Vitamin giant bounds onto the scene

BEIJING - Five years after NBTY Inc, formerly known as Nature's Bounty Inc, began selling its products on the Chinese mainland, the US producer of dietary supplements is ready to take another step forward.

In an attempt to capitalize on the growing demand from China's expanding middle class, the company plans to boost its investment in the country to become the leader in the nutritional-supplements industry.

"China is without doubt going to be the biggest market for supplements. This is driven by the aging population, rising incomes and better-educated consumers," said Xia Junbo, managing director of NBTY (China) Trading Company Ltd, the Chinese unit of NBTY. "We are prepared to make a substantial investment in China."

Founded in New York in 1971, NBTY is a manufacturer, marketer and distributor of a wide range of vitamins and nutritional supplements in the United States and more than 90 other countries.

The company offers more than 22,000 nutritional products under a range of NBTY and third-party brands.

Sales growth

NBTY's global sales grew by 6.9 percent in the fiscal year that ended in September 2010 to $2.83 billion from the same period in the previous year. The company set up a representative office in Beijing in 2005 and began selling its products in China in 2007.

Sales of NBTY's products in China have grown steadily. Revenue in China reached 500 million yuan ($79.3 million) last year, an increase of 70 percent from 2010. Xia is optimistic that sales will continue to climb.

"China has gradually become one of NBTY's fastest-growing markets worldwide," Xia said.

He said NBTY has introduced about 200 products under several different brands, such as Met-Rx and Nature's Bounty, into China. Products such as vitamins, fish oil, and protein are the most popular, in line with the global market.

NBTY's products in China target all ages above 2 years and now are more appealing to high-income consumers.

"There is going to be more availability of products that will be more competitively priced in China in the near future," Xia said.

Currently NBTY has more than 1,000 franchised stores and 8,000 retail terminals in supermarkets, pharmacies and department stores in China, mainly in first-tier cities such as Beijing, Shanghai and Guangzhou. Xia said that in the next five years, the company will devote more effort to tap into China's second- and third- tier cities and the country's vast western regions.

Untapped market

"The demand for healthcare products in the western regions and small- and medium-sized cities keeps rising, which provides us with opportunities," Xia said.

However, he added that although he believes China has a great deal of untapped market potential in the less-developed regions, hurdles remain before his company can access the number of consumers it hopes to reach.

He said market conditions vary across the country and because the distribution system in most parts of China isn't as efficient as it needs to be, the company will cooperate with powerful regional distributors to obtain wider market coverage.

An NBTY spokesperson said the company was also aware of the importance of having an e-commerce platform in China. The company has cooperated with several of China's largest e-commerce websites including Taobao and 360buy.

"E-commerce is expected to become another sales growth engine for NBTY in China," Xia said.

He said that at present NBTY's products sold in China are all imported from the US, but the company will consider localizing production by acquiring Chinese outfits.

"NBTY makes acquisitions every year worldwide, we will also acquire Chinese companies to expand our market share in China," he said.

In 2010, NBTY acquired a plant in Zhongshan, Guangdong province, one of its 23 overseas production bases, to produce fish oil purely for export. Xia said that in the future the plant will also be used to serve the burgeoning Chinese market.

"Having a local presence will help NBTY to gain more understanding of what it takes to succeed in a completely different market from the US," Xia said.

China Daily

(China Daily 03/03/2012 page10)