Recently our editorial team sat down with Jeff Crowther from China Health Products Association. Below is the Q&A interview we conducted. To learn more about Jeff and his association, please visit https://uschinahpa.org/.
As one of the pioneers of China’s natural health products industry, what would you say are the available opportunities for nutraceutical and health/wellness companies in the country?
In short, I would say cross-border e-commerce (CBEC) remains the main channel of opportunity for most international brands of dietary supplements. Because CBEC does not have a registration system, market entry is relatively straight forward.
As for what type of products are finding success, it’s really a mixed bag. Currently, probiotics are trending as are immune products, NMN, and liver protective products. However, the mainstays of letter vitamins and minerals continue to be good sellers as well especially calcium. China’s consumers are keen to try new products that offer transparency, innovation or unique function.
What are the requirements for organizations looking to join Health Products Association?
The association is a non-profit organization; its membership is made up of companies involved in the overall natural health product industry including dietary supplements, nutritional ingredients, sports nutrition, probiotics, omega fatty-acids, functional foods, natural cosmetics, natural petfood and companies that provide services to the industry. Companies must apply for membership and sign a code of ethics. Finally, an annual fee is required based on two different levels of membership, Associate Level and Board Level.
What legal restrictions would you say negatively affect China’s natural health product industry?
The registration and approval process for dietary supplements is expensive and time-consuming. A typical registration with claims can cost more than $120K USD and take 3-5 years to complete. Due to this high level of investment in both time and capital, not many international companies choose this route and instead utilize the before mention CBEC channel. Furthermore, the registration process has standards for potency and ingredients, so most international brands will find it necessary to reformulate the product to meet the registration requirements.
There are actually two ways to gain approval for traditional “in-country” commerce such as brick and mortar sales. The first is the registration system just outlined above and the second is a type of filing or recording system. This is only an option for letter vitamins and minerals. The government has recently added a few other acceptable ingredients such as CoQ10, Fish Oil, Melatonin, Spirulina, and Ganoderma Lucidum spore powder (Lingzhi or Reishi Mushroom) to this list. The recording system’s costs vary but fall in the range of $10-20k USD and take less than a year to finalize. The claims here aren’t as strong as in the registration system. They tend to be more “nutritional support” in nature.
Are there fundamental factors that differentiate the natural health industry in China and the US?
The most obvious difference between the two markets is the regulatory situation where China has a pre-market approval process, and the U.S. does not. The industry in China is also much younger. The U.S. supplement industry can be traced back to the late 1800’s whereas China’s industry began 100 years later in the 1990s. However, China’s supplement industry didn’t really start hitting sizable growth rates until 2014 when CBEC became an option to reach China’s consumers. Together with the existing domestic brands, global direct sales companies, and these new to market international CBEC brands, the market really started to expand and is now the second-largest market in the world just trailing the U.S. market in size. However, some would say it has already passed the U.S. market. Anyway, it’s certainly close.
Another difference between the markets again points to the later development of the China market. There are no specialty health food retailers in China or developed supplement areas in grocery stores, so the infrastructure just wasn’t there and to this day is lacking. Prior to CBEC, the main channel was pharmacies which China has an abundance. The initial brands to enter the market back in the 1990s did so as registered OTCs and were mainly from pharma companies. The channel, OTC registration, and dosage form (pills) all contributed to consumers viewing supplements more like drugs and expected these products to be curative in nature with strong claims and indications. Moreover, China’s existing Traditional Chinese Medicine system offers a huge variety of botanical products that are regulated as medicine, which further pushed supplements down the medicine path.
As a result, supplement’s true role in nutrition and health was lost to an entire generation. This situation continues to impact the understandings of supplements, especially among older consumers.
What simple advice would you give nutraceutical and health/wellness companies looking to expand into China?
First and foremost, ensure intellectual property is protected before entering the market. This means securing all trademarks not only to protect your brand but in many cases the large CBEC platforms require proof of trademark registration prior to allowing the brand to sell online.
Next step would be to find a trusted knowledgeable partner to assist with your overall market entry plan. Of course, joining HPA-China would be a great first step as the organization can assist with every aspect of market entry and act as a trusted partner to ensure the company’s endeavors and expectations are met. Outside of that, focusing on CBEC for a new to market company is the only real move. However, within that CBEC realm, there are many ways to approach the market with varying levels of investment and risk. This is where working with HPA-China can be extremely helpful to identify the best solution to meet the company’s expectations and overall budget. Besides CBEC’s main platforms such as Tmall and JD, there are a continuously growing number of selling options including social selling, live streaming and an everchanging number of social platforms to work with such as Pin Duo Duo, Little Red Book, BiliBili, etc…. Having a trusted partner to assist in finding the right fit is very important.
Finally, make sure your company has a dedicated team or team member overseeing the China business and keeping up to date with where and how the brand is being sold and presented to China’s consumers. In some cases, international brands can lose control of their brand because the in-country distributor / retailer isn’t being very transparent with their activities. For example, the partner decides to overstep regulations to boost sales resulting in legal action against the partner and potentially the brand. Either way, there will certainly be negative press and market consequences. Like a doting parent, Get Involved and Stay Involved. Make regular visits to the market, support the partner as much as possible with marketing, graphics, videos, etc.
China is a huge market opportunity for many supplement and healthy food & beverage companies. The government’s recent five-year plan is squarely focused on health of its population. With that kind of government push, the overall nutrition, health and fitness industries are going to do extremely well in the coming years. So don’t stay on the sidelines, get started with your China endeavors today.
