According to statistics, by 2020, China's middle class will increase to 4 millions and the per capita disposable income of 273 Chinese cities will catch up to that of Shanghai. As the Chinese middle class pay increasing attention to health and nutrition, dietary supplements and nutritional health products are becoming increasingly popular, thus bringing about a huge and highly promising health food market. More and more foreign health food brands are pouring in for a share of this delicious "cake" – How to benefit from this $25+ billion market? Recently, Jeff Crowther, Executive Director of USCHPA offered his opinions.
"BLUE HAT" IS THE BIGGEST CHALLENGE
China Food and Drug Administration (CFDA) has put dietary supplements into the category of "health food". Crowther once predicted in an interview that the size of China's health food market is about $25 billion. It is difficult to know the precise value of the Chinese health food market, as the products in this market include food, beverage, etc.
Four years ago, CFDA began to revise the regulatory procedures for health food. Health food products require a "blue hat" logo, which may take three years to register. Health food producers also need to invest in expensive clinical tests. Such restrictive system will make many participants quit the Chinese health food market. Crowther said that the growth of health food in China is slower than expected because restrictive regulatory systems tend to impede investment.
The Chinese regulators want to change the situation. In July, 2014, the National People's Congress approved the Food Safety Law of the People's Republic of China (Revised Draft), which incorporated the registration process of dietary supplements into the notification
system to make it simpler. For some restricted supplements, CFDA should be notified before they enter the market and they do not need to be submitted to the “Blue Cap” for selection.
For health food producers, the “Blue Hat” registration process is a big challenge because it takes three years to get approval, and the registration fee for each product exceeds $150,000. According to Crowther, "additionally, it takes one more year to record the process, which costs about $15000 to $2000”.
The notification system is only applicable to vitamins and mineral supplements, and so far only a few companies have completed the process, so it is still in the early stage, but this situation may change. Crowther said that the recording process of vitamins and minerals should be closely watched, because other ingredients may be added to vitamins and minerals, such as fish oil, lutein, lycopene and ginseng, which might be put into the approval list. This helps to speed up the market entry process and reduce the time and money required to obtain registration approval.
NEW OPPORTUNITIES BROUGHT BY CROSS-BORDER ECOMMERCE
Regulators are looking for simpler procedures, while investors, retailers and consumers pay more attention to cross-border ecommerce. According to Crowther, the Chinese consumers are most interested in mature international brands and they search the Internet to find popular things around the world. Nowadays, with the fast development of social media, it is important for international brands to reach the Chinese consumers through the help of social media like WeChat.
In recent years, investment activities for health food have increased significantly, and it is not rare that Chinese companies take over American brands. In 2018, the Harbin Pharmaceutical Group established a $300 million strategic partnership with the American retailer GNC. It is one of the most important deals in recent years. Now, the Harbin Pharmaceutical Group owns 40% share of GNC. William Hood, founder of William Hood & Co., said, "Why is the Chinese buyer interested in GNC? It is because GNC is well known in China, and is a small business with great potential overseas. At the time of the deal, GNC already had five retail outlets in China. Investment is the fastest way for the development of China's domestic industry. Investment in or control over international brands paves the way for the sustainable development of the industry.” Other noteworthy deals include Shanghai Pharmaceutical’s purchase of Australian supplements company Vitaco Holdings, and Xiwang Food’s purchase of Canadian health products company Iovate Health Sciences.
PROBIOTICS AND OMEGA-3 ARE MOST LIKED BY THE CHINESE PEOPLE
Nowadays, health and health care have become hot topics for Chinese consumers. China’s “National Fitness Program” also encourages people to do more physical exercises. According to Crowther, "data show that there are a lot of sport events such as marathons, bicycle races and triathlons held in China every year. These activities increase the number of exercisers and raise people’s interest in nutrition, especially protein and amino acids, such as BCAA formula, pre-exercise formula and creatine." He said that the USCHPA will hold the Sport Nutrition Industry Summit in Shanghai on August 15th, which will be an ideal opportunity for international companies to enter the Chinese market, and they will be able to get the latest information on sport nutrition at the meeting.
Crowther said that the Chinese consumers are also very interested in probiotics and Omega-3 fatty acids in addition to sport nutrition. "Omega-3 fatty acids have more advantages because they have been in the market longer than probiotics. Probiotics are mostly used in the dairy / yogurt industry. They have not yet had a major impact on the supplements market mainly because of the "Blue Hat" restrictions.
He added: "like other companies around the world, I think many Chinese companies are interested in using big data to customize supplements, and collecting information through wearable devices or blood tests to do health research.
