Misperceptions clash with the reality

Multinational companies' misperceptions about China's consumer healthcare market:

1. This market is small.

Fact: The market is large and is continuing to grow rapidly. McKinsey forecasts that it will increase at an annual rate of 12 percent, representing a total market potential of $44 billion by 2017.

2. The market is focused on traditional Chinese medicine, which is all about roots and herbs.

Fact: There is significant room for TCM and Western products. Consumers' perceptions and use of TCM and Western medicine differ markedly. They perceive Western products as more effective and tend to use them in more advanced stages of an illness, while using TCM in the early stages.

3. The market is highly fragmented, and it is difficult for a new entrant to gain a significant foothold.

Fact: The top 10 companies command 30 to 40 percent of the market. It is highly dynamic, and newcomers have the chance to enter it.

4. Success is all about winning in the retail pharmacy sector.

Fact: The sector is important for on-the-counter products, especially TCM. Hospitals continue to be an important channel for Western over-the-counter drugs. Meanwhile, direct sales and modern trade outlets, such as supermarkets and convenience stores, play increasingly bigger roles.