Pet Food Industry Margin Pressure: What It Means for Brands

# Pet Food Industry Margin Pressure

Chinese pet food leaders 乖宝 (GuaiBao), 中宠 (Zhong宠), and 路斯 (Lusci) all reported Q3 revenue growth but declining profits. Zhong宠 also announced a new 50M RMB investment in its Cambodia factory. What does this mean for new brands?

Why margins are shrinking

Price war

Too many players in commodity extrusion food, driving online price competition.

Raw material volatility

Meat, grain, and packaging costs fluctuate, but retail prices cannot rise.

Rising channel costs

Traffic costs on Douyin and Tmall keep climbing.

Capacity expansion

New factories in Cambodia and Shandong are still in investment phase.

What this means for brands

Choose the right co-packer

1. Is the factory profitable long-term? Loss-makers may cut corners.

2. Capacity utilization?

3. Customer concentration?

4. Stability and reliability?

Opportunities in the price war

• Differentiated categories (baked, fresh, freeze-dried) are not in the price war
• Start small, test the market
• Fewer SKUs with higher margins
• Long-term framework pricing beats spot negotiation

Do not pick the cheapest

A factory 10% cheaper but inconsistent costs more in returns and recalls. Prioritize quality control, sampling speed, and communication.

Outlook

• Commodity extrusion will continue consolidating
• Baked, fresh, and freeze-dried will keep growing
• Leaders will continue expanding overseas
• Co-packing industry concentration will rise

If you are entering the market now, start with a differentiated process to avoid the extrusion red ocean. Mixiaoqi pet food OEM/ODM operates fresh and freeze-dried lines and supports small trial runs.

FAQ

Is it too late to enter pet food?

Commodity extrusion yes; differentiated categories still have room.

Should I pick the cheapest co-packer?

No. Quality and stability matter more than unit price.

How do small brands negotiate?

Start with sampling to build trust, then move to framework pricing as volume grows.