Holland & Barrett, the UK's biggest health food retailer, entered the Chinese market for the first time by opening two franchise stores in Shanghai on Thursday.

Tapping into China's burgeoning health supplement sector demand, Holland & Barrett hopes to open another 16 stores later this year, and more than 500 stores within 5 years' time.

"We will start form Shanghai, and go to all over China in the future. Our target is to become the No. 1 brand for health living in China," said Harvey Kamil, vice chairman of NBTC, parent company of Holland & Barrett.

Chris Wood, minister and deputy head of the British Embassy in China, said that he feels excited the British household retailer is taking a "bold move" in to the crowded and competitive China market.

"Chinese consumers are increasingly wealthy nowadays, and also becoming more discerning," he said, noting that life style products will have great potential when some luxury British brands like Burberry and Rolls-Royce have achieved great fame in China.

Local people in Shanghai are curious about the new shop and fresh brand. Xia Guifang, a 54-year-old retired worker, said she is definitely interested in the products, as "something from UK must be of good quality". But she said the price is a bit high.

A bottle of cranberry capsules sells at RMB 278 yuan ($44) in the store of Shanghai. And a small bottle of oats avena sativa costs 69 yuan.

"We know there is great demand, so we have quite an ambitious plan in the Chinese market," said global franchising manager Mark Stewart-Maunder.

He added that Holland & Barrett's products are unique for their quality, citing the brand's Good Manufacturing Practice certification and endorsement from organic associations as proof.

Moreover, the brand's training scheme, the Natural Health Academy, became the first high street program to receive the UK government's Education Development International endorsement.

Leveraging upon its quality training credentials, Holland & Barrett is launching a health consultancy service in China, where customers can pre-book one-to-one sessions to receive advices about healthy living.

"It's about giving that extra service in the Chinese market. It'll be the first market where we've done it. So when Chinese consumers want some good advice, they can confidently come to us," said Stewart-Maunder.

China has witnessed a growing demand for nutritional supplements in recent years, driven by its aging population, rising incomes and better-educated urban consumer population.

Last year, more than 260 billion yuan ($41 billion) in health foods were sold in the country, according to the National Development and Reform Commission's Public Nutrition and Development Center.

Meanwhile, China Health Care Association data showed that Chinese consumers' average spending on healthcare products in 2011 accounted for 0.1 percent of their total expenditure. In comparison, consumers in developed countries spent only 0.03 percent.

But Holland & Barrett will face tough competition in China.

Among international companies, Amway, a direct seller, has staked out a lead position with a market share of 16 percent in 2010, according to Euromonitor data. Its 2010 sales reached 21 billion yuan.

Another competitor is General Nutrition Centers Inc, a Pennsylvania-based manufacturer and retailer of health products that launched products in major Chinese cities including Shanghai, Guangzhou and Shenzhen last August.

Tongrentang, a traditional Chinese medicine producer with more than 300 years of history, joined in the race in 2003 by launching subsidiary to sell herbal healthcare supplements.

Sales revenue of Tongrentang Health grew from 180 million yuan in 2003 to 5.6 billion yuan in 2011, and sales manager Song Tong said earlier this year that a sales target of 10 billion yuan is set for 2014.

Stewart-Maunder says that a certain level of competition will help to "expand product categories in the Chinese market" and benefit every brand, but he feelss that Holland & Barrett's over 90 years of history will help it gain consumer trust.

Founded by Samuel Ryder as a market garden in Brighton, a city on the south coast of Britain, the brand has grown to over 700 retail stores in the UK and Ireland.

It launched a franchising strategy for overseas expansions 4 years ago, and has since established 10 franchised stores in Singapore, 6 in Cyprus, 3 each in Malta and the United Arab Emirates, and 1 each in Hungary, and Gibraltar.

Stewart-Maunder says that China has "always been on the radar" since Holland & Barrett looked overseas for growth. "In fact, we've had many hundreds of enquiries from interested parties."

But finding a franchising partner was challenging, as some parties were too small to make the investment required, and others did not understand the brand's core values.

Finally, an appliance manufacturer, Changzhou Globe Tools Co. came along, and demonstrated its commitment by recruiting a team of experienced managers in the retail sector to help it build the brand in China.

"Now we feel that we have a partner with a like mindset, has engaged in extensive market research, and is really willing to invest behind the brand over the long term," Stewart-Maunder said.