Is the pet economy market a blue ocean or a bubble?

This article introduces the rapid growth of China's pet economy, analyzes the consumption potential, brand competition and industry development trends of the pet market, and how pet companies can achieve growth through innovation and expansion into new markets.

According to a Goldman Sachs report, the number of pets in China will exceed that of children under the age of 4 for the first time in 2024, which is undoubtedly shocking. By 2030, the number of pets in Chinese cities and towns is expected to exceed 70 million, twice the number of children.

Is this trend really unstoppable? In my country, the number of pets has increased dramatically, almost approaching the number of children. The pet economy is booming, the existing market is stable, and the incremental market has huge potential. What is the truth?

01 Is the pet “hot” economy coming?

The number of pets in my country has increased dramatically. What is the truth behind the economic boom?

As time comes to Double 11 in 2024, the performance of the pet market once again verifies its strong consumption potential.

At 8 pm on October 14, after Tmall’s Double 11 pre-sale started, 32 pet brands doubled their pre-sale amount year-on-year in the first hour of pre-sale, and 73 pet brands surpassed the full-day performance of the first day last year. In the four hours of pre-sale, pet live broadcast transactions increased by 123% year-on-year. These data undoubtedly provide strong evidence for the prosperity of the pet economy.

The prosperity of the pet economy is not groundless. In recent years, as pet owners pay more attention to the emotional aspects of their pets, the pet products industry has begun to grow continuously.

According to a Euromonitor report, the retail scale of the global pet products market (excluding services) reached US$193.53 billion in 2023, of which the global pet products retail scale was US$52.4 billion, maintaining steady growth.

In Shanghai, the rise of Pet Fashion Week is a microcosm of the booming pet economy.

From the launch of the first Shanghai Pet Fashion Week in October 2023, to the direct doubling of the number of participating brands in the second session, to the rich and diverse forms of events in the third session, Pet Fashion Week not only showcases the concept of pet fashion, but also becomes an important platform for pet owners to socialize and interact.

Faced with this blue ocean market, entrepreneurs have rushed in to seize the opportunity.

Da Q, a post-80s entrepreneur, is one of them. At the end of 2022, he decisively switched to the new track of pet fashion, and in just two years, he has laid out the pet economy business map in four or five sub-sectors.

While pursuing commercial interests, he also fully understands the essence and core value of the pet economy. "We hope to create a comprehensive offline experience venue to make people willing to consume."

He said, "We hope to turn offline stores into 'people-pet-friendly' fashionable pet lifestyle spaces."

02 Brands are competing with each other, who will be the winner?

Although the domestic pet industry started relatively late, with the improvement of people's economic level, the change of ideas and concepts, the aging of the population and the growth of single and DINK groups, keeping pets has become a kind of emotional sustenance for people.

With the birth of the "loneliness economy" and the rise of the "pet economy", the pet industry has also ushered in unprecedented development opportunities.

So, in this prosperous pet industry, which brands are worthy of our attention?

Take Tianyuan Pets as an example. Its financial report for the first half of 2024 shows that its total revenue reached 1.252 billion yuan, an increase of 24.72% over the same period last year. This performance not only proves the huge potential of the pet market, but also demonstrates the strength and international competitiveness of domestic pet brands.

We have to mention pidan. This brand was born in 2015 and quickly emerged in the pet market with its unique design concept and high-quality product quality.

Pidan's products have won world-class industrial design awards many times, and its cat litter market share ranks first on Tmall. Its brand unit price is about 115 yuan, and its comprehensive gross profit margin exceeds 50%, showing strong market competitiveness and profitability. Pidan has also cooperated with many well-known IPs to launch co-branded products, further enhancing its brand awareness and influence. In terms of sales channels, Pidan has achieved full online and offline coverage, and its products are exported to 21 countries around the world, demonstrating its strong market expansion capabilities.

Next, we would like to introduce Xiaoke Cature. This brand was founded in 2017 and focuses on the pet health industry. Xiaoke Cature has established the first pet care laboratory in China. The monthly sales of its self-developed pet mouthwash exceeded 100,000 pieces, and the repurchase rate is nearly 35%. Its strength should not be underestimated.

In terms of sales channels, Xiaoke Cature has also achieved a comprehensive online and offline layout, and its products are exported to 52 overseas countries and regions. Its main products, Cat Highness mixed cat litter and dog tooth cleaning water, have won wide acclaim from consumers with their excellent performance and affordable prices.

Vetreska is a brand featuring anthropomorphic and anthropomorphic product design. Founded in 2017, Vetreska mainly distributes its products offline, accounting for about 90% of its sales. Its unique virtual theme world of "cactus, watermelon, and cherry" and the brand short film launched by cross-border cooperation with art KOLs are impressive.

Weika also officially announced Lu Han as the global spokesperson for the brand, further enhancing the brand's popularity and influence. In terms of sales channels, Weika has also achieved comprehensive online and offline coverage, and its products are deeply loved by consumers.

RedDog is a brand that is positioned as a "pet nutrition expert". As the first brand to enter the pet nutrition cream category in China, RedDog's main products, nutrition cream and hair removal cream, have ranked first in the same category in the Chinese market since their launch. Its exclusive sponsored pet doctor variety show and pet concert, as well as the annual pet offline sports meeting, all demonstrate the brand's deep heritage and strong strength in the pet industry.

Pat is a brand that focuses on raw bone and meat formula. Since promoting the concept of feeding "raw bone and meat" in 2018, Pat has contributed more than 80% of the brand's performance with the sales of over one million packages of its raw bone and meat freeze-dried series products. The joint R&D center established with Zhejiang University further demonstrates the brand's strong strength and innovation ability in product R&D.

FURRYTAIL is a brand that started with design and then focused on the full range of cat lifestyles. Its first liquid probiotic product sold over 1 million cups within 7 days of its launch, demonstrating the brand's keen insight and innovation in the field of pet health. As the first Chinese brand to reach a strategic cooperation with the World Small Animal Veterinary Association, the future development of FURRYTAIL is worth looking forward to.

Finally, we would like to introduce Maomaogougou. This brand was founded in 2016 and is positioned as a technology brand, adhering to the principle of "making smart pet products for mothers and infants". As a Xiaomi ecological chain enterprise, Maomaogougou has achieved remarkable results in the field of smart pet hardware with its intelligent and home-oriented product design concepts and strong channel expansion capabilities.

Behind the prosperity of the pet economy, we should also see the problems that exist.

On the one hand, with the surge in the number of pets, competition in the pet products market has become increasingly fierce. Major brands have increased their investment in research and development and launched new products to attract consumers. This has also led to uneven product quality on the market, and some inferior products have even posed a threat to the health of pets.

On the other hand, with the continuous development of the pet economy, some businesses have begun to take advantage of this trend to engage in hype and fraud, damaging the interests of consumers.

03 How can pet brands break through in the stock war?

Since 2019, the huge potential of the pet market has gradually been discovered by major e-commerce platforms. "Double 11", as an annual consumer feast, has become the main battlefield for pet consumption. The initial results of "Double 11" in 2024 also mark the increasing standardization and maturity of the industry.

The first change is that in the track of rigid demand, food is king.

Among the many sub-sectors of the pet industry, pet food is undoubtedly the track with the most rigid demand attributes, occupying half of the overall market. The "White Paper on China's Pet Industry in 2023-2024 (Consumer Report)" shows that food accounts for as much as 52.3% of the pet market. Wanlian Securities' research report further pointed out that pet food and medical consumption are the two pillars of the industry chain. Companies that have been listed or are planning to go public, such as Guaibao Pet, China Pet Foods, and Xinruipeng, all focus on these sub-sectors.

Taking the "Double 11" pre-sale as an example, the hot-selling products are mainly concentrated in baked food, freeze-dried food and other cat and dog food, and the hot-selling products of major well-known brands have significant advantages. Tmall's Double 11 battle report shows that within the 4-hour pre-sale, the sales of Fregate, a subsidiary of Guaibao Pet, increased by nearly 10 times year-on-year, and the sales of Fresh Lang increased by more than 500% year-on-year, while Taste of the Wild and Stella & Chewy's also achieved more than 260% and more than doubled growth respectively. These data undoubtedly prove the strong demand in the pet food market and the increase in brand concentration.

Although the pet food market is growing rapidly, competition among brands is also becoming increasingly fierce. As the market structure becomes more differentiated, how to maintain brand innovation and market share has become a challenge that every company must face.

Second, new ideas have emerged, and the pet track has been extended in a more humane way.

Companies in the pet industry are increasingly focusing on extending human consumption habits and needs to the pet sector. The Flegatt (Shanghai) R&D Center, a nutrition research institute opened by Guaibao Pet in Shanghai, is a typical example. The center uses mainstream pets such as dogs and cats as observation points to conduct in-depth research on factors including behavior and palatability. This in-depth observation and research is, to some extent, more effective than studying human pups, because it is relatively easier to create an environment suitable for cats and dogs.

In the first half of 2024, Guaibao Pet achieved operating income of 2.427 billion yuan, a year-on-year increase of 17.48%, becoming the only A-share listed company in the pet track with a half-year revenue of more than 2 billion yuan. In addition, at the brand upgrade and new product launch conference on October 14, Fleetgate upgraded its brand slogan to "Fresh Meat Precision Nutrition" and released two series of new products, further strengthening the high-end characteristics of its products.

Although the humanized extension of the pet track provides a new growth point for the brand, it also means that the brand needs to continue to invest in research and development and innovation to meet consumers' growing quality and personalized needs. Otherwise, it is easy to be eliminated by the market.

With the rise of emerging brands, segmented markets may become new blue oceans.

Among the six pet brands whose sales exceeded 10 million in the four hours of pre-sale on Double 11, most of them are emerging brands in various segments. For example, the new brand "Meow Tree", which specializes in cat climbing frames, has become the top 1 in its segment at multiple points just after one year of official operation on the Taobao Tmall platform. IGG, which specializes in selling parrot staple food and health products, has seen its sales increase by more than 300% year-on-year in the Tmall Double 11 store since it went on sale in July 2023.

The rise of these emerging brands not only enriches the product lines of the pet market, but also provides consumers with more choices. At the same time, they have also achieved rapid growth and seized market share by intensive cultivation of the market segments.

The value of my country's pet brands is becoming more differentiated.

According to the 2023 Pet Industry White Paper, the urban dog and cat consumption market will reach RMB 279.3 billion, a year-on-year increase of 3.2%. With the increase in the number of pets and the improvement in consumption capacity, the industry has entered a stage of steady growth. However, this is a severe test for brands.

As of early August 2024, 945,000 new pet industry-related companies have been registered in China, and the industry structure is very fragmented. In order to gain more market share, the sales expense rate of each company will continue to grow for a long time, resulting in the industry's profit level becoming increasingly differentiated, and gradually showing a trend of the strong getting stronger.

Although the top brands have many stories to tell, the entry barriers to core areas such as pet food are actually very low. How to stand out in the fierce market competition has become a question that every brand must think about. At the same time, as the trend of domestic substitution strengthens, how domestic brands can improve their quality and cost-effectiveness is also the key to future development.

Linking online and offline, going overseas to explore new blue oceans.

In the global pet market, North America is currently the largest market, accounting for about 38% of the global market share. For domestic pet companies, overseas expansion has become a new growth point. Tianyuan Pet and other companies are actively expanding into the international market through a sales model that emphasizes both online and offline sales. Online sales are mainly in the form of B2C and B2B, and self-operated brand flagship stores and franchise stores are established on third-party platforms; offline channels mainly sell products through wholesale.

According to statistics, the global pet market will be approximately US$304.4 billion in 2023 and is expected to exceed US$500 billion by 2030. For domestic pet companies, seizing this bonus period and paying attention to more pet market segments is the key to achieving overseas expansion.

Although overseas expansion provides new growth points for domestic pet companies, it also means that companies need to face more challenges and risks. Before entering a new market, conducting comprehensive market research, formulating localized strategies, and finding reliable distributors or agents are all essential steps.

04 Conclusion

Driven by both the stock market and the incremental market, the pet industry has shown a strong growth momentum. Looking at the industry changes and brand rise from the performance of "Double 11", it is not difficult to find that pet food, as a rigid demand track, has continued to increase its market share and brand influence.

At the same time, new ideas have emerged, extending human consumption habits and needs to the pet field, providing new growth points for brands.

In the future, the world of the pet industry may only belong to those leading brands with greater influence.

Written by: Li Jiaman, Edited by: Yang Yong This article is written by the author of Operation Party [Hydrogen Consumption], WeChat public account: [Hydrogen Consumption], original/authorized to be published on Operation Party, and reproduction is prohibited without permission.

The title image is from Unsplash, based on the CC0 protocol.