Author: Jean, Shu-Ching Chen
The nutrition and health industry is now a part of the national economic development plan.
Once it was exotic derivatives of traditional medicine – such as liquid extracts of chicken or snake, or medicinal wines – that the Chinese sought as elixirs to health and longevity. Now Chinese consumers have turned their hopes to vitamins and protein powders, thereby creating the world’s second-largest market for dietary supplements, after the United States.
A concoction of rising consumer power, growing health awareness, lifestyle changes and a rapidly ageing population is sustaining healthy profits for supplement manufacturers.
The outbreak of severe acute respiratory syndrome in 2003, followed by a cascade of food scares, gave sales a further boost. Chinese not only consume large quantities of potent capsules – while paying higher prices than their American counterparts – they also serve the same stuff to their pets, to the consternation of veterinarians.
China’s market for dietary supplements, at about 100 billion yuan ($16 billion) in 2014, grew by 12%, from 89.2 billion yuan a year before, according to research consultants Frost & Sullivan. (The U.S. market is $25 billion.) Figures from the China Health Care Association are even more buoyant, showing the industry growing an average of 10% to 15% each year from 2010 to 2014, with sales expanding from 260 billion to 400 billion yuan.
“A positive industrial environment in the last five years also has driven the fast growth,” says Neil Wang, global partner and China managing director at Frost & Sullivan, confirming that the nutrition and health industry is now a part of the national economic development plan.
Exactly what modern elixirs do the Chinese consumers favor? Plenty of protein powder, calcium supplements, laxatives, vitamin E and weight loss products, the five most popular blockbusters, in that order, according to the latest national audit by IMS Health, whose figures exclude over-the-counter pharmacies.
About 70% of China’s dietary supplements are purchased from direct sellers, led byAmway and its army of a quarter of a million, mostly female, sales representatives. As early as 2003, this positive development propelled China to Amway’s top market. Frost & Sullivan estimates that Amway holds an 11% share of the overall market, and 20% in the direct selling segment.
Chinese authorities rely on a cumbersome product-registration process to monitor the quality of each supplement that is made or sold in its market.
But China is taking at least one step closer to the United States, where supplements are rather loosely regulated.
Come October, a new automatic filing system will exempt ingredients and products previously approved from repeated – and costly – laboratory tests and regulatory hoops. But newly imported supplements, or those made with new ingredients, will still have to pass through the same old regime, which takes at least two years to complete. This promises an uphill battle for foreign players, such as NBTY or GNC Holdings, that seek to introduce new products.
“The entry barriers for foreign competitors will remain high. The short-term impact will be good for domestic players like us,” says Liang Yunchao, chairman of By-health, the leader in retail sales.
By-health has built a repertoire of more than 120 products, through more than a decade of registration procedures and paper work, obtaining more product approvals than anyone else in the industry except state-owned traditional Chinese medicine maker Beijing Tongrentang.
The new food safety law that takes effect in October aims to help redress China’s checkered food safety record, by tightening rules on registration, supervision and management of products in the nation’s food supply chain.
Sources of foods and labelling will be traceable; violations will be met with punitive damages and fines up to ten times the price of the involved goods or services; retailers will be required to carry out due diligence on suppliers. Small and medium-sized players with a penchant for illegal additives and exaggerated or false claims could be curbed, to the benefit of consumers, and to established brand leaders.