Business Club News, January 21
Dong'e Ejiao, known as "medicine in Maotai," really has to sell the price of Maotai. On January 6, East E-Jiao issued an announcement saying that since January 7, 2011, the Ejiao block ex-factory price will not increase by more than 60%. This is the fifth time Dong'e Ejiao has raised its price since 2010. The cumulative price increase over the past year has exceeded 100%, and this price adjustment is the largest increase in E-Jiao since history. According to market estimates, after the price increase of 60%, the ex-factory price of the gelatin block will reach 954 yuan per kilogram and the retail price will reach 1289 yuan.
Coincidentally, just a week earlier, Pien Tze Huang Pharmaceutical and Guilin Sanjin Pharmaceutical announced the same price adjustment on the same day. Pien Tze Huang raised domestic price of Tsai's Tsai 20 yuan for each Tsai Zi from January 1, 2011, and raised its export price by 3.5 US$; Guilin Sanjin. The supply price of the product was increased. Among them, Sanjin Tablets was 6%, Guilin Watermelon Cream was 6%, and Watermelon Cream Lozenges was 8%.
Under the background of downward pressure on the overall drug price, in the face of strong competition from western medicine substitutes and consumers' high sensitivity to drug prices, why do some Chinese herbal medicines frequently increase prices?
84% of the price of Chinese medicinal materials increased last year
According to the data, Dong'e Ejiao is the largest ejiao enterprise in the country. Its annual output and export volume of E-Jiao account for 75% and 95% of the country's total. The price of East Ejiao's price increase kicked off early last year. On January 16 last year, East Ejiao raised the Ejiao block ex-factory price by 10%; on January 28, which was less than two weeks apart, the Ejiao block ex-factory price rose by 20% again, from 432 yuan/kg to 516 yuan/kg; 5 On the 25th of the month, Dong'e E-Jiao raised the ex-factory price of Ejiao block by 5% to 542 yuan/kilogram; on October 11, it announced again that the ex-factory price of Ejiao block was increased by 10% from October 9th to 596 yuan/kg. If we add this price increase on January 7, 2011, the price of Ejiao will nearly double, and the ex-factory price will be about 954 yuan per kilogram.
Similar cases exist in old Chinese medicine companies. In early 2009, Pien Tze Huang raised its export price by US$4/grain, from US$16.5/grain to US$20.5/grain, with a price increase rate of 24.2%. From January 1, 2011, Pien Tze Huang raised its domestic sales price of its products. To 220 yuan / grain, an increase of 10%, export sales of 20.5 US dollars / grain, an increase of 17%. Yunnan Baiyao raised prices on February 5th, 2009. The retail price of 5-pill “white cream†rose from 9.89 yuan to 24 yuan, an increase of 143%, and the ex-factory price rose to 15.6 yuan, up 84%. Subsequently, the five species of Yunnanbaiyao had an average price increase of 10%, and capsules and powders also increased by 6%.
Data from the Chinese Medicine Association shows that last year, 84% of 537 Chinese herbal medicines increased their prices by 5% to 180%. Which accounted for 28% of the varieties rose more than 51%; accounting for more than 6% of the varieties of 181%, and 2% of the varieties more than 300%. Cordyceps sinensis, water scorpion, pine fritillaria, green shell, donkey-hide gelatin ranked first in the forefront.
Ye Songtao, a pharmaceutical analyst at Changjiang Securities, believes that last year the scope and extent of price hikes for Chinese herbal medicines were rare in the past year. Through the analysis of the price transmission chain and domestic major Chinese medicine products, the price adjustment of brand enterprises has become a trend in the context of rising raw materials.
Rational return of value?
Zhou Lei, director of the professional committee of the Chinese Medicines Market of the Chinese Medicine Association, believes that price increases are the result of many years of accumulation. Reasons for price increases include reduced production, more exports, greater domestic demand, natural disasters in production areas, and unscrupulous traders' hype. “The latter two are incentives under special circumstances and will not play a leading role.â€
“The acceleration of new medical reforms and the construction of new rural cooperative medical institutions in the past two years has increased the basic needs of important products. The price increase of these old traditional Chinese medicine products is essentially a manifestation of a rational return of market values.†Some experts believe that Chinese medicine protects varieties and exclusive products. Variety of prices is nothing less than a change in supply and demand, the problem is not who is the price increase, but whether the price increase is reasonable.
In response, Qin Yufeng, general manager of Dong'e Ejiao, explained that the increase in e-Jiao's price has been accompanied by a shift in the customer base. The sales target has shifted from the original rural middle-aged women with weaker economic strength to stronger spending power. The white-collar workers in the city, along with the transfer of customers, are the sales terminals, which have been reduced from 300,000 pharmacies covering vast rural areas to 38,000 pharmacies, mainly cities.
Although Ejiao's prices have been rising all the way, in Qin Yufeng's view, the value of Ejiao is still not fully reflected. He used to compare Ejiao with Cordyceps on several occasions. According to the data provided by it, from 1985 to 2009, the price of donkey-hide gelatin rose 12 times, the price of Cordyceps rose 120 times, and the per capita disposable income of urban residents increased by 23 times. Qin Yufeng believes that donkey-hide gelatin products have been in short supply in recent years, and the out-of-stock season has become the norm. There is only one conclusion, that is, consumers agree with this price and agree with the value represented by this price.
The author noticed that investment institutions are generally optimistic about the investment value of old TCM companies compared to consumers’ complaints about increasing prices. Shenyin Wanguo’s research report released on January 5 predicts that from 2010 to 2012, the average price of donkey-hide gelatin will increase by 47%, 50% and 30% respectively year-on-year. The gross margin of ejiao series will be 71.3 in 2010. %, up to 75.8% in 2011 and 78.1% in 2012. Shenyin Wanguo believes that Dong'e Ejiao's market value is expected to exceed 100 billion yuan in the next three years.
How long will the price increase continue?
According to industry insiders, due to the destruction of the environment of wild Chinese herbal medicines, there are fewer and fewer wild Chinese herbs. Under normal circumstances, the yield of wild medicinal herbs is insufficient and can be replaced with home-grown medicinal herbs or as a mainstream raw material. However, in recent years due to a variety of reasons, the production of homegrown medicinal herbs has also been reduced, such as: young and middle-aged labor to enter the city labor, the lack of major labor force production of medicinal herbs; low drug prices, long growth cycle, high cost, poor efficiency, farmers planting enthusiasm not tall. Some experts estimate that from 2008 to 2009, the country’s medicinal planting area decreased by more than 40% from 2002 to 2005, the highest period. Since 2000, the country’s total output of medicinal herbs has declined by about 20% annually.
On the one hand, the market demand at home and abroad continues to increase. On the other hand, the output of both wild and domestic herbs is shrinking, and the gap is growing. The Chinese medicine market has formed a seller’s market, and the overall price increase has become a kind of inevitable.
However, not all Chinese medicine companies are able to shift cost pressures through price increases. According to the provisions of the essential medicines system, prices are regulated for products entering the Medicare and Essential Drug List. However, the exclusive varieties of Chinese medicine can both enjoy the pricing treatment and fully share the benefits of access to the Medicare and Essential Medicines Catalogue. The Shandong Provincial Price Bureau issued a notice on December 28, 2010, stating that donkey-hide gelatin, tortoiseshell rubber, and antler rubber products will no longer be included in the government's pricing management scope. The price will be set by the company itself, and the price of Dong'e gelatin will also come immediately.
How long will this Chinese herbal medicine price increase since 2009 begin? Zhou Lei believes that due to the lack of stability of the country, it is expected that prices will not fall in the short term. “Individual species are subject to price increases due to natural disasters and speculation, and the rate of increase is not normal. It is expected that the supply will stabilise and prices will fall back in the coming year. However, most of them may increase with the increase in CPI (infants’ consumer goods price index). ."He said.
In fact, the price increase of Chinese herbal medicines has resulted in a significant reduction in the production of Chinese herbal medicines and a significant reduction in wild herbs, but it is also related to the irregularity in the cultivation and circulation of Chinese herbal medicines. The cultivation and circulation of Chinese herbal medicines is still in a state of extensiveness and tradition, and it has not been able to match the modern requirements of traditional Chinese medicine production.
Zhou Lei said: "First of all, I hope to establish national reserves for common Chinese herbal medicine varieties in the future, so as to stabilize the price level and ensure the normal medical treatment for the people. Second, I hope to establish the collection and release of basic data on supply and demand of the long-lasting medicinal herbs market. The mechanism allows all aspects of medicinal production to be targeted and standardized."
Dong'e Ejiao, known as "medicine in Maotai," really has to sell the price of Maotai. On January 6, East E-Jiao issued an announcement saying that since January 7, 2011, the Ejiao block ex-factory price will not increase by more than 60%. This is the fifth time Dong'e Ejiao has raised its price since 2010. The cumulative price increase over the past year has exceeded 100%, and this price adjustment is the largest increase in E-Jiao since history. According to market estimates, after the price increase of 60%, the ex-factory price of the gelatin block will reach 954 yuan per kilogram and the retail price will reach 1289 yuan.
Coincidentally, just a week earlier, Pien Tze Huang Pharmaceutical and Guilin Sanjin Pharmaceutical announced the same price adjustment on the same day. Pien Tze Huang raised domestic price of Tsai's Tsai 20 yuan for each Tsai Zi from January 1, 2011, and raised its export price by 3.5 US$; Guilin Sanjin. The supply price of the product was increased. Among them, Sanjin Tablets was 6%, Guilin Watermelon Cream was 6%, and Watermelon Cream Lozenges was 8%.
Under the background of downward pressure on the overall drug price, in the face of strong competition from western medicine substitutes and consumers' high sensitivity to drug prices, why do some Chinese herbal medicines frequently increase prices?
84% of the price of Chinese medicinal materials increased last year
According to the data, Dong'e Ejiao is the largest ejiao enterprise in the country. Its annual output and export volume of E-Jiao account for 75% and 95% of the country's total. The price of East Ejiao's price increase kicked off early last year. On January 16 last year, East Ejiao raised the Ejiao block ex-factory price by 10%; on January 28, which was less than two weeks apart, the Ejiao block ex-factory price rose by 20% again, from 432 yuan/kg to 516 yuan/kg; 5 On the 25th of the month, Dong'e E-Jiao raised the ex-factory price of Ejiao block by 5% to 542 yuan/kilogram; on October 11, it announced again that the ex-factory price of Ejiao block was increased by 10% from October 9th to 596 yuan/kg. If we add this price increase on January 7, 2011, the price of Ejiao will nearly double, and the ex-factory price will be about 954 yuan per kilogram.
Similar cases exist in old Chinese medicine companies. In early 2009, Pien Tze Huang raised its export price by US$4/grain, from US$16.5/grain to US$20.5/grain, with a price increase rate of 24.2%. From January 1, 2011, Pien Tze Huang raised its domestic sales price of its products. To 220 yuan / grain, an increase of 10%, export sales of 20.5 US dollars / grain, an increase of 17%. Yunnan Baiyao raised prices on February 5th, 2009. The retail price of 5-pill “white cream†rose from 9.89 yuan to 24 yuan, an increase of 143%, and the ex-factory price rose to 15.6 yuan, up 84%. Subsequently, the five species of Yunnanbaiyao had an average price increase of 10%, and capsules and powders also increased by 6%.
Data from the Chinese Medicine Association shows that last year, 84% of 537 Chinese herbal medicines increased their prices by 5% to 180%. Which accounted for 28% of the varieties rose more than 51%; accounting for more than 6% of the varieties of 181%, and 2% of the varieties more than 300%. Cordyceps sinensis, water scorpion, pine fritillaria, green shell, donkey-hide gelatin ranked first in the forefront.
Ye Songtao, a pharmaceutical analyst at Changjiang Securities, believes that last year the scope and extent of price hikes for Chinese herbal medicines were rare in the past year. Through the analysis of the price transmission chain and domestic major Chinese medicine products, the price adjustment of brand enterprises has become a trend in the context of rising raw materials.
Rational return of value?
Zhou Lei, director of the professional committee of the Chinese Medicines Market of the Chinese Medicine Association, believes that price increases are the result of many years of accumulation. Reasons for price increases include reduced production, more exports, greater domestic demand, natural disasters in production areas, and unscrupulous traders' hype. “The latter two are incentives under special circumstances and will not play a leading role.â€
“The acceleration of new medical reforms and the construction of new rural cooperative medical institutions in the past two years has increased the basic needs of important products. The price increase of these old traditional Chinese medicine products is essentially a manifestation of a rational return of market values.†Some experts believe that Chinese medicine protects varieties and exclusive products. Variety of prices is nothing less than a change in supply and demand, the problem is not who is the price increase, but whether the price increase is reasonable.
In response, Qin Yufeng, general manager of Dong'e Ejiao, explained that the increase in e-Jiao's price has been accompanied by a shift in the customer base. The sales target has shifted from the original rural middle-aged women with weaker economic strength to stronger spending power. The white-collar workers in the city, along with the transfer of customers, are the sales terminals, which have been reduced from 300,000 pharmacies covering vast rural areas to 38,000 pharmacies, mainly cities.
Although Ejiao's prices have been rising all the way, in Qin Yufeng's view, the value of Ejiao is still not fully reflected. He used to compare Ejiao with Cordyceps on several occasions. According to the data provided by it, from 1985 to 2009, the price of donkey-hide gelatin rose 12 times, the price of Cordyceps rose 120 times, and the per capita disposable income of urban residents increased by 23 times. Qin Yufeng believes that donkey-hide gelatin products have been in short supply in recent years, and the out-of-stock season has become the norm. There is only one conclusion, that is, consumers agree with this price and agree with the value represented by this price.
The author noticed that investment institutions are generally optimistic about the investment value of old TCM companies compared to consumers’ complaints about increasing prices. Shenyin Wanguo’s research report released on January 5 predicts that from 2010 to 2012, the average price of donkey-hide gelatin will increase by 47%, 50% and 30% respectively year-on-year. The gross margin of ejiao series will be 71.3 in 2010. %, up to 75.8% in 2011 and 78.1% in 2012. Shenyin Wanguo believes that Dong'e Ejiao's market value is expected to exceed 100 billion yuan in the next three years.
How long will the price increase continue?
According to industry insiders, due to the destruction of the environment of wild Chinese herbal medicines, there are fewer and fewer wild Chinese herbs. Under normal circumstances, the yield of wild medicinal herbs is insufficient and can be replaced with home-grown medicinal herbs or as a mainstream raw material. However, in recent years due to a variety of reasons, the production of homegrown medicinal herbs has also been reduced, such as: young and middle-aged labor to enter the city labor, the lack of major labor force production of medicinal herbs; low drug prices, long growth cycle, high cost, poor efficiency, farmers planting enthusiasm not tall. Some experts estimate that from 2008 to 2009, the country’s medicinal planting area decreased by more than 40% from 2002 to 2005, the highest period. Since 2000, the country’s total output of medicinal herbs has declined by about 20% annually.
On the one hand, the market demand at home and abroad continues to increase. On the other hand, the output of both wild and domestic herbs is shrinking, and the gap is growing. The Chinese medicine market has formed a seller’s market, and the overall price increase has become a kind of inevitable.
However, not all Chinese medicine companies are able to shift cost pressures through price increases. According to the provisions of the essential medicines system, prices are regulated for products entering the Medicare and Essential Drug List. However, the exclusive varieties of Chinese medicine can both enjoy the pricing treatment and fully share the benefits of access to the Medicare and Essential Medicines Catalogue. The Shandong Provincial Price Bureau issued a notice on December 28, 2010, stating that donkey-hide gelatin, tortoiseshell rubber, and antler rubber products will no longer be included in the government's pricing management scope. The price will be set by the company itself, and the price of Dong'e gelatin will also come immediately.
How long will this Chinese herbal medicine price increase since 2009 begin? Zhou Lei believes that due to the lack of stability of the country, it is expected that prices will not fall in the short term. “Individual species are subject to price increases due to natural disasters and speculation, and the rate of increase is not normal. It is expected that the supply will stabilise and prices will fall back in the coming year. However, most of them may increase with the increase in CPI (infants’ consumer goods price index). ."He said.
In fact, the price increase of Chinese herbal medicines has resulted in a significant reduction in the production of Chinese herbal medicines and a significant reduction in wild herbs, but it is also related to the irregularity in the cultivation and circulation of Chinese herbal medicines. The cultivation and circulation of Chinese herbal medicines is still in a state of extensiveness and tradition, and it has not been able to match the modern requirements of traditional Chinese medicine production.
Zhou Lei said: "First of all, I hope to establish national reserves for common Chinese herbal medicine varieties in the future, so as to stabilize the price level and ensure the normal medical treatment for the people. Second, I hope to establish the collection and release of basic data on supply and demand of the long-lasting medicinal herbs market. The mechanism allows all aspects of medicinal production to be targeted and standardized."
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