This article was published in the lead up to our China Health & Food Supplements Industry Report, available for free right now.
As the world’s most populous nation, China is one of the biggest markets on the planet for almost anything. This is certainly the case for health supplements, which boast a massive market in China. The latest figures from 2018 put the industry as being worth some 22.78 billion USD. It is estimated that by 2023 this figure could rise to a staggering 40 billion USD, following a 2019-2023 compound annual growth rate (CAGR) of 14%.
However, this size is a direct consequence of the size of the country and its population. The actual consumption rates are still far behind developed Western markets or neighbors like Japan. Per capita health product consumption was 177 RMB in China during 2018. Compare this to 767 RMB, 662 RMB, and 924 RMB in Hong Kong, Japan, and the US respectively. This may be due to competition from entrenched Traditional Chinese Medicine (TCM) alternatives, or simply a consequence of such products having only entered the China market relatively recently.
Some experts compare the current China market to that of the 1970s US due to size and level of development. Others look to the Japanese market due to similarity in consumption habits and cultures. Based on such comparisons, experts suggest that the China market has space to grow by 200-300% in the coming years.
Vitamins, Minerals, & Supplements (VMS) account for more than 90% of the entire health product industry, not including over-the-counter medication. This segment increased 9.2% from 2017 to 2018, to reach a total market size of 148.55 billion RMB. However, despite the rich variety in product types within this segment, as a whole it is highly homogenized. Many products are functionally identical or equivalent to competitors’ offerings.
The remainder is largely made up of Weight Management products. This segment of the health products market in China reached 12 billion RMB, up 9.2% from 2017. China’s large population and increasing obesity rates mean there’s a great deal of untapped potential in this space. This is despite obesity rates remaining much lower than most Western countries.
There is another segment worth watching, however. According to Euromonitor, the Sports Nutrition segment of the health products market in China grew 42.2% in 2018. This growth saw it reach around 15.1 billion RMB. This makes it something of a niche segment in the market, sporting the smallest size. However, though its base is small, it is witnessing impressively fast growth.
Online Sales of Health Supplements
Online retail has come far since its humble beginnings a few decades ago. It now represents a dominant sales channel that is increasingly impossible to ignore. With unparalleled convenience and the ability to offer far wider selections of immediately available goods than any physical retail location, online has grown from strength to strength. This is especially true in the Chinese market, and has become a vital channel for health supplements in the country. This is particularly true for overseas sellers. Cross-border channels now enables sales to China without any physical or legal presence there.
Leading brands such as Blackmores have openly stated that their China business is “almost exclusively an eCommerce business”. Impressive for a leading brand in the country’s health supplements market, for whom almost 40%
of global annual sales come from China. Online retail currently accounts for 31.9% of the health supplements market in China, but is also experiencing growth more than three times faster than the next fastest growing channel, at 31.2% to direct selling’s 10.1% (and an industry average of 10.6%).
When compared to the total market size, the online market still represents only a minority of sales, with offline sales still accounting for more than 50%. However, strong growth over most of the past six years has seen this share grow considerably, and while 2018 saw smaller growth than the market as a whole, with growing integration between online and offline lifestyles in China, it is a strong possibility that online sales with overtake offline within the next decade. Either way, online selling has become impossible to ignore.
Over the past decade, the number of companies with 1%+ market share in the Chinese health care products market has more than doubled from just six in 2009 to 13 in 2018. Currently, Infinitus holds the most of any company operating in the country, at 10.2% of the market share, with Thompson rising to 7.5% in 2018, and Amway China shrinking to just 6.5% after having peaked at 15% in 2012. Still, companies with a market share under 1% make up more than 50% of the market, suggesting that there’s a lot of space for new market entrants. Especially given the degree of change we can see in the market shares of the leading companies over the last decade. For now, no brand is so entrenched that it is immune to competition from rising stars.
There is no overall dominance in the VMS segment, with a high number of brands each with a relatively small market share. According to Euromonitor stats, only 12 VMS brands had a market share of more than 1% in 2018. The top three brands account for just 26% of the market.
In terms of competitive landscape, major brands dominate the Weight Management market segment. The top three biggest brands control 62% of the market share, with market leader Herbalife controlling nearly 50% by itself. Herbalife focuses its strategy on this market segment, which has become the source of 64% of its revenue.
A few main brands dominate the Sports Nutrition segment. The top three brands account for 63.9%. Market leader Xiwang Food took its position as the biggest brand in sports nutrition in 2017, one year after purchasing foreign brand MuscleTech. Meanwhile, Kangbit is the preeminent example of a domestic success story – securing its second-place position by being the official sports nutrition provider to national and regional sports teams.
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