Lockdown Stockpiling May Edge China’s Supplements Market Into Global Top Spot
Executive Summary
Chinese consumers are stockpiling dietary supplements again against the backdrop of new coronavirus lockdowns in parts of the country. TMO Group thinks this could edge China into the global number one spot in terms of size, ahead of the US. Managing partner Jing Zhou comments on the trends that have driven China's stellar rise, and how international consumer health firms can seize the country's supplements opportunity.
A sudden rise in COVID-19 cases in China’s financial center Shanghai has plunged the city into lockdown, with fears that the country’s capital, Beijing, could be next.
Given a week’s notice, and with the prospect of a shortage of fresh fruit and vegetables, Chinese consumers have been stockpiling vitamins and minerals, according to e-commerce specialists TMO Group.
This surge in spending could be just the boost needed to push China’s supplements market ahead of the US as the world’s largest – an outcome that TMO thinks would have happened anyway by the end of the decade.
While these new lockdowns will have a negative impact on China’s economy, especially if the surge in cases spreads to Beijing, TMO managing partner Jing Zhou told JBW Insight that this stockpiling would have a “pretty good” impact on the country’s supplements market, which has been growing rapidly in recent years.
In 2020 the market grew by about 12%, according to TMO data. Although this growth rate is down from a staggering 20% in 2019, TMO still expects growth to be in the vicinity of 10% for 2021 and 2022.
“If this trend continues, we are looking at China becoming the largest health supplements market in the world by the end of the decade,” Zhou pointed out.
In 2021, China’s supplements market was estimated by iiMedia to be about RMB271bn ($34bn) in size – about two-thirds the size of the US.
But with the US growing at only 5% annually, if China maintains its stellar rise, it will soon overtake it, Zhou predicted.
Unsaturated Market
Perhaps more significantly, China’s supplements market is also relatively unsaturated, compared to the US.
“In the US per capita consumption is estimated at $177 – and this is very close to the same metrics for other developed countries: $151 for Australia and $146 in Japan,” Zhou explained. “The same parameter for the Chinese market is only $30, indicating huge potential for further growth.”
Turning to the drivers of China’s supplements market’s impressive growth, Zhou pointed to a number of factors.
Firstly, incomes in China have been rising for decades to the point that supplements are now viewed as everyday commodities by a growing number of consumers, rather than as “high-end products and affluent gifts” as they had been in the past, she noted.
Given the Chinese’s healthy respect for their elders, people aged 65 and older are relatively well off, with their purchasing power growing every year.
According to Zhou, elderly people in China are the “main force behind the health supplement market,” accounting for half of the market’s sales volume.
Aging Population
However, it is important to understand that, on the one hand, this group are extremely savvy consumers that want to get the “maximum bang for their buck,” and on the other, they are not directly responsible for the majority of actual supplements sales.
“Just under a third of the time these supplements are purchased by a close relative, spouse or child, and half the time by someone else,” Zhou said. “Therefore, for a product aimed at older people, it is important to plan communication accordingly.”
The strong demand from elderly consumers also reflects an aging population in China, which in turn is shaping state healthcare policy in a way that should benefit the country’s supplements market.
“According to WorldData, the median age is 38 years, putting China about a third of the way down in the rankings of all world countries – right between the US and the United Arab Emirates,” Zhou noted. “176m people in China are 65 or older (as of 2019), which accounted for nearly 12.6% of its total population.”
“With that, health issues like cancer and cardiovascular diseases are increasingly affecting healthcare costs,” she continued. “There are estimates saying that up to 75% of elderly Chinese people are suffering from chronic diseases.”
Alongside encouraging people to take better care of their health, including using supplements – especially pregnant women, now that China is implementing a three-child, rather than two-child policy – the Chinese government is expanding online purchasing options, including cross-border e-commerce.
E-Commerce
Thanks to favorable customs policies and simplified procedures for foreign brands, e-commerce has become the largest sales channel for supplement sales in China, increasing its share to 40% in 2021.
There are a number of popular marketplaces to choose from, Zhou pointed out, but the three top players, Tmall Global, Kaola and JD worldwide, collectively occupy about 60% of the market.
Young consumers – “millennials and GenZ’s,” Zhou said – are the main driving force behind this channel’s growth. About 83% of shoppers are in the 19-40 age bracket.
Rapid urbanization is pushing young people towards supplements, Zhou explained, with a growing number of those aged 25-40 years experiencing sub-optimal heath.
“Long working hours, stress, lack of exercise, combined with big city lifestyle (insufficient sleep, unbalanced diet, alcohol consumption, smoking) can lead to overall decline in vigor, that can’t be traced to any particular health problem,” Zhou commented.
“This cohort is on the lookout for a boost, and they are ready to spend money on it,” she said. “This group occupies about 20% of the health supplement market.”
Young Families
As already noted, many young couples are looking to start or add to their families now that China is allowing three children.
“Chinese women are ready for extra expenses during this stage in life,” Zhou said. “Around 90% of women would take some form of health supplements during pregnancy – mostly folic acid, multivitamins and omega-3.”
“Future mothers pay attention to the quality, safety and convenience of supplements, eagerly accepting advice not only from doctors, but from advertisements, social media, and key opinion leaders,” she added.
When it comes to the types of products Chinese consumers buy, Zhou said that they “may exercise a fair bit of cautiousness and tend to stick to familiar trustworthy brands.”
“Evidence of that can be seen in the list of top imported health supplement brand sales in November 2020 and November 2021,” she continued. “The top five lines of both lists are occupied by exactly the same names. All five grew 20-30% in 2021 compared to the previous year.”
Nevertheless, Chinese consumers are still often looking for a bargain.
“While overall brand sales are universally up, sales through online brand flagship stores are down for all brands, except one – Move Free – meaning all the growth comes from the non-flagship lower price stores,” she said.
“Chinese buyers do appreciate the quality that familiar brand names can provide – but would pass on paying extra, if they can help it.”