China’s pet care spend set for dramatic increase, says Goldman

Goldman Sachs is urging investors to take a bet on China’s $30bn pet market and the prospect that the country’s city-dwelling youth will opt for well-fed cats and dogs over a new baby boom.

The US investment bank has laid out its case for the Chinese pet care market in a 104-page report that forecasts a stellar 19 per cent compound annual growth in pet food spending between now and 2030 as, among other factors, the diet of China’s 92m cats and 92m dogs shifts from leftovers to packaged pet food.

Critically, the report predicts a transformation of China’s pet market over the coming decade as the industry expands to meet the demands of fast-growing single and elderly populations. Both of these demographic groups, said Goldman, have a high correlation with higher per-pet spending than elsewhere in the world.

Forecasts of continuing growth in China’s singles population run contrary to the ambitions of the government which has been at ever greater pains to reverse the country’s falling fertility rate. Some analysts believe this could leave the world’s second-biggest economy old before it is rich.

Amid immense economic pressure, Chinese millennials have shattered centuries-old traditional, cultural and family taboos. Increasing numbers of younger Chinese are veering away from marrying and having children.

Those trends have continued despite Beijing’s efforts to pressure and incentivise women into having more children to arrest a fast decline in the national birth rate to one of the lowest in the world — about 1.3 births per woman.

Official forecasts suggest the number of people living alone in China will reach 92m next year, with not only younger people choosing to live alone or struggling to find a partner, but also a gradually rising divorce rate. More than a third of China’s dog and cat owners, according to Goldman Sachs, are single.

As well as basing its forecasts on a broad rise in Chinese incomes and the effect that similar macroeconomic factors have had on pet spending in other countries, the Goldman report introduces a variety of metrics to the traditional lexicon of equity research.

By page 18, readers are encouraged to start seeing the prospects of the market in terms of the populations and diet ratios of “penetrated pets” – animals whose food overwhelmingly consists of purchased pet food.

The report notes that despite high numbers of pets, the pet care industry in China is at an early stage. In 2020, 17.6 per cent and 14.5 per cent of Chinese households owned, respectively, a dog or a cat. That compares with 40 per cent and 35 per cent in the US.

Citing a white paper by Pet Fair Asia and, Goldman says that the industry in China was $30bn as of 2020, compared with $104bn in the US despite the larger absolute size of China’s dog and cat populations. Household ownership of pets and spending per pet are where the gap exists, the report explains.

The annual spending-per-cat in China’s tier-1 cities, wrote the five-strong team of Goldman analysts, will surpass that of the 2020 levels of other major developed countries by 2030. By that same year, they added, tier-1 urbanites’ annual spending-per-dog will have passed that of the UK and Japan, leaving only the US with a greater financial commitment to canine nourishment.

In a bid to satisfy the appetites of China’s growing pet food industry Chinese companies have also been targeting foreign pet food makers. Private equity group FountainVest Partners this month bought Ziwi in a deal that valued the New Zealand company at about $1.1bn.

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