Despite substantial growth in the fitness industry, where the market for fitness centres last year was valued at upwards of US$20bn, and surging at a rate 10 percentage points higher than the global average of 20%, the rise of performance supplements is running out of steam.
Typically, sports nutrition would be expected to grow in tandem with fitness, but it has actually been slowing significantly from a peak in 2012 of 19% due to a raft of barriers.
“There’s a lack of channels, and there are regulatory problems,” says Drew Campbell, founder and chief executive of WHS, one of the very few specialist sports nutrition retailers with a presence in multiple Chinese cities.
It is widely believed that the regulatory system is behind this paucity of sales channels, its complexity dissuading international companies from investing time and expense in registering their products for export to China. Who wants to invest in a health food chain that has limited products on the shelves?
There have been cases of manufacturers waiting a standard three years to gain registration only to find that the size of their supplements were too large for the local market to swallow comfortably. But rather than just reducing the capsules and reformulating based on the size, they are then forced by regulators to revisit the entire approval system again.
“It’s very difficult. Even though we’ve been doing this for 10 years, every single import is difficult. If it were easy, the market would be a lot bigger—so even if people are quoting very big numbers, like Swisse and Blackmores reporting massive growth, these are just one or two stories fuelled by imports from countries like Australia that are trusted.”
The two Australian supplements majors have been enjoying wild success in China, with Swisse bought in late 2015 by Hong Kong-listed Biostime, and Blackmores exhibiting substantial growth.
But for small retailers like WHS, “you can’t relax because regulations are changing all the time,” says Campbell.
This contrasts with the situation just a few years ago, in which the regulatory environment suffered from a distinct lack of inertia at a time when the business environment had begun to soar.
This year, though, a number of changes to nutraceutical regulations are on the way, though businesses are as yet unsure what effect they will have on doing business.
Following the introduction of a new notification system for vitamins and minerals this month, whereby suppliers will see much of the registration red tape removed from commodity ingredients, changes are expected later this to the way food ingredients are regulated, while sports nutrition regulations will be on the anvil in November.
“You can’t know whether they are good or bad until you have started using the regulations yourself,” says Campbell. “There’s nothing black and white here; it’s still ambiguous. They have to do something because it’s a mess. They have to look at cleaning it up. And as the central government has put a mandate on getting people to be healthier and doing more fitness, there are some solid, positive reasons fuelling it.
“But the flip-side is that traditional local businesses do not want the market to be open up further—both for economic reasons and for protection reasons.”
Jeff Crowther, executive director of the US-China Health Products Association, believes that the regulators are moving in the right direction—albeit slowly—but echoes Campbell’s views on established interests.
“You have to remember that the system has been in place for a long time,” he says, “and a lot of companies have invested a lot of time and money in this system.
“If you all of a sudden say we’re going to open the market, there will be a lot of push-back from them not to do this. They are enjoying very low competition because not many foreign companies have gone through the Blue Hat system.”
To gain a “Blue Hat”, which represents full certification, a product must go through a three-year approvals process. While for pharmaceuticals and medical devices, Chinese regulators have borrowed much from their European and American counterparts, “they didn’t model dietary supplements after anything,” says Crowther.
“They just created this system that is very much akin to a drug registration and have never really changed that. They are constantly getting counselled by groups like ours and internal Chinese groups who tell them that the Blue Hat is ridiculous.”
However, this month’s changes to the recording system can be viewed as mildly positive, though by making it easier for a list of specific vitamins and minerals that can be marketed without resorting to the approvals process, it will only affect a small segment of the nutrition industry.
Crowther believes that the new system will result in regular e-commerce channels being flooded with multivitamins and calcium, whereas suppliers of more complex formulations will have to continue going through the Blue Hat system.
Yet it might well pave the way for more nutraceutical ingredients to be notified in the future. As he puts it: “This recording system has opened the door to what we want, but [the regulators] still have their foot behind it—it’s only open a little bit.”
“Blue Hat registrations expire after five years, so if companies know that six years from now the door is going to open a little bit wider, then maybe the Blue Hat system might start to go away, or stay there but with a completely different underlying system. Nobody really knows, but that’s what we’re hoping,” he adds.
There is already speculation that ingredients such as fish oil will find their way onto the list as ingredients like krill oil have already been approved by the National Health Commission as a food.
“It’s got to be safe if it’s approved as a food ingredient, so why can’t we put this into a soft gel capsule? You have to imagine that they are going to be adding some of these things to their list—maybe just not right away,” says Crowther.
Returning to sports nutrition, the health food industry is missing a trick as the nation becomes more fitness obsessed, according to Kelvin Goh, chief executive of Shanghai Asia Fit Consulting.
With thousands of newly qualified personal trainers entering the market each month after completing certification programmes, very few of them are trained in nutrition.
“This is a potential sales force, but Chinese gyms and health food suppliers are not taking advantage of this,” says Goh.
Moreover, very few gyms sell sports nutrition products or feature juice bars that lace smoothies with supplements. “Until that happens, that’s a wasted sales channel for sports nutrition.”