Consumer Staples , Consumer Discretionary , Industrials Author：Steve Bu Editor：Lina Peng May 12, 2023 01:33 PM (GMT+8)

After a two-year hiatus, the largest and most influential pet products expo in China has finally returned to the banks of the Huangpu River.

pet

From May 5th to May 7th, the third TOPS Pet Expo was held at the Shanghai Pudong World Expo Exhibition & Convention Center. According to the organizers, the event attracted over 800 exhibitors, 70,000+ professional visitors, and 150,000+ consumers, divided into 11 theme zones including the "New Domestic Pet Products Zone," "Original Imported Pet Products Zone," "Pet Health Zone," "Cat Lovers Zone," "New Forces in the Pet Industry Zone," "TOPS 100 Selected Supply Chain Exhibition Zone," and "Foreign Trade Zone."

When I arrived at the exhibition on the afternoon of May 6th, I saw many pet owners carting large and small suitcases full of products from exhibitors who offered on-site promotions and free gifts. The crowds of people surging out of the nearby Shanghai Metro Line 13 World Expo Station and Line 8 China Art Museum Station and heading towards the entrance of the World Expo Exhibition & Convention Center showed the continued popularity of the pet economy in recent years.

The entrance of TOPS

The pet industry has been increasingly favored by capital in recent years, and consumers' recognition and acceptance of new brands have greatly improved. What are the reasons behind this trend, and what are some representative Chinese companies in the pet industry that are going global?

Industry and Social Factors Driving the All-In Pet Consumption Trend

One set of data is hard to ignore. In 2022, China experienced negative population growth for the first time since 1962, with a decrease of 850,000 people compared to 2021. In April of this year, India surpassed China to become the world's most populous country. Behind this trend is the high cost of raising newborns in China and the declining desire for marriage and childbirth among young people in the face of social pressure.

In high-pressure work and lonely living environments, young people are gradually choosing another outlet to relieve stress and cultivate emotional attachments - pets. According to many pet bloggers on social media, the emotions of cats and dogs are relatively simple, and they will not leave their owners once they have recognized them. Imagine when exhausted office workers return home and have an intimate encounter with their cats and dogs waiting at the door, it is a healing moment for many pet owners.

Industry data also strongly suggests this trend. According to the "Blue Book of China's Pet Industry Development Report 2022" jointly released by the Asia Pet Research Institute, Tmall Pet, Ali Mama, and Euromonitor International, China's pet ownership is still dominated by cats and dogs, accounting for 75%; the domestic pet industry market is rapidly expanding, with market size increasing from nearly CNY 80 billion in 2017 to over CNY 170 billion in 2022. In second-tier and above cities, 19-30-year-olds are the main group of pet owners, and female pet owners account for 80% of the total.

A Survey of China's Leading Pet Companies Going Global

According to statistics, the global pet consumption market reached a scale of USD 232.5 billion in 2021 and is expected to reach approximately USD 350 billion by 2027, with a compound annual growth rate of 6.1%. This has become the driving force for many pet product brands to seek new growth points by expanding overseas markets.

The United States is the primary target market for many pet product brands going global. According to data from the American Pet Products Association for 2021-2022, about 90.5 million American households own pets, and the pet ownership rate has increased to 70%. In 2021, nationwide pet spending exceeded USD 123 billion, including USD 50 billion on food and snacks and nearly USD 10 billion on grooming, boarding, and even pet health insurance.

In terms of pet food, Tianyuan Pet's (天元宠物) products involve cat and dog snacks. But at present, in terms of popularity, domestic pet food brands and overseas well-known Acana, Orijen, Ziwi, Royal Canin, etc. is still temporarily unable to match.

More pet companies are focusing on high-priced pet homes and leisure products and intelligent products.

Here we divide them into two major categories: pet home and leisure products and intelligent products. Yuanfei Pet (源飞宠物), Vetreska (未卡), Ziel Home Furnishing (致欧科技), and Pidan (蛋壳生物) are typical companies in the leisure product direction. Vetreska specializes in exquisite pet products for women, while Ziel and Pidan are dedicated to developing pet toys, cat climbing frames, and cat and dog beds.

Vetreska

Players in the intelligent product market are clearly favored by capital. PETKIT (小佩宠物) has been cultivating the domestic pet circle for many years, and its products cover various scenarios, such as health monitoring (smart companion machine), diet (smart antibacterial feeding bowl), sleep (four-season cat and dog bed), toilet (fully automatic cat litter box), and outdoor sports (travel cup and smart traction rope). PETKIT focuses on high-consumption areas such as the United States and Europe in the overseas market and develops product categories that meet local market demand. The company's investors include GGV (纪源资本), Qiming Venture Partners (启明创投), Atlas Capital (知春资本), INCE Capital (渶策资本), and Kunyan Capital (坤言资本).

Among the new brands, CATLINK and Birdsong and Fragrant Flowers are developing rapidly. CATLINK specializes in AI voice-controlled smart cat litter boxes, which use artificial intelligence technology and have various functions such as voice control, remote control, and cat litter monitoring. The product is sold in 93 countries and regions around the world. It entered the US market in 2021, and its overseas independent website was officially launched in October of the same year. Currently, its market share in Japan, South Korea, Thailand, and Vietnam is stable at number one. In October 2021, CATLINK completed its first round of financing, with the leading investor being the industry leader Ruipeng Pet (新瑞鹏).

Pet Marvel

Pet Marvel (鸟语花香) was founded in 2019 and its products include pet smart devices, pet daily necessities, and pet toys. It has launched more than 60 products with nearly 300 SKUs. Products such as the Pet Smart Feeder Mini, Magic Cube Smart Cat Litter Box, Smart Vacuum Grain Storage Box, Pet Smart Accurate Diet Light Series, and Natural Wind Smart Drying Box are selling well through various channels. As of September 2022, Pet Marvel had successfully entered markets in Japan, South Korea, the United States, Canada, Australia, Brazil, Germany, Thailand, the Philippines, and Taiwan, China. In August 2022, the company received tens of millions of yuan in Series A financing led by Nars Group (纳爱斯) and CICC Capital (中金资本).

New Trends in the Pet Industry's Overseas Expansion

From the above overview of pet industry companies going global, EqualOcean has summarized the following trends:

As consumers' usage scenarios and demands become more specific and demanding, the intelligence and segmentation of pet products have gradually emerged. Innovative products that cater to the needs of "lazy pet owners" have gradually gained market favor in recent years. Therefore, intelligent cat litter boxes, feeders, dryers, waterless bath towels, small pet climbing aquariums, and monitors that are dedicated to liberating labor have become the focus of new pet products. Currently, companies such as Chongjing Biotech (宠璟生物), PETKIT, CATLINK, NOTTY and Pet Marvel have entered this field.

As pet owners pay more attention to the ingredients and safety of cat and dog food, the health of pet food has become a trend. In the past, frequent toxic cat food incidents sounded the alarm for consumers. Therefore, many companies' product characteristics are to use high-end scientific formulas and materials, and the unit price is higher than before. Companies worth paying attention to include Nature Bridge (比瑞吉), Cature (小壳宠物), China Pet Foods (中宠股份), Partner Pet (帕特宠物), and Pet-Ever (生生不息).

Pet-Ever

As people gradually regard pets as family members and regard pet ownership as a way of life, the home decoration, personal care, and related chain service industries related to pets have gained attention, including vacuum cleaners, cat backpacks, cat climbing frames, and pet care centers that integrate washing, medical care, and consumption needs. Currently, Vetreska and Ruipeng Pet (positioned as a pet care platform) form a new and old combination in this field.

In addition, as the trend of "young, high-income, and highly educated" pet owners deepens, a series of new niche fields that expand to meet pet owners' intimate emotional needs have gradually gained attention, including pet cloning and pet funeral services. For example, PanGene (磐吉基因), which mainly engages in pet cloning, has used its self-developed stem cell embryos and animal gene editing technology to clone cats and dogs, providing a bridge for those who have lost pets to continue their emotional connection. It is worth mentioning that due to strict domestic legal regulations and supervision, PanGene has taken the lead in going global and has gained many customers worldwide.