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Growing Appetite for Nutritional Supplements in China

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Every time before she takes a business trip to the United States or Europe, Wang Qi is given a shopping list from relatives and friends. Every time, that list is filled with names of high-end brands in cosmetics and luxury items.

Recently, however, that list has grown. The 32-year-old executive assistant in Beijing says she doesn’t remember when the list started to grow but it has been piling up with names of nutritional supplements. Shopping for vitamins now consumes most of her time shopping overseas.

“People around me seem to be more concerned about their health than in the past,” Wang says.

With improved living standards in urban cities and a heightened belief that vitamins contribute to better health, Chinese urbanites have been showing a greater demand for nutritional supplements in recent years. The demand has attracted more nutritional supplement manufacturers from around the world to cash in on the trend, despite the fact that most of the world’s vitamins are produced in China.

Vitamins in China, which has already cornered the vitamin A and C markets, often go hand in hand with the nation’s food industry, with billions of dollars in goods exported each year. There are thousands of drug companies in China.

It is estimated that the sales of vitamins and dietary supplements as well as food and drug additives in China will reach 600 billion yuan ($95.2 billion, 73 billion euros) by 2015. According to industry experts in China, additives take up a large portion of sales in the country.

But one of the main reasons why the door is open for international vitamin makers, says Zhang Yongjian, an expert with the China Health Care Association (which is affiliated with the Chinese government) is that most of the vitamins produced in China are shipped overseas and sold under foreign brands.

Zhang says other reasons for increased demand include “growing disposable incomes, an improved health awareness, together with worsening health problems and an aging population”.

According to the latest report by the association, average spending by Chinese consumers on healthcare products in 2011 accounted for 0.1 percent of their total expenditures. In developed countries, people spent just 0.03 percent on nutritional supplements.

But Zhang, the main writer of the report, says although China’s nutritional supplement industry is far smaller than in developed countries, the business is growing.

Over the past two decades, Chinese expenditures on health products grew annually at a rate between 15-30 percent, far higher than the 13 percent in developed countries over the same period.

Backed by his report, Zhang believes China will become one of the world’s largest consumer markets for dietary supplements in the near future.

The growing market in China has attracted multinational nutritional supplement manufacturers, despite high thresholds to enter the market and cumbersome approval procedures.

Statistics from the report show that over the past 15 years about 644 types of nutritional supplements have been exported to China, among which 63 percent is from the US.

Michigan-based Amway, a direct selling company and manufacturer of primarily health, beauty and home care products, is one of the biggest foreign players in the field.

According to market intelligence company Euromonitor International, Amway has led overall dietary supplement sales in 2010 in China by holding a 16-percent market share. But it faces challenges from competitors who are increasing their presence in China, such as NBTY, the New York-based manufacturer of vitamins and nutritional supplements.

General Nutrition Centers, a Pennsylvania-based retailer and producer of health and nutritional products, is another competitor. It has launched products in major Chinese cities including Shanghai, Guangzhou and Shenzhen in August.

David Zhang, CEO of GNC China, says the company aims to become the leading nutritional supplement brand in China.

“More and more Chinese consumers, particularly in big cities, are looking for international leading brands that can provide trusted product quality and innovative product lines,” Zhang says.

He says GNC is to further expand its presence in all major Chinese cities by next year. “China is already the No 2 biggest nutritional supplement country according to Nutrition Business Journal. We believe China’s nutritional food market will experience a fast growth period in the next five years,” he says.

Currently GNC products sold in China are produced and imported from the US. “We have adapted a multichannel strategy to list our products in premium supermarkets, high-class department stores, health and beauty stores as well as on e-commerce (sites),” Zhang says.

He says GNC provides Chinese consumers professional products, health solutions and recommendations from in-store health advisors.

One outcome of the competition has been the diversification of China’s dietary supplement industry. Several foreign vendors are focusing on the production of healthcare products for specific groups.

Guangzhou Biostime Inc, a subsidiary of Biostime International Holdings Ltd (which is based in the United Kingdom), is a provider of premium pediatric nutrition and baby care products.

It was one of the first companies to introduce child probiotic supplements, a dietary supplement to aid in digestion, to China in 2003. The product instantly became the company’s bestseller.

According to Euromonitor International, Biostime accounted for approximately 85.4 percent market share in retail sales of children’s probiotic supplements in China in 2009.

Leo Zhu, the company’s senior sales director, says sales of probiotic supplements grow annually at about 20 percent in China.

“We have been focusing on Chinese affluent mother consumers, who have bigger consumption power and are more willing to buy nutritional supplements for their children,” Zhu says.

He says the company is making efforts to promote more baby healthcare products to meet the soaring demand from Chinese parents.

“We will work together with our global strategic partners for the joint research and development of innovative and high-quality nutrition products dedicated to pregnant mothers, infants and children in China,” he says.

Despite the encouraging sales growth of premium imported food supplements across the Chinese mainland, industry experts warn overseas companies should be better informed of the Chinese market and more cautious before heading to China.

“Because of the huge cultural differences, a Western healthcare producer must be patient when tapping the Chinese market,” says Luo Yang, an expert with the China Chamber of Commerce for Import and Export of Medicine and Health Products. “It needs to make sure it understands the needs of Chinese shoppers.”

She says if an imported brand sticks to its past experiences rather than adjusting its market strategy for China, that company could eventually withdraw from China.

Along with the influx of international brands, Chinese local nutritional supplement manufacturers are looking for a way forward. But because more nutritional food companies have emerged in China in recent years, products made by China’s local enterprises are less popular for a number of reasons including a lack of innovation and research and development as well as poor marketing models.

To reverse this situation, several major domestic producers have begun to seek help from companies in the US and Europe.

As China’s biggest importer of drug and healthcare products, China Meheco Corp, a State-owned enterprise listed on the Shanghai Stock Exchange, began to develop its own branded food supplements in the US in 2007.

“The R&D capability of US health food companies is ahead of China, so we want to improve our product quality through technical cooperation with them,” says Du Xiangdong, a general manager at China Meheco. “Taking into account Chinese people’s diets and physical condition, scientists and researchers from two sides will work together to produce formulas that are best suited for Chinese (people), which I think is helpful to improve our competitiveness.”

Currently Meheco’s dietary supplements can only be found in Beijing’s upscale shopping malls, but Du says the company will expand its presence by adding counters in other major cities this year.

With Chinese consumers having more exposure to a wider range of products, both domestic and imported, experts are calling on the government to strengthen supervision of the market to ensure Chinese people are able to consume quality healthcare products.

“Although the Chinese government has successively launched many laws and regulations to regulate China’s health food industry in recent years, compared to the market in the US or Europe, China still have a lot to improve,” Luo says. “We should further standardize China’s healthcare industry, so as to make local nutritional brands more competitive in the international market.”

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