NUTRACEUTICALS &

FUNCTIONAL FOODS MARKET

Dr. DEBASHISH KAR, PhD

Executive Summary

The Indian Nutraceuticals market valued at $1480 Million in 2011 to grow to $2731 Million in 2016 – Frost & Sullivan

The Global Nutraceutical market in 2011 was $149.5 Billion Comprises of three segments, dietary supplements, functional foods and

functional beverages

Market

Drivers &Challenges

Drivers:• Increasing shift towards preventive therapies• Increasing disposable income• Increase in Healthcare Spending• Increasing shift towards self-medication• Growth in pharmacy and wellness & retail

chains• Favorable pricing environment

Challenges:• Lack of standardization• High pricing• Lack of awareness• Marketing and distribution challenges

Government Regulations

Amway17%

Dabur12%

Heinz6%

Ranbaxy6 %Pfizer

5%

Oth-ers

56%

Major Players

Major Players by Market Share-

Domestic companies currently enjoy a stronger foothold , but multinationals are also increasing their presence. Players include large FMCG companies, pharma companies.

Regulatory framework to govern the nutraceuticals market in India has yet to be implemented rigorously Food Safety & Standards Act 2006 was effective from 5th August 2011

Contents

1. IntroductionNutraceutical-ClassificationNutraceutical- Necessity Nutraceutical-Therapeutic Benefit

2. Market Overview

3. Competition - FMCG Vs Pharmaceuticals

4. Drivers & Challenges

5. Government RegulationsPast & current state of FSSAIFSSAI - Functionaries

6. Strategic Recommendations

7. Way Forward

Nutraceuticals -Classification

Nutraceutical the term coined from "Nutrition" and "Pharmaceutical”

The term "nutraceuticals" is often interchanged with "functional foods" even though there are subtle differences between the two.

Nutraceuticals are "naturally derived bioactive compounds -dietary supplements and herbal products, and have health promoting, disease preventing, or medicinal products”

Functional foods are foods which contain an ingredient that gives that food health-promoting properties over and above its usual nutritional value, for example, Probiotic yoghurts

Necessity of Nutraceuticals

In Indian 380 million population are Undernourished.Nearly 70% (280 million) low purchasing power lead to deficient in micronutrients.Remaining 30% (100 million) due to inadequate food consumption for various reason like illness, low appetite ,diet consciousness.

Calorie sufficient-nutrient deficient population-570 millionPeople who are consuming adequate or excess calories than norm but not sufficient nutrient, generally higher and middle income group.May have need due to specific conditions like pregnancy, obesity, stress due to changing life style.

Over-nourished population-80 millionThis segment sufficient purchasing power and with enhanced nutrient and calorie intake due special requirements sports, heavy exercising, etc

Nutraceutical-Therapeutic Benefit

Nutraceuticals Market

The Indian Nutraceutical market valued at $1.5 Billion compare to global Nutraceutical market of $149.5 Billion in 2011

United States, Europe and Japan are the largest markets that together account for a combined market share of over 90% of the global Nutraceutical.

The Indian Nutraceutical market currently accounts for only 1% of the global market.

The global market is growing at 7% where as Indian market has been growing at a 21% CAGR for last 3 years.

Functional Foods is the largest segment, followed by Dietary Supplements.

Functional Foods54%

Dietary Sup-plements

32%

Functional Bev-erages14%

Market Share

Source: E&Y, Net scribes

Competition - FMCG Vs Pharmaceuticals

The Indian Nutraceutical market is dominated primarily by Pharmaceuticals and FMCG companies with very few pure play Nutraceutical companies

Largely, the market is fragmented. However, the FMCG dominated segments are relatively less fragmented as compared to the pharmaceuticals.

Drivers & Challenges – Summary

Affluence -Working population with changing lifestyles

Affordability –Driving towards wellness

Awareness and media penetrationRegulatory framework not yet implemented

High prices of nutraceuticals

ChallengesDrivers

Accessibility due to extensive marketing

Approaching towards preventive therapies

Inadequate resources for implementation of regulation

Lack of credibility of nutraceuticals

Impediments

Benefits

Growing disposable income and lifestyle change in dietary habits are likely to fuel the demand for nutraceutical products.

Based upon qualitative analysis on dynamics of developed markets

Government Regulations

Food Safety and Standards Authority of India (FSSAI), which is responsible for framing rules and regulations to govern the nutraceuticals markets.

FSSAI (Food Safety and Standards Authority of India )–

The Food Safety and Standards Act, 2006 was notified in the gazette of India on 24th August, 2006

Authority Established-2008 to operationalize the FSS Act,2006

Gazette Notified Licensing/Registration-FSS Regulations 5th Aug , 2011

All Food Business Operators in India to get Licensed/Registered with Food Safety Authority

Genesis and current state of FSSAI

Source: Primary Interviews and Ernst & Young analysis

Major Functionaries in FSSAI

Challenges & Success Strategy

Marketing

Challenges Strategy

High development

cost

Clinical complexity

Partnership for cost effective development

Well designed trials & protocols

Development

High promotional spend

Uptake by stakeholders

Market competition

Regulatory Barriers

Patent Barriers

Enter marketing agreements

Right product for right indication

Low cost manufacturing

Gain experience from US/EU regulatory guidelines

Gain legal expertise

Profitability

Marketing

Technical Barriers

Lack of

Manufacturing

facilities

Early planning & analysis

Team up with companies having expertise

Access to GMP facilities

Manufacturing

Big US/EU Pharma

Indian Pharma

Strengths meter

Based upon qualitative analysis on dynamics of developed markets

Way Forward

Agenda for government

Lay down rules to govern quality and claims of nutraceutical products

Take measures to ensure availability of adequate resources for

implementation of laid out rules

Encourage R&D in the field of nutrition and deploy PPP models to serve

needs of the undernourished segment of population

Agenda for private sector

Product development : Develop customer focused products addressing

specific needs of different consumer segments

Product differentiation : Differentiate products by focusing on

credibility building and/or lowering prices of products

Product promotion : Increase awareness of the benefits of

nutraceuticals through advertizing and physician education

Thank you!

* Information presented here is available in public domain.