Centuries-Old Chinese Medicine Giant Tongrentang Embraces the Internet Era: IPO Filing Signals New Chapter

The U.S. government is promoting the reshoring of manufacturing, with Trump implementing tax cuts to attract industrial return; Germany has launched Industry 4.0, and China has introduced Made in China 2025. From deindustrialization to reindustrialization, manufacturing has once again become the core focus of China’s business community. In fact, however, even the pharmaceutical industry, currently a high-growth sector, faces immense pressure for transformation due to rising labor costs, cash flow constraints, and weak market demand. With a history spanning nearly 350 years, Beijing Tongrentang Co., Ltd. has weathered profound changes in personnel, systems, and dynasties. Despite numerous crises, it has repeatedly managed to survive and thrive. Tongrentang’s transformative efforts amid adversity deserve attention and study. After more than three centuries, this old tree is sprouting anew, potentially blossoming into widespread prosperity.

Beijing Tongrentang was founded in the eighth year of the Kangxi reign of the Qing Dynasty (1669). Starting from the first year of the Yongzheng reign (1723), it officially supplied medicinal products to the Imperial Pharmacy of the Qing Palace, serving through eight emperors over a period of 188 years. In 1992, with Beijing’sMedicineTongrentang Group, composed of 21 core entities including the Materials Company, Tongrentang Pharmaceutical Factory, and Tongrentang Pharmacies, was officially established, marking the formation of the early Tongrentang Group. In its early stages, the group suffered from chaotic internal resource planning, unclear positioning of subsidiaries, and severe intra-industry competition. In July 2011, Tongrentang Group restructured around its core entity, Beijing Tongrentang Co., Ltd., establishing six secondary groups. This move dismantled the outdated corporate structure, defined specialized divisions of labor for each major group, and injected new momentum into the subsequent development of various business lines.

The layout of Tongrentang’s subsidiaries represents the overall strategic direction. The architecture of the Tongrentang Group comprises six secondary-level groups, three institutes, and two reserve entities, currently owning three listed companies. The six subsidiaries are responsible for six core directions. In the field of traditional pharmaceuticals, Beijing Tongrentang Co., Ltd. is responsible for the R&D and production of established first-tier brands, i.e., cash cow products, while Tongrentang Technologies is responsible for launching new first-tier products, i.e., star products. Tongrentang International (Tongrentang Guoyao) is responsible for distribution and retail in overseas markets. Tongrentang Commercial is responsible for the operation of Tongrentang pharmacies and in-store TCM practitioners, establishing a retail network and differentiated layout. Tongrentang Health focuses on life and health products. Tongrentang Shenrong is responsible for the production of decoction pieces and Chinese herbal materials.Sales 。

Data Source: Orient Securities

Tongrentang’s industrial chain layout covers the entire value chain, including Chinese herbal medicine cultivation, procurement, pre-processing of raw medicinal materials, production of proprietary Chinese medicines, and sales of finished products. Based on Tongrentang’s initiatives since 2016, its primary focus has been on expanding domestic and international retail operations, establishing a health-focused internet platform, and enhancing its portfolio of big-health products.

Tongrentang is not only a hallmark of Traditional Chinese Medicine (TCM) but also a renowned brand representing traditional Chinese culture. By the end of 2015, Tongrentang operated 2,633 retail outlets and medical institutions, including 2,174 pharmacies and 280 medical institutions in China, as well as 113 pharmacies and 66 medical institutions overseas, with a presence in more than 20 countries and regions. Through gradual and persistent expansion, Tongrentang has achieved the vision that “wherever there are Chinese people, there is Tongrentang.”

In September 2016, Beijing Tongrentang opened two branches in Manhattan and Flushing, New York, and established an education and exhibition center in San Francisco. In November, Beijing Tongrentang Africa Co., Ltd. was founded.

In 2016, Tongrentang continued to expand its retail business, frequently opening new branches both domestically and overseas by capitalizing on the surge in popularity of traditional Chinese medicine (TCM) in recent years. Judging from the expansion trend of its retail business in 2016, Tongrentang is expected to continue opening new stores, thereby sustaining its outreach efforts in promoting TCM culture.

In 2016, Tongrentang’s initiatives in the internet sector were frequent and noteworthy. To break through the traditional overseas development model of Traditional Chinese Medicine (TCM) and leverage the internet to drive innovation in TCM services, Tongrentang established Tongrentang International in 2015, positioning it as an internet company focused on the vertical health sector. Based on various reports from that year, Tongrentang International gained significant visibility, with its cross-border e-commerce operations evolving from importing products to expanding globally, while forging close collaborations with domestic internet companies and financial institutions. These developments indicate that although Tongrentang’s internet strategy was just beginning, it warranted close attention.

In late 2015, Tongrentang International launched Tianrantao, China’s first cross-border e-commerce platform focused on the health vertical. The platform integrates nearly 100 premium global health brands and offers thousands of overseas products, introducing high-quality international health products to the Chinese market.

Tianran Tao

In September 2016, Tongrentang International and Chongqing Lejiatao launched a comprehensive strategic partnership, joining forces to build an Internet TV + e-commerce cross-border general health sector. Leveraging global high-quality health resources, Tongrentang International aims to meet consumers’ demands for a quality lifestyle, while Lejiatao connects supply and demand through its Internet TV platform, enabling both parties to achieve complementary advantages and resource sharing. In December, the Tongrentang International Traditional Chinese Medicine Global Expansion Platform (WWW.TRTMED.COM) was launched. This platform adopts a direct procurement model from source to user, integrates Tongrentang’s global supply chain to enable direct overseas shipment, and merges with Tongrentang International’s health service management to provide a variety of services.

Tongrentang International Platform for the Global Expansion of Traditional Chinese Medicine

At present, Tongrentang International’s online presence is exclusively based on e-commerce platforms. VCBeat attributes this strategy to two main factors. First, China’s e-commerce industry is highly developed, allowing Tongrentang to leverage its late-mover advantage and benefit from the ease of operating on such platforms. Second, Tongrentang boasts abundant offline resources and maintains stricter control over pharmaceutical product quality, enabling it to effectively integrate internet operations with physical entities and achieve a synergistic effect where 1+1>2.

Tongrentang is continuously striving for new breakthroughs and has intensified its efforts to expand into overseas markets, enabling more of its products to reach global consumers. In response to international demand, Tongrentang has begun establishing a traditional Chinese medicine (TCM) supply chain system, facilitating the global expansion of high-quality domestic TCM and botanical drug resources.

“No matter how complex the processing, we never skimp on labor; no matter how costly the ingredients, we never compromise on quality.” These two ancient maxims embody Tongrentang’s product philosophy. For over 300 years, Tongrentang has remained centered on product operations. Currently, the Tongrentang Group offers more than 1,500 products, including classic varieties such as the “Ten Famous Medicines” and the “Ten Flagship Products,” along with newly developed “Ten Key New Varieties.”

Since 2016, we have observed a subtle shift in Tongrentang’s product management philosophy. The company began to deliver products to users with an emphasis on value-added services and started applying internet-centric principles to its operations. In that year, Tongrentang established close collaborations with internet companies to promote health management products; partnered with financial institutions to launch innovative health-service financial products; expanded into the fast-moving consumer goods (FMCG) market by introducing life and health products such as herbal beverages; and began leveraging e-commerce platforms like Tmall and JD.com for product marketing.

On March 22, 2016, Tongrentang Health launched Tongrentang Herbal Tea and Tongrentang Maca Oolong Tea in the lobby of The Ritz-Carlton, Chengdu, marking its push into the fast-moving consumer goods (FMCG) market. In subsequent promotional efforts, Tongrentang leveraged e-commerce platforms for sales promotions and began experimenting with various innovative marketing strategies, including event-based marketing, to expand product influence.

In October 2016, Tongrentang International established partnerships with Bank of Beijing in the fields of finance and healthcare. Following this collaboration, Bank of Beijing became the primary partner for online acquiring and payment services on Tongrentang’s cross-border health e-commerce platform, “Tianrantao.” Leveraging its resources in the vertical healthcare sector, Tongrentang International will provide health-related products and services to tens of millions of Bank of Beijing cardholders.

Based on Tongrentang’s product initiatives in 2016, the company is shifting from a product-centric mindset to a user-centric one, beginning to approach its offerings from the customer’s perspective and expanding its product portfolio into innovative health services. In terms of new product development, the strategy has evolved to: “We have identified an unmet health need among our customers, and Tongrentang Health can develop corresponding products to address this need.”

We believe that Beijing Tongrentang’s subsequent strategic layout in the big health industry will also unfold across these sectors.

1. Shift in Target User Base. In its retail business, Tongrentang will continue to strengthen its overseas presence, with an increased focus on expanding its store network through pharmacy acquisitions. The target user base will gradually shift from the Chinese patient population to the broader international patient population.