Vitamin giant takes bounteous step

New York-based company ramping up for a major expansion in China

Five years after NBTY, formerly known as Nature's Bounty, began selling its products on the Chinese mainland, the US dietary supplement giant is ready to take another step forward.

In an attempt to capitalize on the growing demand from China's expanding middle class, the company plans to boost its investment in China to become the leader in the nutritional supplements industry.

"China is no doubt going to be the biggest market for supplements. This is driven by the aging population, rising income and better educated consumers," says Xia Junbo, managing director of NBTY (China) Trading Company Ltd, the China unit of NBTY. "We are prepared to make a substantial investment in China to offer our high quality products to all age groups."

Xia Junbo, head of NBTY (China), says the company will boost investment in China. [Zhang Wei / China Daily]

Founded in 1971 in New York, NBTY is a manufacturer, marketer and distributor of a broad line of vitamins and nutritional supplements in the United States and in more than 90 countries.

The company offers more than 22,000 nutritional products under a number of NBTY and third-party brands.

NBTY's global sales grew by 6.9 percent in the fiscal year that ended in September 2010 to $2.83 billion (2.1 billion euros) from the same period last year. The company set up a representative office in Beijing in 2005 and began selling its products in China in 2007.

Sales of NBTY's products in China have steadily grown. Revenue in China reached 500 million yuan ($79.3 million, 59 million euros) last year, an increase of 70 percent from 2010. Xia is optimistic that sales will continue to climb.

"Although we are fairly new to China, China has gradually become one of NBTY's fastest growing markets worldwide," Xia says.

He says NBTY has introduced about 200 products under several different brands, such as Met-Rx and Nature's Bounty, into China. Products like vitamins, fish oil, and protein are most popular, in line with the global market.

NBTY's products in China target all ages above 2 and now are more appealing to high-income consumers.

"There is going to be more availability of products that will be more competitively priced in China in the near future," Xia says.

Currently NBTY has more than 1,000 franchised stores and 8,000 retail terminals in supermarkets, pharmacies and department stores in China, mainly in first-tier cities such as Beijing, Shanghai and Guangzhou. Xia says in the next five years, the company will devote more effort to tap China's second- and third- tier cities and the vast western market.

"The demand for healthcare products in the western market and small- and medium-sized cities keeps rising, which provides us opportunities," Xia says.

But he added that although he believes China has a great deal of untapped market potential in less developed regions, hurdles remain before his company can access the number of consumers it hopes to reach.

He says because market conditions of various regions in China are varied and because its distribution system in most parts of China isn't as efficient as it needs to be, the company will cooperate with powerful regional distributors to obtain a broader market coverage.

In addition to its plans of expansion, however, Xia says it will also work to promote NBTY's products over the next five years.

NBTY spokesperson said the company was also aware of the importance of an e-commerce platform in China. The company has cooperated with several of China's largest e-commerce websites including Taobao.com and 360buy.com.

"E-commerce is expected to become another sales growth engine for NBTY in China," Xia says.

He says right now NBTY's products sold in China are all imported from the US, but in the future, they will consider localizing production by acquiring Chinese companies.

"NBTY makes acquisitions every year worldwide, we will also acquire local Chinese companies to expand market share in China," he says.

In 2010, NBTY acquired a plant in Zhongshan, Guangdong province, one of NBTY's 23 overseas production bases, to produce fish oil only for exports. Xia says in the future the plant will also be used to serve the burgeoning Chinese market.

"Having a local presence will help NBTY to gain more understanding of what it takes to succeed in a completely different market from the US," Xia says. "NBTY is sure to be rooted in China, it is just a matter of time."