The Vitamin and Dietary Supplements market represents yet another example of a booming industry that China is poised to dominate, with Roland Berger data indicating the fact that the market is expected to find support north of $40 billion by 2023, boasting an impressive 14% CAGR. These figures should (of course, this is dependent on what happens in other jurisdictions as well) enable China to ultimately surpass the United States as the number one VDS market worldwide.
How and why is this happening?
First and foremost, let us take a close look at Daxue Consulting age distribution data for Chinese consumers of health products:
- 27% of them are between 18 and 24 years old
- 29% of them are in the 25 to 29 group
- 14% are aged 30 to 34
- 12% are in the 35 to 39 zone
- 13% lie in the 40-49 area
- Only 5% are older than 50
Two more than interesting conclusions can be drawn:
- As with many other industries, growth at this point is largely driven by the financially potent and in our case also reasonably health-aware rising Chinese middle class, about which you can read more by clicking HERE to access an article we have dedicated to this topic
- Despite older individuals representing ideal consumers of Vitamins and Dietary Supplements, market penetration is remarkably low, indicating tremendous potential for those savvy enough to approach this target audience with a compelling offer
Another data point worth mentioning is represented by the fact that women tend to be better-represented than men when it comes to consumption, with 56 of every 100 VDS consumer being female.
Furthermore, as many would have suggested after a brief age group analysis, online communities do indeed represent an increasingly effective awareness generation medium. Just like Western consumers, Chinese buyers frequently conduct research online before making a purchase, whether we are referring to search engines or social media platforms. Of course, as discussed in other ChinaFund.com articles, while the principle is identical, the platforms themselves are different.
But while Chinese health product consumers for the most part research via Chinese platforms, consumption data tends to indicate that Western brands are still preferred at this point in time. This is because Western products continue to surrounded by an aura revolving around higher quality, a status quo to which China-specific problems such as the many fake products on the market have contributed.
However, as time passes, just like in many other industries, endogenous growth is to be expected. To put it differently, many factors are contributing to a potential virtuous circle surrounding Chinese Vitamin and Dietary Supplement companies, factors such as:
- The Chinese authorities encouraging not just domestic consumption (in an effort to shift to a more consumption-oriented economic growth model, something China has already managed to do rather successfully) but also domestic production of such products, in an effort to facilitate endogenous industry growth and lessen the dependence of the average Chinese citizen on Western products
- Chinese companies becoming more and more sophisticated as well as well-funded. The idea that a Chinese company has to follow the “cheap labor + copycat technology” paradigm is a myth at this point. Not because such players no longer exist but rather because the ecosystem is now so complex that there is ample room on the market for anything from bottom of the barrel enterprises to sophisticated companies that are capable of reaching parity with their Western counterparts based on a wide range of indicators
- Domestic brand loyalty slowly manifesting itself, in tandem with an increase in confidence pertaining to Chinese products in general (rather than strictly VDS products), think of it as one of the top effects of the previously addressed points
How can one make this obvious mega-trend with respect to health products work in his or her favor as an investor? It is ultimately all a matter of gaining exposure to the right assets and everything depends on your risk tolerance, with a binary perspective manifesting itself, broadly speaking:
- On the one hand, those on the less risk tolerant end of the spectrum can limit themselves to gaining exposure to companies which are currently dominant in China and have proven themselves. Companies such as Infinitus with a 12% market share, Amway (yes, Amway) with a market share that is getting close to 10% and so on. While it is debatable how much growth potential still there is on the table, those who believe in sticking with what has been proven to work will most likely be content with such options
- Blazing trails by gaining exposure to assets pertaining to newer entrants. Of course, navigating the oftentimes murky waters of a volatile jurisdiction such as China is anything but a walk in the park but those who make the right choices can be asymmetrically rewarded. While wealth enhancement is most definitely possible with assets from the previous category, fortunes can literally be made with this one
No matter which side of the fence you are on, the most important first step revolves around a commitment to take meaningful action rather than let generational mega-trends slip by without gaining exposure to assets with career-altering potential. You have a wide range of tools at your disposal to conduct a thorough due diligence process yourself (including tools available free of charge via ChinaFund.com) and, of course, should you require more granular assistance, you can visit the Consulting page of our website to find out who we are and what we can do for you. Should you decide to take things further, simply send us a message through the Contact page of ChinaFund.com and we will do our best to help.