Estimates peg China’s dietary supplements market anywhere between the US$10 – 16bn mark. However an exact figure is difficult to pinpoint due to a lack of product registration compliance and few official statistics from the government, according to the New Zealand Trade & Enterprise (NZTE).
What is not disputed however, is that it is a market that is growing and Euromonitor data forecasts that the vitamins and dietary supplements sector is set to maintain a healthy growth of 6% CAGR until 2015.
Jeff Crowther, executive director of the US-China Health Products Association, said that China’s dietary supplements market is attractive for investors due to this growth potential.
However, “the current regulatory system is holding the industry back from reaching its true potential… Real growth will only be realised with regulatory reform of the entire system,” Crowther told FoodNavigator-Asia.
“Regulatory reform toward a more open and transparent system will encourage more foreign and domestic players to invest, which will encourage further investment in building up sales channels such as health food stores, which will then give consumers greater product choices, lower prices and access to educational materials,” he said.
‘Heavy handed with regulations’
China’s State Food and Drug Administration (SFDA) oversees the dietary supplements industry, “and over the last few years has been attempting to reform the industry,” he said.
But “China across the board tends to go heavy handed with regulations and this is mainly due to the immense size of the population. Guiding, overseeing and policing industries operating in such a populace place is a monumental task to say the least,” he added.
Presently dietary supplements are regulated in the same way as drugs, he noted, and for international manufacturers, products must be registered – a process that is both costly and timely.
“The product must go through animal and human testing and in most cases the product will have to be reformulated for the China market due to potency restrictions. Most high potency multi-vitamins would be considered too strong for SFDA and denied a registration,” Crowther said.
This is a “huge hurdle that has swayed many foreign brands to sit on the fence and ponder their China entry plans a bit further,” he added.
A lack of education and closed marketplace
The sector is gripped by direct sales companies and strong domestic players Crowther said, and so international manufacturers looking to enter China’s dietary supplement market must have realistic expectations.
They will need to “rely heavily on the value of their innovation and quality to capture customers,” he said, as they will be unable to compete on price with the domestic manufacturers.
After direct sales companies, the majority of supplements are sold in pharmacies that hold control of upwards of 80% of all retail sales in the country, he said.
“Pharmacies in China are places to buy medicine and thus over the years has unfortunately lumped dietary supplements with drugs in the minds of the average Chinese consumer,” Crowther added.
He noted that education about dietary supplements is lacking among Chinese consumers, with many believing they are akin to medicine.
However, it is often forgotten that China is a young country in comparison to the US or European countries, and thus it has a lot of catching up to do, Crowther said.
Crowther said that the US-China Health Products Association is working with both the US and Chinese governments as well as industry to share information and encourage regulatory movement that in the end will benefit the consumers and industry.
“I’m optimistic that the government will move the dietary supplement industry toward a more open and transparent system… Every year there are more and more events in China that are dedicated to discussing dietary supplements and exchanging information and this is a good sign for the industry’s future,” he concluded.