Pet industry refers to all the industrial chains surrounding "pets", including food (40%), supplies (10%), medical care (20%) and other services. At present, pet food and supplies are the main links in the pet economy. Since the epidemic, the pet industry has become more resilient, and is driven by the epidemic and online consumption. At present, China's pet industry has basically entered a mature and stable period, and the overall market size exceeds 200 billion yuan; Companies in the pet industry have also accelerated the pace of ipos, and a number of pet companies in the field of food and supplies have performed well.
In 2021, the global pet products scale increased by 10.7% to 44.76 billion US dollars, according to Euromonitor data is expected to 21-27 years scale will be CAGR7.0% to 67.19 billion US dollars; Among them, the United States and Western Europe are the main consumption areas, accounting for 47% and 20% respectively in 21 years, and it is expected that CAGR4.3% and 7.6% will reach 275.5 and 14.24 billion US dollars in 21-27 years. 20 years, China's pet consumer goods market size of about 37 billion yuan, referring to the United States, Japan and other developed countries pet development history, we believe that the expansion of the number of pets, demographic changes, and rapid economic development are driving the scale of the industry continued to expand, and now our country is going through a similar process, is expected to continue to grow rapidly in the future.
Food Track: China's pet food scale is about 80 billion yuan, of which online is the main sales channel, the food track has developed rapidly in recent years, but the industry lacks unified standards, the market is mostly occupied by foreign brands, the domestic brand price war is obvious and most of the main low-end grain, the future domestic brands are expected to seize the share by cost-effective, channel, marketing and supply chain advantages. And through research and development to develop high-end products and acquisition of foreign brands continue to narrow the gap with international brands.
Medical track: China's pet medical industry is in a highly dispersed state, limited by factors such as high entry threshold and high customer unit price, the branding process is developing slowly, and it is still in the early stage, among which the diagnosis and treatment market accounts for about 95% and the scale exceeds 50 billion yuan, and with the improvement of pet owners' health awareness, online diagnosis and treatment has broad prospects. Supplies track: pet supplies track has not been occupied by international brands, and some domestic brands with OEM to achieve segmentation of the leading field, while major enterprises rely on years of experience accumulation and consumer insight in overseas mature markets to feed the domestic market, jointly expand the pet supplies market space; In the long run, the industry will continue to reshuffle, with their own brands, research and development advantages and in the quality, research and development, channels and marketing of sufficient efforts to build a moat easier.
1: Pet industry overview
1.1 Pet industry definition
Pet industry concept: The pet industry refers to all the industrial chain around "pets", involving pet food, pet medical treatment, pet services, pet cages, pet supplies and other goods and services around pet consumption, including pet breeding and pet trading. At present, China's pet industry has gradually developed a whole industrial chain covering pet clothing, food, housing and transportation, birth and death.
1.2. Industrial structure of pet industry
Pet food is the core of consumption (accounting for about 40%), medical care (accounting for about 20%), supplies (accounting for 10%) and various types of services are growing. Pet food category is the largest market segment of the pet industry. With the improvement of people's awareness of feeding commercial food, the market demand for pet food is further released. The second is pet medical care, mainly for pet hospitals and individual diagnosis and treatment services; There are more subcategories of pet products, among which the turnover of smart devices has increased rapidly; The forms of pet services are increasingly rich, and with the upgrading of residents' consumption and the change of pet raising concepts and the role of pets, the pet service industry will grow steadily. Among pet consumption categories, food, supplies and medicine are just needed expenditures for pets, and the consumption penetration rate of pet staple food is the highest, exceeding 70%; Pet treats came in second at 69 percent. Pet products ranked third with 63% penetration.
1.3. Development history of pet industry: It has officially entered a stable and mature stage
The recovery of China's pet industry: Reviewing the history of China's pet industry, we can be divided into four stages: 1) The enlightenment period (1990-1999) : In 1992, the establishment of China Small Animal Protection Association marked the formation of the pet industry, in 1993, Marche, Nestle, Royal and other brands successively entered the domestic market, and then the concept of "pet companionship" began to rise; 2) Gestation period (2000-2010) : standard breeding became the main policy rotation, the concept of pet raising changed greatly, and pet manufacturing enterprises and pet service platforms began to emerge; 3) Rapid development period (2011-2020) : The number of pets increased by more than 100 million, the industry ushered in well-jet growth, the upgrading of consumption concepts to fine pet raising, the pet service industry rose, pet medical enterprises developed and expanded; 4) Stable maturity period (2021-present) : the normalization of the epidemic combined with changes in population structure stimulated people's pet mentality, the number of pets maintained a steady growth, the industry gradually developed an industrial chain covering the whole life service, and domestic enterprises rose.
1.4, pet industry chain analysis
The industrial chain is basically improved and expanded to more diversified: the pet industry is widely distributed, the pet consumption market covers the entire life cycle of pets, and the industrial chain is gradually improved. At this stage, the field of pet food and supplies is the main link of the pet economy. Upstream - aquaculture trading: lack of scale effect, low concentration, many market participants; There is no large-scale professional organization for pet breeding in China, nor does there exist standardized and unified supply channels, and the live trade is a relatively low frequency consumption category compared with other pet subsectors. Midstream - Pet products: The competition is fierce, among which pet food and pet products are the key industries in midstream, and the market concentration of the head company still has room to improve. Downstream - pet derivative services: diversified service types, pet insurance, pet funeral, pet photography and other new needs continue to emerge, lack of head brands, market fragmentation.
1.5, "pet consumption" companies set off a wave of listing, pet market economy rapid growth
As early as 2017, the first wave of listing took place on the pet track, Zhongpet shares and Petty shares successively landed on the capital market, Luce Shares listed on the North Stock Exchange in March 2022, Guobao GEM IPO in July, Yuanfei Pets listed on the Shenzhen Stock Exchange in August, and Tianyuan Pets Gem listed in November. In addition, there are Fubei pets, Zhongheng pets, Ruipai pets, Youpai pets, New Ruipeng pets are queuing up to go public, and various companies in the pet industry have accelerated the pace of IPO. According to Tianyan data, 2014-2021 domestic pet registered enterprises show rapid growth, the compound annual growth rate is as high as 76.39%, the industry heat is high; Among them, more than 805,000 new registered enterprises in 2021, +181% year-on-year, the fastest growth rate in recent years; From the perspective of registered capital, nearly 80% of pet-related enterprises registered capital within 1 million yuan, registered capital of more than 10 million yuan of its related enterprises accounted for 2%; From the point of view of establishment time, 54.6% of pet-related enterprises were established in 1-5 years, and 38.4% of related enterprises were established within 1 year.
1.6, pet economy blue ocean, capital has settled in
Pet track is favored by capital: Investment and financing in the pet consumption market gradually rose after 2013, in 2016, the head PE Hillhouse Capital acquired the German pet brand Junbao Gimborn, began its layout in the pet industry, 2018 is the pet industry investment and financing "spurt" year, IT data show that in 2018, there were 46 investment events in the pet consumption market. As of November 25, 2020, a total of 18 investment events have occurred, and investment events and investment amounts have declined significantly due to the impact of the epidemic and the overall equity investment market environment. We believe that under the environment of rational capital market and increasing difficulty in raising funds, smes will accelerate their exit. In 2021, there were 58 financing events in China's pet industry, twice as many as in the world; On the subdivision track, capital favors food, supplies and medical care. In terms of subdivision, there were 17 investment incidents in the pet food field, which is still the mainstream direction of capital investment, 16 pet supplies, and 13 pet medical treatment; The total amount of 58 financing events exceeded 3.558 billion yuan, of which 15 exceeded the 100 million level.
1.7, the epidemic is difficult to stop "it economy", behind the "cat economics" theory of thinking
Pet consumption toughness highlights: Under the influence of the epidemic, the online penetration rate of pet consumption continues to increase, according to the data of the United States Group, the turnover of the United States Group flash purchase pet category has risen rapidly, the total CAGR of the rolling year reached 145%, the turnover has not decreased, and it is still strong, and the pet industry has the ability to resist the downturn of the economic cycle or even the growth of the trend, so the pet track has naturally become a high-quality track for some investors to hedge their funds. The core of "cat economics" behind it is the pursuit of consumers' emotional needs: During the US economic recession in 2008-10, pet consumption showed a countertrend growth, and the Japanese economic circle once proposed a conclusion of "cat economics" in response to this phenomenon, that is, cats are equal to the economy, and the core behind it is consumers' pursuit of emotional needs, and emotional needs are the third layer of Maslow's needs. It is a higher level of demand than physiological (clothing and food) and safety (work and packaging) needs, which is why the pet industry is developing against the economic cycle.
1.8, e-commerce channels have grown strongly, and online consumption has become the main driving force for market growth
Online consumption habits are an important driver for the growth of the global pet market: According to Euromonitor data, 2017-21 global e-commerce market size compound growth rate as high as 29.3%, e-commerce penetration has reached 20.7%, e-commerce channel growth is still strong, and with the formation of consumer habits and consumption channels gradually to online migration, online channel penetration is expected to further increase. Domestic pet consumption channels should focus on pet stores and e-commerce platforms; Consistent with the development trend of global e-commerce channels, benefiting from more convenient mobile payment, domestic consumers have gradually strengthened their online consumption habits, and pet e-commerce channels have developed rapidly, gradually becoming an important driving force for pet consumption growth.
1.9, the pet economy represents a significant increase in the performance of many companies
Zhongpet and Guaibao have the largest revenue scale, and Yiyi and Guaibao have the highest compound growth rate of net profit: Since 2022, in the face of the adverse situation of multiple uncertainties such as the epidemic, geopolitical conflicts, and uncertain economic forms, many pet economic companies have achieved good "results", and their revenue and net profit have achieved double growth, and their resilience has been highlighted. In terms of volume, the scale of the food track is larger than that of the supply track, with Zhongpet and Guaibao leading the scale, followed by Tianyuan Shares and Yiyi shares of the supply track. In 2018-21, the compound growth rate of Yiyi, Yuanfei, Tianyuan, Zhongpet, Petit and Guaibao's revenue was 13.2%, 35.0%, 27.9%, 26.8%, 13.5% and 28.2% respectively, and the compound growth rate of net profit was 47.7%, 29.6%, 7.1%, 27.0%, -24.7% and 46.6%, respectively. Yiyi and Guobao compound growth rate is the fastest, the source of flying profit growth is also in the forefront of the industry.
2: How big the market space is
2.1 Pet industry market size: the scale of more than 150 billion US dollars, the United States is the largest market, China is rapidly expanding
The global pet industry is worth more than $150 billion, and the United States is the largest market. According to Euromonitor data show that the global pet market in 2021 is expected to grow by 8.1% year-on-year to 153.6 billion US dollars, 2018-20 global pet market growth rates of 5.9%, 3.8%, 7.4%, the global pet industry continues to grow; Among them, the United States is the largest market, with a pet industry scale of $123.6 billion in 21 years, making it the largest and most mature pet economy in the world. China's industry scale exceeded 200 billion yuan and continued to grow: With the diversification of pet-related consumption types, the scale of the pet industry is expanding rapidly, and the market size of China's pet industry will grow by 24.4% to 240 billion yuan from 2012 to 2021, and the penetration rate of pet raising in China (about 20%) still has greater room for improvement compared with the United States (about 70%).
2.2. Us pet market: leading in scale, largest pet food expenditure, high care and health track attention
The United States leads the market size and has the highest pet penetration rate in the world: After more than 100 years of development, the pet industry in the United States is becoming more and more mature, and the pet consumption in the United States is less affected by the economic cycle, and the industry shows strong rigid demand. The pet penetration rate in the United States is the highest in the world, and the families with dogs and cats account for more than 70%. The pet raising enthusiasm is high, and under the high pet raising enthusiasm, the market shows strong consumption resilience, and the pet consumption expenditure exceeds 120 billion US dollars after the epidemic. Among them, pet food, as a just-needed product, is always the largest expenditure for pet rearing, and under the concept of scientific and exquisite pet rearing, the care and health track is also worthy of attention.
2.3, Stone from other mountains - Inspired by mature pet markets such as the United States and Japan
Referring to the development history of pet industry in developed countries, we find that the per capita GDP growth in the United States drives the growth of pet market size, and its rapid economic development has brought about the growth of average pet consumption and the increase of pet owners. The pet industry in the United States has a long history of development, and has experienced the process of integration from traditional retail stores to comprehensive, large-scale and professional pet sales platforms. It is the world's largest pet market with mature industrial chain, large number of pets, high household penetration rate (70%), high per capita pet consumption expenditure, and rigid pet demand.
From the data point of view, the size of the US pet market grows with the growth of per capita GDP. From 2010 to 20, the market size of the US pet industry grew by 7.9% to 103.6 billion US dollars, which brought about the growth of the demand for various products and services in the pet industry. Under the epidemic situation in 20 years, GDP recorded the first negative growth in 10 years (-2.6% year-on-year). However, pet consumption expenditure increased by 6.7% year-on-year, showing the resilience of pet consumption under the epidemic. In 21 years, the U.S. pet market increased by 19.3% to 123.6 billion yuan, including pet hygiene products, including pet products and pet transactions, the market size reached 29.8 billion US dollars, accounting for 24.1%, and the CAGR of 2018-21 was 17%, which is the fastest growing segment of the pet industry.
2.4. Driving factors behind the growth of China's pet industry
Based on our analysis, we believe that the rapid economic growth, the expansion of the number of pets, the change of population structure, the transformation of the role of pets, the upgrading of industrial models, and the integration and acquisition of enterprises are the core causes of industrial expansion, and now our country is going through a similar process. We use PESTEL model to analyze the drivers of the growth of the pet industry: 1. Policy driven: The Ministry of Agriculture and Rural Affairs announced the introduction of strict supervision of pet food enterprises on the 20th, improving the threshold of external access, and stricter imports are good for the healthy and orderly development of domestic enterprises; From the ban notice issued by the Ministry of Health in 1980 to the introduction of dog management regulations in recent years, the policy has changed from the initial ban and restriction to standardized pet rearing and scientific breeding, and has continued to promote the healthy and stable development of the industry.
2.5. Consumer portrait of China's pet market: Pet raising groups are mainly high-income and highly educated white-collar workers, and the proportion of men is increasing
The pet population dominated by high-income, highly educated white-collar workers has spawned a combination of emotional and functional motives for pet keeping. Pet owners are mainly white-collar workers with high income and high education, and pets are more endowed with emotional roles to accompany their owners and add interest. Ninety percent of pet owners keep pets out of emotional motives such as adding fun, decompressing and relieving loneliness. Heavy work is constantly squeezing the life of white-collar workers. Pets can bring people more happiness and help relieve stress, anxiety and loneliness. Pet owners prefer cats and dogs, and the proportion of men increases. Cats and dogs are the pet owners most preferred breeds, the proportion of cats, dogs are more than 70%, the proportion of cats is slightly larger than dogs; Male pet raising population increased significantly, but female sex is still the main force of pet raising. The proportion of men rose from 21% to 38%, while the proportion of women was more than 60%.
3: Pet industry subdivision track
3.1. Pet food industry characteristics and industry map
Pet food can be mainly divided into three categories: pet staple food, pet snacks and health care products, among which the demand for staple food is the strongest, which mainly includes dry food, semi-dry food and wet food. Its industrial chain includes food research and development, food production, food sales and other links. The upstream food research and development link is dominated by domestic OEM and brand self-owned research and development base. The midstream is dominated by pet food manufacturers, while the downstream is dominated by pet food distribution channels. The current sales channels mainly include supermarkets, e-commerce platforms, convenience stores, etc. Pet food track features: pet food runs through the whole life cycle of pets, with high frequency, strong demand characteristics, its track shows: 1) the track is more mature, competition is more intense than supplies and medical track; 2) Refined pet raising promotes product upgrading, pet owners pay more attention to the multiple functions of staple food and pay more attention to brand/origin; 3) Online is the main consumption channel
3.2. Characteristics and industry map of pet medical industry
Characteristics of pet medical track: 1) The entry threshold is higher than that of food and supplies: the input cost of rent, equipment, doctors and so on is relatively high; 2) The high price of customers leads to consumers' resistance to pet hospitals; 3) The branding development of pet medical track is also relatively slow; 4) Healthy pet raising has become a trend, and the superimposed epidemic situation and the refined pet raising trend catalyzed pet owners' attention to pet health; 5) The trend of online pet medical treatment is obvious.
3.3. Pet products industry characteristics and industry map
Pet products are high-quality track: pet products have rigid, high-frequency consumption characteristics, because of its track characteristics: 1) Cleaning supplies and daily necessities have large daily consumption, high purchase frequency, high re-purchase rate, low price sensitivity, strong demand resilience, 2) can resist environmental risks, and have the ability to "cross the cycle", so the existing pattern of the industry is stable, and high elastic opportunities are more pregnant in the context of the outbreak of the epidemic and online migration of consumption. Pet products market mainly includes pet utensils (nest/mat, utensils, drinking water, etc.), cleaning utensils (pet shampoo, Drool, shaving knife, etc.), pet clothing (collar, shoes, clothes), pet toys (balls, teething sticks, training toys) and other segments.
4: Supply track analysis
4.1, why are we more optimistic about the investment value of pet products track at this stage?
More than 80% of the market share of pet food is occupied by international brands, the concentration is high and there is no authoritative industry standard in the industry, and the food track industry barriers are low, the characteristics of "big industry, small company" are obvious, domestic brands are weak but have advantages in research and development and manufacturers, and the product brands of various countries have invested a lot of marketing costs will mainly focus on grabbing market share. The industry price war is obvious, the enterprise profit is damaged; Among them, pet snacks, as a pet food that has risen in recent years, have a low concentration compared with the pet food market, and the production and sales have the characteristics of small batches and multiple batches. Domestic enterprises produce such products in the export trade with obvious cost advantages, or more worthy of attention. Pet health care, as a large segment track, has attracted high attention in recent years, but is limited by high entry threshold and high customer unit price and other factors, the market pattern is highly fragmented, and the operation is still dominated by self-employed clinics, and there are few large chain hospitals. It still needs time to cultivate and strengthen pet owners' attention and education on pet health.
Compared with the pet food and pet medical track, we believe that the pet supply track may be more investment value: Pet supplies circuit pattern compared with food dispersion, has not been occupied by international brands, and some national product brands with OEM to achieve segmentation of the leading field, while the major enterprises in order to solve the problem of weak domestic demand, have to expand the overseas market and through marketing promotion education market, jointly expand the pet supplies market space. In the long run, the pet industry will continue to reshuffle, with their own brand, research and development advantages and in the quality, research and development, channels and marketing of sufficient efforts to build a moat easier. We are optimistic about the growth logic of enterprises in the pet products industry:
1, domestic + foreign two-wheel drive to supplement the domestic market shortcomings: domestic pet products companies are mostly started by brand OEM, and the main revenue from overseas markets, companies rely on the deep cultivation in the field of single categories to achieve the leading position in the field of segmentation, and rely on years of experience accumulation and consumer insight in overseas mature markets to feed the domestic market. 2, the domestic pet industry in the early stage of development, the space is broad, companies began to focus on independent research and development, strengthen brand building to enhance product added value and profit: pet products began to develop their own brands to cultivate the second growth curve, while focusing on research and development to enhance product added value and improve their own profitability. 3) The influx of capital is expected to push the industry to maturity early.
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