Goldman Sachs urges investors to place a bet on the $ 30 billion pet market in China and expects the city’s youth in the city to opt for well-fed cats and dogs as a result of a new baby boom.
The US investment bank set out its case for the Chinese pet grooming market in a 104-page report that predicts excellent 19 percent annual growth in pet food spending between 2020 and 2030, including China’s 92 million diet cats and 92m dogs moved from leftovers to packaged pet food.
The report predicts a critical transformation of the Chinese pet market in the coming decade as the industry expands to meet the demands of rapidly growing single and elderly populations. Both of these demographic groups, Goldman says, are associated with higher spending per pet than anywhere else in the world.
Predictions of sustained growth in the single population of China run counter to the ambitions of the government, which has made increasing efforts to reverse the declining fertility rate in the country. Some analysts believe it could make the world’s second largest economy grow old before it’s rich.
Amid tremendous economic pressure, Chinese millennials have shattered centuries-old traditional, cultural and family taboos. Increasing numbers of younger Chinese are deviating from marriage and children.
These trends continued despite Beijing’s efforts to pressure women and encourage more children to stem a rapid decline in the national birth rate to one of the lowest in the world – about 1.3 births per woman.
Official forecasts suggest that the number of people living in China alone will reach 92 million next year, with not only younger people wanting to live alone or struggling to find a partner, but also a gradually rising divorce rate. According to Goldman Sachs, more than a third of China’s dog and cat owners are single.
In addition to its predictions based on a broad rise in Chinese income and the effect that similar macroeconomic factors have had on pet spending in other countries, the Goldman report also contains a variety of metrics for the traditional lexicon of stock research.
On page 18, readers are encouraged to begin to see the prospects of the market in terms of the population and dietary ratios of “penetrating pets” – animals whose food consists predominantly of purchased pet food.
According to the report, the pet care industry in China is at an early stage despite the large number of pets. In 2020, 17.6 percent and 14.5 percent of Chinese households owned a dog or a cat, respectively. That compares with 40 percent and 35 percent in the US.
Referring to a white paper by Pet Fair Asia and Doumin.com, Goldman says the industry in China was $ 30 billion by 2020, compared to $ 104 billion in the US, despite the larger absolute size of China’s dog and cat populations . The gap exists in household ownership of pets and the expenses per pet.
The annual spending-per-cat in first-class cities in China, writes the five-strong team of Goldman analysts, will exceed the levels of other major developed countries by 2020 by 2020. By the same year, they added, level 1 urbanites’ annual spending per dog would have surpassed that of the UK and Japan, and only the US has a greater financial commitment to dog food.
In an effort to satisfy the appetite of the growing pet food industry in China, Chinese companies have also targeted foreign food manufacturers. Private equity group FountainVest Partners bought Ziwi this month in a deal that the New Zealand company valued at about $ 1.1 billion.