ENTRY INTO THE CHINESE HEALTH FOOD MARKET!VITAFOODS ASIA, 2013!

1.  Chinese Health Food/Dietary Supplement Market

Overview!

2.  How to Enter the Chinese Market!

3.  How to Be Successful in China!

4.  Why We Add Value!

5.  Q&A!

Agenda!

Part 1"Chinese Health Food Market Overview!

China as an Attractive Market!•  China forecast to achieve 7%+ GDP

growth in the next 5 years!

•  Large market size: 575 million (urban) + 765 million (rural) !

•  Rapid urbanization and increasing upper middle class will support sustained spending growth!

•  Ageing population will drive continuous growth in healthcare. 180m+ people will be over 50 yrs old in the next 10 years!

•  Chinese consumers increasingly accept imported products and find them affordable!

Source: China Nutritional Supplement Market Overview (David Zhang)!

Growing VDS & Nutritional Foods Industries in China!

Source: China Nutritional Supplement Market Overview 2012 (David Zhang)!

Market Growth by Product Category!

Source: McKinsey Report on Nutritional Supplement Market, China Nutritional Supplement Market Overview 2012 (David Zhang)!

Size in USD millions

Consumer Preferences "(2012 Survey)!

(%)!

Source: Annual Report On Healthcare Food Industry of China No.1, Page 194, 200!

Popular Functional Products! Purpose of purchase!

Popular imported dietary supplements include herbal, beauty and weight control products.!

Retail Sales & Market Share "(2010 Survey)!

Source: Annual Report On Healthcare Food Industry of China No.1, Page 246!

2010 total retail sales (through shopping malls, supermarkets): RMB64.1billion, up 14.4% from 2009!

Sales through other channels such as pharmacies (drug stores), conferences, Internet, direct selling, etc. are not included. !

Dietary Supplement Sales Channels (2012 Survey)!

Source: Annual Report On Healthcare Food Industry of China No.1, Page 204!

Demand is concentrated in Tier-1 and Tier-2 cities.!

Very fragmented market with the top 10 players holding less than 25% of the market.!

Chinese Consumers’ Perception about Imported Dietary Supplement Products!

Source: Annual Report On Healthcare Food Industry of China No.1, Page 219!

Foreign companies can potentially tap into 76.7% of the market where consumers are open to buying imported products!!

Part 2"How to Enter the Chinese Market!

Barriers to Entry!High brand building and channel

operating requirements!

Foreign companies often neither understand the Chinese culture nor

have right connections!

High human resources requirements and difficult to find and retain talent!

Regulatory environment: highly regulated and frequently changing!

Opportunities Are Massive, So Are Challenges!

Importation!•  CIQ (China Entry-Exit Inspection and Quarantine Bureau) requirements!

•  Selecting a right import port (over 100 ports in China) and complying to its varying import requirements!

Must meet the regulations of these government bodies:!•  Ministry of Health!•  SFDA (State Food & Drug Administration)!•  AQSIQ (General Administration of Quality Supervision, Inspection and Quarantine)!•  SAIC (State Administration for Industry and Commerce)!•  “Blue Hat” (quality & safety) registration!

Registration!

Regulatory Requirements for Importing Dietary Supplements!

The regulatory processes are time-consuming and stressful. Most companies use agents to handle the processes. !

Successful Entry " Successful Sales !

!  Product must be market-ready before distributors can accept it!!  An effective marketing and sales model in China relies on established

distribution network and wise pricing!!  Internet selling is growing but it will not work without a recognizable

brand!!  Without connections with a powerful national distributor and key

influencers in the market, companies will bear high marketing, channel operating and HR costs with little chance for success!

!  Marketing materials must be in Chinese and accessible to the consumers !

Market Barriers!

How Imported Dietary Supplements Reach Chinese Consumers!

Manages regulatory compliance including product registration with multiple government authorities - critical to entering the Chinese market and often time-consuming and stressful!Sets marketing strategies and plans including brand building, channel strategies and pricing. Very powerful in the supply chain. Finding a right ND determines sales success!

Implements the marketing plans set by the National Distributor. Absorbs logistical and marketing costs !

Consumers usually accept RRP of under RMB300/product. Foreign companies must understand how pricing works at each level of the supply chain. !

Part 3"How to Be Successful in China!

Consumers! Connections!Culture!

Success Factors - 3C’s!

!  Understand and appreciate the unique Chinese culture for doing business!

!  Have language capabilities to communicate messages in China in a culturally intelligent manner!

!  Understand the needs and buying behaviours of Chinese consumers!

!  Segment and target the right consumers and understand the most effective marketing tools to reach them!

!  Doing business in China is largely about connections !

!  Building trust and lasting relationships with the right agents and distributors who have knowledge, experience & powerful marketing capabilities is often critical for success!

Part 4"Why We Add Value!

We identify ingredients and finished products that have potential in China!

3!1! 2!

Our Value Chain!

We consult with your company and our Chinese partners to break down the entry and market barriers for you!

We ensure your company is equipped with the success factors - 3Cs!

Your product"

Chinese Consumers"

Who We Are!

•  Is the largest and most influential organisation in China’s healthcare industry, consisting of nearly 1,000 companies, many of which are key distributors and manufacturers.Through CHCA’s Committee of Health Care Consultation, we engage in market strategy consulting, health food registration advisory services, law and policy research, healthcare industry research, evidence-based study of health food products, domestic and international health food industry communications, as well as healthcare industry conferences and exhibitions. !

•  Our expert team consists of richly experienced consultants and technical experts for food, medicine and biology. !

•  We maintain a strong relationship with Chinese regulatory authorities. !

China Health Care Association (CHCA)!

Why You Will Work with Us!•  Proven track record in successfully bringing Western brands and

products into China!

•  As the healthcare industry’s opinion leader, we are able to leverage industry resources to your benefit, assisting you in selecting the right partners and navigating the Chinese market!

•  Strong connections and partnerships with other key market players including successful national distributors. Our partners competently handle regulatory requirements, have proven experience in market success, and maintain close relationships with regulatory authorities. !

•  Qualified and customer-centric trilingual (English, Mandarin, Cantonese) consultants who will build a bridge to China for you!

Specific Services Available to You (1)!Our services cover almost the entire supply chain for imported products. Working together with our Chinese partners, we are able to help your company:!

1)  Understand the Chinese healthcare and dietary supplement industries and market and provide all kinds of market data!

2)  Handle all registrations with the Chinese government for health food (finished products or ingredients), cosmetics, medicine, medical appliances, etc.!

3)  Understand the importation options and procedures and optimize the process for you!

4)  Understand the IP situation in China and handle the IP protection and patent registration for you!

5)  Establish sales and marketing channels including traditional and online channels and find you distributors of various sizes!

Specific Services Available to You (2)!

6)  Find all sorts of marketing service providers in China for product positioning, packaging, advertising, etc.!

7)  Organize seminars, trade fairs, conferences, press meetings, etc. !

8)  Find land and facilities if you want to open your own factory or subsidiary in China!

9)  Find ingredients for foods and functional foods!

10)  Arrange financing options !

11)  Manage public relations!

12)  Manage other ongoing issues or crises!

Thank !you.!