In 2021, the size of China’s pet consumer goods market has reached 79.989 billion yuan, a year-on-year increase of 13.7%. Pet food is the largest segment of the pet industry, and is further subdivided into pet staple food, pet treats, and pet nutrition. According to Euromonitor International data, the size of my country’s pet food market in 2021 will be 48.188 billion yuan, and the average annual compound growth rate from 2017 to 2021 will reach 24.8%, far exceeding the world average of 6.17%. The characteristics of rigid demand and high-frequency consumption of pet food make it a major segmented competition track in the pet industry, which is in a period of rapid growth.
However, from the perspective of the development of my country’s pet market, differences in pet raising concepts, product penetration, and brand competition status and trends, the pet food industry is still in its infancy. In 2021, the number of online dog and cat pet food brands has exceeded 37,000, but according to statistics, nearly 70% of domestic brands have a unit price of less than 15 yuan per kilogram, which is related to the homogeneity of pet food products and the fact that domestic brands rely more on ” The development model of “marketing + OEM” is closely related. Most brands have no brand power at all, and are basically still in the stage of price competition. Fortunately, some companies and brands are aware of this problem and actively invest in product innovation and brand building, hoping to get rid of the low-price competition environment.
This article starts from the historical background of the development of my country’s pet consumption market, and discusses the current situation, opportunities and challenges of the domestic pet food market based on the differentiation of domestic and foreign pet consumption markets, the current situation of competition, and the concept of pet raising.
Centennial VS? 30 years, the basic status quo of the industry
The formation and development of the European and American pet markets have a history of at least a hundred years. At the beginning of the 21st century, international giants have accelerated their industry integration. One of the more representative ones is Nestle, which entered the pet market through the acquisition of Purina; in 2002, Mars acquired Royal and entered the pet competition by creating a differentiated concept of “natural pet food”. The European and American pet markets have entered a mature stage.
The formation and development of the domestic pet consumption market is basically in this period, but the development cycle is short, only over 20 years. Before 2000, domestic pet products changed from “prohibited” to “restricted”. Domestic pet product consumption was dominated by imported brands, and the market size was small. Development, rapid GDP growth, urbanization and the opening of international trade, etc., domestic pet consumption enterprises or brands have begun to appear, but most of them are based on the mode of OEM or OEM for foreign brands. Offline, professional pet stores began to emerge and develop; online, with the rise of e-commerce, online channels also began to develop.
Since 2010, the domestic pet market has continued to heat up and ushered in a period of rapid development, perhaps due to the decline in foreign trade exports, the development of e-commerce, the increase in national income levels, demographic changes, and capital concerns.
OEM companies continue to expand the domestic market and their own brands, such as Petty and China Pet; the maturity of production technology also promotes the rise of emerging brands, such as Crazy Puppy. There are also some consumer goods giants that have acquired or built their own brands. For example, after Chaoyun Group launched “Stubborn Tail” as a pet cleaning product brand, it will launch “Stubborn Mouth” in 2021 to enter the high-end pet staple food track; Suligao; Naaisi Group’s self-built brand Taodouwanguo. Driven by the blessing of capital, a number of new brands have also emerged, such as Weishi, Red Dog, and Gao Yejia. In the past two or three years, the online market share has further expanded, the number of offline pet stores has increased, and the online and offline omni-channels have been further integrated and developed.
In the past 10 years, domestic enterprises and brands have ushered in a moment of bright development. The overall market share has increased significantly compared with imported brands, but the gap with imported brands is still obvious.
From the perspective of brand market positioning, imported brands are positioned in the mid-to-high-end market, while local brands are mostly positioned in the mid-to-low-end market. Of course, this has something to do with the historical reasons for the “preconceptions” of imported brands and the development of the domestic “OEM” model, as well as the gap between enterprise product development and innovation.
In terms of market share, imported brands still occupy the largest share of brands: Royal (Mars) accounts for 7.1% (2021 data). In terms of brand distribution, from 2011 to 2020, among the top 15 brands, the share of imported brands dropped from 28.8% to 13.9%, and the number of finalists dropped from 7 to 6; the share of local brands dropped from 13.9% Increased to 15.5%, and the number of finalists increased from 8 to 9.
From the perspective of brand concentration, compared with overseas, the pattern of pet food in China is also relatively scattered, and due to factors such as channel changes, the concentration has shown a downward trend in the past 10 years. According to the data of an institution in 2021, the domestic pet food brand concentration CR5 (the market share of the top 5 companies in business scale) is only 17.4%, which is far lower than that of the United States (71%), the United Kingdom (62%), and Japan. (64%) and other mature markets. The Chinese market is characterized by high concentration of enterprises and low concentration of brands.
Gap means challenge, but also means opportunity.
Where does the opportunity come from?
From the macro to the micro, the opportunities in the domestic pet consumption market, especially the opportunities in the pet food segment, can be discussed from four aspects.
1. The overall development trend of the industry is improving The market size of the
pet food industry continues to grow, and the overall development trend is improving.
In 2020, the United States, which has the highest pet penetration rate in the world, is 70%, and other major western countries with high pet penetration rates (Australia, Canada, the United Kingdom, and Germany) are 35%-58%. In comparison, China’s pet penetration rate is only 22%, less than one-third of the United States, and there is also a distance from Japan (28%), which is also an Asian country. At present, China’s pet market is in the ascendant and is still in a period of rapid expansion, and there is a lot of room for improvement in penetration rate.
2. Young pet owners in the incremental market are more accepting of new brands The biggest difference between
the domestic pet consumption market and the foreign market is the difference in pet owners. This difference is reflected in several aspects.
First, the population structure is different. From the perspective of population structure, Chinese pet owners are relatively young, and the current pet economy is mainly driven by young groups. Domestic “post-80s” and “post-90s” pet owners account for as high as 77%. Tmall data shows that the purchase TGI (Target Group Index) of emerging white-collar workers is as high as 239, and the purchase amount TGI of Generation Z and emerging white-collar workers leads the industry as a whole. This is very friendly to domestic brands or new brands, because these people do not have much loyalty to old brands (overseas brands), or they have never heard of pets before.
Second, the motivation and emotional needs of pets are different. In fact, there is no positive correlation between pet consumption and the income level of pet owners. The relationship orientation and emotional concentration of pet owners to pets affect their shopping methods and shopping intentions for pets. For example, many pet owners keep their pets just because they are bored and cute. For them, pets are just “toys or props”. Most domestic pet owners regard pets as pets, not family members. The simplest comparison is the difference in motivation and emotion between pet consumption and infant market consumption.
Third, the scientific concept of pet raising by pet owners in my country is still lacking. my country’s pet owners’ information acquisition channels are not professional enough, and the scientific concept of pet raising has not yet been popularized. E-commerce platforms and various content platforms (such as Xiaohongshu, Douyin, etc.) are still important sources of pet raising information for pet owners. Although these platforms are rich in information, the quality of information is uneven and even contradictory. This has led to a large number of products and difficulty in choosing, which has become a major pain point for pet owners to choose. These characteristics of pet owners, if used properly, can bring huge opportunities for the development of enterprises and brands.
3. The Chinese characteristics of more cats and fewer dogs have given the opportunity to latecomers
According to data from the Paidu pet platform, in terms of breeding type, domestic pet cats will account for 59.5% of pet types in 2021, surpassing pet dogs. Foreign pet owners prefer pet dogs: taking the United States as an example, pet dogs account for 71.2% of pet types, more than pet cats. The rapid rise of China’s “cat economy” and “cloud-sucking cats” and the rapid growth in the number of cat lovers. Compared with pet dogs, pet cats require less space for keeping pets, spend less time and energy on pet owners, and are more suitable for work. Busy urban youth. Such pet-raising features make the competition in the cat food market segment more likely, and also give birth to segmented brands such as Gao Yejia that focus on cat food.
4. The industry concentration is low, and the competition pattern is far from
solidified According to Euromonitor International data, the CR10 of China’s pet food industry calculated by the company’s caliber in 2021 will be 24%, while the CR10 of the US and Japanese markets will be 76.8% and 84.4% respectively; The CR10 of China’s pet food industry calculated by brand caliber is 18.6%, while the CR10 of the US and Japanese markets are 40.5% and 49.8% respectively during the same period. Although Mars and Nestlé, the first to enter the Chinese market, once occupied a relatively high share in the pet food industry (the market share of the two reached 23.8% in 2012), with the liberalization of pet food import restrictions in my country and the entry of many local brands In 2021, the combined market share of Mars and Nestlé is only 10.7%. The overall industry concentration is in a downward trend, and there is still a pattern of “fighting among princes”.
Competitive Challenges and Recommendations
Foreign-funded enterprises represented by Mars (Royal) and Nestle (Goneng), listed companies represented by Petty (Tooth Energy) and Zhongcong (Naughty), Chaoyun Group (Stubborn Tail), Nais Group (Taodouwanguo) represented by large-scale fast-moving consumer goods companies, new companies and new brands represented by Crazy Dog, Weishi, Red Dog, Gao Yejia, etc., as well as other pet food companies, these five types of companies have formed The basic pattern of the existing domestic pet food consumption market.
Compared with foreign-funded enterprises, local brands and enterprises have more accurate insights into domestic social culture and consumer psychology, and can more flexibly use new media platforms for marketing and publicity. As of June 2022, taking the Douyin platform as an example, with the exception of Royal, which has released 323 short videos and has 1.05 million followers, the rest of the imported brands have not formed influence; while the local brands Bernard Tianchun, Crazy Dog, Naughty , Bi Ruiji, Lilang fans have exceeded 100,000. Among them, Lilang has 654,000 fans and has released 358 short videos (see Table 1).
New media has also become an important channel for acquiring customers. Different from overseas markets, since the accelerated development of my country’s pet food industry and the outbreak of e-commerce platforms are highly consistent in time, and pet food’s high-frequency consumption, easy storage, and standardized attributes are naturally in line with e-commerce positioning, e-commerce channels have dominated the market. my country’s pet food industry sales. my country’s pet food sales are dominated by e-commerce channels, which further empowers small and medium-sized brands. The combination of new media publicity and e-commerce platform sales enables them to quickly acquire customers.
For example, Crazy Puppy, Weishi, and Red Dog are all representatives of this type. According to Euromonitor International data, in 2021, pet food in my country will account for 60.9% of the e-commerce circulation channels, and the sales of e-commerce channels will be 29.347 billion yuan. The average annual compound growth rate from 2017 to 2021 will be 37.51%. The popularity of e-commerce channels enables emerging brands to quickly cover a wide range of markets. With the cooperation of new media platform marketing and promotion, these brands have the possibility to quickly acquire customers.
However, from another perspective, the current pet food industry in my country is still in its infancy, and pet owners have not yet formed the concept of scientific pet raising and product discrimination. Although many emerging brands have invested heavily in marketing, they have gained better brand exposure. However, the growth of emerging brands is more aimed at sinking markets and pet-loving small white people. Although they can quickly seize market share, they are bound to be accompanied by low-price competition in pursuit of cost-effectiveness, which is easy to cause industry introversion. JD.com data shows that domestic staple food brands are mostly distributed in the lower price band. According to our statistics, 73% of the domestic brand products have a unit price of less than 30 yuan/kg, and the competition in the low price band is too crowded.
For another example, the new domestic brand Crazy Puppy, aimed at the new generation of pet owners, has risen rapidly with its super cost-effective (average price of 20 yuan/kg) popular products, and it took only 5 years from its inception to a market share of 1.1%. time. However, with the large number of entrants in the industry and most brands adopting similar cost-effective strategies, the market share of Crazy Puppies, which failed to convert the sales scale into brand power in time, was rapidly squeezed, and the market share increased from 1.1 in 2019. % slipped to 0.4% in 2021.
Therefore, for local enterprises and brands, how to accumulate brand power is the key. And the precipitation of brand power, the most fundamental and most basic is the product and product quality assurance.
Local emerging brands basically adopt the “marketing + OEM” model, and with the help of capital, more competitors enter the market, such as emerging brands such as Red Dog and Weishi. However, for emerging brands, although priority is given to the OEM model to reduce capital pressure and exert marketing efforts to seize consumers’ minds, they will inevitably face product homogeneity and product quality problems in the process. For example, there have been a lot of negative news about product quality in Red Dog and Weishi. For emerging brands, after their brand share increases, the supply chain and brand power also need to be strengthened, and the asset-light expansion model simply relying on “marketing + OEM” may be unsustainable in the long run.
Local companies and emerging brands are breaking out. On the one hand, they can start with products, and on the other hand, they can start with corporate and brand strategies.
At the product level, in terms of staple food, in addition to fresh food, the product forms of overseas pet food have been widely sold in the domestic market, and the opportunity to occupy market share through greater product form innovation is already small, and the nature of pet food is different. In other words, larger form innovations may be difficult for consumers to accept. Therefore, companies that seize market trends through R&D and launch conceptual innovations or functionally positioned products are more likely to stand out. High-tier cities dominate pet consumption, and premiumization is the only way for local brands to avoid falling into low-price competition. For example, from dry food to wet food, the main track of dry food is improved and upgraded, and the wet food track pays more attention to cat food rather than dog food; from full-price food to functional food and nutritional food. This requires enterprises to have high-quality own production capacity and product research and development capabilities, and to have a keen insight into pet food consumption trends in the domestic market.
Since well-known foreign brands mainly focus on pet staple food products, the concentration of pet snacks market is low, and the barriers to market entry are small. Domestic pet food brands have achieved relatively high growth rates in this track in recent years by virtue of their high cost performance and advantageous marketing channels. bigger space.
At the enterprise and brand strategy level, the successful innovation of the product concept can guide the brand to gain a differentiated advantage in a certain segment, so as to develop and grow. From the perspective of the development of the local pet consumer market, this has resulted in a high degree of diversification of pet food, and each concept and sub-category can satisfy a group of people. From the perspective of industry characteristics, it is possible that brand concentration is naturally biased towards dispersion. . From the perspective of the United States and Japan, where the development of the pet food industry has entered a mature stage, most leading companies adopt a multi-brand strategy, so the concentration of companies is much higher than that of brands.
The multi-brand strategy can make the group’s R&D, production capacity and channels produce scale effect. In the future, my country’s top pet food companies can also develop into a multi-brand matrix through acquisitions.
Epilogue
To sum up, there are currently two completely different development models in my country’s pet food industry. A number of local emerging brands make full use of the characteristics of the domestic market and enter the market with the model of “marketing + OEM”. Although many brands have achieved considerable sales in the short term, it is difficult to accumulate brand power, and the model of relying on burning money to maintain high growth is unsustainable in the medium and long term. In contrast, imported brands generally transplant the quality-first high-end product strategy to the Chinese market. Although they have no advantages over local brands in terms of new media operation and marketing, their product positioning and brand operation philosophy are in line with the leading domestic pets. The core demands of pet owners in first- and second-tier cities in the development of the food industry. In recent years, many imported high-end brands represented by Desire and Pinnacle have flourished in the domestic market.
Therefore, for local brands, on the one hand, it is necessary to adhere to the difficult and correct path of high-end. Only through high-end can local brands build real brand power, thereby breaking through the introversion of the industry and the suppression of overseas giants, and then Enjoy the long-term dividends of industry development. On the other hand, based on the characteristics that the domestic pet industry company concentration is much higher than the brand concentration, it adheres to the multi-brand development strategy. Fortunately, local leading companies such as China Pet and Petty are also implementing a quality-first, multi-brand development strategy.
The future is promising.
