kina rapport

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Meabco 2015

一項戰略洞察中國市場的維生素和補

充

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The Chinese market for vitamins and

dietary supplements

The purpose of this rapport is present facts about the Chinese market for vitamins and dietary

supplements, which are relevant for the characteristics of Substance from Meabco A/S.

First of all let’s take a look on the effects of Substance:

Anti-aging

Strengthening of bones (useful for elderly citizens and pregnant women)

Strengthening of immune system

Strengthening of hair and nails

Improving metabolism

Improve digestion

Increase efficacy when pregnant

Increase well-being and safety in children

Increase well-being

Increasing quality of blood

Skin health

The plan is to sell these effects separately in different products.

Development in China so far

We start of by taking a look on the development in the Chinese market where it grew from 57.7 in

2009 to 100 billion Chinese yuan (CNY) in 2014. This is an explosive growth of 75 percent.

Dietary supplements

Dietary supplements are the biggest category. It has risen from 38.36 billion in 2009 to 70.39 billion

CNY in 2014, which make it an interesting market for both Chinese and foreign companies.

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Vitamins

The market for vitamins has been rising in China during the last half decade. Overall vitamins stand

at around 13 billion CNY in 2014.

Multivitamins rose from 6,67 to 9,53 billion

Vitamin B rose from 721,8 million to 1 billion

Vitamin C rose from 845,7 million to 1.31 billion

Vitamin E rose from 769,5 million to 1.14 billion

The reason vitamin C and E sell well is because of their anti-aging and immune boosting qualities.

However, in order to maximize the effect of E-vitamin you have to take it alongside food products

containing fat such as corn, egg cheese and milk.

Actually, some consumers do not believe in taking supplements for vitamins. They instead prefer

fresh vegetables and fruit1. However, Chinese consumers are increasingly in pursuit of targeted

multivitamins, which suits their situation or wishes2. This has seen an increase in sales of age- or

gender-specific products.

Multivitamins for specific groups

Elderly: risen from 5.6 percent in 2009 to 7.9 percent in 2014

Pregnancy: risen from 1.5 to 3.4 percent

Women: risen from 1.8 to 3.5 percent

Men: risen from 0.6 to 1.7 percent

Also noteworthy is weight management, which is a separate category from vitamins and dietary

supplements. This area of consumer health is expected has risen from 5.47 in 2009 to 6.31 billion in

2014

Pediatric vitamins and dietary supplements represented 18 percent of total vitamins sales in 2014

(7,3 billion CNY). Cautiousness from parents, when choosing VDS for their children, being an

obvious barrier. Calcium supplements and protein powder, to supplement nutritious elements for

growing children, were popular in this segment.

1 Euromonitor 2015;2


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The greying population, an increasingly busy lifestyle and the mounting pressure from life and

work are all factors that push up the demand for consumer health products. Stronger purchasing

power means a pursuit of consumer health products that are able to boost immunity, delay ageing

and fight fatigue3.

Just that is being offered by Infinitus, which is the second largest company on the market China.

They offer a variety of consumer health products that can strengthen the immune system, anti-

ageing effects, relieving fatigue, cardiovascular health, digestive health, liver health and reducing

blood sugar. These effects are in higher demand today, which is seen by the numbers below.

All the products contain traditional Chinese herbal ingredients, which is in line with consumer

demand4. It mostly comes in the form of pills and capsules, but also in the form of tonics and

bottled drinks5.

Market shares by relevant groups (out of 100 percent)

Immune system up from 21.9 to 23.7 percent

Bone down from 26.6 to 25.7 percent

Digestive up from 1.9 to 2.1 percent

Beauty up from 13.1 to 13.6 percent

General health down from 13.3 to 12.3

Heart health at the same level

Bone health and immune system stand for nearly 50 percent of the total value sales in 2014. These

dietary supplements, such as calcium supplements and ginseng, target senior consumers and

working consumers with a hectic daily schedule.

Beauty is another growing positioning of dietary supplements, which aim at women wanting a

younger and fairer appearance.

New combination formulas, such as Herbalife Active Fiber Complex, made from herbal ingredients

like apple fibre, citrus fibre, and sophora flower etc., are positioned as digestive health supplements,


4 See top of page 4 of this report


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claiming to help control calorie intake and burn body fat. These are receiving mounting attention

from local consumers.

Natural and easy on the go

Herbal/traditional combo dietary supplements are increasingly popular with consumers. They crave

convenient and balanced supplements, and supplements with herbal/traditional ingredients are

deemed to be milder with fewer side effects6.

There is both stronger purchasing power and a demand for high-end products in China. This is

exemplified by the launch of Naturone, containing carefully-selected upmarket raw materials,

including organic herbs in 2014. The product claims to boost immunity, and it is sold at CNY 1,999

per bottle (which amounts to 60 tablets). This is far higher than other products with similar

ingredients. International kung-fu star, Jet Li, was used to help promote the brand7.

In general, capsules, tablets and oral liquid are the popular delivery formats in China. This is

because of convenience and hygiene. Demand for single-consumption pack size is on the rise

enabling on-the-go consumption.

This is also seen with the rising popularity of Tonics and bottled nutrition drinks, which has have

risen from 5.92 billion in 2009 to 9.31 billion in 2014.

The latest additions are various collagen drinks, claiming to achieve soft and supple skin with

reduced wrinkles and mainly targeting female consumers.

Companies present in China

Some western firms are currently present on the Chinese market: Johnson & Johnson, Wyeth,

GlaxoSmithKline, Pfizer and Bayer. They are however some way behind market leaders Amway

and Infinitus8.

Below is a ranking of the relevant products and their makers in the different categories, which are relevant for Meabco A/S.

Rank Immune

system

Bone

strengthening

Digestive Multivitamins

for elderly

Multivitamins

for pregnancy




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products

1 Nutrilite

from

Amway

Nutrilite Calcium

Magnesium Tablets

from Amway

Sanjing Zinc

Gluconate

Oral Solution

from Harbin

Pharma

Centrum Silver

from Pfizer(USA)

Elevit from Bayer

(Ger)

2 Infinitus

from Lee

Kum Kee

Caltrate D from

Pfizer (USA)

I & Onlly

Liquid from

Shanghai

Jiaoda Onlly

Co

Goldpartner from

Stone group

Holdings

Matema from Pfizer

(USA)

3 By-health

from By-

Health

Tiens Calcium

Powder from Tiens

Group (Tianjin

Tianshi)

Onlly You Jun

Duo from

Shanghai

Jiaoda

Golden Scrianen from

Beijing Scrianen

Pharmaceutical

Relevant companies share of the Chinese market

0 2 4 6 8

Market share

in 2014

Bayer

GlazosSmithKline

Harbin

Stone Group

Nu-Skin

Wyeth

By-Health

Johnson & Johnson

Perfect

Tianjin Tianshi

Infinitus

AmwayThere are many firms on the Chinese market, and only two firms (Amway and Infinitus) have a

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considerable market share. This means different options if one want to enter the Chinese market

with product(s)

Option A: Collaborating with international firms already present (Wyeth, Johnson &

Johnson, Bayer, GlaxoSmithKline)

Johnson & Johnson have seen a steady increase in market share from 1 percent in 2009 to 2.5 in

2014. The opposite can be said of GlaxoSmithKline with a decline in market share from 1.5 to 0.9

percent. The money is certainly there, but the question is how big the interest and patience is.

Immune system and digestive could be interesting for these firms seeing that market leaders here are

all Chinese companies.

Option B Market leaders (Amway and Infinitus)

Pregnant and elderly are areas of Substance could interest the biggest firms. These categories are

currently dominated by foreign firms.

Option C Local companies with potential

Some local companies have experienced significant growth and must be expected to have an

interest in expanding further. These companies are Tianjin Tianshi, Guangzhou By-Health, Perfect

and Nu Skin.

One way of doing this could be by collaborating with Meabco.

Future prospects in China:

Overall the market for vitamins and dietary supplements is expected to grow to 127 billion CNY in

2019.

Dietary supplements are expected to rise from 70.39 billion in 2014 to 90.19 billion

in 2019

Vitamins are expected to rise from 13 to 15.5 billion CNY

Tonics and bottled nutrition drinks expected to rise from 9.31 billion in 2014 to

12.35 billion in 2019. 1

A rise in Pediatric Vitamins and Dietary Supplements from 7.34 to 9,37 billion

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Immunity boosting, anti-ageing and anti-fatigue functions are likely to continue their popularity in

the forecast period for VDS, thanks to the greying population, the accelerated life pace and

mounting pressure from life and work9.

Consumer health products are expected to experience steady demand over the forecast period. The

population aged 65+ in China is anticipated to grow by about 33% from 2014 to 2019, far higher

than the total population forecast growth at 2% in the same period. The rising consciousness of

personal well-being among these senior consumers in particular is likely to be translated into the

growing demand for consumer health products, including varied dietary supplements, to lead a

healthier life.

A rise in Multivitamins from 9.53 to 11.09 billion

A rise in vitamin B from 1 to 1.16 billion

A rise in vitamin C from 1.31 to 1.75 billion

A rise in vitamin E from 1.14 to 1.44 billion

Weight management is expected to continue its rise from 6.31 billion in 2014 to 7.29 billion in 2019.

Where in China should one focus?

Three regions stand out both now and in the future: East China, North and North East China and South China

are the biggest markets both now and in the future. South China will have the biggest growth with a 27.98

increase from 2014 to 2019. This is sharply followed by East China with an increase of 27.72 percent and

North and North East China with 25.9 percent.


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0

10

20

30

40

50

60

East

China

N and

NE

China

S

China

2014

2019

East China

Fierce competition among pharmaceutical companies due to high concentration of

multinational pharmaceutical companies

High cost of labour and rent

Still the ideal region for local players to establish product awareness10

Vitamins and dietary supplements continued the double-digit value growth in 2014

Consumers caring about balancing their nutritional intake and preventing diseases

The greying generation in this region stimulates the need of calcium supplements

Parents concern for their children’s health has resulted in the strong growth of pediatric

vitamins and dietary supplements.

Mid China

Mostly agricultural

Relatively low GDP per capita

Government focus on the region to grow economically

However, purchasing power and health awareness is on the rise

10

Euromonitor 2015;32

10

North and North East China

Fierce competition

Local protection policies

Growing health awareness and the bad quality of air in Beijing and Tianjin

Focus on build-up of bodies, enhancing immunity system and staying healthy.

Successful campaign to crack down on illegal cooperation, which is a good signal for a

better-regulated environment for vitamins and dietary supplements in North and Northeast

China.

Product categories such as proteins, calcium supplements as well as those focusing on

general health are now well accepted and widely purchased

Worse of is products containing new ingredients, such as collagen-added calcium

supplements.

Product efficacy and quality are increasingly valued by local consumers, which enable

major international brands to experience faster growth than domestic players.

North West China

Citizens can receive financial support from the government annually through health

insurance card.

Internet retailing is becoming the main access for local people to get the international brands

and best-selling products like pediatric OTC(sold over the counter).

Local companies enjoy a geographical advantage in producing herbal dietary supplements

The Gansu government decided to invest CNY50 million annually to develop

herbal/traditional Chinese medicines in September 2013.

Herbal/traditional products are prioritized for local healthcare institutions and hospitals.

187 Tibetan Medicines were included in the EDL in Qinghai province, which help benefit

nearly 500 million residents

Compared with the decelerating economy growth in coastal provinces, the great potential of

per capital GDP growth in Northwest China has attracted both domestic and international

players to seek new growth engines

Proteins, calcium supplements as well as those focusing on general health are now well

accepted and widely purchased, compared with the products containing new ingredients.

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South China

Consumers have gradually become aware of the importance of building a fit body and losing

weight in a sensible way. In the large cities of South China, especially Guangzhou and

Shenzhen, many fitness clubs are newly opened

Growing consumer awareness of well-being and the government’s tendency to regulate less

of the OTC market.

Compared with vitamins and calcium supplements, which is near saturation, sports nutrition

may see a higher growth rate as it is still unfamiliar to Chinese consumers.

South West China

Compared with other regions in China, Southwest China has seen a series of relatively

stronger political support from local governments who attached great importance to the

economic potential brought by the medical industry

Synthetic drugs face relatively greater challenges from traditional Chinese herbs in

Southwest China, especially in Guizhou, Yunnan and Tibet

With increasing economic power in recent years, Southwest China has been seen as a crucial

market place for brands.

Local governments are mapping out strategies to enhance competitive edges of economic

development by fostering giant pharmacy corporations

Unique geographical conditions and a rich herbal resource.

Consumer behavior

Another important aspect is where consumers go to buy their goods. The tendency is quite clear,

movement away from physical shops and towards more non-store retailing. The latter mainly made

up by direct selling and internet shopping.

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Stores

Non-storesStores

Non-stores

Conclusion

The market for vitamins and dietary supplements in China has had a huge growth in last five years.

The market will continue to grow, but there is going to be a shift from the general health to more

individual needs (pregnancy, immune system, bone strengthening). This could mean great

opportunities for Substance from Meabco A/S because of its many different effects.

In order to enter the Chinese market a collaborator is need. There are a lot of different companies on

the Chinese market, but the strategy will determine which to target.

The economic, social, and agricultural difference between the five regions is also a factor worth

noticing.

Focus should both be on internet sale and stores because of changing consumer behavior.

2009 2014

kina rapport

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