While pet food inflation is slowing, according to John Gibbons of PetBusinessProfessor.com in his latest January 2024 report, it is still going strong. January 2024 marked the fourth highest rate, with 2023 coming in at the second highest annual rate in history.
Prices turned up a bit in January 2024, but the YOY national Consumer Price Index (CPI) decreased to +3.1% from +3.4% (January 2023) due to the big monthly price lift in 2023.
In January, pet food prices came in at +4.8%, down slightly compared to December's number of +5.1%. Pet food prices passed the national CPI in July 2022, and at 4.7% in January, it is still 51.6% above the national rate of 3.1%.
When comparing pet food prices to the CPI from two years ago when inflation took off (January 2022), CPI was +9.4% and pet food prices were +5.6%, meaning pet food prices are slightly up more than two years ago.
2022 compared to 2024
• U.S. CPI – The inflation rate was below 2% through 2020. It turned up in January 2021 and continued to grow until flattening out in Jul>Dec 2022. Prices turned up Jan>Sep, dipped in Oct>Dec then rose in January but 30% of the 22.4% increase in the 49 months since December 2019 happened in the 6 months from Jan>Jun 2022 – 12.2% of the time.
• Pet food – Prices were at or below Dec 2019 levels from Apr 20>Sep 21. They turned up and grew, peaking in May 2023. They have essentially stabilized at this record level. 93% of the 22.9% increase has occurred since 2021.
YOY -- 2022 compared to 2024
• U.S. CPI – Prices are +0.5% from December. The YOY increase is 3.1%, down from 3.4%. It peaked at +9.1% in June 2022.
“The targeted inflation rate is <2% so we are still 55% higher than the target,” explained Gibbons. “After 12 straight declines, we had 2 lifts, a stable month, 2 consecutive drops, now 2 lifts – not good news!”
The current rate is 52% below 22>23 but the 21>24 rate is still 17.9%. That is 79.6% of the total inflation since 2019. Inflation was very low in early 2021.
• Pet food – Prices are -0.1% vs December and +4.8% vs January 23, down from 5.1%.
“[Pet food prices], however, they are still 4 times the Food at Home inflation rate,” said Gibbons. “The YOY increase of 4.8% is being measured against a time when prices were 17.3% above the 2019 level, but that increase is still 4 times the pre-pandemic 1.2% increase from 2018 to 2019.” The 2021>2024 inflation surge has generated 90.2% of the total 26.5% (Now: Second highest) inflation since 2019.
Prices and consumer spending
“Pet prices are 20.9% above 2021 and 26.1% higher than 2019,” said Gibbons. “Those are big lifts. Since price/value is the biggest driver in consumer spending it is likely to affect the pet industry.”
And likely to affect the pet food segment most.
Gibbons points out that the food segment is most needed so the response will be complex.
“It could include a movement to online shopping, switching to private label or even downgrading the quality of food,” said Gibbons.
