Cathay Securities and Haitong Securities: Optimistic about the era of efficacy in health products, high homogeneity in segmented categories such as fish oil

According to the Zhitong Finance APP, Guotai Junan has released a research report stating that, similar to the beauty industry, health supplements have high gross margins and high marketing expense ratios, with a more advanced stage of efficacy and lower intensity among leading brands, currently entering a new stage of transformation. New channels and new customer groups are expected to catalyze new demand for the efficacy of health supplements, bringing new opportunities for transformation in the industry. The report is optimistic about brands that excel in product innovation and strengthen operations. It recommends RYC (003010.SZ), which is transforming from agency operation to independent brand incubation, and pays attention to the adjustments and improvements of BYHEALTH (300146.SZ). Related stocks include Jindawei (002626.SZ), H&H International Holdings (01112), Xianle Health (300791.SZ), and Baihe Co., Ltd. (603102.SH).

Guotai Junan's main points are as follows:

The trillion-yuan health supplement market is expected to expand with new demographics and new demands

In 2024, the market size of vitamins and dietary supplements (VDS) in China is projected to reach 232.3 billion yuan, a year-on-year increase of 4%. Compared to the United States, there is still room for improvement in the penetration rate of health supplements across all age groups in China. With the cultivation of health supplement consumption habits among young and middle-aged individuals and the aging population, the market has long-term growth potential. The components and functions of health supplements are numerous, leading to a dispersed demand, and thus a fragmented market. In 2024, the CR3 for VDS market companies in China is 22%, with the top three brands—BYHEALTH, Amway, and H&H—each exceeding 10 billion yuan in retail sales. Similar to the beauty industry, health supplements have high gross margins and high marketing expense ratios, with a more advanced stage of efficacy and lower intensity among leading brands, currently entering a new stage of transformation.

Optimistic about new channels and new demands driving the functionalization of the health supplement industry, bringing opportunities for product innovation

Health supplements have high gross margins and heavy marketing, making them suitable for content e-commerce. In 2024, the GMV of health supplements on Douyin is expected to increase by 44% year-on-year. The rise of new channels on Douyin brings in a younger incremental customer base, and the current landscape on Douyin is still uncertain, with a high proportion of white-label products, providing opportunities for new brands and new categories to emerge. Similar to functional skincare, new channels educate new customer groups and meet the new demands of ingredient enthusiasts. Cross-border e-commerce and the supply side of synthetic biology help accelerate the efficacy evolution of health supplements. During this transformative phase, traditional brands are large and comprehensive, but the proportion of segmented efficacy categories remains low. With the emergence of new hot ingredients and new categories, brands with strong product innovation capabilities are expected to seize new opportunities.

Among segmented categories, fish oil and coenzyme Q10 are growing rapidly, while probiotics and oral beauty have large capacities, and basic nutrients are highly homogenized

1. Fish Oil: Market size is 5-10 billion yuan, with high efficacy and customer group extension, including young and middle-aged individuals and new scenarios for anti-inflammation and beauty, with brands achieving differentiation through purity, structure, and formulation. 2) Coenzyme Q10: Market size is 4.1 billion yuan, a year-on-year increase of 17%, with demand stimulated by the pandemic, high pressure, and women's health care. 3) Probiotics: Market size exceeds 10 billion yuan, with regulating intestinal health as the core function, extending to weight management; the top three brands—Lifespace, WanYiLan, and Nutrilite—each exceed 1 billion yuan in retail sales. 4) Oral Beauty: Market size exceeds 10 billion yuan, with high average transaction prices and numerous innovations; new anti-aging ingredients such as ergothioneine, NR, and PQQ are growing rapidly, and product differentiation can be achieved through ingredient innovation and recombination. 5) Basic Nutrients: The market sizes for vitamins, minerals, and protein are 32.9 billion, 27.1 billion, and 11.6 billion yuan, with year-on-year increases of 3%, 5%, and 1%, respectively. Traditional brands dominate this segment, with high product homogenization and a focus on channels. The top brand on Douyin, Nutriland, relies on deep distribution and cost-performance strategies to maintain a leading position Risk Warning: Changes in cross-border health product regulations, intensified competition, and underperformance of new products