HuaChuang Securities: The high-end breakthrough of domestic pet food has ushered in an important opportunity, and the core competition in the market has shifted to supply chain self-control

According to Zhitong Finance APP, Huachuang Securities released a research report stating that in the process of pet premiumization, on the demand side, the role of users is shifting from "passive buyers" to "active selectors"; on the supply side, the consumption focus of the high-end pet food market is transitioning from a single nutritional indicator to comprehensive performance and functional segmentation. The introduction and localization of baking grain technology have become an important opportunity for the premiumization of domestic pet food. The core competition in the pet food market has shifted from price wars to "trust premiums" and "supply chain self-control"; successful premiumization means that differentiation can be clearly perceived by consumers, thereby alleviating pet owners' trust anxiety, allowing them to pay a trust premium while forming higher brand loyalty; at the same time, it further strengthens the logic of increasing market share for leading brands.

The main viewpoints of Huachuang Securities are as follows:

Drivers of Premiumization: New Generations' Equal Rights Interpretation of Premiumization

The rise of new consumption comes from the demands of new generations, characterized by: 1) emphasis on self-value expression and recognition of ideological consensus; 2) demand for information equality. This has given birth to new business models, such as the experience economy, social economy, and psychological compensation economy, which differ from traditional consumption in their shared characteristics.

New consumption brings a new expression of domestic premiumization. Premiumization in the new consumption era is interpreted as consumption equality, meaning that the quality-price ratio brought about by the revolution in supply chain efficiency and the full penetration of channels becomes a "dividend" that all citizens can enjoy, thus providing opportunities for basic consumption to achieve "high quality at low prices." At the same time, spiritual needs and emotional consumption generate high-end premiums, where decision-making power shifts from brands to "super fans," significantly increasing the success rate of user co-creation of explosive products.

In the process of pet premiumization, on the demand side, the role of users is shifting from "passive buyers" to "active selectors"; on the supply side, the consumption focus of the high-end pet food market is transitioning from a single nutritional indicator to comprehensive performance and functional segmentation. The introduction and localization of baking grain technology have become an important opportunity for the premiumization of domestic pet food. The core competition in the pet food market has shifted from price wars to "trust premiums" and "supply chain self-control."

What Makes It Fresh? Taking Xianlang as an Example, How Brand Premiumization Breaks the Deadlock

(1) Breaking the industry dilemma of "high-end not attracting traffic, low price not profitable" comes from the systematic layout of brand pathways. Its core logic lies in: 1) binding consumer mindset through technological breakthroughs; 2) acquiring precise traffic through content operation; 3) strengthening high-end recognition through standard construction. This has given birth to a new growth model, which is significantly different from traditional reliance on a single price or channel: ① Mindset logic: seizing the recognition of baking grain through "0 meat powder, all fresh meat low-temperature baking" technology, and reinforcing the "Xianlang = high-end" label through international cat competitions and group standards; ② Traffic logic: achieving high-quality user reach through grass-planting and evaluation content on platforms like Xiaohongshu, forming stable traffic; ③ Profit logic: building a "price pyramid," creating a full-cycle closed loop with trial packs, mid-priced combinations, high-end grain, and subscription services, effectively converting traffic into profit (2) High-end positioning is redefined in the Xianlang model. Its connotation is not only high pricing but also the scientific and professional endorsement of the brand through technological and standard premiums, while achieving consumption equality through content and trust chains. Specifically manifested as: ① Consumer selection: The pricing strategy of RMB 186/2kg precisely targets the core customer group willing to pay for scientific pet care and quality premiums; ② Trust building: Collaborating with authoritative institutions to release group standards, incorporating "freshness + safety" indicators into the system, promoting industry standardization; ③ Asset accumulation: Driving users from one-time consumption to long-term repurchase through comprehensive content collaboration, forming a leap from "traffic → user assets → brand assets."

Comparison of important factors in Xianlang's high-end positioning: Content capability comparison - Mao Ge Ping

(1) Mao Ge Ping: Strong content + IP barriers, comprehensive output from point to area. 1) Mao Ge Ping himself is the strongest IP; 2) Mao Ge Ping trains makeup KOCs, radiating the Mao Ge Ping IP from points to lines; 3) The offline counters form a large regional KOC matrix, achieving efficient conversion from offline experience to online reputation. These three factors work together to ultimately achieve excellent results of offline traffic spilling online, high success rates of explosive products, and high store efficiency.

(2) Content capability is the core lifeline of brand strategy in the era of online traffic red sea. Necessity: Online traffic costs have risen to high levels, and brands urgently need to break through traffic blockades to achieve efficient user reach at lower costs. Superiority: Miaofansi and Jingu have proven that user stickiness and mind share built by content are deep moats that competitors cannot imitate in the short term with capital, providing real and effective growth for brands.

Investment Suggestions

The high-end positioning of pet food is an inevitable result driven by "demand upgrade + supply rise." On the demand side, new generation consumers, empowered by information equality and cognitive surplus, are shifting consumption decisions from "brand-oriented" to "ingredient-oriented + trust-oriented," willing to pay premiums for emotional value and scientific formulas; on the supply side, domestic brands are breaking through foreign technology barriers with new processes such as baked grains, enhancing quality control and response speed through their own supply chains, achieving the harvest of "trust premiums." In this context, content capability has become the core competitiveness for brands to achieve low-cost customer acquisition and user retention in the traffic red sea.

High-end positioning is an explicit expression of differentiation, and only players without shortcomings in the industry can fight to the end. Successful high-end positioning means that differentiation can be clearly perceived by consumers, thereby alleviating pet owners' trust anxiety, allowing them to pay trust premiums while forming higher brand stickiness; at the same time, further strengthening the logic of market share increase for leading brands.

Target Aspects

Recommended leading industry targets: CHINA PET FOODS (002891.SZ), Petpal Tech. (300673.SZ), GAMBOL PET (301498.SZ), YUANFEI PET (001222.SZ).

Risk Warning

Brand and channel development may fall short of expectations; significant fluctuations in raw material prices; quality and safety issues in pet food; product innovation and promotion may not meet expectations