THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY

USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT

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In 2012, Taiwan’s total pet food imports continued their record-setting trajectory, reaching an all-time high of nearly US$110 million, a nine percent increase from 2011. The United States continues to be the leading supplier with a 33% market share. Despite increasing competition, U.S. pet food brands are commonly viewed as being significantly higher quality and market opportunities still exist. The attention to - and willingness to pay for - high quality product is representative of the larger trend in the Taiwan market where pets are treated as valued family members.

Amy Hsueh, Agricultural Marketing Specialist,

American Institute in Taiwan

Emily Scott, Acting Chief, Agricultural Section,

American Institute in Taiwan

Agricultural Trade Office Activities

Market Development Reports

Livestock and Products

Taiwan Pet Food Market – Market Opportunities Exist for

U.S. Product

Taipei

Taiwan

TW13026

7/24/2013

Public Voluntary

General Information:

I. Market Overview

In 2012, Taiwan’s total pet food imports continued their record-setting trajectory, reaching an all time high of

nearly US$110 million, a nine percent increase from 2011. The value of Taiwan’s pet food (dog and cat food for

retail sale) imports have tripled over the past ten years, growing from $36 million in 2002 to nearly $110 million

in 2012. The United States continues to be the leading supplier with a 33% market share. Despite increasing

competition on both ends of the retail price spectrum, unexplored and undeveloped market opportunities exist.

U.S. pet food brands are commonly viewed as being significantly higher quality with quality being the primary

factor in a Taiwan pet owner's decision to purchase a more expensive product. The attention to - and

willingness to pay for - high quality product is representative of the larger trend in the Taiwan market where

pets are increasingly treated as valued family members.

Source: Global Trade Atlas (GTA)

Social Trends

The growth in Taiwan’s high-quality pet food market reflects a societal shift in attitude toward animals as pets:

from feeding table scrapes to stray animals to serving prepared pet foods to well cared for family companions.

With rising incomes and strong western influences, dogs and cats are now a symbol of affluence and sometimes

fashion in Taiwan.

Taiwan is an aging society with one of the lowest birthrates in the world. Taiwan's 2012 birthrate was 1.265 and

represented a 10-year high. Consistent with global trends, singles in Taiwan are delaying marriage until later in

life. Single households - at both ends of the age range - are increasingly viewing pets as supportive

companions. Moreover, an increasing number of financially independent singles and DINKs view pet ownership

as a cheaper and possibly less overwhelming option than raising children. Thus, with more cash in hand,

members of the younger generation are willing and able to spend increasing amounts money on their pets'

food, services, healthcare etc. Steve Tsou, chairman of the Taipei Pet Appliances Association, confirms, "As

services for pets become more closely modeled after those offered to humans, the gap between the quality of

pets' lives and our lives is shrinking. That indicates a huge market potential for the pet products and services

industries."

Taiwan continues to deal with a significant stray dog

population, many the result of abandonment by owners who no

longer have the space, time or desire to care for a full size

animal. However, local and international non-profit agencies are

increasingly successful in rescuing these animals and placing

them in adoptive homes. While pet ownership overall is a

symbol of affluence in Taiwan, people tend to favor purebred

dogs, especially if they can afford it. Large breeds in

particular as seen as a status symbol, indicative of someone who

has sufficient space to raise such animals in one of the most

densely populated regions of the world. Still, the most popular dogs are of the smaller or toy varieties.

According to a 2011 survey by Taiwan's Council of Agriculture (COA), there are 1.24 million dogs on the island;

down 31% from a historic peak in 2001, but stable over the past decade. On the other hand, from 2003 to 2011

the cat population rose by 22% reaching 302,847 cats in 2011. Overall, sings of pet diversification are showing.

Cats are becoming especially popular likely due to Taiwan's tight living spaces. Alternative and exotic pet

ownership is growing too - fish, turtle, rabbit, and hedgehog ownership have all increased.

II. Market Access Analysis

Despite stagnant growth in the domestic pet population, demand for high quality pet food is growing. Taiwan's

pet food market is fairly mature, with an increasing focus on high quality or niche products.

Imported pet food, aside from product produced in Thailand, is more expensive than locally produced product.

Trade and Competition

In 2012, Taiwan imported US$110 million worth of pet food, a 9 percent increase from 2011. The United States

continues to be the largest supplier with a 33% market share followed by Thailand (24%), France (15%),

Australia (12%), Canada (4%) and the Netherlands (3%). While official data on domestic pet food production is

not available, industry executives estimate that pet food produced on the island - using both domestic and

imported ingredients - accounts for only 20-30% of the total pet food market, in terms of value.

Premium U.S. pet food products have increasingly faced competition from France which supplies Royal Cain pet

food, also perceived to be a high quality product. Thailand has also captured increasing market share though

Thai product tends to be at the opposite end of the price and quality spectrum compared to both the U.S. and

French products. In 2012, imports from the United States posted a nearly 3% decrease in value while imports

from both France and Thailand posted a 15% and 23% increase respectively. Australia, on the other hand,

previously the number two supplier of pet food to Taiwan, has seen exports fall considerably over the past few

years.

Source: GTA

Dog food accounts for approximately 75% of the pet food market with cat food making up the rest. Dried food

captures 80% of the market with "wet" or canned food accounting for the remaining 20%. A list of the major

pet food brands available in the Taiwan market and corresponding market share can be found in Appendix I.

Distribution Channels

In Taiwan, pet food is sold in a variety of outlets, from simple convenience stores to high-end specialty pet

stores. Pet food importers prefer to sell directly to retail outlets to avoid costs associated with wholesalers and

distributors.

Hypermarkets: These grocery/department store behemoths have done very well in Taiwan, especially

Costco where free samples and low-priced bulk goods result in lines of customers! Pet products tend to

be lower priced, but opportunities abound.

Supermarkets: Despite retail space dominated by domestically produced or low-cost imports, this is an

important distribution channel which captures the majority of citizens during their weekly shopping

expeditions, for instance.

Convenience Stores: Although limited space prevents these stores from carrying extensive variety, they

should not be discounted. Taiwan has the highest density of convenience stores in the world. Foot

traffic abounds as people can pay phone bills, mail packages or purchase train tickets at any one of the

9,100 stores on the island.

Pet Stores: As pet ownership has become fashionable, so have the pets themselves. These stores offer

pet clothes and accessories as well as food, treats, shampoos etc. The majority of U.S. pet food is sold

at these specialty stores which cater to high-spending clientele.

Veterinary offices/animal hospitals: At one time, heavy lobbying efforts resulted in an unspoken

agreement which realized Royal Cain as the only brand of pet food sold at Taiwan veterinary clinics.

However, there is more diversity now and U.S. pet food companies should realize the potential these

outlets have as distribution points for prescription or dietary products, supplements and product

marketed as “healthy” or “nutritious.”

Online stores: Unsurprisingly, online pet food store sales have increased in recent years. The younger

generation is keen to quickly find bargains on their product of choice using the internet.

ATO Taipei strongly recommends investing necessary time and energy to find a reliable and efficient importer

and distributor for any pet food product. The ATO Taipei maintains listings of potential

importers/distributors for U.S. suppliers interested in accessing the Taiwan market.

Barriers to Trade

Taiwan’s Bureau of Animal and Plant Health Inspection and Quarantine (BAPHIQ) is the division of COA charged

with overseeing dog and cat food imports. BAPHIQ’s pet food import requirements are detailed in the

regulation "Quarantine Requirements for the Importation of Dog and Cat Food" which can be found at the

following link BAPHIQ webpage: http://www.baphiq.gov.tw/admin/upload/twgov_file_201107262350302.pdf

The biggest barrier to entry for U.S. pet food to Taiwan continues to be the lingering ban on ruminant products

from countries determined by COA - not an international, scientific body such as the World Organization for

Animal Health (OIE) - to have Bovine Spongiform Encephalopathy (BSE). Moreover, all U.S. facilities producing

pet food for the Taiwan market are subject to an extensive application process including on-site review and

inspection by COA's BAPHIQ division at the facility's expense. At present, only 20 facilities are approved by

BAPHIQ for export to Taiwan.

In June 2012, the U.S. Department of Agriculture (USDA) commented on draft language submitted by BAPHIQ to

the World Trade Organization (WTO) amending Taiwan's current dog and cat food import regulations. In May

2013, Taiwan notified updated draft text to the WTO, having taken some of the comments received on the 2012

proposal into consideration. The USDA is currently seeking input from interested parties on the proposed text

and will deliver collected comments to Taiwan and the WTO in hopes of encouraging Taiwan to more

appropriately align import requirements with those recommendations set forth by the OIE.

In May 2013, AIT/AGR published a report further detailing the barriers to entry for U.S. pet food products to

Taiwan. The report is available at the following link:

http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Accessing%20Taiwan's%20Growing%20Pet%20Food

%20Market_Taipei_Taiwan_5-13-2013.pdf

There are no quotas in effect for pet food imports. Pet food is listed under Harmonized System Code

2309.10.00.00.2, “Dog or cat food, put up for retail sale." The import tariff for this code is 2%, on a CIF basis, ad

valorem. Imports for this classification are subject to inspection upon arrival by Taiwan authorities. There are

also several miscellaneous fees, including a 5% VAT.

III. Marketing Opportunities

Pet ownership is much more prevalent in Northern Taiwan, around the capitol city of Taipei. Pet stores,

grooming "salons", boarding facilities and even restaurants catering to human and canine customers abound in

modern Taipei. Conversely, the highly-populated central and southern cities of Taichung, Tainan and Kaohsiung

are still developing their pet industries, thus market opportunities exist to establish U.S. pet food as the "go-to"

products.

In Taiwan, well-planned and executed promotions strongly dictate the rise or fall of new-to-market products.

Attractive packaging and exiting promotional events draw customer interest, perhaps more so than other

markets. Taiwan consumers, particularly the younger generations, are heavily influenced by both Western and

Japanese culture.

Major factors impacting consumer's choices include nutrition levels, pet preferences, price and brand name.

Similar to recent trends in "people food", consumers are also looking to purchase product which claims to be

organic, natural, healthy etc. Other important factors include labels such veterinarian endorsements, country of

origin or certifications from the USDA, for instance.

U.S. pet food in the Dream Mall in Southern Taiwan during '2012 American Food Festival' summer promotion

Participation in local trade shows or in-store promotions is one of the most efficient ways to generate sales in

Taiwan. For instance, held every July, Aqua Pets Taipei is the biggest pet product show in Taiwan. In 2011, this

event attracted over 150,000 visitors over the four day period and generated over 200 press reports (print,

online or television). Also, the annual "American Food Festival" includes in-store promotions at Taiwan's

leading supermarket/hypermarket chains. Participation in this or similar events can provide new-to-market

companies a great deal of free publicity and the opportunity to establish important industry contacts and

consumers. For more information on these events, interested U.S. suppliers should contact the Taipei ATO.

IV. Contact Information

The Agricultural Trade Office (ATO) works with more than 20 U.S. producer associations represented in the

Taiwan market and is constantly developing new marketing activities throughout Taiwan. Please contact the

ATO for basic market information reports and updates on promotional activities including food and agricultural

shows and buyer missions:

Agricultural Trade Office

American Institute in Taiwan

Room 704, 7th Floor, Lotus Bldg.

136 Ren-ai Road, Section 3, Taipei, Taiwan

Tel: (886-2) 2705-6536; Fax: (886-2) 2706-4885

Email: ATOTaipei@fas.usda.gov

Website: http://www.ait.org.tw/en/home.html

The Agricultural Section is located in the American Institute in Taiwan (AIT) and is responsible for reporting and

market access issues. Please contact the Agricultural Section for any regulatory or market access type

questions:

Agricultural Section - American Institute in Taiwan

7, Lane 134 Xin-Yi Road, Section 3

Taipei, Taiwan

Tel: (886-2) 2162-2316; Fax: (886-2) 2162-2238

Email: AGTaipei@fas.usda.gov

Website: http://www.ait.org.tw/en/home.html

Animal and Plant Health Inspection Service (APHIS) - American Institute in Taiwan

7, Lane 134 Xin-Yi Road, Section 3

Taipei, Taiwan

Tel: (886-2) 2162-2221; Fax: (886-2) 2162-2215

Email: davin.c.potts@aphis.usda.gov

APPENDIX I

U.S. Pet Food Brands Available in Taiwan and Corresponding Market Share

Sources Brands Market Share

U.S. Hill's 16%

France Royal Canin 14%

U.S. Cesar 7%

U.S. Holis+icRecipe SOLUTION 5%

Australia 1st Choice 4%

U.S. Nutro Choice 4%

U.S. Eukanuba 4%

U.S. Optipro Toma-Pro 4%

Taiwan Pro's Choice 3%

Canada Orijen 3%

U.S. Pedigree 3%

Canada Nutram 2%

U.S. Pro Plan 2%

U.S. Organix 2%

Japan Mobby Choice 2%

U.S. Kirkland Signature 2%

Canada Pure 2%

U.S. Taste of the Wild 2%

Taiwan Petlife 1%

Canada Acana 1%

U.S. Ultramix Natural 1%

U.S. Natural Balance 1%

U.S. Blue 1%

U.S. Alpo 1%

U.S. ANF 1%

U.S. VF 1%

Brazil Total Alimentos Products 1%

U.S. Nature's Domain 1%

U.S. Canidate 1%

Taiwan Fuso Pets 1%

U.S. Chicken Soup 1%