Five key market trends shaping the China supplement landscape for exporters

There are clear opportunities for products based on TCM principles. ©iStock

Chinese demand for supplements and natural products shows no sign of slowing, but would-be exporters need to be mindful of five key trends shaping the market today in order to secure business success.

According to the Australian Trade and Investment Commission — Austrade — the Chinese health food market, which includes vitamins, dietary supplements, animal and herbal extracts, and Traditional Chinese Medicine (TCM), is currently valued at RMB200 billion (US$30 billion), and is projected to grow by 10% every year until 2025.

In a new report, Complimentary Medicines in China, Austrade states: “The growing market for complementary medicines has been driven by a heightened awareness of health, wellness and safety issues among Chinese consumers.

“A large ageing population is seeking to manage specific conditions while younger consumers, particularly women, want to maintain their health. Many prefer international brands and have the income to pay for foreignmade products.”

The Chinese Government has also made health a priority in its 13th Five-Year Plan (2016 to 2020), with a suite of national initiatives that support demand for complementary medicines.

The report, which is designed to help Australian firms seeking to export to China, also says: “This includes promoting the development of TCM by building research institutions and standardising TCM products and services.”

It adds that despite there already being over 15,000 registered health foods in the Chinese market, there is still great potential for more.

Nevertheless, Austrade has identified five key trends that firms need to be aware of when planning market entry.

1) Regulations are getting tighter

“China is becoming increasingly regulated and moving towards a system that provides consumers with the assurance they seek,” states the report.

It says the introduction of the Blue Hat logo, combined with the recent streamlining of the registration and filing process, makes it easier to identify health foods with functional claims.

“Health claims have become more standardised and credible, with regulations prohibiting health foods from claiming they can cure illnesses,” it adds.

More stringent advertising laws mean “the days of making rapid and lucrative sales through unrealistic promises are gone, as government regulators, consumers and professional claimants are quick to pursue offenders”.

It also notes that the new health food registration process includes a pre-approved list of ingredients. If ingredients of a health food product have been pre-qualified, then recorded filing, instead of a complicated registration approval procedure, is sufficient for approval of that product.

However, the list is relatively short and the process for getting new ingredients added to the list appears cumbersome.

2) Increased potential for products based on TCM principles

A 2016 Chinese government white paper reported that China has approximately 4,000 TCM hospitals and over 42,000 TCM clinics.  In 2015, there were 910 million visits to TCM practices nationwide.

“There are clear opportunities for products based on TCM principles to be developed for, and promoted to Chinese consumers,” adds the report.

“To capture a share of the TCM opportunity in China, Australian companies need to build their product portfolios of TCM components.”

In May 2016, Blackmores announced the acquisition of Global Therapeutics, Australia’s leading provider of retail Chinese herbal medicine formulations through the trademarked brands Fusion and Oriental Botanicals.

3) Don’t discount the potential of raw materials

Due to continuing environmental contamination in soil and the overuse of chemicals, herbs are often found to have excessive levels of heavy metals and chemicals. This not only affects the exportability of raw herbs, but also their medicinal properties.

“As a result, high-value Chinese herbs and other raw materials planted or obtained from Australia are now on the agenda for many big pharmaceutical companies and potential investors from China,” the document notes.

Although there are still no specific protocols in place, it seems likely Chinese companies will be interested in sourcing ‘clean, green and safe’ raw materials from Australia in the future."

One Chinese pharmaceutical company is already thought to be exploring the possibility of planting ginseng in Tasmania for export back to China.

4) Online channels will continue to dominate

Although the Chinese government has tightened regulations on cross-border e-commerce, the report maintains that the channel remains an effective way for many foreign products to enter the Chinese market, with comparatively easy market access and a favourable tariff policy.

“In 2015, online retail sales totalled RMB3.88 trillion, a growth of 33.3 per cent from 2014. Online retail sales of foods increased by 41 per cent,” it adds.

“In addition to being a retail channel, the Internet is one of the main ways Chinese consumers research health products. A survey by the China Consumers’ Association found 63 per cent of consumers obtained information about health foods from online sources, with 70 per cent getting information from TV commercials.”

5) More diversified products will secure success

As they become more sophisticated in health food consumption and receive more tailored healthcare advice, consumers are demanding a more diversified range of products.

“Many leading health food companies have responded to this trend, such as By-health, which launched three new sports supplements, and women’s health and high-value TCM products in 2015,” adds the report.

This trend is also aided by the limited availability of mainstream medical services. China’s healthcare infrastructure and resources are unevenly distributed, meaning many consumers have inadequate or unsatisfactory access to primary healthcare, and are looking to health foods to help maintain their well-being, the report underlines.

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