A market where advertising leads and classifications have blurred

On the 23rd, the Ministry of Food and Drug Safety identified 26 cases in an online inspection in which advertisements made ordinary foods or cosmetics appear to be products close to pharmaceuticals. In particular, as interest has grown in health functional foods claiming body fat reduction benefits, consumers have become more likely to expect exaggerated effects beyond the actual approved scope, and as a result, reports of side effects and disputes have also been increasing.

The problem is that the advertising methods rely more on presentation than on the products themselves. Tactics such as fictitious doctors or pharmacists created with generative AI fabricate trust, and as cases continue in which consumers purchase after seeing SNS advertisements but then have difficulty verifying sellers or obtaining refunds, the limitations of existing labeling regulations in sufficiently protecting consumers have become apparent.

Why the MFDS is rewriting the rules

Customized health functional foods, institutionalized on March 19 last year, spread rapidly, but criticism has mounted that consumers find it difficult to grasp at a glance the nature of the products and the precautions for taking them. In response, the government is moving to attach dedicated labels to such products, strengthen statements saying they are not pharmaceuticals and the indication of consumption deadlines, and at the same time revise manufacturing and quality control standards in line with the direction of international harmonization of GMP for health functional foods.

This adjustment is not merely about refining wording, but a response to a market that has entered a different stage. As health supplements have begun to be consumed as problem-solving tools similar to medicine, policymakers are reflecting the view that post-market protections should also be expanded, including systems for consumer redress and age-specific safety information.

The industry’s center of gravity is shifting from finished products to ingredients

Meanwhile, in the industry, as differentiation through sales of finished consumer products alone has become more difficult, B2B expansion centered on functional ingredients and research capabilities is gaining momentum in earnest. K-Food+ exports have risen to $7.05 billion, and as companies focus investments on research institutes to secure materials backed by overseas regulatory compliance and clinical evidence, evaluations such as best corporate-affiliated research institute are also becoming a means of enhancing business credibility.

The steady stream of approvals for individually recognized ingredients reflects the same trend. Ingredients with proven functionality, such as chondroitin sulfate and BN-202M, provide not only material for new products but also exclusivity periods and B2B supply opportunities, showing that competitive standards in the health functional food industry are shifting from marketing to scientific data and the ability to clear regulatory hurdles.

Distribution and production are also being reorganized around efficiency

Market expansion does not necessarily mean expanding production bases. As seen in Amorepacific’s push for the sale of its Anseong health functional food plant, some companies are trying to improve profitability by consolidating production at core factories, while others are expanding K-wellness products overseas as everyday consumer goods through channels such as the Olive Young store in Pasadena, California.

In other words, the industry is moving in a two-track flow, reducing facilities on one side while expanding on the other. Even aggressive investments such as about a 200% increase in production capacity compared with previous levels are being concentrated on materials and product categories with proven demand, suggesting that going forward, the more important competitive point may be not which company produces the most, but how resources are allocated to items with the right functionality and quality systems.