A costly mess: What one cat litter brand takeover reveals about China's pet ...

by MA Yue

During this year's Double 11 shopping festival, pet goods have become one of the fiercest categories on China's e-commerce platforms. Major sites have rolled out separate rankings for pet food, toys and cleaning products — a sign that, as more young people choose pets over parenthood, the pet economy has become a battleground for growth.

JD.com's latest sales data show the top five cat litter brands as pidan, Cuihua Xu, Lorde, Honeycare and Arm&Hammer. Among them, Cuihua Xu — owned by Hangzhou Gaoyea — has emerged as a breakout brand. Its litter sells for 10.37 yuan (US$1.43) per kilogram, costlier than many types of rice, yet it remains trapped in the paradox of "high price, low profit."

On October 26, leading pet hygiene exporter Tianjin Yiyi announced it would acquire 100% of Hangzhou Gaoyea. The news sent Yiyi's shares tumbling 9.3% on the day trading resumed, closing at 31.61 yuan, before sliding further to 28.61 yuan by November 7 — a reaction that reflected market skepticism toward the deal.

Founded in 2018, Gaoyea started with cat food but rose to prominence with cat litter. Its sub-brand Cuihua Xu, launched in 2022 with a focus on tapioca-based litter, quickly became a top seller on Tmall. Founder PENG Han previously told Jiemian News that sales climbed from 75 million yuan in 2023 to 260 million yuan in 2024, a 247% jump. The company targets 1 billion yuan in revenue by 2025.

Photo from Cuihua Xu

But strong sales haven't translated into strong profits. Gaoyea recorded 302 million yuan in revenue and 3.08 million yuan in net profit in 2023 — a razor-thin 1% margin. In 2024, net profit rose to 18.3 million yuan on 460 million yuan in revenue, or about 4%.

"Cuihua Xu cat litter is already priced at the top end of the domestic market," Peng said. Still, profits are squeezed by rising raw material costs — especially tapioca starch — and an endless price war. "Once a new product appears, competitors rush in with cheaper versions. It's inevitable."

Marketing is another heavy burden. To gain visibility, new brands must pour money into social media campaigns and livestream promotions. "It's a brutal business," said an e-commerce operator familiar with the sector. "Most startups burn through budgets chasing traffic. With ROI algorithms locked by platforms like Tmall and JD.com, all that's left to compete on is price."

By contrast, mature markets in Europe, the U.S. and Japan are far less chaotic. Consumer-goods giants such as Nestlé, P&G and Colgate-Palmolive dominate through established distribution networks, while major retailers like PetSmart, Walmart and Amazon push their own private labels.

"Chinese brands tend to cut prices under competitive pressure, not because they've improved production efficiency," said FENG Huaqing, vice president of Ries Consulting China, in an interview with Jiemian News. For heavy, low-margin products like cat litter, he said, the key lies in refining manufacturing and optimizing logistics routes to lower transport costs.

Peng noted that Cuihua Xu's latest price cuts were only possible after production scaled up. Analysts believe Yiyi's acquisition could create synergy: Gaoyea contributes brand strength and marketing expertise, while Yiyi — long experienced in OEM and export manufacturing — can help streamline and upgrade its supply chain.

Still, expanding overseas remains a high-risk path for China's emerging pet brands. Many leading domestic players, including Yiyi, act as OEM suppliers for foreign retailers — a stable but low-margin business. Others, such as China Pet Foods and Gambol Pet, have pursued growth by buying established brands and factories abroad.

"For basic categories like cat litter, it's extremely hard for new Chinese brands to challenge established Western consumer or retail giants," Feng said. He believes the next big opportunity may come from smart pet devices — automated litter boxes, feeders and water dispensers — where no dominant global player has yet emerged.