Ecuador drops value-added tax on pet food

Beginning February 1, more than 8 million Ecuadorian families with pets are expected to see a reduction in pet food costs.

The elimination of VAT on pet food marks a significant milestone for the Ecuadorian market.
The elimination of VAT on pet food marks a significant milestone for the Ecuadorian market.
yarndoll | Bigstock.com

The Ecuadorian Committee for Pet Nutrition (CENMA) has confirmed that, starting February 1, 2025, pet food will be exempt from value-added tax (VAT). This initiative, driven by CENMA’s collaboration with government entities, represents a major win for pet owners and the pet food industry alike. More than 8 million Ecuadorian families with pets are expected to see a reduction in costs, potentially improving access to higher-quality pet food and reflecting a governmental effort to support animal welfare.

Ecuador’s pet food industry is poised for substantial growth, driven by higher-than-expected pet ownership rates. According to the 2022 pet census, the country is home to 5.2 million dogs and 2.4 million cats — figures that surpass previous industry estimates. With a population of 17 million, where 39.7% are adults aged 30 to 64, the demand for pet food is expected to rise steadily as more households integrate pets into their lifestyles.

Current projections suggest that Ecuador’s pet food market will exceed 300,000 metric tons by 2024. The VAT exemption is expected to further accelerate this growth by lowering costs and making pet food more affordable for a larger segment of the population.

Opportunities for local manufacturers

Ecuador’s pet food sector is predominantly supplied by local manufacturers rather than imports. Companies like Pronaca are already responding to the growing demand by expanding production capabilities. Pronaca’s $25 million investment in a new facility, set to increase capacity by 25%, positions the company to capture a larger share of the market.

With the VAT exemption in place, local producers have a unique opportunity to strengthen their market presence, offer more competitive pricing, and potentially introduce new product lines tailored to evolving consumer preferences.

Potential challenges and considerations

While the VAT removal is a positive step, it presents certain challenges. Increased demand may put pressure on production capacity and supply chains, requiring manufacturers to scale efficiently without compromising quality. Additionally, competition among brands could intensify, leading to price fluctuations and shifting consumer expectations toward premium or specialized formulations.

The elimination of VAT on pet food marks a significant milestone for the Ecuadorian market. It not only benefits consumers by making pet ownership more affordable but also encourages industry growth and innovation. With strong demand and local manufacturers investing in expansion, the future of Ecuador's pet food market looks promising.

CENMA’s efforts in securing this tax relief reflect their commitment to promoting pet nutrition and supporting the industry’s development, setting a precedent for other markets in the region to consider similar measures.

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