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Asian Pet Care: Untapped Potential for Regional Players

10/12/2018
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The pet care market in Asia Pacific is still relatively small compared to other consumer industries. With maturing growth expected in Western markets and increasingly populous markets located in Asian countries, there is room for growth in the Southeast Asian region. Jakarta (Indonesia) and Manila (Philippines), for example, are expected to add over four million new inhabitants over 2017-2030.

Asian Century: strongest growth globally for Pet Care

Over a 10-year period, Asia Pacific posted the most stable growth in terms of volume consumption of pet food, driving a strong value CAGR. This growth is set to strengthen over the forecast period at 9% in constant value terms, outpacing Latin America by three percentage points.

Chart 1: APAC steadily grew over the years up to 2018, driven by pet owners upgrading to commercial pet food. Source: Euromonitor International

Vietnam, Indonesia and Thailand boasted the strongest CAGR for pet care over 2013-2018. In fact, the Thai market is almost four times the size of the Malaysian market.

Presence of regional players limited to a single market

Among the top 10 companies in the world, only half have penetrated Southeast Asia. Mars, Nestlé, and Colgate-Palmolive, for example, are household names in the region, with wide product portfolios and strong brand equity.

These three companies with the addition of Charoen Pokphand Group form 78% of value sales in 2017 thanks to their presence in most of the major Southeast Asian markets. The remaining 22% comprises imported, local and artisanal brands that fail to claim a bigger share regionally due to their limited geographic footprints.

For example, the performance of Hunter Group Ltd is comparable with Colgate-Palmolive’s in Thailand, but because Hunter is not prominent in Indonesia, Malaysia, Singapore, the Philippines and Vietnam, it has a lower regional share. Consequently, white space for Hunter Group is largely limited to Thailand, while Colgate-Palmolive stands to gain from the other five markets due to strengthening demand for commercially-packaged pet food across the board.

Chart 2: The top 10 companies in Southeast Asia, including private label, are most prominent in Thailand (nine out of 10 companies have sizeable sales), followed by Malaysia and Indonesia. In contrast, only three of the top 10 companies in the region are sizeable in Vietnam. Source: Euromonitor International

Companies with a strong foundation in individual markets could stand a chance to grow market share in the region should they push for sales in neighbouring markets. With high prospects for growth of pet care in the region and strengthening consumer education about commercial pet food, geographic expansion is essential in breaking out from the 22% pool.

Demand for premium products

Regional and local companies can innovate by using exotic ingredients that appeal to local cultures, such as turmeric, to distinguish their brand value from products already available. However, despite the rise of premiumisation, consumers in Southeast Asia still consider price significantly when deciding repeat and regular purchases. Affordability is still an important aspect.

Online presence is becoming more essential as consumers are increasingly digitally-savvy and rely on this channel for information. Word of mouth is a very strong driver for growth in pet care in Asia, coupled with accessible products, as this could potentially influence consumers to upgrade.

With strong demand expected from consumers, pet care companies can generally look forward to positive prospects in the region, albeit alongside intensifying competition. To claim a bigger piece of the pie for sustainable growth, regional expansion is likely to boost growth over the long term.

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