Companies across the globe are looking to share in China’s recent pet food boom, but tapping into the country’s market is a delicate business move. Fish4Dogs, a UK-based firm specializing in fish-based pet food, has seen significant sales growth after investing in the Chinese market.
Fish4Dogs was approached at Interzoo Germany in 2010 by the founders of Ocean Star, a pet food distributor based in Shenzhen, China. Ocean Star was looking to reposition their business from selling local pet food brands to specializing in a western brand and bringing it to the Chinese market.
Fish4Dogs was already undergoing research to assess market attractiveness across the globe, according to Fish4Dogs CEO, Graham Smith. “China scored very highly for several reasons, including emerging growth in premium pet food purchasing, a desire for western brands, an opportunity to be early market entrants, a fast-growing middle class population, awareness of the benefits of fish in the human diet, and humanization of pets to the status of family members,” said Smith.
Fish4Dogs CEO Graham Smith, pictured with his dog Sadie, has witnessed the company’s growth, which was recognized with the Queen’s Award for Enterprise 2017: International Trade. | Courtesy Fish4Dogs Ltd
Pet food mergers and acquisitions in 2017 have highlighted a rising global interest in the Chinese pet food market, and in February 2017, the Pacific Rim was ranked as the top rising pet food market.
A white paper released in January 2017 by the China Pet Industry Alliance in conjunction with other China pet associations details the country’s emerging growth. In 2016, the Chinese pet food market share accounted for the highest growth among pet goods, including supplies, drugs, services and other categories. Annual pet food sales reached 45.7 billion Yuan (US$6.85 billion), accounting for 37 percent of the industry scale, according to the report.
Despite the attractiveness of the Chinese market, it poses challenges to businesses on the outside looking in. “The biggest challenge was where and how to start, since China is such a huge territory,” said Smith.
Getting noticed in such a vast and highly fragmented marketplace required skill and foresight, according to Smith. “The solution was to work with our distributor to build sales one city at a time,” he said. “So, with a tailor-made strategy of having a technical pet nutritionist plus sales resource, we did just that.” Fish4Dogs and Ocean Star started in Ocean Star’s home city of Shenzhen and over the years moved on to Shanghai, Beijing and other cities.
“However, we only moved to another city when a solid base of sales had been established in the previous city,” said Smith.
The strategy makes sense, considering that China’s rising pet ownership is concentrated in Shanghai and Beijing, the country’s two largest cities. Twenty-four percent of Shanghai residents own dogs and 11 percent own cats, while in Beijing, 25 percent of residents own dogs and 8 percent own cats, according to a 2016 Petfood Forum China presentation on pet food market opportunities in the country.
During the marketing process, Fish4Dogs was surprised to find few differences between the European and Chinese pet food industries, according to Smith. Like European pet owners, Chinese pet owners are taking more time to research what is in their pet’s food and what is available in the market. “China is no different except in the speed of growth of premium brands linked to the GDP (gross domestic product) growth in the economy and a desire for western lifestyles, which include pet ownership,” he said.
Despite similarities between the European and Chinese markets, Smith said Fish4Dogs anticipated one major difference. Pet food e-commerce in China was much more developed than in other established markets such as the UK and the US.
Internet retailing, which benefits from the convenience trend and wider accessibility, is set to continue to close the gap on pet shops in 2017, according to Euromonitor International’s Pet Care in China report, released in May 2017.
The growth of e-commerce as an emerging market channel made selling Fish4Dogs products to Chinese consumers simpler, said Smith. Ocean Star used the e-commerce channel to promote Fish4Dogs outside of the traditional pet-shop trade, enabling the brand to be purchased in more rural areas of China.
Fish4Dogs also utilized social media as a powerful word-of-mouth marketing tool. “Satisfied customers spread their good news to prospective customers about the benefits of feeding a fish-based diet to their dogs and cats,” said Smith.
Fish biologists and pet food manufacturers have found that fish-based pet food’s success may depend on the species of fish used and where it comes from. Smith believes that his company’s Norwegian heritage and ownership has influenced their growth, as fishing is a major industry in Norway.
Although several brands have introduced fish-based recipes into their ranges, Fish4Dogs is one of the first companies to maintain a single focus on fish as an ingredient, according to Smith, and the company’s success may cause others to follow suit. “Fish4Dogs had the advantage of being a first-mover in using fish as the single protein source in dog food,” said Smith. “Of course, other players are entering the market, but we welcome competition. The more voices saying, ‘fish is good,’ the more the market will grow, and we are well placed to take our fair share of this growth.”
While cat trends continue, the pandemic has added to overall slow-growth treatment of the cat food market.
Premiumization and humanization, as well as automation, fueled continued operation growth in spite of the COVID-19 pandemic.