The rise of China’s most dynamic new economy
China’s pet industry is part of the renaissance. The sector has experienced significant growth in recent years. As Chinese consumers’ disposable incomes and consumption levels continue to rise, the number of pet owners is also showing an upward trend – it reached 68.44 million in 2021, according to a white paper on Chinese pet industry. The tendency to live alone – in part due to younger generations marrying later and later – and an aging population are further spurring the growth of this furry bargain. Additionally, more and more consumers are increasingly willing to spend on their pets. So we see that the term “pet economy” was coined in this context.
Boom in the pet economy
Ping An Securities expects the market size to grow continuously, reaching 649.1 billion yuan by 2025 with a CAGR of around 11.1% from 2021 to 2025. However, the Chinese pet industry is still very underdeveloped compared to those in more developed economies, suggesting unprecedented opportunities. for the pet track. According to Frost&Sullivan, the percentage of pet-owning households out of all households, or the penetration rate of pet ownership in China, is expected to increase by more than 7% in the five years from 2019, showing relatively rapid robust growth potential, compared to the United States, whose penetration rate is expected to increase from 68.9% to 72.9% over the same period.
With such growing demand, venture capitalists have also set their sights on the market – which is dominated by dogs and cats. According to EqualOcean, a total of 29 fundraising events took place in the pet industry throughout 2021. Of these, pet health supplier RedDog (Chinese: 红狗) pocketed $200 million CNY in a Series A funding round in January 2021, while PETKIT (Chinese: 小佩宠物), a technology-focused pet products maker secured $500 million in the round Series D funding from a pool of well-known investors. They included Qiming Venture Partners, GGV Capital and Atalas Capital. Shanghai-based CHOWSING (Chinese: 宠幸) and its sub-brand Nourse (Chinese: 卫侍) were another A-level player.
Pet food and supplements: Chinese brands are gaining momentum
Taking an in-depth look at the pet food submarket, the report covers three major areas which are staple foods, snacks, and nutritional products. Due to the relatively inelastic demand for these goods, this submarket has a high consumer penetration rate compared to accessories or healthcare. Furthermore, it has experienced rapid expansion over the past decade. According to Consumer Sector, the cumulative annual growth rate of China’s pet food submarket between 2016 and 2020 is 29%, which is 6.4% higher than the global average.
A major characteristic of the pet food submarket is its ability to withstand economic shocks or even downturns, as Donald put it. Data from Euromonitor showed that the size of China’s pet food market grew by 23.9% to reach 122 billion yuan in 2020 despite the COVID-19 pandemic. Among them, the staple food is a must-have for pets. Consumers of staple foods, regardless of their age group, prefer to stock them when the trader offers them a discount. Consequently, they do not buy staple foods regularly. In terms of staple food distribution channels, e-commerce platforms remain dominant. About 70% of consumers purchase all or most of their pet food online, while 20% of users split their purchase between online and offline. On JD.com, staple foods account for 50% of overall sales in the pet category.
In terms of competition, international brands such as ACANA, Orijen and Solid Gold have consolidated their experience and expertise through years of practice and are thus more recognized by consumers. However, domestic players are on the rise. Among the top 15 companies by sales, Chinese brands accounted for 10 seats in the pet dog food market, 8 seats in cat food, 11 seats in dog snacks, 10 seats in cat snacks, according to research by Kaiyuan Securities.
Pet Supplies: Clever, Anthropomorphic Styles Lead the Way
The pet supplies market is currently smaller than the pet food market, but it is rapidly growing. It refers to products developed, manufactured and used specifically for pets, including toys, cleaning supplies, electrical appliances and even clothing.
With technology changing every aspect of our lives, pet owners are also looking for a smarter connection with their beloved pets, with the goal of greater safety, convenience and enjoyment. JD.com data shows that from January to May 2022, sales of smart pet toys increased 80% year over year, smart water dispensers jumped 84% year-over-year, while search volume for smart cat litter boxes jumped 267% year-over-year. Simply put, pets are going digital and this segment is furthermore poised to grow even faster in the future.
From non-alcoholic beers for dogs to post-modern pet furniture, the humanization of pets – also known as anthropomorphization – is another emerging trend in the pet industry. This is reasonable, as human owners are actually the ones paying for these products, and many pet owners want the best for their pets and are looking for products that serve a higher purpose than mere utility.
VETRESKA (Chinese: 未卡), a pet lifestyle brand with products ranging from cat litter boxes to soilless catnip, has put this phenomenon well into practice. The company has applied trendy symbols such as cactus and watermelon to its brand and products that young pet owners – the main consumer group – love. Its founder and CEO, Donald Kng, told EqualOcean that “we have a great chance of creating viral products because we know our consumers well.” This brand of pets creates a psychological feeling that pet owners share their preferences and hobbies with their pets. , and thus help to strengthen the bond between them.
At present, the company has successfully entered international markets in North America and Southeast Asia. Donald mentioned that they have over seven agents across the North American continent as well as their own retail networks. In the future, the company also plans to open overseas offline experience stores.
In the future, China’s pet economy will continue to flourish and become a mature market. Not surprisingly, it can exhibit similar characteristics to growing markets, such as those in developed markets.
For example, a reasonable assumption is that more pet owners will begin to focus on new aspects of care, including immune system strengthening, gastrointestinal conditioning, calcium, and skin care. Keywords such as multifunctional, natural and organic can be at the forefront of consumer considerations, with a variety of staple foods, snacks and nutritional products emerging to meet the needs of different pets in different circumstances. . In addition, personalized pet foods can be welcomed by pet owners, who will tailor their pet’s diet to their health condition, life stage, breed and size, acting as their pet’s personal nutritionist.
Although the pet industry is generally recession-proof as a whole, given the huge shock of the pandemic and months of lockdown, “it’s still seeing a drop in consumption,” Donald said. In such a context, being profitable while innovating would be a strong point for pet supplies, and VERTRASKA also revealed that they will adopt a multi-brand development strategy to carry out these tasks while maintaining a consistent brand image. .
The founder of Hongzuimao, a kitten food supplier, said, “Thirty years ago, people called their children ‘dogs’; and these days people call their pet ‘son’. This is an interesting statement, with endless business opportunities conjured up by it.