The China Report: Wellness Trends, Growth and Market Opportunities

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Lululemon, Virgin Active and Adidas have high hopes for the Chinese market, and while an increasing number of middle-class consumers flock to purchase activewear, and participate in group fitness activities; healthy eating looks set to be the next big growth area.

Demand for activewear and athleisure clothing has been boosted by the rapidly increasing disposable incomes of Chinese consumers – a McKinsey projection recently suggested that over half of households in the country will be internationally classed as middle-income families, with over US $16,000 a year to spend by 2020. But, it has also been helped by changing attitudes to conspicuous consumption, following President Xi Jinping’s campaigns against officials decked head-to-toe in bling.

Established fitness brands and younger companies have been quick to respond. Adidas – which saw sales in Greater China increase by almost 20 percent in the first nine months of 2015 – wants to open 3,000 new stores in the region by 2020, announcing a partnership with property developer Wanda Group to achieve this.

Unveiling the plans, group CEO Herbert Hainer said the country is “one of the most important markets for Adidas globally.”

And, the vast opportunities of such a fast-growing market means there is a consensus that the benefits outweigh the challenges of operating in a region where counterfeiting is rife.

The red and white branding synonymous with US giant Under Armour was recently replicated by a Chinese upstart calling itself Uncle Martian, but the setback has done nothing to deter the brand from reaching out to more consumers in the country. At a financial results briefing earlier in July, chief executive Kevin Plank projected that his company would do more than US $150m of business in China in 2016 alone.

Lululemon has also been quick to realise the market’s potential, opening its first “showroom” store with a limited range of lines in Shanghai in 2014, quickly following this up with a presence in Beijing. Now the company is predicting that its full-size store in Hong Kong will bring in revenues of US $8million over the course of 2016.

In May, Lululemon teamed up with Asia-wide boutique fitness community GuavaPass to put on a pre-summer event in Shanghai, with colour-themed classes and branded giveaways. GuavaPass itself highlights the growing opportunities for boutique fitness brands in China too.

The Chinese wellness industry

Image: GuavaPass

Launched in 2015 with a Classpass-style business model, GuavaPass allows consumers to access workouts in cities across Asia and the Middle East, including Hong Kong and Shanghai.

Among the classes users can access, nods to wellbeing concepts long-established in China are prevalent, with “zen” and “balance” common themes – while luxury facilities demanded by those whose income is on an upward trajectory are the norm.

Alex Garcia, whose Afit studio in Shanghai has expanded rapidly from a single-room enterprise with three clients when he established it in 2014, to a leading boutique exercise facility with 70 customers, has witnessed the evolution of the market firsthand.

“Before we could say it was possible to count with our hands the amount of trainers and studios available – the separation between the small players and the big local and international ones was evident. Now everything has changed,” he explains.

From the perspective of his business partner Mariam Soto, this boom provides plenty of opportunities for established brands looking to move into the country too. “If we compare the options available here to what we can find in the west, there is a gap that many brands find attractive,” she adds, explaining that new expats often struggle to adapt their healthy lifestyles to what is on offer.

“At the end of the day, China has a huge market and local players aren’t big enough to address their needs. So, this industry has a lot of room to keep on growing, and we definitely expect this to happen considerably in the next following years.”

International brands currently face limited competition from home-grown competitors from other parts of Asia, though the expansion of those which do exist highlights the growth potential of the luxury health club market. Pure Fitness, a Hong Kong-based chain, opened its first club in mainland China in 2014, adding a yoga studio in Shanghai to its portfolio of more than a dozen branches across the peninsula.

Established multiples are also moving in to provide branded workouts and premium facilities. Les Mills International launched a dedicated China office in 2014 when the company took over instructor training and product distribution, having previously worked with health club chain New

Life Resources. And in May, Virgin Active, which already operates three health clubs in Thailand and one in Singapore, announced an Asia strategy which will see the brand investing £150m in expanding its presence in existing locations before moving to target Hong Kong, described in a statement as “a natural gateway to China.”

For many of the wellness brands looking to expand into the market, events partnerships are being used to increase recognition and drive market penetration.

As well as Lululemon’s collaboration with GuavaPass, 2016 has so far seen Tough Mudder announce a working relationship with global sports management company IMG to help them roll out events in China. This year has also heralded a deal between Fitbit and Alibaba-owned Tmall.com to make the former’s Blaze and Alta devices available online to consumers in the country.

“Across China there is a growing interest in personal health, fitness and overall wellbeing, and we see very strong demand from our customers in these categories – specifically for Fitbit devices,” said Alibaba’s Hao Li.

Chinese wellness industry

Image: Fitbit Launch at TMall owned by Alibaba Group

Though it is maturing at a gentler pace than other verticals, the market for healthy food and drink is also growing. “It’s not an established lifestyle here yet, but healthy eating is definitely an important trend,” explains Joel Bacall, a senior client manager at The Silk Initiative, a consultancy founded in 2014 to help foreign brands target Chinese consumers.

Pointing to the relatively recent popularity of coconut water and chia seeds amongst Chinese consumers, Bacall describes maca powder as “just taking off”.

Highlighting the growing interest in healthy beverage consumption, Shanghai-based private equity firm ClearVue Partners recently invested US $30m into CHIC Fresh, a cold-pressed juice company headquartered in the same city.

“In China, demand for premier goods that enhance a personal sense of health and wellness – such as healthy snacks and beverages, rather than daily necessities will accelerate,” said ClearVue founder Harry C.Hui in a press release unveiling the deal.

“The lion’s share of the consumption growth will come from ‘post-80’s generation’ with a higher per capita GDP.  CHIC Fresh’s product and technology will serve this fast growing segment,” he added.

For healthy food brands looking to make the most out of such opportunities, Bacall highlights the importance of natural, preservative-free labels, adding that these are more popular with Chinese consumers than scientific claims about nutritional benefits. “It’s very rare to see a blue sky here,” he explains, “so purity is really important.”

As China continues to get richer, the desire from consumers to embrace healthy lifestyles amidst the smog is only going to get stronger. The challenge for brands seeking to win them over will be positioning themselves in a way that is sympathetic to the country’s wellness traditions, while providing enough modern luxury to satisfy tech-driven demand.

Venture capitalists are betting that the tech side of Chinese wellness will see particularly exciting growth in the coming years, with health and fitness app Keep securing US $32million in May.

For brands looking to make the most of the current climate, they could do worse than look to the recent Asics purchase of tracker app Runkeeper. Though this involved an Asian fitness brand buying up a US tech company, opportunities running in the opposite direction are plentiful – and embracing the smartphone seems a safe bet when it comes to winning the hearts and minds of Chinese consumers.

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