Nutritional supplements a thriving market

Given the fragmented Chinese health market, the BCG report suggested companies develop product portfolios by enhancing brand building, since Chinese consumers prefer trusted brands, and educate and inform consumers about their product quality to correct common misconceptions.

It is also important to manage retail outlets aggressively because most consumers make their final purchase decisions at retail stores or pharmacy chains, the report said.

Online opportunity

Synlait Milk to buy 25% stake in New Hope Group unit

China to improve population's nutrition

Christina Wang is a veteran purchaser on Taobao.com, the country's leading online retailer. Nutrition and health products are one of the regular purchases she makes from the stores on the website that offer international brands in this category.

She shops for fish oil and omega-3 supplements for her mother, who has heart health risks, and multivitamins for herself from the online shops.

The Internet is not an important purchasing channel for health and nutrition products yet but it soon will be. According to BCG's survey, the Internet is a critical channel for information and sales in many product categories.

The total number of online shoppers in China grew to 260 million in 2013, up from 180 million in 2011, and online sales already take up about 8 percent of total retail sales, according to the report. But due to trust issues, only 2 percent of consumer health products are purchased online.

Still, the online channel for such products is developing quickly, as the government and industry players work to improve consumers' confidence, including stricter requirements for online vendors and consumer education campaigns released by the various enterprises.

The number of products available also is growing quickly. Take JD.com, one of the country's largest retailers, for example. It now offers more than 4,000 health products online.

The report predicted that the health and wellness market will migrate to the Internet sooner than later, given that the Internet provides more convenience, greater price transparency and more product information than off line shopping.

Online promotions and discounts may also engage consumers and drive sales, especially for known and proven products, the survey said.