When Saatchi & Saatchi pried the Amway China account from incumbent Ogilvy & Mather China last month, it was assigned a brand with an intriguing back story, Nutrilite. Conceived in Shanghai in 1934 by Dr Carl F. Rehnborg, the nutrition supplement was perfected in California. Nutrilite first appeared in Amway’s sales portfolio in 1949, and eventually Amway took over the company in 1994.
That year also marked a homecoming for Nutrilite, which was returned to China when Amway built its first factory in Guangzhou.
Today Nutrilite is as Chinese as a foreign brand could be. Liu Xiang served as spokesperson when he won Olympic gold in 2004, and now the country’s Olympic gymnastic team is featured in Nutrilite’s new crop of TV commercials. Amway spent Rmb 619 million (US$91 million) on advertising for Nutrilite last year, according to Nielsen.
Nutrilite - because of its health claims - is lumped into a broad category of over-the-counter (OTC) healthcare products.
The OTC market in China is small, but growing. A report by PricewaterhouseCoopers (PwC) puts total consumption of Western pharmaceuticals at less than US$15 per capita, still one of the lowest levels in the world, but given China’s population of 1.3 billion, that yields a handsome US$20 billion. If traditional Chinese medicine (TCM) is included, that sum more than doubles, according to Pharma China, which calculated the total market at US$50 billion.
Especially in rural areas, TCM is “first line therapy” according to a study by Kline, and is sold by at least 150,000 outlets across China. Established TCM pharmacies include the 300-year-old Tongrentang which has more than 500 retail outlets and more than 100 branded TCM OTC remedies.
Eighty per cent of Western pharmaceuticals are prescribed at hospitals, and until recently most of the remainder were sold through pharmacies. OTC healthcare - which embraces a mix of Western and Chinese formulations - is usurping the role of both TCM pharmacies and Western chemists.
The PwC report puts OTC sales at US$7.5 billion in 2007, or 22 per cent of Western medicine sales. Euromonitor, on the other hand, includes TCM and calculates the sector at Rmb 77.7 billion last year, excluding child-specific OTC.
Nutrilite’s maker isn’t complaining, as the dietary supplement has - according to Euromonitor - a 10.3 per cent category share, giving it a clear lead over second-place Tiens. It is no coincidence that the top five brands are all dietary supplements, a segment with sales totalling Rmb 52.9 billion last year, or 68 per cent of total OTC healthcare, according to Euromonitor.
Branded foreign dietary supplements might be common in tier-one cities, where they retail for three to four times their Chinese counterparts, but in the hinterlands there is a “great regional disparity” in product availability and the ability to pay for them, says Kelly Wong, head of healthcare research, TNS China.
Even so, sales of OTC healthcare in China have grown 11 to 12 per cent annually during the past eight years. Besides dietary supplements, the other OTC categories are cough, cold and allergy remedies at Rmb 8.8 billion, medicated skin care at Rmb 5 billion, analgesics at Rmb 3.8 billion and digestive remedies at Rmb 3.7 billion.
“In 2000, the Government drew a line that defined what is a prescription drug, and what can be sold over-the-counter,” says Wong. “In the past it wasn’t so clear. It used to be that pharmacies were the sole channel for OTC products, but now there is a change in market structure. Now we are seeing new retail formats, such as the shop-in-a-shop at Wal-Mart. The Government has also allowed online pharmacies.”
Eight years ago, chemists had 64.6 per cent of OTC sales, according to Euromonitor, but by last year that dropped to 45.8 per cent. Competing against them are grocers (16.2 per cent), non-prescribing drugstores (14.9 per cent) and newer formats such as mass merchandisers and healthfood shops. But the real challenger is direct sales (22.8 percent), and that is largely down to Amway.
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That year also marked a homecoming for Nutrilite, which was returned to China when Amway built its first factory in Guangzhou.
Today Nutrilite is as Chinese as a foreign brand could be. Liu Xiang served as spokesperson when he won Olympic gold in 2004, and now the country’s Olympic gymnastic team is featured in Nutrilite’s new crop of TV commercials. Amway spent Rmb 619 million (US$91 million) on advertising for Nutrilite last year, according to Nielsen.
Nutrilite - because of its health claims - is lumped into a broad category of over-the-counter (OTC) healthcare products.
The OTC market in China is small, but growing. A report by PricewaterhouseCoopers (PwC) puts total consumption of Western pharmaceuticals at less than US$15 per capita, still one of the lowest levels in the world, but given China’s population of 1.3 billion, that yields a handsome US$20 billion. If traditional Chinese medicine (TCM) is included, that sum more than doubles, according to Pharma China, which calculated the total market at US$50 billion.
Especially in rural areas, TCM is “first line therapy” according to a study by Kline, and is sold by at least 150,000 outlets across China. Established TCM pharmacies include the 300-year-old Tongrentang which has more than 500 retail outlets and more than 100 branded TCM OTC remedies.
Eighty per cent of Western pharmaceuticals are prescribed at hospitals, and until recently most of the remainder were sold through pharmacies. OTC healthcare - which embraces a mix of Western and Chinese formulations - is usurping the role of both TCM pharmacies and Western chemists.
The PwC report puts OTC sales at US$7.5 billion in 2007, or 22 per cent of Western medicine sales. Euromonitor, on the other hand, includes TCM and calculates the sector at Rmb 77.7 billion last year, excluding child-specific OTC.
Nutrilite’s maker isn’t complaining, as the dietary supplement has - according to Euromonitor - a 10.3 per cent category share, giving it a clear lead over second-place Tiens. It is no coincidence that the top five brands are all dietary supplements, a segment with sales totalling Rmb 52.9 billion last year, or 68 per cent of total OTC healthcare, according to Euromonitor.
Branded foreign dietary supplements might be common in tier-one cities, where they retail for three to four times their Chinese counterparts, but in the hinterlands there is a “great regional disparity” in product availability and the ability to pay for them, says Kelly Wong, head of healthcare research, TNS China.
Even so, sales of OTC healthcare in China have grown 11 to 12 per cent annually during the past eight years. Besides dietary supplements, the other OTC categories are cough, cold and allergy remedies at Rmb 8.8 billion, medicated skin care at Rmb 5 billion, analgesics at Rmb 3.8 billion and digestive remedies at Rmb 3.7 billion.
“In 2000, the Government drew a line that defined what is a prescription drug, and what can be sold over-the-counter,” says Wong. “In the past it wasn’t so clear. It used to be that pharmacies were the sole channel for OTC products, but now there is a change in market structure. Now we are seeing new retail formats, such as the shop-in-a-shop at Wal-Mart. The Government has also allowed online pharmacies.”
Eight years ago, chemists had 64.6 per cent of OTC sales, according to Euromonitor, but by last year that dropped to 45.8 per cent. Competing against them are grocers (16.2 per cent), non-prescribing drugstores (14.9 per cent) and newer formats such as mass merchandisers and healthfood shops. But the real challenger is direct sales (22.8 percent), and that is largely down to Amway.
Got a view?
Email [email protected]
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