China’s supplement market is growing at double digit levels. Jeff Crowther has the market intel to assist companies in capitalizing on emerging opportunities.
By Sean Moloughney, Editor 06.02.22
With nearly 30 years of experience in the dietary supplement industry, Jeff Crowther has worked in retail management, international business development, international regulatory advocacy, and more. As Executive Director of the Health Products Association – China (HPA-China), a U.S. non-profit dedicated to the overall natural health products industry, he assists hundreds of global dietary supplement and nutritional ingredient companies with their China endeavors.
The association’s primary focus is the continued development of China’s dietary supplement and overall natural health products industry, and it works closely with both government and industry, offering members business related services to help them succeed in one of the most challenging markets in the world. Crowther’s daily work focuses on association member services such as regulatory consulting, market entry strategies, marketing and advertising, cross border e-commerce solutions, match-making, market intelligence, conference organization, and more.
Nutraceuticals World (NW): Could you give us some background on HPA-China’s origin story? What’s your mission and how has the organization evolved over time?
Jeff Crowther: The association was established back in July of 2010. At that time, I had already been living in Beijing for five years having worked as NBTY’s international business development manager for China followed by a position with the Natural Products Association, opening and running their China office. In 2010, NPA chose to leave the China market.
Being in Beijing and without a job, I began discussions with both dietary supplement and nutritional ingredient companies about creating an association with a focus on business oriented services, which would be open to all global players. From these discussions, Health Products Association – China (HPA-China) was born with founding members Jarrow Formulas, NSF, and TSI Group.
I also invested one and half years of my time without taking a salary to ensure the association could gain more members and survive into the future. If I had taken a salary out of the gate, the association would have failed after the first year. That was a tough period as I was burning through my life’s savings with a child on the way. I was and still am 110% committed to making the association a successful venture for the companies that support it.
Currently the association’s ingredient segment is growing faster than its finished products segment. I believe that’s a result of China’s growing domestic supplement and healthy food brands.
The association has added its Probiotics China Summit held in Shanghai each year and Probiotics Online system, which promotes probiotic member offerings directly to China’s supplement, food, and dairy industries through executive interviews and live streaming events all done in Chinese. HPA-China is also in the process of launching a summit and online promotion channel for Omega-3 and Marine Ingredients as well as for Botanical and Innovative Ingredients segments.
NW: HPA-China recently published the 500th edition of its “China Updates” newsletter. What does this milestone represent to you and the community you serve?
Crowther: After finishing and publishing that issue, it brought me back to the beginnings of the association, reflecting on all the challenges it faced getting started. Currently the newsletter goes out to over 20,000 subscribers each week. When I meet new people at expos and conferences, I’m always thrilled when I hear they read the newsletter and find value in it.
NW: For those who may not be familiar with the newsletter, can you discuss the content and intelligence behind these updates?
Crowther: Each week the association compiles news on China’s overall supplement and food industry. Topics covered are on product launches, market entry, mergers/acquisitions, food safety issues, regulations, consumer and economic situations, and any other news that could impact the industry’s ability to prosper in the market. The newsletter is free, so I invite people to visit our website, www.hpachina.org and sign up.
NW: How has COVID impacted the association and how have you adapted?
Crowther: COVID has not been kind to the association. As a result of international travel being essentially shutdown and China having an extensive quarantine system in place, visiting China has been a no-go for the last couple of years. This of course has impacted the members’ ability to visit the market to explore potential partnerships, meet with current distributors, attend expos and conferences, or simply visit their in-country office or manufacturing facility.
For the association’s larger members, most have a developed China team, which was able to continue conducting business and attend events. Throughout 2020 and 2021 China never really closed down; most expos and conferences went on as planned. However, international visitors didn’t attend these events due to travel bans and the inconvenience of China’s two-week quarantine system.
This year tables have shifted with most of the world relaxing COVID policies, allowing people to travel and get back to business “as usual,” while China struggles with the Omicron variant by closing down the country, effectively canceling or rescheduling expos and conferences. The association’s planned Probiotics China Summit was scheduled to be held the day before the Fi Asia-China Expo on Jun. 21, 2022. It is now in the process of being rescheduled to Nov. 24, 2022.
One positive outcome from COVID for HPA-China was the creation of “HPA-Global Insights,” which is the association’s YouTube video-podcast channel. Like everyone else, I was using Teams or Zoom to keep in touch with industry colleagues. Many of those conversations ended up being opportunities to connect on personal levels and talk about all manner of subjects. Some of those conversations ended up being so insightful and full of interesting and useful industry information. I thought this would be a great platform to share information with the industry and provide a fun way to keep in touch with my friends around the world. I’m happy to report the videos have gained attention on both YouTube and LinkedIn, which is beneficial to the guests of the show and the listeners interested in the content.
NW: How would characterize the health products market in China today, how has the pandemic changed the equation, and what kind of potential do you forecast?
Crowther: Like the rest of the world, supplements—especially those with the function of immune enhancement—have been selling well as a result of COVID. In general, the probiotics industry has grown significantly in China. From 2004 when I first entered the China market until now, there have been many changes to China’s dietary supplement—or as China legally refers to them, “health food products”—industry.
The main change was the creation and adoption of cross border e-commerce (CBEC), which really began taking hold around 2014. CBEC did three major things for the supplement industry. First, it gave global players an opportunity to sell products directly to China’s consumers without needing to gain the approval from the government. This was big because an approval can take upward of three years and cost over $150,000 USD to complete. Second, it decreased the costs across the board for both marketers and consumers. Prior to CBEC, foreign supplement brands on the shelf would cost about two to three times the retail price in say the U.S., so that a $20 USD bottle of fish oil in the U.S. would cost the equivalent of around $50 USD or more in China. Country of origin and China retail pricing are now much closer and reasonable for consumers. And third, CBEC gave China’s consumers a much broader variety of supplements to choose from, which benefits everyone.
As for potential, China’s supplement market continues to grow at double digit levels. Although this current lockdown is beginning to slow consumer spending, supplements remain strong sellers as consumers aren’t in a rush to cut back, especially during a pandemic.
NW: What principle challenges or obstacles do businesses face in trying to enter the Chinese market today?
Crowther: Earlier I mentioned government approvals. This would be the main obstacle. Yes, CBEC gives global brands access to the market, but it is only one sales channel of the market and one only the tech savvy can navigate. Like most other regions of the world, the older generation doesn’t spend money on the latest and greatest tech, nor do they always know how to use it.
For example, when looking at sales channels, the older generation primarily makes supplement purchases through pharmacies or direct sale companies—whereas younger consumers focus on internet sales platforms like Taobao, Tmall, JD, etc. as well as social selling and live-streaming platforms like WeChat, Pin Duo Duo, Douyin, and others.
Without market approval from the government, international companies only have access through internet channels. The entire brick and mortar channel is off limits and that’s a sizable chunk of business opportunity not realized.
Other challenges include China’s growing trend of buying domestic brands over international brands; this nationalistic trend is happening as a result of China’s ever-changing relationship with the rest of the world. However, because domestic offerings for supplements are still not huge, consumers are generally still motivated to purchase international supplement brands. You only need to look at internet sales to see that international brands hold most of the top spots, and sales continue to expand.
NW: What tips or recommendations would you give to companies/brands considering selling products in China?
Crowther: This is difficult to answer concisely. HPA-China represents both finished product supplement brands and nutritional ingredient brands, so the advice is different for both. The advice would also depend on what level of investment the company is interested in making in the market. For example, do they want to control their destiny 100% by opening an office and hiring their own team, or are they content finding an in-country partner to run the business? Again, depending on the answer, the advice is going to be very different.
In general, a finished consumer product manufacturer (B2C) would do best to enter CBEC and social selling channels first, as it is the path of least resistance, and less expensive. With that said, it isn’t as simple as throwing products up on a CBEC platform like Tmall and the money starts rolling in. There are still many costs involved in activating your brand and getting the marketing wheels churning.
China’s consumers buy brands not products, so if your brand is unknown or can’t readily be searched by potential buyers, the brand will have a tough go at sales. For smaller brands or those that don’t want to invest truckloads of capital, social selling would be the best bet. Tmall and the larger mainstay CBEC platforms can be quite expensive to enter and tend to be better for larger brands or those interested in investing larger amounts.
For nutritional ingredient companies (B2B), there isn’t a CBEC channel that allows companies to bypass China’s regulations. With that in mind, first the company has to ensure the ingredient is approved for import and follows the current approved standards of production. If the ingredient is not yet approved, then the company will have to go through the National Health Commission to gain approval. This process typically takes two years to accomplish. During this process of gaining approval, HPA-China can assist with regulatory, market intel, and gaining some indirect business through the company’s clients that are currently using the ingredient by entering CBEC.
In both the above cases, companies entering the China market must provide support to their partners on the ground and stay involved. Too many times I’ve seen a business go sideways because the brand owner wasn’t keeping tabs on how the partner was running the business, or how they were presenting the brand to consumers. Companies should have a dedicated staff member that regularly keeps in touch with said China partner. Obviously, if the brand is opening their own office then they have the resources and infrastructure to guide the business more effectively.
Most important is to protect the company’s intellectual property. Ensure that all trademarks, names in native language as well as Chinese are secured, including website domain names. If any company is interested in the China market or in need of rethinking their China strategy, please contact me at email@example.com.
(Source: Nutraceuticals World)
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