China Food

Is the Functional Food Bureau of Huaxi biology an adventure for the brave or a game for the confident?

has been laying out functional food for one and a half years. What is the answer given by Huaxi biology?

Text: Josephine

Source: foodily daily food (ID: foodily)

On August 30, Huaxi biology announced its financial results for the first half of 2022. According to the data, in the first half of 2022, the revenue reached 2.935 billion yuan (RMB, the same below), an increase of 51.58% over the same period of 1.937 billion yuan in the first half of last year, but functional skin care products are still the main force.
Source: semi annual report of Huaxi biology in 2022
Foodaily daily food noted that the functional food business of Huaxi biology had a revenue of about 44.3658 million in the first half of this year, accounting for 1.5% of the company’s total operating revenue.
Huaxi financial report said in the financial report that the functional food business has achieved substantial growth under a low base. The revenue of this business was 23 million yuan last year, and nearly doubled in the first half of this year.
In this way, the growth rate is indeed good. When Huaxi biological laid out its functional food business line in 2021, it said that “functional food will be the ‘fourth round’ driving the growth of Huaxi biological’s revenue.”
But now, with the silence of the new consumption wave, the consumer doubts faced by functional foods and the uncertainty of the environment, is this food Bureau under Huaxi biology an adventure for the brave, an adventure for the reckless, or a game for the confident?
Source: Huaxi biological official website

The growth rate is fast and money is spent

As mentioned at the beginning, Huaxi biological functional food had a revenue of more than 40 million yuan in the first half of the year, almost twice that of last year.
However, compared with functional skin care products, the growth rate and revenue are far from each other. In the first half of the year, the revenue of functional skin care products business was 2.172 billion, accounting for 74% of the company’s revenue, and the year-on-year growth rate was as high as 77.17%.
Since January last year, the National Health Commission approved that sodium hyaluronate (hyaluronic acid) can be used as food raw materials in dairy products, beverages, alcohol, cocoa products, candy and frozen drinks. Huaxi biological has launched three functional food brands, namely, the hyaluronic acid water brand “shuijiquan”, the hyaluronic acid food brand “black zero” and the hyaluronic acid fruit drink brand “Xiejiao”, to enter the functional food industry.
Source: Huaxi biological official website
Huaxi biological financial report shows that in the first half of the year, the business line of functional food is gradually improving its product line. Shuijiquan launched hyaluronic acid soda bubble water; Black zero launched four products including berry vinegar plant drink, Yuyou citrus high dietary plant drink, iron rich soft candy and fat burning coffee according to the market popularity; Five products of “night hat and essence drink” of 2.0 series will be launched in the corner, and more new products of 3.0 series will be launched in the second half of the year.
At the same time, the business line has strengthened the layout of offline channels, but the financial report only mentions that shuijiquan has settled in offline supermarkets, intelligent retail terminals, enterprise offline group purchases, etc.
It is worth noting that the financial report also points out that the sales expenses of Huaxi biology in the first half of the year increased by 54.68% year-on-year
And from the perspective of market penetration, the penetration rate of functional food in China is still low. According to the data of China industry information network, the per capita consumption of functional food in the United States in 2018 reached 924 yuan, Japan 662 yuan, Hong Kong 767 yuan, while the penetration rate in Chinese Mainland was only 117 yuan, which was only about 20%, far from the United States (60%) and Japan (40%).
It can be seen that the gap in China’s functional food market is huge, the demand is not saturated, and the space is still huge.
However, the biggest problems faced by domestic brands lie in two aspects: 1. Word of mouth; 2. Repurchase. Mainly reflected in:
Publicity effect, many taboos
According to the 2022 China health food and functional food industry research report of iResearch consulting and Research Institute, functional food is healthier than ordinary snack food in terms of food formula, often with 0 sucrose, 0 pigment, 0 preservative, etc. In terms of publicity, it mainly focuses on the promotion of high-quality raw materials, good manufacturer qualifications, endorsement of large manufacturers and product function test reports.
Source: iResearch consulting and Research Institute
At present, health products need to have blue hat certification, but functional foods are not subject to too strict market supervision, and are mainly used as ordinary foods. However, the state has strict restrictions on the publicity of the health care functions and disease treatment functions of ordinary foods.
This year, a new brand of functional food said in its promotion that “lutein can effectively protect children’s eyes”, “regulate the intestinal tract”, “improve sleep and enhance metabolism” and other health functions; It can “reduce the activity of the virus” and “have an effect on the inflammation of women’s private parts” and other disease treatment functions. Therefore, he violated the advertising law and was punished administratively.
In fact, this leads to higher communication costs between functional foods and consumers in terms of efficacy publicity.
Slow effect / non intuitive effect, “IQ tax” is synonymous
In the past two years, a large number of new functional food brands have been born, such as buffx and minayo. At this time, functional food is different from health care products such as Tomson Beijian and Swisse, but appears in the market in the form of snack products such as sleep Gummies, enzyme jelly bars and white kidney bean chewable tablets.


“It is mainly to distinguish from traditional health care products, so that consumers can meet specific efficacy needs while enjoying delicious snacks. This will be more fun, not like taking medicine. Consumers will have a good impression,” an industry insider told foodaily daily food.
However, consumers have different perceptions. Many brands will shout slogans such as “iron supplement”, “sleep aid” and “balanced probiotics”, but the problem is that the effect is often slow or can not be seen intuitively. Some young consumers who are eager to see the results often lack patience, which will directly affect the re purchase rate of products.
At the same time, many consumers who buy food for its efficacy can easily question the “intelligence tax” because they can not see the immediate effect in the short term.
Trust is fragile, and it is difficult to repurchase
In fact, there is no obvious difference between functional food and other food segments, and it is difficult to go from innovation to repurchase.


While the repurchase rate of other tracks is low, mainly for
From the transformation into skin care products in 2012 to now, the revenue of skin care products has accounted for most of the revenue, which shows that the transformation of TOC is successful. Therefore, as a functional food, Huaxi bio can still take advantage of its raw material advantages and independent scientific and technological research and development capabilities. The whole supply chain system is relatively mature, whether in terms of raw materials, formula innovation or raw material costs. This is the advantage of Huaxi bio.
However, as mentioned above, unlike functional skin care products, functional foods face weak trust in the whole industry.
At present, in response to consumers’ anxiety about health and whitening, functional foods mainly focus on “anti fatigue, refreshing”, “decompression and sleep support”, “skin management” and “weight management”. Under the situation of similar functional ingredients of functional foods and serious product homogeneity, how to develop more effective ingredients, tap more market segments, develop more consumption scenarios, and meet more specific needs is Huaxi biology, And the only way for all functional food enterprises to break through the industry.
Functional food should not only compete with similar products, but also with other replaceable foods, highlighting its taste advantages over health products and efficacy advantages over snack foods.
At the same time, consumer education is also an important focus of the functional food industry, allowing consumers to adjust their expectations of products, avoiding consumers from using functional food as medicine, refusing to bear the unbearable weight of functional food, and alleviating consumers’ purchasing anxiety.

In brief, as Zhao Yan, the former chairman and general manager of Huaxi Biology (688363. SH), said at the 2020 annual performance media communication meeting, “the food grade hyaluronic acid market will grow considerably, but 2021 is only the beginning, and it will take some time for consumers to understand hyaluronic acid. I believe there will be a substantial growth in the next few years.”

This is not only applicable to hyaluronic acid food, but also to the whole functional food. The road of this industry is just beginning.
When this industry is emerging, the market should also give these innovative products more tolerance and room for improvement, so that more innovative enterprises can grow through trial and error.
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Is the Functional Food Bureau of Huaxi biology an adventure for the brave or a game for the confident?





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