Over the past two decades, China's pet industry has seen remarkable growth. In 2023, market revenue is projected to hit US$66.1 billion, with the pet food segment alone reaching US$7.45 billion. This sector is expected to grow at an annual rate of 10.96% (CAGR 2023-2027). In comparison, the United States will lead globally, generating US$57.63 billion in pet food revenue in 2023.
The COVID-19 pandemic and a growing aging population have significantly influenced China's pet industry. The pandemic accelerated existing trends, including a shift towards online shopping for pet products and an increase in pet ownership as more people work from home. According to iResearch, China's pet industry was valued at US$44.4 billion in 2020, growing to US$51.5 billion in 2021, with projections of reaching US$66.1 billion in 2023.
Demographic shifts have played a crucial role in this growth. Many older adults are adopting pets for companionship, while younger generations, who often prefer to remain single or child-free, see pets as a preferable choice. Almost half of Chinese households now own pets, including dogs, cats, fish, and birds. The rise of a large middle class with disposable income, along with urbanisation, has also driven this trend.
Education and income levels among pet owners are notably high. Despite only 23.61% of the population having higher education, most pet owners are university graduates. Additionally, a significant portion of pet owners are young, with 46.3% born after 1990 and 22.9% born after 1995. These pet owners tend to have higher earnings, with 46.7% earning between RMB 4,000 (US$593) and RMB 9,999 (US$1483), and 34.9% earning over RMB 10,000 (US$1,483).
The duration of pet ownership remains relatively short, with 52% of pet owners in 2021 having had a pet for less than three years. This suggests that new pet owners are driving market growth, highlighting the potential for continued expansion, especially among younger demographics.
Pet humanisation is on the rise in China, influenced by changing lifestyles and the adoption of Western habits, particularly among younger people. The National Bureau of Statistics of China reports that 61% of the 65+ age group own pets, often small, easy-to-care-for animals. Urbanisation also boosts demand for prepared pet foods, as they fit the busy lifestyles of city dwellers. Pet food varieties have become increasingly popular, with a growing focus on health and nutrition.
The pet food market in China is diversified, encompassing dry and wet foods, treats, and other products. Dog food remains the largest segment, making up 53.3% of the market in 2021. Freeze-dried dog food is gaining traction due to its nutritional benefits. China's pet food production reached 1.13 million tons in 2021, a 17.3% year-on-year increase, with major production in Hebei and Shandong provinces.
Leading players in the Chinese pet food market, such as Mars Incorporated and Nestle Purina Pet Food, continue to innovate. For example, Nestle invested around US$35.11 million in new pet food products in 2021. The market is consolidated, with multinational companies holding significant shares, although domestic brands are catching up.
In terms of market dynamics, cats have overtaken dogs as the most popular pets. By the end of 2021, there were 58 million cats and 54 million dogs in China. Cat ownership grew by 19.4% year-on-year, compared to 4% for dogs. However, dog owners tend to spend more on their pets, with an average annual spend of RMB 2,634 (US$390.62) compared to RMB 1,826 (US$270.79) for cats.
The pet industry in China includes not only food but also products and services like veterinary care, grooming, and training. The veterinary market, in particular, has significant growth potential, with a penetration rate of 75.8%. Despite the increasing number of pets, the current vaccination rate is below 50%, suggesting room for growth in veterinary services.
Technology also plays a growing role in China's pet industry, with products such as automatic feeders, electronic collars, and home camera systems gaining popularity. These "smart" devices are particularly attractive to tech-savvy younger generations.
China's pet product market, valued at US$5.5 billion in 2020, continues to expand, driven by demand for hygiene products, accessories, and toys. High-frequency purchases, such as daily necessities and hygiene items, are common, with an average of 2.7 daily necessity items and 2.5 hygiene products bought per quarter.
Regulatory changes are also shaping the market. The Ministry of Agriculture and Rural Affairs of China (MOA) has introduced new regulations for pet food, affecting both domestic and imported products. The United States is currently the largest exporter of pet food to China, with US$304 million in exports from January to November 2022, a nearly 200% year-on-year increase.
Looking ahead, China's pet industry is poised for continued growth. With a large and increasingly wealthy consumer base, the market offers ample opportunities for investors. As younger generations enter the workforce and middle-aged millennials become wealthier, spending on pets is expected to rise, especially in the absence of children. The industry's expansion, which began in the 1990s, is now accelerating, offering a promising future for both domestic and international players.
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