The Zhitong Finance App learned that Shanxi Securities released a research report saying that currently the pet food industry is still in the midst of fierce competition, and companies' investment in marketing and R&D is constantly increasing, and profitability is facing challenges. Functional pet food in China may enter a marketing period. On the one hand, the growth rate of the number of pets is slowing down, the aging rate is gradually increasing, and the demand for elderly pet health care and disease segments is increasing; on the other hand, in the context of precise feeding, pet owners are willing to pay a reasonable premium for functional food, which can not only increase the scale of revenue, but also improve profitability to a certain extent. Domestic listed pet food companies are still in their infancy with the layout of functional food, especially prescription food, which poses great challenges to the company's R&D capabilities, production capacity, and channel expansion capabilities.
The main views of Shanxi Securities are as follows:
Key drivers for the development of functional foods
(1) Demand side: The growth in the number of pets is slowing down, and the aging rate is increasing. On the one hand, the number of urban dogs and cats in 2025 was +1.8% year-on-year, lower than the 2019-2024 CAGR (4.6%). Among them, dogs were +1.6% year-on-year, and the growth rate was relatively stable; cats were +1.9% year-on-year, and the growth rate slowed. On the other hand, dogs and cats over 7 years old in China account for nearly 20%; Japanese elderly dogs over 7 years old account for 56.8%; elderly cats account for 44.4%; American elderly dogs and cats account for 37% overall; and EU elderly dogs account for more than 30%. China's elderly pet market is in its infancy. It will continue to enter a centralized aging cycle in the next five to ten years, and the demand for health care and disease care for elderly pets will increase in segments. (2) Supply side: From the perspective of industry competition, the layout of branded staple foods, especially high-end staple foods, is particularly important for food manufacturers. In terms of market capacity, staple food is the ballast stone for pet dog and cat food consumption, accounting for a stable share of around 70%. In 2025, the market size of staple food for dogs and cats is nearly 113.8 billion yuan. In terms of profitability, staple foods > snacks, staple foods are more in demand than snacks, and have a large scale effect; at the same time, staple foods have a high degree of standardization, are suitable for assembly line production, have many snack SKUs, and rely on manual operation; in addition, judging from the business model, staple food branding has certain bargaining power and higher gross margin.
Functional pet food product development trends in the past 10 years
(1) Steady growth in the number of new products: According to MintelGNPD statistics (covering dry food, wet food and snacks), the total number of functional pet foods sold worldwide in 2016-2025 was 5,4834, and the number sold in 2025 (6717) increased by 40.5% compared to 2016 (4780). (2) Types marketed: Skin and hair products are the most common, followed by digestive products. The two are mainly dry food products. (3) Formulation ingredients: Vegetable protein is most widely used, concentrated in dry food; yeast also grows significantly in dried dog and cat food; in addition, common ingredients include herbs, algae, and unsaturated fatty acids (omega-3). (4) Nutritional positioning: Grain-free and high-protein claims have increased most significantly. Among them, grain-free ones are often introduced for pets that are sensitive to grain or have poor digestive tolerance. (5) Systematic: The functional performance of pet food cannot be judged only from the selection of ingredients; functional effects are the result of interactions such as formula design, manufacturing process, and biological activity stability.
Global functional pet food development trends
According to Euromonitor statistics, the global penetration rate of dog and cat prescription food was 4.1% in 2025, of which the penetration rate of cat prescription food was 3.6%, and the penetration rate of dog prescription food was 4.5%. In 2025, the global penetration rate of non-prescription premium foods for dogs and cats was 26.3%, of which 26.2% was for cats and 26.3% for dogs. Considering that non-prescription high-end foods include some staple foods without functional claims, this means that the global penetration rate of functional foods is less than 26%. Euromonitor counted the penetration rate of prescription food in 10 countries, and the data performance was mixed. In 2025, Japan and Italy had a high penetration rate of 10.9% and 10.1% respectively; the penetration rate of prescription food in the US was 6.3%; Brazil and Russia had low penetration rates of 1.6% and 2.9%. The rest of the countries had penetration rates between medium orders and high units.
Functional pet food in China may enter the release period
According to China Research Network's forecast, the penetration rate of functional staple foods will jump from 15% in 2024 to 35% in 2030; based on the aging ratio of pets in China, the US, and Japan, it is estimated that the current penetration rate of prescription food in China is about 1%-2%, assuming it will increase to 3%-4% in 2030. (1) Assuming that China's urban dog and cat staple food scale growth rate is 7% from 2026-2028 and 6% from 2029-2030, which is higher than the global growth rate (about 5%); (2) Assume that the penetration rate of prescription foods and functional foods will increase evenly from 2025 to 2030. (3) Based on the above assumptions, it is calculated that in 2025-2030, prescription food and functional food will usher in a period of rapid growth, with compound growth rates of 26.3% and 21.3% respectively, which is far higher than the growth rate of the main food market for dogs and cats (6.6%).
Risk warning: risk of increased market competition; risk of product expansion falling short of expectations; risk of trade friction; risk of fluctuations in raw material prices; risk of product quality.