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Double-digit nutraceutical growth highlights India’s economy of scale

By Raynah Coutinho in Mumbai , 29-Aug-2013

Double-digit nutraceutical growth highlights India’s economy of scale

Indian nutraceutical companies have been watching a nascent industry mature over the last couple of years, and now recently released figures have backed up the boom.

According to Ikon, the market research agency, the nutraceutical industry is expected to double over the next five years, and some of this growth will be supported by traditional pharmaceutical companies moving into nutrition.

Gujarat Research Allopathic Foundation (Graf) Laboratories is a case in point, having just announced plans to begin the manufacture of nutraceuticals. “We have zeroed down on nutraceuticals as a main focus for Graf’s future growth,”  Shivender Aggarwal, executive director told Economic Times this week. 

Sustained growth

Ikon says the nutraceuticals industry has been growing at a healthy rate of 18.46%, and is expected to reach the US$3bn mark (Rs20,300cr) as early as next year. 

The boom is showing no sign of abating either. Another report, by TechSci Research, forecast tremendous growth for India’s nutraceuticals market, with revenues expected to hit US$4.2bn (Rs28,000cr) by 2017, fuelled by a greater industry focus on expansion to boost over-the-counter growth. 

Graf, which had earlier focused on anti-infectives, cardio and gastroenterology drugs, orthopedics and pain killers, will now invest in creating and growing a nutraceuticals division by allocating Rs150cr (US$22m) to a new production facility in Gujarat. The plant is slated to open in January 2014 and reach an annual capacity of 5.1bn nutraceutical tablets, capsules and softgel pills. 

The new kid on the block will join giants like Ranbaxy, Abbott India, Nicolas Piramal, Dr Reddy’s Lab and Pfizer, which dominate the market at present. The lengthening list of leading players also includes Dabur India, Zandu, GSK, Heinz, Yakult Danone and Herbalife.

Increased health awareness and changing lifestyles are largely behind nutraceutical’s growth, while fast-rising healthcare costs are also driving demand, says analyst Taruna Sondarva. 

And, according to Graf’s Aggarwal: “Doctors are also suggesting supplements to patients in order to improve their overall health.”

A number of multi-national companies, including US-based General Nutrition Corporation, Vitamin World and Amway, have entered the Indian market over the 18 months. 

One of them, NBTY, formed a partnership with MNS at the start of 2012 after predicting the rise of health snacks and drinks.

We see a bright road ahead for protein bars and ready-to-drink beverages as health and fitness-related products will form an important part of people’s discretionary spending,” Rahul Anand, chief executive of the joint-venture, tells us. 

With more than half of India’s population is young, single and increasingly affluent, Anand believes the market was perfectly poised for NBTY’s entry, especially as it is the market’s nature to spend money for quick routes to good health.

Intra-segment shifts

According to Ikon’s research, the functional beverage market is leading the nutraceutical growth at a compound annual rate of around 21%, followed by functional foods at 20%, and dietary supplements, at 15%. 

Traditionally pharma-dominated dietary supplements had enjoyed a greater portion, but the recent shift in consumerism has resulted in functional food and beverages together increasing their share,” explains Sondarva. 

Initially we will target prescription sales and later enter the OTC nutraceutical segment,” Aggarwal said of Graf’s upcoming nutraceutical project. 

Functional food currently enjoys the largest share of the nutraceuticals market, followed by dietary supplements, and this trend will drive the market for fortified foods and probiotics. But there is still a long way to go, starting with persuading consumers that the industry supplies more than fairweather products.

The market has not yet adopted nutraceuticals for regular consumption,” explains Azaz Motiwala, Ikon’s founder. “Indian consumers are still only at the awareness or interest stages of the product adoption cycle.” 

As a result, companies need to redefine their marketing strategies to bring customers to the trial and evaluation stages, he adds.

Early days of boomtime

Given the past and forecast growth rates, is likely that the overall market will have quadrupled in size between 2010 and 2020, so therefore the scope for domestic and multinational nutraceutical companies is substantial. 

But India is still nascent, representing only 2% of the global nutraceutical market,” says Sondarva to put the figures in perspective. “Our per-capita consumption is only worth Rs170 (US$2.50), putting it far behind developed nations.” 

Nutraceuticals penetration in urban India currently stands at 22.5%, while in rural areas it spirals down to 6.3%. But while might suggest an urban nature to the market, Sondarva suggests that rising rural prosperity and increasing lifestyle diseases in these areas have created a latent market that accounts for up to one-third of overall scope.

Its small base notwithstanding, India’s double-digit rise is still around 10% higher than the the overall global growth rate of 7%. 

Add this to a vast, increasingly upwardly mobile population, it is no surprise that more companies are looking to move into India’s nutraceutical market.

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