Nutra Summit Presentation for 15th March

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The Indian Nutraceutical MarketDynamics of a Consumer Driven Market

A Frost & Sullivan whitepaper presented at the

India’s biggest Nutraceutical, Functional Foods, Dietary

Supplements and Ingredients Show15th – 17th March 2012, Lalit Ashok, Bangalore, India



2

Agenda

Customer

Satisfaction

Table ofContents

1Understanding the India Story

1

1

Indian Nutraceuticals

2

1The Indian Consumer Perspective

3

1The Road Ahead

4



3

Understanding the India Story



4

India’s Growth Story: Robust economic growth slated for the

next five years at an average of 9 percent per annum

Economic 360 Perspective : Economic Growth Outlook (India), 1995-2015

Gross Domestic Product

• Investment climate will improve and trade policy initiatives likely to result in export market diversification.• Investments in Infrastructure, Healthcare & Education to drive the economy

• Special Economic Zones, Technology Parks and Exports Promotion Zones -High tech industries likely to emerge as

leading industry sectors

• With strong economic growth prospects, Indian economic growth likely to reach pre crisis growth of 9 percent

between 2012 and 2014 driven by domestic consumption and exports

Note: All figures are rounded; the base year is 2011. Source: Frost & Sullivan

7.3

4.4

9.5

8.79.2

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

1995 2000 2005 2010 2015

Year

G D P G r o w t h R a t e s ( % )



554693-90

Driven by FDI: The most favored destination after China

Economic 360 Perspective : Foreign Direct Investment Inflows(India), 2004-2011

• India considered to be the second most favored destination for FDI after China.

• Trigger - Reduced industrial licensing requirements by introducing effective industrial policy reforms

• Challenge - Poor infrastructure and slow pace of opening many sectors for foreign investment.

• Key Sectors that will attract a majority of FDI - infrastructure, energy, telecoms and IT

• SEZ’s established to assist export oriented sectors are to attract considerable amount of FDI by 2014

Foreign Direct Investment (FDI)

Note: Year refers to fiscal year. All figures are rounded; the base year is 2011;

Source : Frost & Sullivan

0.00

5.00

10.00

15.00

20.00

25.00

30.00

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

F D I I n f l o w

s ( $ B i l l i o n )

Year

Value tillOctober, 2011

Sectors

2000-2011

($ Billion)

Share

(%)

Power 6.9 4.6

Automobile 6.4 4.3

Petroleum and Natural Gas 3.3 2.2

Chemicals 3.1 2.1

Food Processing 2.7 1.8



6

High

Upper Middle Class

Middle

Low

Economic 360 Perspective: Changing Income Structure (India), 2010

Source: Frost & Sullivan

2010 2020

India is likely to become the fifth

consumer market in the world by

2030 driven by increase in

population and rise in disposable

income

Economic 360 Perspective: Household Consumption (India), 2010

Source: IBEF and Frost & Sullivan

4.0%

14.0%

33.0%

49.0%

15.0%

32.0%

33.0%

20.0%

Food, Beverages,

Tobacco

34 %

Apparel

5 %Housing and

Utlilities

12 %

House Products

3 %

Personal Products

and Services

9 %

Transportation

19 %

Communications

3 %

Education and

recreation

6 %

Healthcare

9 %

• Food, Beverages and Tobacco collectively

accounted to 34 per cent of the Indian

Household’s “Share of wallet”.

• India is likely to witness a future shift from the

consumption of basic necessities to more luxury

items.

Growth Impact: Larger Disposable Incomes to DriveConsumption



India’s pressing need for Nutraceuticals: The rise of lifestyle

diseases

Top Metros Diabetic Population (India), 2010Prevalence of Coronary Heart Diseases (India), 2010

• Between 1998 and 2005, India's overweightrates increased by 20 per cent. The nationalfamily health survey has found 13 per cent ofwomen and 9 per cent of men in the 15 – 49age group to be overweight or obese.

• India has become the diabetic capital of theworld with 55 million diabetics in 2010.

• 40 percent of all deaths in the last decade

have been Cardiovascular related. Thenumber is expected to cross the 50 percent

mark by 2020.



India and Indian Nutraceuticals: From then to now

19951990 2000 2008 2011

• Comprehensiveeconomicreform

• Structuraladjustmentprogram

• Market orientedand liberaleconomy,macroeconomicstabilization

• The Indianeconomywitnessedliberalization in1991

• Financial

sector reformsandderegulation ofindustriallicensing.

• Move towardsa moreintegratedeconomicsystem.

• Increasedfocus oninstitutionalreforms.

• Increased FDIinvestments,infrastructuralrelated reformsand formationof SpecialEconomic

Zones (SEZs)

• Global financialcrises (2008) ledto a decline inannual GDP to6.7 percent in2008.

• Banking andfinancial systemremained stablewith domesticdemand in favor

of consumerdurables andautomobilesserving as maindrivers for growth

• India’s growth

potential is observedin a shift towards aknowledge- basedeconomy.

• Increasing per capitaincome, emergingmiddle classpopulation, presenceof intellectual capital,increasing presence

of multinationals andFDI inflow reflectsstrong growthprospects

Source: Frost & Sullivan

2014

• Globalcompaniesdevelopsourcing ties inIndia for rawmaterials,attracted byIndia’s

biodiversity

• R&D hubs set up

to procure andinnovate for theEU and USmarkets

• Supply to selectIndian customerswhose businessis also exportoriented

• Global MNC’s

foray into Indiato set upmanufacturingsites andestablish theirownprocurement.

• Government fundsvitamin fortificationinitiatives providing thefirst boost to the Indianindustry asmanufactures startlooking at the domesticmarket

• The imminent global

recession andincreasing affluence ofthe Indian populacecause globalmanufacturers tofocus on the IndianNutraceutical market



Indian Nutraceuticals



Indian Nutraceuticals: 1% of the Global Market

Indian Nutraceutical Market, 2011

Total Market Size: $1480 Million

The Indian Nutraceutical market was valued at $1480 Million in

2011. Dietary supplements was the largest category

accounting for 64 percent of the Nutraceuticals market, driven

primarily by the pharmaceutical sector in the form of Vitamin

and Mineral supplements.

Functional foods and Functional beverages are relatively

nascent markets in India, primarily due to the existence and

reliance on traditional wisdom and Ayurveda by a burgeoning

middle class, which accounts for a huge chunk of the

purchasing power in India. Further the marketing of productssuch as sports and energy drinks, is primarily targeted at niche

segments of the urban population, resulting in low penetration

for these products, even amongst the urban population.

Source for Natural Vitamins

Growth of the Dietary supplements will

be spurred forward by the growing

demand for dietetic supplements, due to

an urban, fitness conscious, young

population.



Indian Nutraceuticals: Dietetic Supplements and FortifiedFoods gaining prominence

Indian Dietary Supplements Market: Split by product type, (India)2011

$950 M

Indian Functional Beverages Market: Split by product type, (India)2011

$180 M

Indian Functional Foods Market: Split by product type, (India)2011

$350 M



Understanding the Dynamics: Awareness still the Indianhealth and wellness Industry’s biggest challenge

M a

r k e t D r i v e r s

M ar k e t

R e s t r ai n t s

Increased

awareness of

functional

benefits

Urbanization

of the mass

population

Increasing

disposable

income and

standards of

living

Aggressive

retail

marketing

Lack of

product

credibility

Unclear and

ambiguous

regulations

Over-crowded

product

market

Lack of

products

catering to

the Indian

customer



FMCG and Pharma companies look to Nutraceuticals as apremium segment to existing brands

Type ofcompetitors

PharmaceuticalDominated

FMCGDominated

Number of Competitors

Low High

Vitamin andMineral

Supplements

Energy Drinks

Herbal Supplements

Dietetic Supplements

Sports Drinks

Chyawanprash

Supplements

Functional Juices

Fortified Foods

The Indian Nutraceutical Market is dominated by Pharmaceutical and FMCG giants. While Dietary supplements

such as Vitamin and Mineral Supplements have been captured by Pharmaceutical companies, functional food and

beverages are now being brought to the market by FMCG companies. However, certain segments like dietetic

supplements are now being catered to by pure-play nutraceutical companies, apart from their pharmaceutical and

FMCG counterparts.

The fragmentation in

each of the product

markets is reflective of

the type of companies

that cater to it.

Pharmaceutical

dominated segments

are highly fragmented,

while FMCG dominated

segments are largely

consolidated



The Indian Consumer Perspective



Lifestyles & Goals Vary by Age & Gender…

Children & Adolescents Males, 17 to 30 years Males, 30+ years

L i f e s

t y l e s

G o a l s

Female

• Good academicperformance

• Adequate growth &development

• Greater Immunity

• Quick career growth

• Overall fitness

• Disease prevention(to some extent)


• Career growth

• Diseaseprevention &

• Diseasemanagement


• Weight Management

• Prevention of ageing concerns andillness

• Greater immunity against commonillnesses & disease management

Lower parentalsupervision on foodhabits

Busy dailyschedule,including school / college, tuitions,travel etc.

Extended WorkHours

Lower Physical Activity

Increased mental& physical load toaccelerate career

DiseaseManagementor preventioninitiatives

Increased intake of fast food & junk food (Youngerfemales as well)

Limited intake of fast / junk food

Irregular food habits including skipped meals, flexible meal t imings

Time constraints &managing multipleschedules & Diseasemanagement / preventioninitiatives (older females)



Correspondingly…the Role of Supplements and Functional

FoodsChildren & adolescents

1. As a meal replacement when… • Child is selective of the food

he/she consumes• Child skips a meal

2. When Nutritional intake isinadequate (small servings)

3. Quality of nutritional intake is low

(junk food, fruits, & vegetables arenot of ‘good’ quality) • Nutritional intake is

inadequate for normalgrowth needs(height/weight) or with theaim of consuming ‘brain

foods’ • Greater nutritional intake is

needed for gym or physicalworkouts

1. As a meal replacement when ameal, typically breakfast, hasbeen skipped

2. Replacement of an afternoon/ evening snack/refreshment(reduce unhealthy food options)

3. To build satiety, so irregular meal

timings do not result indiscomfort

4. To prevent & manage obesity,cholesterol, BP, etc.

5. As a supplement when foodintake is inadequate (smallservings), quality of nutritional

intake is low, nutritional intake isinadequate for daily functioning,for gym or physical workouts

6. To address concerns on calciumdeficiency & other problemsspecific to women

1. Replacement of an afternoon/ evening snack/refreshment(reduce unhealthy foodoptions)

2. To build immunity, strength tofight & prevent illness

3. To prevent & manage lifestyle

diseases like obesity,cholesterol, BP, etc.

4. As a supplement, when foodintake is inadequate (smallservings) or when quality ofnutritional intake is low

5. To address concerns on iron /

calcium deficiency & otherproblems specific to women

Adults, 17 to 30 years Adults, 30+ years



Selecting a Healthy Product : Goal Satisfaction and Taste areprimary attributes

GoalSatisfaction

Brand name

Taste & Flavour

Importance

Low High

Low High

Low High

Veracity ofsource

Low High

Convenience offormat

Low High

Gender

GoalSatisfaction

Brand name

Taste & Flavour

Importance

Low High

Low High

Low High

Veracity ofsource

Low High

Convenience offormat

Low High

Age

Males

Females

17 years to 30 years

30+ years



18

Complan/Horlicks/Bournvita are perceived as Basic-level nutrition brands while Pediasure /Nutrilite/Protinex are consumed for greater nutritional needs

Medicinal Health FoodsSupplements

Horlicks, Boost, Complan,Pediasure, Ensure, Nutrilite

Horlicks Nutribar, YakultProbiotic Drink, Real &Tropicana 100% Juices, Saffola

Heart Oil etc.

Calcium Sandoz, Calcimax,Ferronine, (primarily Tablets

and Tonics)

Remain Active & energetic through theday.

All round development (Cognitive andPhysical)

Greater immunity againstcommon illnesses as a result ofbalanced nutrition

Disease prevention and

management.

Consumers perceive various brands differently, based on the brand format and where they purchase it from. These can be classified into

three categories:

Medicinal – purchased from a pharmacy, and is usually in the form of tablets or tonics. They are consumed primarily on a doctor’s

recommendation.

Supplements – Purchased from supermarket/pharmacy, and is usually in the form of powders to be mixed with milk or water. They are

consumed on a doctor’s/dietician’s/trainer’s/peer’srecommendation.

Health Foods – purchased from the supermarket, and are functional variants of foods that form a part of the consumers regular diet (like

fortified biscuits). They are consumed based on peer recommendations and based on awareness through advertisements

Consumer Brand Perception: Defined by who and where



19

The Road Ahead



20

Indian Nutraceuticals: Dietary Supplements lead the way

The Indian Nutraceutical market is estimated to grow to $2731 Million in 2016 at a CAGR of 13.0 percent.Functional foods will be the quickest growing category till 2015 followed by Dietary Supplements. However,dietary supplements, specifically herbal and dietetic supplements will form the greatest opportunity areas for

Nutraceutical manufacturers , driven by growing demand from an evolving consumer base.



21

Dietary

Supplements

FunctionalBeverages

FunctionalFoods

Indian Nutraceutical Market

Key ingredients

21

Overcoming Common Challenges

Absence of Product Validation &CredibilityHerbal Supplements Industry self-regulation, through

research backed claims

Challenges Way Forward

Multivitamin Packages Lack of Product DifferentiationCreating brand identity- focus on

specific ailments/ingredients

Isoflavone Supplements Low Awareness Focus on brand building activities

Energy Drinks Premium PricingDilution of present Oligopolistic

Market

Key Formats



22

What Indians want : Meeting Consumer Expectations

Prevalence of Traditional Wisdom The Indian consumer, especially the middle class

relies heavily on traditional wisdom, to achievecomplete nutrition. Consumers preferred to use

natural extracts of medicinal plants and herbs

such as Amla and Ajwain for their health and

nutrition, as opposed products readily available in

the Indian market. This trend stems from both the

affordability of such remedies (when compared to

Nutraceuticals) and a deep-rooted belief in age-old therapies.

2

3

1

Customization in the Indian household

Indian consumers customize the

Nutraceutical products that are readily

available to suit their needs, be it in the

form of dosage, or the addition of an extra

ingredients to bolster the current product.

For instance, there is a preference for

adding jaggery to supplements such as

Pediasure to increase iron intake in the

diet. In other cases, consumers go over

the recommended amounts of malted

health drinks per serving to both boost

energy and improve taste. While the

benefits and risks of this are yet unknown,

it highlights a certain gap between what

consumers want and what they receive.

Preference for instant mixes and fortified foods

Consumers have shown a greater preference for

instant mixes and fortified foods, over tablets and

tonics, which are closely linked in the consumer’s

mind to sickness and disease. Further, the ease and

speed of preparation of instant mixes make them the

format of choice for most consumers.

Key Trends:

Nutraceutical

Market



23

About Frost & Sullivan

Frost & Sullivan, the Growth Partnership Company, has been partnering with clients to support the development

of innovative strategies for more than 50 years. With 40 global offices and more than 1800 industry consultants

and analysts across North America, South America, Europe and Asia Pacific, the company offers strategic

information and advice in almost all countries in the world.

Frost & Sullivan serves an extensive clientele that includes Global 1000 companies, emerging companies, and

the investment community by providing comprehensive industry coverage that reflects a unique global

perspective and combines ongoing analysis of markets, technologies, econometrics, and demographics.

Frost & Sullivan South Asia, Middle East & North Africa team works across the entire industrial and

technological spectrum with leaders and challengers, as a strategic business partner. Its vast portfolio of

services and advisory competencies include custom strategic consulting, market intelligence, summits and

conferences and management training.

CHEMICALS, MATERIALS AND FOODS PRACTICE

Frost & Sullivan's Chemicals, Materials & Food practice provides global industry analysis, growth consulting, market research, market forecasts andinsights into emerging technologies. This enables our clients to address current trends and challenges, identify new technologies and take advantageof growth opportunities. Our Chemicals, Materials and Foods Growth Partnership Services subscription offers comprehensive coverage of key marketsectors, namely:

Food & Beverage Ingredients marketsFood, Drugs & CosmeticsSpecialty & Fine Chemicals

Petrochemicals and derivativesBuilding MaterialsPackagingPaints & CoatingsAdhesives, Sealants and ResinsPlastics, Polymers and Downstream applications

This comprehensive coverage ensures that we are fully equipped to provide clients with a complete assessment of opportunities, both inside andoutside their current marketplaces. Our uniquely broad perspective allows us to quickly and effectively support clients in identifying and qualifyingnew growth opportunities.

“We Accelerate Growth”

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24

About Nutra India Summit

Nutra India Summit is India’s most authoritative congregation of Nutraceuticals, Functional Foods,

Dietary Supplements Industry. This Summit has always been an Interface between Academia, R&D

institutions and Industry and has taken all efforts to ensure that the critical issues for the rapid growth of

this industry sector are adequately addressed.

7th Nutra India Summit is organized by the Council of Scientific & Industrial Research (CSIR),

International Union of Food Science and Technology (IUFoST) along with MM Activ Sci-TechCommunications and supported by the leading Industry Associations.

MM Activ the Sci-Tech Communication Company is engaged in creating, planning, development and

implementation of the fully integrated national & international trade shows, focusing on frontier

technologies.

MM Activ creates and nurtures a platform for effective interaction amongst industry, scientific fraternity,

policy makers, opinion leaders and academia in the events. These events facilitate networking,

technology transfers, collaborations, business development and joint ventures. Moreover, they provide

excellent platform for scientific knowledge dissemination and make all stakeholders future ready.



Contact Details

For More Information Contact:

Hema Thakur,Chemicals, Materials & Foods Practice,South Asia,Tel: +91 (0) 22 6160 6666;Fax: +91 (0) 22 2832 4713;E-mail: [email protected] more at www.frost.com

Nutra Summit Presentation for 15th March

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