Tianfeng: The pet economy continues to heat up, breaking through 300 billion for the first time, focusing on the dual themes of "domestic substitution + consumption upgrade".

Tianfeng released a research report stating that China's pet economy is booming, with the increasing proportion of contemporary singles and the dual-wheel drive of pet emotional companionship driving industry demand growth. In the pet industry, food accounts for a high proportion and is the main foundation. Online channels are the largest sales channel for pet food, with online sales of staple food accounting for over 80%. The industry believes that with the rapid rise of domestic brands, focusing on "domestic substitution + consumption upgrade" as the dual main line. Recommended targets: Gambol Pet Group (301498.SZ), Petpal Pet Nutrition Technology (300673.SZ), Yantai China Pet Foods (002891.SZ), LUSCIOUS. Tianfeng's main points are as follows: With the continuous warming of the pet economy, China's pet consumption market has exceeded 300 billion. According to the "2024 China Pet Industry White Paper," the consumption market for urban dogs and cats has grown by 7.5% to 300.2 billion yuan, with the dog consumption market reaching 155.7 billion yuan, a slight increase of 4.6%; the cat consumption market reaching 144.5 billion yuan, an increase of 10.7%. The increasing proportion of contemporary singles and the dual-wheel drive of pet emotional companionship are driving industry demand growth. 1) From the perspective of the evolution of single society: According to data from the Ministry of Civil Affairs, the number of marriage registrations in China in 2024 fell to a new low since 1980, reaching 6.106 million pairs, and the birth rate also decreased from 13.57% in 2016 to 6.77% in 2024. The number of marriages hit a new low, and the trend of not getting married and not having children is promoting another economic track. 2) Looking at the age distribution of pet owners, the core drive comes from the post-90s main group (41.2%) and the accelerating penetration of the post-00s new generation (25.6%, +15.5pct YoY). According to CCTV News data, the estimated number of graduates from national universities in China in 2025 is 12.22 million. With more post-00s entering society, it is expected that the post-00s will also become one of the main forces in pet ownership in the future. Pet food accounts for a high proportion, and the pet industry is becoming increasingly diverse. The staple food market still accounts for 52.8% of the basic market, while non-staple categories such as medical (28.0%), supplies (12.4%), and services (6.8%) account for over 47%, indicating significant penetration space. Compared with the more mature pet market in the United States, pet consumption of dogs and cats in China is still at a low level, with a clear logic of rising quantity and price. Online: Online channels are the largest sales channel for pet food, with staple online channels accounting for over 80% of sales. According to the "2023-2024 China Pet Industry White Paper," the traditional online channels for pet owners to purchase staple foods accounted for 80% in 2023, ranking second is the pet store channel, accounting for 31.8%. At the same time, there was a significant increase in live broadcast platforms in 2023, up by 6.3 percentage points. E-commerce has formed a multi-polar pattern, with Taobao channels dominating and Douyin channels growing rapidly. 1) Taobao leads other platforms in the pet industry. According to the "2024 Taobao Tmall Pet Industry Data White Paper," Taobao is currently the largest e-commerce platform in the pet industry, accounting for over 50% of the market share on major e-commerce platforms. In addition, the number of pet owners on Taobao has exceeded 100 million, with double-digit growth year-on-year. 2) Douyin e-commerce shows strong growth in the pet category. The pet category on Douyin e-commerce grew by 65% in 2024, performing exceptionally well during major promotional periods, such as a 168% increase during the 2024 618 event and a 205% increase during the Asia Pet Exhibition. Searches for "pet" grew by 415.59% year-on-year, consumer growth by 92%, and influencer growth by 102%. 3) JD's overall transaction user numbers and transaction activity have further increased. In 2024, the number of new transaction users on JD increased by 39%, with a 4% increase in purchase frequency; the number of existing transaction users grew by 26%, with an 8% increase in purchase frequency. The high-value user group continues to expand and maintain high activity. Plus user numbers increased by 38%, with a 2pp increase in the structure ratio and a 12% increase in purchase frequency. The user numbers for cat-related categories showed the most significant growth, reaching 34%. Domestic independent brands continue to strengthen, while foreign brand rankings decline significantly. The top 10 brands for cats and dogs in the 2024 Tmall Double Eleven ranking were: Meowforall, Xianlang, Lanshi, Freja, Honest One, Royal, Bailey, Netease Yanxuan, Crave, and Icanina. Throughout the entire Double Eleven period, the overall growth rate for cat and dog food exceeded 40%, with new technology leading the growth. Cat baking food grew by over 120%, dog baking food by over 60%, and cat and dog prescription food by over 80%. Offline: 1) Retail sales in offline channels have shown signs of recovery, with differentiation in physical services. Offline channels account for 44% of the total payment amount of pet consumers in China, with pet stores/hospitals ranking in the top three during non-major promotion periods. Physical formats show polarization: standard retailers improve efficiency through "experience + instant delivery," while grooming/boarding services rely on professionalism to achieve high premiums. Is offline consumption still important? The consumer spending structure shows that the demand for pet raising still heavily relies on offline physical services and local support services, and offline scenes have an irreplaceable role in service delivery, which determines that physical channels have always been the infrastructure of this industry. 2) The number of pet stores has exceeded 90,000, with a high proportion of comprehensive pet stores. As of December 2024, the Pet Industry Database Mini Program had collected data on 93,986 operating pet stores, including over 70,000 comprehensive pet stores, 16,500 single-product stores, and nearly 7,000 live animal stores. In terms of grooming and care, pet owners' preference for pet stores has increased significantly. The proportion of pet owners choosing pet stores for grooming reached 68.3%, an increase of 9.2 percentage points from 2023. The proportion of pet owners choosing pet stores for boarding pets reached 50.9%, an increase of 6 percentage points from 2023. 3) The share of the pet medical market accounts for nearly 30%, and the number of pet hospitals is rapidly increasing. In terms of consumption structure, the medical market segment in the pet industry has reached nearly 30% of the market share, with a significant increase in the number of pet hospitals.Market share is 28.0%. According to data from Pet Industry Home, as of December 2024, the Pet Industry Home app has a total of 28,975 operating pet hospitals in its database. This includes 25,425 commercial veterinary hospitals and 3,552 livestock veterinary stations with various functions such as pet quarantine, vaccines, and rabies control. In addition, in first-tier cities, the medical expenses for single cases of dogs or cats have seen the most significant growth. In first-tier cities, the medical expenses for dogs reached 664.9 yuan, an increase of 7.9% compared to the previous year, and the medical expenses for cats reached 510.9 yuan, an increase of 7.2% compared to the previous year.Risk Warning: Fluctuation in raw material prices risk; Market competition risk; Exchange rate fluctuation risk; Export trade friction risk.