In yesterday's article, the director mentioned that the economic base determines the superstructure. Referring to Japan and South Korea, which have cultural habits similar to ours, it is basically after the economy grows to a certain extent that the people begin to pay extraordinary attention to health, and even regard health as the most important factor to consider in consumption (this may also be the reason why the average life expectancy of the Japanese is the highest in the world). Subsequently, the health product industry in Japan began to develop rapidly.

How advanced is the health product industry in Japan and South Korea? I believe the director doesn't need to say much. Friends who like to watch Japanese and Korean dramas all understand...

The domestic health product industry has also begun to show signs of accelerating growth recently. Probiotics are the first to become popular. With one comes two. In the future, as domestic residents have more and more money in their pockets, pay more and more attention to their own health, and human understanding of efficacy substances increases, coupled with technological progress, more and more health substances will inevitably become popular.

Advertisement

In other words, China's health product industry is expected to start accelerating development and will eventually catch up with Japan and South Korea. Therefore, domestic health product companies with potential are actually very worth paying attention to.

In today's article, let's sort out these potential health product companies together.

The old leader, Tomson Bi-Jian

In terms of overall market share, Tomson is now the absolute first in China, with an industry market share of more than 10%.

In the offline pharmacy channel, Tomson Bi-Jian's coverage rate reaches 65%, and the market share exceeds 30%. Although there are no specific data online, it is generally among the top.On Double 11 of 2023, Tomson BiJian achieved a total online sales of over 900 million yuan, a year-on-year increase of more than 20%, and continued to lead the industry. Its official flagship store ranked first in the sales of health food/dietary nutritional supplements on Tmall, and has been ranked first for five consecutive years. According to the data from Business Consultant, from January to October 2023, in the top 12 categories of Ali's nutritional health sales, Tomson BiJian ranked in the top three for seven categories.

As of the first half of 2023, Tomson's online revenue accounted for 37% of the total revenue, and it is expected to reach 40% for the whole year. In other words, the ratio of Tomson's online to offline is 2:3, which is a rare enterprise that does well in both online and offline.

Generally speaking, the ceiling for a single health product is 1-2 billion yuan, and it is very difficult to reach this ceiling, often requiring years of consumer education.

At present, there are three single products in Tomson BiJian that are in this range, namely protein powder, Jianliduo (joint protection), and LSG probiotics, which is very rare in the industry. In addition to these three star products, the company also has large products such as "Jianshijia" (eye protection), "Jian'ansi" (liver protection), "yep collagen peptide", milk thistle, melatonin, and even overseas brands like BYHEALTH.

In general, regardless of the online and offline channels, product echelon, the number of blue hat (health product approval), or consumer reputation, Tomson BiJian is currently in the absolute first echelon in China. As long as the economy continues to grow in the future and the awareness of residents' health continues to improve, Tomson is expected to benefit the most from this process.

Well-known H&H International Holdings

This company, the director thinks it is at a disadvantage in the name. If you say its brand, I think everyone will understand, Biostime, Swisse, ha ha, is it well-known?

At present, H&H Group has three major business segments, namely the adult health product business mainly based on the acquired Swisse brand; the infant business including the Biostime brand of probiotics, infant formula, the dodie brand of diapers, and the Good Goût brand of organic infant food; and the pet business including the acquired pet nutrition brands Solid Gold and Zesty Paws.In the first half of 2023, the revenue from the supplement business, including Swisse, infant and toddler probiotics, and pet supplements, has accounted for 60.1% of the company's total revenue. According to the company, the global sales of the Swisse brand have exceeded 1 billion Australian dollars (about 5 billion RMB), which has tripled since the company's acquisition in 2015.

Currently, Swisse is also very popular in China, especially online. During the Double 11 period in 2023, the flagship store of By-Health ranked first, followed by the flagship store of Swisse.

Swisse is a strong competitor to By-Health online, but it is significantly weaker offline. The core issue is that to enter pharmacies, it is necessary to have a "blue hat" (healthcare product approval), and Swisse has been in China for a relatively short time, with insufficient approvals. As of the first half of 2023, the company's general trade channel product SKUs have expanded from 47 (12 blue hat products) in 2022 to 74 (18 blue hat products), and offline outlets have covered 52,504. It is worth mentioning that the high-end series Swisse Plus+ launched by the company in the third quarter of 2022 has grown rapidly, with its revenue share in mainland China reaching a high single-digit percentage.

Thanks to the promotion of high-end products in the adult health product business, in the first half of 2023, the company's adjusted net profit margin for the corresponding business increased by 4.5 percentage points to 23.6%. With the continuous expansion of Swisse's channels and products in the Chinese market in the future, it is expected to grow faster than the industry and continue to improve profitability.

However, from the overall business layout of H&H, it is not difficult to see that the company has acquired more in recent years, and the pace has been quite large, resulting in greater pressure on the balance sheet, which is somewhat unattractive.

Jiangzhong Pharmaceutical, an old state-owned enterprise, has been dominating the probiotics list on JD.com recently. It is not the LSG of By-Health mentioned earlier (ranked third), nor Swisse (ranked fourth), nor the little blue bottle we talked about yesterday, but the probiotics of Jiangzhong Pharmaceutical.

Jiangzhong Pharmaceutical is a national-level old brand, and I believe many students have heard of or used Jiangzhong's stomach-friendly digestion tablets (there are still goods in the director's house). The company has two national brands "Jiangzhong" and "Chuyuan," as well as two well-known brands in Jiangxi Province, "Yang Jisheng" and "Sanghai," and is a subsidiary of the state-owned enterprise China Resources Group.The product line is very rich, covering multiple areas such as the spleen and stomach, intestines, throat, and nourishment, but the most famous are still digestive system products. In addition to the probiotics and stomach-strengthening digesting tablets mentioned earlier, lactobacillus tablets are also a popular product of the company. The core product series is shown in the following figure:

Jiangzhong Pharmaceutical's revenue has increased from 1.755 billion in 2018 to 3.812 billion in 2022 in the past five years, with an average compound growth rate of 21.4% per year. The net profit is slightly less impressive, growing from 470 million to 596 million, with an average compound annual growth rate of only 6.12% over four years. However, considering the impact of the epidemic and the rise in raw material prices, most companies' net profits have significantly lagged behind revenue, so it's not too bad.

In the first three quarters of 2023, Jiangzhong Pharmaceutical's revenue achieved a year-on-year increase of 9%, and the net profit increased by 16% year-on-year, indicating a relatively stable long-term growth.

As a well-known OTC pharmaceutical company in China, Jiangzhong has an inherent advantage in entering the health product market. On one hand, it has a brand advantage, and on the other hand, the pharmacy channels are already in place. Most importantly, the R&D strength of a pharmaceutical company is inherently stronger, making Jiangzhong a company worth paying attention to.