Nutraceuticals in India: A Challenging Opportunity
As growth begins to plateau in more established territories, attention is turning to emerging markets with a fast-expanding middle class.
One of these is India. It cannot quite compete with China for sheer volume of potential consumers: China has a population of around 1.38 billion compared with 1.31 billion in India, although the Indian population is expected to catch up by 2022.
On the other hand, a significantly larger proportion of the Chinese population lives in urban environments, where factors such as improved access to healthcare, higher disposable income and more exposure to diseases of affluence will create greater demand for nutraceuticals.
Nonetheless, India offers considerable potential for growth from a modest base, currently estimated at 1-2% of global nutraceutical sales. To deliver fully on that promise, though, food and pharmaceutical companies need to address a number of regulatory, cultural, economic and structural challenges in the Indian market.
The underlying growth drivers are already there. A combination of rising disposable income, growing prevalence of chronic disease, and willingness to pay for personal healthcare, favors a shift towards health maintenance, early intervention and disease-risk reduction – key pillars of the nutraceuticals market.
These factors are especially relevant in a country where access to publicly funded healthcare is limited. Only around 30.5% of all health expenditure in India comes from government – compared with, for example, 47.0% in the United States, 47.5% in Brazil, 56.0% in China, 67.0% in Australia and 76.7% in Germany.
Heavy reliance on out-of-pocket expenditure in India makes for a stark choice between spending now to stay healthy or storing up problems that may end in premature mortality or chronic morbidity.
Non-communicable diseases, such as diabetes, cancer and heart disease, account for 53% of the overall disease burden and 60% of all deaths in India. More than 20% of the population has at least one chronic disease and over 10% of the people have more than one. The number of people with diabetes, for example, is already estimated at more than 61.3 million and is expected to reach 101.2 million by 2030.
Part of this is due to increasing longevity. Life expectancy at birth for both sexes in India is now 68.3 years, compared with 58 years in 1990. But other key risk factors, such as smoking, obesity, substandard diet, alcohol consumption and sedentary lifestyles associated with growing urbanization, play a significant part.
Growing disposable income
At the same time, personal resources to ward off disease are fast expanding. The Boston Consulting Group (BCG) and Confederation of Indian Industry predict that by 2025, real average household incomes in India will have grown by 70%.
Previously BCG forecast that consumer spending on health would nearly quadruple from $49 billion in 2010 to $183 billion in 2020. Underlying these trends is strong growth in the fitness and wellness markets. For example, quarter-to-quarter sales of wearables in India, such as smart watches and fitness bands, were up by an estimated 42% in Q2 2016.
The personal-health boom applies mainly to the aspirant urban middle class, though, especially in Southern India. These consumers tend to be more health-aware, have more money to spend, and are more concerned both with looking good and reducing disease risk through smart nutritional choices.
All of this presents a range of opportunities for a market currently valued at $2.8 billion by the Associated Chambers of Commerce & Industry of India. Citing a report by Frost & Sullivan, Assocham says nutraceutical sales are growing at a compound 17% per year and should reach $6.1 billion by 2020.
The main drivers for this growth are functional foods and beverages, which make up 60% of the total market. Dietary supplements account for the remaining 40%, Assocham notes.
In terms of ingredients, vitamins and minerals hold a 36% share of the Indian nutraceuticals market, followed by probiotics and omega-3 fatty acids with 9% and 5% respectively. The rest of the market includes probiotics, amino acids, peptides, fibers, antioxidants and plant extracts.
These figures suggest the market is outgrowing but not discarding its legacy of traditional herbal and ayurvedic medicines.
Reliance on these products may dilute demand for emerging nutraceuticals, particularly as some Indian consumers may be unaware of newer ingredients such as omega-3 fatty acids. On the other hand, herbal and ayurvedic medicines provide a rich local ingredient base for incorporation into nutraceuticals.
Chyawanprash, or herbal honey, has been a notable success. It is incorporated as a general health supplement into anything from jam to chocolate to cheesecake to capsules. Traditional medicines also represent a culture of natural products and self-care that dovetails with global trends in nutraceuticals.
Pharmaceutical manufacturers in India are mostly engaged in the dietary-supplement market. Food companies, such as Nestlé, Danone, Unilever, Kellogg, and Yakult, are more active in functional foods and beverages, with a few exceptions such as GlaxoSmithKline’s Horlicks and Viva or Abbott’s longstanding commitment to child-, adult- and medical-nutrition brands such as PediaSure, Ensure or Glucerna.
There are also leading national players in the functional-foods segment, such as Amul, Dabur, ITC, Britannia and Parle, as well as Indian companies marketing ayurveda-based functional foods and dietary supplements (e.g., Dabur, Himalaya, Amway, Hamdard Laboratories, Baidyanath, Pantanjali).
Along with a wide range of segments and ingredients, India presents a number of unique challenges to market entrants. Among these are:
• Tailoring products to domestic tastes and preferences. These might include vegetarianism, Halal or Hindu dietary practices, traditional remedies, flavor and formulation preferences reflecting social and cultural diversity, or reluctance to see functional benefits in staple foods.
Yogurt, for example, is a dietary mainstay in India, and is often homemade. Educational programs on diet, nutrition and disease risk-reduction will help to clear a path for premium-priced nutraceutical brands.
Mainstream food companies, with their long experience of consumer markets and varying tastes and textures, will have the competitive edge here. Pharmaceutical companies entering the nutraceuticals market may want to access these capabilities through joint ventures, research partnerships or acquisitions.
• The right price point. Premium pricing of nutraceuticals in India may be viable for the urban middle class but not for the rural poor.
It will require more attention to scientific evidence and professional endorsement that substantiate health claims. A comprehensive approach to the Indian market calls for a split-level strategy, with tailored branding, formulation, positioning, pricing, and distribution.
There may be opportunities to penetrate poorer segments of the market on a platform of social responsibility, in tandem with non-government organizations or government fortification programs.
• An uncertain regulatory climate. With the current lack of clarity and standardization around issues such as product definitions, approvals, health claims and manufacturing standards, the mainstream industry complains that much of the Indian market is counterfeit or effectively unregulated.
As things stand, nutraceuticals fall under the Food Safety & Standards Act. They are treated broadly as food products, subject to manufacturing/quality standards and restrictions on claims to prevent or mitigate disease.
Market players say the lack of carved-out nutraceuticals regulations leads to confusion and expediency. For example, any food supplement in a ‘drug-like’ oral formulation is categorized as a medicine, with corresponding approval requirements, even if it is only making structure-function claims.
More recently, the government announced that proposed sector-specific regulations – the Food Safety and Standards (Food or Health Supplements, Nutraceuticals, Foods for Special Dietary Uses, Foods for Special Medical Purpose, Functional Foods, and Novel Foods) Regulations, 2015 – were at the final notification stage.
These establish conditions for the manufacture, formulation, approval and sale of nutraceuticals, as well as for health claims, RDAs, scientific evidence and labeling. There are lists of permissible additives, vitamins, minerals, amino acids, plant ingredients, etc.
To the dismay of many manufacturers, the Food Safety and Standards Authority said in March 2016 that the draft regulations would apply to all nutraceuticals launched in India after 2011 until the rules were finalized.
Fundamentals in place
As these issues highlight, serious contenders in India’s nutraceuticals market must come equipped with determination, flexibility, sensitivity and patience. Nonetheless, the fundamentals for a thriving market are in place, including encouragement from the top down.
The Indian government recently signaled its commitment to local investment in nutrition science and innovation, with the long-term of making India a global hub for ‘wellness’ foods.
For food and pharmaceutical companies with ingenuity and staying power, India is a dynamic new front in a global market where the center of gravity is shifting increasingly to emerging economies.