Gf Securities Co., Ltd. released a research report highlighting that, from an industry chain perspective, professional contract manufacturers of health supplements are indispensable for small and medium-sized brands. Leading contract manufacturers enjoy stable demand and lower expense ratios, maintaining relatively stable net profit margins. Meanwhile, brand operators tend to adopt a high gross margin, high expense ratio model, with those demonstrating strong operational capabilities achieving relatively higher net profit margins, making them noteworthy.

Looking ahead, in the nutritional supplements sector, interest-based e-commerce and cross-border e-commerce channels hold sustained growth potential. The report recommends focusing on brand operators with strong operational capabilities and involvement in cross-border markets, as well as leading contract manufacturers with competitive R&D and production capabilities.

Key insights from Gf Securities include:

**China's Nutritional Supplements Market Shows Promising Growth with Rising Penetration** In terms of GDP per capita, developed economies in Europe and the U.S. generally exhibit a positive correlation between per capita health supplement spending and GDP levels. In 2024, China's per capita spending on nutritional supplements was $26, only 14%, 21%, and 29% of the levels in the U.S., South Korea, and Japan, respectively, indicating significant room for penetration growth.

In terms of growth momentum, China's dietary supplement market reached RMB 232.3 billion in 2024, with a CAGR of 8.9% from 2010 to 2024. Given the increasing demand for health and wellness among Chinese consumers, the market is expected to maintain a mid-to-high single-digit CAGR over the next five years.

**E-Commerce Channels Drive Growth, Presenting Opportunities and Challenges for Supplement Brands** The mainstream sales channels for nutritional supplements in China have evolved from direct sales & pharmacies to traditional shelf e-commerce and now interest-based e-commerce. While e-commerce remains the primary traffic source for the industry, brand-side profitability in these channels is relatively lower.

As a result, Gf Securities emphasizes the importance of brand operators' capabilities in interest-based e-commerce. Additionally, domestic supplement brands are expected to enter cross-border markets to seek growth and enhance profitability.

(1) **Interest-Based E-Commerce**: This model addresses two major challenges in the supplement industry—lack of trust and consumer awareness—while precisely matching brands with target audiences, enabling efficient conversions and repeat purchases. Platforms like Douyin and Kuaishou prioritize operational capabilities, allowing agile small and medium-sized brands to gain rapid traction. According to Xingtu Data, emerging brands such as Feicui and YOUTHOLOGY ranked among the top 10 in nutritional supplement sales during the 2025 Double 11 shopping festival on these platforms.

(2) **Cross-Border E-Commerce**: Overseas brands inherently convey heritage and quality, naturally resolving trust issues. Cross-border imported supplements are only subject to origin-country regulations, allowing greater flexibility and speed in launching new products. Innovations like ergothioneine have successfully attracted consumers as rapidly growing categories. For brand operators, cross-border supplements feature high average order values and strong repurchase rates, likely attracting more participants in the future.

**Risk Factors**: Slower-than-expected macroeconomic growth, underperforming channel development, regulatory changes, intensifying industry competition, and food safety risks.