China CBEC phenomenon: Tmall Global on overcoming supplements supply chain woes as products hit peak popularity

By Tingmin Koe

- Last updated on GMT

From left: Yang Rui, board member at Sirio Pharma, Zhou Yuan, head of health products at Tmall Global, Hans Yao, VP at Sirio Pharma, Feng Shiqian, GM of the Chinese Region at CAC Webber Naturals, Kong Lingpeng, business leader of the Chinese Region at Doppelherz, and Eugene Ung, executive manager of Best Formulations. ©Sirio Pharma
From left: Yang Rui, board member at Sirio Pharma, Zhou Yuan, head of health products at Tmall Global, Hans Yao, VP at Sirio Pharma, Feng Shiqian, GM of the Chinese Region at CAC Webber Naturals, Kong Lingpeng, business leader of the Chinese Region at Doppelherz, and Eugene Ung, executive manager of Best Formulations. ©Sirio Pharma

Related tags tmall CBEC Sirio Pharma

Overseas supplements sold into China via cross-border e-commerce (CBEC) can get popular easily, but supply chain pain points are making it difficult for brands to replenish their goods in time, says the head of Tmall Global.

Zhou Yuan, head of health products at Tmall Global, revealed the above in a panel discussion hosted by China contract manufacturer Sirio Pharma during its 30th​ anniversary celebration held in Shanghai on June 20.

The half-day celebration also saw the attendance of major figures in China’s health foods industry, including China Nutrition and Health Food Association (CNHFA) president Bian ZhenJia.

The last item of the agenda was a panel discussion titled “Cross-border business-gain access to the global nutritional supplements market” involving five guest panellists.

They were Zhou Yuan, head of health products at Tmall Global, Hans Yao, VP at Sirio Pharma, Feng Shiqian, GM of the Chinese Region at CAC Webber Naturals, Kong Lingpeng, business leader of the Chinese Region at Doppelherz, and Eugene Ung, executive manager of Best Formulations. 

Based in Canada and Germany respectively, Webber Naturals and Doppelherz are both selling their health supplements into China via CBEC on platforms such as Tmall Global operated by Alibaba. Best Formulations, on the other hand, is a contract manufacturer officially acquired by Sirio Pharma in January.

Hosting the discussion was Yang Rui, board member at Sirio Pharma.

She pointed out that the CBEC sector has been growing at nearly 18 percent, while that of the health supplement industry in China has been growing at around six per cent in recent years.

“This means that CBEC is growing at three times higher of our industry, and this is a phenomenon which we should pay attention to,”​ said Yang.

However, the channel has been plagued by supply chain challenges and brands are finding it difficult to stock up their goods in time especially when they are highly popular.

“China's retail models are very different from the overseas markets...Just one livestreaming session and a product can go out of stock and so, there will be challenges faced on the supplier end,” ​said Yao.

In fact, Zhou has summarised the cons of nutritional products sold via CBEC into three key words – Unfamiliar (生), Expensive (贵), and Slow (慢).

He said that Chinese consumers were unfamiliar with CBEC products and even if they were to buy the products, they were unsure about the products’ functions and whether they were worth the money.

Third, CBEC can also be affected by a slow logistical flow and supply chain.

In the same vein, Kong pointed out that adjustments and changes in supply chain were the biggest pain points for the company.

Giving overseas brands the flexibility

Tmall and Sirio Pharma have set up a facility in Zhuhai Free Trade Zone to help overseas supplement brands address supply chain challenges arising from the sudden increase in consumer demand.

“Overseas brands might have managed to build a name for themselves through content marketing, interest marketing, or by posting content on Xiaohongshu (Little Red Book). Subsequently, its products could have run out of stock very quickly on Tmall and in the next three months, it might be very difficult to restock them," ​said Zhou.

Officiated in April, the facility is mainly used to pack capsules / pills from overseas supplement manufacturers into bottles, or blister packs.

It could also manufacture supplements that come in the form of soft gel capsules, hard capsules, and tablets.

According to Sirio Pharma, overseas brands could either choose to manufacture their products in Sirio Pharma’s overseas factories or by themselves, and subsequently send the products for packing in the Zhuhai factory.

Deterring viral products that deliver no real benefits

In addition to supply chain issues, the Zhuhai factory is designed to speed up the commercialisation of new supplement prototypes and raise the quality of products sold via CBEC.

“A lot of the prototypes that I have seen in the tradeshows are not translated into finished products used by the consumers in their daily lives. Many have stopped at the R&D stage.

“If they could work with Sirio Pharma and tap on its raw material R&D capability, we hope that more consumers could get hold of better products quicker,”​ said Zhou. 

As for product quality, he said that the CBEC sector was in urgent need of ensuring that nutrition products were safe and truly beneficial to consumers' health.

“We are concerned about the quality of nutrition products that became popular in a short span of time. Could it be that their growth is solely driven by the injection of funds and that they do not deliver any real benefit to the consumers at all? 

“Second, we are concerned about the manufacturing standards of nutrition products and the quality of factories making the products. We want the nutrition industry to continue growing but do not want it to be tainted by bad publicity,” ​he said. 

As the use of CBEC becomes even more widespread in China, Zhou said Sirio Pharma would be a key partner for this year and even in the next three to five years.

Three categories of interest from Tmall

Nutrition foods for anti-aging, for the microbiome, such as pre/pro/postbiotics, and superfoods containing botanical extracts are the three categories that Tmall Global would want to focus on for the upcoming year. 

According to Zhou, younger consumers tend to look for functional snacks while those who are more knowledgeable about nutrition will look for personalised products.

As such, Tmall Global will be launching ‘nutritious food packs’ (营养餐包) designed based on gender and age. Zhou added that food packs designed for use in specific circumstances (场景类餐包) would be another growth opportunity.

Feng, on the other hand, said that fish oil was Webber Naturals’ largest category in China and globally.

As for Doppelherz, Kong said that consumer preference has been changing since CBEC began in the mid-2010s till now.

“In 2014 and 2015, when CBEC has just started, the first few products that consumers got to know from Doppelherz was its garlic extract for immune health.

“Between 2016 and 2018, consumers have become more familiar with CBEC and there was a greater demand for nutricosmetics and more began to purchase our oral collagen.”

In the recent years, Doppelherz's most popular products are lutein and co-enzyme Q10, said Kong.

“We hope to promote CBEC development in the next five years. Not only do we import products, we can also export our products to the US too,” ​Yao said, ending the session with his five-year forecast on health foods and CBEC.

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