Protecting furry family friends creates booming market for players

With China's pet market constantly expanding, a subcategory－pet vaccinations－is gradually taking root, and more vaccine providers are emerging, becoming a new focus of investment.

On Feb 9, Shanghai-based Aichong Biotechnology announced that its inactivated feline triple vaccine had entered its clinical trial stage. Seven months earlier, the company received investment from Yingke PE. The capital inflow targets the research and development of pet vaccines.

In September, Kanghua Animal Health－a wholly owned subsidiary of Kanghua Biotech Co Ltd－held an opening ceremony in Chengdu, Sichuan province, officially entering the high-end pet rabies vaccine segment.

Also last year, Zhang Chongyu, chairman of Jinyu Bio-Technology, another biopharmaceutical company in the animal vaccine field, said during a news conference that the company's short-term goal was to become among the world's top 10 companies in the field of animal vaccines.

Demand for pet vaccinations has been rising in China in recent years. Expenditures on pet vaccinations are taking an increasingly large share of overall pet-related healthcare services.

According to a report jointly released by the China Animal Agriculture Association and Shandong province-based pet information platform Pethadoop, in 2021, pet inoculations topped the reasons for pets' visits to veterinarians, with 70.3 percent of owners taking their pets to animal hospitals at least once last year.

The 2021 Pet Industry White Paper further illustrated that cat vaccination rates are usually higher than those of dogs. Feline and canine vaccination rates in the entire pet vaccination sector stood at 44.6 percent and 30.8 percent, respectively.

However, in contrast to skyrocketing demand, the paper said China's R&D of veterinary vaccines has long been focused on animals raised for their meat, rather than house pets. Chinese companies that develop pet vaccines are significantly underdeveloped in terms of both scale and maturity to meet rising needs from the pet sector.

Currently, foreign companies dominate the market, with animal health heavyweights－such as United States-based Zoetis and French-based Merial and Virbac－taking nearly 90 percent of the market share. The rest of the market is shared by homegrown enterprises, including Jinyu Biotechnology Co Ltd, Wuhan Keqian Biology Co Ltd and Pulike Biological Engineering Inc.

Industry experts said that the present market pattern leaves limited space for Chinese brands to develop.

Li Xue, millennial founder of Loving Care International Pet Medical Center, a high-end Beijing-based pet care chain brand, said that her hospital doesn't offer domestic-brand pet vaccines to consumers, as there is hardly any demand.

"Consumers prefer imported products, especially those related to their pets' health and safety, such as vaccines," she said.

Muzapaer, a college student and owner of two cats in the Xinjiang Uygur autonomous region, said that the still-raging COVID-19 pandemic is impeding the vaccination of pets. Foreign vaccine prices nearly doubled compared with that before the pandemic, and they have been in short supply for a long time.

"Without prompt replenishment, we have to book for vaccinations at least a month in advance," said Muzapaer.

Although there are alternatives produced by local pet vaccine companies, most pet owners in China choose to wait.

"Nearly 95 percent of pet owners will choose overseas vaccines, having expectations that imported ones have a higher immunization rate. Even if the vaccines are running out, they will wait, as they see pets as members of their family," Muzapaer said.

But actually, most consumers don't know that there are available domestic vaccines.

"They just want to give their pets, or to put it more precisely, their 'kids', the best care they could ever give," said Li of Loving Care International, who also has five dogs of her own.

"They think pet vaccines developed by foreign companies contain more advanced technology and maturer production procedures, which they expect will be better for their pets. This explains why imported vaccines are preferred. Once people establish emotional bonds with pets, they can hardly ignore them, and are more likely to make every decision about pets very cautiously," she said.

Gloria Nan, a thirty-something engineer in Beijing, said: "Domestic vaccines need to be more advanced to convince consumers. For instance, kittens under six months might be more susceptible to feline panleukopenia if not getting timely inoculations. When it comes to pet-related healthcare, cost is never a consideration. I just want my kittens to grow up healthy and safe."

With the improvement of people's disposable incomes and consumption upgrades, consumers are becoming more willing to spend their money on pets.

Public data showed that in 2019, total annual sales in China's pet-related pharmaceutical industry exceeded 50 billion yuan ($7.85 billion). At present, there are more than 4,000 domestic veterinary drug manufacturers, with more than 2,500 kinds of veterinary drugs for sale in China.

Among the 2,500, 70 percent were imported. However, pet drugs only serve as one of the business branches of veterinary drug companies, which also offer products designed for agricultural livestock.

"All business entities are interest-oriented. With little market demand, they are less motivated to spend their time and money on the R&D and manufacturing processes of pet-specific medicines," said Qiang Lin, a medical practitioner that has been in the industry for over 20 years.

"Over time, with domestic companies' production of pet vaccines remaining inadequate, and the import of international pet vaccines impeded by the pandemic, the supply of pet-related medicines has become scarce, making it even harder to meet surging market demand from fast-growing ranks of pet lovers," Qiang said.

Wang Peng, associate professor at Renmin University of China, said that with consumption upgrade, there had been an increasing number of Chinese consumers raising pets to relieve their sense of loneliness. To put it more accurately, in this situation, it is better to consider them "parents" rather than consumers as they no longer see pets as consumer goods or personal entertainment accessory.

"There has been an inevitable trend that more and more people in China regard pets as important family members, and thus invest a lot of energy and expense to raise them. Their purchasing power of pet-related goods and services is rising, leaving considerable development space for the market," Wang said.

However, he added that China's pet-related economy has not yet been branded and institutionalized. In other words, this is still a blue ocean field, and many business opportunities await to be explored.

"With relevant laws and regulations remaining to be strengthened, from the perspective of animal-related pharmaceutical enterprises, it is worth thinking about how to benefit from development potential and core competitiveness.

"There may be more business forms in the pet-related economy in the future, with more refined market demand. It is wise for related enterprises to think carefully, make elaborate plans, and grasp business opportunities," Wang said.