South Korean pet food brands fighting foreign competition

Income growth and popularity in pet ownership, especially dogs, have increased demand for pet food in South Korea, where foreign pet food brands are dominating the market.

(Karakoram | Dreamstime)
(Karakoram | Dreamstime)

Income growth and popularity in pet ownership, especially dogs, have increased demand for pet food in South Korea, according to a US Department of Agriculture (USDA) Foreign Agricultural Service (FAS) report released in 2016. The report shows that foreign companies are dominating the market, as 60 percent of all pet food consumed is imported and 40 percent is domestically produced.

In 2015, South Korea imported a total of US$148 million worth of pet food, an 11 percent increase from US$133 million in 2014. Respectively, imports from the US increased 17 percent to US$39.9 million from US$34 million (see Figure 1). 

Pet-food-import-values-by-country-2012-15_fig1

FIGURE 1: From 2012 through 2015, China consistently held the largest market share of South Korean pet food imports, followed by the US, France, Thailand and other countries. | Source: US Department of Agriculture Foreign Agricultural Service

 

Foreign brands exporting to South Korea

According to a Euromonitor International report on dog food in South Korea released in May, US-based Royal Canin Korea held the highest percent value share of any foreign brand during 2016 at 15 percent. A Euromonitor report on cat food in South Korea found that Royal Canin Korea also dominated 2016 cat food sales with a 24 percent value share that year. Wet cat food performed particularly well that year, leading to a 17 percent increase in value sales for the company.

After Royal Canin Korea, Lotte Nestlé Korea held the second-largest value share at 11.5 percent, and Mars Korea Inc. came in third at 10.6 percent.

As South Korean pets eat more healthily and have access to adequate veterinary care, they are living longer, and the senior pet population is increasing. Thus, there is high potential for senior-specific pet food, including potential for wet dog food, which is mainly sold at premium prices by dominant foreign brands such as Cesar Senior and MM Dogs.

Domestic brands expand their presence

Pet food market trends in South Korea continue to show that consumers prefer foreign products, but South Korean distributors, specifically large food companies, are making efforts to steer consumers toward domestic brands.

A report from Euromonitor International analyzing pet care trends in South Korea shows that leading domestic pet food manufacturers continued to perform well with economy brands in 2016. Domestic brands have typically focused more on dogs and cats in rural areas, whose owners tend to prefer economy dry food. However, a new trend in premium pet food has also emerged as more domestic players are producing superpremium human-quality pet food.

For example, CJ CheilJedang, a subsidiary of CJ Group in the human food and pharmaceutical sectors, has introduced two new premium pet food brands, O’Nature and O’Fresh. Both brands are marketed as designed with local ingredients, and O’Nature was launched as the company’s representative premium-level brand, according to the USDA FAS report.

Pulmuone, another leading company in fresh packaged food for humans in South Korea, sells its products domestically and internationally. The company launched its dog food brand Amio in 2014. Like CJ CheilJedang pet food, Amio is advertised as a product made from fresh, local ingredients. Another domestic company, Korea Ginseng Corp., is marketing a dog food made from organic foodstuffs in an effort to appeal to dog owners seeking premium products in urban areas.

In 2011, E-Mart Co Ltd., South Korea’s largest retail chain, launched its Molly’s Pet Shop specialty outlets. E-Mart also recently launched Molly’s Science and Molly’s Pro Balance, which is exclusively distributed via Molly’s Pet Shop outlets. For domestic brands like Molly’s, tapping into the right distribution channel for certain products may be a key factor in competing with foreign brands. As of 2015, grocery stores and Internet retailing are the most common pet food distribution channels (see Figure 2).

South-Korea-pet-food-distribution-channels

FIGURE 2: Foreign importers and manufacturers distribute pet food mainly via grocery stores and e-commerce, while small pet shops/vet clinics and other channels are reserved for premium products. | Source: US Department of Agriculture Foreign Agricultural Service  

 

The Euromonitor South Korea pet care report shows that e-commerce has increased as more online retailers distribute premium brands alongside economy and mid-priced brands. The Internet market has a price advantage over pet shops and veterinary clinics, and consumers are drawn to online retailing when buying premium brands, since premium products are often priced higher in-store.

The future of the South Korean pet food industry

As the quality of domestic brands increases, consumer preference has recently shifted slightly toward domestic brands, according to the USDA report. The report also shows that per capita income in South Korea reached US$27,340 in 2015 compared to US$24,696 in 2012. As South Korea’s per capita income continues to grow, the report predicts that the demand for premium and superpremium products may increase.

However, both Euromonitor reports on cat food and dog food in South Korea predict an increase in value and volume sales of economy dry food as well. All categories in dog food are expected to record growth in sales, as the dog population is predicted to increase over the forecast period to 2022. The report predicts that economy dry dog food will show the highest value compound annual growth rate (CAGR) and that economy dry cat food will see a value CAGR of 15 percent at constant 2016 prices. Premium pet food is typically more popular among urban consumers, but volume sales of economy pet food for dogs in rural areas are set to continue increasing.

The growth of economy dry food may be linked to South Korea’s stray cat and dog population in an environment increasingly concerned with the protection of animals. In particular, South Koreans who feed stray cats are more likely to buy economy dry cat food than premium cat food.

As polarization between economy and premium pet food strengthens in South Korea, the pet food market is experiencing tremendous overall growth. The market’s growth is only expected to continue as household incomes rise. An increase in e-commerce and a shift in consumer preference for locally sourced, high-quality pet food have set the stage for domestic pet food companies to compete with previously dominant foreign brands. 

 

 

More on the global pet food market

www.petfoodindustry.com/pet-food-market-data

 

Page 1 of 701
Next Page