Marsh & McLennan Advantage Insights logo
Conversations and insights from the edge of global business
Menu Search

BRINK News is transitioning to This Moment platform on as of March 31, 2023. Read the update here.


Traditional Asian Medicines: An Opportunity for Investors

All eyes are on the future of health care. Incumbents, investors and startups are fixated on how digital technology, artificial intelligence and machine learning can unlock greater health care system efficiency, affordability, and quality.

For investors, we believe there could be overlooked opportunities representing new sources of value and inspiration in an otherwise saturated consumer health market and that they could form an integral part of the fabric in the goal of improving health care access. They include practices such as traditional Chinese medicine (TCM), Ayurveda from India, and Jamu from Indonesia.

Traditional Medicines Market—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. At the worst, they are 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 an investment of over $100 million.

In Asia, traditional medicine has persisted alongside Western medicine for decades. Key Asian markets such as 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). For example, Vingroup, one of Vietnam’s largest conglomerates, has recently announced its next new venture—Vinfa, a pharmaceutical business that will focus on preservation and research of Vietnamese herbs in traditional oriental medicines.

Lastly, many Western MNC pharmaceuticals have ramped up investment in understanding the science behind specific ingredients to link healing effects demonstrated over centuries to empiric evidence and 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, such as 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 medicine portfolio. For example, according to Euromonitor, the four major herbals players in Indonesia only have slightly more than one-third of the total Jamu market and are followed by a long tail of over 25 or so other players with less than 2 percent market share each and few big umbrella brands.

Second, there are pockets of unmet demand, which include going modern and mainstream in emerging Asian markets and, increasingly, creating new health trends in export markets, but these require the difficult formula of having the right brand, right product, and 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 Nestlé to Clorox have also made key investments in supplements and herbals as easy entry points into the health care segment, and traditional medicines could be another potential avenue into Asia.

A fundamental conflict for traditional medicines vis-à-vis Western medicine is in terms of scientific/clinical credibility, which makes it difficult for them to match 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, although 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 their flexible benefits). Thus, while traditional medicine is largely an out-of-pocket proposition for consumers, it is still considerably more affordable than Western medicines.

There are other favorable 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.

Value Creation Opportunities

Against these opportunities and challenges, there are three key developments that support the continued attractiveness of the traditional medicines segment.

First, traditional medicines have embraced new marketing and branding approaches to increase customer foothold in their home markets and abroad, in the same way Western consumer goods have done to market across the globe. More players will begin to offer experiences, meaning traditional services and products in a one-stop shop, as they vertically integrate. The use of consumer goods business tools such as CRM and e-commerce have accelerated entry to new markets for traditional products, helping them to quickly establish and target their niche customer base.

Source: Traditional Asian Medicines Unlocking New Sources of Value from Ancient Practices

Second, enhancements in the supply chain, such as testing for ingredient authenticity and safety, can help to restore consumer confidence in the quality of traditional medicines in both domestic and export markets. The crossover from medicine hall to medicine aisles in the pharmacies has also been enabled by a chain of custody certification, modern packaging, and increasing regulation of health claims.

Players are beginning to develop power brands that cover a broader range of therapeutic and preventive areas, emphasizing brand loyalty and recognition with spillover effects for introducing new kinds of herbals and brand extensions. These modern plays have the potential to generate demand among quality-seeking local consumers and trend-seeking global ones, especially when partnered with modern distributors, retailers and other international players.

Lastly, this interest from MNCs (pharma, consumer goods and others) in traditional remedies creates further opportunities in raw materials production, product design and development, distribution, and M&A.

Why Traditional Medicines, and Why Now?

Growth in the traditional medicines market is enabled by the increasing demand for alternatives, or complements, to Western therapies—the next global “bone broth” trend could very well be among the many traditional remedies in Indonesia, Vietnam or China. While health fads have put some traditional treatments onto the global stage, we should also recognize that there may be significant, latent opportunities at home markets in Asia.

Refreshed packaging, messaging, and online channels can also appeal to younger consumers who had in the past turned away from these traditions but who now see new value in their healthy, natural or chemical-free properties. As these treatments gain credibility, mainstream familiarity and access, they also become affordable options that local Asian consumers, who had once aspired for Western over-the-counter drugs, could embrace once again. Strategic partnerships with local producers and multinational investors could accelerate the modernization of TCM and other Asian medicines to restore markets at home and enter new ones abroad.

Some global players have recently put their consumer health business lines on the market, as pharma and consumer goods companies begin to re-evaluate their strategic positioning and diversification. However, a bright spot for further investments may indeed be traditional medicines, which are altogether complementary to existing portfolios and provide access to entirely new markets. At the same time, they may also hold a key part of the puzzle in providing better health care access to consumers across Asia in recognizable form, enhanced by modern approaches.

Matt Zafra

Principal, Health & Life Sciences at Oliver Wyman

Matt Zafra works extensively with pharmaceutical companies, payers, hospitals and clinic providers, and employers to develop new partnerships in the Asia-Pacific region. He has extensive healthcare consulting and insurance brokerage experience in Southeast Asia as well as in the U.S.

Get ahead in a rapidly changing world. Sign up for our daily newsletter. Subscribe