Traditional Chinese Medicines have been popular in China for centuries, but contemporary concerns such as weight loss and anti-ageing are giving rise to new product opportunities. FF&N's Asia correspondent, Kinzie, investigates the new face of an ancient market.
Traditional Chinese Medicine (TCM) is founded on the idea that the body should be maintained in a healthy, disease-free, 'balanced state' via herbal-based dietary supplements and a nutritious diet. As Dr. Zhuoling Ren, a TCM specialist at the China Academy of Traditional Chinese Medicine in Beijing says, "Understanding the properties of foods, their effects on health, using food for preserving health and preventing and treating illness is the science of traditional Chinese medical and dietary therapy."
With more than 6,000 factories currently producing TCM remedies, the 3,000-year-old Traditional Chinese Medicine industry can certainly be said to be in a healthy 'balanced state.' Historically, China has viewed herbal products as medicines, unlike much of the Western world that often considers them as supplements or food items. In this context, it is difficult to separate nutraceuticals and functional foods from established traditional medicines in China.
Such 'medicines' are commonly added to day-to-day Chinese meals for functional purposes. Indeed, the popularity of many foods is directly attributable to their purported health benefits. Green tea, shiitake mushrooms, garlic, cabbage and kelp are just a few examples of foods revered for their therapeutic potential in China.
However, the country is beset with product labeling issues, substandard nutritious ingredients and unacceptably high levels of preservatives, mildews and agricultural chemical residues such as heavy minerals and sulphates that are the result of modern extraction processes. A recently conducted government survey of 49 varieties of health care foods in Shanghai found almost a quarter to be substandard. To counter this effect, a number of scientists are experimenting with adding trace elements to improve the nutrient value of vegetables and other foods.
The Modern Chinese
As the consumption of animal food and the proportion of dietary calories derived from fat has ballooned, Chinese consumers have become concerned with obesity, particularly among children. This fact, coupled with higher disposable incomes, is opening the door for companies that can define and market the nutritional value of their goods.
Demand for products used for slowing the ageing process, combating senility and lowering blood cholesterol levels is also likely to surge. As China's population ages, the country is expected to have the largest elderly population in the world by 2020, with 240 million people over 60 years of age.
Throughout the population, many health issues remain. According to the United Nations (UN) and the World Health Organisation (WHO), vitamin A deficiency remains a public health problem in China. Dietary surveys in rural areas have found that children under three years old consume only 30-40 per cent of the RDA of vitamin A, while iodine deficiency disorder and iron deficiency anaemia are common ailments. Iron supplementation has been implemented among female workers. Lactose intolerance, also prevalent among Chinese, is feeding demand for products such as soy derivatives. One success story, Hong Kong's Vitasoy International Holdings, processes soy beans ('the cow of China') into high-protein, vitamin-enriched soy milk. Since 1940, the company has grown into a multinational with sales in excess of $1.28 million.
The change in consumption habits is being assisted by the widespread acquisition of appliances such as refrigerators, and many Chinese are making the transition from raw vegetables and meats to processed, storable and value-added foods. Consumers accustomed to purchasing their food daily in local markets are getting used to packaged goods readily available in a crop of new supermarkets across the nation. Functionality comes in forms such as vegetable powders that are added to fermented doughs to make vegetable breads, noodles and instant soups.
Market research firm ACNielsen recently found that three of the top-10 most advertised products in China belong to the health care industry. Of the total advertising spent in 2000, health care products accounted for more than 10 per cent. Mainland Chinese products were also featured in Hong Kong's 10 most advertised products in 2001. Tonics such as Fancl House's Slim Products, Hong Fu Loi Brain Pills and Tai Tai Oral Liquid are just some products enjoying rapidly increasing popularity. This trend has gained momentum as access to the Internet and foreign magazines has improved, resulting in market sectors evolving rapidly.
A Tricky Path To Profits
Hong Kong-based Power Sports is one of many companies taking advantage of the new climate. Building on a strong mainland mail-order clientele, Power Sports is looking to expand its sports nutrient business in China. As managing director Leighton Tsai says, "The Chinese are very serious about sports and the training of world-class athletes, with regional budgets, government subsidies and bodies that provide the infrastructure for product clearance." They also value claims validity, product safety and legitimate production and import companies with good brands they can trust, Tsai notes. "Once you get on the approved list, there is a direct channel to the market, bypassing the Health Ministry, taxes, customs and labelling regulations. It can be a shortcut to getting products onto retail shelves."
Understanding the well-established yet complicated regulations governing medicine in China is vital to success, says Matthew Cheng, a Hong Kong-based business and natural product development consultant. "Capsules or tablets and other forms of delivery methods may have to be classified into the categories of functional foods or drugs, depending on the claims and ingredients, as well as the quantity of herbs or pharmaceutical materials. In China, there are six classes of drugs and medicine. They are under the authority of SDA (State Drug Administration) and the registration of a new product requires various tests along with lengthy and costly clinical tests."
David Tang, of Hong Kong's PuraPharm, agrees that labyrinthine regulations complicate matters. "I have seen a lot of good companies fail in China simply because they didn't know the regulations," he observes.
Others, such as the ShenZhen TaiTai Pharma-ceutical Company, have enjoyed great success. In 1998, it packaged a traditional Chinese medicine as TaiTai Menocare Essence. It embarked on a lavish, Western-style advertising campaign to promote its product's health benefits, and was rewarded when the product secured a large slice of the domestic menopause health market.
While an expensive marketing campaign can help deliver success, in a country with as many geographic and cultural differences as China, regulatory adherence and efficient product distribution are equally important. Understanding the country's rich history in TCM, the general population's approach to food, and the deep-rooted, sometimes fantastical, cultural folklore on the subject of health is essential.
For instance, foods like shark fin soup and preserved duck egg with embryo are considered delicacies while chicken feet are common streetside snacks. Snake, cooked in soup, is said to be good for the skin. Fresh snake blood is thought to be good for the eyes and lower spine, as a relief for fatigue and is also widely consumed as an aphrodisiac. Similar claims are behind the presence of toads and lizards, which are sold alongside eggplant, pork and fresh-cut flowers in local markets everywhere.
The market potential for health food in China over the long-term will be huge, yet significant growth may be five to 10 years away. However, surveys indicate that health food consumers are more concerned about quality and possible side effects than price, meaning that quality products with proven health benefits have the greatest chance of success, both in the short- and long-term. And with peer influence and new product curiosity cited as major factors for consumers who may be deciding whether to purchase health food products, the future certainly holds many opportunities for companies looking to establish themselves in the world's most populous nation.
Kinzie is owner of aka Media Ltd., a Hong Kong-based marketing communications company. Tel: +852 2960 4837, email [email protected]