While pet food inflation is slowing, according to PetBusinessProfessor.com’s John Gibbons in his latest January 2024 report, it’s still picking up. January 2024 marked the fourth highest rate, with 2023 entering the second highest annual rate in history.
Prices rose slightly in January 2024, but the YOY national Consumer Price Index (CPI) declined to +3.1% from +3.4% (January 2023) due to large monthly price increases in 2023.
In January, pet food prices reached +4.8%, down slightly from December’s figure of +5.1%. Pet food prices passed the national CPI in July 2022, and at 4.7% in January, it was still 51.6% above the national rate of 3.1%.
When comparing pet food prices to CPI from two years ago when inflation increased (January 2022), CPI was +9.4% and pet food prices were +5.6%, meaning have slightly increased pet food prices over two years ago.
2022 compared to 2024
• US CPI – Inflation rate is below 2% until 2020. It peaked in Jan 2021 and continued to grow until flattening out in Jul>Dec 2022. Prices increased Jan>Sep, decreased in Oct>Dec and rose in January but 30% of the 22.4% increase in the 49 months since December 2019 occurred in the 6 months from Jan>June 2022 – 12.2% of the time.
• Pet food – Prices were at or below Dec 2019 levels from Apr 20>Sep 21. They grew and grew, pulsing in May 2023. They actually stabilized at this record level. 93% of the 22.9% increase has occurred since 2021.
YOY — 2022 vs. 2024
• US CPI – Prices are +0.5% from December. The YOY increase was 3.1%, down from 3.4%. It rose to +9.1% in June 2022.
“The inflation rate target is <2% so we are still 55% above target," Gibbons explained. “After 12 consecutive declines, we had 2 lifts, a stable month, 2 consecutive declines, now 2 lifts – bad news!”
The current rate is 52% below 22>23 but the 21>24 rate is still 17.9%. That’s 79.6% of total inflation since 2019. Inflation was very low in early 2021.
• Pet food – Prices were -0.1% compared to December and +4.8% compared to January 23, down from 5.1%.
“[Pet food prices], however, Food and Home is still 4 times the rate of inflation,” Gibbons said. “The YOY increase of 4.8% is measured against a period when prices were 17.3% above 2019 levels, but that increase is still 4 times the pre-pandemic 1.2% increase from 2018 to 2019.” The 2021>2024 inflation surge 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,” Gibbons said. “Those are big elevators. Since price/value is the biggest driver of consumer spending, this is likely to impact the pet industry.”
And likely to impact the pet food segment.
Gibbons points out that the food component is the most important so the response will be complex.
“This could include a move to online shopping, a move to private label or even a downgrade in food quality,” Gibbons said.
