The pet market includes two major product types: pet food and pet products. In 2021, the pet product segment market accounted for over 54% of the revenue share. According to Grand View Research, the global pet market in 2022 had a market size of USD 159.1 billion and is expected to reach USD 236.16 billion by 2030, with a compound annual growth rate of 5.1%. Geographically, the pet market is mainly divided into North America, Europe, Asia Pacific, South America, the Middle East, and Africa. Among them, North America is the world's largest pet market, with a market share of 43% in 2021; The European region is the second largest region in the pet market, with extensive infrastructure related to pet shops and veterinarians; With rapid economic expansion and an increase in disposable income, the Asia Pacific region is becoming the fastest-growing region; A large portion of the market share in South America is attributed to aquaculture related production facilities; In contrast, the pet industry in the Middle East and Africa is still in its infancy.
In terms of domestic market size, the main players are concentrated in two fields: pet food and pet supplies. With the increasingly fierce competition in domestic pet tracks, most pet brands choose to go global collectively. In the first half of the year, 75.88% of the revenue of Yantai China (中宠股份), which specializes in pet food, came from overseas. The company expanded its overseas market through OEM/ODM model; Petpal Pet's (佩蒂股份) operating revenue was CNY 1.27 billion, including CNY 1.06 billion in overseas markets, accounting for 83.45%; Currently, the main source of revenue for Luscious Pet (路斯股份) is OEM exports, with overseas revenue accounting for 66.47%; The overseas sales revenue of Gambol Pet (乖宝宠物) is CNY 1.34 billion, accounting for 39.65%. The same is true for pet product brands. Yuanfei Pet (源飞宠物) accounted for 96.31% of its overseas revenue in the first half of 2022, with overseas sales revenue of CNY 597 million in 2021; The major overseas customers of Yiyi (依依股份) are Petsmart, WalMart, Amazon and other core channels, accounting for 96% of its overseas revenue in the first half of the year; The total overseas sales revenue of Tianyuan Pet (天元宠物) was CNY 1.187 billion, accounting for 62.94% of the total revenue.
From the perspective of consumption structure, the pet industry can be divided into pet food, pet supplies, pet healthcare, and pet breeding. Among them, pet food can be divided into main grains, snacks, and health products according to its purpose. Pet staple food is the largest segmented market, accounting for 69.6% of the pet food market share. The main grain is corn and other grains, which meet daily basic needs and nutrition. Its upstream mainly consists of agricultural products and meat and other agricultural and sideline product industries, with obvious cyclical attributes. The midstream mainly consists of food research and development and production manufacturers, while the downstream mainly consists of pet shops, pet hospitals, and end consumers. The replacement of main grains requires one to two weeks of sequential replacement, therefore its brand stickiness is strong.
Snacks focus on interactivity and functionality, such as rewards and tooth cleaning, and are the second largest sub category. With the refinement and scientification of pet care, pet owners have increased their emphasis on snack ingredients and raw materials, and the demand for healthy and functional snack products has increased. Snacks mainly consist of chicken breast, duck breast, and other meats, with a wide variety.
Health products are used for the daily maintenance of pets, and cat/dog health products are one of the main products of pet health food. With the increasing emphasis on pet health, the penetration rate and consumption amount of health supplements are increasing. Its ingredients are dominated by vitamins, probiotics, and other supplements, with fish oil, chondroitin, vitamins, and other nutritional concepts dominating.
Pet food faces great difficulties when it goes to sea. Pet food involves food safety, and overseas sales require dual approval from both domestic and target countries, making it relatively difficult to go overseas. Secondly, domestic and foreign pet food hygiene indicators have different standards for certain ingredients, which increases the difficulty of export. For a long time, the export of pet food in China has mainly focused on OEM processing, mainly serving foreign brands and channel manufacturers, represented by Yantai China (中宠股份), Petpal Pet's (佩蒂股份), and Gambol Pet (乖宝宠物). From a consumer perspective, pet owners tend to choose "high-quality" food, such as some European and American brands placing their supply chain at the source of raw materials to ensure the high quality of food. For Chinese brands, this will face issues such as cost control, supply chain improvement, and brand promotion. If the supply chain is placed domestically, transportation and storage are also major pain points.
Pet products mainly include daily living and care products for pets. Due to its large category specifications and low standardization level, there are a large number of pet product manufacturing enterprises, and the business scale of a single enterprise is relatively small. Therefore, it relies on supply chain service providers to provide value integration for upstream and downstream. Supply chain service providers integrate the value of upstream manufacturing links, connect with downstream hospitals, e-commerce platforms, and pet stores, shorten the time for matching upstream and downstream demand, and improve supply efficiency. At present, the pet supply chain service industry in China is in its early stages of development, with a relatively dispersed competition pattern and a large number of supply chain service providers. However, a small number of companies have a larger scale and the ability to provide comprehensive value services. With the accumulation of experience and resources, leading enterprises are expected to become stronger and stronger.
With the upgrading of consumption under the demand for exquisite pet care, Chinese pet products continue to innovate and develop towards intelligence and refinement. In terms of pet smart products, it covers various aspects such as pet food, shelter, and play, such as smart feeders, smart water dispensers, smart cat litter pots, smart pet toys, and wearable products for pets. The upstream of the pet intelligent products industry focuses on chips; Midstream is a smart brand business with fierce competition; Downstream are consumers and related sales channels. The concentration of pet smart brands is relatively scattered, and each brand has strong advantages in segmented category competition. The current market is showing a situation of exploring competitive advantages in segmented tracks.
In terms of overseas markets, the pet product market is relatively mature and there are no products or brands that specifically meet consumer needs. In the overseas market, product innovation is generally slow, and the unit price of intelligent products is expensive, resulting in poor user experience. Therefore, domestic intelligent brands not only have the advantage of supply chain costs in overseas markets, but also have the advantage of product update iteration speed. Chinese brands have a clear advantage in the category of smart devices, and their product categories are continuously expanding. Shelley, the overseas business manager of Petkit (小佩宠物), told EqualOcean that the European and American markets actually leave a lot of market competition for companies with innovative products, and Chinese companies have great advantages in the smart pet product market in Europe and America. Martin, the founder of Furbulous, also expressed the same viewpoint, and he stated that users in the European and American markets are very concerned about the safety of pet products, which is a point that companies and brands need to pay attention to. The risks and benefits of going to sea coexist, and problems such as product homogenization and low-end technology are emerging one by one. Enterprises that can ensure product safety while achieving innovation and rapid product iteration are more competitive in the market.
The pet healthcare industry is growing rapidly. According to Frost & Sullivan data, the market size of the pet medical and service industry in 2022 was CNY 106.2 billion, with an expected compound growth rate of 19% between 2022 and 2026. As the role of pets shifts towards family, their health expenses are also becoming rigid expenses. Due to the inability of pets to express themselves, pet owners' choice of medical services depends on the judgment of medical institutions and doctors, so pet owners have a great dependence on medical institutions and doctors. Pet owners will trust and rely on medical institutions based on their medical experience and effectiveness, and have strong consumer stickiness. In addition, the unit price of medical services is much higher than other pet consumption. As a healthcare industry, pet healthcare requires hospitals, doctors, and related personnel to have certain qualifications, and compared to other pet tracks, its entry barriers are relatively high.
With the increase in the number of pets, the aging population, and the incidence of diseases, the demand for medical services is also rapidly growing. Due to the shorter lifespan of pets compared to humans, pets have a higher frequency of demand for disease treatment and surgical diagnosis and treatment. In addition, with the refinement and personification of pet care, pet healthcare has gradually extended from physiological services such as vaccines and physical examinations to comprehensive physical and mental health care for behavior correction and mental health. Compared to the North American market, there is a lot of room for improvement in the advanced consumption of pets in China, such as pet physical examinations, pet funerals, etc. It is expected that the related demand will further expand the diversification of pet medical services.
In summary, the export of pet food is fraught with difficulties, complex procedures, and difficult to control costs. In terms of pet products, there is huge market potential, with relatively low brand concentration, multiple segmented categories, and fierce industry competition. Chinese merchants have great advantages in supply chain, cost control, and product update iteration, especially in the field of intelligent products, filling the demand gap in overseas markets. Chinese merchants need to find their competitive advantages, develop their own segmented tracks, and conduct multi-channel marketing.
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