China’s two leading publicly traded pet food manufacturers, Zhongchong (002891.SZ) and Peidi (300673.SZ), released their H1 2026 earnings on August 25, both reporting a stark ‘revenue up, profits down’ pattern that underscores intensifying margin pressure across the sector.
Zhongchong posted revenue of RMB 3.28 billion (+34.9% year-over-year) but net profit fell 37.6% to RMB 127 million. Operating costs surged 45.7%, outpacing revenue growth, while sales expenses climbed 46.3% to RMB 430 million as the company invested heavily in brand promotion amid deepening competition from both domestic and foreign brands entering the Chinese market. Pet snacks remained the largest segment at RMB 2.06 billion, with pet main food growing 27.3% to RMB 1.0 billion.
Peidi reported revenue of RMB 740 million, essentially flat at +1% year-over-year, while net profit collapsed 69.3% to RMB 24.3 million. All three product categories — plant chews, nutritional meat snacks, and hide chews — saw gross margin declines of 3 to 7 percentage points. Q2 net profit alone fell 71.4% year-over-year.
What the results mean
The results confirm that the era of volume-driven profitability in Chinese pet food has ended. Raw material cost inflation, escalating brand promotion spend, and the entry of food-industry giants including Jinluo, Shuanghui, Yili, and Want Want Group are compressing margins across the board. Industry growth has decelerated to 4–5% annually from historical double digits, shifting the competitive battleground to formulation, functionality, and brand differentiation.
For the broader market, the divergence between top-line growth and bottom-line contraction signals a maturation phase: scale alone no longer protects margin, and the winners will be brands that can command pricing through formulation, efficacy claims, and consumer trust rather than pure distribution reach.
