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.

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 manifest 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. However, that being said, China’s market size is still quite a bit smaller, if I look at the number – sorry I have to look at the number really quick but China’s market size –

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 like around $400 or 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 8^th or 9^th 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 a nostalgia marketing right there – so that’s –

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.

Find the full Vitamin and Health Supplements Market Report 

This article Market Tidbits transcript #3: A quick glance at the vitamin and health supplements sector in China is the first one to appear on Daxue Consulting - Market Research China.

Facing the increasing elderly population and risks of eye diseases for office workers, eye supplements market in China is growing. 

Statistics show, China’s elderly population will increase to 418 million in 2035, accounting for 1/4 of the total population. Cataract and glaucoma are often the most common problems of eye health in the elderly. Age-related macular degeneration (AMD) is another big eyes-related issue. In China, 4 million people suffered from age-related macular degeneration in 2017. It has become one of the important reasons affecting the eye health of the elderly. The incidence of age-related macular degeneration increases with age. Timely taking of eye supplements can help to treat AMD at an early stage. Otherwise, it is highly likely that the lesion will cause severe visual impairment or even blindness.

Besides the silver generation in China, white-collar workers in China are the ones who experience various high-energy blue lights such as mobile phones and computers. This blue light radiation for a long time leads to various problems such as eye fatigue, itching and soreness. At present, the prevention of visual damage caused by blue light is the main directions of the eye healthcare market in China.

The retail value of eye care market in China is increasing

In 2014 retail value of eye care market in China accounted for 24 billion yuan. In 2019 it reached 28 billion yuan.

The eye care market includes eye disease medicine (cataract medicine, glaucoma medicine) industry, eyewear industry, eye protection industry. Eye supplements include Chinese medicine eye patch, eye drops, blueberry nutrition capsules, etc.

The concentration ratio of the eye supplements market in China is 36.4%. The compound annual growth rate (CAGR) of this market was higher from 2005-2012 and accounted for 9%. From 2012-2019 it was 5.1%.

Different reasons for purchasing eye health supplements

According to iimedia research, in 2019 19.8% of the respondents preferred health supplements related to eye care and pressure reduction.

High rate of eye-related diseases in China

Data shows the prevalence rate of cataract in China among those aged between 60 – 89 years old is around 80%. It is above 90% for those older than 90 years old. Besides, around 25 million elderly people in China in year 2018 had the macular degeneration issue. The age-standardized prevalence rates of glaucoma have increased over the past 20 years, reaching 2.6% in rural China.  

Big number of people with myopia creates opportunities for eye supplements market in China

In 2016, the number of myopic patients in China has reached 600 million. By 2020, the total number will reach 700 million, accounting for about 49% of the total population.

According to the “Results of Chinese Children and Adolescents Myopia Survey 2018”, the overall myopia rate of children was 53.6%. Among them, 14.5% of 6-year-old children, 36% of primary school students, 71.6% of junior high school students. 81% of high school students had myopia. The myopia problem of children and adolescents becomes more and more serious as their academic performance increases. Myopia is also a driver of the eyeglasses market in China.

China’s myopic population is already huge. At the same time the situation is getting worse with the popularity of different electronic devices in China.

Lutein and zeaxanthin products grow in the eye supplements market in China

The combination of zeaxanthin and lutein can filter harmful blue light, protect eyes from oxidative stress and radical damage. Besides, it reduces macular damage, playing a role in maintaining normal vision of the retina. Such supplements also prevent age-related macular degeneration. In addition, lutein protects eyesight, delaying the progression of myopia, and alleviating visual fatigue. However, the human body cannot synthesize lutein itself. That is the reason of growing demand for lutein-based eye supplements. In 2008, the National Health Commission approved Lutein Ester from Marigold Flower as a new resource for food efficacy.

Lutein and zeaxanthin production in China

In the pharmaceutical industry in China,  lutein and zeaxanthin is used in the development of eye care products.From 2012 to 2016, the compound annual growth rate of products based on lutein and zeaxanthin were 25% and 18%.  Between 2017 and 2020, the lutein price compound annual growth rate will reach 6.3%. The market size will exceed 350 million US dollars in 2020.

Chinese enterprises have officially produced lutein since 2000. There are two types of products, natural and synthetic. The latter has the largest output (a company in Lanxi City, Zhejiang Province). The domestic annual production capacity of lutein has been 10-20 tons.

Blueberries eye supplements production

Companies also widely use blueberry to produce eye supplements. Blueberries contain an antioxidant called anthocyanin that may provide eye protection and even improve vision. China’s northeast Daxing’anling region has established a domestic blueberry production and processing base. At present, Chinese companies export blueberry dry powder that meets international standards to Japan and Europe. The estimated annual export volume is about 10 tons.

COVID-19 impact on eye supplements market in China

According to Baidu index, the search for ‘eye care’ grew after the lockdown. But none of these researches are related to eye supplements. Instead, they are related to anti-blue light electronic devices, eye-protection exercises and eye-care instruments.

Baidu index: eye care related search terms

Prospects of eye supplements market in China

Eye supplements targeting the old people have great market potential. Especially for those have macular-degeneration issue. A Chinese company called BY-HEALTH (汤臣倍健) launched a product called ‘EASEYE’ (健视佳) in 2018 targeting at this group. It earned 47 million yuan in terms of revenue and this company is expanding its domestic market.  This product contains triple nutrients of β-carotene, lutein ester and anthocyanin, which has the effect of alleviating visual fatigue. Moreover, elderly people’s health awareness becomes higher due to the coronavirus outbreak in China.

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This article The eye supplements market in China: Driven by office workers and elderly is the first one to appear on Daxue Consulting - Market Research China.

The for organic production, including atmosphere quality, organic irrigation water, unpolluted soil and natural processing. Organic food in China has to satisfy the following requirements:

“Complying with specific principles of agricultural production, production did not use raw materials or products generated by genetic engineering, did not use chemical syntheses such as pesticides, fertilizers, growth regulators or feed additives. It also needs to follow natural rules and adopt a series of techniques to maintain sustainable agricultural production.”

Organic food production models in China: the system production is the main force

In China, most organic foods are cultivated by organized systems, not like other countries where organic foods are supplied by individuals. There are three mains organic food production models in China: the first one is that big company leases land from farmer and pays them. The second model is that under the permission of local governments, big companies sign an organic food production contract with farmers. The third one is the organic producer association. Farmers set up an association by themselves to conduct large-scale organic food production.

The categories of organic food in China

Due to vast cultivation areas and various climates, diverse organic food can be grown in China. The main organic products exported are processed vegetables, soybeans, honey, grains, green tea, herbal medicines and beans, which are mostly raw and semi-processed.

The development of the organic food industry in China

[Source: International Trade center. The development of the organic food industry in China]

The concept of organic food was introduced in China after the reform and opening-up policy. By 2018, China’s organic agriculture acreage ranked third in the world, accounting for 4.5% of the total acreage of global organic agriculture and 50% in Asia. From 2002 to 2013, many laws were introduced to regulate the orderly market environment of organic agriculture. Thus after 2013, organic agriculture in China entered a stage of rapid development.

The evolution of the organic food market in China.

Looking at the evolution of the market, we can definitely say that organic food in China has huge potential in international and domestic markets. Just in 2018, domestic sales of organic products in China were about ¥63.15 billion, up 4.01% from ¥60.67 billion in 2017. Besides, e-commerce largely stimulated sales of organic food in China. At present, the market size of organic food in China is still very low, which is far from meeting the needs of domestic and foreign consumers.

Organic packaged foods and beverages lead organic food consumption

Unlike other countries which mainly consume organic vegetables and fruit, organic milk dominates China’s organic market because of its nutrition and perceived benefits to the immune system. Ranking as the 4^th largest market in the world by value, China’s total market size for organic packaged food and beverages in 2017 was $2,839.2 million. As for China’s top three organic milk companies, Yili, Mengniu and Shengmu, they have perfect production, processing and transportation systems. Moreover, marketing and KOL strategy are are crucial to their success.

Consumer analyses of organic food in China

Customer preferences of organic food

According to a study conducted by International Trade Center of 204 Chinese organic consumers in Beijing and Shanghai, the top five reasons of choosing organic foods were:

1) Enforcement of quality

2) Overall quality

3) Certification relating quality

4) Food safety

5) Information about nutritional value

Issues that Chinese consumers were less concerned with were:

• Promotion and advertising of organic food
• Appearance
• Whether the organic food was produced in China
• The social status of people purchasing organic food
• The idea of face saving (mianzi) when purchasing organic food.

While consumers traditionally prefer to buy Chinese food, western lifestyles and eating habits are increasingly becoming the norm, especially among younger generations who have travelled overseas to study or work.

[Source: International Trade Center. The profile of different organic food consumers in China and their proportion in consuming] 

Is organic food a necessity for Chinese consumers?

Most Chinese consumers are price sensitive and look for value when buying organic food. Are organic products safer than other products？Are foreign imports really worth paying 2-3 times the cost of domestic items？These are some questions Chinese consumers ask themselves when they buy organic food. For most Chinese consumers, they don’t think that organic food’s high price matches its nutritional value. And many consumers also consider organic food as a marketing term without real higher nutritional value. From a sustainability point of view, the organic food industry is not as friendly towards the environment as people imagined. The production of organic food also exhausts a large amount of carbon dioxide and occupies much more lands than traditional agriculture. It is obvious that organic food has more natural nutrients and secure guarantees, however most Chinese consumers consider it as a luxury.

Organic food trade in China, B2B

The industrial chain of organic food in China, B2B

[Source: Leadleo research institute. The vertical structure of the organic food industry in China and its component companies.]

The upstream enterprises of the organic industry in China are mainly agricultural suppliers, farmers and organic assessment agencies. The midstream is comprised of organic agricultural enterprises. The downstream participants are transporters and distributors.

China is becoming one of the largest organic consumers in the world. With such potential, it’s not surprising that China has become a goldmine for international organic food suppliers. However, selling its products to Chinese consumers requires some adjustments and a specific strategy for cross-border e-commerce in China.

Retail e-commerce is an incredible impetus for China’s organic food industry

China is by far the largest e-retail market in the world. Thus, online retail and O2O models are the most efficient sales channels for organic food in China. In 2018, the amount of orders of Chinese online retailer Pinduoduo for agricultural products surpassed 65.3 billion RMB, with a 233% increase from 19.6 billion RMB in 2017. Hence, such a performance makes “Pinduoduo” the biggest Chinese online platform of agricultural products.

As the largest consumer market for organic packaged foods and beverages and the fastest growing organic food market in Asia, China’s organic market offers many opportunities for foreign B2B investors. However, it’s necessary to know what the are trends for B2B marketing in China and how to build a B2B sales network across China.

Imports and exports of organic food in China

By 2018, food imports in China exceeded 424 billion RMB (US$60 billion). In addition, China is expected to be the top importer of foreign food, of which edible vegetable oils, cereal and milk products account for roughly half of all food imports. On the other hand, China’s organic food is mainly exported to Japan, America, Southeast Asia, The EU and South Korea, comprising 80% of China’s total exports. At present, China’s organic food exports only occupies a very small share of the international market, accounting for less than 1% of the global market share.

The impact of COVID-19 on the organic food market in China?

[Source: Zhihu. The evolution and forecast of China’s natural healthy food market.]

After the depression, the organic food market in China will quickly resume.

The impact of Covid-19 is like a bombing on China’s organic industry. Due to the recent situation, many of China’s food-trading firms have seen international orders fall by 75% because of foreign barriers to trade. Meanwhile, the country’s catering industry has been shut down, thus the demand for organic food has plummeted. Zhou Hong, president of one of China’s largest crop growers, estimated that the outbreak could reduce the company’s exports for 2020 by more than 20%. Nonetheless, after the outbreak, physical health has become the core of Chinese consumers’ priorities. As Chinese consumers’ incomes continue to rise and more are concerned with a healthy diet, the market size of natural health food is expected to approach 200 billion RMB in 2022. In light of this wave in health consciousness, some green food companies seized the opportunity. “Grain Mill” harvested 918 million RMB as the turnover and 105 million RMB for net profit of the 2th quarter in 2019, which turned it into the industry leader.

Covid-19’s impact on customer’s behavior in China

Due to many restrictions proposed by the Chinese government to minimize the impact of Covid-19, people have had to stay at home and cook by themselves. Thus, frozen and convenient foods became their first choice. According to research released by Nelson about how Asian consumers will eat post Covid-19, 86% of Mainlanders said they would eat at home more often than before the outbreak. In addition, 80% will pay more attention to a healthy diet and 89% claimed that they prefer to buy fresh food online now. On the other hand, health products such as vitamins, health teas and probiotics are also popular among Chinese consumers. As a result, the epidemic has changed many Chinese people’s consumption behaviors; and health-related products will be favored during and after the special period.

The Covid-19, a plight or booster for the organic milk industry in China?

Although Chinese consumers have huge demand for organic milk, China’s milk industry will inevitably be impacted by Covid-19 on production, transportation and sales. Focusing on China’s biggest dairy company, “Yili” encountered a 10.7% contraction on its 1^st quarter’s turnover compared with 2019. However, despite the liquid milk revenue of “Yili” plummeting by 19%, its market share rose by 1.1%, arriving at 39.3%. Organic milk contains various nutrients and can help improve people’s immune systems, which will help in producing a purchasing upsurge. Therefore, the sales of organic milk and milk powders by “Junlebao” rocketed by more than 50% during the outbreak. Meanwhile, It is interesting to know that the sales of milk powder by foreign brands make up 60%-65% of total national sales in China. And as for most dairy companies, they are very optimistic about the organic milk market in China after Covid-19.

Future of the Chinese organic food industry

China’s organic food market is developing rapidly, and the potential demand for organic food among Chinese consumers is enormous. As for the choice of organic food, imported organic food has quality advantage. Although Covid-19 has depressed China’s organic food industry, the emergence of a healthy diet concept and increasing demand for organic food will lead to a rapid recovery. Just as Jack Ma said: the next richest person in China will be in the health industry.

If you have any question or would like to discuss your interests in organic food market in China, do not hesitate to reach out to our project managers at dx@daxueconsulting.com to get all answers to your questions.

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This article The organic food market in China is the first one to appear on Daxue Consulting - Market Research China.

Matthieu David interviews Gordon Dumoulin, founder and CEO at Dumoco Natural Ingredients. When it comes to eating healthy everyone knows that “natural” is the way to go. But where does Gordon’s company fit on the Chinese F&B market? (read an article about Frozen food market in China). Is there a need for an intermediary between a customer and Chinese farmers, processing companies, etc.? Find out the answer to these questions and more in this new China Paradigm podcast.

• 0:14 Guest introduction
• 2:50 The business of natural ingredients – how does it work?
• 8:35 Doing business in China vs the West – the win-win scenario
• 12:30 How do natural ingredients fit on the Chinese medicine market?
• 18:24 How does Dumoco Natural Ingredients collect their product?
• 20:39 Who are Dumoco Natural Ingredients’ clients in the West?
• 22:33 Transparency and pricing – how does one affect the other?
• 25:12 Managing the exports – a necessity for both small and large companies
• 27:40 Instant Bridge Education – another success story in China
• 31:53 Who are Instant Bridge Education’s clients?
• 36:25 Education adapted for the need to express
• 39:47 Change is inevitable – why is that a positive thing?
• 41:58 5iZ – name origin and mission
• 45:32 What books have inspired Gordon Dumoulin the most?
• 50:46 What unexpected success and failure has Gordon Dumoulin witnessed in China?
• 53:45 What does Gordon Dumoulin read to stay up to date with business in China?
• 56:06 Outro

 China Paradigm website

The relevant episodes

We believe, that China, with 20% of world population and as the second world economy, is impacting every single business, small to big. That is why it is a new paradigm. How does China impact your business is the ultimate question we will answer through those podcasts.

China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.

This article China Paradigm 98: Tapping into China’s natural ingredients niche in F&B is the first one to appear on Daxue Consulting - Market Research China.

The vegan movement in China

In the last few years, Chinese consumers’ interest in meatless meals has soared. Chinese people are becoming more health-conscience and more conscientious about their food choices. They are increasingly aware of the negative consequences of consuming too much animal products, hence are open to eating plant-based foods. According to a report by Euromonitor, China was projected to be the fastest-growing market for vegan products between 2015 and 2020, with a growth rate of 17.2 percent. Chinese people are increasingly aware of the negative consequences of consuming too much animal products, hence are open to eating plant-based foods.

Veganism in China: Does it have potential?

However, being vegan or vegetarian in China is still very challenging. Although Chinese consumers have a wide range of plant-based food options, a typical Chinese meal contains a lot of meat. It’s not that the average Chinese diet consumes more meat than an average western diet, but rather meat is distributed among many dishes. Even many “vegetable” dishes are flavored with meat, hence sticking to veganism in China is very difficult.

Moreover, most people do not yet understand the vegan movement in China, so ordering a plant-based meal in a common Chinese restaurant can also be tricky. But this situation seems like it is being changed – Chinese, vegetarian restaurants have mushroomed in recent years, especially in first-tier cities such as Beijing and Shanghai. If you search “素食餐厅” (Chinese for vegetarian restaurant) on dianping.com (Chinese Yelp), over 500 results in Shanghai and almost 500 results in Beijing will be found.

The vegan food industry in China: Why veganism is trending among younger generation

Before China’s reform and opening up at the end of the 1970s, meat was still a luxury for most Chinese families. Unsurprisingly, as the meat has become more accessible and affordable, Chinese consumers started consuming huge amounts of meat without considering health. For many Chinese people – especially those who have experienced an empty stomach in their early lives – eating no meat is still a synonym for starvation and malnutrition. Most people believe that meat is one of the most nutritious foods, and a diet without meat will make you weak or even sick. Although it is very hard to cut out meat from Chinese consumers’ daily regimen, more and more people in China have learned the health consequences of eating an unbalanced diet. At the same time, young people are becoming more aware of different issues caused by meat-consumption, such as animal rights and environmental impacts – such questions contribute to the development of the vegan movement in China.

Read more about animal maltreatment in China: Mistreatment of Animals in Chinese Wildlife Parks and marine parks.

The tradition of eating vegetarian food in China

Although in modern China, meat is an indispensable part of a typical dining table, vegetarianism in China was actually rooted in religion and culture. Buddhist monks are not allowed to kill for food or accept an animal product which has been killed for them. Many temples in China run their own monastic restaurants within the institutions. Visitors of Buddhist temples – no matter religious or not – enjoy a nice vegetarian meal in the temple. It is a delicacy for many Chinese people which comes along with a good conscience of not killing lives for the meal. In the past, Chinese people would give up on meat for a certain period of time to show the Buddha their devotion.

Veganism in China:  A long history of “imitation meat”

While mimicking meat with plant-based ingredients is becoming a huge trend in the West in recent years, “imitation meat” is nothing new for Chinese consumers. In one respect, China has a very sophisticated food culture, wit and playfulness  have always played an important role in food preparation. On the other hand, there always has been a need for imitation meat for a religious reason. For example, the history of  “rolled-tofu chicken” (素鸡Suji, Chinese for vegetarian chicken) can be traced over 1000 years back and is a common soy-based product many Chinese people are familiar with.

China has its own plant-based meat producers who understand Chinese consumers’ taste preferences and eating habits. However, most of them are limited to Chinese styled cuisine. “Consumers and media don’t know about us because we don’t have the star power of the Western start-ups, which get investors like [Hong Kong businessman] Li Ka-shing and Bill Gates,” Zhou, senior marketing manager of Whole Perfect Food, said in an interview with South China Morning Post. The Chinese plant-based meat manufacturer, which is set up in 1993 and headquartered in Shenzhen, has an annual sale of 300 million yuan (US$44.6 million) and plans to become a global player in the “imitation meat” industry.

Take-aways for international companies who want to enter the market of vegan food in China

• A typical Chinese dining table contains a lot of meat and other animal products. Not eating meat is being considered as malnutrition for the majority of Chinese consumers. Veganism in China is still far from the mainstream diet.
• China has a rich catering culture. Although health issue plays a more and more important role in Chinese consumers’ diet, the taste can never be compromised.
• China has a long history of imitating meat with plant-based ingredients. Consumers are familiar with many kinds of vegetarian dishes which taste and look like meat or other animal products.
• Concerns about animal rights and environmental impacts, as well as the vegan movement in China, are still at the early stage in China. For the mass consumers, purchasing vegetarian food in China- is more about a healthy diet.
• Environmental pollution and food safety have been seen as crucial issues in China; imported product is often considered more nutritious and safer due to stricter quality control. (Read more about importing food to China)

Author: Chencen Zhu

Make the new economic China Paradigm positive leverage for your business

Do not hesitate to reach out our project managers at dx@daxue-consulting.com to get all answers to your questions

This article Vegan movement in China : Growing trend or fad diet? | Daxue Consulting is the first one to appear on Daxue Consulting - Market Research China.

1. Babies from the baby-boom back in the 1980s have become parents themselves in the last decade. They have caused another, bigger baby boom, because of the cancellation of the one-child-policy. In 2016, the universal two-child policy came out, meaning that every couple in China can have 2 children. This is considered as the loosest birth control policy in China since 1980.

2. The Chinese emerging middle class is holding stronger purchasing power. According to a study from McKinsey & Company, 76 percent of China’s urban population will be considered middle class by 2022 and the number was just by 4 percent back in 2000.
   

Chinese consumers trust international brands/products. Western brands are a symbol of high quality and above all safety. When it comes to pregnant women and their unborn babies, Chinese consumers are more than ready to spend a fortune on high-quality products and services. This means huge opportunities for international brands on the Chinese prenatal care market.

Chinese expecting mothers literally wear radiation-protection-clothes in their daily lives

The Chinese maternity clothes market is showing a steady growth trend. Chinese mothers-to-be are searching for maternity clothes which are both good looking and functional. Fabric without noxious chemical substances is especially popular for Chinese pregnant women.

Source: FORWARD THE ECONOMIST

You cannot be too cautious when it comes to babies for Chinese consumers. Due to the high internet and smartphone penetration in China, Chinese people are deeply concerned about the harm that digital devices can do to human bodies, especially for unborn babies. Although modern medicine hasn’t yet proven the harms of radiation caused by moderate use of digital devices like smartphones or PC, many Chinese expecting mothers choose to protect their unborn babies from this potential danger. There are lots of brands for pregnancy clothes claiming to have an anti-radiation function. One of the most popular brands is Joiue Varry from France, which claims to use silver from the Cannington silver mine producing their maternity clothes.

Screenshot: product from Joiue Varry on Tmall achieving over 7.000 sales volume for the last 30 days

Chinese consumers prefer international pregnancy supplements, formulas are not only for babies but also mothers-to-be

On popular social media platforms in China like WeChat and Weibo, pregnancy supplements are one of the most discussed topics among prenatal care posts. Most recommendations are international brands/products, which have a better reputation among Chinese consumers.

Besides vitamin and DHA, supplements like calcium and iron are also common on Chinese prenatal care market. There are also pregnancy supplements which are untypical in many other countries like pregnancy formula. There is a big market of pregnancy formula in China since many Chinese consumers believe that pregnancy costs the expecting mother a lot of nutrition, especially calcium. Thus, taking in lots of dairy products helps mother-to-be to get enough calcium and other nutrition. There is a big market of pregnancy formula in China.

Screenshot: search results for “pregnancy formula” on Tmall

Searching for “pregnancy formula” on Tmall, the majority of the popular brands popping out are international like Anmum from New Zealand and Nestlé from Swiss land. Chinese consumers have been deeply concerned about dairy safety ever since the Chinese milk scandal in 2008 which was a widespread food safety incident and sickened nearly 300,000 infants according to CNN China. Besides New Zealand and Switzerland, other popular places of origin for pregnancy formula are Australia, Holland, Ireland, French and Denmark.

High-end maternity and infant hospitals show huge opportunities for international investors on the Chinese market

Although most pregnant Chinese women do their prenatal check-ups in local public hospitals, more and more Chinese consumers are turning to high-end private clinics because of the better consultation and all-around services. In the recent years, Chinese public hospitals are generally overloaded and have a poor reputation due to several reasons, e.g. ridiculously long waiting time, relatively low level of hygiene etc.. The Chinese emerging middle class is seeking out private medical facilities to take care of the expecting mothers and their unborn babies.

International maternity and infant hospitals/clinics are much more expensive than local Chinese ones. However, an increasing number of Chinese patients are having private medical insurance/maternity insurance, which can cover a good amount of hospital costs. There are also other reasons for expecting mothers in China to choose private hospital over a public one, for example, Chinese public maternity and infant hospitals are not allowed to reveal the gender of an unborn baby by law.

From all this, it follows that high-end maternity and infant hospitals show the great lucky chance for international investors on the Chinese market.

E-reputation plays a crucial role in the brands’ development in China: Using Chinese social media and e-commerce platforms to engage with consumers

Chinese consumers are becoming more conscious of health and beauty, naturally, expecting mothers care about both their appearance and health during their pregnancy. Therefore, the demands of organic skincare and cosmetic products (specialized for pregnant women) have been consistently increasing on the Chinese market.

Source: chyxx.com

The other peculiarity of Chinese cosmetic and skin-care products market is the extremely strong impact of brand reputation on Chinese consumers’ purchasing behaviors. “The word-of-mouth and e-reputation play crucial roles in the development of a brand.” Says Thibaud Andre, project leader of Daxue Consulting. As we can see from the related terms of “pregnancy skin care” on Baidu Index, almost all highly related terms are about brands or brand recommendation. The term “international” and “top international brands” are also among them, the only brand can be seen on Baidu Index is Clarins from France.

Source: Baidu Index, related terms by searching “Pregnancy skin care products”

Clarins’ Chinese brand name “娇韵诗” (jiao-yun-shi) sounds slightly similar to the original name, in which “娇” means tender, delicate and dainty, “韵” means rhyme or charm and “诗” means poetry. These three Chinese characters build a romantic and beautiful aura for the Chinese consumers and indicate the products can provide them with graceful body and skin. Taking Clarins as a successful example of an international brand on the Chinese prenatal skincare market, they are active on the Chinese social media, cooperating closed with celebrities and KOLs. Clarins has over 680,000 followers and 27 posts in October 2018 on China’s No. 1 micro-blogging social media platform Weibo. The brand Clarins has also its own official website and is present on almost all important Chinese e-commerce platforms. Which is a crucial factor as online stores have been the most important distribution channel for Chinese consumers to purchase pregnancy cosmetic products.

Clarins’ presence on Chinese e-commerce platforms

In 2016, the sales volume of online retail has exceeded offline stores for pregnancy cosmetic products in China

Although Clarins is selling a wide range of skin care products, because of its clear and trustworthy brand image, Clarins’ product is famous for its safety and effectiveness. Its pregnancy care product like stretch-mark-reducing lotion is especially popular on the Chinese market. On China’s first and biggest Q&A platform Zhihu, when coming to questions like “How to prevent stretch marks?” Products from Clarins are being mentioned frequently.

Screenshots from Zhihu: this answer got 1.1K “agreed” and 271 comments in the last 3 months

Chinese families spend a tremendous amount of resources on education: starting with fetal/prenatal education

Chinese parents are willing to invest more financial resources on the well-being and development of a child than an average western parent. That starts long before the baby gets born, Chinese consumers are purchasing products which they think can accelerate the intellectual development of their unborn babies. There is a saying in China which has been used very often in the marketing campaign of many children/baby-related products: Winning at the starting line(赢在起跑线). Given the high concerns of Chinese parents over the academic performance of their children, products claiming to have educational function always capture Chinese parents’ attention, especially which from an international brand.

One of the most popular brands for fetal/prenatal education product on the Chinese market is a brand called BabyPlus from the USA. Its prenatal education system claims to create proprietary and age-appropriate rhythms for fetuses, which deliver many benefits, for example, ability to build consistent sleeping habits and reaching developmental milestones well.

Screenshot: BabyPlus official Tmall shop sold 369 pcs of this prenatal education device (costs around USD 200) in the last 30 days

 Chinese consumers are looking for international high-quality prenatal products

In 2016, the Chinese government carried out the universal two-child policy, which is considered as the loosest birth control policy in China since 1980. Along with the Chinese emerging middle class’ increasing purchasing power, China’s prenatal care market shows a high-speed growth. No matter if it is a prenatal supplement or cosmetic product specialized for pregnant women, “Chinese consumers obviously prefer international brands.” Says Xiaonan Hua, Project manager of Daxue Consulting: “Part of the international niche brands are popular among Chinese consumers, but their products generally unavailable in China.” E-commerce platforms have been an extremely important distribution channel for international brands to engage with Chinese consumers and market different kinds of prenatal products. Since e-reputation plays a crucial role in the brands’ development in China, leveraging Chinese social media and cooperating with celebrities/KOLs are important for international companies, who want to enter the Chinese market.

Author: Chencen Zhu

Daxue Consulting regularly helps clients optimize their China business development by offering database building assistance, market research, simple distribution analysis, and SEO.

Our staff has strong experience in business development in Shanghai, Beijing, and other tops 50 China’s cities.

This article International brands are in demand on China’s prenatal care market | Daxue Consulting is the first one to appear on Daxue Consulting - Market Research China.

China is one of the biggest producers and consumers of VDS products in the world

The market value of the VDS market in China is steadily increasing. In 2017, the total market value of vitamins in China reached 3.4 billion USD, an increase of 32% since 2014.  By 2020, the VDS market is projected to reach over 22 billion USD or 169 billion RMB. Two vitamin manufacturers in China, CSPS Pharmaceutical and Zhejiang NHU, have not only made China’s list for China’s Fortune 500 companies but now stand as global leaders in the industry. CSPS Pharmaceutical has reached a market value of 12.39 billion USD, while the latter reached 6.09 billion in 2017.

Most VDS market’s consumers are under the age of 30

As of 2017, people under 30 years of age are the main consumers of health products. The aging population, (above 50 years of age) make up the smallest consumer group despite an overall aging population in China, signaling room for growth. Additionally, more than half of consumers are women (56%), which might indicate that women have developed more of health awareness. Despite higher purchases from women in 2017, men still maintain a higher average consumption of health products. In terms of consumer attitude and perception of such products, online communities indicate an interest in a variety of topics related to VDS, from brands to functions, effects, gender appropriate supplements, amongst others.

For the Chinese VDS consumer, effectiveness is extremely important

Within social media, the most commonly discussed topic regarding VDS is its effectiveness. Foreign brands are usually more popular due to the perception that foreign brands are more effective. Fake products in China also contribute to this perception, raising questions of quality and high demands of function and benefits from Chinese consumers.  On WeChat, discussions are also broken down into questions on the best types of products for certain groups of people, such as elderly people and pregnant women. On Weibo, the main VDS content consists of posts and articles introducing many different types of VDS products and key elements buyers should take note of before purchasing the product. Within these posts, international brands are also more popular among domestic brands. On the Chinese question and answer forum site Zhihu, the consumer concerns about VDS products are heavily engaged in three main questions: 1) How to pick and use dietary supplements, 2) Advantages and disadvantages of vitamins and supplements, 3) Brand introductions- primarily foreign.

Among Baidu searches, Daxue Consulting’s Baidu index semantic analysis also reveals that the most keywords associated with VDS searches related to its function, effect, and brands.  The search index for “vitamin D” was also the highest at the end of November 2017, in light of National Heart Failure Day and vitamin D has been shown to improve heart function. Baidu index also revealed By-Health (domestic) and Amway (international) as the brands leading with the highest search number. Amway was also the most searched brand on WeChat, significantly higher than other brands in the last 90 days since November 2018.

Vitamin and supplement market competition is fierce in China

Currently, the VDS Industry in China is a fiercely competitive environment. The top 6 brands took up a combined market share of 43%; however, the differences in market share among brands was not substantial, with the leading brand Infinitus at 12%, followed by Amway in second place at 9%. The remaining 57% of the market share is occupied by numerous smaller domestic brands. This lack of market domination demonstrates enormous room for market penetration in the VDS industry.

Increasing e-commerce and online purchasing channels point to higher VDS consumption in China

China has witnessed expansion in its online retail coverage of VDS products, in addition to its social media presence. E-commerce giants T-Mall and JD are important purchasing channels for vitamin and dietary supplement brands both domestic and international. In addition, online retail is an important channel of distribution as VDS brands are selling their products through their official websites or flagship online stores on T-Mall or JD.

On e-commerce platforms, foreign brands of a product are more typically expensive than domestic brands. Protein Powder is one VDS sector where foreign brands are preferred more prominently. A protein used for fitness, or mass gainers, is a significant category amongst protein powder products, and while it is currently dominated by Western brands, fitness related VDS is the fastest domestic growing sector. Within the fish oil and vitamin sector, domestic brands have more of a market presence. Many of these domestic companies have a strong presence on social media. The leading Chinese brand of fish oil By-Health has over 2.6 million followers on Weibo.

Caltrate – analysis of a leading international brand on the Chinese market

While many international vitamin brands have not made significant use of their Weibo account, calcium brand Caltrate is an exception, with over 2.3 million followers on its Weibo. It is one of the most well-known international VDS brands in China, as well as one of the first to enter China’s market. It has established a presence through their own website, as well as multiple other e-commerce platforms such as Kaola and Pinduoduo as well as T-Mall and JD. Traffic on its website reached over 80 thousand in the past 3 months, and monthly sales on T-Mall has surpassed 51 thousand. Caltrate has also reached 359 daily sales on Pinduoduo. Daigou Hunter shows that a large number of T-Mall sales were purchased for Daigou – literal translation “buying on behalf of” – which refers to shopping agents who are living overseas setting up unofficial reselling activities, for friends, families, or others.

What is crucial for foreign VDS brands on the Chinese market?

With VDS safety, effectiveness, and health benefits in the minds of Chinese VDS consumers, it is very important to have a pleasant and evocative brand name. The corresponding Chinese name of VDS brands should strategically match the phonetic pronunciation with a positive meaning related to health and safety. Anyway or 安利 anli, has extended its popularity and persistent sales method in China through its strategic Chinese brand name: 安 a meaning safe, and 利 li meaning easy. Inasmuch as anli is now used in Chinese vernacular as a language of promotion. Caltrate and Centrum, or 钙尔奇 gaierqi and 善存 shancun are examples of two other international brands that have demonstrated strategic and effective Chinese brand naming.

Efficient distribution channels for vitamins and supplements in China

While its online presence in both social media and e-commerce has been steadily on the rise, its main purchasing channels on the Chinese market are still predominantly physical stores. In 2017, half of the retail sales of dietary supplements came from direct sales. Online sales took up ⅓ of total VDS retail sales in China, thus it is an important sales channel with growth potential. Specialized stores for vitamin and dietary supplements are also the main distribution channel. A search on Dianping (similar to a yelp in China) for VDS in Shanghai shows 800 results. Within stores in Shanghai, vitamins and protein powders are the most common in-store products.

International brands should leverage online sales and promotion channels to achieve success on the Chinese VDS scene

Just as there are a number of offline specialized VDS stores, online promotional channels are also an effective environment to leverage, especially for foreign brands looking to expand into the Chinese market. Some dedicated websites include iHerb.com, China-puritans.com, J1.com, and Kuailedo.com. Specialized magazines also function as strategic promotional channels and informational platforms.

Health Care Magazine 健康之家

Diversified demands, deepening VDS market segments, increasing room for market penetration

An expanding awareness for healthy living, higher disposable income, and higher demands of quality products worthy of its value are all factors that are driving the rapidly expanding middle class to have increasingly diversified demands in the VDS market. As a result, the Chinese VDS market is seeing more range in its products offered. Its vertical market segments are deepening to meet more particular demands, for more specific groups of people. Companies are entering the market positioning for new market segments such as age, functions, and ingredients. New Products are satisfying age group demands by targeting teenagers and the elderly. They are also accommodating for functional demands with products offering specific abilities, such as muscle gainer, immunity boosters, and anti-aging supplements. Natural products are also entering the market to satisfy demands in the all-natural less-processed segments, for consumers concerned with the safety of Chinese product ingredients.

Author: Julia Qi

Daxue Consulting performs market sizing as part of strategy-oriented projects Whether you are an international company that wants to enter the Chinese market, you already established operations in China or you have already a large history and experience in the Chinese market, you always need to be aware of the current size of the market and the opportunities that arise from it. No matter if it is a market analysis, a marketing research or it is a market entry study – our research at Daxue Consulting includes market sizing methodologies.

This article How China is becoming the largest and most diversified market for vitamin and dietary supplements (VDS) | Daxue Consulting is the first one to appear on Daxue Consulting - Market Research China.

The chaga mushroom market in China has seen a significant increase in interest from consumers since 2016. Chaga (白桦茸) is a mushroom, well known in the West, which contains a multitude of nutrients, minerals and antioxidants providing health benefits. According to our research, this trend is part of a broader focus of many Chinese consumers on healthy living. Several factors can promote the entry of the chaga mushroom into the Chinese market. In one of our previous surveys about Chinese millennials consumption habits, we found that, today, « eating better » is a high priority for many Chinese. In addition, more and more Chinese young people are avid consumers of food supplements (considered a healthcare product); in fact, 60% of Chinese consumers under 40 are interested in food supplements.

In China, there is already a multitude of traditional medicinal herbs. The Chinese have been using herbs for medicinal purposes for decades. In this article, we will see if the chaga mushroom could become more popular in the Chinese market.

[ctt template=”2″ link=”gbd8o” via=”yes” ]“60% of Chinese consumers under 40 are interested in food supplements.”[/ctt]

Chinese consumers developing taste for the chaga mushroom (白桦茸)

The chaga in China is called the mushroom of immortality, a mushroom with exceptional properties. Similar to charcoal in both shape and colour, the chaga grows on birch trees in the cold regions of the northern hemisphere, where temperatures drop to -34°C for more than two to three months per year. The chaga mainly grows in Siberia’s virgin forests. Thus, Russia leads the world in chaga research.

Chaga mushrooms can be consumed in different ways: as a capsule to swallow, as a drink such as tea, or prepared for mixing with water. Most Chinese consumers drink chaga in tea form. One packages the mushroom into a tea bag in slices or in powder form, then soaks the tea bag in water.

Chaga tea effects on cancer patients are notable. Indeed, chaga health benefits are myriad. The chaga mushroom can:

• Reduce inflammation
• Treat diabetes
• Treata variety of cancers
• Curerelated skin problems
• Promote anti-aging of the skin
• Stimulate and regulate the immune system
• Lowerblood pressure
• Improve and prevent allergic cortex
• Solve related hepatitis, gastritis, duodenal ulcer and nephritis conditions

Chaga has piqued Chinese netizens’ interest after winning over the West

Baidu Index (百度指数) trend line for the keyword “Chaga”(白桦茸) on the Chinese Internet between 2011 and 2017.

Before 2014, the chaga was unknown to Chinese Internet users. But since 2016, Chinese have gained significant interest in the chaga mushroom. Chinese people are interested in the efficacy（功效）of the chaga, its price（价格）and its applications, as evident in the graph below.

Searches using the search terms: « how much is certified chaga product » (白桦茸正品多少钱一斤) increased because of the prevalence of low quality chaga products in the Chinese market. It is very important for people to get the authentic products to achieve their desired results; most of the products on the Chinese market are raw or semi-finished rough products. These mushrooms have little to no medicinal value and the preparation process for these inferior chaga is unrefined.

Graph of « Chaga » and related keywords from February 2017 to January 2018. Sourced from Baidu Index (百度指数) by Daxue Consulting.

Growing demand for health care products in China

Chinese consumers have begun to focus more and more on health care products. Naturally, they have also taken a greater interest in healthy food. The health food market in China is burgeoning, as evidenced by the increase in Chinese consumers’ online searches for foods with health benefits.

Chinese people have a strong preference for imported health foods

2016年4月底我国保健品细分产品数量

At the end of April 2016 the number of health care products in China

Source: Zhiyan Consulting (智研咨询)

The domestic health products market (国产保健品) is a large market for immunity (免疫力) products, with a large range of offerings, including 57 imported health products (进口保健品). This indicates that there is healthy demand for such products. The market for the vitamin sector is also experiencing high levels of demand.

Vitamins (维生素), as well as immunity (免疫力) and sleep (睡眠) improvement products are dynamic movers in the imported health products market.

Chaga, which improves people’s immunity to diseases and ailments, therefore has a strong foundation in the health products market in China. Chinese people have been using domestic health products for decades, but are still interested in discovering and importing new health products.

[ctt template=”2″ link=”gbd8o” via=”yes” ]“Chinese people have been using domestic health products for decades, but are still interested in discovering and importing new health products.”[/ctt]

China already has its own superfoods

In China, healthcare products (保健品) are generally divided into two groups with health supplements (保健品), and traditional herbal products (传统中草药产品). Health supplements are not traditional or natural. However the traditional herbal products are natural products made with herbal, animal or plant extracts. Naturally derived products are central to nutrition in China and subsequently play an important role in the natural additives market in China.

The following chart shows the top 10 herbs by market sales value in the Chinese market in 2016.

Source : Reproduced by Daxue Consulting with data from Herbs Market Analysis Report 2016 (2016年草药市场分析报告) and State Administration for Market Regulation (中国国家市场监督管理总局)

China is a major player for herbal medicine products (中草药产品). Indeed, the country has a strong background as Chinese people have been using medicinal herbs for decades.

These traditional herbal medicine have been present in China for 5000 years and have been used to treat different types of diseases as we had developed in one of our previous articles on Herbal medicine in China. Traditional Chinese Medicine (TCM) (传统中药) is used more and more around the world. The Chinese herbal medicine are classified in «medicinal products» in Europe, and in « dietary supplement » (膳食补充剂) in the United States.

In TCM, herbs are often in the form of teas, capsules, liquid extracts, granules, or powders.

Can chaga seduce the health food market in China?

Price analysis

According to our analysis with data sourced from the largest e-commerce platforms in China, the chaga mushroom is sold at a price between 350 rmb ($55) and 450 rmb ($70) for 500 grams. The chaga mushroom is sold online at a higher price than the three most popular TCM herbs on the Chinese market : notoginseng (三七), pilose antler (鹿茸) and the lyceum fruit (枸杞).

Despite its higher price, the chaga has a great potential due to the willingness of Chinese consumers to pay premium for imported healthy food products and the increasing demand for food supplements.

[ctt template=”2″ link=”gbd8o” via=”yes” ]“The chaga has a great potential due to the willingness of Chinese consumers to pay premium for imported healthy food products and the increasing demand for food supplements.”[/ctt]

In China, the Internet is the main distribution channel for chaga

Produced by Daxue Consulting using data from Maijia (卖家).

According to this graph, over the period of 2017, healthcare products saw an online sales volume of over 20 million.

According to a previous study about China’s health supplement market and its major distribution channels, consumers generally buy their health care products via the following retail channels:

• Pharmacies are a common distribution channel, like Dashenlin (大参林) and GuoDa (国大药房) very well known in China, with a considerable market size.
• Hypermarkets like Carrefour (家乐福), Walmart (沃尔玛).
• Direct sellers, one of the most famous of which is Amway (安利).
• E-tail; companies open a flagship store on online retailing platforms such as Tmall (天猫) or JD.com (京东).

Because it is a nascent market, chaga is not distributed everywhere in China. According to our research on the chaga mushroom market in China, chaga is not available in pharmacies or hypermarkets. Chaga mushrooms are mainly sold:

• On Taobao (淘宝网) through daigou (代购), a person located outside of China who purchases goods, list the products on an e-commerce platform from abroad and sells them to customers in mainland The high demand for this gray market service is linked to Chinese consumers’ concern over counterfeit products.
• On Tmall (天猫) in official stores such as “Yushenfang” (御参坊), “Qindingtai” (秦鼎泰) and “Sanjingtang” (三京堂).
• Direct selling through the company Beijing Siberia white birch antler R & D Co. LTD (北京西伯利亚白桦茸研发研发限有限公司), a representative company of the Sino-Russian chaga (白桦茸) trade; Zdorov Company (滋得洛夫), an official manufacturer and supplier of natural health and beauty products; and Shandong Promix Food Co. Ltd. (山东博罗米克食品有限公司). Direct selling allows consumers to purchase natural products without the risk of counterfeit products. Thus, we can conclude that the chaga maintains a large presence on Chinese online retail platforms.

According to our analysis, a producer of chaga can open a shop in China and market his or her product’s quality and authenticity. Daxue recommends this mode of distribution for potential market entrants to the Chinese chaga market.

Daxue provides market sizing and supply chain analysis for the chaga mushroom market in China:

Daxue Consulting has a robust background in the food supplements industry in China. Our market research team has carried out projects for different clients overseas seeking to enter the Chinese healthcare products market.

At Daxue Consulting, we conduct research methodologies such as analysis and assessment of the market in China, supply chain and distribution analysis. From this perspective, we are disposed to support your entry in the chaga mushroom market in China. Daxue can optimize your market entry, analyze your industry, benchmark your competition in China, define your distribution and provide guidance about the consumer preferences and purchase habits. Our analyses provide a complete overview of the market.

If you have any question or inquiry, you can send us an email at dx@daxueconsulting.com.

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This article The chaga mushroom market in China: on the verge of a breakthrough? is the first one to appear on Daxue Consulting - Market Research China.