Thorne, based in Sandpoint, ID, distributes its products in the practitioner channel in North America. In China it will distribute selected products through the distribution network of its Chinese partner, YouCare Pharmaceutical Group, based in Beijing.
The move will capitalize on the Chinese demand for American made products, said CEO Paul Jacobsen. After the melamine scandal and other food safety issues, products made in-country are not as trusted by consumers as are imports.
“We believe that the growth in China will be for US-made supplements. We make our products here and we source a lot of our ingredients in the US or in Europe. Our target market is wealthier Chinese consumers who want American quality,” Jacobsen told NutraIngredients-USA.
Barrier to entry
The move has been some time in the making, Jacobsen said. China requires imported health process to go through a registration process that is a significant barrier to entry.
“You have have to go through a fairly rigorous registration process with their FDA. Some of the products we will be selling will still have to go through that process,” Jacobsen said. As for the product mix, Jacobsen said Thorne is looking at a number of areas.
“We are going to work on a number of therapeutic areas that are similar to the US. They are having weight and diabetes issues that are all starting there now,” he said.
In addition to having access to YouCare’s distribution and marketing expertise, Thorne will also look to broaden distribution within China in the future with something analogous to the US practitioner channel. In China, it will work more through hospitals, as opposed to individual practitioners, Jacobsen said.
“For right now this is more of a consumer play,” Jacobsen said.
According to Thorne, in 2012, the market for nutraceuticals including traditional medicines in China was $90 billion, with an annual growth rate of 22%. Thorne expects the market to reach $140 billion within five years, which would make China the largest market for nutraceutical products in the world. Under the joint venture agreement, Thorne will be responsible for manufacturing products in the United States and supporting marketing activities. Thorne's manufacturing platform has been designed to conform to the rigorous chemical manufacturing controls (CMC) of botanical drug specifications instituted by the US Food and Drug Administration (FDA) and is FDA 231CFR211 compliant. YouCare will provide expertise in all areas of product registration, marketing, commercialization and distribution.
"YouCare Pharma has extensive experience in healthcare marketing and commercialization in China," said Weishi Yu , Executive Chairman of YouCare Pharma "We are ideally positioned to tap into the large and rapidly expanding demand for nutraceuticals in China. Factors including economic growth and an aging population are likely to increase demand for high quality nutritional supplements and lifestyle management products in China in the years ahead.”
Long term investment
The high bar that imports must clear means that entry into the Chinese market must be viewed within the proper time frame, Jacobsen said. Quick returns on investment are unobtainable, so a company has to have enough financial heft to bear those costs over a period of time.
“The only problem is with a lot of companies they can’t get in there because having these certifications is really important if you are going to following the rules and regulations. You really do need to take a long term frame because it is both time consuming and expensive,” he said. “Ultimately, we think it will be very significant for us.”