Chinese health and wellness market set to expand
April 2014 | FEATURE | SECTOR ANALYSIS
Financier Worldwide Magazine
With the expansion of the Chinese urban middle class, the Chinese health and wellness market has developed considerably in recent years. This trend is expected to continue over the course of the next five years, as the nation becomes increasingly conscious of its health.
The sector’s upward trend is expected to spark business opportunities throughout the world’s second largest economy, according to a new report released by the Boston Consulting Group (BCG). BCG believes that the value of China’s emerging health and wellness market will climb to nearly $70bn by 2020. The over-the-counter (OTC) market alone is already worth around $18bn a year in China, and is expected to grow at a rate of around 8 percent per year going forward. The report was based on a survey of around 2600 middle and upper income consumers, aged between 18 and 65, from a number of large, medium and small cities across China.
There are a number of catalysts for this expected expansion in the health and wellness market. Many Chinese consumers are becoming increasingly health conscious, purchasing a wide variety of products to treat common complaints, provide energy boosts and strengthen their immune systems.
Arguably, the rapid development of the wider Chinese economy and increasing urbanisation of the Chinese population are largely responsible for the increase in health consciousness across China. While urbanisation has led to rising levels of disposable income and improved living standards for much of the public, it has also been the catalyst for greatly increased levels of stress among Chinese citizens. China’s aging population and the country’s continuing issues with food safety and quality have also contributed considerably to the increases of the health and wellness market. Indeed, more and more Chinese consumers are turning to self medication with health supplements and OTC health treatments – even buying brand names and higher-quality products that are more expensive in order to meet their health needs. “We project an average year on year growth of about 11 percent for the OTC treatments segment and vitamins, minerals and supplements (VMS) market between 2014 and 2020,” said Wu Chun, partner and managing director at BCG Greater China.
According to the report, Chinese consumers are the most health conscious in the world and 73 percent of those surveyed noted they would be willing to pay a premium for products deemed to be healthier. This figure skews 12 percent higher than the global average. Furthermore, health care and nutritional products rose to become second among 15 product categories for which Chinese consumers were prepared to pay a premium.
In this nascent health and wellness market, there are enormous opportunities for manufacturers of such products to prosper in China’s highly competitive sector. But despite these opportunities there are a number of variables that companies must consider before committing any considerable capital to the region.
If healthcare firms are to prosper in the Chinese market, they must navigate a number of key strategic issues and choose their battles wisely. The report suggests that Chinese consumers, overall, prefer well known brands. Established brands were generally considered safer and of higher quality than smaller, lesser known brands. Chinese consumers tend to associate stronger, more ubiquitous brands with higher quality. Accordingly, by developing the identity and strength of a company’s brands, organisations looking to gain ground in China can display the efficiency and expertise of their product. The report also notes that the credibility garnered by umbrella brands tends to trickle down to other products contained within their portfolios.
Companies must also manage their retail outlets aggressively and prepare to engage in online retailing, particularly as pertains to the sale of vitamins and supplements. E-commerce accounted for only 2 percent of total health product sales in 2013, as many Chinese consumers distrust the internet when buying healthcare items. The report notes, however, that online sales have been growing quickly of late.
Finally, companies operating in China must develop a solid understanding of the role that city size plays in Chinese consumer behaviour. Shopping habits and preferences differ enormously from city to city, and it is vital that businesses develop and tailor their marketing strategies for the relevant locations. Those firms with a weaker brand identity in China should initially target smaller markets in order to gain a foothold.
For those companies willing to tailor their products and strategies, the wellness and health market in China will provide them with myriad opportunities to build their brands and reach new sections of society. However, due to the speed at which the sector is developing, it is vital that companies strike quickly if they wish to be a major player in this growing market.
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