According to the Zhitong Finance APP, Huachuang Securities released a research report stating that stable economic growth, aging population, and the rise of Generation Z are catalyzing the accelerated penetration of functional foods, maintaining a compound annual growth rate of 6.3% over the past five years, significantly higher than the same period for social retail and other basic consumer goods. Meanwhile, in recent years, the combination of health and self-care demands has led to comprehensive penetration among consumer groups such as women, teenagers, infants, and pets. In terms of channels, online growth through platforms like Douyin and cross-border e-commerce is rapid, with private domain models and new retail entering the scene. The health supplement industry shows a coexistence of leading companies and long-tail players, with a clear dual phenomenon. Precise positioning of C-end vertical demands and targets leveraging new channels in the industry are worth deep exploration; the B-end operational capabilities are undergoing a comprehensive transformation, recommending SIRIO (300791.SZ) and paying attention to Biohigh (603102.SH), among others.
<h2>The main viewpoints of Huachuang Securities are as follows:</h2>
Stable economic growth, aging population, and the rise of Generation Z are catalyzing the accelerated penetration of functional foods
First, economic development drives an increase in per capita disposable income. From a global perspective, China's current per capita income level has entered a stage that catalyzes the acceleration of health care demand; second, the trend of aging leads to an increase in daily proactive health care demands, expanding the population of heavy consumers of functional foods; third, the macro economy has transitioned from a period of rapid growth to a moderate growth era, with the consumption habits of young consumer groups focusing on &#34;self-care&#34; continuing to amplify. Driven by these three factors, the penetration of functional foods across all age groups is expected to continue to increase. China's functional food industry has maintained a compound annual growth rate of 6.3% over the past five years, significantly higher than the same period for social retail and other basic consumer goods.
New demands and new channels resonate, bringing a large number of new opportunities to China's functional food market
At the industry mid-level, the product carriers, channel models, and consumption scenarios that meet new consumer demands are being reshaped, specifically manifested as:
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New demands: The combination of health care and self-care is broadening consumption scenarios towards leisure, accelerating penetration across all age groups. Traditional health supplement consumption mainly targets middle-aged and elderly populations, with effects concentrated on basic functions such as disease prevention or alleviating physical discomfort, like fish oil for preventing cardiovascular diseases, protein powder for boosting immunity, and glucosamine for joint care. Meanwhile, in recent years, the combination of health and self-care demands has led to comprehensive penetration among consumer groups such as women, teenagers, infants, and pets, with further expansion of segmented effects like beauty and health (anti-aging) and stress management (sleep aid). New products that meet these new demands are rapidly emerging: new leisure-type formulations, such as functional gummies, oral liquids, and beverages; new flavors, including fruit and floral; and customized portable small packaging innovations that broaden consumption scenarios.
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New channels: Rapid online growth through platforms like Douyin and cross-border e-commerce, with private domain models and new retail entering the scene. The C-end supply of health supplements has a low entry threshold and high markup rates across various industry chains, leading to profound changes in channel models in recent years. The industry has transitioned from a past dominated by direct sales to the rise of chain pharmacies, and now to current online and diversified transformations: first, online sales have multiplied over the past decade, currently accounting for more than half, with many new light-asset brands rapidly emerging to capture young consumers, especially with the rapid development of content e-commerce and cross-border e-commerce on platforms like Douyin. Therefore, second, private domain models provide personalized services that enhance consumer loyalty, naturally aligning with the attributes of health supplement categories, where strong trust leads to high repurchase rates, suitable for increasing average transaction value or incubating new brands, typical examples being Lemon Box, Mai Jili, and Nutrition Factory, among others
Third, the offline new retail formats represented by Sam's Club and Hema are reusing channel traffic to launch their own brands.
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Industry Opportunity: Coexistence of New and Old Formats, Embracing New Opportunities in Vertical Segmentation, Precise Positioning on the C-end, and Efficient Response on the B-end, Establishing Demand Insights and Reverse Selection Capabilities
The landscape of the health supplement industry shows a coexistence of leading companies and long-tail brands, with a clear dual phenomenon. On the C-end, traditional product consumer groups are solidified, with strong long-cycle stability but limited growth potential. Therefore, traditional C-end leading companies have outstanding comprehensive strength but weaker growth. On the other hand, the trend of demand vertical segmentation is prominent, with the expansion of segmented efficacy giving rise to numerous new brands and rapid development opportunities, leading to a long-tail trend in the industry. Thus, precise positioning of segmented efficacy and customer groups will be key to the rise of C-end brands. Meanwhile, B-end supply chain companies will inevitably face a reform in customer management, with traditional large B customers demanding strong R&amp;D, high-standard supply chains, and non-standard customized services (CDMO), resulting in strong order stability. New small B customers rely on new demand trends, with basic requirements for suppliers being small orders with quick response and low costs, corresponding to flexible production and rapid product iteration. Higher-level demands focus on forward-looking market awareness, and large B-end companies that establish demand insights and reverse selection will occupy the high ground in the industry.
Investment Recommendation: Capitalize on New Opportunities in Industry Restructuring, Recommend SIRIO, Focus on H&amp;H International
C-end precise positioning of vertical demand and leveraging new channels are worth deep exploration: Focus on H&amp;H International (01112), as its operational and financial pressure peak has passed, the infant formula industry is bottoming out, Swisse health products are driving growth, and its pet health product business has a prominent forward-looking layout; also pay attention to online retail company RuYuchen (003010.SZ), whose own health product brand Feicui is positioned in the anti-aging vertical segment, showing outstanding growth; as well as the operational adjustments of Tongchen Beijian (300146.SZ); B-end operational capabilities are undergoing comprehensive transformation: Recommend SIRIO (300791.SZ), which has a complete global layout and operational reversal, and is increasing investment in new channels, and pay attention to Biohigh (603102.SH) and others.
Risk Warning: Intensified industry competition, reduced cost-effectiveness, overseas disruptions on the B-end, significant cost increases, etc

603102

300791

Huachuang Securities released a research report indicating that China's functional food industry has maintained a compound annual growth rate of 6.3% over the past five years, significantly higher than other consumer goods categories. Economic stability, aging population, and the rise of Generation Z are driving the accelerated penetration of functional foods, with consumer groups including women, teenagers, infants, and pets. Online channels such as Douyin and cross-border e-commerce are experiencing rapid growth, and the industry landscape shows a coexistence of leading companies and long-tail players. It is recommended to pay attention to companies like SIRIO and Biohigh

HuaChuang Securities: Functional foods accelerate penetration, tapping into new opportunities in industry reshaping