China, “Largest” Dietary Supplement Market?

China is well known for its undisputed title as having the world’s largest population. There are many other “largest” titles China has that may or may not surprise you. Mandarin, the official language of China, has the largest amount of native speakers than any other language, beating English out at over 2 to 1. Recently, China became the world’s largest exporter as well as surpassed both the U.S. and Japan as the largest producer of automobiles. Moreover, many speculate that China’s GDP is on track to exceed that of the U.S. by 2035.

With all the “largest” titles China is accumulating, it is not farfetched to consider that China’s dietary supplement industry will also one day be the largest. However, this title will be a little more difficult for China to grasp due to the restrictive nature of their regulatory system. Existing regulations have been discouraging both domestic and foreign companies from investing heavily in the industry. The lack of transparency and a drug-like registration process has been stifling the industry’s true potential. China’s State Food and Drug Administration (SFDA) is in charge of regulating the dietary supplement industry, which is actually called the “healthy foods” industry, and lumps together any and all products that are considered by Chinese authorities as healthy. This can include such products as Traditional Chinese Medicine formulas, as well as food and alcoholic beverages containing herbal extracts. China has yet to legally define dietary supplements and create a separate regulatory system. The current system requires companies to register their products with SFDA prior to marketing. The process requires a large investment of both time and capital. A typical registration will take 18-24 months to complete and cost in excess of $20,000 per SKU. China does not have a structure / function claim system like the U.S. and instead relies on 27 approved claims, which are more in line with health claims. If the product’s function cannot fit into one of these 27 approved claims, then it will be difficult, if not impossible to register.

Most foreign companies doing business in China are doing so as food, thus avoiding the “healthy food” registration process. Entering the market as food is not illegal, but the company has to prove their product is in fact a derivative of food and must also have a good reliable local partner. China’s Import and Export authorities are in control of this system. SFDA has little to do with products if they enter as food. The advantages of entering China in this way include decreased time and money to get import approval.

Normal food import approval takes weeks and can cost as little as $1,000 per SKU to get the sanitation certificate one needs to sell the product. However, imported food cannot make claims and advertising is tightly controlled.

The good news is that China is taking steps to reform the dietary supplement industry. The restructuring process began back in 2008. Draft regulations were released in May 2009. In June 2009, the Natural Products Association’s (NPA) China office presented SFDA and China’s State Council as well as the U.S. Department of Commerce with comments on the draft regulations and an industry report to help encourage China to move the industry toward a more open and transparent system. Consumer demand and local industry pressure coupled with NPA and U.S. government engagement have all played their role to lead officials to reform the system. The new regulations will be making strides in the right direction. However, there still remains a significant amount work to be done before the industry can realize its full potential.

NPA’s China office director Jeff Crowther will be giving a presentation during Supply Expo/ Expo West to discuss the current system and the pending changes coming to China’s dietary supplement industry. The presentation will take place on March 13, 2010 2:30-4:00pm in room 207A on the Expo show floor. Crowther will also discuss market environment and sales channels as well as introduce NPA’s China initiatives and how the association is helping its members get a handle on the China market.

NPA has maintained an office in China since 2006. The association is partnered with the U.S. Department of Commerce (U.S. DOC) through the Market Development Cooperator Program. NPA China has been working closely with both U.S. DOC in Washington D.C. and the U.S. Embassy in Beijing. Office director Jeff Crowther has over seventeen years of experience in the natural products industry and has worked in many aspects of the industry including retail sales and management, international business development and regulatory advocacy. For the last four years, he has worked full time in Beijing as the director of the association’s China office and is responsible for working with both Chinese and U.S. officials to move China’s dietary supplement industry toward a more open and transparent system. NPA China also offers its members a variety of market entry benefits. For more information, contact Jeff Crowther at the association’s Beijing office [email protected]

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