London in Green

Chinese Pet Food Full of Potential, With Competition Set to Increase

December 3rd, 2012
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Paula FloresAnalyst Insight by Paula Flores, Head of Pet Care Research at Euromonitor International

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The Chinese pet care market is
valued at US$1.3 billion in 2012. With pet food sales accounting for only some
37% of that provisional total, the latent potential remains significant. After
all, this is a country with already one of the highest pet populations in the

With some 27.4 million dogs,
China ranks third in the world in terms of population. Click to Tweet! Meanwhile, its cat
population provisionally numbers more than 11 million animals in 2012. Click to Tweet! In terms
of other pets – including birds, fish, reptiles and small mammals – China ranks
first worldwide, at nearly 250 million animals. This is nearly double the
number of such pets in the UK, which ranks third in the world.

Demographic and socioeconomic
factors also favour continued growth for China’s pet food market. The
percentage of Chinese households with a disposable income of over US$10,000 is
36%. Click to Tweet! This corresponds to a four-fold increase in the number between 2006 and
2011. Likewise, the number of households with a disposable income of over
US$45,000 grew four-fold over the same period, although these account for just
3% of the households.

A very low prepared gap for
both dogs and cats also makes China one of the most dynamic pet food markets in
. The percentage nutrition stemming from prepared food remains well below
10% for dogs and cats. This indicates just how much potential there is in the
Chinese market, as most of the pet population is still eating table scraps
rather than prepared pet food. As a means of comparison, Brazil has a prepared
gap of 28% for cats and 50% for dogs, while the corresponding figures in
neighbouring South Korea are 30% for cats and 25% for dogs.

Among affluent Chinese pet
owners, international manufacturers have very strong brand equity. Domestic
players are more commonly found in the economy segment, and compete by enticing
new consumers from feeding pets scraps into the prepared food market. The top
two companies, Mars and Nestlé alone, enjoy a 58% market share in dog and cat
food. In comparison, the two leading local players, Tongwei Co Ltd and Nory Pet
Co Ltd, each achieved a modest 2% retail value share in 2011.

Two main challenges remain for
Nestlé and Mars, which are the leaders in mid price segment: bringing new
consumers into the pet food market in the first place, typically at the economy
end of the price spectrum, and driving more affluent consumers up the value
chain towards premium positioned (and priced) products and brands. Indeed, both
these dynamics are already impacting the competitive landscape for pet care in
China. While retail sales in 2012 remain driven by mid priced products, via
leading brands such as Whiskas, Friskies and Purina Dog Chow, the near future
will see the premiumisation trend speed up, making China a premium – and thus
value-led – pet care market.

Given these prospects, recent
reports that Vitakraft has set up a new partnership with Wanpy, a local treat
manufacturer, should come as no surprise. At the same time, Vitakraft has also
set up a new distribution centre in Shandong Province. Globally, Vitakraft had
a 1% retail value share in 2011, ranking it seventh amongst the top global pet
care players
. A bigger slice of the fast growing market that is Chinese pet
care might just put it ahead of Sanofi.

While Vitakraft’s presence is
strongest in other pet food, recent developments in more mature markets have
seen Vitakraft looking to develop dog and cat food. Offering mid-price products
in a market like China, and simultaneously pulling consumers up the value
chain, might just be the right way for it to diversify its operations and

Have a question or a thought to add? Leave us a comment below.
  • Lona Holm

    With all the animals dying in the US and Canada from pet treats made in China, I’d be so leary to ever purchase these products, even if I lived in Asia.