All eyes are on the future of healthcare – incumbents, investors and start-ups have fixated on how digital technology, artificial intelligence and machine learning can unlock greater healthcare system efficiency, affordability, and quality. We believe there could be overlooked opportunities in healthcare’s past, however, for example, in alternative medicines. These practices, such as traditional Chinese medicine (TCM), Ayurveda from India, and Jamu from Indonesia, represent new sources of value, and inspiration, in an otherwise saturated consumer health market and could form an integral part of the fabric in the goal of improving healthcare access.
Traditional Medicines Market – in Asia and Abroad
Traditional medicines remain embedded in cultures across Asia – they are derived from natural sources such as plants and animals and perceived by the public to be safer alternatives to synthetic chemicals used in Western medicines, and, at the worst, acknowledged to do little harm even if they are considered clinically dubious by many Western physicians. Increased spending on healthy living has renewed global interest in holistic medicines and created new consumer trends – look no further than New York, where Pipa Tangjiang, a Chinese cold remedy made from the loquat fruit and dating to the Qing dynasty, has recently become a flu season fad. Ancient Nutrition, a Florida-based producer of bone broth supplements, has recently received a $100+ million USD investment.
At home in Asia, traditional medicine has persisted alongside Western medicine for decades. Key Asian markets like China, Thailand, Indonesia, and Vietnam have seen double digit growth in the traditional medicines / herbals market in recent years. At the same time, the traditional medicines market has begun to modernize both in channel and in process, somewhat expectedly, but unexpectedly opening new avenues to growth. Traditional medicine has expanded its footprint from its traditional trade stable (medicine halls, local village doctors) into modern trade channels (supermarkets, pharmacies, and convenience stores). Moreover, the field of genomics (DNA sequencing) addresses a key challenge of authenticating ingredients and assuring quality, in a market segment notorious for illicit trade and counterfeiting. Lastly, many Western MNC pharmaceuticals have also ramped up investment in understanding the science behind specific ingredients to link healing effects demonstrated over centuries of empiric evidence to the science. This has spurred an extracts and supplements market straddling both East and West, inspired by traditional practices but designed for Western consumption. Key TCM players, like Tong Ren Tang in China, and Eu Yan Sang in Singapore, have also begun to move downstream, expanding from product manufacturing to operating retail stores and offering in-house TCM services and treatments.
Implications for Potential Investors in Asia
For strategic and financial investors, there is room to consolidate, both vertically and horizontally, as the market remains relatively fragmented. While some power brands have emerged, few cover the entire range of any one traditional medicines portfolio, which represents hundreds of different lines of practices treating numerous therapeutic areas and sourced from all types of vendors, large scale and cottage industry. For example, the four major herbals players in Indonesia only have slightly more than 1/3 of the total Jamu market, and followed by a long tail of over 25 or so other players with less than 2 percent market share and few big umbrella brands.
Secondly, there are pockets of unmet demand (which includes going modern and mainstream in emerging Asian markets, and increasingly, creating new health trends in export markets), but these require the difficult formula of right brand + right product + right time. Companies that produce Tiger Balm and Brand’s Essence of Chicken are just a few of the players who have started this journey successfully and continue to gain in market share around the world. Consumer goods companies (from Nestle to Clorox) have also made key investments in supplements and herbals as easy entry points into the healthcare segment, and traditional medicines could be another potential avenue into Asia.
A fundamental conflict remains for traditional medicines with Western medicine in terms of scientific and clinical credibility however, let alone matching the scale of R&D and go-to-market resources of the consumer brands with which they compete for share. Funding, from national health systems and insurance, is also a mixed bag of mostly exclusions and some reimbursement, though employers in Asia have also increasingly begun to offer TCM as a benefit (Mercer data suggests 28 percent of all employers in Asia now include this in flexible benefits). Thus, while traditional medicine is largely an out of pocket proposition for consumers, it is still considerably more affordable in general than Western counterparts. There are other favourable conditions for growth in this market - consumer demand is picking up, as is governmental support and incentives to continue local investment in these industries that preserve tradition and provide jobs.