“As consumption continues to upgrade, younger people’s demands for their appearance, weight and health have increased, which is forcing industries to update their products. Functional foods have an opportunity to grow and will be an important trend in healthcare,” said food analyst Zhu Danpeng.
Functional food ads surfaced several years ago as many food and beverage brands put out products containing herbal ingredients touting medicinal properties that target the health concerns of younger consumers. In December 2020, Coca-Cola launched a ginger-flavored cola made to be served warm, which not only capitalizes on a common Chinese home remedy for colds – cola heated up with added ginger – but also the belief in TCM that ginger helps increase energy levels during the winter months.
Last year, TCM brand Tong Ren Tang released coffee drinks containing herbal ingredients such as goji berries, believed to improve sleep, and motherwort, which according to TCM promotes circulation and helps menstrual flow. Other pharmacy chains and traditional healthcare product makers soon followed with their own herbal snack food lines.
Beverage brands have been aggressive in their advertising to health-conscious consumers, such as Coca-Cola and Sprite with dietary fiber, and flavored sparkling water brand Qingqi with added vitamin C and niacinamide, a form of vitamin B.
Snack brands like Three Squirrels have developed products containing sesame, date, goji and red bean – all touted in TCM as helpful in slowing hair loss, weight loss and improving skin quality.
As capital floods in, functional food brands mushroomed. Buffx, an herbal candymaker established in April 2020, saw three rounds of investment in a year. Two similar companies, Minayo and Nelo, each received tens of millions of yuan in financing in 2021. The brands quickly dominated the market through a combination of novel ideas, creative packaging and marketing to younger demographics. Advertised as having an instant effect in controlling sugar, carbohydrates and fat in the body, they quickly became highly visible on social networking sites such as Weibo, Douyin (China’s TikTok) and video platform Bilibili.
Minayo, which launched in August 2020, sold over two million pieces in its first month and has a monthly repurchase rate (return customers) of over 30 percent. Buffx sold over 20,000 boxes of “sleep gelatin cups” in two months after its product launch on Tmall. Nelo also boasts a repurchase rate of 20 percent for its jelly-based products that claim to promote liver health. Statistics from Taobao, Alibaba’s e-commerce platform, show that total sales of functional foods surpassed all other food categories during its annual Double-11 shopping event in November 2020.
“The domestic market for functional foods developed quickly. Its gross annual value surpassed 270 billion yuan (US$42b) in 2020,” Chen Wei, president of Jiangnan University and a food specialist, said at a forum on functional foods held in Jinan, Shandong Province in April.
Compared to countries where functional foods have been popular for years, China’s market is nascent. A report released by market research supplier Forward Intelligence in 2020 showed that over 50 percent of people in the US buy functional foods, compared to only 20 percent in China. Per capita
consumption of functional foods in China hovered between one-sixth and one-eighth in 2018 compared to developed countries and regions.
Controversy abounds over the effects of functional foods in a health product market already under scrutiny for preying on elderly consumers. Many accuse brands of exaggerated claims and misleading packaging. Brands tout the positive effects of their products without disclosing their possible side effects, experts said.
“It [functional foods] appears to be an active response to issues, but it’s actually an evasion or placebo. It would be more accurate to say they [young people] are buying comfort or abating fear through their purchases,” Zhu Yi said.
The sector also suffers from loose regulation and definition. In China, health food manufacturers must apply for a special certificate for any product advertised as having functional or other health benefits. “But many companies are advertising the functionality of their products without the certificate, which is actually illegal,” Zhu Danpeng said.
Despite the increased willingness to invest in general health, Zhu Danpeng said many Chinese consumers are ill-informed and can be easily swindled by unscrupulous sellers and poor-quality products. “Getting them better informed is essential. I believe their understanding of functional foods will improve with time,” Zhu Danpeng said.
However, experts agree that market supervision is also essential. “While raising public awareness, authorities need to tighten supervision over the production, sale and promotion of products in this field to stop businesses from taking advantage of the system,” Zhu Yi added.