China’s pet market magnet for investors

vivadmin/ January 3, 2018/ News

Mr Li Mingjie is a pet industry investor’s dream. The 23-year-old e-commerce worker spares little expense to make his pooch happy.

“I’ll happily splash out on my dog,” Mr Li told Reuters as he walked his brown poodle Coco in Pingyang, a town on China’s east coast. “She is like a child to me.”

He is far from alone in China these days.

The growth of the middle class, a massive move to urbanisation and other demographic changes – such as rising numbers of elderly, and people getting married and having children later than before – have been turning this into not just a pet-owning society but also one that is prepared to lavish money on them.

Chinese shoppers are set to spend 46.3 billion yuan ($7.2 billion – €5.9 billion) on their pets by 2022, up from 17.5 billion yuan ($2.7 billion – €2.2 billion) this year as the market grows at around an annual 20 per cent, according to estimates from Euromonitor.

The US market may be much bigger with an estimated $44.4 billion (€36.8 billion) in sales this year but it is growing around only 2 per cent a year.

The surge in Chinese demand is not only great news for global pet food behemoths such as Mars and Nestle, but also rapidly growing Chinese pet food and product companies, as well as entrepreneurs setting up everything from dog salons for grooming to fancy pet hotels.

It is an amazing shift in a country where owning pets was once banned for being too much of a bourgeois pursuit under revolutionary leader Mao Zedong, and where there is still an annual dog-meat festival in the southern Chinese town of Yulin.

“There is huge growth potential in the Chinese market,” said Mr Liu Yonghao, the chairman of Chinese company New Hope Group at a recent event in Beijing, noting that younger people especially were developing closer bonds with their pets.

“They are willing to spend lots of money on the pets because they have become like part of the family,” he said.

New Hope joined a consortium, including Singapore’s state-owned fund Temasek and private equity firm Hosen Capital that just closed a $1 billion (€829 million) deal to acquire Australian pet food maker Real Pet Food, with the aim of taking the firm’s brands to China.

The growing popularity of pets is turning China into a magnet for local and global firms.

Mr Thomas Kwan, chief investment officer of Hong Kong-based fund manager Harvest Global, said China’s pet market would be one of his personal picks for 2018 as consumers looked to shift up to premium products.

He said the questions pet owners are asking now are “Can you buy them healthy foods? Can you give them a good lifestyle?”

Pingyang, where Mr Li lives with his poodle, has big ambitions in China’s pet economy.

The county, which is near the wealthy city of Wenzhou and has a population of almost one million, is among a slew of places responding to Beijing’s call to create 1,000 “speciality towns” by 2020 in industries from cloud computing to chocolate.

In Pingyang’s case the theme is pets. It has a dog bone-shaped visitor centre and pet factories, while locals said there were plans for pet-themed hotels and a retail hub.

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