To all those multinationals thinking of launching health and wellness products in China, the message is: think local. Chinese consumers have taken to functional drinks that contain traditional, medicinal products as belief in the health properties of these ingredients runs high. As Dominique Patton reports from Beijing, food companies should look to follow a similar path.
Go deeper with GlobalData
China’s health and wellness market lags far behind that of most Western countries but, last week, a conference in the sector in Beijing heard that recent innovation shows that some areas are worthy of more attention from international food companies.
Sales of China’s health and wellness food and beverages reached CNY172bn (US$25.19bn) last year, just 7% of China’s total packaged food sales, according to Euromonitor. A large share went to beverage firms, particularly juices.
Nevertheless, dairy firms are catching up, introducing a spate of new fortified yoghurts in recent months and turning China into the globe’s second-largest market for probiotic drinking yoghurt.
“Per capita consumption of probiotic yoghurt is still very low at $1 compared with $30 in Japan. But because of the size of the market, it’s already quite big. And it’s set to grow by 120% by 2012,” predicts Ewa Hudson, health and wellness research manager at Euromonitor.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataYili and Mengniu, China’s largest dairies, are also offering yoghurts to enhance beauty. Yili launched its collagen-enriched, low-fat Youpin Jiaren yoghurt at the end of 2008 and has heavily promoted the product this year. Targeted at “urban, white-collar ladies”, the yoghurt is said to “help its user lose weight and improve beauty”, according to the company’s website. It also contains aloe, blueberry granules and probiotics.
The success of functional dairy products – worth about CNY19bn last year – is prompting manufacturers of other health ingredients to see China’s dairy industry as a useful partner.
“Daily-dose yoghurts are a growing category in China and this is a good platform for us,” says Mikko Laavainen, commercial director at Raisio, the company that produces the cholesterol-lowering ingredient Benecol.
Raisio won Chinese regulatory approval for Benecol a year ago and is talking with local food manufacturers to introduce the product in China. Despite relatively low awareness of cholesterol-related health effects, Laavainen says recognition of the problem and how foods could be used to tackle it is on the rise.
”Recently, local brands introduced cholesterol-lowering vegetable oils on the Chinese market. The amount of sterol esters is very low so they’re not that effective. Also, the dose is difficult to measure with cooking oil. But they have opened the market for more serious products.”
Raisio is also looking at other foods that are part of the Chinese daily diet such as noodles. Local noodle makers are keen to increase their margins, increasingly promoting low-fat variants to meet rising concerns about obesity. One company, Baixiang, offers Da Gu Mian, noodles in a collagen-rich broth for consumers interested in bone health and beauty.
Laavainen says China’s traditional attitudes towards food as a natural medicine are encouraging. “It helps when people understand that with food you can improve your health. The attitude in China is more favourable in this respect than the US for example.”
However, bringing a new, functional ingredient into the market will require large advertising spend to educate consumers about how it works, Euromonitor’s Hudson argues. She suggests food makers look to the innovations in China’s drinks industry where many manufacturers are using traditional Chinese medicinal foods, already well known by consumers, to add value to products.
Mitch Barns, president of Nielsen China, agrees. “Consumers tend to trust products based on Chinese traditional foods or medicines, believing them to have fewer side-effects.”
Resistance to premium pricing is also likely to be a barrier for many international companies, Hudson says, with Chinese yoghurts cost about half the price of those sold in Japan. “Spending power is much lower in China. The market might not be so attractive for international brands,” she explains.
Pricing has not proved a problem for Kraft Foods, which has a leading share of the fortified foods market, thanks to its mineral and fibre-enriched biscuits. The high calcium Jia Gai biscuit brand, launched in China in 2005, costs just CNY1.70 for a 100g pack. It targets children, an increasingly important market in China as one-child families dedicate larger amounts of their rising incomes to their child’s diet.
“This important nutrient is very often lacking in the traditional Chinese diet,” said Fei Che, spokeswoman at Kraft China. Chinese still consume relatively little dairy and low-priced biscuits can reach a larger population.
However, some argue that mineral fortification, now commonplace in biscuits, does little to differentiate any new products in this category. Also, Chinese consumers still tend to view all snacks as unhealthy food, research by Nielsen suggests.
Despite this, Euromonitor expects to see strong growth in fortified biscuits. High-fibre bread is also booming. Sales will increase more than treble from 2007 levels by the end of 2012, the analysts predict.
However, one area that, until now, has remained untapped is the weight-management category, says Hudson. “China is really, really far behind in this area,” she contends.
Despite rising obesity levels, Chinese people tend to be happy with their weight, suggests a Nielsen study. “It is claimed that losing weight is not for shape but health. Therefore many people don’t mind gaining weight if it does not harm their health,” Barns explains.
China, then, is showing signs of potential for the health and wellness category but it remains a tough nut to crack.
