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The health functional food market in China is undergoing steady expansion, driven by the continuous growth of the aging population and the increasing health consciousness among people. In 2021, the market size was 328.9 billion yuan. It is projected to reach 436.6 billion yuan by 2026, with a compound annual growth rate (CAGR) of 5.8% from 2022 to 2026. This upward trajectory reflects a shifting mindset among Chinese consumers who are increasingly prioritizing their health and well-being.
In terms of product categories, health functional food can be divided into Vitamins and Dietary Supplements (VDS), Traditional Products, Weight Management products, and Sports Nutrition products. VDS dominate China’s health functional food market, with a market share about 57.5% in 2021.
The penetration rate of health functional food in China stands at approximately 20%, which is relatively lower compared to mature markets such as the US, Australia, and Japan. This indicates substantial potential for growth. Moreover, while the mid-aged and elderly populations are traditionally the primary consumers, there is a noticeable shift as more and more young people are realizing the importance of maintaining good health. This changing consumer mindset is expected to contribute to higher penetration rates across all age groups, presenting new opportunities for market expansion.
China has emerged as a significant consumer of health functional food, attracting numerous international brands to enter the market. The total import value of health functional food in China reached 40.2 billion yuan in 2022, with a notable YoY growth of 14.6%. From 2016 to 2022, the CAGR of the import value of health functional food in China was an impressive 25.3%. This data highlights the sustained interest and demand for overseas health functional food. Concerning the importation sources, the United states is the largest import source, accounting for about 20% of the total import value. The following are Australia, Germany, Indonesia and Japan.
China's health functional food market exhibits relatively low concentration, with no dominant monopoly. In 2021, the top 10 players collectively held a market share of approximately 27.7%, and none of them individually commanded a share exceeding 10%. This creates a promising environment for new entrants seeking to enter China's health functional food market. Importantly, it is worth noting that half of the top 10 players are international companies, indicating the significant presence and competitiveness of global players in this industry.
In China, health functional foods are sold through various channels, including e-commerce platforms, direct sales, pharmacies, and offline retail channels such as supermarkets and mother-and-baby stores. Historically, direct sales was the primary sales channel in China, but its prominence has declined since 2016, particularly after the notable Quanjian scandal of vicious false advertising and pyramid scheme. The Chinese government cracked down on non-compliance issues within the direct sales model, leading to a loss of consumer trust in products sold through this channel.
Similarly, the pharmacy channel has experienced a slowdown in recent years due to factors such as higher prices, reduced foot traffic caused by the impact of COVID-19, and adjustments in medical insurance policies. In contrast, e-commerce channels have witnessed rapid growth and have become the dominant channel for health functional food sales. This can be attributed to their convenience, competitive pricing, and wide product selection.