Market Tidbits transcript #3: China’s vitamin and supplements market. Differences in preferences China vs. West
Matthieu David: Hello everyone, today we are going to go through our new vitamin and health supplements sector in China report, which was published in July 2020.
Download Vitamin Market in China report
Here to talk about it with me is Allison.
Allison Malmsten: Hi, I am Allison, the marketing manager at Daxue Consulting.
Matthieu David: Thanks for being here. So today we go through this topic which is the Vitamin and Health supplements sector in China, which has been a topic for years, it has been impacted by cross border eCommerce, it has been – actually I don’t know if I could say dominated but influenced a lot by brands from overseas and we are going to see which countries are more valued by Chinese consumers, but if we compare China to the west, what would be your conclusion, Allison, after reading the report?
Allison Malmsten: So, I think one thing that really sticks out is there’s different motivations to take health care supplements in China. In China the number one concern is skin health and the appearance of the skin, so a lot of the supplements will market themselves towards skincare and you might even see for example a specific supplement that’s in China marketed as a skincare product, but then it helps with skincare and then in the west, it might be marketed as it helps with the immune system or something else.
Matthieu David: Very interesting. So it has been in some ways rebranded for the Chinese consumers and I think in the report we mentioned that there was some – also fake statements – do you feel that the fact that the same vitamins would be branded for skin instead of immune system in other countries, would be considered a fake statement or is it just different properties which are – communicated on – what’s your reaction when you read reports?
Allison Malmsten: Yeah that’s very interesting. Its hard to say whether it’s really fake, I mean we would really have to dig into the research done by the companies that created the products and did their own testing further on health departments and their local governments’ approval, but yeah I do think that – for example, some products in China might be marketed as skin lightening, especially like – on another note, some moisturizers might be marketed as skin lightening, whereas in the west moisturizers are known to keep your skin more tanned because it causes you to not shed skin. So, yeah, I think in order to really know the answer to that, you would have to follow a group of consumers for a while to see how it really – how the vitamins really are processed in the body. To a certain extent there’s obviously going to be an amount of the mental factor or the placebo effect like if you believe a certain vitamin is going to make your skin look healthier or it’s going to improve your immune system, you might look in the mirror and say – wow, my skin is glowing today when in reality you don’t really know if its improved that much.
Matthieu David: And in the topics you wanted to mention too when we compare China to the west, is about the level of consumption and the room for growth which seems to be still steep in China?
Allison Malmsten: Yeah, so currently China’s vitamin market has about a 10% YoY growth rate, now this is about the same growth rate as the US in the 70’s, but in the US in the 70’s a lot of these products were still developing and a lot of them would have very negative side effects, and so obviously this would hinder the market growth. But, right now a lot of these products they have already been perfected over a couple of decades now, and so there’s a lot of room for them to really be successful and grow very quickly.
Matthieu David: The numbers you came up with when we talked about it is that – it was a per capita standing and China was still standing on 18$ USD where the US is –
Allison Malmsten: Yeah, the annual consumption is only 18$ USD per person, whereas in the US it’s around, was it 140?
Matthieu David: Its 148 – the number you came with, so that’s a very, very common way of looking at where you could still grow in China, what segment could still grow is to look at the per capita consumption and to say that China within the coming 10 -20 years will catch up the level of Korea or the US. So, it would be a ten-fold or maybe 8-fold growth if you look at the numbers. That may not happen but that gives a little bit an idea of the gap which could be caught up. At least certainly the case let’s say for – half the population is certainly believable, maybe not the entire population, so its still a fold of maybe 4-5 times.
Allison Malmsten: Yeah and then for japan and Korea the per capita expenditure on health supplements is 100$ so that’s still five times more than China.
Matthieu David: Yeah so that’s certainly why as well a lot of brands are looking at China because they see there’s an appetite for it, there is a culture of eating supplements or superfood, to become a little bit of – that’s the topic I’d like to discuss, a bit of a superhuman, I feel there is a bit in China, a culture of being super-efficient and superman or superwoman and in order to reach this level, either to exercise or to eat a lot of supplements. So, in terms of culture, it seems to fit and in terms of spending it seems not to have reached the maximum.
Allison Malmsten: Yeah definitely I think Chinese especially millennials and Gen-Z are really looking to become the best that they can be and they’re willing to make purchases to do so. Some factors for a healthy lifestyle perceived amongst Chinese people are for example a balanced diet which in a survey by Mintel, 50% of Chinese believed that its important and they do have a healthy diet, but then 49%believed that it is important, but they don’t believe that their diet is healthy enough. And so, this is just an example of about 50% of people are out there and they think they want to do better, they want to close that gap between their ideal self and their current self.
Matthieu David: And that’s something interesting in the report as well. We didn’t want to dig in too much when we were talking about the report today but when you look at the search on Baidu and what’s trending, one of the trends during and after COVID-19 was to try to understand what is junk food and what is a healthy food, because actually people have a hard time to distinguish what is junk food and what is healthy food. We think about fast food when we think about junk food, but it’s not necessarily healthy when its not fast food. Are very oily dishes healthy? Certainly not. And so, there is a request – quest I would say, by Chinese consumers to understand what healthy and not healthy is during COVID-19 and after COVID-19. So, that brings up a topic about COVID-19, how COVID-19 has impacted the industry overall, the self, the perceptions, and I think it’s also impacted prices.
Allison Malmsten: Yeah definitely. So, Covid-19 did stimulate the sales of the vitamins and health supplements sector in China, for sure one topic is immunity and based on the results from Baidu’s searches, you can see that the search for how to improve immunity has skyrocketed around the time that Wuhan was closed down. And then that results in people trying to optimize their health and so vitamins – they had some big online deals, so during February – March, and April, some top brands like By-Health and Swisse were already up in sales by around 40-60% from the year before, and, of course, a lot of this is because people were in general shopping online more and so because this is measuring online sales, that can explain some of these numbers, but there was a lot of price dropping from February-March-April to try and encourage these consumers to shop online and buy their products.
Matthieu David: Yeah, to that we need to remember that the shops closed, the online sales may have cannibalized the offline sales, so all in all the market may not have grown as much as 40-60% during and after Covid-19.
What kind of vitamins Chinese eat most? You mentioned that some vitamins are marketed towards skin more than in the west, but are there some vitamins that Chinese prefer, or health supplements?
Allison Malmsten: So the most popular vitamin is vitamin E and in the US for comparison, Vitamin E falls in like the 8th or 9th spot for Vitamins and Vitamin E is marketed as something for skin, something to help elderly, and then after vitamin E comes Vitamin C – which is a bit more popular in the US at least, because it’s known for immunity – preventing colds – so yeah – and then after that is vitamin A which is of course known to help eye sight.
Matthieu David: We mentioned at the beginning that health supplements and vitamins – again I’m not sure to use the right word by dominated, but are largely influenced by overseas players, foreign players. How the different countries perceived by Chinese people. We know that Australia and New Zealand usually have a good image in terms of nature, in terms of food – is it a case in vitamins and health supplements and what other countries stand out?
Allison Malmsten: So Australia definitely stands out, 22% of the vitamin imports in China are from Australia, they’re know for vitamin C – calcium, collagen, grapeseed and dietary fibre and I think the idea that Australia is kind of green, healthy, natural is definitely true in this case – there is one Australian brand that their offline store is kind of like an Australian theme and its decorated kind of like a forest or a jungle and its all green and leaves and I think that’s definitely consistent with their marketing message of being – hey, we’re Australian so we’re natural and yeah I think that’s very effective in the vitamin industry.
Second is the US – they account for 20% of the imports and they’re known for big brands like GNC and so some of those marketing strategies they use like KOL’s and they’re known because they have a big strong brand name and so some people when they’re looking for trustworthy brand names, they might go for some of these foreign brands.
Matthieu David: So you already touched the point about marketing strategies for herb supplements by mentioning some KOL – you mentioned three strategies or tactics that you wanted to go into – one is to use multiple channels to reach consumers – you already mentioned shops – offline shops, and the second one is the market to the right consumers and in the report, we see that the most – the segment expressing the highest interest into vitamins and health supplements, doesn’t mean the segment which is buying the most actually. But the one which is expressing most interest is about 20-29 years old and then you have the 30-39, but this is really the core segment, which looks always a bit younger than the one you would expect – 20 – 29 and so to market to the right consumers would be your second recommendation, to be very careful on this, and secondly its to leverage social media and gain insight from them. Can you elaborate a bit more about those three directions you suggest to form brands in the health supplements and vitamins to explore?
Allison Malmsten: Yeah so first point – using multiple channels to reach consumers, in China omni channel is very important. New retail which is the combination of online and offline – so like we talked about earlier a lot of these products are sold on platforms like Alibaba’s Taobao and Tmall, but at the same time a lot of the brand awareness comes from seeing the stores and going into the stores. One of the strategies that brands use is pop up stores, which is where they kind of have a little exhibit pop up in the street or in the mall and these little pop up stores, they really encourage people to take pictures and share on social media which for them after the cost of the pop up store, the following social media sharing is all free for them.
GNC has had pop up stores, Blackmores and yeah – so that’s how they reach consumers, they do branding offline and you can of course purchase offline too, that increases their brand awareness and then the stores are very interactive and then they might hop online for that final purchase.
Next point – marketing to the right consumers. So, based on our analysis from Baidu, who is searching about vitamins?
Well, it appears that 20-29-year old’s are the main people searching for these products. In contrast when we did an analysis on searching for healthy food, the target age – the age group of the people searching for healthy food was the 30-year olds. So, it does show that the 20-29-year old’s, they are definitely curios to learn more about these products and maybe compare them online, so a lot of the brands do cater their marketing tactics to reach these groups. One strategy is KOL marketing, another example which I thought was pretty clever was that one brand that had a sleep supplement, it’s called [Chinese 16:37] it’s a Chinese brand, they actually target people who stay up late at night, which is likely to be college students and they have these videos that play late at night, talking about marketing their products and they also have comics released late at night, kind of to target those people. Similar to Zhai people like we talked about last time, its targeting that group of people. So that’s kind of some interesting ways – there’s another By-Health, collaborated with transformers, which was really popular when the 20 -29-year old’s – when they were kids. So, it’s a little bit of nostalgia marketing.
Matthieu David: It’s interesting to see them targeting a specific context in which you may think of health supplements or vitamins, I really like those niches where you find your sweet spot and Chinese seems to have found that and By-Health, working with, collaborating with Transformers.
I have been always, since I’m in China – surprised how transformers have been popular in China and competing with Disney. I don’t know if its part of Disney, I don’t think so right –
Allison Malmsten: I don’t know, I was never a fan of it.
Matthieu David: But it seems to be more familiar to Chinese than the very well-known Disney cartoon or movies that we would have been familiar with in Europe or in the US – Transformers have really made a mark in China.
AAllison Malmsten: Right. And what’s also interesting is that whilst Star Wars kind of took over the world and everybody ahs seen all of the Star Wars movies; Star Wars is actually not famous in China at all.
Matthieu David: Interesting too, yeah. Very interesting, we need to challenge what we believe as well known and as taken for granted in China, always reconsider it.
And the last one you were mentioning is leveraging social media to reach consumers and gain insights.
Allison Malmsten: Yeah, so when it comes to reaching consumers, one interesting thing is Chinese people – especially on WeChat, they love to use emojis and those little dancing cartoons, they love to use those and so Blackmores has actually released their own emoji for one and then also something that’s very interesting is – if these brands can do some social media listening to see what Chinese consumers are saying about their brands, there’s a lot of learning.
1 – some three key things that we picked out, that was very interesting to us is some of the three biggest complaints about vitamins was 1] that the pill tasted bad. 2] that the pill was too large and 3] that the effects were not obvious enough.
For the first two points –
Matthieu David: Sorry to interrupt but I like to stop on pill tasted bad – maybe that’s something you wanted to say but the fact that the pill tasted bad, I’m wondering if its not good. Because you don’t expect something healthy to taste good. You don’t expect a medicine to taste good. Actually, if it tastes bad, it may link more to something more scientific and chemical or – chemical in a positive way, made by science – something made on purpose, not to please you but to do good for your body.
Allison Malmsten: Yeah what I thought was really interesting is that – these vitamins are obviously – like they’re not made to be eaten or really chewed on. So that’s why – what’s interesting in China they say literally eat medicine, but in the West, we say take medicine – I don’t know how it is in French but in English, we don’t think of it as eating, and so I think what was very interesting is they would say that the medicine or that the vitamin it doesn’t taste good and I think – well, from my perspective, from the western perspective, obviously – its not candy. I mean, they can add a little bit of sugar to the recipe to maybe make it taste better, but the purpose is not for taste. Although some vitamin C ones might taste citric, but there are some pills like fish oil pills, for example, they’re not going to taste good. So, I just thought that’s very interesting that they comment that it tastes bad and they complain about that.
I actually went and looked at amazon reviews in the West and I saw that nobody was commenting about the taste, cause you just think that’s irrelevant, but that’s a good point to say – maybe the product was not stored properly, maybe it was not kept in a cool enough condition or maybe it was past the expiration or something. Yeah, and then the second point was –
Matthieu David: It’s interesting how semantics could influence also the comments from consumers because of the expiration to eat medicine, in French we say the same as in the US – to take medicine, instead of taking – which certainly would imply different thinking in French relationship with food and with medicine and to associate food and medicine because you eat medicine – it’s a very interesting point.
And the last thing you wanted to mention is about healthy lifestyle, right?
Allison Malmsten: Yeah so, we were curious to look at how do Chinese define a healthy lifestyle – obviously that can be perceived as differently across cultures. What we found was very interesting among Chinese people, nutritious food is definitely the most important factor in their – the first choice they make to improve health condition. After that is trying to make better life choices like sleeping more or maybe even using Chinese traditional medicine and then health supplements comes next – but what I thought was interesting is sports and fitness came last and I don’t know if this is my own personal bias but I think in the US when we think – oh we want to make healthy life choices – we think first we go to the gym and the very last thing is changing our eating habits. We always want to outwork a bad diet, we always want to try and work it off at the gym, but in China, it looks like it’s the opposite. It seems that nutritious food comes first and fitness comes last. Health supplements are in the middle, but like you mentioned – with the language, especially with the word for taking health supplements being to eat – I wouldn’t be surprised if that’s more closely related to the perception of nutritious food.
Matthieu David: Interesting. Also in China, my experience is that there is this tendency to think about a miracle solution like when you get – you don’t feel good or you have a cold, you would drink hot water and then you have this one solution fits all – I feel with vitamins and with health supplements, you have this relationship also like miracle solution to whatever problem you have, except that you may have one specific vitamin health supplement to solve your specific problem instead of one solution fitting all.
Another thing I liked in the report and found very inspiring, interesting and something certainly to look at more deeply in the future, is about how to market vitamins and health supplements and it seems that the packaging is very important. It seems also that when you want to connect with the Gen-Z, you may think also about Buddhist healthcare. You may also think about some ingredients like honey, goji berry, tea with health ingredients, fermented food, wheat proteins, things that resonate with the Gen-Z and lastly health is not only – we talked about eating medicine, but actually there are a lot of other products to make it possible for health supplements and vitamins to cobrand their product, which are devices, which are affiliated appliances that somethings certainly a bit new in the mind of consumers to have like air purifiers, to have water purifiers, to have different tools, devices plugged with electricity, IoT, using the internet for health – one being all the Xiaomi devices to track your health, like your pulse and so on.
So, there are a lot of opportunities to communicate about your health I feel in China – it’s a very, very aware market about health. Do you feel the same?
Allison Malmsten: Yeah, in fact, you mentioned about the Chinese magical solution – I think that’s very interesting because I think eastern medicine is kind of – it’s about bringing the body back into balance and I believe that all health problems are caused from the body being out of balance and so doing something like drinking hot water to somebody who believes in that is – drinking hot water, it will solve digestive issues, it will solve skin issues, it will solve any kind of stomach ache if you ate something bad, of course, if you have the flu or anything, you absolutely are supposed to drink hot water. So I think that there’s a lot of belief that no matter what problem your body is having, its having it because its out of balance and then there is this key thing that can bring your body back into balance whether it means cooling you down or warming you up, based on the yin-yang, whereas western medicine is targeting like – okay so you have a stomach problem and we have to identify what the problem is and based on what the problem is there will be a specific remedy for that or medicine for that and it might not be – we won’t relate it to another problem that you’re having in the body.
So I think even though there’s a lot of Chinese people today who don’t necessarily believe in Chinese medicine, you will still find that when talking about food or when talking about a lot of these different life things that these beliefs will kind of sneak their way into the conversation and into the thought and yeah – if that makes any sense – whether they believe in Chinese medicine or not, they’ve grown up with the culture and they’ve grown up with family members telling them what to eat when you’re feeling a certain way or what ingredients help with what type of illness and I think its hard to separate that for the rest of their life. So I think that using these very traditional ingredients like goji berries or fermented food or even using them and then marketing them in the products, again ginger is a really good one and ginseng – that could be really beneficial for marketing in China, versus like if you use ginger in your marketing in the West, people might be like – okay! What is that supposed to do?
MatthMatthieu David: Very true. Thanks for taking the time Allison to talk about the report, and if you want to know more about the report you can find the report on SlideShare, they are all stored on SlideShare and on our website. Thanks for listening everyone.
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