“We now watch advertisement on health products, beauty and body care products everyday everywhere, which actually shows how big the industry is and will be,” Yu Xiucheng, former deputy director of Science& Technology and Education Department of Ministry of Health (MOH) said. “The health product sales in China had exceeded RMB 100 billion in 2010. And it is estimated that the potential market size can reach over RMB 350 billion. The health industry is on a fast track,” he added. Yes, the market is growing, the potential is huge, the future is promising, but how about the situation now?
OMG, so many problems!
The health product industry started to develop in the early 1990s. After over 20 years of development, the industry is still weak and in chaos though. Many industry experts and officials feel a lot of problems ahead.
Trust lost
“I’m aware that Chinese consumers have a b品v a ad r i e( i bt myǎ po o r ejf i sàfsnai ok sneh ,í w uphnǐnes na, fhe he e ao alrrt h i u n sp g e r lo tehds esu cwpt r s o)or dd d u,u c e保 t ts o健 t h t食ha et have plagued China’s dietary supplement industry in the past,” Jeff Crowther, Executive Director of US-China Health Products Association said.
It is true that the industry in China was somehow ruined by too many fake products and untruthful marketing. It’s not news to hear illegal manufacturing and operation in the industry; drugs are added into health products illegally, exaggerated advertisement for the products. The trust crisis is already the bottleneck of the industry development. “That would not only mislead and deceive consumers, but also do harm to their health. Especially those health products claiming to have the function of losing weight and reducing blood sugar are often detected to contain illegal drugs,” said Tong Min, Director of Health Product and Cosmetics Department of SFDA.
Chaotic manufacturing
There are over 6,000 bio-pharmaceutical companies in China, but most of them are in small size and do the low level repeating job. “For the manufacturing enterprises in health products, their characters can be concluded as too many, too small, too dispersed, too chaotic, and too low-level,” said Tong.
China now is a very important nation as ingredients exporter. However, while more and more Chinese companies started to do business in foreign markets, the export value didn’t grow at the same speed as what the company number did. According to China Chamber of Commerce for Import and Export of Medicines & Health Products (CCCMHPIE), in 1996, only 123 Chinese companies were doing export on ingredients, and got US$246,000 in average export value for each company. However in 2010, 1,279 companies joined the export team, which was over 10 times of that in 1996, but with only US$637,000 in average export value, less than 3 times growth over 1996. (See the table below) The cake didn’t grow that big, but more and more companies came to grab a piece of share. The fact that there are too many small companies in the industry makes it difficult to even name a few brands that the customers are familiar with and trust. (Yes, difficult to trust.)
Few R&D investment
Since the enterprises are in small and medium size, the investment in R&D is far from enough that the products produced are in low level and lack core competitiveness. Some companies are even dishonest and use illegal measures (eg, adding drugs into the products) to cheat consumers. (And that brings back to the TRUST problem again.)
Lag-behind regulation
“Our regulations and rules lag behind the requirement of industry development, and an over-all standard hasn’t built up. The standards of raw material safety, detecting measures, producing technology, function claim assessment are missing or are poorly designed. As a result, the supervision work from SFDA is difficult to conduct,” Tong said from State Food and Drug Administration side.
Tong’s opinion was echoed by Crowther. “The current regulatory system is holding the industry back from reaching its true potential. Real growth will only be realized with regulatory reform of the entire system.”Crowther said.
Health products are in an embarrassing position in China’s regulation
system. The registration for the health products, “blue hats”takes years and a lot of money to obtain with very strict process and procedures. While many health products are sold as food, a yogurt from Mengniu, a local and big dairy company is sold as health product with a proud blue hat. While vitamins are typical health products, they are much more popular sold in China as OCT, a kind of drug. Let alone various TCM products causing more confusion. “The overlapping of the market leads overlapping of the administration. Health products are actually in a grey zone,” said Crowther.
More education in need
The concept of keeping health has to change in China, as “the health problem of the Chinese people is changing”, said Yu. “The chronic non-infectious diseases, such as hyperglycemia, hypertension and tumor, has replaced the traditional infectious diseases as the main causes of death. Future focus of the industry will be transferred from treatment to prevention, from infectious diseases prevention to chronic diseases prevention. Yet Chinese’s main conception is still going to find the best doctor after getting ill. Little attention is paid to daily care of the physical condition. If people’s conception has adjusted, doctors, including the best doctors, can have the energy and time to educate public more in how to prevent diseases,” Yu added.
According to a recent survey conducted by the Chinese Consumers’ Association, 5.1 percent of the senior respondents think the health products “can” cure diseases; 47.1 percent think the products “can help” to cure diseases; 27.9 percent of seniors trust advertising rather than a doctor’s advice and 29.2 percent of seniors attended health lectures or products experience events held by commercial organizations resulting in 64.3 percent of those attending to buy the products immediately or after the event. Education on Chinese’s health concept and knowledge still has a long way to go.
And more...
Yu has more to say, “I can conclude as five big problems the industry is facing. #1. Low level of consumer compliance or repeat business; #2. Over reliance on advertising; #3. Weak industry strength and lack of innovation; #4. Difficult to compete with foreign competitiors; #5. Defective rules and regulation. If China can’t solve the five problems properly, the development of health products industry will surely suffer,”Yu said.
Well, what to do?
With so many headaches inside the industry, China still has to move on.
According to Tong, what SFDA is busy doing now is building up a regulation system. They are going to launch or revise several regulations in the near future, including “Health Products Supervision and Management Regulations”, “Registration and Management Rules of Health Products”, “Trial Production and On-site Assessment Regulations”, “Technical Standards to Health Products Inspection and Assessment”, and “Standards to GMP of Health Products”.
Also, the Food Safety Committee Office of the State Council issued a special Notice at the end of last year, titling“On Further Strengthen the Supervision Work on the Quality and Safety of Health Products”, and made concrete arrangements for the administration of the quality and safety of health products, including more frequent supervision checks, building up a Blacklist system, more strict supervision on advertisement and labels, more followed regulations.
The Blue Paper of China’s Health Product Industry Development released on January 5, by China Health Care Association and the Research Center for Development & Regulation of Food and Drug Industry of Chinese Academy of Social Sciences predicted the development trend of the industry in the future, describing a promising and encouraging future.
1) The demand for health products will increase rapidly in China that its industrial size will grow in large scale as well;
2) The category of the health products will be more diversified, and the general price of the products will go down;
3) “Green, Natural, Organic, Environmental friendly”will be the keywords to a new growth of the industry;
4) The market share taken by those products based on Chinese traditional health culture will grow impressively;
5) The growth pattern of the industry will shift from marketing-oriented to science& technology-and-capital-oriented;
6) The supervision on health products safety will be more severe, and the supervision on their function and claims will be strengthened;
7) The influence from industrial associations will be more powerful.
“Another piece of good news is the task of fully promoting the health products industry’s development has been listed in the Twelfth Five-Year Plan of MOH.” Yu said. “We will see an improvement in the future.”