Leading global supplement retailer General Nutrition Centers Inc. (GNC) announced February 12 that it is partnering with the state-owned Chinese food conglomerate Bright Food Group Co. Ltd. to introduce GNC supplements and nutritional products to the Chinese market. GNC will collaborate with Shanghai Yantang Group, a wholly-owned subsidiary of Bright Food, to form the joint venture GNC China.
GNC currently retails nutrition products in 47 countries worldwide through the company’s franchise operations, but the People’s Republic of China (PRC) may prove to be one of GNC’s most lucrative markets for the future. According to Nutrition Business Journal research, China’s supplement sales grew 9.3% to $8.1 billion in 2008, and the country is poised to become the world’s largest supplement market in coming years. “Based on our research in the nutrition industry in China, GNC believes there are significant growth opportunities in the PRC marketplace,” said Joe Fortunato, chief executive of GNC. “We look forward to working with Bright Food, which has strong product, distribution and retail capabilities in China.”
Jungie Ge, vice president of Bright Food and chairman of Shanghai Yantang Group, seconded Fortunato’s optimism, calling the partnership “a key growth factor for our business.” The collaboration represents Bright Food’s entrance into the nutrition products market. “Bright Food’s partnership with GNC in nutritional products will not only introduce GNC’s popular products into China,” said Ge, “but we will also seek GNC’s assistance to improve and upgrade selected Bright Food products. In the future, the products of GNC and Bright Food’s health related products will be sold in a wide range of retail formats in China.” GNC China expects product launches by mid-2010.
NBJ Bottom Line
Chances for success for foreign investment in China’s burgeoning supplement market are promising but not without a measure of peril. Jeffrey Crowther, executive director of Natural Products Association-China (NPA-China), told Nutrition Business Journal that working toward moderating Chinese government regulations on nutrition products will be imperative to growing the Chinese supplement industry to its full potential. Compared to U.S. supplement regulations, China’s rules are quite onerous. Domestic and foreign companies alike must register their products with China’s State Food and Drug Administration (SFDA), a process that can take up to two years and cost $50,000 to complete. Chinese regulatory agencies also often maintain overlapping jurisdictions, burdensome product-testing requirements, potency restrictions on vitamins and minerals, and other obstructions that can hinder foreign investment in the country’s supplement market. In addition to these regulatory hurdles, companies also face a Chinese consumer base that is often misinformed about supplements, misunderstanding their health benefits and/or believing them to be in the same category as pharmaceuticals and prescription drugs. Also, unpackaged herbal and traditional products make up the largest portion of Chinese supplement sales, as is often the case in less developed markets. These factors, says Crowther, makes investment in consumer education in China another crucial step toward growing the industry.
Obstacles aside, however, China—which currently commands the world’s fourth largest supplement market, behind the United States, Western Europe and Japan—shows the potential to top the global supplement industry in the years to come. With the increase in incomes and living standards of China’s burgeoning middle class has come an increase in consumer interest in health products. And with the recent fears over China’s melamine-tainted food products, Chinese consumers have invested their trust in the safety and quality of imported products, making now a good time for companies such as GNC to build a strong foothold in this country of more than 1 billion people.
Nutrition Business Journal’s 2010 Global Supplement & Nutrition Industry Report provides a deep dive into the Chinese market and includes detailed NBJ sales and growth estimates for the country’s dietary supplement, functional food and beverage, natural & organic food and beverage, and natural & organic personal care (N&OPC) and household products categories. Learn more or order a copy of the report (which publishes later this month) via the NBJ Website.
Related NBJ links:
China Remains Poised to Become the World’s Top Supplement Market
What Will It Take for China to Surpass the U.S. in Supplement Sales?
Supplements Stand Out as 2008 Sales Bright Spot for U.S. Nutrition Industry
Related NPICenter links:
China, “Largest” Dietary Supplement Market?