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Analysis: How to unlock the APAC consumer health opportunity

From aspirin to bone broths, the consumer healthcare market in Asia combines East and West and the growing population has more money to spend on healthy lifestyles. Sumit Sharma, head of health & life sciences, Asia Pacific, at Oliver Wyman, looks at how to identify new sources of value.

Today's healthy shopping carts are still dominated by modified versions of everyday goods, with lower levels of fat or sugar or higher levels of protein. But they also contain some new categories: superfoods, supplements, and serums, which often come with aspirational claims and expensive price tags. The marketing of healthy products has evolved beyond general claims, such as that a product is “good for you,” towards clinical claims that are personalised, quantifiable, and targeted, whether they contribute to weight loss, improved memory, or reducing carcinogens.

The trend comes as consumers seek more care outside the clinical setting and increasingly self-diagnose, self-medicate, and self-monitor. This has also facilitated the rise of a new industry segment in consumer wearables, apps, and other means of digital engagement in health. All of these movements have resulted in a new paradigm that Oliver Wyman calls “the proactive consumer”. These consumers are willing to spend on health benefits and technology and are looking for complements and even alternatives to prescription drugs and over-the-counter (OTC) medicines.

The result is renewed interest in the health and wellness business, which generates worldwide sales of more than US$700 billion. The Asia-Pacific share grew from 19% in 2007 to more than 30% last year as the region’s population and purchasing power increased.

Asia is both a source of raw materials, such as ginkgo biloba, and an inspiration for new product lines such as herbal tonics and drinks based on traditional Chinese medicine (TCM). TCM sales have grown 25% over the last six years and the category has expanded out of Chinese medicine halls and into modern supermarkets and pharmacies in its home markets China and Singapore.

In addition, products such as bone broths have become surprising health fads in the West. Many multinational healthcare – that is, pharmaceutical – and consumer packaged goods (CPG) companies have long seen the consumer health business as a diversification strategy, particularly given its high margins compared to lines such as off-patent drugs and food products. Numerous Asian companies have also entered the market for vitamins and herbal and mineral nutritional supplements (VHMS), creating new brands or exporting them to Asia from established markets such as Australia and the US. This steady growth and increasing activity provide an opportunity to re-evaluate the opportunity in the Asia-Pacific region.

These trends make the Asia-Pacific region ready for entry and expansion: Its health-and- wellness market is expected to grow at an average of 8% a year between 2016 and 2020, and key markets such as China and Indonesia show promising potential in both OTC and VHMS products.

The opportunity is not uniform across Asia, and there is variation in the competitive and accessibility challenges – including regulatory barriers and route-to-market set-up – to new entrants and small players looking to grow. China has loosened regulations for online selling, fuelling demand for VHMS, particularly from Australia. This has attracted foreign investors – for example, Australia’s Swisse brand is now Chinese-owned. India, despite a population almost as large as China’s, has lagged in overall value, but the market is expected to grow. In particular, a trend for self-medication is beginning to take hold, boosting OTC market growth to double digits.

The popularity of traditional products, such as Ayurveda, has attracted global and regional investors eyeing them for export, even as local price ceilings may hinder margin growth in India. In both China and India, digital infrastructure investment is increasing, and e-commerce has become a key channel of consumer health distribution. Accessing rural populations through localised, lower-cost products is already a key strategy in food and personal care for many CPG companies, and is now being used for pharmaceuticals in consumer health as well.

Asia is also home to many local conglomerates and domestic CPG companies that have stronger and deeper penetration and footprints than multinational players. Furthermore, traditional medicines in Asia have become mainstream opportunities for CPGs and multinationals. For example, Suntory’s BRAND'S Essence of Chicken, once a simple TCM remedy based on concentrated chicken stock, has grown into a powerhouse brand with deep penetration in modern trade, while maintaining a presence in traditional medicine halls. It has further segmented its product line into new varieties – the same product enhanced with Cordyceps, Tangkwei, and Ginseng flavours – to target specific segments, such as women, the elderly, and young businessmen.

There is often, however, no clear winner in consumer health categories. In China, for example, research has shown limited brand awareness and loyalty for VHMS, though there are signs that these factors are increasing as companies delve further into direct selling and marketing.

This article first appeared in Oliver Wyman Health.

Posted on: 01/05/2018 UTC+08:00


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