Ongoing sales boom driven by rising health awareness

China's health products market has boomed over the past decade.

China Investment Consulting Co Ltd, a domestic market research company, said sales of health products rose from about 50 billion yuan ($7.9 billion) in 2000 to some 70 billion yuan in 2008 and about 100 billion yuan in 2010 and 2011.

But many once-famous companies never survived to enjoy the boom, with several major brands vanishing as their makers were brought down by financial and organizational troubles.

One example was Apollo, a supplier of nutritional drinks based in Dongguan, Guangdong province, whose sales rose from 7.5 million yuan in 1988 to 240 million yuan in 1990 and 1.3 billion yuan in 1993, before it succumbed to ill-planned diversification.

Another example was Flying Dragon Ltd, which made sexual enhancement drugs based on traditional Chinese medicine. It started with 60 workers in 1990 in Shenyang, Liaoning province, but a huge ad campaign helped it bring annual profits above 200 million yuan in 1993 and 1994. It fell victim to bad management and embezzlement.

However, the absence of a State-sector monopoly and intense competition have helped the market grow and contribute half of the profit for the Chinese pharmaceutical industry, industry specialists said.

In large cities and coastal areas, public health awareness has risen amid an unprecedented increase in living standards - and concern about pollution and the health hazards of modern life.

For more than a decade, consumer spending on health products has grown faster than GDP, according to the China Health Care Association.

Two-thirds of the consumers of health products are the aged and children, despite increasing complaints by urban workers about work pressure and "sub-optimal" health, China Investment Consulting said.

Health products aren't bought only for immediate consumption: in China, they are also used as gifts.

This explains why the five months running from the Mid-Autumn Festival to Spring Festival (usually from late September to mid-February) generate more than 65 percent of yearly sales of health products, according to Meng Yue of Beijing Found Marketing Consulting Co Ltd.

Suppliers are concentrated in the developed areas, with nearly half in Beijing, Shanghai, Guangdong and Jiangsu. A few are located in rural areas that are rich in herbal resources.

Many of the industry's products focus on a small range of conditions. More than 60 per cent of all health products are designed to enhance the immune system, reduce cholesterol and boost recuperation, said Jia Yaguang, deputy secretary-general of the healthcare association.

As a result, many products use a limited range of raw materials, reflecting the industry's technological weakness. Most of the suppliers are small and medium-sized enterprises with limited research and development capabilities, and many products have tiny market shares.

Jia said last year that as of 2010, China had more than 1,700 companies that had won government approval to manufacture health products, and about 70 percent were SMEs.

Many other SMEs officially registered as food and beverage makers also supply health products.

According to CHCA data, the largest suppliers in China are:

- US-based Amway, supplier of Nutrilite and other health products;

- Hong Kong-based Jinri, known for its imports of American ginseng and other products;

- Hong Kong-based Hongfuloi, known for products to treat female anemia;

- Shenzhen-based Joincare ,which started with Taitai Oral Liquid, a health product for middle-aged women, in the early 1990s;

- Wanji Group a supplier of American ginseng-based products, also based in Shenzhen.

(China Daily 04/18/2012 page14)