Guohai Securities: Maintaining the Refined Operation of “Recommended” Rating Brands in the Pet Food Industry Entering a New Stage

The Zhitong Finance App learned that Guohai Securities released a research report saying that competition in the pet industry has intensified, and growth driven by marketing expenses is difficult to sustain in the long term. Currently, the pet market's comprehensive operating capacity requirements for controllable supply chains+new product development+refined marketing have further improved. The bank judged that leading brands have formed a major advantage over small brands in the waist and tail, and the pet industry's competitive pattern is becoming clear, maintaining the pet food industry's “recommended” rating.

Guohai Securities's main views are as follows:

The domestic pet market channel has changed in the past 20 years. It has experienced changes from offline to online, and from distribution to direct sales. Taking advantage of the e-commerce channel dividend period, domestic pet brands have developed rapidly

From 2003-2012, China's pet industry was in the initial development period where offline was dominant and distribution dominated. The market pattern was controlled by foreign brands, and domestic pet brands started; in 2012-2018, e-commerce dividends represented by “Taotian” and “Double Eleven” became the core driving force in reshaping the pet industry pattern. Since 2019, represented by Douyin, content-driven and refined channel upgrades have reshaped the brand development link.

Online channels

Online channels are the number one sales channel for pet food. Relying on e-commerce platforms to achieve rapid start-up, it has now become a core channel for domestic pet brands to reach mainstream customers and undertake daily consumption. The rise of content e-commerce in recent years has further strengthened its drainage and transformation capabilities.

Offline channels

It is the core scenario for pet brands to build trust and accept service-oriented consumption. Mainly specialized stores and pet hospitals, they provide physical product experience and professional consultation, and undertake services that are difficult to replace online, such as medical treatment and nursing. At the same time, they are an important channel for penetrating the sinking market, complementing online.

Channel decision strategies and keys

Efficiency improvement and brand building are still key factors in channel competition, and the core is building brand awareness. Facing a “stock game” where traffic dividends subside and customer acquisition costs are high, brands need to shift from extensive expansion to “deep efficiency cultivation” throughout the user life cycle. When the growth rate of the industry slows down, the core of channel competition is building brand awareness. Traffic segmentation, channel fusion, and track segmentation (different volumes such as PikaPov, segmented according to population and region). The bank predicts that the online transformation of traditional channels will focus on accurate access and refined operation.

Risk warning: Competition among domestic pet food brands intensifies, and the risk that domestic sales growth will fall short of expectations; risk of fluctuations in raw material prices; risk of pet food safety issues; risk of trade friction; focus on the risk that the company's profit forecast falls short of expectations; the risk that different products are not fully comparable.