The market size of the small "cute pet" will exceed 100 billion, and the hot track pet enterprises have joined the IPO ranks to establish their own brands or the key to victory

In recent years, under the catalysis of the epidemic, the pet economy has become a new wind, and many pet enterprises have also taken the opportunity to go public. First, Luc Shares and Yuanfei Pets have successfully landed in A-shares, and then Tianyuan Pets, Guaibao Pets and Fubei Pets have lined up for IPO. Recently, the registration of Tianyuan Pets, which has passed the meeting, has also been approved to take effect, which means that A-share pet enterprises may add another senior general.

However, there were also car rollovers in the listing of pet enterprises. In January this year, Zhongheng Pets, whose listing application was accepted for only 17 days, withdrew its application materials after being selected for IPO on-site inspection, which means that there are still many problems behind it that have not been really solved.

In fact, although the pet track is hot, there are also pain points for industry enterprises. Many pet enterprises are still overseas "OEM". However, under the background of continuous trade frictions, the risk behind excessive dependence on overseas markets is not small.

The 100 billion level pet track has entered a mature stage

The team of A-share pet enterprises is growing

China's pet market started late, but the speed of its rise is beyond imagination. According to Euromonitor's prediction, the industry scale will increase from 11.8 billion yuan in 2008 to 163.6 billion yuan in 2027, with a CAGR of 15%. It is expected to enter the 100 billion level track in the near future.

From the perspective of market development stage, China's pet consumption will enter a mature period in 2020 after more than 20 years of introduction, education and popularization. The market space is full of imagination, which may be the reason why pet enterprises compete for listing in recent years.

According to the data from the Pet Industry Branch of China Animal Husbandry Association, in the pet industry market consumption structure in 2021, the pet food industry will account for 51.5% of the market, the pet medical industry will account for 29.2% of the market, while the pet service industry, including pet foster care, pet beauty, pet weddings and funerals, will account for 12.8% of the market, in addition, pet toys, pet clothing and other fields will account for 6.5% of the market.

Up to now, there are 7 listed companies mainly engaged in pet consumption in A-share, including Petty, Zhongchong, Ruth and Yiyi at pet food track, Hofeng and Ripple at pet medical track, and Yuanfei pets at pet supplies track.

In addition, there are many companies that have arranged the pet track. Red Week found that there are 46 A-share listed companies that have pet consumption in their business scope, such as Angel Yeast, Antarctic E-commerce, Kid King and other consumer giants.

The pet enterprises that are about to enter the capital market and are still queuing up for IPO are Guaibao Pets, Fubei Pets, Tianyuan Pets, etc. Among them, Guaibao Pets is mainly engaged in pet food business. It was approved by the GEM IPO in July this year, and has yet to be registered and reviewed by the CSRC. It is only a short cut from listing.

Forbes Pets, also engaged in pet food, launched a sprint to the main board of Shanghai Stock Exchange. It submitted the prospectus in June 2021. At present, it has passed a round of review and feedback.

Tianyuan Pet, a track company for pet products with cat climbing frame and cat nest as its core products, started its GEM listing journey in July 2020, passed the meeting in February 2021, and became registered in September this year, which means that A-share pet enterprises may add another major general.

In this year, two pet enterprises have appeared in A-share market, namely, Luc Shares, which has successfully landed in the Beijing Stock Exchange, and Yuanfei Pets, which is known as "the first dog rope" and has landed on the GEM.

As the pet track enters its mature stage, the number of A-share pet companies will gradually increase, and the pet companies will become hot in the future.

The label of "OEM" of pet enterprises is still in use

Private brand or key to success

At present, although the pet track is extremely hot, it is not difficult to find that some enterprises in the industry still have some hidden worries. Take Zhongchong as an example. More than 70% of its income comes from overseas sales. Its products are mainly sold to the United States, the European Union, Japan and other countries and regions, and depend on export. In addition, OEM/ODM (OEM/ODM) products are mainly produced according to customer orders in the export market, accounting for more than 60%. The sales of independent brands are relatively small, and the dependence on OEM is relatively serious.

Interestingly, Yuanfei Pet, which was just listed this year, is deeply bound with Zhongchong Shares. According to public data, they have jointly set up an overseas company, Cambodia Aitao. The model of Aitao is the same as that of Zhongchong, mainly focusing on OEM sales, and the business is mainly from overseas.

The same is true of the unlisted Tian Yuan Pet. According to the prospectus, from 2019 to 2021, its overseas sales revenue accounted for 90.94%, 74.08% and 72.31% of the main business revenue, respectively, and the sales revenue of OEM products accounted for more than 70%.

The overseas market is the main battleground for pet enterprises, which is mainly due to the relatively mature development of the foreign market. According to Everbright Securities Research Report, the U.S. pet industry will occupy 40% of the global market share in 2021, followed by Europe, which will occupy 32% of the global market share. The above two regions have already occupied more than 70% of the global market share.

Foreign pet companies have their own brand and dealer system in the local area, but most of them are not engaged in production. They mainly rely on purchasing processed pet food from the production enterprises and then OEM sales. As a result, many Chinese pet enterprises lacking their own brands have become OEM factories of overseas pet enterprises.

Against the background of growing trade frictions, the risk of relying on overseas markets is not small. Tian Yuan Pet said frankly in the prospectus that since the second half of 2018, Sino US trade frictions have intensified, and the United States has continuously imposed tariffs on Chinese imports. Some of its main products, such as cat climbing frames and pet bedding, have been within the scope of the levy, which has had a certain impact on its export business to the United States. In addition, its largest customer, Kmart AUS, is an Australian customer, whose revenue accounts for more than 10% of its revenue. Since the outbreak of the epidemic, the relationship between China and Australia has also been tense, and its export business has been in danger.

Different from the above pet enterprises, the domestic income of Guaobao pets exceeds that of overseas pets, which makes it a bit "alien" in the pet track. Taking 2021 as an example, its domestic and overseas income amounts to 1.334 billion yuan and 1.226 billion yuan respectively, with domestic income higher than overseas income.

Guaibao Pets is different from other pet enterprises. It devotes itself to brand marketing, and constantly builds its own brand by increasing advertising marketing. Its "Mafudi" has become well-known in the domestic pet market. Pet food is a fast moving consumer product, so the brand effect quickly brings immediate effects.

But Guaibao Pets also have their own worries, such as the low net interest rate, the squeeze of profit space, the worrying of sustainable growth capacity, and the existence of major overseas pending litigation. Red Week magazine has detailed the article "Guaibao Pets' Overseas Litigation Is Pending, and the Profit Space Is Facing Double Squeeze at Home and Abroad.". Therefore, there are many problems to be solved.