Petfood and pet care products in China, Thailand, India, Japan, Singapore, South Korea and Taiwan
Continued Dynamic Value Growth Performance
Due to improvements in disposable income levels as well as changing demographics towards favourable conditions for pet keeping, the total pet population in China increased during 2006. This had a positive impact on total value sales of petfood and pet care products across the country. In addition, the continued expansion of premium wet and dry petfood through specialised channels and of mid-priced wet and dry petfood through supermarkets/hypermarkets into second- or third-tier cities offers wider access to pet owners who are willing to feed their pets with packaged petfood. All this led to dynamic value sales growth of petfood and pet care products over the review period.
NestlÃ© (China) and Royal Canin Opening Local Production
In view of the high cost of importing dog and cat food from overseas, NestlÃ© (China) Ltd has set up its first local manufacturing site in Tianjin, China. The production site was completed in early 2007, enabling the company to reduce costs and provide tailored products for the China pet market, which fits with the company's intention of taking the leadership position from Effem Foods (Beijing) Co Ltd, which had established production sites for petfood and pet care products much earlier than NestlÃ© (China).
Meanwhile, premium dry dog and cat food player, Royal Canin Au Yu (Shanghai) Petfood Co Ltd, is planning to set up a local manufacturing site in Fengxian district, Shanghai, over the forecast period.
Strong Growth in Forecast Period
Value sales of petfood and pet care products are expected to see dynamic growth during the forecast period, due to the low penetration of prepared petfood within overall petfood consumption as well as the increasing number of pets being kept as companions. This will result in petfood products continuing to see faster growth in the premium segment, as well as growing interest in pet nutrition. Pet care products will continue to record dynamic growth due to increasing interest in pet nutrition and other pet care items such as pet shampoos and pet toys.
Economic uncertainty leads to certain changes in purchasing habits
Following the poor economic situation in Thailand in 2006, pet owners had to adjust their purchasing habits in 2007, with many of them switching to mid-priced and economy dog and cat food. However, economic uncertainty did not seriously affect the purchasing habits of middle- and high-income pet owners who remained willing to invest in their pets. This trend was instrumental in driving the value growth of dog treats and pet care products in 2007. On the other hand, manufacturers continued to boost the awareness of the benefits of prepared dog and cat food by participating in various shows such as the annual "PET Expo".
"One stop" outlets gaining popularity
As pets have several needs including food, accessories and veterinary care and as pet owners become increasingly busy, a number of "one stop" outlets that cater to all these different requirements, in just one location, have emerged. Furthermore, a multitude of veterinary clinics outlets, with their own pet shop and pet grooming centre sections, have appeared in the cities. Supermarkets/hypermarkets outlets have also begun to offer a much wider variety of products. While the focus in veterinary clinics outlets is on nutritious, premium products, the popularity of supermarket/hypermarkets outlets has grown due to their economy and mid-priced brand offerings.
Petfood and pet care products expected to continue its positive performance
With disposable incomes expected to increase over the forecast period and households expected to become smaller as well as the aging population being expected to continue to increase, it is expected that many people will continue to seek the company of a pet. Owing to increased awareness of the nutritional benefits of petfood and continued increases in the pet population, petfood and pet care products is expected to perform well with the strongest constant value growth coming from dog treats, as dog owners start to treat their dogs even more like family members.
Changing attitudes boost sales of petfood and pet care products
Changing lifestyles in the form of the rise in nuclear families and double income households have encouraged the growth of pet ownership in urban areas of India. Increasingly, pets are being looked upon as companions and members of the family rather than as guard dogs for example. Pet owners have started to take an interest in their pet's diet, health and grooming. A gradual shift towards prepared petfood was observed over the review period and pet owners have been more willing to spend on petfood and pet care products than ever before. This trend has spawned an entire industry, with a growing emphasis on pet care.
Locally manufactured brands advance while imported ones suffer
The ban on imported petfood due to the outbreak of Avian Flu, which importers grappled with through much of 2006, was continued in 2007. Despite the lowering of import duties, the reduced availability of petfood products proved frustrating for manufacturers, importers and consumers in 2007. Whilst a few foreign brands such as Royal Canin and Bento Kronen escaped the ban, others, including the US brands Pro Pac and Purina, were severely affected. On the other hand, locally manufactured brands benefited from the breakdown in the supply chain of imported brands.
Pooch pampering to drive value sales over the forecast period
The nascent petfood and pet care products industry in India offers strong growth opportunities in the forecast period. With pets increasingly being treated as companions and fashion accessories rather than guard dogs for security purposes, pet owners are expected to spend more on their pets. The urban areas of India are expected to drive the demand for petfood and pet care products over the forecast period, while dogs are expected to remain the preferred choice of pet for Indians. Thus, pooch pampering and other Western pet trends are expected to be key drivers of value growth over the forecast period.
Pet pampering pushes up sales
In 2007, petfood and pet care products in Japan witnessed current value growth of nearly 3% on the previous year. Sales were driven by the increasing humanisation of pets, rising pet ownership, a stronger preference for pure breed pets, and the greying pet population. A positive economic backdrop, and demographics which show an increasing proportion of elderly people and a declining birth rate, has resulted in a strong propensity for pet owners to pamper their pets with premium petfood. In particular, functional premium dog and cat foods have demonstrated robust growth in sales as a consequence. As pet care products became necessary to take care of aged pets, pet care products recorded the highest current value growth of the three sectors in 2007.
Growing strength of Uni-Charm Pet Care Co Ltd
Uni-Charm Pet Care Co Ltd saw an increase in its share of overall petfood and pet care products in 2006. The company continues to maintain the edge it has gained against NestlÃ© Purina Pet Care from 2004 and is second only to clear leader Master Foods Japan. Uni-Charm's success and growing strength can be attributed in part to the company's commitment to reinforcing its communications with its customers and the support provided to its retail partners. The former is especially key given Japanese pet owners' changing needs, while the latter helps to boost visibility of products and, therefore, sales.
Buoyant future in a nation where pets outnumber children
It is expected that Japan's petfood and pet care products market will post a constant value CAGR of around 3% over the forecast period. As of 2007, Japan has received wide media coverage on how pets outnumber children in the country. With a significant proportion of the population ready for retirement during 2007-09 on top of the declining birth rate, many of these retirees-to-be have indicated their intention to buy a pet when stopping work. Japanese pet owners have earned a reputation for being astute consumers with the ability to indulge their pets. These factors, taken together, create a favourable environment for growth for the petfood and pet care products industry.
Slower but still healthy year continues for petfood and pet care products
In 2007, the performance of petfood and pet care continued to become more stable with already high penetration of most products especially petfood. Volume growth remained positive, driven by healthy growth in the pet population, especially small mammals, fish and cats. However, bird ownership continued to suffer from the threat of bird flu and health scares, thus negatively affecting bird food sales too. Another factor sustaining the positive overall growth was the increasing indulgence of pet owners who strive to improve their pet's welfare and are more willing to spend extra money on petfood and pet care products. Despite the already established status of the industry, several innovative products were launched on the market towards the end of the review period, such as mineral water for pets and this indicates healthy prospects for the market.
Improved growth expected for the industry
Over the forecast period, the performance of petfood and pet care is expected to stay positive and even improve slightly in terms of compound annual growth rate (CAGR) for value sales. Even with the impending tougher regulations from the government expected in the forecast period, the industry remains optimistic. Events such as Aquarama exhibition - focusing on fish - are expected to raise pet owners' awareness and knowledge. More new products and species can be an eye-opener for visitors from overseas as well as local people. Dog food, cat food and small mammal/reptile food are also on track to keep performing healthily. Nonetheless, bird food has the least positive prospect of all petfood products in Singapore depending on how long the concerns over bird flu remain in the forecast period.
Recovering economy leads to moderate value growth in 2007
Petfood and pet care products was negatively affected by poor economic performance in South Korea over late 2004 and 2005. However, over 2006 and 2007, the economic outlook improved so petfood and pet care products experienced moderate recovery in value growth. Owing to the more optimistic economic outlook the value growth of premium dog food and premium cat food also showed signs of recovery in 2007 as pet owners began to trade up. Players in petfood and pet care products have also indicated that "luxury" products for pets have been increasing in popularity in South Korea, as affluent pet owners become more willing to spend large amounts of money on their pets.
Internet becomes a popular distribution channel
Pet shops continued to be the most important retail channel in petfood and pet care products in 2007, as such outlets tend to be conveniently located in residential areas. In addition, pet shop owners focus on building ties with their customers, making recommendations and discussing pet-related issues with pet owners when they visit an outlet. This has helped to consolidate the leading value share of pet shops in the distribution of petfood and pet care products. However, the internet has also become a more prominent channel of distribution in South Korea and offers a wide variety of products at lower prices, often by 25% to 30%, than in other channels. With regard to products on the internet there are various imported products that are very attractive to pet owners who are concerned about the health of their pets and who wish to purchase "premium" products.
Demographic trends expected to lead to higher pet ownership
Pet ownership in South Korea is expected to increase further over the forecast period owing to favourable demographic trends such as an ageing population and an increasing number of single-person households and households that have two incomes but no children. These types of consumers are all expected to have few dependents and high disposable incomes and are thus expected to desire pets for companionship. Furthermore, they are expected to treat their pets as family members and to purchase "premium" products for them, as these are typically associated with high quality. Increased focus on the quality of life of pets is also expected to lead to increased demand for products in pet care products such as pet accessories and dietary supplements.
Premium petfood and pet care products on the rise
The petfood and pet care products market shines in terms of value sales, while volume sales remain stagnant due to the declining dog population. Value sales of petfood continue to grow as consumers trade up from unprepared to prepared petfood and from economy or mid-priced to premium brands. For manufacturers, of more significance is the changing profile of pet owners in Taiwan as affluent working couples, childless families, retired individuals and financially independent single households become the largest groups of people that own pets. These people treat their animals as family members or child-substitutes. They are willing to spend money on food to keep their pets healthy, and on treats and toys to keep them happy. They are the groups that are less likely to be affected by the country's economic instability and the target consumers of premium petfood and pet care products.
Local manufacturers shine
In 2007, manufacturers such as Uni-President Enterprises Corp and Fwusow Industry Products Co Ltd are significant producers of petfood, and Tai Kong Corp and Hai Feng Feed Co Ltd are specialised in aquarium goods. Backed by strong distribution networks, these local manufacturers are able to compete with international players. Local products are generally positioned as mid-to-low price. In 2007, major breakthroughs in research and development from local producers such as Uni-President were seen, as this company launched dog food with Natto pro-biotic for intestinal health. This proved that local players are no longer followers in the market but can be leaders in both product invention and sales performance. Eyeing the potential in premium products, Fwusow also announced its plans to invest in a new production plant in Taiwan in early-2007. It aims to grow its market share during the forecast period.
Healthy future for the market since Taiwanese consumers enjoy the companionship of pets
Continuing growth in dog and cat food as well as pet care products are the main drivers behind the predicted robust growth of the petfood and pet care products market during the forecast period. Dogs and cats are considered family members and they are likely to receive better care than other pets. Other petfood, on the other hand, is expected to see more restricted development since consumer interest in other pets is dwindling. The consumer base of fish food is decreasing also. Fish food manufacturers are expected to focus more on the export market due to the dwindling interests in Taiwan.
Pet owners want a lot from their pet food brands. They want primary proteins that suit what they believe is best for their animal. They want grains or they don't. They want something customized, but it has to be easy to understand.
Constraints and crises, like those experienced in 2020, help drive innovation and sustainability offers context.