Cathay Securities and Haitong Securities: Pet health has attracted attention, and domestic brands show overall stronger innovation capabilities

According to the Zhitong Finance APP, Guotai Junan has released a research report stating that the Asia Pet Expo will open in 2025, with a record scale. From the trend of new products, pet food is increasingly focusing on "precise segmentation" and "efficacy." The innovation of pet brands is shifting from pleasing pet owners to focusing on pet health, with domestic brands showing overall stronger innovation capabilities. Compared to leading brands in the US and Japan, which account for over 20%, the landscape of pet food brands in China is expected to become more concentrated in the future. As pet ownership matures, the willingness and frequency of pet owners taking their pets to the vet have significantly increased. On the other hand, upgrades in medical technology and equipment, combined with diversified drug supply, are driving up the average cost of pet diagnosis and treatment. Guotai Junan's main points are as follows: Asia Pet Expo opens, scale reaches a new high From the trend of new products, pet food is increasingly emphasizing "precise segmentation" and "efficacy." For example, Frigat has launched a new dry, zero-pressure fresh meat natural food, highlighting precise nutrition from fresh meat; Wanpi has debuted a precise nutrition series, introducing formulas for beautiful fur and intestinal protection; Lanshi has released a new product called "Milk Shield Grain," focusing on "meat-milk synergy," combining patented lactic acid bacteria technology from cat sources. Several brands continue to break through in marketing, such as leading collaborations with Wulin Waizhuan attracting numerous viewers. Overall, pet brand innovation is increasingly targeting pet health rather than just pleasing pet owners, with domestic brands showing stronger overall innovation. Post-00s pet ownership ratio increases, spending per pet grows According to the "China Pet Industry White Paper," currently, post-90s individuals remain the main force in pet ownership, accounting for 41.2%; the proportion of post-00s pet owners has significantly increased, rising from 10.1% in 2023 to 25.6% in 2024. Pets can provide strong emotional support to young people at a low cost. Post-00s are expected to become the growth driver for the next stage of the pet industry. Meanwhile, the average annual consumption per dog/cat is expected to grow by 3%/4.9% year-on-year in 2024. Pet spending in China has maintained growth in recent years, but compared to the US and Japan, it is still at a relatively low level (pet spending in the US and Japan is 4-6 times that of China), and the types of pet spending are also less than those in the US and Japan. As awareness of scientific pet care continues to build and various pet products and services gradually improve, there is still room for growth in spending per pet in China. The landscape is still in a dispersed stage, expected to trend towards concentration in the future China's pet food industry started relatively late, and competition is still fierce, with the market being highly fragmented. GAMBOL PET's Maifudi and Mars' Royal are the top two brands in China's pet food market in 2024, but their market shares are both in single digits. However, large brands can easily emerge in pet food because buyers and users are separate; buyers need brands to gain recognition of the products, and pet food has strong stickiness (cats and dogs cannot easily switch staple foods). Compared to leading brands in the US and Japan, which account for over 20%, the landscape of pet food brands in China is expected to trend towards concentration in the future. Pet health attracts attention, demand for pet medical care rapidly increases On one hand, the aging of pets increases the likelihood of illness. As pet ownership matures, the willingness and frequency of pet owners taking their pets to the vet have significantly increased. On the other hand, upgrades in medical technology and equipment, combined with diversified drug supply, are driving up the average cost of pet diagnosis and treatment. Demand for pet medical care is rapidly increasing, and the market continues to expand Risk Warning Exchange rate fluctuations exceed expectations; significant increases in raw material prices; intensification of China-U.S. trade frictions; intensified domestic market competition