Can the health supplement market maintain healthy growth?
In 2022, China's health care products market will reach 230 billion yuan, ranking second in the world. Figure Visual China.
Text |He Xiaoqing, Wang Yaxin, Zhou Kunyi
With the improvement of living standards, the surge of "sub-healthy" people, and the catalysis of the epidemic, consumers' awareness of "preventive treatment" of themselves and their families has been strengthened. Health supplements have gradually become the "fourth meal" of family life.
With the intensification of aging, the health care consumption of the silver-haired population has not yet reached the explosive period, while the post-90s generation and Generation Z have risen to become a new force in the consumption of health care products. The punk health care of "staying up late at night and eating the most expensive health care products", the targeted health care of "pursuing scientific and precise efficacy", the snack health care of "liking portable and ready-to-eat and diversified tastes", and the appearance health of "freezing age and anti-aging" are becoming a new trend in the consumption of health care products for young people. New products, new ideas and new topics for health care consumption are setting off a trend on social networking**.
At the same time, the Quanjian incident, policy regulation and the epidemic have also exacerbated the channel change. E-commerce has surpassed traditional direct sales and has become one of the most important sales channels in the health care products industry. Based on Xingtu data, during the "Double 11" period of integrated e-commerce platforms such as Tmall and JD.com in 2023, the total sales of nutrition and health care categories will exceed 14.8 billion yuan.
The focus of this article is how the health care products industry will develop under the new normal of the economy, new consumption forces, and new changes in the market.
What is the size and growth of China's nutraceutical market?
It is estimated that the scale will exceed 300 billion yuan in 2028, and show a unique "U-shaped" population distribution of penetration.
In 2022, the size of China's health care products market will reach 230 billion yuan, ranking second in the world.
On the one hand, there is still a big gap between the per capita consumption expenditure of Chinese health care products and that of developed countries. Chinese's per capita consumption of health care products is only less than 20% of that of the United States, Germany and other countries in the same period.
On the other hand, the penetration rate of health products in China is also low among all age groups. The average penetration rate of health care products in the United States is more than 50%, and the overall penetration rate decreases with age - among them, the penetration rate of health care products over 65 years old is the highest, reaching more than 70%;The lowest penetration rate is under 25 years old, at 30%. The average penetration rate of health care products in China is only 20%. In addition, the penetration rate of health care products in China shows a U-shaped distribution, with the penetration rate of the middle 35-44 year old group being the lowest, only about 10%;The penetration rate for people over 65 years of age and 20% for people under 25 years of age is about 25 per cent. China's unique U-shaped distribution highlights the vitality of the younger generation's consumption of health care products, which has become a new engine for the market.
In the future, it is expected that the size of China's health care products market will exceed 300 billion yuan in 2028, with an average annual compound growth rate of about 6%.
What is the impact of the epidemic on the health supplement industry?
Accelerating the formation of national health awareness is especially conducive to immunomodulatory health care products.
The outbreak of the new crown epidemic has accelerated the formation of national health awareness, which has driven the development of almost all categories of health care products in the short term, and directly stimulated the growth of related categories such as "immune regulation", "family health" and "sports and fitness". In the medium and long term, it is expected that this trend will continue to ferment, and the industry penetration rate is expected to further increase.
Based on a consumer survey conducted by A.T. Kearney in 2022, categories such as vitamins, minerals, fish oil, and probiotics benefited the most during the pandemic. When asked about the change in consumer behavior after the end of the pandemic, more than 70% of consumers said that their consumption of health products would remain unchanged, and 10%-20% said that it would be strengthened. Interestingly, when consumers were told that certain categories were beneficial for "modulating immune" function, there was a significant increase in consumer interest and demand for that category.
Do you have to wear a "blue hat" for health care products?
While "blue hat" provides credit endorsement, "health food" has found a new way and is in high demand.
In recent years, with the emergence of chaos in the health care products market such as "exaggerated efficacy", "illegal addition" and "fake and shoddy", a series of policies to strengthen market supervision have been promulgated. At the same time, in order to further stimulate the vitality of China's health care products industry, we will continue to promote the development of the health food filing system, from the previous single registration system to a "dual-track system" combining registration and filing. On the whole, the supervision of health care products in China is showing a trend of "simplification tends to be strict", and it is constantly changing from "development standardization" to "standardization of development".
"Blue Hat" health food logo.
Among the policies of various health care products, the "blue hat" has attracted the most attention. "Blue hat" is a special mark for health food registered or filed by the State Food and Drug Administration. The "blue hat" has a high threshold, a long time for clinical trials and official approval, and it needs to be effective and more than 50% effective to obtain the label. At present, the "health foods" sold in the Chinese market include "real" health foods that have been registered and filed in accordance with the law and bear the blue hat logoThere are also "pseudo" health foods that have certain nutritional functions, but have not obtained the blue hat certification, and can only be sold as ordinary food. Among them, ordinary foods without "blue hat" certification cannot be added with health food or pharmaceutical raw materials, nor can they be specifically advertised in any way such as product packaging, instructions, advertising, and sales staff introduction.
Therefore, for brands, having a "blue hat" is like adding a layer of "blue buff" to the product, and the official endorsement is more assured, and it is more conducive to achieving omni-channel (especially professional channels such as pharmacies) and all customer groups (especially middle-aged and elderly) coverage. However, due to the long approval cycle, high cost and limited quantity of "blue hats", some brands will obtain "blue hats" by cooperating with OEMs with "blue hat" approvalsThere are also some brands without "blue hats" and some products with new ingredients and new functions, which focus on young customers and functional food tracks, and are mainly sold through channels such as e-commerce, supermarkets, personal care and beauty stores, and mother and child stores.
Which high-potential categories will stand out in the future?
Focus on plant essences, vitamins, probiotics, oral beauty, weight management and other subcategories.
Health care products can be mainly divided into vitamins, calcium, protein supplements, probiotics, fish oil, non-calcium minerals, oral beauty, weight management, glucosamine chondroitin, coenzyme Q10, animal essence and other categories. We** will stand out in the following high-potential categories in the future and deserve to be focused on.
First of all, plant essences and vitamins, as the largest categories, have maintained a steady growth of 3%-5% in omni-channel in the past three years, but have achieved more than 20% growth in cross-border e-commerce channels. It is expected that the growth rate of cross-border e-commerce will remain above 10% in the next five years.
Secondly, probiotics, oral beauty and weight management, as the fastest-growing segment with considerable market size, are expected to maintain an average annual compound growth rate of % and 7% respectively in the next five years, with great development potential.
Specifically, on the one hand, more and more young people have high-salt, high-sugar, spicy and heavy eating habits, coupled with sedentary, late nights and other work and rest, intestinal problems are showing a trend of normalization - probiotics and other "gastrointestinal regulation" has become a major need of modern families.
On the other hand, driven by the beauty economy, women's maintenance needs such as oral beauty and weight management have become potential stocks for the growth of health care products. Plant fruit and vegetable enzymes, collagen peptide drinks, ready-to-eat probiotics and other products have all been popular among young consumers in Tmall's "Double 11" in 2023.
Finally, more and more middle-aged and elderly people and overworked young customers have increasing demand for bone care, eye care and cardiovascular health, and the market for calcium, glucosamine chondroitin, fish oil and coenzyme Q10 will also maintain stable growth.
Online vs.Offline, the market for health care products is in the first place
E-commerce such as live streaming has replaced direct sales as the largest channel, and pharmacies are still the core of offline channel layout.
In recent years, the Quanjian incident, policy supervision, the epidemic and the younger consumer base have exacerbated the reform of health care product channels. The e-commerce channel has replaced traditional direct sales as the largest channel for health care product sales, and is expected to further increase to 60% market share in the futurePharmacies will continue to be the most important channel for offline health care product sales - the integrated omni-channel operation of online and offline will become the breakthrough way for the growth of health care product retail.
Channel focus 1: e-commerce
With the rise of the post-90s generation and Generation Z, health care product e-commerce has developed rapidly - in 2020, e-commerce began to replace direct sales as the largest channel for health care product consumption. Among them, social e-commerce such as Douyin and Pinduoduo are the fastest-growing, and the average annual compound growth rate is expected to reach more than 20% in the next five years. Cross-border e-commerce has become the preferred channel for overseas brands to enter the Chinese market due to relatively low entry barriers and few restrictions on product formulas, and is expected to maintain an annual growth rate of 10%-15% in the future.
It is worth noting that although the live broadcast platform cannot sell "blue hat" health care products and promote the health function of the product, the growth of non-"blue hat" health food on the live broadcast platform is eye-catching.
Channel Focus 2: Direct Marketing
As the largest channel for the sales of health care products in the past, the direct sales channel used to occupy half of the sales of health care products. With the butterfly effect caused by policy regulation and the Quanjian incident, the traditional direct selling channel has been greatly impacted. By 2022, the market share of the direct sales channel has been less than 30%, and it is expected that the market share will continue to decline in the future.
Channel Focus 3: Pharmacies
As the most important channel for middle-aged and elderly customers, pharmacies' market share has dropped slightly from 21% in 2016 to 17% in 2021 with the introduction of new medical insurance regulations and epidemic lockdown. In the medium to long term, pharmacies will continue to be the most important channel for offline health care product consumption, and are expected to maintain stable growth in the next five years.
Other offline channels
In 2021, the personal care beauty store for young women and the mother and baby store channel for pregnant women each accounted for less than 5% of the market share, and it is expected to maintain stable development in the next five years. Most of the traditional supermarkets with a market share of about 2% are mainly family packs and gift packs with basic nutrition, and it is expected that the proportion of health care product sales in this channel will decline slightly in the future. Although the current market share is less than 1%, membership-based supermarkets such as Sam's and Costco are expected to grow faster due to their higher customer base spending power and planned store expansion.
Outside the silver-haired group
What other "treasures" of health care products are available to consumers?
Generation Z, cutting-edge white-collar workers, and sophisticated mothers have become a new force in the consumption of health care products.
Chinese health care product consumers can be divided into six typical customer groups: silver-haired elderly, middle-aged health care, young women, young men, mothers and infants, and students. At present, the health care consumption of the silver-haired population has not yet reached an explosive period under the intensification of aging, and Generation Z, cutting-edge white-collar workers, and exquisite mothers have become a new force in the consumption of health care products, and have effectively driven the market expansion.
In 2022, a report jointly released by Xinhuanet, Tomson Bio-Health and JD Health shows that young consumers aged 18 to 35 account for 83% of health and wellness consumers7%。The punk health care of "staying up late at night and eating the most expensive health care products", the targeted health care of "pursuing scientific and precise efficacy", the snack health care of "liking portable and ready-to-eat and diversified tastes", and the appearance economy of "freezing age and anti-aging" are becoming a new trend in the consumption of health care products among young people, and the demand scene of health care products is developing towards refinement.
According to the consumer survey questionnaire conducted by A.T. Kearney in 2022, national certifications such as product raw materials, formulas, and "blue hats" are the most important considerations for consumers to buy health care products, followed by brand awareness and professionalism. The younger generation younger than 30 years old pays more attention to the convenience, taste and pre-sales and after-sales service experience of the product dosage form than the middle-aged and old customers.
What is the competitive landscape of the health care products market?
The overall market pattern is fragmented, and new brands continue to emerge in subdivided tracks.
At present, the competition pattern of China's health care products market is relatively fragmented and the concentration is low. The market share of the top 10 health care product brands, especially direct sales brands such as Nutrilite, Infinitus, and Herbalife, is constantly being eroded. In addition, the industry's higher profit margins and lower barriers to entry have attracted more pharmaceutical companies and food companies to enter, and emerging brands in various segments continue to rise.
Specifically, China's health care product players are mainly divided into four echelons. The top 10 brands in terms of market size are the first echelon, with a market share of about 1%-10%, such as Tomson By-Health, Nutrilite, Infinitus, Swisse, Calqi, Biostime, etc. The second echelon is the top 10-30 brands, and the market share is mostly distributed in 05%-1%, including traditional vitamin and dietary supplement brands such as Blackmores, GNC and Shancun, as well as emerging brands in sub-categories such as Xiaoxian Stew, Duoyan Slimming and Muscle Technology. The third echelon is mainly distributed with a market share of 01%-0.The top 30-60 brands in the top 5% are represented by Yangshengtang, Jianleduo, Fancl, Doppelherz, Wonder Lab and Life-Space. The fourth echelon is distributed with more than 2,000 long-tail brands, and most of them have a market share of less than 01%；Among them, there are many well-known overseas brands such as NatureMade, Nature's Bounty, Garden of Life and Soyjoy.
What are the current "interesting, colorful, and material" innovative health care products?
Personalized customization, multiple compounds, innovative dosage forms, and unique packaging" are the breakthrough points of product innovation.
At present, the upgrading and innovation of health care products has ushered in a new wave, and four types of "interesting, beautiful, and material" innovative products have become popular star products loved by young consumers.
Focus on key point 1: personalized customization
Customized health care products usually provide personalized matching solutions for different groups of people or even individuals, so that consumers can obtain the sense of dignity and efficacy of "customized for me" and improve repurchase.
For example, lemonbox, a custom vitamin brand, collects information about users' age, gender, nutritional goals, and lifestyle habits through online questionnaires, evaluates consumers' nutritional needs, and provides a one-to-one precision nutrition solution - one bag of customized vitamins per day.
GNC's "Daily Nutrition Pack" launched in May 2022 has also exploded. The "Daily Nutrition Pack" includes 2 capsules of basic nutrition and 3 capsules of precision nutrition, and is a one-stop nutrition solution customized for age groups and genders. For example, for 30+ women, it focuses on enhancing vitality, eye protection, stress relief, whitening and hair care to fight early aging, for 40+ women, it focuses on strengthening vascular health and advanced anti-aging skin, and for 50+ women, it focuses on preventing cardiovascular disease and relieving insomnia, irritability and other menopausal symptoms.
Focus on focus 2: multi-disciplinary composite classes
The multi-effect integration of health care products is also expected by young people, among which "vitamin +", "probiotics+" and "collagen +" product innovations are the most common.
For example, Swisse Women's Multivitamin is fortified with 11 vitamins, 11 minerals, and botanical extracts to help relieve stress, boost immunity, and improve skin. Garden of Life's beautiful skin probiotics use a compound formula of "probiotics + retinol (vitamin A) + lycopene", which repairs the ** barrier of the skin strain, and combines retinol and lycopene to help ** anti-light and anti-oxidation. Wonderlab continues to "stack buffs" in the efficacy of probiotics, and has launched products such as all-round gastrointestinal health small blue bottle probiotics, women's health cranberry small powder bottle probiotics, and children's appetizing small yellow bottle probiotics.
Focus 3: innovative dosage forms
Compared with traditional "pharmaceutical" dosage forms such as tablets, capsules, and granules, young consumers prefer new dosage forms such as gummies, jellies, and ready-to-drink products—and the form of health care products tends to be "fast-moving snacking" and "convenient and immediate".
Among them, gummies are mostly found in sleep aids, collagen beauty products and multivitamins. For example, By-Health has launched a series of new functional gummies such as acerola cherry vitamin C gummies, collagen gummies, and DHA gummies. Swisse has launched products such as Ultivite multivitamin gummies, probiotic and prebiotic gummies, beauty collagen glow gummies, and more.
Jelly forms are mostly found in beauty and slimming products such as enzymes, collagen and L-carnitine. For example, Zimeitang Xian Fiber Stick White Kidney Bean Enzyme Jelly, Duoyan Slim Soso Stick Collagen Enzyme Jelly, Besunyen Probiotic Enzyme Jelly.
At the same time, as an innovative dosage form, drops are mostly used in infant nutrition and health products, which are conducive to children's absorption and easy to carry. For example, the Canadian brand Bioamicus has launched BB12 probiotics, vitamin D3, lactase and other drops.
Some brands are also exploring spray product innovations. For example, Bodybuilder, Canada's leading vitamin brand, has launched three spray products – Melatonin Sleep Spray, Vitamin B12 Spray and Vitamin D Spray.
At the same time, even traditional capsule dosage forms can bring consumers a new experience with the blessing of cutting-edge technology. For example, Ritual, a women's vitamin brand, uses microbead-in-oil capsule technology to separate dry and oily nutrients. For example, international health brands such as Swisse and Garden of Life have iterated some of their products into greener and more natural vegetable capsules (VCAPS). Another example is the new double-capsule technology (DuoCap) that can realize the function of solid-liquid separation and timed release, and the liquid-filled capsule technology (Licaps) of Pfizer Capsugel in the United States to help improve the absorption of the human body.
Focus on focus 4: unique packaging
In addition to the innovation of internal dosage forms, the innovation of external packaging is also an attractive and unique selling point for young people in today's "appearance era", helping some brands to achieve "corner overtaking".
For example, more than 80% of the customers of Wonderlab, a sports and intestinal nutrition brand, are 18-30-year-old Gen Z cool girls, who have high requirements for product appearance and social attributes. In 2022, Wonderlab's meal replacement shake won the Gold Award for Food and Beverage Packaging at the German iF Design Awards, known as the "Oscars of Design" – the product is branded with Klein Blue as the brand color and packaged in the iconic "Chubby Bottle". The probiotic solid drink products launched by it are also different from the homogeneous bar bags on the market - the 75g meal replacement shake chubby bottle is reduced to a 2g mini bottle of individual packaging, and is equipped with pull-out storage boxes, open-lid family buckets and other outer packaging.
For another example, the daily nutrition bar and lipstick launched by the British dietary supplement brand Vitplus+ are about the same size, which solves the pain point of health care product bottles and cans that are not easy to carry. Ritual allows users to clearly see the capsules inside through the fully transparent outer packaging, and establishes a trustworthy brand image with an extremely transparent visual experience.
Conclusion
At present, it is an era of consumption differentiation: consumption upgrading and downgrading coexist, and the pursuit of high quality and cost performance coexist. Generation Z, who laughs at themselves as "lazy and poor" and has to hold their money tightly, has put forward requirements for health, environmental protection, and good looks when they consume - behind this is a more refined customer group division and demand matching.
In this context, can health care products maintain healthy growth?In the medium to long term, the answer is yes.
Although health care products are in the track of consumption upgrading, the prospects are promising. However, in the current "involution" competitive environment, it is difficult to support the long-term performance of the brand by replicating the simple and crude "marketing + brand premium" play. This requires health care product companies to practice "internal skills" - for example, the ultimate product power created through consumer insights;Another example is the refined channel and market operation created through scene segmentation and integrated marketing.
In short, in this era of transition from "incremental" to "stock", the real tough battle is still to come.
The authors, He Xiaoqing, are the President and Global Partner of A.T. Kearney Greater China, Ms. Wang Yaxin is a Director of A.T. Kearney, and Ms. Zhou Kunyi is a consultant at A.T. KearneyEditor: Yu Le).