Home to the world's largest livestock industry, China has been the object of much fascination among global animal health companies. However, while other sectors in China have ridden the China economic express train, the animal health industry has been somewhat stuck in the sidings, and foreign firms have had to wait their turn for success in China’s market. A new industry report published by Animal Pharm sheds light on the current market and identifies the latest market developments in China.
Informa reports publisher, Alan Bullion, spoke to Animal Pharm’s Joseph Harvey to learn more about the Chinese animal health market.
What are the main significant happenings at the moment in Chinese animal pharmaceuticals?
Right now is a really interesting time because it seems to be at a tipping point in the Chinese animal health industry. Over the last 5-10 years, international companies from the US and Europe have been involved in a small number of joint ventures in China, and they’ve been ramping up their sales in the country too. More recently, we’ve also been seeing smaller companies from Argentina and elsewhere in Latin America set up joint ventures in China. It’s a new part of the industry to many international companies but it’s definitely an important part.
What is the growth rate for the Chinese animal health market?
Between 2007 and 2015, sales of animal health products in China increased annually by around 11% and this is more than double, actually, of the global average excluding China.
What are the biggest animal health sectors in China?
Naturally, the food-producing animal area is huge there with poultry, pork and cattle as well. There’s agriculture industries growing there but I think it’s quite interesting to notice, ten years ago there was no companion animal industry in China at all – and now it’s growing. It’s growing extremely fast, as you can imagine, from the small base but it’s mimicking what we’ve seen in places like India and Brazil which, at the moment, have booming pet markets.
Who are the big players? Who is moving and shaking the market?
There are two big companies that spring to mind and they’re the two largest domestic animal health companies in China. The biggest at the moment is CAHIC and the second biggest is Jinyu Group. Actually, at the moment their annual sales are quite close to each other and it’s predicted that Jinyu will be the biggest domestic animal health company. They are both very big firms that do pharmaceuticals, feed, feed additives and vaccines as well.
What is driving that competition between the two big players?
I spoke to some of these Chinese companies and they are the first to admit that products such as vaccines aren’t of the highest quality in China. It’s improved a lot over the last half a decade but these companies are now looking for help from international partners to improve the quality of the animal vaccines actually used in China. That’s really growing competition.
Following on from that, is there space for consolidation?
Yes. There definitely is. There are over 1000 animal health companies in China, some of them absolutely minute. I think the top ten or twenty would only make up 5% of all the companies that are active over there. I spoke to Jinyu and I spoke to CAHIC and they said, of course, M&A is going to go through the roof in China when these smaller companies are going to get purchased, mainly by domestic players, over the next couple of years.
What challenges and opportunities are there for companies willing to invest in China?
Well, I find one of the challenges that always arises when I'm talking to international companies about China is their concern over regulations and their concern over IP protection. I think these concerns are valid and the word from the Chinese authorities is that they’ve acknowledged this and they’ve said they are going to try and improve this.
Explore the Animal Health market in China, including trends and developments, market opportunities, challenges and more in the recently published Animal Pharm: China Top 20 Companies report.