Liu Yang of Jinding Capital: A Massive Market with High Barriers — The Rise of Consumer Healthcare

Strategic support from the “Healthy China” initiative, coupled with demographic shifts and product technology iterations, has ushered in a new wave of growth for the consumer healthcare sector, which had already completed partial market education during the pandemic.

In this context, “how to seize innovation opportunities across the consumer healthcare industry chain and tap into new growth avenues driven by consumption upgrading” has become key for investment institutions to achieve sustainable development in the sector.

Addressing this issue, Liu Yang, Founding Partner of Jinding Capital, provided insights at the “2023 Future Healthcare Fund Partners Summit,” drawing on Jinding Capital’s industry understanding and investment practices.

The following is an edited summary of viewpoints:

In the Age of Population Aging: Spotting New Opportunities in the Health and Wellness Sector

Over the past decade, Jinding Capital has deeply cultivated the consumer sector, achieving comprehensive coverage across key verticals including food, pet care, beauty and cosmetics, home furnishings, and building materials. Furthermore, Jinding Capital has established an integrated system that empowers portfolio companies from brand building and marketing to traffic acquisition, and has served as the lead investor in 90% of its projects.

Today, Jinding Capital is also leveraging its accumulated insights and practical experience in the consumer sector to identify new opportunity windows in healthcare and wellness, namely opportunities driven primarily by demographic shifts.

In the past, Jinding Capital seized the investment opportunities in new consumption, driven by the rise of post-90s and post-00s consumers and the substitution effect of “Guochao” (China-chic) brands fueled by growing national confidence. For instance, recognizing the increased demand for companionship resulting from declining birth rates, we have invested in more than 20 projects in the pet sector.

With a keen sensitivity to demographic shifts, Jinding Capital has identified new opportunities in the broader health sector associated with population aging. To date, we have established strategic positions across multiple tracks, including consumer healthcare, elderly care and rehabilitation, as well as medical devices and algorithms designed for integrated healthcare solutions.

Especially in the consumer healthcare sector, Jinding Capital has identified clear opportunities.

Winning Over Women: Capturing the 10-Trillion Consumer Healthcare Market

From a medical perspective, consumer healthcare today entails a higher proportion of out-of-pocket expenses, with consumption scenarios shifting from hospitals to out-of-hospital settings and homes. From a consumer perspective, consumer healthcare clearly presents higher barriers to entry compared to mass-market consumer goods, which generally have low product differentiation and are prone to intense cutthroat competition, given its requirements for product qualifications and exclusive hospital distribution channels.

Therefore, Jinding Capital believes that consumer healthcare is a promising sector that combines the vast market potential of consumer goods with the relatively high barriers to entry characteristic of the medical industry.

Beyond high barriers to entry, consumer healthcare is also a sector with a vast market size.

Traditionally, market perceptions of consumer healthcare have largely been confined to niche segments such as dentistry, ophthalmology, and medical aesthetics. However, Jinding Capital defines consumer healthcare as a broad sector grounded in evidence-based medicine and dedicated to scientifically addressing user needs. Promising future avenues within this space include medical nutrition and chronic disease management.

In light of this, given that the overall healthcare sector is valued at only a few trillion yuan, China’s 400 million female consumers aged 20 to 60 alone can sustain a consumer healthcare market worth 10 trillion yuan. Women are the core force determining consumption trends; indeed, those who win over women will dominate the consumer healthcare landscape.

In female consumer spending, the proportion of “self-pleasing consumption,” represented by medical aesthetics, is increasingly rising. Additionally, women’s health is a key area of focus for Jinding Capital.

We have observed that the gynecology sector is a significantly undervalued market. With over 100 million patient visits for gynecological diagnosis annually, the vast majority fail to receive adequate solutions. This substantial unmet demand constitutes a massive market valued at hundreds of billions of yuan.

The Endgame of Consumer Healthcare: Becoming a Brand

Consumer goods and consumer healthcare share a common trait: they align with human nature. For instance, the underlying investment logic for food products is that they are palatable and addictive, such as spicy hot pot, coffee, and sweet desserts. Applying this logic to consumer healthcare, we believe that meal replacements, which are associated with weight loss, are unpalatable and go against human nature, making it difficult to sustain long-term consumer demand. In contrast, GLP-1 (generally referring to glucagon-like peptide-1) represents a category that aligns with human nature by suppressing appetite at its source to achieve weight loss, making it a worthwhile area for strategic investment.

Moreover, consumer goods giants typically emerge in sectors characterized by high repurchase rates, with brand equity serving as the ultimate competitive moat for consumer products. By analogy, branding should also represent the endgame for consumer healthcare.

Regarding how to build a brand, we can cite the example of Jinding Capital’s star project—“Wang Xiaolu,” the leading brand in tiger-skin chicken feet.

First, at the product selection level, Wang Xiaolu entered the broad braised food market. Within this category, the brand further focused on the chicken feet segment, targeting scenarios such as casual snacking and side dishes.

Second, at the product level, Wang Xiaolu has built product differentiation around three key attributes: generous meat content, large size, and nail-free preparation, even leveraging these to revamp its entire supply chain.

Thirdly, at the channel level, Wang Xiaolu first leveraged the traffic dividends of online new media to become a leading internet-famous brand for online sales of tiger-skin chicken feet. It then capitalized on its online advantages to rapidly expand into offline convenience stores, ultimately evolving into an omnichannel brand.

Based on the case of Wang Xiaolu, we believe that the construction of consumer healthcare brands can be divided into the following dimensions:

First, new brands often emerge from new product categories. Taking medical aesthetics as an example, Imeik and Shengboma have become category leaders by seizing opportunities in the niche segment of new materials.

Second, volume precedes brand. The foundation of volume is product strength; superior products drive repeat purchases and word-of-mouth referrals. Once a strong product is established, the brand must rapidly expand from a single channel to an omnichannel strategy to scale up, as the growth ceiling for a single channel is low. A company that remains merely the leader in a single channel can easily be overtaken by late entrants.

Third, excel at establishing brand mindshare. A brand, by definition, represents the consumer’s primary choice for a particular solution; you must articulate why consumers should choose you over competitors. For instance, Feihe managed to stand out among major overseas infant formula giants under the banner of a domestic brand, even in the aftermath of the melamine crisis. Its strong brand power stems not only from high-quality milk sources and professional quality standards but also from its successful capture of the unique differentiator “better suited to Chinese babies’ constitutions.” By thoroughly embedding this brand perception into the market, Feihe achieved a remarkable turnaround in the entire infant formula sector.

The case of Feihe also serves as a reminder to entrepreneurs that the window of opportunity to break through in a market dominated by industry giants is now extremely narrow. There is a saying in the industry: “Entrepreneurs are the testing ground for many large companies.” This means that even if entrepreneurs manage to seize an opportunity in a new category, they risk being overtaken by established enterprises if they fail to quickly capture consumer mindshare.

Therefore, only by capturing consumers’ mindshare can a company build a genuine brand and establish true competitive barriers.

Conclusion: Empowering Consumer Healthcare Through Industrial Investment

Why do many entrepreneurs in the consumer healthcare sector choose Jinding Capital today? It is not only because of our resources and accumulated expertise in the medical field, but also because we are an industry-focused investment institution that empowers the growth of consumer healthcare brands through a “beginning with the end in mind” philosophy.

The limited partners (LPs) of Jinding Capital are primarily listed companies. To date, we have partnered with over 40 listed companies. As a corporate venture capital (CVC) firm, we combine financial investment capabilities with industrial resources to help businesses strengthen and expand through investments and mergers and acquisitions.

Leveraging Jinding Capital’s brand insights and experience, we also possess robust capabilities in formulating product strategy, competitive strategy, and brand strategy.

In the consumer healthcare sector, Jinding Capital aims to empower outstanding entrepreneurs by leveraging its decade of accumulated resources and expertise in consumer channels and brand strategy.