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China’s urban pet population will surpass the number of children under the age of four this year, according to Goldman Sachs, creating a $12bn market for pet food by the end of the decade.
The US investment bank’s estimate of China’s toddler-to-pet balance, which underpinned a research note published this week, forecasts the supremacy of pets continuing to rise in coming years as younger Chinese opt for cats and dogs over starting families.
By 2030, according to Goldman, China’s pets will be well on their way to outnumbering the nation’s human under-fours by a ratio of two to one.
The Goldman analysis feeds into a wider recalculation by investors of the impact of China’s demographic challenge as the overall population declines, with an ever-increasing cohort of elderly and a “baby bust” of decreasing births.
“We expect to see stronger momentum in pet ownership amid a relatively weaker birth rate outlook and higher incremental household pet penetration from the younger generation,” wrote Valerie Zhou, the Goldman Sachs consumer staples analyst who led the report.
In 2017, there were 90mn children aged zero to four in China, according to the Goldman Sachs report citing National Bureau of Statistics data, compared with the bank’s estimate of 40mn cats and dogs kept as urban pets. The US bank estimates that this year, those figures will converge at about 58m, and by 2030 China will have more than 70mn urban pets and fewer than 40mn children under the age of four.
“I think the increasing trend of keeping pets is related to the atomisation of society,” said Laura Luo, 30, who works in education in Chengdu. She has three cats that require about Rmb500 ($70) a month of food. She also has a crested gecko and a hognose snake, which between them cost only a few renminbi a month on food, as their principal diet is live crickets and frozen mice, respectively.
“Maintaining a relationship with a pet is much cheaper and less difficult than maintaining relationships between people,” she said.
In Goldman’s base case, China’s pet food industry will grow at a compound annual rate of 8 per cent from its 2023 level of Rmb51bn to Rmb63bn in 2030. On the bank’s most bullish outlook, with cat food consumption growing at twice the pace of dog food consumption, China’s pet food market could more than double to $15bn.
The optimism for the pet food industry contrasts with a gloomier outlook across China’s vast consumer markets, where demand has remained weak since the Covid-19 pandemic. Retail sales, an official gauge of consumption, rose just 2 per cent year on year in June, and consumer price growth has in the past year frequently fallen into deflationary territory.
The report, which also forecast a phase of M&A-driven consolidation within China’s pet food industry, contrasted its current state with the developed market counterparts of the US and Japan.
In Japan, it noted, the pet population of 20mn is roughly four times bigger than the 5mn under-four human population. Because of Japan’s entrenched low birth rates and higher pet ownership, the bank in part based its trajectory for China on how pet food sales in Japan related over time to sales of infant milk formula. Japan’s pet food market, it noted, was now eight times larger than its formula market.
In the US, which is by far the world’s largest pet market, there are more pets than children of any age. The American Veterinary Medical Association estimates there were 84mn-89mn dogs and 60mn-62mn cats in 2020. Government data shows there were 73mn children of all ages in the same year.
Chinese pet ownership also came into focus under the country’s strict lockdowns between 2020 and 2022.
A survey by UBS of 1,500 pet owners found 80 per cent maintained or increased pet-related spending “after the pandemic versus before the pandemic”.
Analysts at the Swiss bank said this was “evidence of the pet market’s strong resilience in the face of macro headwinds”. It attributed resilience during the pandemic to “the significant role that pets can play in households”.
