Analysis on China’s Blood Enrichment Products Market
Blood enrichment products possess some special characteristics in China’s healthcare market. Firstly, they are one of the most developed products in the Chinese healthcare market, as blood enrichment products have now been divided into two regulatory categories: medicine and health foods.
Secondly, ingredients of blood enrichment products have three main categories, namely chemical compounds, generic food ingredients and Chinese herbs such as angelica and donkey-hide gelatin. Thirdly, due to constant marketing campaigns, people have now accepted that there are three types of blood enrichment products in terms of effectiveness: pure blood enrichment, blood and energy dual enrichment and female body strengthening.
It can be said that China’s blood enrichment product market is a result of extensive consumer education in the last 10 more years. Currently, the medicine part of this market is worth approximately RMB 2 billion (US$ 260 million), while the health food part is about RMB 2 – 2.5 billion (US$ 260 – 330 million).
In terms of blood enrichment products, the health food category has made better contributions to the industry so far. According to a survey in early 2006, there were about 600-700 blood enrichment food brands in China, with leading national players such as Red Heart King Group, Joincare Pharmaceutical Group, Hong Fu Loi International, Harbin Pharmaceutical Group Sixth Pharm Factory, Hengan Group and Yangshengtang Group, and tens of leading regional brands.
The blood enrichment medicine segment was relatively less competitive compared to blood enrichment food segment. There were only a handful of serious national players, such as Dong-E E-Jiao Group, Jiuzhitang Group, Jilin Xiuzheng Pharmaceutical and Shandong Fujiao Group, and there were rarely any leading regional brands. Dong-E E-Jiao Group had been the dominant player in this market with 43% domestic market shares and 75% of export market shares for three consecutive years.
Among blood enrichment medicines, donkey-ride gelatin-based products had been gaining more and more popularity, with more than 45% market shares in mid-2006.
Wholesale prices of blood enrichment products in China exhibited the following characteristics: health foods higher than medicines, oral liquids higher than syrups, branded products higher than non-branded products, and prescription products higher than OTC (over the counter) products.
In terms of retail prices, there were also three distinctive characteristics. Firstly, branded products, despite their higher prices, had smaller profit margins than non-branded ones. For example, for the same donkey-ride gelatin-based oral liquids, products from Dong-E E-Jiao had a gross margin of only 20%, while products from the lesser-known Jiangxi Yuxin Pharmaceutical could reach 85%. Secondly, competition in the retail end was maturing, as manufacturers and distributors tended to achieve a rational balance between promotional expenditure and product pricing in many geographical regions. Thirdly, although blood enrichment products had originated from rural areas in the 1990s, amid the short-sighted competitive environment, currently there was a shortage of products that could satisfactorily meet the demand from rural populations.
As more than 80% of blood enrichment products were sold as OTC medicine in China, the real driving force in this market would be the competition among OTC outlets (mostly pharmacies). Survey statistics showed that among the top three factors that influenced consumers’ purchasing decision of blood enrichment products, “in-store recommendations” ranked the highest, followed by “doctor prescriptions” and “brand awareness” each with 21% respondents, and “previous experience” finished the last with 12% respondents.
From the above statistics we could conclude that a product’s competitiveness was largely determined by its word-of-mouth recognition, which was in turn developed from factors including retail outlet development, in-store sales personnel, unique selling points of a product, packaging and promotional campaigns.
Market strategy solutions
The above analysis indicates that there are two major themes in the current blood enrichment product market: retail outlets and rural demand. These two themes could therefore form the basis for a company’s development breakthrough.
Retail outlet strategies
Retail strategies have to be differentiating, emotional and communicative. Differentiating means product innovation and operational advantages, in order to achieve an optimal combination of performance, products and prices.
An emotion-appealing marketing campaign is important for blood enrichment products, as their target purchasers are mostly female customers, who are relatively more emotional. Therefore, a detailed, considerate and comprehensive promotional campaign, coupled with effective execution, will be the key factors to secure good sales volume.
A communicative strategy means companies have to establish long term relationships with their target customers, by means of regular and diversified communications and messages, so that consumers can improve their understanding of particular products and manufacturers.
Promotions key to rural market operations
The definition of rural market here also covers county-level markets (the third and fourth tier markets). Compared to urban market, rural market has the following three advantages. One is their better understanding of the danger of blood deficiency, due to their suboptimal nutritional intake. Rural consumers buy blood enrichment products not only for beauty purposes, but also for real blood supplementary purposes. The second advantage is that rural consumers typically have more “sheep mentality’ when it comes to consumption, easier to be manipulated by well-executed promotional campaigns. The last advantage is that in rural markets, promotions and sales activities are normally tied together, while companies may have to sink more marketing money to please the more cherry-picking metropolitan consumers.
Distribution channels and promotional campaigns will be the keys for opening up the rural demand of blood enrichment products. It is important for a product manufacturer to partner with those commercial distribution companies with rural supply qualifications. And promotional campaign should not only be targeting end customers, but also grass root-level pharmacies and shops.