China’s Pet Boom

Overview of China’s Pet Industry

With the expansion of urban incomes and increase of Chinese choosing to raise pets especially in tier-1 cities, pet-related products and services in China are continuously evolving, resulting in a rapid expansion of the industry. In 2020, China’s pet industry reached a total value of 300 billion CNY. With the penetration rate of pets expected to further rise and related offerings continuing to mature, the Chinese pet industry is expected to grow with a CAGR of 14% and will reach 450 billion CNY in 2023.

The pet industry consists of four segments – pet food, medical care, pet consumer goods, and services:

• Pet food is the biggest industry segment, accounting for >30% of value. With increasing awareness for healthy feeding, demand for pet food is expected to be further stimulated.
• The second biggest market is pet services (27%). Due to changing ideas on raising pets and busy lifestyles, especially this industry will further evolve and mature in China.
• The pet medical and pet-related consumer goods industry account for 23% and 16% respectively. Medical services (including pet hospitals and clinics), while pet consumer goods (such as smart tracking equipment) both face rapid growth.

Why does the Industry Grow so Fast in China?

The demographic shift is one of the main reasons: With the increase in the number of “empty-nest elderly” and “empty-nest young”, more and more people place their desire on being accompanied by pets. People of 65 years and above account for almost 14%. Meanwhile, marriage and birth rate have continuously declined since 2014. It is expected that the number of Singles living on their own will reach 92 million in 2021. Thus, an increasing number of people will choose pets as a life companion. Over 34% Chinese pet-owners expressed that they raise pets to feel less alone – making it the most important reason for this decision.

Another reason is the increase of income and consumption upgrading: In 2020, per capita urban disposable income has increased 3.5% and reached 44,000 CNY. The average annual consumption amount per dog/cat in China increased from 4,350 CNY (2017) to 6,650 CNY in 2020, corresponding with the growth of disposal incomes.

Deep-Dive into Pet Food

Pet food consists of staple food, snacks, and “healthy” food. As a necessity of raising a pet, pet food has the characters of being high frequent and high necessary. The pet food industry remains growing with a growth rate of around 20% in recent years.

However, competition in pet staple food is fierce, with the Chinese market mainly being dominated by international players such as Royal Canin, Orijen, and Myfoodie. The top 10 pet food brands on JD.com in 2020 accounted for 58% of total – among which almost half were international brands.

At the same time, the rise of domestic brands also cannot be ignored: Benefited by domestic supply chain advantages, domestic pet food brands have grown rapidly in recent years. Five domestic brands have entered the Top 10 Pet Food list on 2020 Tmall’s “Double 11” festival. But most of domestic brands need to further strengthen their R&D processes and focus more on the rising demand of pet-owners for healthy and green food.

In terms of sales channels, e-commerce is the most important channel for pet food: In contract to pet healthcare or other services, standard pet food is more convenient for consumers to purchase online. In 2020, the sales of pet food on JD increased by 45%, and over 70% of pet-owners usually buy pet food online. Besides, consumers’ demand on price performance also promotes the trend of buying pet food online.

Except for price, nutrition, health, and benefits of pet food are also important. Almost half of pet-owners consider the health impact of the food they buy first. Over 70% consumers also consider their pets’ acceptance of the food including taste, special demands of their pets, and age of their pets.

Driven by this trend, pet food brands continuously launch various products with different special functions to meet consumer’s needs, such as increasing immunity, protecting intestines and stomach, supplementing calcium, etc. Consumer’s increasing attention on product health makes them more and more focus on brand reliability and the origin country of products - thus, here large and international brands (especially imported high-end pet food brands) have undoubted advantages. Meanwhile, consumers’ pursuit of high price performance on pet food also provides opportunities for smaller domestic brands and ecommerce platforms, which mainly focus on mid- and low-end demands.