Sizing up the market for Nutraceutical Products in India and forSizing up the market for Nutraceutical Products in India and forecasting opportunities in the ecasting opportunities in the

long termlong term

Nutraceuticals India 2012Nutraceuticals India 2012

October 2012October 2012

Presented by: V. Chaitra Narayan , Program Manager, Frost & SullPresented by: V. Chaitra Narayan , Program Manager, Frost & Sullivanivan

© 2012 Frost & Sullivan. All rights reserved. This document contains information that is the sole property of Frost & Sullivan.

No part of it may be circulated, quoted, copied or otherwise reproduced without the prior written approval and consent of Frost & Sullivan

AGENDA

• Megatrends Shaping the Nutraceutical Market

• Global Market Overview

• Indian Market Snapshot

• Nutraceutical Value Chain

• Opportunities for India

• Way Forward

3

Booming Population:

Sustained population growth will result in a shift of focus from high

consumption regions such as the US and Europe to high-population

countries like India and China. It is expected by 2020, that 37 percent

of GenY (aged 15-34) will be centered in India and China, with Asia as

whole accounting for 61 percent of 2020s GenY population

MEGATRENDS SHAPING THE NUTRACEUTICAL MARKET

0.360.44

0.14 0.07 0.13

0.330.22

0.37

0.63

0.22 0.13 0.26

0.44

0.51

0.33

0.19

0.21

0.11

0.23

0.47 0.57

0.07

0.47

0.12

0.07

0.22

0.09

0.16

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

Africa Rest of Asia Latin America,

Caribbean andOceania

North America Europe India China

Po

pu

lati

on

in

Billio

n

65 Years and Above 35-64 15-34 0-14

1.69

2.56

2.1

1.2

Source: U.S. Census Bureau, 2010, and Department of Economic and Social Affairs of the United Nations

2010 2020World Population: Breakdown by Region

(Global), 2020

6.83

Billion

7.55

Billion

Population in

Billion

Health, Wellness, and Well-Being:The health and wellness industry is poised for a

radical change with information technology taking

the forefront in research and development,

diagnostics, and monitoring. In future, diagnostics

will become less invasive, preventative, and image-

based. Medicines will be marketed as molecular

and personalized drug cocktails. However, given

current levels of Government spending on

healthcare, it is expected that the consumer’s

focus will shift from treatment-based remedies to

preventive remedies. The evolving definition of

health, wellness, and well-being will become the

new value proposition for companies across this

sector and an important factor of differentiation.

The evolving definition of Health, Wellness, and Well-being

Mind Body Soul

Mood

Stress levels

Mental health

Sense of

optimism

Attitude

Security

Safety

Sight/vision

Touch and feel

Smell/breathing

Sound

Temperature

Wellness

Personal values

Personal

fulfilment

Self image/self

actualization

4

GLOBAL NUTRACEUTICALS MARKET – CONSUMER-DRIVEN

GROWTH

Market

Stage

Market

Stage

GrowthGrowth

Market

Revenues

Market

Revenues

$149.5 B$149.5 B

(2011)

Market Size at

End of Forecast

Period

Market Size at

End of Forecast

Period

$210 B$210 B

(2016)

5-year Forecast

Market Growth

Rate

5-year Forecast

Market Growth

Rate

7.0%7.0%

(CAGR)

US, Europe, and Japan

are the largest markets,

while India, China, and

Brazil are key growth

geographies

Global Market, 2011

USA

36%

Europe

25%

Japan

22%

India

1%

ROW

16%

Global Nutraceutical Market, 2011

Total Market Size: $149.5 Billion The global nutraceuticals market in 2011 was estimated to be $149.5

Billion, with the US, Europe, and Japan being largest regional

markets accounting for nearly 93 percent of the global nutraceuticals

demand. These markets are nearing maturity, with exceedingly high

per capita spends on nutraceutical products, thus forcing

manufacturers to look at developing countries such as India and

China, which have considerably lower per capita spend on

nutraceutical products, as key growth regions for their nutraceuticals

portfolio

ROW= Rest of the world; CAGR = Compound annual growth rate

5

CUSTOMIZATION OF NUTRACEUTICALS WORLDWIDE

Going Natural

Cultural

Differences

With increasing concerns about side-effects resulting from chemicals and introduction of synthetic additives in

foods, consumer demand for natural alternatives has increased dramatically. The industry responded to such

demand by focusing on customization of products to focus on natural alternatives for established variants.

Nutraceuticals manufacturers understand that various cultures have specific requirements for products. The

latest trend is understanding such cultural requirements and focusing on these. For instance, in India, omega-

3, a traditionally non-vegetarian product, has been developed with vegetarian variants.

Formulation

Efficiency

Nutraceutical ingredients have typically been positioned as natural and healthy alternatives to traditional

medicine. However, one of the primary challenges being faced by these products is the difficulty in formulating

these products into traditional food and beverage products. For any food or supplement manufacturer looking

to add functional ingredients to their products, the key issue of stability must be addressed as soon as possible

during the product development process. Such challenges have caused for innovative product presentation to

ensure ingredient viability and stability.

With increasing sophistication in nutraceuticals and demand for personalized medicine growing, consumer

demand for products with specific health benefits has been skyrocketing. This is particularly apparent in

Europe, where nutraceutical products have now been split into various segments based on health benefits.

These segments such as heart health, eye health, digestive health, joint health, and so on, are gaining

immense popularity with manufacturers positioning themselves to specifically focus on certain health

avenues.

Specific Health

Benefits

6

Functional Foods24%

Functional Beverages

12%

Dietary Supplements

64%

Indian Nutraceutical Market, 2011

The Indian nutraceuticals market was valued at $1,480 Million in

2011. Dietary supplements was the largest category accounting

for 64 percent of the market, driven primarily by the

pharmaceutical sector in the form of vitamin and mineral

supplements.

Growth of dietary supplements will be

spurred by growing demand for dietetic

supplements from an increasingly urban,

fitness-conscious, young population

TOTAL INDIAN NUTRACEUTICALS MARKET = 1% OF THE GLOBAL MARKET

Market RevenuesMarket Revenues

$1,480 M$1,480 M

(2011)

Market Size at

End of Forecast

Period

Market Size at

End of Forecast

Period

$2,731 M$2,731 M

(2016)

5-year Forecast

Market Growth

Rate

5-year Forecast

Market Growth

Rate

13.0%13.0%

(CAGR)

7

DIETARY SUPPLEMENTS MARKET

Vitamin and

Mineral 48%

Herbal 23%

Chyawanprash 8%

Dietetic 21%

$950 M

Competitive Structure

Number of

Companies in the

Market

Over 500

Competitive

Factors

Branding, Price, Key

Benefits

Key End-user

Groups

Seniors (> 50 years)

Adults (25-50 years)

Young adults (15-25

years)

Sportsmen and athletes

Major Market

Participants

Pfizer, Ranbaxy, Elder

Pharmaceuticals, and

Dabur, etc.

Notable

Acquisitions and

Mergers

Sanofi-Aventis and

Universal Medicare;

Reckitt Benkiser and

Paras Pharma

Unit: USD Mn

8

FUNCTIONAL FOODS MARKET

Fortified Baked Goods 24%

Fortified Malted Health Drinks29%

Functional Dairy8%

Fortified Edible Oils

26%

Others13%

$350 M

Competitive Structure

Number of

Companies in the

Market

25-30

Competitive Factors Perceived Value

Key End-user Groups

Children (5-15 years),

Families and Seniors

(>50 years)

Major Market

Participants

GlaxosmithKline,

Yakult-Danone

Notable Acquisitions

and Mergers

Yakult Honsha and

Danone Group formed

a JV to enter India

Unit: USD Mn

9

FUNCTIONAL BEVERAGES MARKET

Energy drinks10%

Functional Juices84%

Sports Drinks

3%

Others3%

$180 M

Competitive Structure

Number of Companies

in the Market12-15

Competitive Factors Branding

Key End-user Groups

Young Adults (15-25

years)

Sportsmen and athletes

Major Market

Participants

Red Bull, PepsiCo, Parle

Agro

Notable Acquisitions

and Mergers

PepsiCo and Tata Global

Beverages have formed a

JV to create Nourish Co,

which currently

produces fortified water

Unit: USD Mn

10

THE NUTRACEUTICALS VALUE CHAIN

Basic Raw Material SupplierNutraceuticals Ingredient

Manufacturer

Contract Manufacturer

Functional Food Co.Dietary Supplement Co.

Distributor/Retailer

Consumer

Basic raw material comprises

roughly 50-75 percent of ingredient

ex-factory cost

Nutraceutical

ingredients

account for

nearly 60-80

percent of the

ex-factory cost

for dietary

supplements

In functional foods, nutraceutical

ingredients usually account for 10-

25 percent of the ex-factory cost

Depending on the channel, cumulative margins

of participants across the retail channel can vary

from 12-25 percent of the MRP

Marketing and (Re)packaging costs + Marketer’s

margin form nearly 50 percent of the product

MRP

11

OPPORTUNITY ASSESSMENT FOR INDIA: PRODUCT/BRAND DIFFERENTIATION

AND HIGHER PENETRATION WILL BE CRUCIAL FOR SUCCESS

• The market is expected to witness growth of 12-15% in the next 5 years. Over the forecast period, the market is

expected to witness an increase in competition in the form of top rung global players making a foray into the

Indian market. As the US and EU markets saturate, specifically for categories such as dietary supplements, India

is being seen as the road to growth for most global health and wellness players. Vitamin and mineral

supplements are expected to retain majority share in this segment.

• In functional beverages, an increase in uptake of enhanced drinks and energy drinks is expected, primarily

driven by a young, urban, working population. In functional foods, diabetic foods are expected to witness

highest growth, as consumers tend to perceive a healthy lifestyle as an alternative to insulin.

Product-Line Differentiation

•Establishment of line variants. For

example, Omega-3 oils into

vegetable oils to provide

penetration into the commodity

Product Identity

•Creating brand and

product equity. For

example, the entry of

Yakult has testified this

factor due to its global

recognition

•Value-Added Focus:

Technical and formulation

support and new

possibilities for existing

ingredients

Market Penetration

•Penetration Efforts: Required

especially in low-volume markets

such as Probiotics. For example,

Amul’s Probiotic ice cream calls for

a certain specification causing lower

threat from substitution

•Targeted marketing, advertising,

and sales promotion campaigns that

address specific needs of target

consumers

12

WAY FORWARD: CUSTOMIZATION THE KEY REQUIREMENT TO

TARGET A DIVERSE POPULATION

Formulation

Efficiency

The latest trend for nutraceuticals manufacturers is

understanding such cultural requirements and focusing on

specific product formats. For instance, omega-3 developed

with vegetarian variants has gained traction with the large

Indian vegetarian population.

The latest trend for nutraceuticals manufacturers is

understanding such cultural requirements and focusing on

specific product formats. For instance, omega-3 developed

with vegetarian variants has gained traction with the large

Indian vegetarian population.

Formulation remains one of the primary challenges being

faced by these products. For any food or supplement

manufacturer looking to add functional ingredients to their

products, the key issue of stability must be addressed as

soon as possible during the product development process.

Innovation product presentations have thus been used to

ensure ingredient viability and stability.

Formulation remains one of the primary challenges being

faced by these products. For any food or supplement

manufacturer looking to add functional ingredients to their

products, the key issue of stability must be addressed as

soon as possible during the product development process.

Innovation product presentations have thus been used to

ensure ingredient viability and stability.

As middle-class purchasing power increases, manufacturers

need to focus on traditional brand identity allowing

consumers to connect with the brand on a cultural level (for

example, B Natural’s range of juices). The industry needs to

focus on inclusion of natural extracts (with proven health

benefits) for their products.

As middle-class purchasing power increases, manufacturers

need to focus on traditional brand identity allowing

consumers to connect with the brand on a cultural level (for

example, B Natural’s range of juices). The industry needs to

focus on inclusion of natural extracts (with proven health

benefits) for their products.

Traditional

Wisdom

Cultural

Differences

With increasing sophistication in nutraceuticals, consumer

demand for products with specific health benefits has been

on the rise. Nutraceutical products have now been divided

into various segments based on health benefits. These

sectors such as heart health and eye health, allow

manufacturers to position themselves better in India.

With increasing sophistication in nutraceuticals, consumer

demand for products with specific health benefits has been

on the rise. Nutraceutical products have now been divided

into various segments based on health benefits. These

sectors such as heart health and eye health, allow

manufacturers to position themselves better in India.

Specific Health

Benefits

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’s South Asia, Middle East and 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 and insights into

emerging technologies. This enables our clients to address current trends and challenges, identify new technologies and take advantage of growth opportunities.

Our Chemicals, Materials and Foods Growth Partnership Services subscription offers comprehensive coverage of key market sectors, namely:

Food & Beverage Ingredients markets

Food, Drugs & Cosmetics

Specialty & Fine Chemicals

Petrochemicals and derivatives

Building Materials

Packaging

Paints & Coatings

Adhesives, Sealants and Resins

Plastics, Polymers and Downstream applications

This comprehensive coverage ensures that we are fully equipped to provide clients with a complete assessment of opportunities, both inside and outside their

current marketplaces. Our uniquely broad perspective allows us to quickly and effectively support clients in identifying and qualifying new growth opportunities.

“We Accelerate Growth”

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: hthakur@frost.com

Learn more at www.frost.com