South Korea’s mid-sized private equity firm SG Private Equity (SG PE) has decided to invest in pet healthcare company Sungbo Pet Healthcare, betting on the company’s growth potential and strong distribution network.

The domestic pet food market is led by foreign brands despite rapid growth in the pet industry. Many Korean companies, including Dongwon F&B, Harim Pet Food, Pulmuone, Korea Ginseng Corporation (KGC) and Binggrae, have tapped the market since 2010 but they are still laggards. Foreign brands such as Royal Canin, Cesar and ANF dominate 70 percent of the domestic pet food market.

Sungbo Pet Healthcare has gained competitiveness by entering the niche semi-moist pet food sector. The company is currently selling its Naturis products through veterinary clinics. The domestic pet food market is valued at roughly 1.5 trillion won ($1.2 billion) and is growing continuously. Sungbo Pet Healthcare’s sales are expected to increase steadily as the company produces premium semi-moist pet foods, which are less competitive compared to other products.

Diversification of distribution channels are also considered one of the company’s strengths. Sungbo Pet Healthcare is selling its products largely through veterinary clinics. It hasn’t started B2C (business to consumer) sales yet. The company plans to use investments from SG PE to expand its distribution channels to online and social commerce.

SG PE sees high growth potential in the generic medicine market. Sungbo Pet Healthcare received approval from the state-run Animal and Plant Quarantine Agency at the beginning of the year to sell generic drugs for heartworm disease and heart disease.

The company has veterinary diagnostic laboratory Neodin Biovet Lab as its affiliated company, solidifying its relationship with veterinary clinics. Neodin Biovet Lab is a veterinary contract research organization which provides services to more than 80 percent of all veterinary clinics in the country.

“If the company launches generic drugs, sales are going to increase rapidly,” said an SG PE official.  (Reporting by Se-hun Jo)