In recent years, major consumer brands have rubbed the heat of "kittens and puppies".
For example: McDonald's launched a limited cat's nest package, Heytea opened a pet-friendly theme store, Perfect Diary launched a puppy eye shadow disk with Li Jiaqi's pet Never, Starbucks launched a cat's claw cup and so on.
In fact, the marketing idea of bundling with pets has indeed allowed these companies to obtain a double harvest of traffic and sales.
McDonald's 100,000 limited cat nests were all sold out in one day, and the discussion of related Weibo topics exceeded 100 million; the pet-friendly theme store opened by Xicha attracted many consumers to take photos and punch cards; Perfect Diary and Li Jiaqi's dog Never joint puppy eye shadow disk, 100,000 inventory sold out in less than 1 minute in Li Jiaqi's live broadcast room; Starbucks's cat's paw cup is even more "a cup is difficult to find".
Behind the "big fire and big sale", the new consumer group's love and pursuit of new things also reflects the continuous rise of the mainland pet market.
Infographic According to IC photo
Side A of Pet Economy:
Booming hot market
According to the "2020 China Pet Industry White Paper", the number of pets and pet owners in the mainland continues to grow. In 2020, the number of dogs and cats in China has exceeded 100 million, and the number of dogs and cats has reached 62.94 million, an increase of 2.8%; of which more than 60% of pet owners are distributed in first- and second-tier cities. The growth of the number of pets has driven the pet industry to enter the broader blue ocean market.
"I'd rather save money and give my pets better living conditions." This is the inner monologue of many pet lovers at present. The pet industry chain can be divided into three parts: upstream for pet adoption and trading, midstream including pet food, supplies, etc., downstream including pet grooming, foster care, medical, insurance and other services.
It is precisely because the status of pets in people's lives is getting higher and higher, around the pet industry chain, the entire industry began to "grow rapidly".
According to data released by Taobao, in 2019, the "Double 11" cat food has surpassed infant milk powder and won the top spot of the "Most Popular Imported Goods"; during the "Double 12" period in the same year, the sales of cat Hanfu, Japanese pet quilts, pet dryers, and kennel electric blankets have increased significantly.
During this year's Spring Festival, pet Chinese New Year's Eve meals, pet couplets and other products are also very popular on the e-commerce platform, taking pet Chinese New Year's Eve rice as an example, the price ranges from tens to hundreds of yuan, and the highest is nearly 1,000 yuan.
Pet consumer goods have been involved in all aspects of pet daily life, according to the "2020 China Pet Consumption Market Report", the average annual consumption amount of a single pet in Chinese in 2020 is 6653 yuan, compared with 5561 yuan in 2019, an increase of 19.6% year-on-year; it can be seen that pet owners are more and more willing to spend money for pets.
At the same time, according to the "2021 China Pet Consumption Trend White Paper", the pet economy in 2020 has reached nearly 300 billion yuan, and it is expected to reach 445.6 billion yuan by 2023.
Source: iResearch, Red Star Capital Bureau
The number of pets and the willingness of consumers to spend money for pets are constantly improving, and under the huge market size, the pet track is particularly "tempting".
According to Tianyancha data, since 2015, the pet track has quickly become the "fragrant food" of capital. In the years that followed, the market enthusiasm for both the amount of financing and the amount of financing did not diminish in the slightest. According to the incomplete statistics of One Glance Commercial, a total of 42 financings occurred in the domestic pet industry in 2021, and the disclosed financing amount has exceeded 3.1 billion yuan.
The main areas of market focus are pet food, pet supplies and pet medical treatment.
Pet food is a major necessity throughout the pet life cycle, with high frequency, strong demand, high repurchase rate and other characteristics, so it is the most important area in the entire pet consumption structure. In 2021, there were 16 financing incidents in the pet food field, with a cumulative financing amount of more than 1.6 billion yuan.
Source: Public Information, Overview Business
Pet supplies are needed for pet life, other consumer goods in addition to food, and are currently developing in the direction of intelligence. In 2021, there were 13 financing incidents in the field of pet supplies (including pet intelligence), with a cumulative financing amount of nearly 300 million yuan, which is the second largest market segment after pet food in terms of financing.
Pet medical care is the segment with the highest capital and technical threshold in the pet economy, covering three categories: pet diagnosis and treatment, pet medicine, and pet vaccine. In 2021, there were 5 financings in the pet medical industry, and the cumulative financing amount reached 700 million yuan. From the perspective of financing amount, enterprises with more than 100 million yuan of financing in the pet industry in 2021 are mainly concentrated in the field of pet medical treatment.
In addition, according to Tianyancha data, as of the end of October 2021, there have been more than 750,000 pet-related enterprises in China, and the growth rate of newly registered enterprises in the first half of 2021 is as high as 237.74% year-on-year.
The entry of new players and the continuous increase of capital have made the pet track full of vitality and liveliness.
B-side of pet economy:
Listed companies sitting on the "cold bench"
Although the pet economy seems to be very hot, there are relatively few A-share listed companies focusing on the pet economy in China, mainly pet food manufacturer Petty Shares (300673. SZ), Zhongpet Shares (002891. SZ), and pet supplies manufacturer Yiyi Shares (001206. SZ); at the same time, the enterprise volume is relatively small, and the business coverage is relatively narrow.
1. The performance of pet listed companies
From the perspective of corporate revenue, according to the financial report data of various enterprises, the operating income of Petty Shares, Zhongpet Shares and Yiyi Shares in the first three quarters of 2021 was 915 million yuan, 2.012 billion yuan and 944 million yuan respectively, with a year-on-year growth rate of -5.8%, 24.2% and 2.2% respectively; while the high revenue of Pet Shares in the first three quarters was mainly due to the acquisition of 70% of the equity of PFNZ of the New Zealand pet canning factory, which was included in the consolidated statements in the third quarter. Regardless of the acquisition factor, the revenue growth rate of each enterprise in the first three quarters was relatively weak.
In terms of net interest rate, the net interest rate of each enterprise is not high. Petty shares, Zhongpet shares, Yiyi shares in the first three quarters of 2021 net interest rates of 8.78%, 5.26%, 10.98% respectively; in addition, Petty shares said in the 2021 performance forecast that the company's net profit attributable to shareholders of listed companies in 2021 fell by 47.75% to 21.62% compared with the same period last year, mainly because Vietnamese factories were affected by factories such as the shutdown of the epidemic.
At the same time, the main source of revenue of the three companies is from overseas. According to the financial report, in the whole year of 2020, the overseas and other business revenue of Petty shares, Zhongpet shares, and Yiyi shares accounted for 85.14%, 75.89% and 88.13% of the total revenue, respectively, and the core of the so-called overseas business is to provide production oem services for foreign pet brands.
Since the company mainly takes the "OEM" mode of production, the gross profit margin of the enterprise is not high. In contrast, freshpet (FRPT.US), a company focused on fresh natural pet food in the United States, basically maintained a gross profit margin of more than 40%. In addition, the "OEM" model of these domestic enterprises also needs to face the risk of raw material cost changes in the upstream of production, and there is no premium for their own brand. Without the core right to speak, it can be said that all that is earned is "hard money".
Source: Company Financial Report, Red Star Capital Bureau
2. Self-built brand, enterprises still have a long way to go
In order to improve brand influence and increase the bargaining power of products, these domestic companies that started as foundries are trying to launch their own brands and obtain greater profit margins.
For example, China Pet shares launched "Wanpy Naughty" and "Zeal True" in the domestic market, and launched pet snack brands "Wanpy", "Jerky time" and "Toptrees" in overseas markets; Petty shares launched its own brands Haoshijia Healthguard, Tooth Energy ChewNergy, Knight Banquet Minuteway, Petty, CPET, etc.; Yiyi shares launched its own brand as HuSHPET.
On the one hand, the end users of the pet track are more dispersed and it is difficult to quickly reach the consumer level; on the other hand, the purchasers and users of pet food are separated, and consumers tend to buy brands they trust, so it is relatively difficult to obtain customers.
This may lead to the embarrassing situation that companies will burn money to smash marketing in order to launch their own brands, but the market response will be mediocre. For example, the domestic pet e-commerce company went to the United States to list the first share of Boqi Pet (BQ.), the company first launched the cost-effective route of "Yiqin", and invited Jia Nailiang to endorse, and then launched the light luxury route of the freeze-dried food brand "Magic Coffee". However, the situation of these two private brands is not optimistic, product sales have always been difficult to increase, and the proportion of net income of private brands has been in a downward trend. According to the financial report, in fiscal 2019, fiscal year 2020 and fiscal year 2021, the net income from private labels accounted for 25.9%, 19.2% and 15.1% respectively.
Figure according to the company's financial report
For these listed companies in China, there is still a long way to go if they want to get brand dividends and gain the recognition of more consumers.
Thinking triggered by the A-side and B-side
On the one hand, there is a huge market and scrambling capital, on the other hand, the development path of listed companies is not mature, and the pet track seems to have a "fault" at the capital level.
The reason for the "fault" is mainly that the current domestic pet market is still in a period of barbaric development, the market as a whole is disorderly competition, and the concentration of the entire industry is also low.
From the perspective of the pet food industry, according to Euromonitor data, the domestic pet food market CR10 in 2020 only accounts for 18.2% of the market size of China's pet food industry, which means that there are many players in the pet food industry, but there are very few brands that really have the right to speak in the market. In addition, due to the low threshold of the pet products industry and the diversification of pet demand, the industry is also highly fragmented, and there is no situation where big brands have run out.
Due to information asymmetry and resource asymmetry in the pet medical market, in recent years, the entire industry as a whole has shown a state of "frequent chaos". According to whale's "Pet Medical Industry Report", there were 10,000 to 15,000 pet hospitals in the country in 2019, of which the number of large-scale chain hospitals accounted for less than 15%. There are many problems in the pet medical industry, such as opaque fees, low medical standards, and poor service quality.
brief summary:
The mainland population base is large, and due to factors such as the aging of the population and the pressure of young people's lives, the future imagination space of the "economy" is huge, but on the other hand, the development of the mainland pet market is still in its infancy, and the industry still needs time to practice the law of survival of the fittest in the market. For players, this is an opportunity and a challenge.
Red Star News reporter Yu Yao Liu Mi
Edited by Tao Yueyang
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