Pets promise profits

Amy is going for a walk, Dengdeng is having his lunch, and Lele is playing with a ball.

As you might have guessed, these characters are dogs, not people – but that doesn’t mean they aren’t on social media

Smellme, a smartphone app for Chinese pet lovers, is part of the multi-billion yuan industry that has sprung up around the household animal in recent years.

It currently has five million members, the majority of which are dog owners. They post everything their pooches do – from having puppies, to trying on new clothes and even going sailing.

As China enters the year of the “Earth Dog”, more and more of the country’s 1.4 billion citizens are choosing to raise pets.

According to a recent report by the Chinese Pet Products Association, there are now 50 million registered dogs on the mainland and pet ownership in general is growing at about 15% a year.

The result has been a massive explosion of pet-related goods and services: China has gone from being a country where keeping a dog was frowned upon because it was too ‘middle class’, to one where it is fine to spend Rmb1,000 ($158.64) on a photo shoot for your new puppy.

“I’ll happily splash out on my dog,” Li, the owner of small brown poodle recently told Reuters. “She is like a child to me.”

The pet association report found that Chinese spent Rmb134 billion on services and products in 2017, up 10% from the year before. By 2020, it forecasts that the annual figure will reach Rmb188 billion.

“Changes in China’s population structure such as groups of unmarried youths, empty nest pensioners and DINK families (double income, no kids) provide a large space for growth of the market,” it said.

Interestingly, the largest growth in pet ownership comes from people under 30 who want animals for emotional sustenance. The report also noted a shift in attitudes to pets when people start having children. In the past it was common to get rid of a pet when a baby arrived. Now families will actually add pets when they have children.

All of this is producing something that might be termed “canine kuai” or “doggy dollar” – an economy set up to cater to the needs of all these new pooches.

So just what do these products and services include? Well, for start there are the dogs themselves, and the clear evidence is that Chinese dog owners are very enamoured of pedigree breeds.

A small brown Poodle (currently China’s most popular dog) costs Rmb5,000 on average, a Corgi about Rmb6,000 and a Labrador about Rmb6,500.

The next most expensive outlay is the food. There is a strong preference for organic or natural products, and just as with baby formula, there has historically been a distrust of local brands.

In 2014 a company in Jiangmen was found to have smuggled tonnes of dry American dog food into China to meet demand for goods people could trust.

Since then Chinese brands such as Natures Bridge, Pure&Natural and Lanshier have gained market share at the top end of the market.

After food the next biggest item on pet owners’ shopping lists is healthcare (spending on vets makes up 22% of total spend, versus 35% for food), followed by beauty and bathing. Over 40% of dog owners take their dogs to a salon and the average annual spend on services such as grooming is Rmb2,200.

Last year a clinic in Beijing made headlines because it was offering acupuncture for dogs. Meanwhile some pet product companies have started to produce muzzles with filters to protect dogs against smog.

Yet in a country where some still see dogs as something to be eaten (see box), arguably the most surprising development is that some Chinese want to hold funerals for their pets and even bury them in places they can visit. For instance a one square metre plot at the Anji Cemetery outside Hangzhou costs upwards of Rmb8,000.

Capitalising on the country’s growing demand for pet products, several food manufacturers have tapped the A-share market to raise funds.

Wenzhou-based Peidi completed an initial public offering on the Shenzhen market in July, for instance, and it saw its shares soar 44% on the first day of trading. Investors are taking heed. Boqii, an e-commerce platform that specialises in pet products, received $102 million in backing from international private equity investors as well as China Merchants Bank in 2016.

Lu Yi is typical of why fund managers are so excited by the growth prospects of the ‘dog industry’. For the well being of her 13 year-old Schnauzer no expense is spared, Lu told Forces Behind Brands, a news portal.

The dog, she admits, is like a son to her (Sina, a portal, says one recent survey revealed that over half of pet owners like Lu “treat their pets like their children”). Her Schnauzer eats only organic and low-sodium dog food, gets new outfits whenever Lu is shopping online, and in the hot summer months is a frequent visitor to high-end pet salons.

Owners like Lu make very emotional decisions where their pooches are concerned – leading them to be less price sensitive. That makes them a lucrative demographic. Sina adds that there are now 200 million ‘singletons’ in China, a number that suggests there’s huge potential for dog ownership to grow.

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