2022 China Nutraceuticals and Functional Foods ReportSource:iResearch
May 11,20226:55 PMOverview
Management mode: Record-based products have low entry barriers and can be launched in a short time. However, the products' raw materials and function claims are very limited and the homogeneity problem is severe; Registered products have more available raw materials and function claims, but they need to be systematically reviewed. The approval document is greatly affected by the administrative approval, which means the launch time is difficult to control.
Function claims: The allowed function claims of nutraceuticals are limited to 24 specific functions and supplementing vitamins and minerals.
Industry problems: Limited function claims, seriously homogenized existing product functions, and difficulty in meeting consumers' more segmented health care needs.
Response strategies: Domestic companies can complete the product matrix by acquiring high-quality foreign companies, thereby meeting consumers' segmented demand.
Product types: The products are usually in the form of snacks and are very convenient. The product formulas usually contain low sugar and low calorie. The main functions are about health and beauty. In terms of ingredients, choose mature raw materials that are widely recognized by consumers to cut the cost of popular science education.
Industry problems: claim functions are restricted and the cost of communicating with consumers is high; limited use of functional ingredients might affect the efficacy.
Response strategies: optimize product formulations and compound raw materials of multiple functions to solve the problem caused by insufficient use of a single raw material; Prove the efficacy of the product through functional tests; Communicate with consumers to guide them to have reasonable psychological expectations for product functions.
Industry overview: Japanese health functional foods were divided into three categories: specific health foods, functional label foods and nutritious functional foods. They are managed by different classifications and grades.
The Japanese market is mature and is reaching saturation. Three policy adjustments have stimulated market growth.
FFC system: The system has lowered the market entry threshold, which is conducive to the entry of small and medium-sized enterprises; large enterprises certify or upgrade their original products, which stimulates the growth of the original businesses.
However, under this system, the industry development still faces some problems and supervision needs further improvement.
Conclusion and enlightenment: The introduction background of the FFC system in Japan is very different from the current development period in China.
Industry entry barriers: The nutraceutical industry has high requirements for companies' legal qualifications, R&D capabilities and financial strength; the functional food industry has low entry barriers and more flexible development.
Mature enterprises: In the nutraceutical industry, acquisition is a fast way for cross-border players to enter the market. In the functional food industry, companies can achieve business growth by relying on corporate background to upgrade products or expand related categories and by reusing existing channels and customer resources.
Start-ups: In the nutraceutical industry, it is difficult to create a large-scale company from nothing; In the functional food industry, it is necessary to find potential needs and consumption scenarios of users, occupy their minds through original product innovation, and seize the time window to make breakthroughs.Industry Development Background – Demand
The fast pace of life and great work pressure result in the obvious sub-health problems in modern society. In 2018, the overall sub-health detection rate of urban residents in six provinces/cities in China reached 68.1% (10254/15066), showing the common problem of sub-health. Different age groups' self-rated health status shows that young people are more worried about their health conditions. People in different age groups have similar health expectations, however, the post-90s and Generation Z have much lower self-rated health scores than others, indicating their concern about their health condition. In the aspect of young people's regimen awareness, Generation Z attaches great importance to their health and nutritional supplements. As young consumers' health awareness keeps rising, their potential demand for healthy and nutritious products will be constantly released.
Industry Development Background - Supply
With years of experience in processing, large producers not only have the ability for processing materials, but also the ability for product R&D. The maturity of the supply chain reduces the time needed for launching a new product and lower the barrier for startups, helping downstream brand owners’ fast product innovation and iteration. The dispersive online channels and the fragmented media can help startups reach their target users quickly.
Industry Chain - Map
Nutraceuticals – Operating Data
Compared to normal food companies, nutraceutical companies have a higher gross profit margin and a higher ratio of expenses to sales
Through typical companies in nutraceuticals, pharmaceutical companies, dairy companies, and ordinary food industries, we can see the operating conditions of companies in different industries. The gross profit margin, R&D expense ratio, and sales expense ratio of BY-HEALTH, which focus on nutraceuticals, are about 65%, 2%-2.3%, and 29%-33%, all higher than most ordinary food companies. Thus, the nutraceutical industry has the features of a high gross profit margin and a high ratio of expenses to sales.
Nutraceuticals – Development and Strategies
Cross-border online shoppers buy nutraceuticals frequently, and the spending on nutraceuticals is rising, showing that consumers have high recognition of imported nutraceuticals and are used to buying such products through overseas online channels. The transaction volume of the nutraceuticals category of Tmall International has been surging. In 2020 the transaction volume of nutraceuticals of Tmall International increased by 199% year on year, showing that cross-border e-commerce will be increasingly important in sales of nutraceuticals.
Pain Points and Problems in the Functional Food Industry
Product efficacy is affected by multiple factors such as production techniques, ingredient ratio, raw material quality and limited ingredient dosage. However, currently, the state has no product supervision and certification standards for functional foods. Consumers can only make superficial judgments on product formula, appearance, etc. Some products on the market have conceptual addition and some enterprises' products are of low quality, which will have a negative effect on the reputation of the entire industry and lose consumers' trust.
Functional Foods – Development and Strategies
Optimize product formula and compound multiple functional raw materials to solve the problem of insufficient dosage of a single raw material; Prove product efficacy through functional tests to gain consumers' trust
Development Opportunities and Limitations
The industry is prospective due to the aging population and rising health awareness. However, restricted by relevant laws and regulations, enterprises’ development will be constrained in the short term.
Table of Contents of the Full Report
Research Background and Target
Concept Definition Content
1 Industry Development Background
2 Industry Chain Analysis
2.1 Map of Industry Chain
2.2 Upstream of the Industry Chain
2.3 Midstream of the Industry Chain
2.4 Downstream of the Industry Chain
3 Analysis of the Nutraceutical Industry
3.1 Industry Development History
3.2 Policy and Regulation
3.3 Regulatory Model
3.4 Product Types and Function Claims
3.5 Imported Nutraceuticals
3.6 Operating Data
3.7 Industry Pain Points and Problems
3.8 Development and Response Strategies
4 Analysis of the Functional Food Industry
4.1 Reasons for the Rise of the Industry
4.2 Industry Characteristics
4.3 Product Types
4.4 Investment and Financing Analysis
4.5 Industry Pain Points and Problems
4.6 Development and Response Strategies
5 Analysis of the Japanese Functional Food Market
5.1 Industry Overview
5.2 Specific Nutraceuticals
5.3 Functional Labeled Foods
5.4 Summary and Inspiration
6 Analysis of Market Entry Opportunities
6.1 Industry Entry Barriers
6.2 Market Players
6.3 Key Factors for Companies
6.4 Analysis of Nutraceutical Market Entry Opportunities
6.5 Analysis of Functional Food Market Entry Opportunity
6.6 Industry Development Opportunities and Limitations
7 Industry Development Analysis From the Proposals During the Two Sessions in 2022
Upstream: The raw material link has high requirements on the R&D capability and financial strength of the enterprise. Due to high time costs, only large enterprises have R&D strength. Favorable national policies promote commercial application of raw materials, which is conducive to the development of categories and the upgrading of product structure.
Midstream: Producer provides brand owner with services such as product filing, R&D, and production. The specialized labor division improves industrial efficiency and lowers entry barriers for startups; Functional food startups mostly turn to nutraceutical producers for production. The development of downstream brands drives the business growth of supply chain enterprises.
Downstream: Nutraceuticals are mostly sold directly or in pharmacies. Functional foods are mainly sold via online channels and can not be sold in pharmacies.
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