China Market Overview 2015-03-06

Expo West March 6, 2015
Jeff Crowther – Executive Director (USCHPA)
China
Dietary Supplement Market Overview

Agenda
Your Trusted Partner in China
•  Market
Overview

•  Trends

•  Regulatory:
Finished
Products

•  Regulatory:
New
Food
Ingredients

•  Sales
Channels

•  Cross
Border
E-‐Commerce

•  Market
Entry
Tips

•  IntroducDon
to
USCHPA

China: Dietary Supplement Market Overview

Market and Information Disclaimer

Market Overview

Market Overview

GDP Real Growth: 7.4%
Population: 1.36 billion
Consumer Base: 280 million
Consumer Goods Sales 12.1%
Country Overview*
Opportunities
•  China FDA New Regulations (NOTIFICATION)
•  National Health Commission (formerly MOH) Ingredient Approvals
(Krill Oil, DHA, Chitosan, Acai, Theanine etc…)
•  Healthcare System Moving Towards Prevention
•  E-commerce Growth
•  High Regard for Foreign Brands
* Data Collected on July 2014 from China Bureau of Statistics

Market Overview
24
20
30
0
5
10
15
20
25
30
35
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
World Asia Pacific China
%growth2013/2018
RetailvalueUS$million2018
China to Outpace the World and Asia Pacific
Nutritionals Outlook
Sports Nutrition Paediatric Vitamins and Dietary Supplements
Dietary Supplements Tonics and Bottled Nutritive Drinks
Vitamins Weight Management
% Growth Combined Categories 2013/2018

Market Overview
“Health Food” Industry Figures?????
¥600 billion ($96 billion) HK Trade Development Council
¥400 billion ($64 billion) China Health Care Association
¥124 billion ($20 billion) U.S. – China HPA
¥83 billion ($13 billion) Euromonitor
BY 2015
¥1 trillion ($159 billion) NDRC’s Development Plan Stated
Exchange rate $1 : ¥6.27 March 1, 2015

Why the Confusion?
Contributing factors to
unclear sales figures:
-  Lacking Standard Definition
-  Conference Selling
-  Gray Market Activities
-  Black Market Activities
-  Redundant Agencies
-  Overlapping industries
Supplements, Pharma, TCM,
Food, etc.
Disclaimer!
Market Overview

Market Overview
Source: CNutra
Name
Sales
(US$)

Amway
－安利
4.8
billion

Inﬁnitus
－无极限
3.7
billion

Red
Bull
－红牛
2.6
billion

Perfect
China
－完美
2.3
billion

New
Era
－新时代
1.6
billion

Tong
Ren
Tang
－同仁堂
1.4
billion

Tien’s
－天狮
1.1
billion

Jing
Brand
-‐劲牌
1.06
billion

JoinCare
Pharma
-‐健康元药
1
billion

Nuskin
(Pharmanex)
–
如新
900
million

2013: China’s Top Ten Health Product Companies
Direct Sales (MLM)

Market Overview
Direct Sales
and
Conference
Selling
Controls over
60% of the
Market 新时代

Market Overview
Amway’s China Operations
•  1995 Launched
•  6% Annual Growth
•  9,000 Employees
•  300,000 Sales Staff
•  280 Cities

Market Overview
2014: Other Top Supplement Companies

Company
Products

BiosRme
Baby
ProbioRcs

Bristol-‐Meyers
Squibb
Theragran
M

By
Health
Dietary
Supplements

GNC
Dietary
Supplements

Harbin
Pharma
Kids
Liquid
Cal-‐
Zinc

Minsheng
Pharma

21
Super
Vita

Nature's
Bounty
Dietary
Supplements

Shangdong
Dong
E
Jiao
Women
/
Skin

Tasly
/
Kasly
TCM
/
direct
sales

Wyeth
Centrum
/
Caltrate

Yang
Sheng
Tang
Dietary
Supplements

Market Overview
8% Growth rate (Euromonitor)
20% Growth rate (NDRC and CHCA)
2,100 Chinese Supplement Companies have passed through GMP
certification
14,106 domestic registered dietary supplements with China FDA
736 foreign registered dietary supplements with China FDA
23% of market is calcium supplements
74% of the market are traditional / herbal based products
Dietary Supplements Industry Facts

Market Overview
Senior Citizen Population
This segment of the population is an issue
for China but an opportunity for the dietary
supplement, functional food and medical
food industry

Market Overview
Israel Population Pyramid
Source: World Fact Book

Market Overview
U.S. Population Pyramid

Market Overview
China’s Population Pyramid

Market Overview
China’s Population Issue
2015: population of 60 and over
221 million
2053: population of 60 and over
487 million
•  Strain on Economy
•  Moving Toward Preventative
Health
•  Opportunity for
Supplements, Functional
Ingredients / Products
China National Committee on Aging

Trends

Trends
USCHPA Electronic Survey January – February 2015
15.9%

13.1%

13.0%

6.4%
6.3%

6.1%

4.4%

4.1%

3.7%

3.2%

23.8%

1,104
Surveyed
in
31
Regions

Beijing

Guangdong

Shanghai

Jiangsu

Shandong

Hebei

Tianjin

Zhejiang

Henan

Chongqing

Other

Trends
16.85%

49.46%

25.09%

6.79%

1.72%
0.09%

45%

55%

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

15-‐24
25-‐34
35-‐44
45-‐54
55-‐65
Over
65
Male
Female

261
339
292
212
0 50 100 150 200 250 300 350 400
Monthly Income
$239 - 478
$479 - 797
$798 - 1,276
$1,277 above
Demographics

Trends
Findings
Does your family take supplements?
Are you more interested in buying blue hat products?
Are you more interested in domestic or imported brands?
YES NO
78% 22%
73% 27%
IMP. DOM.
57% 43%

Trends
Which Supplements is
Your Family Taking?
MulR-‐Vitamins
34%

ProbioRcs
25%

Collagen
23%

Minerals
22%

Fish
Oil
22%

Propolis
21%

Protein
Power
19%

Glucosamine
17%

Grape
seed
Extract
14%

Others
12%

TradiRonal
Chinese

Medicine

10%

DHA
8%

Lycopene
7%

Folic
Acid
7%

Soybean
Isoﬂavones
6%

Coenzyme-‐Q10
6%

Garlic
5%

Evening
Primrose
Oil
4%

Melatonin
4%

ChondroiRn
Sulfate
4%

Astaxanthin
3%

Milk
Thistle
Extract
3%

Trends
Which International Brands
Are you Familiar With?
Which Domestic Brands Are
you Familiar With?
Pfizer
Centrum
52%

NBTY
31%

GNC
27%

Schiff

22%

Blackmore's
17%

Nature
Made
15%

Nature's
Way
14%

Puritan's
Pride
12%

Jamieson
11%

Others
9%

Nordic
Naturals
8%

Swanson
7%

Swisse
6%

Jarrow
Formulas
6%

Now
Foods
4%

Amway(China)
58%

By-‐Health
55%

Yang
Sheng
Tang
47%

Tong
Ren
Tang
46%

21Vita
40%

Jiuzhitang
34%

Taitai
Jingxin
30%

Life
No.1
30%

Conba
29%

Herbalife(China)
29%

Perfect(China)
25%

Inifinitus
21%

Tiens
13%

Nu
Skin(China)
9%

Dr.Herbs
6%

Others
4%

USANA
4%

Trends
What Retail Setting Do
You Buy Supplements?
Multiple Responses
Drug
Store
66%

Online
Store
39%

Receive
as
Gim
26%

Oversea
Purchase
by
Friends
22%

Hospital
17%

Direct
Sell
16%

Others
8%

Trends
•  Probiotics, Calcium and DHA were key functional ingredients
added in milk formula and dairy products
•  Protein popular due to consumer knowledge of muscle lose in
elderly (Sarcopenia)
•  Important categories: Elderly, Children and Women’s Beauty
•  Greater acceptance among consumers of Green, Organic,
Healthy and Nutritious

Trends
•  Herbal related products in tincture dosage form
•  Crack down by CFDA has really hurt the dietary supplement
import business
•  Move from brick and mortar to Internet
•  Due to lose of “food” import channel companies are working
on food type dosage forms
•  USCHPA and other organizations pushing for regulatory
reform paying off – notification system created
•  Government reported lack of Omegas-3s in diet. COFCO and
Golden Dragon Fish Cooking Oil added Omega-3s

Regulatory:
Finished Products

China’s 12th Five Year Plan (2011-2015)
For the first time ever, China specifically made the health
food industry part of their long term plans. Areas of Focus:
1.  R&D of new resource foods
2.  Improve quality
3.  Promote development
4.  Increase consumption for special needs groups
pregnancy, children, elderly, athletes, soldiers etc.
5.  Incorporate TCM – botanicals
6.  Encourage growth of high tech larger firms
7.  By 2015 nutrition and health foods should hit $159
billion with an annual growth rate of 20%
8.  Top 100 firms control 50% of the market
Regulatory

Regulatory Finished Products
Two Ways:
1.  Registering products with China’s
Food and Drug Administration
(CFDA) as “Healthy Food”.
2.  Approval from Administration of
Quality Supervision Inspection and
Quarantine (AQSIQ) as “Food”.
Dietary Supplement Imports

CFDA Regulatory Process
–  CFDA’s health food
registration has 27 allowable
claims (CHANGING)
–  One product can have up to
three claims
–  Claims require extensive
testing including human and
animal trials

CFDA New Approved Claims
HT = Human Testing AT = Animal Testing HAT = Human and Animal Testing
1. Improve immune system (AT)
2. Improve Sleep (HAT)
3. Relieve physical fatigue (HAT)
4. Enhance oxygen deficient endurance (AT)
5. Help protect against radioactive matters (AT)
6. Increase bone density (AT)
7. Protect liver against chemical damage (AT)
8. Relieve eye fatigue (HT)
9. Eliminate acne (HAT)
10. Eliminate chloasma (HAT)
11. Improve moisture of the skin (HT)
12. Improve oil content of the skin (HT)
13. Weight loss (HAT)
14. Help in lowering blood glucose (HAT)
15. Improve growth and development (HAT)
16. Anti-oxidation (HAT)
17. Improve nutritional anemia (HAT)
18. Help in memory improvement (HAT)
19. Adjust intestinal flora (HAT)
20. Promote lead excretion (HAT)
21. Promote digestion (HAT)
22. Clear the throat (HAT)
23. Protect gastric mucosa (HAT)
24. Promote lactation (HAT)
25. Promote Fecal Excretion (HAT)
26. Help in lowering blood pressure (HAT)
27. Help in lowering blood lipid (HAT)
Cancelled Combined Combined

This is the year it was
approved and its
corresponding
certificate number.
“G” indicates it is a
domestic product
This means China
Food and Drug
Administration
(CFDA).
This is the CFDA
Functional product
logo with Chinese
statement which
means health food
product.
CFDA’s “Blue Hat” Registration for Health Food

Registration Costs
–  Need to hire registration
consultant
–  Registration fee in excess
of $70,000 per SKU
–  2-3 years waiting period

Year
DomesRc
Foreign
Total

2014
941
10
951

2013
946
11
957

2012
691
11
702

2011
767
13
780

2010
751
21
772

2009
568
25
593

2008
596
36
632

2007
377
10
387

2006
751
17
768

2005
943
29
972

2004
1531
54
1585

2003
603
50
653

2002
882
52
934

2001
491
47
538

2000
779
74
853

1999
689
91
780

1998
742
77
819

1997
1003
106
1109

1996
55
2
57

The
ﬁrst
year
that
registraRon
administraRon
was
transferred
from
the
Ministry
of

Health
to
the
State
Food
and
Drug
AdministraRon

History of CFDA
Registrations 1996 - 2014

China’s Regulatory Environment
Blue Hat Registration
Flow Chart
•  Two year process
•  If product needs human
testing, process
extended by 3 -8
months
样品及技术资料交接
Handover the sample and technical data
编制送检验资料，向国家
CDC
TESTING
申请，缴纳试
验费，开始注册检验

完成注册检验及申报资料编制
Finish sample testing and application documents compilation
国家⾷食品药品监督管理局（CFDA）受理
Accepted by the China Food and Drug Administration (CFDA)
CFDA复核检验
Quality inspection
CFDA完成技术审评
Technical review by CFDA
CFDA完成⾏行政审批
Administration approval by CFDA
取

证
Obtain the certificate
1st Month
2nd Month
13th Month
14th Month
22nd Month
24th Month
24th Month

Blue Hat Registration Costs:
Item
Fee
(¥)
Fee
($)

Agent
Fees
¥350,000
$56,452

Toxicology
test
¥70,000
$11,290

FuncRon
appraisal
test
（animal）
¥80,000
$12,903

FuncRon
appraisal
test
（human）
¥200,000
$32,258

Hygienically
and
stability
test
¥60,000
$9,677

Eﬃcacy
composiRon
evaluaRon
¥30,000
$4,839

SRmulant
/
banned
substance
test
¥10,000
$1,613

Microbial
idenRﬁcaRon

¥15,000
$2,419

Microbial
toxicity
evaluaRon
¥15,000
$2,419

Review
inspecRon
¥50,000
$8,065

TOTAL
¥880,000
$141,935

NEW Draft Regulations for Nutritional Supplements
Released November 5, 2014
Administrative Regulations for Nutritional Supplements
and
Information Requirement for Nutritional Supplements
DRAFT

•  Notification System
•  Vitamins and Minerals (What about other nutrients?)
•  Tablets, Capsules, Liquids, Granules (What about others?)
•  Three Consecutive Batches for Testing (New Products?)
•  Manufacturing Flow Chart
•  Foreign Manufacturers One Year Sales/Marketing Record
(New Products?)
•  New DRI (Daily Recommended Intake) Higher than before

•  Controlled by Administration of Quality Supervision
Inspection and Quarantine (AQSIQ)
•  Most Foreign Companies were using this method
•  Most dietary supplement dosage forms no longer
accepted (tablets, capsules, soft-gels, etc)
•  Need AQSIQ sanitation certificate (pass testing)
•  AQSIQ takes up to 1.5kg of samples for testing
•  Labels must be in Chinese
Food Import Approvals

•  Register label with AQSIQ takes about 2-4 weeks
•  Foreign Organic certificates / logos not
recognized.
•  Shipping and customs clearance together takes
about 2-3 months
•  Most important: Need experienced customs
clearance agent
•  Importing is a Gamble
Food Import Approvals Continued:

Food Import Approvals Continued:
Label Approval Fees – $800 per label. This is a one time fee
unless changes are made to the label after it approval, which
require paying ¥4,800 again.
Agent Fee - $1,600 per shipment or 1.5% of the shipment,
whichever is larger
Chinese Import Tax - 20%
Value Added Tax - 17%
Chinese Inspection and Quarantine Testing Fees - $190 -
$480 per shipment. It depends on shipment method (air / sea)
and how many different products are in the shipment.

AQSIQ Food Import Approvals Cont:
Sanitation Certificate Fee – Free but some agents charge
$50 or more per SKU. Sanitation certs are needed each time
you import for each product.
Warehousing Fees - $1 per day per sqm - $0.10 per kilo to
load from truck to warehouse.
Domestic Logistic Fee - $70 - 130 This is the fee to ship
from Tianjin to Beijing customs.
Miscellaneous Customs Fees - $100 These include
customs receiving fees, hygiene fees, handling fees, etc.
Unfortunately, this is not very transparent.

Documents Needed:
•  Health certificate
•  Certificate of origin
•  Free sale certificate
•  Contract between manufacturer and importer
•  Invoice from manufacturer
•  Packing list
CIQ registration number for foreign manufacturer / marketer
company:
http://ire.eciq.cn/entire/controller?
SERVICE_ID=REGISTRY_EXPORT_ADD_SERVICE&newsearch=true&re
cordperpage=10&defSearch=true
AQSIQ Food Import Approvals Cont:

Regulatory:
New Food Ingredients

Regulatory: New Food Ingredients
The Commission is made up of 2 former agencies (March 16, 2013)
Ministry of Health
National Population and Family Planning Commission
Industry Opportunity
February 10, 2014 - At present, China’s food production cannot meet the nutritional
needs of its people. Under-nutrition and over-nutrition coexist among Chinese people,
and the society lacks the knowledge on nutrition and health. In order to better cope with
the above challenges, the State Council officially published the National Program for
Food and Nutrition Development (2014-2020). The Program focuses on safeguarding
effective food supply, optimizing food structure, and improving the nutritional status of
residents.
2008 - 2014
NHFPC has approved 81 New Raw Food Materials

Regulatory: New Food Ingredients
Approval Process Snapshot
Agency: NHFPC
Time: Average 2 years
Costs: $30k - $100 (One agent I know their fee is $64k)
Agent: Need a local agent to facilitate process
Risk Assessment Report: New aspect of the process
and not well understood
Testing: Should be done in China to avoid set backs
Expert Panel: Not transparent (MOH can overturn
panels decision)

Sales Channels

Nature’s Bounty
•  High-end Supermarkets
•  Shopping Mall Kiosks
•  Health and Beauty Store
Watson’s
Mannings
•  Pharmacies
•  Internet
•  China currently lacks
Health Food Store
Chains
Sales Channels

GNC
Blackmores / K-Lex
Sales Channels

GNC and NBTY
High-end Supermarket
Beijing Hualian – Market
Place
Sales Channels

Health and Beauty Stores
Sales Channels

Pharmacy
Sales Channels

Sales Channels
China E-Commerce
Fastest Growing
648 million shoppers
$443.68 billion

Cross Border E-commerce

Sales Channels
Source: www.iresearchchina.com
Cross Border Percentage
Total Imports / Exports
2008 – 4.6%
2016 – 19%
Since 2012
2,000 companies have
registered as cross
border traders

Cross Border E-commerce
3rd Party Customer Service Company (TP Firm)
•  Need TP company
$1,500 - $4,800 monthly fees
3 - 10 % profit share
•  Need Warehousing
•  Shipping $4 per lb. $1 every lb. after
•  Customs 10% tax if over ¥500 in value
•  Tmall Global (Need Invite)
$25,000 deposit (refundable)
$5 – 10 thousand annual fee
3% per sale
1% for currency exchange
•  Not all products can use free trade zone
Cross Border E-commerce Insights

Market Entry

Market Entry
Things I hear from members and clients:
“Why can’t I do that”?
“How can they do that”?
Legal
Illegal
Gray
Area
1.  Rule of Law
2.  Relationships
The Two “R’s” of China
R2
R1

Market Entry
• Failed Partnerships
• Partner Mishandling Brand
• Lack of Surveillance (gov.)
• Huge Gray and Black Market
• False Sense of Market
• Lack of Product Education
Market Entry Issues
• Non-Transparent Regulations
• Exclusive Retail (private
channels not open to new
comers)
• Lack of Suitable Sales Channels
without Bluehat registration
• Lack of Support / Surveillance
from exporting company

Market Entry
•  PROTECT your Intellectual Property
•  Contact Local Export Assistance Groups
•  Contact Your Embassy in Beijing
•  Join U.S. – China Health Products Association
•  Understand China’s Business Environment
•  Bigger Isn’t Always Better
•  Dedicate someone to China project
•  Trips to Ensure Proper Handling…GET INVOLVED
Market Entry Tips:

China
Expos

June 24 – 26, 2015
Shanghai New International Expo Center

China
Expos

April 1 – 3, 2015
National Exhibition and Convention Center (Shanghai)

China
Expos

December 2 – 4, 2015
Xiamen International Expo Center
China International Health Care Expo

China
(Hong
Kong)
Expos

September 2 – 3, 2015
AsiaWorld - Expo Center Hong Kong International Airport

Introduction
to
U.S. – China Health Products Association

Intro to U.S. – China HPA
Established:

July
28,
2010

Status:

U.S.
Non-‐Proﬁt
501c6
OrganizaRon

Model:

TradiRonal
AssociaRon
/
Business
Consultancy

PosiDon:

Largest
organizaRon
of
foreign
companies
focused

on
dietary
supplements
and
nutriRonal
ingredients

in
China

Association Services:
1. Regulatory Advocacy
Annual Industry Paper
Comments to China Gov.
2. Business Services
On the Ground Partner
Product Registration
Market Intel
Trade Mark Issues
Quality Assurance
Sourcing Assistance
Conferences / Networking
Partner Introductions
Staff
Jeﬀ
Crowther-‐

ExecuRve
Director/Founder

Carrie
Wang-‐

AdministraRve
Director

Ben
Zhang-‐

Science/Regulatory
Manager

Lilian
Lin-‐

CommunicaRons

Alice
Yang-‐

Magazine
Editor

Guo
Junlong-‐

Web
Designer
/
IT

Coco
Liu-‐

General
Assistant

NutriDonal
Outlook
Magazine:
“Best
of
Industry
Award
2014”

Article Link Here

•  USCHPA
hosted
the
ﬁrst
annual
summit
on
November

3-‐4,
2014
in
Beijing.

•  110
Global
Abendees
represenDng
60
organizaDons

•  24
PresentaDons
from
leading
Industry
experts

•  5
Governments
involved:
Canada,
China,
Israel,
EU

DelegaDon
and
U.S.

Nutrition and Health Industry Summit - Probiotics
June 23, 2015 - Shanghai, China
Nutrition and Health Industry Summit – Omega-3s
June 27, 2015 - Shanghai, China
UP COMING
SUMMITS

Weekly
English
Newsleber

130+
Issues
Archived

Over
5,000
Database

www.uschinahpa.org

“Health
Weekly
–健康周报”
Chinese Language Weekly
Newsletter
Over 8,000 Industry Leader
Data Base

www.chinaushpa.org

“NutriRon
and
Health”

膳食与健康

•  Bilingual Chinese/English
•  USCHPA / CHN GOV Partnership
•  60,000 Readers and Growing
•  Platform for Education / Marketing
•  Global News Source

SOCIAL
MEDIA

Launched
WeChat
Group
-‐
December
1,
2014

Jeff Crowther
Executive Director
jcrowther@uschinahpa.org
www.uschinahpa.org
THANK
YOU

China Market Overview 2015-03-06

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