Vitamins and dietary supplements in China – A Growing Demand For International Brands
Vitamins and dietary supplements (VDS) is a product category difficult to defined from a western point of view. In contrast, there are exactly 27 functions characterizing vitamins and dietary supplements in China. Those products, halfway between food and medicine support the human body in very different ways. By consuming specific types of VDS, consumer’s immune system and memory is fortified, blood regulated better, sleep quality enhanced, and organs such as throat, liver, stomach protected. Other kind of vitamins and dietary supplements even enable people to lose weight, have a clear skin, resist to low oxygen or radiations, and have higher bone density. Quality products are recommended to children as their consumption improve growth and development. In China, functions over the immune system are the most valued by customers and account for 27% of sales.
The 3D printing industry is scheduled to become the next 1 trillion dollar industry. This industry won’t be on its own, according to official Chinese government documents, in less than five years the Chinese market will reach 1,29 billion dollars for VDS. In the past, demand for VDS has been varying a lot because of poor product quality resulting into scandals, and frequently changing regulations. Since 2005, the growth has stabilised and is growing exponentially. The growth of demand for vitamins and dietary supplements is fueled by the breakthrough of modern Bio-tech that is being applied with Chinese traditional herbal food.
An 8 trillion RMB vitamins and dietary supplements market by 2020
Health care market in China is 2% of the total GDP, while in most developed countries it is around 15%. As a result, the annual growth rate of health care in the largest Chinese cities is 30% and half for smaller cities.
The Chinese government 5 year plan scheduled the market to reach 1 trillion RMB this year, with a growing growing rate of 20% however sales are still currently far below. This year the market scale will reach around 170 million RMB. The difference between the government estimation and reality illustrates the high market potential. Vitamins and dietary supplements will be increasingly supported by the Chinese government to favour a healthy population and reduce medical expenditures. Regulations are getting clearer to boost the application and approval process. China is in pace to become the largest market as the population is shifting towards a healthy and functional alimentation. In the last years the Chinese are developing a taste for high protein and dietary fibber food.
In parallel to this trend, the Chinese population is getting older and will need to take care of their health more and more. Currently, the average Chinese spends 28 times less on vitamins and dietary supplements compared to Americans. The extremely high potential of the Chinese market may also be explained by the increase of the population’s purchase power and the broader targeted consumers. In Shanghai and Beijing, kids are the largest consumers reaching 93% and 78% of elder people also enjoy VDS benefits.
Overseas vitamins and dietary supplements demanded
The Chinese are avoiding local brands. Consumer have felt betrayed by Chinese vitamins and dietary supplements companies in the past so their confidence for Chinese brands is particularly low. According to a research powered by the Chinese central station, only 3% of consumers believe that vitamins and dietary supplements can really have the effect it claims but 60% believe they are partially functional. Recently, people however are increasingly believing in VDS benefits so consumers are looking for trustable quality international brands, using high end technologies and biology knowledge. The consumers association of China believes Chinese lost their consumers trust by promoting fake effects, lying advertisements and failure to obey regulations. Furthermore, the Chinese lack knowledge about vitamins and dietary supplements and can’t rely on professional guidance. As a result, the market is highly segmented and brands have nearly no reputation but international players have grabbed over 70% of the market despite a majority of 96% local firms.
What VDS are consumed in China?
Currently, Chine consumers are valuing calcium and protein powder most of all. This shows the desire of being taller and stronger of Children and young people. Those functions are mainly found under the form of Calcium/Protein fortification, Lecithin, Spirulina, Vitamins, Propolis. This is also present trough garlic extraction, ginkgo extraction and fish oil. The Chinese are searching for more convenient products. Consuming vitamins and dietary supplements must be performed daily so the most pleasurable tastes and products forms are popular.
Vitamins orientated products are also the trend in China. On its own this market accounted for 16,27 billion dollars last year. More traditional Chinese ingredients are getting increasingly popular too. It is estimated that more than 4 billion people are using products related to herbal medicine in the world. We can find amongst the most traditional vitamins and dietary supplements: donkey-hide gelatine, ginseng and Cordyceps sinensis.
In the past five years international players sales for vitamins and dietary supplements is growing at a rate of 12%, which is higher than the average 10%. As mentioned in the title, it is time for international brands to enter the market, but don’t rush in. The VDS market in China will be changing fast, it requires real analysis and strategic choices that may be tailored and cost effective. For example, local rural producer may become important players in the coming years as they build trust though different brands.
Internal case study: Vitamins and dietary supplements in China 2015