Driven by the increasing number of pets and the evolving demands of consumers, China's pet industry has seen strong growth in recent years, propelling product innovations that prioritize health and nutrition.

Since the beginning of 2024, newly registered enterprises related to the pet industry reached 945,000 in China, the Economic Information Daily reported. The pet care market's size totaled 279.3 billion yuan ($39.6 billion) in urban areas in 2023 and is expected to jump to 361.3 billion yuan by 2026.

According to market consultancy iiMedia Research, pet food reached a market scale of 190 billion yuan in 2023 and is expected to reach 267 billion yuan in 2025.

The White Paper on China's Pet Food Industry, published by Deloitte China, forecasts the pet food market will reach 114 billion yuan by 2026, with pet staple food, nutrition products, and snacks expected to grow at a compound annual growth rate of 17 percent, 15 percent, and 25 percent, respectively.

Demand for pet food and supplies continues to rise, and the market is expected to grow at a CAGR of 13.1 percent over the next five years, according to a report jointly released by the Asia Pet Alliance Institute and Euromonitor International.

This surge in consumer demand is reflected in the strong performance of listed companies. China Pet, a veteran player in the sector, reported a revenue of 1.96 billion yuan in the first half of this year, marking a 14.1 percent year-on-year increase.

The company's net profit also grew, up 48.1 percent year-on-year to 140 million yuan. Its gross profit margin rose by 3.33 percentage points, reaching 28.98 percent, with staple pet foods contributing most to this growth.

With competition heating up and consumer preferences becoming more sophisticated, China's pet sector is poised for continued growth and innovation, driven by a commitment to health, technology, and user engagement.

Hao Bo, deputy director of the Asia Pet Alliance Institute, said of the growing consumer preference for high-end fresh and functional pet foods, "We have observed a shift toward more refined products such as high-end fresh foods and functional staple foods that cater to the health and nutritional needs of pets."

Pet health is becoming an increasing concern for consumers. JD Health data show a growing focus on pet healthcare, with products for joint, dental, liver, and immune support experiencing rapid sales growth.

Liu Rui, manager of JD Health's pet health division, said that pet owners are willing to invest more to improve their pets' quality of life, particularly for aging pets.

The pet food sector has also attracted attention from dairy companies, with brands like Yili Group's "Yibao" focusing on lactose-free and gut-health-enhancing dairy products for pets.

Since the launch of its "Yibao "series in October 2023, Yili Group has rapidly ascended to the top of the pet milk category, boasting millions in monthly sales.

As scientific feeding concepts gain traction, the demand for refined pet feeding solutions is on the rise. The pet dairy market holds significant potential, though competition is fierce.

"Pets are often lactose intolerant, making the development of high-quality, low-lactose, or zero-lactose dairy products critical for growth," the company said.

Meanwhile, Novonesis, formed through the merger of Novozymes and Chr. Hansen, has introduced innovative biological solutions to the pet industry.

The company debuted three key offerings — enzymatic pet grooming, probiotics, and odor removal — positioning itself as a leader in biotechnology for pets.

Ye Xiaofeng, vice-president at Novonesis Asia-Pacific, said, "Biotechnology-based solutions are the key to addressing these challenges, making pet products safer, healthier, and more sustainable."

In addressing health issues in pets, such as hairballs and digestive problems with grooming cats, Novonesis has introduced a mild enzymatic hair treatment solution. This can be incorporated into hair care products or functional pet foods to help manage hairball-related issues, ensuring better intestinal health for cats.

As technological advancements reshape the industry, companies such as Hangzhou Patrieg Intelligent Pet Technology Co Ltd are pushing boundaries to improve living conditions for pets to keep them healthier.

Patrieg's "Smart Pet Cabin" series, equipped with fresh air, heating, and monitoring capabilities, attracted significant attention at the recent Pet Fair Asia 2024 exhibition in Shanghai, receiving over 1,100 professional buyers from 27 countries and regions and securing contracts for more than 30,000 units.

Patrieg's founder, Jiang Xiaomeng, said the potential of smart technology is expected to play an incremental role in the pet sector, comparing their "Smart Pet Cabin "to how smartphones disrupted traditional phones.

How to better engage with pet owners is considered key to winning more consumers. E-commerce remains a critical channel for the industry, with 80.6 percent of pet owners purchasing their main pet food through traditional online platforms.

During the June 18 Shopping Festival this year, online pet consumption experienced significant growth, with sales of niche products such as "cat and dog baked goods" and "cat and dog raincoats" increasing by over 100 percent and 166 percent year-on-year, respectively.

Additionally, livestreaming platforms are becoming increasingly popular, with the number of pet owners purchasing through these channels rising by 6.3 percentage points in 2023 compared to 2022, according to Tianfeng Securities.

On-site engagement has also become a focus for many brands. Chen Niehan, vice-general manager and CEO of Peidi, a pet food producer, emphasized the importance of balancing online and on-site efforts. Peidi reported a strong first half, with revenue increasing by 71.64 percent year-on-year to 845.6 million yuan, and net profit soaring by 329.38 percent to 97.9 million yuan.

"This year, we are introducing more engagement campaigns in cities like Shanghai, Beijing, and Chengdu to boost brand loyalty and enhance our interactions with consumers," he said.

The growing pet market has also boosted the pet insurance industry.

A white paper on the development trends of the digital pet insurance industry in 2023, jointly released by Zhong'an Insurance and Ant Insurance, reports that cat insurance policies have surpassed dog policies in terms of growth and coverage for the second consecutive year, with cat insurance now accounting for over 60 percent of policies. The most popular insurance types include third-party liability and medical.

Despite these gains, the white paper notes that the domestic pet insurance market is still in its early stages, with an overall penetration rate of less than 1 percent, signaling room for significant future growth.