Just how fragile is consumer confidence?

Confidence among consumers was reasonably steady in 2024, but this year began on something of a sour note as many industries prepared to face political uncertainty and fresh economic challenges.

There are a variety of ways the pet sector might look to change in order to meet the current needs of pet owners.

Large decline in the US

The Consumer Confidence Index^® (CCI) in the US declined in December, January and February after multiple months of stabilization, and continued to drop in March.

The Conference Board, a respected think tank that conducts a survey to measure CCI among the US population, found 13.7% expected their incomes to decrease in the next 6 months, up from 12.3% who said the same in January. Overall, consumer confidence saw its largest monthly decline since August 2021.

“References to inflation and prices in general continue to rank high in write-in responses, but the focus shifted towards other topics,” says Stephanie Guichard, Conference Board Senior Economist, Global Indicators.

“There was a sharp increase in the mentions of trade and tariffs, back to a level unseen since 2019. Most notably, comments on the current [US] administration and its policies dominated the responses.”

Mixed picture elsewhere

Numbers abroad have not mirrored the US figures. Australian consumers became increasingly pessimistic around the end of last year, but consumer confidence rose 4% in March, according to research by the University of Melbourne. Confidence in the EU has also remained sturdy.

There, the Economic Sentiment Indicator (ESI) dipped in December but ticked back up slightly in January and February. However, retailers’ business expectations for the next 3 months worsened moderately.

In South Korea, political upheaval rattled consumer confidence in December, with the Bank of Korea’s monthly survey reporting the lowest confidence there in years. But optimism picked up again in January and rose 4.4% in February.

In Japan, the CCI dropped sharply in December and January, but the decline may have begun stabilizing in February, when a 0.57% decline in consumer confidence was reported.

Following a relatively successful ‘soft landing’ from the high inflation wave that marked the first half of this decade, the economy has remained relatively strong in the US and elsewhere. Costs remain high, however, leading many people to continue to feel the need to tighten their belts.

Areas of concern

Pet industry consumer confidence may be somewhat stronger than the market overall, according to Lorraine Shirley, an expert on the US pet industry and Manager at Clarkston Consulting.

However, there are unique reasons for concern because of which population groups have been driving the strongest declines in consumer confidence overall.

December’s decline in confidence was driven by consumers over the age of 35, which includes most millennials, a generation that drives a large amount of spending in the pet market.

That month, confidence also declined most sharply among those living with household incomes of between $25,000 (€24,350) and $100,000 (€97,400), a large group that could be susceptible to belt-tightening.

Impacting non-essential items

The proportion of those surveyed who are planning to buy homes is also down, which could mean more people living in rented properties that are less likely to be pet friendly. Anything bringing down the pet population naturally affects the sales of pet goods.

Shirley believes these trends may impact durable products more than consumables. “I don’t expect that (…) we’re going to see a decline overall in food. I would see pet owners focusing their dollars on, again, pet food, maintaining their purchases in that space but potentially drawing back on some of that non-discretionary spend.”

Political and economic disruption

Many US consumers responding to the Consumer Confidence Survey said that politics, including tariffs, were shaking their confidence.

In Europe, the ESI did increase in February, but future consumer confidence numbers there and elsewhere will obviously depend on political and economic developments in the months ahead.

Worrying about the future can drive many consumers to spend less on non-essential pet goods too. However political winds may blow in the long term, there’s clear evidence that shoppers are still looking to cut costs even years after inflation peaked.

Premium still going strong

As of January, Shirley notes there is little evidence that premium food products are about to lose significant ground. “The premiumization and pet owners’ interest in maintaining the best quality of food for their pets,

I think will still remain strong,” she says. “It hasn’t wavered, despite fluctuating consumer confidence in the last year.”

A similar trend is ongoing in Europe. “Shoppers are looking to ensure value for money in their pet purchasing. This doesn’t mean always buying the

cheapest products, but they want to feel that, where the price is more expensive, the extra pounds or euros are worth it. So those brands and products that have functional or added health benefits are thriving,” says Mike Davies, Global Analytics Leader at NielsenIQ.

Less could be more

However, the push for premium food could take different forms – so manufacturers and retailers may need to get creative.

“Pet owners are still wanting to give the best quality to their pets, but it might be in smaller quantities,” Shirley says. “They’re not maybe willing to spend the 100-whatever dollars on their food up front.”

For example, premium-quality kibble might face new weaknesses if hit with competition from food toppers or nutritional treats and supplements. Treats and toppers allow pet parents to feed their pets functional ingredients without breaking the bank.

That means an opportunity for growth in the premium treat market and more limited growth in premium food.

Discount with caution

Inflation has cooled down significantly since its peak in 2022 – in the pet industry, too. Many countries, including the US, Canada and Spain, have experienced deflation in the pet sector, and many other countries that have published pet-specific data show slowing inflation.

While some pet supplies are getting cheaper, costs in the pet sector are unlikely to have a clear impact on consumer confidence.

If shoppers are paying more of their income towards housing and groceries, cooling pet inflation will not likely be enough to offset this broader economic pain for pet owners.

According to data from NielsenIQ, more products are being sold on promotion than ever before.

Davies suggests that consumers “will also happily buy bigger packs if that generates a longer-term saving”. This presents both opportunity and risk for businesses.

While discounts can help increase sales volume, Davies warns against relying too heavily on deals. “Both manufacturers and retailers still need to be really cautious. It’s tempting to invest heavily in promotions to try and drive volume, but longer term this can be damaging and undermine brand equity and ‘train’ shoppers to buy what’s on offer.”

The need to differentiate

Taken together, these trends and greater uncertainty could threaten the industry’s top players.

“Because of the concerns of overall cost and price, there are more pet owners that are willing to change or try new brands,” Shirley says. “What that means for pet incumbents would be [that they need] to really try to think about how are they differentiating.”

Lack of confidence and cutting costs mean more people could be looking at new brands. That’s an opportunity for small companies and a challenge for large ones.

NielsenIQ has also seen an increased propensity of consumers to switch brands or channels to find savings and quality.

A brand loyal audience

Luckily for some of the largest brands in the industry, brand loyalty is strong among pet owners. Spring 2024 research by Cleveland Research Company found that 51% of pet owners surveyed say they would not switch brands of pet food to save money.

In December 2024, The American Customer Satisfaction Index found particularly strong satisfaction with industry players such as Pet Supplies Plus and online retailer Chewy.

Many firms are pushing brand loyalty as a response to weakened consumer sentiment, such as through subscriptions.

“These can be a win-win, as it makes it much easier for the pet parents, not having to think about their purchasing, but also supports manufacturers as it locks buyers into their brands and reduces the number of occasions where shoppers might switch,” Davies says.