"In addition, with the development of the Internet, more and more people are becoming more dependent on virtual space. While interactions between people have decreased, they have also become more willing to communicate with pets in their families. At the same time, the entry of capital has also promoted the development of the pet industry." Wu Daiqi said.
The "living standards" of pets have also risen with the tide. One data worthy of attention is that the "Engel coefficient" of pet consumption is decreasing. According to the "2021 China Pet Industry White Paper" produced by the Paidu Pet Industry Big Data Platform, from 2019 to 2021, in the pet market, the market share of food dropped from 61.4% to 51.5%, a drop of nearly 10 percentage points; the market share of pet medical care increased by 10 percentage points from 19% to 29.2%. At the same time, the pet industry is developing in the direction of refinement and specialization. When people buy pet food and nutritional products, they are increasingly emphasizing personalized customization and dietary balance. The corresponding services are also continuing to upgrade and become increasingly diversified.
Wu Dan said that only after he started raising dogs did he feel firsthand what a "four-legged gold-eating beast" is. She remembers that she spent more than 5,000 yuan on "Double Eleven" the first year the puppy came to her home to buy pet supplies. "A bag of dog food costs eight to nine hundred yuan; other supplies are also very expensive. A set of shampoo and conditioner cost more than 500 yuan, and a set of toothpaste and mouthwash cost another 200 yuan. For nutritional supplements, I bought foot cream, lecithin and fish oil, plus Daily necessities such as changing pads, diapers, deworming pills, deodorizing water bottles, small toys, and medicines were all spent.”
During the Double Eleven the following year, she stocked up on another 4,000 yuan for two dogs. After doing some calculations, Wu Dan felt sorry for her wallet, but she said she had no regrets: "When I got home after a long day's work, with them accompanying me, I felt everything was worth it."
The domestic pet market is already quite large. According to a report from iResearch, the number of dogs and cats in China has exceeded 100 million in 2020, and the scale of the domestic pet economy has approached 300 billion yuan, and will maintain a compound annual growth rate of 14.2% in the next three years.
This has also led to the accelerated growth of the number of companies related to the pet industry. Tianyancha data shows that as of now, there are more than 1.63 million pet-related companies in China, of which the growth rate of registered companies in 2021 is as high as 133.41%.
The pet consumption track has also officially entered the capital spotlight. An investment banker pointed out that from the perspective of the life cycle of pets, the normal cycle of pets such as cats and dogs is 10-15 years. The life cycle is long enough and they are in high-frequency rigid demand. Coupled with driving factors such as the aging of the population, the pet-raising population and the pet industry are in a period of rapid growth.
According to the "China New Consumption Development Insight Report", a total of 58 investments and financings were completed in the domestic pet industry in 2021. In addition to pet food, the pet service track has also become the focus of capital attention. At present, first-tier institutions such as Sequoia Capital, IDG Capital, and Challenger Ventures, as well as Internet giants such as Tencent and JD.com, have made bets on this track.
Hillhouse has placed a "heavy bet" on the pet track. In 2018, Hillhouse announced that it would integrate its 630 pet medical brands, including Barbie Hall, An'an, Chong Yisheng, and Najia, with 400 animal hospitals under Ruipeng Group, including Ruipeng Animal Hospital, Meilian Zhonghe, and Kate Meow Meow Professional Hospital. At present, Xinruipeng Group is already one of the leading companies in the domestic pet medical field.
Pet concept stocks are sitting on the "cold bench"
Although the pet economic market is growing rapidly, the number of domestic pet listed companies is not large, and at the same time, their size is average.
In the pet market, the subdivisions that have received widespread market attention mainly include pet food, pet medical treatment, pet supplies, etc. Currently, the only two pet food companies listed on the A-share market are Petty and China Pet. In addition, pet products manufacturer Yiyi shares were also listed on the Shenzhen Stock Exchange in May last year. However, the profit scale and price-earning ratio of these pet listed companies are generally not high. As of now, the total market value of the above three companies is 4.427 billion yuan, 7.629 billion yuan, and 3.854 billion yuan respectively, and none of them has a market value of more than 10 billion yuan.
Financial reports show that as of the end of the third quarter of 2021, the operating income of Petty Co., Ltd., China Chong Co., Ltd., and Yiyi Co., Ltd. were 915 million yuan, 2.012 billion yuan, and 944 million yuan respectively, and the net profit margins were 8.78%, 5.26%, and 10.98% respectively.
The profit margins of these companies are low because their revenue mainly comes from overseas and other business revenue, that is, they provide production OEM services for foreign pet brands. For example, in the first half of 2021, the overseas business revenue proportions of Zhongchong and Yiyi were 75.03% and 92.5% respectively. This also means that they are relatively passive in terms of pricing and have no brand premium.
In order to change this status quo and improve profitability and brand influence, Zhongchong Co., Ltd. has launched brands such as "Wanpy" and "Zeal", while Petty Co., Ltd. has also launched brands such as Healthguard and ChewNergy. However, the market influence of these new brands is still limited.
Pet food is still the most promising segment in the pet industry. But at present, the domestic high-end pet food market is still mainly occupied by large multinational companies such as Royal France, Mars Food, and Nestlé (China). It is not easy for domestic brands to grow bigger and get a share of the pie.
According to data from the Qianzhan Industry Research Institute, the top four companies in terms of market share in China's pet food industry in 2020 are Royal France, Mars, Birge and Nestlé (China), and the three top rankings are all occupied by overseas brands. In the mid- to low-end pet food market, there are many local small and medium-sized pet food manufacturers. In such a mixed environment, it is difficult for domestic users to build trust in pet food brands..
In this regard, some investors in the pet industry said, "The success of brands in the pet staple food track mainly depends on the company's branding capabilities and product R&D and innovation capabilities; while pet products are used less frequently, and it is difficult to establish awareness and branding. Enterprises in the industry are generally engaged in low-price competition."
In pet medical and other service markets, due to issues such as uneven service quality and opaque charging and pricing standards, there is still chaos. According to Jingzhun's "Pet Medical Industry Report", there were 10,000-15,000 pet hospitals in the country in 2019, but the number of large-scale chain hospitals accounted for less than 15%.
The pet business seems to be “booming”, but it is still in its infancy. Domestic players still need time if they want to "run out".