Chinese boom: How probiotics and e-commerce are changing China's supplement industry
Research analyst Vicky Zhou said: "Parents have the intention to purchase health supplements for their children, especially probiotic supplements.
"Brands have invested in probiotic supplements to target parents and young consumers, and consumers are responding well to this innovative segment."
The gift of gut health
The report stated that parents' "established knowledge" of probiotics had led to a rise in the number of probiotic supplements purchased for children.
According to KuRunData and Mintel findings on 1,725 Chinese Internet users aged 20 to 59 with children below 18, 64% had bought probiotic supplements such as lactic acid bacteria and enzymes (but not yoghurt) for their children
This figure was the highest among other categories of supplements purchased for children, including mineral supplements (59%), single-vitamin supplements (53%), multi-vitamins (53%), Western dietary supplements (49%), and TCM supplements (6%).
Findings on 2,641 married Chinese Internet users aged 20 to 59 revealed that 29% had bought such supplements for their spouses. Together with multi-vitamins, this figure was also the highest among the aforementioned supplement types bought for spouses.
However, the differences in purchase volume across the categories was markedly smaller than in the case of supplements bought for children — percentages ranged from 25% to 27% across the rest of the categories.
While many purchase probiotic supplements for their children and spouses, younger consumers — aged 20 to 24 — are buying more of such supplements for personal use than other age groups overall (59% compared to the average of 44%).
The report stated: "These younger consumers also take more single-vitamin supplements for themselves. Compared to 2017, the purpose of purchasing health supplements for self-consumption is increasing (e.g., consumers who have bought multi-vitamins for themselves increased from 37% to 42%), suggesting that brands shouldn’t just think of the gifting market."
It added that Chinese consumers in general — and senior consumers in particular — view probiotic supplements positively, with products other than yoghurt perceived as more effective in delivering gut health benefits.
This was attributed to brands educating consumers on how probiotic supplements typically contain active probiotics not found in yoghurt, making them more efficient in boosting gut flora and fauna.
When it came to the method of consumption, however, "an equal proportion of consumers think that taking probiotic supplements are as convenient as taking yoghurt".
The report further stated: "Probiotic supplements are not only good for digestive system, but also can be used to enhance immunity and improve skin conditions. They also blur the boundary between food and health supplements, and the food format is getting more acceptable.
"Key players such as By-Health and Amway have already taken actions to compete within the probiotic supplement category, which will bring fiercer competition to the health supplement market.
“The vaguer line between food and health supplements also gives food and drink companies (the opportunity) to enter this health supplement market.”
Taking it online
E-commerce continues to be a major driving force behind China's health food and supplement sector.
While the industry in China is "highly dispersive" and no single brand or company enjoys over 10% market share, leading firms Amway and Infinitus reported subdued performance in 2018, thanks to normalised regulations for direct selling.
In contrast, By-Health upped its market share with its e-commerce strategy, while H&H maintained stable growth after its acquisition of Australian vitamin giant Swisse.
Incidentally, Swisse was named the top Australian brand at Alibaba’s annual Singles' Day sales event this year.
During Tmall and Taobao's Singles' Day sales, it was the bestselling global health and nutrition brand, followed by By-Health in second place.
Perhaps more tellingly, Swisse's Singles' Day sales on JD.com shot up 35 times from 2017 in the first hour of the sales, signalling not only Chinese consumers' growing preference for the brand itself, but also for online shopping.
A KuRunData and Mintel survey of 3,090 Chinese Internet users aged 20 to 59 showed some overlap in online and offline purchases of supplements, with 89% having made purchases offline and 61% having done so online.
Of those that had bought supplements offline, most (44%) did so at drugstores and pharmacies, while the majority (31%) of consumers who had bought supplements online did so on domestic online shopping websites such as Tmall, JD.com and Kaola.com.
The report revealed that BY-Health was the most popular brand for both offline and online purchases, though the fragmented Chinese market and strong competition meant other brands were not far behind.
At the same time, the biggest driver for older consumers (50 to 59 years old) to buy supplements at physical stores is that they will immediately receive their purchases, while both younger and older consumers value advice from in-store staff.
For consumers who prefer online shopping, convenience is a key factor. Among those aged 20 to 24, access to a wider variety of product choices is one of the main reasons (38% versus 34% of the average), along with the greater availability of uncommon product types often not found in brick-and-mortar stores (39% versus 32% of the average).
The report further stated: "Regarding company competition in the market, direct-selling companies are losing share, while brands turning to e-commerce are gaining share. It is essential for brands to use the different advantages of different channels to better target consumers."
For instance, as older consumers comprise the bulk of offline shoppers for supplements, brands can provide product delivery services for in-store shoppers so they can avoid having to carry heavy packages home.
Furthermore, there are drugstores with on-site doctors to help diagnose customers and issue prescriptions, a trend brands can take advantage of to offer their products to a wider range of consumers.
In fact, 'smart drugstores' have begun popping up in China, offering medically and legally certified diagnoses and prescriptions to consumers online. The report added that subscription was a good way to maintain a consumer base, and provide products to customers when their supplies were running low.
"It not only encourages seniors to buy more products at one time, but also makes them feel they are being taken care of, and builds trust with the brand. To attract young consumers, brands need to provide various product choices and marketing with new technologies, such as VR and live-streaming."
Zhou said, "Brands should develop a professional and international brand image to earn consumers' trust, particularly since e-commerce is emerging. Enhancing product options and innovations is also important to attract consumers."