience and loyalty retention from home delivery & auto-ship

Channel Trends in the Omnichannel Era

David Sprinkle dsprinkle@marketresearch.com Research Director, Packaged Facts

For more information on Packaged Facts’ research reports on the U.S. market for pet products call Jeff Miller @ 212.807.2636 or go to www.packagedfacts.com/pet-products-services-c124/

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