Rapidly Growing Pet Market, Pet Food Faces Trade Deficit... Only This French Company Smiled

Pet Food Trade Deficit This Year
$148.51 Million... 8% Increase YoY
French Royal Canin Royalty Soars... Also Secures 15 Billion Won Dividend

As the population of pet owners raising dogs, cats, and other animals increases, the domestic pet food market has rapidly grown, yet pet food still records a significant trade deficit.

According to export-import trade statistics from the Korea Customs Service on the 10th, the trade deficit for pet food reached $148.51 million (approximately 213 billion KRW) as of October this year. This amount is an 8.2% increase compared to the same period last year ($137.29 million). The pet food trade deficit, which reached $222.43 million in 2018, decreased to $205.24 million in 2019 when pet food exports began to accelerate, and further shrank to $198.18 million in 2022, falling into the $100 million range. Although the deficit narrowed to $157.75 million last year, a large deficit still continues.

Pet Food Exports Increase Tenfold in Five Years

Recently, domestic companies' pet food exports have also rapidly increased. Until 2018, pet food export value was only around $15 million, but it more than doubled to $36.78 million the following year. Subsequently, it nearly doubled again to $67.44 million in 2020, showing nearly tenfold growth over the past five years up to last year. This year, exports reached $133.41 million (approximately 191 billion KRW) by October, an 11.3% increase compared to the same period last year ($119.83 million).

However, despite the high export growth rate, the increase in domestic pet population has also driven up feed demand, causing imports to still surpass exports. Last year, pet food imports recorded $307.5 million (approximately 441 billion KRW), exceeding $300 million for the third consecutive year. This year, imports reached $281.92 million (approximately 405 billion KRW) as of October, a 9.6% increase compared to the same period last year ($257.12 million), making it certain that imports will exceed $300 million for the fourth consecutive year.

The company benefiting the most from the growth of the domestic pet food market is undoubtedly Royal Canin, a global pet food company headquartered in France. Royal Canin established its domestic subsidiary, Royal Canin Korea, in 2005, and opened the Royal Canin Gimje Plant in Gimje, Jeollabuk-do, in 2018. The company achieved $100 million in exports for two consecutive years, a first in the pet food industry, up to last year. Royal Canin Korea's sales, which were 156.8 billion KRW in 2020, more than doubled to 324.4 billion KRW last year, and net profit during the same period increased more than 2.5 times from 16.8 billion KRW to 43.5 billion KRW.

Royal Canin Korea’s Royalty Payments Also Surge

However, this has also led to an increase in the amount of money transferred overseas. Royal Canin Korea currently holds 100% of its shares and has a contract to pay 9% of its domestic sales as royalties to its global headquarters, Royal Canin S.A.S. Due to this agreement, royalty expenses increased from 9.2 billion KRW in 2020 to 15.6 billion KRW last year. Additionally, last year, the company paid 25 billion KRW in dividends.

Meanwhile, the domestic pet food market is expected to continue growing steadily due to improvements in economic levels and changes in family structures such as non-marriage and childlessness. According to market research firm Global Market Insights (GMI), the domestic pet food market, which was valued at $1.4465 billion last year, is expected to grow to $1.652 billion (approximately 2.3 trillion KRW) this year and reach $1.783 billion (approximately 2.56 trillion KRW) next year. Growth is expected to continue, reaching $2.018 billion (approximately 3.16 trillion KRW) by 2027, surpassing the $2 billion mark, and $3.0409 billion (approximately 4.36 trillion KRW) by 2030, exceeding the $3 billion mark.