32-50IntlMarkets1110.

qxd:NUTWORLD 2009 Feature

10/18/10

4:22 PM

Page 39

The International Market

In Summary
These are just some of the regulatory changes and challenges connected to the Canadian NHP marketa complete explanation of all regulatory updates is well beyond the scope of this article. At the same time, Canada still offers a highly lucrative market for NHP finished product and raw material suppliers alike, and

their EN. Thats an awfully long time to wait to get a product to market! Furthermore, if, after a product has been launched with an EN, the NHPD (upon eventual review of the license application) concludes that the product is not backed by sufcient scientic evidence to support efcacy, the NHP supplier may be forced to remove the product from the market.

those with innovative products that blend quality with science are likely to enjoy long-term success.

About the author: Michael Chernyak is managing director of Canadabased CK Nutritional Ingredients. He can be reached at mchernyak@ckfoods.com.

China:
An Underdeveloped Supplement Market = Opportunity
By Jeff Crowther Founder U.S.China Health Products Association
During the first quarter of 2010 (AprilJune), Chinas economy was worth $1.3 trillion, which was enough to surpass Japan as the worlds second largest economy behind the U.S. Although this made international news and generated many scholarly discussions on Chinas position as a growing economic powerhouse, it was not a big surprise among global economists. Japan has held this position since 1968, but with its decadeplus stagnant economy, it was only a matter of time before China surged into second place. This news is, of course, promising to dietary supplement and health product companies who are interested in China as a potential new market. Together with economic development, Chinas regulatory environment and product demand must be considered as key indicators of a truly viable market. leagues in terms of a thriving supplement industry. With that said, having an established supplement industry is not the measure by which countries are judged in terms of economic prowess. Nevertheless, having one does reect an established consumer base with expendable income seeking a higher quality of life, which China is in the process of building one brick at a time. To offer a little more perspective on Chinas second place medal on the podium of the great GDP race, Chinas GDP and per capita GDP couldnt be farther apart. In 2009, the World Bank and International Monetary Fund ranked Chinas per capita GDP as 92nd and 96th in the world, respectively, averaging in at $6621. In contrast, the U.S. is rst in terms of GDP and sixth in terms of per capita GDP ($46,400). For the dietary supplement industry to gain more mass appeal and acceptance, China will need to continue closing the gap between GDP and per capita GDP. This will elevate more of the population to middle-class or true consumer status, possessing the money needed to spend on personal health and well being. One positive sign of consumer growth was the recently released consumer
www.nutraceuticalsworld.com

Developing the Supplement Category in China

With an economy of this size and lots of momentum behind it, one would expect a well-developed dietary supplement industry. Unfortunately, this is not the case. Although China has been posting record gains to its GDP, it is far behind its top-tier global colNovember 2010

spending indicators for July 2010 from Chinas National Bureau of Statistics.Year on year comparison of spending on retail consumer goods, which includes dietary supplements, grew almost 18%. It wasnt until recently that China realized a genuine consumer base with a level of nancial freedom to become consumers of international brands and, more importantly, for our discussion, dietary supplements. Keep in mind, this consumer base is not spread evenly across China and makes up only a small portion of the population mostly found in Chinas well-to-do rst-tier cities like Shanghai, Beijing, Guangzhou and Shenzhen. Although there is a need for dietary supplements in the market, the demand at the moment is underdeveloped. One reason is many Chinese consumers are not used to taking pills, tablets or other dosage forms common to dietary supplements on a daily basis. In fact, these dosage forms are generNutraceuticals World 39

32-50IntlMarkets1110.qxd:NUTWORLD 2009 Feature

10/18/10

4:22 PM

Page 40

The International Market

ally synonymous with medicine. Combine this with one of the worlds most stringent regulatory systems and you have an industry with huge potential, but moving at a snails pace. In order for consumer spending to increase, regulations must be adjusted to a more reasonable level to encourage both domestic and foreign investment, as well as the spread of product education. If consumers dont understand the products, they will not buy them. Current regulations require large investments of both time and capital to achieve market approval from Chinas State Food and Drug Administration (SFDA). The product registration process takes up to two years and costs around $50,000 per individual product (SKU). As a result, companies often need to hire a registration consultant in order to successfully navigate the registration process. The bulk of the estimated $50,000 will actually be paid to one of these consultants with a smaller portion going toward government fees. At this point, consultants are necessary due to the complexities and lack of transparencies involved in the registration process. The process is rigorous and requires tests such as human and animal testing at stateapproved laboratories. Because SFDAs current regulations pose unreasonable nancial burdens as well as expenditures of precious time, many dietary supplement companies choose to market their products simply as food by getting label approval and hygiene certicates from local level Inspection and Quarantine Bureaus. Doing this is certainly less intensive in terms of costs and time, but no product claims or advertisements are allowed. It seems most companies are willing to give these up in order to make it to the shelf in a timely, less costly fashion.

The Main Attraction

The dietary supplement industry, or the healthy food products industry as it is known in China, has been the center of attention over the last couple of years among industry organizations and government. Due to a variety of factors, including incremental consumer demand, consumer safety and protection, increased foreign investment as well as industry pressure, Chinas State
40 Nutraceuticals World

Council has been working on amending current regulations in order to further develop the industry. However, this is turning out to be a difcult task. There are a variety of players involved in sculpting the new industry legislation, including the SFDA, an assortment of nutritional scientists, leaders from different segments of industry such as direct sellers (MLM), manufacturers/suppliers, retailers, Traditional Chinese Medicine (TCM) companies as well as industry associations. Like all other regulatory shifts in the world, those leading the charge for change are not always on the same page. The draft implementation regulations for dietary supplements have been under review, advisement and revision for more than a year. It was expected that by the spring of 2010 the new regulations would have been released. However, the industry is still waiting for a nal draft that will hopefully include some of the suggestions made, such as moving toward a more open system of notication, approving ingredients not product formulas, increasing the upper limits of some nutrients and establishing a structurefunction claim system similar to that used in the U.S., which would replace SFDAs current 27 approved health claims. Although there remains much to be accomplished with regard to regulations and consumer education, the industry is beginning to show signs of progress. At this point, it is obvious that the State Council, SFDA and China Health Care Association are committed to change; it is just a matter of time, which in the world of regulatory advocacy can equate to years. Nevertheless, industry and consumers are not willing to wait for legislators to nalize the forthcoming new laws. Chinas dietary supplement industry is moving forward with anticipation that new legislation is on the way and will be moving in a direction of openness and transparency.

foods and a variety of other health products. Many of these companies are foreign owned or invested and in some cases bring decades of experience in retail health food management to the market. These health product pioneers are taking advantage of being rst in the market and laying the foundation for whats to come. Its not just retailers blazing the trail for industry development; some of the industrys global heavyweights have been and continue to invest in Chinas future health product industry. For example, Amway, Herbalife and Nuskin, to name a few, have been operating successfully in the market for several years and are in it for the long haul, content with growing and developing as the market dictates. And investors are certainly not standing by waiting for regulations to change. In fact, U.S.-based USANA just sealed its entry into China by acquiring BabyCare, a direct seller that has been operating in China for more than a decade. This move will allow USANA to enter the market with preexisting direct sales licenses and an established in-country management team. On the raw material side, large ingredient companies are pushing for ingredient approvals. This past year has seen the approval of sh oil, conjugated linoleic acid (CLA), DHA and plant sterols by the Ministry of Health as new resource foods. Although the regulatory system has not made signicant movement since last year, it is hoped that by the end of this year there will be some positive developments. Regardless of what happens, those on the ground in China envision healthy futures and are optimistic about Chinas dietary supplement and health product industry.

Retail Developments
During the last couple of years, China has witnessed the opening and expansion of retail health food stores, mall and hypermarket kiosks and websites, all selling domestically made as well as imported dietary supplements, sports nutrition products, natural cosmetics, eco-friendly cleaners, organic
www.nutraceuticalsworld.com

About the author: Jeff Crowther is a consultant based in Beijing, who has more than 17 years of experience in the natural products industry, having worked in retail sales and management, international business development and regulatory advocacy. He also manages the U.S.China Health Products Association. In this capacity, he is responsible for working on industry matters affecting U.S.-based companies, as well as acting as a liaison for both American and Chinese companies. He can be reached at jeffcrowther@gmail.com.
November 2010

Copyright of Nutraceuticals World is the property of Rodman Publishing and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use.