The Indian Nutraceutical Market

Dynamics of a Consumer Driven Market

A Frost & Sullivan whitepaper presented at the

Indias biggest Nutraceutical, Functional Foods, Dietary Supplements and Ingredients Show
15th 17th March 2012, Lalit Ashok, Bangalore, India

Agenda

Understanding the India Story

Indian Nutraceuticals

Table of Customer Contents Satisfaction

1 3

The Indian Consumer Perspective

The Road Ahead

Understanding the India Story

Indias 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
10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 9.5 8.7 7.3 9.2

GDP Growth Rates (%)

4.4

1995

2000

2005 Year

2010

2015

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

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

Driven by FDI: The most favored destination after China

Economic 360 Perspective : Foreign Direct Investment Inflows (India), 2004-2011
30.00
FDI Inflow s ($ Billion)

25.00 20.00
15.00 10.00 5.00 0.00 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12

Sectors
Power
Value till October, 2011

2000-2011 ($ Billion) 6.9 6.4 3.3 3.1 2.7

Share (%) 4.6 4.3 2.2 2.1 1.8

Automobile Petroleum and Natural Gas Chemicals Food Processing

Year

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

Foreign Direct Investment (FDI)

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 SEZs established to assist export oriented sectors are to attract considerable amount of FDI by 2014

4693-90

Growth Impact: Larger Disposable Incomes to Drive Consumption

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: Changing Income Structure (India), 2010
2010 2020

4.0% 14.0% 33.0% 49.0%

High Upper Middle Class Middle

15.0%
32.0% 33.0%

Low

20.0%
Source: Frost & Sullivan

Economic 360 Perspective: Household Consumption (India), 2010

Healthcare 9%

Education and recreation 6% Communications 3%

Transportation 19 %

Food, Beverages, Tobacco 34 %

Food, Beverages and Tobacco collectively accounted to 34 per cent of the Indian Households Share of wallet.
India is likely to witness a future shift from the consumption of basic necessities to more luxury items.

Personal Products and Services 9%

House Products 3%

Apparel 5% Housing and Utlilities 12 %

Source: IBEF and Frost & Sullivan

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Indias pressing need for Nutraceuticals: The rise of lifestyle diseases

Between 1998 and 2005, India's overweight rates increased by 20 per cent. The national family health survey has found 13 per cent of women and 9 per cent of men in the 15 49 age group to be overweight or obese. India has become the diabetic capital of the world with 55 million diabetics in 2010. 40 percent of all deaths in the last decade have been Cardiovascular related. The number is expected to cross the 50 percent mark by 2020.

Prevalence of Coronary Heart Diseases (India), 2010

Top Metros Diabetic Population (India), 2010

India and Indian Nutraceuticals: From then to now

Comprehensive economic reform Structural adjustment program Market oriented and liberal economy, macroeconomic stabilization The Indian economy witnessed liberalization in 1991 Financial sector reforms and deregulation of industrial licensing. Move towards a more integrated economic system. Increased focus on institutional reforms. Increased FDI investments, infrastructural related reforms and formation of Special Economic Zones (SEZs) Global financial crises (2008) led to a decline in annual GDP to 6.7 percent in 2008. Banking and financial system remained stable with domestic demand in favor of consumer durables and automobiles serving as main drivers for growth Indias growth potential is observed in a shift towards a knowledge- based economy. Increasing per capita income, emerging middle class population, presence of intellectual capital, increasing presence of multinationals and FDI inflow reflects strong growth prospects

1990
Global companies develop sourcing ties in India for raw materials, attracted by Indias biodiversity

1995

2000
R&D hubs set up to procure and innovate for the EU and US markets Supply to select Indian customers whose business is also export oriented

2008
Government funds vitamin fortification initiatives providing the first boost to the Indian industry as manufactures start looking at the domestic market

2011
The imminent global recession and increasing affluence of the Indian populace cause global manufacturers to focus on the Indian Nutraceutical market

2014

Global MNCs foray into India to set up manufacturing sites and establish their own procurement.

Source: Frost & Sullivan 8

Indian Nutraceuticals

Indian Nutraceuticals: 1% of the Global Market

Source for Natural Vitamins

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 products such as sports and energy drinks, is primarily targeted at niche Growth of the Dietary supplements will be spurred forward by the growing demand for dietetic supplements, due to an urban, fitness conscious, young

segments of the urban population, resulting in low penetration

for these products, even amongst the urban population.

population.

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Indian Nutraceuticals: Dietetic Supplements and Fortified Foods gaining prominence

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

$950 M

$180 M

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

$350 M

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Understanding the Dynamics: Awareness still the Indian health and wellness Industrys biggest challenge

Market Drivers

Increasing disposable income and standards of living

Aggressive retail marketing

Urbanization

of the mass population

Increased awareness of functional benefits

Market Restraints

Lack of

Unclear and

product credibility

ambiguous regulations

Over-crowded product market

Lack of products

catering to the Indian customer

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FMCG and Pharma companies look to Nutraceuticals as a premium segment to existing brands
Pharmaceutical Dominated The fragmentation in Vitamin and Mineral Supplements Herbal Supplements Type of competitors Dietetic Supplements Chyawanprash Supplements Sports Drinks Functional Juices FMCG Dominated Energy Drinks Low Number of Competitors 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.
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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 High

Fortified Foods

The Indian Consumer Perspective

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Lifestyles & Goals Vary by Age & Gender

Children & Adolescents
Lower parental supervision on food habits Busy daily schedule, including school / college, tuitions, travel etc.

Males, 17 to 30 years
Extended Work Hours

Males, 30+ years

Female

Lower Physical Activity

Lifestyles

Increased mental & physical load to accelerate career

Disease Management or prevention initiatives

Time constraints & managing multiple schedules & Disease management / prevention initiatives (older females)

Increased intake of fast food & junk food (Younger females as well)

Limited intake of fast / junk food

Irregular food habits including skipped meals, flexible meal timings

Goals

Good academic performance Adequate growth & development Greater Immunity

Quick career growth Overall fitness Disease prevention (to some extent) Greater Immunity

Career growth
Disease prevention & Disease management Greater Immunity

Weight Management Prevention of ageing concerns and illness Greater immunity against common illnesses & disease management

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Correspondinglythe Role of Supplements and Functional Foods

Children & adolescents
1. As a meal replacement when Child is selective of the food he/she consumes Child skips a meal 2. When Nutritional intake is inadequate (small servings) 3. Quality of nutritional intake is low (junk food, fruits, & vegetables are not of good quality) Nutritional intake is inadequate for normal growth needs (height/weight) or with the aim of consuming brain foods Greater nutritional intake is needed for gym or physical workouts 3. 1.

Adults, 17 to 30 years
As a meal replacement when a meal, typically breakfast, has been skipped Replacement of an afternoon/ evening snack/refreshment (reduce unhealthy food options) To build satiety, so irregular meal timings do not result in discomfort To prevent & manage obesity, cholesterol, BP, etc. As a supplement when food intake is inadequate (small servings), quality of nutritional intake is low, nutritional intake is inadequate for daily functioning, for gym or physical workouts To address concerns on calcium deficiency & other problems specific to women 1.

Adults, 30+ years

Replacement of an afternoon/ evening snack/refreshment (reduce unhealthy food options) To build immunity, strength to fight & prevent illness To prevent & manage lifestyle diseases like obesity, cholesterol, BP, etc. As a supplement, when food intake is inadequate (small servings) or when quality of nutritional intake is low To address concerns on iron / calcium deficiency & other problems specific to women

2.

2.

3.

4.

4.

5.

5.

6.

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Selecting a Healthy Product : Goal Satisfaction and Taste are primary attributes

Gender

Age

Importance
Low High Low

Importance
High

Brand name

Brand name

Taste & Flavour Low Goal Satisfaction Veracity of source

High

Taste & Flavour Low Goal Satisfaction Veracity of source

High

Low

High

Low

High

Low

High

Low

High

Convenience of Low format Males Females

High

Convenience of Low format 17 years to 30 years 30+ years

High

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Consumer Brand Perception: Defined by who and where

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 doctors 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 doctors/dieticians/trainers/peers recommendation. 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

Medicinal

Supplements

Health Foods

Calcium Sandoz, Calcimax, Ferronine, (primarily Tablets and Tonics)

Horlicks, Boost, Complan, Pediasure, Ensure, Nutrilite

Horlicks Nutribar, Yakult Probiotic Drink, Real & Tropicana 100% Juices, Saffola Heart Oil etc.

Disease prevention and management.

Remain Active & energetic through the day. All round development (Cognitive and Physical)

Greater immunity against common illnesses as a result of balanced nutrition

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

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The Road Ahead

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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.

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Overcoming Common Challenges

Indian Nutraceutical Market

Functional Beverages

Functional Foods

Dietary Supplemen ts

Key Formats Key ingredients Herbal Supplements Multivitamin Packages Isoflavone Supplements Energy Drinks

Challenges Absence of Product Validation & Credibility Lack of Product Differentiation Low Awareness Premium Pricing

Way Forward Industry self-regulation, through research backed claims Creating brand identity- focus on specific ailments/ingredients Focus on brand building activities Dilution of present Oligopolistic Market

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What Indians want : Meeting Consumer Expectations

Prevalence of Traditional Wisdom
The Indian consumer, especially the middle class relies heavily on traditional wisdom, to achieve complete 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 ageold therapies. Key Trends: Nutraceutical Market

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

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 consumers mind to sickness and disease. Further, the ease and speed of preparation of instant mixes make them the format of choice for most consumers.

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.
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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.

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About Nutra India Summit

Nutra India Summit is Indias 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-Tech Communications 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.

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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

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