Caitong Securities released a research report stating that China's nutrition and health market continues to expand, yet per capita consumption still has room for growth. Demand is driven by two key demographics—aging populations and younger generations (Gen Z)—evolving toward "precision segmentation" and functional foods. Online channels dominate, with Douyin and cross-border platforms experiencing rapid growth. Traditional categories remain stable, while emerging segments (e.g., ingestible beauty, probiotics) show strong momentum due to star ingredients. Downstream brands face fragmented competition, while rising demand creates opportunities for midstream OEMs. Key insights include:
**Market Overview: A Trillion-Yuan Growth Sector Fueled by Segmented Demand** China's nutrition and health food market reached RMB 260.2 billion in 2024, with a 6.3% CAGR from 2019–2024. However, per capita spending lags behind the U.S., South Korea, and Australia. Aging populations and heightened health awareness drive elderly care demand, while societal pressures and younger-onset chronic diseases make Gen Z a rising consumer force. Demand diversification is shifting from broad demographics to precision targeting, with functional foods becoming a major growth driver.
**Channels: Online Dominance, Douyin and Cross-Border Boom** As consumers skew younger, sales channels are transforming. E-commerce accounted for 60% of 2024 sales (up 12 percentage points from 2021), led by Douyin (53% YoY growth) for its consumer education appeal and cross-border platforms enabling ingredient innovation.
**Categories: Steady Tradition vs. Fast-Growing New Segments** Traditional categories show stable growth, format innovation, and expanded demographics. For instance, bone health revitalizes through ingredient upgrades. Emerging segments—smaller but explosive—thrive on marketing and rapid iteration. Star ingredients (e.g., ergothioneine) and patented strains propel ingestible beauty/anti-aging and probiotics, spawning brands like FILLMED and WonderLab.
**Industry Chain: Fragmented Downstream, OEM Opportunities** Downstream competition remains fragmented as new functional food brands enter via online channels. Swisse leads with youth-focused positioning and a "Mega Brand" strategy. Meanwhile, rising demand and asset-light brands boost midstream OEMs. China’s OEM penetration trails Western markets, offering growth potential for leaders like SIRIO Pharma and Baihe.
**Key Picks**: - **Jindawei**: Leading health ingredient supplier with diversified business lines. - **Jiyuan Group**: Global HMB leader in muscle/joint health. - **SIRIO Pharma**: Top OEM with domestic and international growth potential. - **Baihe**: Flexible supply chain, pet sector expansion, and overseas M&A. - **H&H International**: Strong branding and youth appeal. - **By-Health**: Omnichannel recovery post-adjustment. - **Minsheng Health**: Century-old brand with continuous innovation. - **Scitop Bio**: Domestic probiotic leader expanding capacity and direct-to-consumer reach.
**Risks**: Intensified competition, regulatory changes, food safety incidents, and overseas expansion setbacks.
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