Core Viewpoint - The pet fresh food brand "Paiteshengsheng," founded by Huo Yi, is closing all its stores less than nine months after its launch, indicating significant challenges in the pet food retail market [1][13]. Company Overview - Paiteshengsheng was launched in February 2025, with a focus on fresh pet food and a high cost-performance ratio, featuring a "Pet&Kitchen" area for freshly made meals [5][17]. - The brand aimed to open 100 stores in Shanghai by the end of 2025 but has faced rapid closures, with at least 8 out of 20 stores already shut down [8][13]. Business Model and Challenges - The business model relied on a combination of retail, supply chain management, and membership systems, emphasizing cost-effectiveness [19]. - However, the fresh food segment has high operational risks due to short shelf life and cold chain requirements, leading to significant product loss [19][20]. - The market for pet fresh food in China is still developing, with limited consumer acceptance and low repurchase rates, complicating profitability [19][20]. Market Context - The pet economy has seen rapid growth, but the industry faces foundational issues such as immature supply chains and regulatory gaps [28][29]. - Paiteshengsheng's failure highlights the challenges of scaling in a market that requires deep consumer understanding and long-term investment [29][30]. Future Prospects - Despite the closures, Huo Yi has not abandoned the pet food sector, as indicated by the launch of a new brand "Chong Tiantian," which focuses on fresh food products [13][28]. - The pet retail market is expected to shift towards community-based models, emphasizing trust and customer relationships rather than rapid expansion [32].

Investment Rating - The report maintains an "Increase" rating for the pet food industry, indicating a favorable outlook for the sector's fundamentals and expected performance relative to the market benchmark [3]. Core Insights - The pet food industry is experiencing significant growth, with domestic brands outperforming foreign competitors due to a trend of domestic substitution. Leading domestic brands like Guai Bao Pet and Zhong Chong Co. are showing impressive sales growth and profitability [1]. - Guai Bao Pet's main brand, Mai Fu Di, has maintained the top position on Tmall for five consecutive years, achieving a 150% year-on-year sales increase during the 2024 Double 11 shopping festival. The company reported a revenue of 5.245 billion yuan in 2024, a 21.22% increase year-on-year, with a net profit of 625 million yuan, up 45.68% [1]. - Zhong Chong Co. has developed a strong portfolio of proprietary brands and reported a revenue of 4.465 billion yuan in 2024, a 19.15% increase year-on-year, with a net profit of 394 million yuan, up 68.89% [1]. - Petty Co. also showed strong performance with a revenue of 1.659 billion yuan in 2024, a 17.56% increase year-on-year, and a remarkable net profit growth of 1742.81% [1]. - The report highlights the increasing consumer focus on experience-driven pet care, with new retail formats emerging that combine product offerings with services, catering to the evolving needs of pet owners [2]. Summary by Sections Company Performance - Guai Bao Pet achieved a revenue of 5.245 billion yuan in 2024, with a net profit of 625 million yuan, reflecting a strong growth trajectory [1]. - Zhong Chong Co. reported a revenue of 4.465 billion yuan in 2024, with a net profit of 394 million yuan, showcasing robust brand performance [1]. - Petty Co. reached a revenue of 1.659 billion yuan in 2024, with a net profit increase to 1.82 billion yuan, marking a historic high [1]. Market Trends - The pet food sector is identified as the largest segment within the pet industry, driven by the essential nature of pet care throughout their lifecycle [1]. - The report notes a shift towards high-end market opportunities due to uncertainties in tariffs, which may benefit companies with strong proprietary brands [1]. Investment Opportunities - The report suggests focusing on companies with strong channel strategies and innovative product offerings, such as Tian Yuan Pet and Yi Yi Co., as well as those expanding into smart pet care solutions [3]. - Companies like Guai Bao Pet and Petty Co. are highlighted for their impressive growth in proprietary brand sales, indicating potential investment opportunities [3].