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Shushmul Maheshwari March 01 , 2015
The nutraceuticals industry in India is one of the rapid growing markets in the Asia-Pacific region.
  • Divided into three segments such as functional food, functional beverages and dietary supplements, the nutraceuticals business in India is showcasing a shift in consumer buying behaviour.
  • It has been observed that the domestic nutraceuticals industry is mainly focussed in the southern region of India followed by the eastern region with three major states of Andhra Pradesh, Tamil Nadu and West Bengal.
  • The nutraceuticals market’s penetration in urban India scores around 22.5% while it is comparatively low in rural India with 6.3%.
  • The India nutraceuticals market constitutes around 2% of the global nutraceuticals market.
  • With the passage of time and along with entry of various international and local players in the market, the growth percentage has stood up.
  • The FMCG and pharmaceuticals sectors dominate the India nutraceuticals market.
  • Amway India Enterprises, Dabur India, Ranbaxy Laboratories, Pfizer, GlaxoSmithKline, Himalaya and Modicare are some of the major players that account for a substantial market share in the overall Indian nutraceuticals market.
  • As per our analysis, the industry is anticipated to grow at a CAGR of around 20% over the period 2014-2019.
  • Factors such as rising awareness about health and fitness, ageing population, changing lifestyle, and so on are fostering the growth.
  • Demand for protein supplements is increasing among the urban youth due to rising desire towards maintaining fitness and building a strong physique.
Sub-divisions
The Indian market is subdivided into functional food & beverages, and dietary supplements.
  • Oats, probiotics, nuts, tomato products, yogurt, sports and energy drinks, and so on are functional foods whereas vitamins, minerals, fibres and fatty acids, in the form of tablets and capsules, are part of dietary supplements.
  • Demand for ‘functional food & beverages’ has shown an upswing in recent years mainly via influence of the development of innovative products in this segment.
  • Moreover, urban middle-class population has been switching towards functional food products in order to reduce fat and avoid sugar-rich food for better health benefits.
Drivers
  • Rising awareness among people to stay fit and healthy
  • Growth of online retailing of health products through websites like Healthkart. Online retail penetration rose to 65%, as per ASSOCHAM
  • Robust retail sector which is expected to grow around 13% till 2018
  • Urbanisation resulting in expansion of employment, economic opportunities and infrastructure facilities
  • Commercial advertisement of functional food on television, newspapers, Internet, etc. Total broadband subscribers is expected to be 600 million by 2020, as per Government of India
  • Personal disposable income of Indians is growing at 12-14% rate
Challenges
  • Lack of awareness about nutraceuticals, especially amongst rural people in the country
  • Low per capita consumption of nutraceuticals in India as compared to the US, Japan and European countries
  • Concern amongst people about safety of nutraceuticals following lack of sufficient regulatory policies
For example, high doses of protein supplements lead to nausea, cramps, headache, fatigue and more
  • Lack of regularised system for setting up manufacturing plants for nutraceuticals
Regulation: Food Safety and Standards Act of India
  • Nutraceuticals fall under the purview of Food Safety and Standards Act of India, 2006 (FSSAI). It regulates manufacturing, storage, distribution, sales and imports of nutraceuticals in the country.
  • Chapter 4, Article 22 of FSSAI defines that nutraceuticals can only be used for oral administration. They can be utilised as conventional foods, which cannot claim to cure any specific disease.
  • The Act defines dietary supplements as having characteristics of not a conventional food, but formulated in the form of powders, granules, tablets, capsules, liquid, jelly and other dosage forms. Meanwhile, functional food is defined as food which impacts specific functions in the body that may provide additional health benefits or remedy some disease conditions, following the addition/ concentration of a beneficial ingredient, or removal/substitution of an ineffective or harmful ingredient.
  • We believe that the regulation in India is not stringent enough to ensure consumer safety. FSSAI should play significant role in defining standards to streamline the nutraceuticals market in India, which must include quality raw materials, safe manufacturing of products, health claims, labelling and distribution, and storage.
  • Investment and expansion by nutraceutical players: Nutraceuticals in India had its phase of nascent stage. But in the past few years, demand for such products showcased an increase.
Thus, nutraceuticals are well accepted mainly by the upper-middle section of the country’s population. Various nutraceuticals players which include both pharmaceutical and FMCG giants are planning to expand their product portfolios of nutraceuticals. This is likely to lead to higher flow of fortified foods and beverages as well as dietary supplements in the country and so bolster the growth of nutraceuticals in the coming years. For instance, Amway India Enterprises, a subsidiary of US-based Amway Corporation, has decided to increase its investment in Tamil Nadu with an investment of around US$150 million more in addition to US$64 million planned earlier. The company is in the process of introducing a new facility, with nine production lines of nutrition, cosmetics and oral care products, as per Anshu Budhraja, CFO.

Another company Tata Chemicals is anticipated to invest around US$24 million for installation of a nutraceuticals manufacturing facility in Sriperumbudur, near Chennai, within the next three years. The company is in discussions with players from other parts of the world for export of nutraceutical products mainly to European and Asian countries as stated by R Mukundan, managing director of the company.

Growing Per Capita Consumption of Probiotics
Within fortified foods, probiotics is quickly expanding in India. Though the country is at a nascent stage with respect to market turnover compared to worldwide turnover still it may evolve at a rapid pace for outstanding growth in the near future. India is emerging as a major probiotics market with a CAGR of around 22% till 2015. The market for probiotics is projected to reach US$8 million by 2015. Amul, Mother Dairy, Danone Yakult and Nestle India are among the few producers of such drinks in the country and these are anticipated to show higher growth due to their expanding distribution networks and emphasis on introducing exclusive outlets.

This development will strengthen the market for functional food and beverages, and dietary supplements in the country in the next few years.

Mergers and Acquisitions
In order to expand the business of nutraceuticals in India, companies are entering into joint ventures and mergers-acquisitions in the country. Increase in consumption of functional foods and beverages as well as dietary supplements to stay fit has opened up huge opportunities for companies related to pharmaceuticals and FMCG to increase their product portfolio and mark a significant presence in the country. For example, National Innovation Foundation-India (NIF) has entered into a contract with Bharat Vikas

Group (BVG) India Limited to formulate a new venture company for the commercial production and marketing of nutraceuticals and healthy foods. Both these companies have signed a Memorandum of Understanding (MoU) in this regard. The joint venture company will be into manufacturing of different kinds of medical and functional foods and supplements developed at NIF for domestic purposes as well as for exports to worldwide markets, as per Vipin Kumar, Chief Innovation Officer, NIF India. Recently, another company Aurobindo Pharma accomplished the acquisition of US-based nutrition supplement maker Natrol for US$ 132.5 million.

Funding Aid to Expand Business
It has been noticed that nutraceutical companies are procuring financial assistance from different companies in order to expand their capacity in manufacturing of nutraceutical products, which is likely to intensify the overall Nutraceutical industry in India in the coming few years. For instance, Beloorbayir Biotech Limited, a major manufacturer of food and dietary supplements and other nutraceuticals, declared about an investment of around US$12 million from India Agri Business Fund Limited, which is Asia’s first private equity fund focused on the Indian food and agribusiness sector. The investment will allow the company to further expand its manufacturing capacities and help bolster other infrastructural abilities, as per B G Bairy, MD and CEO, of the company.

Another company, Laila Nutraceuticals, an export-oriented business unit based in Andhra Pradesh is in conversation with global PE funds to lift around US$40 million, as per Kiran Bhupatiraju CEO.

References
Amway; Business Standard; Indian Probiotic Association; Business Standard; Deccan Chronicle; Indian News and Times; and Economic Times.

(The author is CEO, RNCOS Business Consulting. He can be contacted at shushmul@rncos.com)

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