According to a research report, the dietary supplements industry is currently in a phase of simultaneous standardization and innovation-led expansion, with an initial rating of "Overweight" assigned to the sector. The strategy involves a full industry chain approach, focusing on leading enterprises with core competitive barriers: upstream attention should be on companies with raw material technology and production capacity advantages; midstream, priority should be given to R&D-driven CDMO leaders; downstream, focus on companies with strong online operational capabilities and significant brand premium. The aim is to capture opportunities from innovation in specific segments and the transformation of industry leaders. The main viewpoints are as follows:

The industry scale is growing steadily, with positive trends across multiple dimensions. China's dietary supplements market is expanding robustly, with its 2024 market size reaching RMB 436.7 billion, making it the world's second-largest market. Significant gaps remain in per capita consumption compared with overseas markets, indicating substantial room for growth. In 2024, the e-commerce channel accounted for 52.5% of sales, becoming the core growth engine, with interest-based e-commerce and cross-border e-commerce showing leading growth rates. Products are evolving towards more refined efficacy, snack-like dosage forms, with new ingredients and scenario-specific products continuously emerging. The competitive landscape is fragmented, with leading companies coexisting alongside long-tail brands, and cross-border brands are accelerating their entry. At the policy level, dual-track management is promoting industry standardization.

Four Major Dimensions of Evolution, New Opportunities Emerging

Regarding consumer demographics, demand from the silver-haired demographic remains solid, while Gen Z, infants & children, and pet owners have become core new growth drivers. In 2023, the consumer group aged 16-25 saw a year-on-year growth rate of nearly 60%. In terms of channels, product assortments are being differentiated between online and offline, with private domain operations and instant retail demonstrating significant value. In 2024, the transaction scale of private domain e-commerce reached RMB 5 trillion. On the product front, high-growth segments include anti-aging, liver protection, and probiotics, with new ingredients like NMN accelerating their market entry. Snackable and portable dosage forms are gaining favor. The industry chain division of labor is deepening, with the CDMO model becoming commonplace. The domestic related market size reached RMB 25.3 billion in 2024, and leading companies are accelerating their global expansion.

Clear Industry Chain Structure, Distinct Advantages at Each Stage

The industry chain presents a clear "upstream raw materials - midstream manufacturing - downstream channels" structure, with value concentrating towards brands and channels. Upstream raw materials cover items like Chinese medicinal herbs and vitamins, featuring high technological barriers. For instance, the leading coenzyme Q10 enterprise, after its 2025 capacity expansion, is projected to hold over 50% of the global production market share. Midstream is primarily dominated by OEM/ODM/CDMO contract manufacturing. Leading manufacturers possess capabilities for multi-dosage form production and full-chain services, with profit characteristics of "low gross margin, low expenses, stable net profit." Downstream channels are diversified. The brand end exhibits distinct features of high gross margins (60%-70%) and high marketing expenses, with online operational capability becoming a core competitiveness.

Key Stock Recommendations

The report highlights several companies: a core upstream raw materials player; a global CDMO leader; a company driven by both contract manufacturing and the pet care segment; a leading domestic brand; and a multinational company with synergistic development across multiple segments.

It is also suggested to monitor companies with advantages in new raw material deployment or positioning in specific niche segments.

Potential Risks to Consider

Key risks include macroeconomic and consumption recovery uncertainties; intensifying industry competition; operational and channel management risks; compliance and food safety issues; and potential deviations in forecasts and judgments.