Small Capital – Which Functional Food Business Model Is Suitable?

According to 2019 statistics: The number of people using dietary supplements has reached more than 20 million people, accounting for more than 21% of Vietnam's population. This number is expected to increase by about 3-5% by 2022. This shows that the dietary supplement business market still has business potential in the coming years. Do you want to "start a business" with dietary supplements but your capital is not abundant? Which dietary supplement business model is suitable?

Don't miss the article below if you want to find a smart dietary supplement business direction that will help you quickly recover your investment capital!

I. Current status of functional food business model in Vietnam

“Business” – You can choose to sell the products of the manufacturing company (or manufacturing partner) or be a distributor of other businesses’ products. This has created 2 popular dietary supplement business models in Vietnam today:

1. Selling the company's own dietary supplements

This is a popular dietary supplement business model in large enterprises with large capital. For these enterprises, their product lines can be produced from one of the two “sources” below:

• The company's dietary supplement factory
• Factory from the company providing dietary supplement processing services

Because of their own production, these businesses have the advantage of product exclusivity. This can be called a large business model. They can choose many different forms of product distribution such as:

→ Distribution to pharmacies

→ Become a partner of distribution intermediaries and trading companies

→ Sell on the company's own distribution channels, such as: E-commerce, Facebook...

Note: In order to trade in dietary supplements, these businesses need to complete a lot of paperwork and legal procedures. In the case of having a manufacturing plant, even more paperwork and certificates are required.

2. Act as an "intermediary" to distribute other companies' products.

Simply put, you will not produce but only be a “distributor” for other pharmaceutical companies. When choosing this functional food business model, you will be classified as a “distribution partner” of the businesses that NanoFrance has just presented above.

We can clearly see some advantages of this form of business:

• No need to spend too much initial investment capital
• The steps to complete procedures and paperwork are also reduced.
• Reduced business risk

However, at this point, a new problem arises: The product you distribute is NOT special. Because there may be many people distributing the same product as you. → There needs to be a suitable way to distribute the product.

So for those who want to start with a small capital, which functional food business model is suitable? Does the opportunity "overpower" the risk?

II. Small capital dietary supplement business – Which direction is suitable?

With an initial capital of <200 million VND, you should start with the form: Being a distribution intermediary. It does not cost too much to invest in production, and the cost of documents and papers is not too much. However, to "get rich" from this business model, you need to solve 2 problems:

1. Choose “smart” distribution products

Not all dietary supplements are suitable for you to do business with small capital. With an initial investment capital of <200 million, we have some suggestions for you:

• Do not choose high-end dietary supplements
• Prioritize products with "hot" ingredients and dosage forms.
• The product should have any point of difference: ingredients or packaging design.
• The line of dietary supplements you want to distribute must be suitable for current market consumption trends.

You can refer to the BCG matrix for a more comprehensive view of product evaluation. 

2. Appropriate and effective distribution channels

After choosing a product, “narrow down” your target customers. From here, choose the appropriate distribution channel: Facebook, Shopee, Livestream…

Note that: Currently, many dietary supplement lines are being restricted from advertising. In case you want to distribute or advertise the product, you need to find out more information to avoid being punished by state agencies.

In the early days of business, to save costs, you should not hire too many employees. Just you and 1-2 others in charge of distribution channels is enough!

3. Invest with small capital but DO NOT trade in "fake" dietary supplements

Do not sell low-quality, unknown-origin dietary supplements, even when capital is not abundant – This is something that anyone doing business needs to remember. If you want to do business for a long time and have loyal customers, product quality is the fundamental factor.

Hopefully, the above article from NanoFrance will help you choose a suitable functional food business model with low initial investment capital. In case you need further support on legal procedures, further advice on processing and manufacturing functional foods, do not forget to contact NanoFrance!