China's New Craving for Western Food Supplements
Liu Heping is comparing labels. He has just finished a bottle of salmon-oil tablets and wants to make sure he gets the same brand next time. The 43-year-old factory worker could also buy some melatonin tablets if he isn't sleeping well, or maybe some lecithin. Many of the supplements are made in California, but this isn't a health-food store in Berkeley. It's Shanghai, where rising incomes and shrinking government health benefits are creating a boon in health-care-product sales.
The fish-oil caplets aren't cheap. A bottle of 90 "Super Nu-Life Alaska Salmon Gel" tablets cost almost $11, no small amount for Liu, who earns just $180 a month. But he figures paying $3.60 per month -- he takes one caplet a day -- is worth it because he feels more energetic, and his general health has improved since he begin taking the salmon gel a year ago. "It's not too expensive," says Liu. "Guess how old I am?"
Health-care products, including food supplements like salmon oil, melatonin, and multiple vitamins, are the rage in China. Sales there for California-based Kang Long Group, maker of K-Max brand vitamins and food supplements like the salmon-oil tablets Liu buys, have surged by around 60% a year since the brand first arrived here in 1997.
Fish-oil products make up around 60% to 70% of Kang Long's sales, and vitamins make up the rest. While he won't give out figures, Xu Zhen, manager of Shanghai K-Max Trading Corp. says sales have been "very satisfactory." Even more satisfactory, no doubt, because his main form of advertising is word-of-mouth.
For centuries, residents of the Middle Kingdom have placed a high premium on maintaining their health and well-being with tonics and medicinal potions. The Chinese have long believed that warding off sickness through a healthy regimen is the most important medicine of all.
What's different now is that Chinese consumers -- with more disposable income than ever thanks to China's urban economic boom -- are buying imported products made by Western companies. A foreign brand is now the top multivitamin in China. Gold Theragran, produced by Bristol Myers Squibb Co. in a joint venture with local partners, is a best-seller though the price is relatively steep -- $4 per bottle vs. $2.40 for a local product with twice the number of tablets.
Gold Theragran sales in China have grown by at least 25% compounded annually from 1995, rising from around $7 million in 1995, to $32 million last year, says Linda Hsu, associate director of marketing at Bristol in Shanghai.
A clever marketing campaign has helped. In late 1994, vitamins were taken off the country's reimbursement list for drugs. When sales of its products plunged 50%, Bristol came out with Gold Theragran, aimed specifically at adults. It also began pitching vitamins as an over-the-counter remedy, not requiring a doctor's recommendation. Sales rebounded the next year.
Traditionally in China all pills, even vitamins, were prescribed by a doctor and purchased at the hospital. It hasn't hurt that in the past year or so the Chinese government has also begun to promote over-the-counter drug sales. And it helps that Chinese consumers have more money to spend. In Shanghai, the country's largest retail market, the average annual income has risen from $865 in 1995 to $1,413 in 2000.
Nationwide, urban incomes have grown from $651 to $1,014. The rising standard of living has intensified a change in people's focus "from not getting sick to wanting to improve their well-being," says Philip Xiao, a health-industry entrepreneur and former pharmaceutical executive.
Health-care reform is also driving vitamin and fish-oil product sales. For decades, Chinese were reimbursed by their employer for any drug they bought, including vitamins. Soon, however, all Chinese will receive a set amount each year to spend on doctor's visits and drugs.
In Shanghai, the changes began taking effect on Jan. 1. Sales for health-care products at Number One Dispensary, including vitamins, jumped 32% in January over the same month in 2000. "People are going to take more money out of their own purses if they get sick. So, now they become more health-conscious and take preventative steps by investing in health products," says Xu Guofeng, director of the Number One's information division.
Western vitamins aren't the only health-care fad gaining popularity in China. Membership at Gold's Gym in Shanghai has doubled to 1,000 since its opening in September, 2000. More than half the members are men, ranging in age from 25 to 40. They do weights and group exercises like kick-boxing and martial arts. And they buy Gold's Champion brand of nutritional supplements, including protein powder and whey powder. Sales of the energy boosters are "huge, it's unbelievable," says 35-year-old Jill Bodnar, the gym's general manager. She expects current monthly sales of more than $6,000 to double by the end of this year.
Improved quality control has strengthened consumer confidence in the whole health-care-product market. Sales dropped from $3.6 billion in 1994 to $1.2 billion in 1995 after reports of deaths from faulty fish-oil products. China's Domestic Trade Bureau cracked down on, and now tightly supervises, the top 100 or so producers, including distribution and truth-in-advertising rules.
By 2000, nationwide sales for health-care products had rebounded to more than $6 billion. And such goods as the imported fish-oil tablets Liu likes to take slip through Chinese import restrictions because they're classified as food supplements. "This is something that is a great challenge to multivitamin category." says Bristol's Hsu.
Since he's shopping at the Number One Dispensary, Liu can feel fairly confident about the quality -- the company subjects all its products to a battery of tests and even won International Standards Organization accreditation in 2000. He might consider making a switch, though. "A lot of new health products are entering the market to challenge and even replace" fish-oil supplements, says Number One's Xu. Multivitamins, anyone?
By Alysha Webb in Shanghai
Edited by Douglas Harbrecht