By-Health has shifted its primary sales channels from pharmacies to supermarkets and online, but a recent investigation by Beijing Business Today found that the company's channel adjustment is not smooth. In the health product sections of offline stores such as Hualian and Carrefour, sales staff rarely recommend By-Health products. By-Health spent 310 million yuan on marketing this year, yet its performance suffered its first decline in seven years. Even with active exploration of new sales channels, By-Health faces multiple challenges including quality issues and an influx of foreign health brands.

Supermarket Channel Encounters Cold Shoulder Pharmacy sales are sluggish, and the brand is barely visible in supermarkets, indicating that By-Health's exploration of new channels is not going well. A reporter from Beijing Business Today visited a Hualian supermarket in Haidian District and saw only one By-Health product, a protein powder, in the health food section, with the rest being brands like Jiangzhong Group and Kangfulai. A staff member told the reporter that among the health products on sale, only one was By-Health, and sales were poor.

At a Carrefour supermarket in Chaoyang District, only four By-Health products were available in the health product section. The salesperson there also said that By-Health products were not selling well. "We used to have many By-Health products here, but they were all removed due to poor sales."

In addition to the supermarket channel, the pharmacy channel, which By-Health has long relied on, is also not performing well. The reporter visited several chain pharmacies and small to medium-sized pharmacies and found that many sales staff do not recommend By-Health products when customers want to buy health products. A salesperson at a chain pharmacy in Chaoyang District told the reporter that By-Health is currently not selling well. "Previously, Yao Ming endorsed By-Health, and the advertising effect led some people to buy their products. Now, under the new advertising law, celebrities cannot endorse health products, so fewer people buy this brand. If you want to buy, I suggest you choose other brands."

Another pharmacy staff member said, "We don't have By-Health products here. The brand was exposed before, and we haven't sold it for a long time."

Performance Dives Again By-Health's latest performance forecast for the first three quarters shows a net profit of approximately 497 million to 613 million yuan, a year-on-year decline of 5% to 15%.

In the first half of the year, By-Health experienced its first performance decline since listing seven years ago, with net profit of 359 million yuan, down 13.94% year-on-year. At that time, By-Health attributed the decline to sluggish growth in the pharmacy channel and a significant increase in brand promotion expenses.

The semi-annual report shows that By-Health sponsored three variety shows in half a year, gaining broader awareness, but correspondingly, the company's sales expenses increased significantly year-on-year. Sales expenses were 310 million yuan, up 32.73% from the same period last year. Despite investing heavily in marketing and promotion, performance declined again.

By-Health's pharmacy channel accounts for 80% of sales, supermarket channel 10%, and e-commerce about 9%. Traditional pharmaceutical terminal sales have been the main channel supporting By-Health's performance growth over the past few years.

It is understood that in mature markets like the United States and Japan, supermarket channel sales of health products account for more than 20%. Currently, domestic supermarket channel health products mainly meet gift-giving needs. In the future, with the increase in per capita disposable income and health awareness, health products will become daily consumer goods, and the supermarket channel has great growth potential. By-Health stated that it will cultivate the supermarket channel as a new profit growth point.

Wolves Ahead, Tigers Behind "In the second half of 2016, the company will still face the impact of weak pharmacy channel sales and increased expenses," an anonymous analyst commented on By-Health's current performance.

In terms of products, By-Health has launched brands such as Infinite Energy, Daily Plus, and Jianleduo, but sales have not been ideal. According to the first-quarter product revenue share, By-Health brand accounted for 92%, Jianlido 5%, Infinite Energy 2%, and online brands Daily Plus and Jianleduo together about 1%.

By-Health is also focusing on the infant and child business and globalization. In the first half of this year, By-Health launched a new packaging for the "Marvel" series of children's dietary supplements. In March, its wholly-owned subsidiary Hong Kong Bairui established a joint venture with NBTY, which injected the businesses of Nature's Bounty and Met-RX in China, as well as cross-border e-commerce operations, into the joint venture.

It is worth noting that after Nature's Bounty entered China, it was exposed by mainstream media including CCTV due to various issues, and By-Health has also been repeatedly exposed for product quality problems. Zhu Danpeng, a researcher at the China Brand Research Institute, said that health products are different from other products; they are nutritional products without rigid demand, and consumers care more about quality and safety. How to extricate the company from negative news is the primary issue By-Health needs to solve.

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