Insights into China's Health Food Industry 2023

01 Industry Overview

1 Definition Broadly defined, health food refers to food, medicine, and other devices and supplies that people need in their daily lives to protect and maintain their health.

Health food can be divided into three main categories: health food, health medicines, and health supplies. According to the Interpretation of the Food Safety Law of the People's Republic of China, health food refers to food that claims to have health-preserving functions or is intended to supplement nutrients such as vitamins and minerals. Health-preserving medicines have the nature of nutritious and food-based natural medicines and should be used in conjunction with treatment. There are usage and dosage requirements. At present, the national drug approval number B refers to health-preserving medicines that have been rectified by the State Drug Administration. Health-preserving products mainly refer to equipment, products, and devices that are used in people's lives and have specific functions such as regulating human body functions and promoting health.

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The specific classification of the health food industry is as follows:

2 Industry chain analysis: professional division of labor in each link

The upstream of the health food industry chain mainly includes raw materials for health food (animals/plants/Chinese medicinal materials, biological agents, chemicals, etc.), supporting equipment and parts for health equipment; the midstream refers to health food suppliers, and there are many types of health food. The common ones on the market can be divided into health food and medicines, health equipment, and health food, which mainly include traditional nourishing types and dietary supplements; the downstream of the industry chain mainly includes distribution enterprises of health food, which mainly include major supermarkets, hospitals, pharmacies, direct sales stores and e-commerce, etc.

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From the perspective of major companies in each link of the industry chain, representative companies in the upstream raw materials and health equipment parts of the health food industry chain mainly include Justyou, Kindlyway, and Yude Precision; midstream health food companies include By-Health, Yangshengtang, Infinitus, etc.; downstream distribution channels are divided into online and offline channels. Offline channels include Tong Ren Tang, Dashenlin, and other hospitals, pharmacies, and direct sales stores, etc., while online e-commerce mainly includes Alibaba, Jingdong, etc.

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Development history of the industry: The industry is in a period of rapid development

The development of China's health food industry began in the 1980s. The national economic level rose rapidly after the reform and opening up, and people's demand for health products increased. The development of China's health food industry can be divided into three stages:

The first stage was from 1987 to 1998, during which the health food industry flourished, but it was also accompanied by chaos, such as the “Chinese Turtle Essence”?incident.

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The second stage was from 2000 to 2005, during which the health food industry was in the trial stage of development and the number of health food manufacturers was significantly reduced;

the third stage was from 2008 to the present, during which the health food industry is under increased supervision. In 2019, due to the influence of the Quanjian incident, the “100-day action” (January 8-April 18) strengthened the enforcement of the dual-track registration + record-filing system for health food products, strictly regulated medical insurance swipe categories, and stopped issuing direct sales licenses.

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Industry policy background: policy support for the high-quality development of the health food industry

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Since 2012, the State Administration for Market Regulation, the Food and Drug Administration, the National Health Commission and other departments have successively issued policies to support, guide and regulate the development of health products, covering the naming and promotion of health food products, the safety of health food, and other content, with a focus on regulatory and guidance policies. As of June 2023, the national-level health food industry policies are summarized as follows: In order to promote the health of the residents and strengthen preventive healthcare for the elderly, various national departments have proposed a series of policy plans to promote the standardized development of the health food industry. The “14th Five-Year Plan for National Health” proposes to focus on the development of new health products such as health management, intelligent rehabilitation aids, scientific fitness, and traditional Chinese medicine health care, in response to the needs of health promotion, chronic disease management, and elderly care services.

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The national-level health food industry plan is summarized in the table below:

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02 Industry development status

1Health food production is increasing year by year

There are many participants in China's health food industry. Judging from the number and scale of industry enterprises, the overall market supply capacity is showing an upward trend. Judging from the output of health food in China, the health food industry's overall output shows an upward trend from 2016 to 2022. According to data from the China Nutrition and Health Care Association, the output of China's health food market in 2022 was 787,000 tons, an increase of 8.31% year-on-year, reflecting an improvement in industry supply levels. Overall, the market supply level of China's health food industry is increasing year by year. Note: The term “health food products” here refers to oral health food products in the narrow sense, including health food products and health care drugs.

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2Market size steadily increasing

The Chinese health food market mainly includes health food products, health care drugs and health care products. Judging from the market size data, the market size of the Chinese health food market showed a year-on-year upward trend from 2018 to 2022, with the market size reaching 627.2 billion yuan in 2021, a year-on-year increase of 12%. Preliminary statistics show that the market size of the Chinese health food market will exceed 690 billion yuan in 2022.

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3The prices of health food products sold online are mainly concentrated below 100 yuan

Early DataData Compass, an e-commerce big data monitoring platform, shows that in 2022, the sales of e-commerce health food products (nutritional health care + maternal and child health care) reached 83.5 billion yuan, a year-on-year increase of 34%, and a year-on-year increase of 21.1%, indicating a strong market growth momentum. In terms of price segments, in the e-commerce market for health food products in 2021, products priced between 0 and 100 yuan accounted for the largest proportion, exceeding 50%. Although the market share of products priced above 500 yuan was only 3.3%, sales growth was impressive year-on-year. Note: The e-commerce platforms covered by the agency statistics include Taobao, Tmall, Tmall Global, JD.com, JD Worldwide, Vipshop, Pinduoduo, Kaola, Suning, Amazon, etc.

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03 Industry competition landscape

1Regional competition: Guangdong Province has strong competitive health food enterprises

Judging from the provincial and municipal distribution of competitors in China's health food industry, at present, Chinese health food enterprises are mainly distributed in places such as South China and East China, with Guangdong and Shandong in particular. According to the Chinese enterprise database qichanmao, as of May 15, 2023, there were a total of 5,358 relevant health food survival/operating enterprises in Guangdong, and 4,711 in Shandong. Note: as of May 15, 2023.

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2. Competition among enterprises: There are many market participants, and the overall market concentration is not high

In terms of the concentration of the vitamin and dietary supplement market, the market share of the top two companies in 2022 was about 17%, of which the market share of the top-ranked By-Health was more than 10%; the market concentration of the top ten companies was below 40%, and overall, the concentration of the vitamin and dietary supplement market was not high.

In terms of market concentration in the weight management sector, the overall market concentration showed a downward trend from 2018 to 2022. In 2018, the market share of Herbalife, the number one player in the weight management sector, was as high as 43%; in 2022, it dropped to about 14%, reflecting the low barriers to entry for new companies and the declining market leader effect. In 2022, the CR5 will drop below 40% and the CR10 will drop below 50%. Overall, the market concentration of health products in the weight management sector in China is declining, and market competition is intensifying.

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In terms of market concentration in the sports nutrition sector, the market share of the top two companies will exceed 40% in 2022; among them, the top-ranked company is Xiwang Food, with a market share of over 30%, and a significant leading effect; CR10 exceeds 75%, and overall market concentration is relatively high.

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In terms of the concentration of healthcare drugs, the market share of the top two companies in 2022 is 9%, of which the market share of the top-ranked company, Wu Yue Xian, is about 5.5%. The market share concentration of the top five companies is about 16%, and the market concentration of the top ten companies is about 24%. Overall, China's healthcare drug market concentration is not high, and the market competition is fierce.

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04 Industry development prospects and trend predictions

1.Market space

broad With the rise of the country's per capita GDP, consumers have undergone a fundamental transformation in their consumption concepts and willingness to spend on health food products. Health food products will gradually change from optional consumer goods to essential consumer goods in terms of consumption attributes. Under the influence of the new crown epidemic, people's awareness of national health care has accelerated, their consumption concepts have been upgraded, and their demand for health food products has increased, which will bring long-term benefits to the health food industry. Combining the forecast data of various segments, it is expected that by 2028, the market size of China's health food industry will exceed 1.5 trillion yuan.

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2.During the 14th Five-Year Plan period, new health products and traditional Chinese medicine health food products will be the direction of development. The “Healthy China 2030” plan emphasizes that in promoting the construction of a healthy China, we must adhere to prevention first and strengthen early diagnosis, early treatment, and early recovery. The main functions of health food products are to enhance immunity, promote cell regeneration, and promote recovery from illness. They also play a preventive and health-promoting role for healthy people. Judging from national planning policies such as the “14th Five-Year Plan” National Health Plan and the “14th Five-Year Plan” Traditional Chinese Medicine Development Plan, the favorable “14th Five-Year Plan” period's big health policies will be conducive to the development of the health food industry.