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Indian nutra market to reach $4 b by 2018
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Anurag More, Mumbai
March 01 , 2015
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In the last few years, lifestyle diseases have increased around the world as a result of inadequate nutrition due to poor lifestyle choices.
As per World Health Organisation (WHO), mortality rate due to nutrition related factors is nearly 40 per cent in developing countries, underscoring the need for nutraceutical products, to balance the nutritional intake of an individual. Nutraceuticals are products that provide health benefits to the consumer, primarily aimed at achieving basic nutritional needs through dietary means.
Indian nutraceuticals market
According to Frost & Sullivan analysis, the penetration of nutraceuticals in India was around 15 per cent in 2013. Globally the nutraceuticals market earned around US$168 billion in revenues in 2013 in which India had a demand share of around 2 per cent, earning around $2 billion. Growing at a compound annual growth rate (CAGR) of 17.1 per cent, the Indian market is expected to reach $4 billion by 2018. China, southeast Asia, and India are fast-growing markets, with each experiencing growth in double digits. In the last 1-2 years, functional beverages have emerged as fastest growing category for the Indian market, with companies expanding their portfolio in the segment. The category is expected to grow at a CAGR of 21.7 per cent by 2018.
"The Indian nutraceuticals industry has evolved from an ingredient export-focussed industry to one that is looking to cater to the domestic market. With specific focus on the market, the industry has evolved from foods that started out as ‘with natural ingredients’ to, currently, foods that are positioned as ‘preventive care,’" said Vishnu Shankar, associate director & head, chemicals, materials & food practice, Frost & Sullivan.
Meanwhile, Darshan Mehta, executive director, business development, Anil Bioplus Ltd, said, “The nutraceuticals sector in India has grown by CAGR of around 15% in last five years compared to global growth of close to 7%. But, Indian market size of about $2.5 billion is miniscule compared to global market size of $170 billion as of 2014. The higher growth of Indian market is primarily due to its lower base. However, India is among high growth markets along with China and Brazil for the next decade due to rising awareness about healthcare and nutritional food. Due to higher growth that Indian market offers and untapped opportunities in many segments of nutraceuticals, even global companies are eyeing India to drive their growth."
Krishna Srikanth, officer-on-special-duty (OSD), Vasta Biotech Pvt. Ltd, said, "As a country we have a longer history with nutraceutical products than we may imagine. Products like Chyawanprash have held sway for decades now even on a retail level. Today we are at an interesting juncture in India. Various allied industries that have invested in nutraceutical industry are coming together with renewed vigour. FMCG sector which was possibly the first to create trusted nutraceutical brands like Boost, Maltova, Horlicks, Complan, have been aggressively differentiating their products through value addition in recent years. Pharmaceutical players followed suit seeing the commercial opportunity and have actually created a parallel demand system for wellness products.”
He further stated, "The latest entrants have been other niche players, like snack foods, dairy players who too have tasted success in positioning a fortified product for their customers. What all this means is a huge opportunity for nutraceutical ingredient companies to support in the growth and R&D of the players in each of these industries, through sharing good science and responsible support. The good thing about India is that when new entrants step in, they often have the choice to create a parallel untapped market, rather than fight for market share in an already crowded market."
Tirtha Gala, sr executive, nutrition and regulatory affairs, Roquette Riddhi Siddhi Pvt. Ltd, stated, “The market is surely poised for a dramatic growth. It has definitely grown from customers having Chyavanprash for its perceived image of protecting the body from various ailments to more segmented needs, wherein people are ready to buy food supplements as well vitamin and mineral supplements to suit various age groups, health as well as lifestyle requirements.
Netscribes’ latest market research report titled Nutraceuticals Market in India 2014 stated that the increasing shift towards preventive medication, backed by growing purchasing power of Indian consumers, is fueling growth in the market. The nutraceutical sector can be categorised into three broad segments - dietary supplements, functional food and functional beverages. Dietary supplements have witnessed a consistent rise in demand owing to the increasing health-consciousness prevalent among individuals, particularly the growing Indian middle-class population. Probiotics market is at a nascent stage. However, it is one of the most promising categories under the functional food segment and has huge growth potential in the near future, driven by the growing interests of consumers as well as market players. Modern day on-the-go lifestyles of Indian consumers have also promoted the growing use of functional beverages such as energy drinks and fortified juices.
Consumption pattern of nutraceuticals
Mehta of Anil said: “Nutraceutical sector is primarily categorised into dietary supplements and functional foods & beverages. Globally, dietary supplements have higher share (of close to 60%) in market size. Indian market too has higher share of dietary supplements as of now. However, going forward, functional food & beverages segment is expected to have higher growth rate, driven by demand from an evolving consumer base. The pharmaceutical and fast-moving consumer goods (FMCG) giants dominate the Indian nutraceutical market. While dietary supplements such as vitamin and mineral supplements have been captured by pharmaceutical companies, FMCG companies are now bringing functional food and beverages to the market.
Srikanth of Vasta stated, “While nutraceutical products in India may have a longer gestation period before launching, especially when compared to global trends, the life of a nutraceutical product once launched is considerably longer when compared to developed countries and brands continue to stay relevant for significant periods of time without major additions or changes.
"Another key factor is that India-centric needs take centre stage in deciding the R&D priorities – for example the huge need for a variety of diabetic-friendly products, and even at the pre-diabetic market. (India is estimated to have 67 million diabetic patients and 30 million in pre-diabetic condition.) Over the next half-decade or so, we can expect to see such trends give a very Indian flavour to the commercial priorities of nutraceutical companies – wherever they are in the value chain, be it R&D, production, distribution or marketing. So while, global patterns will stay relevant, those that successfully apply existing science to address a uniquely Indian problem, will gain a strong foothold as first movers in their respective markets," he stated.
Gala of Roquette informed, “As compared to abroad, wherein the trust factor of consumers on companies providing reliable and safe products is fairly high, Indian consumers have yet not developed the trust factor. Therefore, the consumption in India is really low as compared to developed countries. The level of awareness is quite low.”
How MNCs look at Indian market
According to Mehta of Anil, India is among three highest growth markets along with China and Brazil. For MNCs, who have established their presence in developed markets, India offers attractive proposition as it is expected to offer double the growth rate compared to global markets. The Indian market offers high growth opportunity in both dietary supplements and functional food & beverage segments. To tap Indian market, MNCs have started either engaging in a tie-up or have established a unit and this trend is expected to grow further as India only has around 2% market share in overall global nutraceuticals segment.
Srikanth of Vasta pointed out, “The real guide and guru for MNCs is to watch and learn from other MNCs who have integrated well in India. The MNCs which will do well and innovate more are the ones that recognise, India is not a pitch for a one-day-match. A number of MNCs have tasted success in projecting brands that maintain a strong local relevance. Also, it is heartening to note the shift in approach from GNI per capita to more segment-based approach, which allows MNCs to take a deeper view of the Indian markets they operate in.
Gala of Roquette stated, “The MNCS definitely are optimistic about the Indian market. The key factor for optimism is the demography which comprises large working population. This working population is aspiring for a better life and a good health is definitely essential to make the most of what life has to offer.
Challenges for the sector
Mehta of Anil stated, “Though, the Indian market offers higher growth compared to global market, the awareness level about nutraceuticals sector is very low. Despite rise in awareness among rising affluent middle- class in last decade, the companies, both local and international, have a tough job on hand to penetrate into target group’s mind and increase their market share. Apart from creating awareness, the companies will have to face three-fold challenge in the form of product development (related to specific disease), product innovation and production promotion.”
He added, “For MNCs, additional challenge will be to understand cultural shift across geographical locations and customise products accordingly. Domestic companies also face challenge of technology, which is easier for their international counterparts. Without technology and adequate investment, product innovation is not possible to compete with MNCs.”
Srikanth of Vasta stated, “On the production side - achieving global credibility, some companies like the Murugappa Group, Zydus Group etc. have done this well through inorganic growth, but many other successful Indian companies are yet to truly hoist their flag on a global market level. On the import side, proprietary ingredients now face significant beaureaucracy with customs and also the FSSAI.”
According to Gala of Roquette, regulatory approvals is one of the major roadblocks preventing the companies to launch many products from their existing portfolio. Presently, the sector relies a lot on imports to cater to the small but growing market. Getting speedy approvals will certainly motivate them to make these products in India. This will certainly aid in reducing the price and make the products accessible to a wider audience. Lack of awareness of the consumers on the benefits of these products is another factor responsible for low sales.
Coping with challenges
Mehta of Anil observed,” Indian nutraceuticals segment is in very nascent stage and so even established companies are facing challenge almost for every product. But, since the domestic companies have understanding of cultural shift, unlike in case of MNCs, these companies are better able to spread their distribution network and customise product according to geographical location.”
Meanwhile, Srikanth of Vasta stated, “The good thing about India is that the size of the current domestic market is only a fraction of its potential, and there is a lot of room for creative work in developing niche areas - whether ingredients or finished products. We have not yet seen any significant impact of larger policy decisions like Make In India, on our industry. Truly the success of the nutraceutical industry in India so far has been largely, despite challenges from the bureaucracy, due to creative entrepreneurial spirit that so many in the industry possess. The path not yet taken is often more difficult but always more interesting!
On a concluding note, Gala of Roquette noted, “Addressing regulatory needs with regular interactions with Food Safety and Standards Authority of India as well as food processing ministry is one of the ways the industry is using to deal with regulatory roadblocks. Besides, educating the consumers on the benefits of these products through various media and channels such as social media, print media, nutritionists and doctors. As the awareness grows, the willingness of consumers to adopt such products also increases.”
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