5.3 Chinese Crystal Herbs (Sparkling Crystal Herbs)

Contents:

            I.  Prologue

                    1. Introductory Comments

                    2. Background to Traditional Chinese Medicine (TCM)

            II. China

                   1.General Comments

                   2.Pharmaceutical Industry

           III. The International TCM Market

1. Asia

2. European Union

3. South America & Africa

4. NAFTA  

           IV. First Local Market Research Steps

            V. Draft Brochure for Chinese Sparkling Crystal Herbs

I. Prologue

        1) Introductory Comments

        2) Background to TCM

    Natural, non-invasive, plant-based medicines, and specifically traditional Chinese herbal medicines, are becoming more and more fashionable in the developed, industrialized countries, especially in the EC and NAFTA.  Modern scientific research is being increasingly applied to traditional Chinese medicine (TCM).  This research is aimed at understanding the success of TCM, when it should be used independently, and when   -- and how -- it is best integrated into standard Western treatments.   

    China's becoming a member of WTO presents a challenge and opportunity to TCM in the worldwide medical market.

II. China

        1. General Comments

"The native Chinese flora is perhaps the richest in the world. . . In Europe, a long  period of economic and agricultural decline followed the fall of the Roman Empire (476 AD).  The plant forms known to the Western World from Theothrastus to the German fathers of botany show that European knowledge had slumped, but there was no corresponding "dark age" in Chinese scientific history.  Botanical knowledge, and the number of plant species recorded by the Chinese, grew steadily as the centuries passed."*

    To give an idea of the foundation on which TCM builds it is interesting to note just how great the differences between European and Chinese knowledge were.  Henry the V (1387-1422) had a library with a total of six (!) books, all handwritten of course.  Printing was still unknown in Europe.  At the same time (early 15^th century) a team of 2,180 Chinese scholars completed a 4,000 volume encyclopedia.  The work Cheng Lei Pen Tshao (Cheng Lei Ben Cao), "Classified Pharmaceutical Natural History" published in 1468 was centuries ahead of European knowledge at that time.

    Estimates of the number of TCM treatments vary from 8,000 to 60,000.  One number that appears frequently is 12,800, of which 1,200 are of recent origin.  Presumably the higher number of 60,000 TCM "prescriptions" reflects variations in local methods.  In the year 2000 there were 7,000 major hospitals in China, of which over 95% had TCM departments, as well as the ones at the 2,600  medical centers at the regional and district levels.  There were 30 major academic institutions focusing on TCM instruction.

    N.B. Data are not current and are for demonstrative purposes only.

* 1421 The Year China Discovered the World, Gavin Menzies, Bantam Books, 2003,  pp. 67 & 69.  The information in the paragraph afterwards is from pp. 66 & 68.  Compare also the classic work by J. Needhan,  Science and Civilization in China, Vol. VI. 

2) The Pharmaceutical Industry

     Health care expenditure is growing rapidly in China. Data from the State Statistics Bureau for Five Year Plans are correctly viewed with caution.  Furthermore their presentation is hard to interpret. In the example below, for instance, what is "health service of medicines" supposed to mean?  Nevertheless, to infer that health expenditure in all major categories grew rapidly seems reasonable.  More recent graphs show this trend continuing. 

    Over the past fifteen years the pharmaceutical industry has shown consistent high growth in China, averaging over ten percent a year and reaching, in some boom years, almost twenty percent.  There are over 1,200 producers of TCM. The largest 50 of these firms enjoy growing sales with excellent profit margins.   

III.The International Market

    Market penetration globally, i.e. the number of people using TCM at least sometimes, has been estimated by the World Health Organization as between 50 and 60 percent, and is on the rise. TCM is exported to almost every country in the world. Global sales are estimated at over $200 million.

 1) Asia

    Some examples from ca. 2000 of annual TCM imports  are:

            • Singapore     $70 million  (presumably reflecting packaging for re-export)

            • Korea           $50      "   

            • Japan           $13      "

    Less than one third of TCM exports have patent protection.  The major producing countries are China, Korea and Japan.  Although China has by far the largest domestic TCM usage, it does not dominate the export markets to the extent one would expect.  There are three reasons for this.  The first is that in many countries TCM is not legislatively protected.  The second is that TCM frequently does not meet an internationally recognized code of purity (content standards).  The third is that the design and quality of Chinese packaging are not aimed at international markets. 

    Nevertheless China represents about one third of the Asian market, according to a study of IMS Health. Their data for 2000 - 2005 show a market breakdown as follows:

            • China - 34%

            • India, South Korea and Taiwan, each with about 15%

            • Indonesia, the Philippines and Thailand, each with about 5%

            • Hong Kong, Malaysia and Singapore, each with about 2%.  

    However the data are generally not reliable. According to one source, Singapore is a market 40% larger than South Korea.  According to another, South Korea is a market seven times larger than Singapore! Conspicuous by its absence form the above list is Japan. To examine marketing practices in Japan is always advisable. For instance, an interesting form of shared branding there is beer and pharmaceuticals. Three companies following this strategy are given below.

            1.1 - Asahi

    The firm also has a strategic alliance with Löwenbräu. Löwenbräu is imported to Japan under

http://www.sapporobeer.jp/kenkyu_e/shoku.html

http://www.asahi-fh.com/

MainPage: http://www.asahibeer.co.jp/english/index.html

            1.2 - Kirin

    MainPage: http://www.kirin.co.jp/english/index.html

            1.3 - Sapporo

    The firm does not have an  independent Pharma-Devision but does have biotechnology products. The first website is in Japanese, which one would expect, but surprisingly the second one is also (June, 2011).

http://www.sapporobeer.jp/kenkyu_e/shoku.html

MainPage: http://www.sapporobeer.jp/english/

2) European Union

    In the Western world, Europe accounts for thirty to forty percent of the global market.  Again, the data are not consistent.  On the one hand, I have read that the total European market is $7,000,000 with Germany representing 40% of the European market, and France another 30%.  On the other hand I have read that sales in England alone are $11,000,000.

    Most companies in this industry are small. The European market is fought over by 30 odd companies, including a dozen in Germany.  The legal position of TCM in Germany is not clear.  It is generally not covered by medical insurance.  Retail prices can be 10 times higher than similar domestic products, even though they are not sold in the monopoly pharmaceutical chains.  (There, for example, aspirin costs 30 (!) times as much as in the U.S. because it is not sold in supermarkets.)

3) South America and Africa

    South America is a famous source of herbal remedies. Two cite just two examples: in Peru, even the common nasturtium provides an antibiotic.  In Bolivia basil is recommended for kidney, bladder, cardiovascular and respiratory problems.

4) NAFTA

    Sales penetration in Canada and Mexico apparently is lower than in Europe. At any rate, the U.S. is clearly a major market, with significantly higher sales (at least $60 million p.a.) than in Europe. Furthermore demand is increasing, reflecting the aging of the U.S. population.

 IV. First Local Market Research Steps

    Reliable data are needed for the market niche/region where one wants to compete. (For instance, an E-commerce venture might begin with a website in English and Spanish targeted at women over 50.) Three approaches are recommended. The first step is to go to a public library and have a librarian assist with the preliminary overview. Have there been studies done about the targeted market?  What information is available on free and commercial databases?

    The second step is to make contact with local universities and see what research is being on TCM.  Perhaps some case studies have been published or a thesis written about it. 

     The third step is now to start talking to some people in the industry.  Talk to a couple of distributors who sell to retail outlets.  Drop by some health food stores and drugstores at a time when business is slow and chat to the purchasing manager.

V. Draft Brochure for Chinese Sparkling Crystal Herbs

 The brochre is presented on its own supage.