How to Succeed in the Multi-Billion Dollar Nutraceutical Business (Part 1 of 3)

Posted by on Aug 23, 2011 in Blog | 1 comment

How to Succeed in the Multi-Billion Dollar Nutraceutical Business (Part 1 of 3)

This 3-part series explores the wonderful world of nutraceuticals. The information included in this series was distilled from a number  key references found at the end of each blog. I will help the reader define what exactly are nutraceuticals and what is the market for nutraceuticals. Marenon Consulting provides a few recommendations on what you can do to succeed in this lucrative healthcare field.

Marenon Consulting is presently providing consulting services to a European nutraceutical client for expanding its client’s presence in North America and the Middle East. This includes a diverse product portfolio as well as the company’s private-label contract manufacturing services.

by Myron Pyzyk, BSc, MS                                                                                                                 

PART 1 OF 3

Part 1 provides an overview of the global nutraceutical market, explores some of the major drivers in the expansion of this market as well as the target consumer(s) for various nutraceutical products.

SECTION A.  GLOBAL MARKET OVERVIEW

The nutraceutical market consists of the total sales of functional food, beverage and supplements fortified with bioactive ingredients including fiber, probiotics, protein and peptides, omega, phytochemicals, and vitamins and minerals. Currently, foods, beverages and supplements equally contribute about 33 percent to the global nutraceutical market but expect functional beverages to overtake the other two market. The supplement market is, by contrast, reaching saturation.

The global market for nutraceuticals was worth $117.3 billion in 2007, approx. $123.9 billion in 2008 and forecast to reach $176.7 billion in 2013 (a compound annual growth rate i.e. ‘CAGR’ of 7.4%) and $243 billion by 2015. The market for this estimate is composed of nutraceutical foods, beverages and supplements.

Nutraceutical foods were the largest market segment in 2007, worth $39.9 billion, increased to approximately $40.6 billion in 2008 and forecast to reach $56.7 billion in 2013, for a CAGR of 6.9 percent. Nutraceutical supplements have the second largest market share, generating $39.0 billion in 2007, approx. $40.5 billion in 2008 and a forecast of approx. $48.8 billion in 2013 (CAGR of 3.8%).

The nutraceutical beverages segment represents the fastest growing segment, expected by 2013 to have dominant  market share by 2013. With this segment worth $38.4 billion in 2007, it is expected to increase to $71.3 billion in 2013 (approximately CAGR of 10.8%). The total functional food, beverage and supplement market, known for ‘premiumisation’, thereby makes the market growth larger in terms of net sales.

The worldwide market for nutraceuticals industry (Readers Note: may refer to specialty nutritional and herbal products market; can anyone confirm this) could total nearly $22 billion by 2013. The United States, Europe and Japan dominate the global market, with the combined share estimated at about 86% for 2007. The U.S. is leading the global nutraceutical market with over 32.8 percent of the global market share. The three regional markets should continue to hold a dominant position as global producers and consumers of nutraceuticals by having high-income consumers, greater awareness and widespread preferences for specialty nutritional and herbal products, and trends promoting preventive medicine and self-treatment.

The demand for healthier foods or food ingredients is likely to intensify as baby boomers (born between 1945 and 1964) become an expanding proportion of the elderly population, highly motivated to seek ways to keep themselves free from age-related chronic health problems. Enhanced awareness about health and nutrition, an affixation on beauty and its care plus the availability of scientific evidence linking diet and health will be major factors contributing to the strong growth being witnessed in the worldwide nutraceutical market. Escalating costs associated with healthcare constitutes another factor that is pushing the demand for self-medication and healthy foods.

Based on their widely publicized health benefits, high demand is expected for nutrients such as:

  • soy proteins and isoflavones (for digestive health, lowering cholesterol and fighting off cancer)
  • psyllium fibers (for colon health)
  • omega 3 fatty acids (for cardiovascular health)
  • probiotics (for gastrointestinal health)
  • lycopene (for their antioxidant capacity)
  • calcium and magnesium (for bone and joint health)

Global demand for nutrients and minerals will reach nearly $13 billion by 2013. Higher demand for vitamin formulations will include non-genetically engineered vitamin E and natural vitamin A (beta-carotene) supplements. Sales of multivitamins for adults and children are also expected to rise and the global demand for non-synthetic vitamins is expected to increase almost 6% annually to about $7 billion by 2013. Herbal as well as non-herbal extracts will also see significant increases, despite ongoing discussions regarding alleged health benefits. Garlic for the heart, saw palmetto for the prostate, green tea to fight cancer, black cohosh for women’s health and glucosamine for bone health are slated to be the drivers in the category.

The author would also add lavender as another potentially important botanical supplement, considered to have a number of beneficial properties supporting human health.

Growth in the herbal supplements market slowed down in recent years, partly due to negative media environment, especially concerning drug interactions, and partly due to consumers demanding specific products for specific ailments.

The dietary supplements segment is fast approaching maturity levels, particularly in developed regions. The maturity may impact on future performance of dietary supplements segment, producing relatively low growth and potentially lower profit generation.

Functional foods constitute a fast moving segment in the nutraceuticals market, driven by the rising health awareness among consumers.  Functional foods provide cheaper alternatives to medical bills in the long run. On the other hand, sales for premium products such as organic and healthy food declined, as people traded down to more affordable nutrition. Growth in the segment is more profound in categories such as cholesterol lowering dairy foods and digestive health products. The significant portion of the new food and drink products have been targetted at ‘middle-age’ consumers, particularly menopausal women e.g. fodds with soy isoflavones, marketed to help ease the symptoms of menopause.

The global nutraceutical market is characterized by intense competitive conditions, driven by several factors such as price, safety, efficacy, packaging and brand loyalty, amongst others. With growing similarity among products and formulations, maintaining consumer brand loyalty is emerging as a critical yet complex issue. As a result of which consolidation activity has gathered momentum. Consequently, large pharmaceuticals companies are taking over smaller and regional players to boost their position in the intensely competitive market.

Reflecting an annual growth rate of about 6%, beyond the U.S., the nutraceutical markets in China and India will be developing rapidly in the wake of economic growth and evolving production methods of increasingly diverse food, beverages and medicinal products. Buoyed by the robust Chinese and Indian nutraceutical markets, the Asia-Pacific market is expected to record exceptional gains in nutraceuticals arena, resulting from rising economic prosperity. Asia-Pacific is set to emerge as the fastest growing functional foods market over the review period.

Market participants will be expected to ramp up innovation including the development of new and innovative products and services as well as intensify their search for new products unavailable to their respective market. Finally, new and more productive business models, suitable to today’s marketplace, will produce truly global market players and stakeholders; expect more global M&A activity.

About the author

Myron Pyzyk is the Principal Consultant and CEO of Marenon Consulting with over 20 years of experience in the pharmaceutical & biotech industries.

 

REFERENCES 

1)      Overview of the Nutritional Supplements Market, December 26, 2007

2)      Global Market Growth for Dietary Supplements, April 17, 2008 Peter Zambetti

3)      List of Events – Nutraceutical World, April 10, 2011-07-29 http://www.nutraceuticalsworld.com/

4)      Supply Side East Expert Report 2011

5)      Health Canada – Natural Health Products

6)      FDA Overview Dietary Supplements

7)      Federal Regulation of Dietary Supplements: Eight Years After the Enactment of DSHEA, Where are We? Fred H. Degnan, Esq.* ANA Outside General Counsel, King & Spalding, Washington, DC

8)      Dietary Supplements Case Studies in Claims Substantiation, April 6, 2011 by Steven M. Weisman, Ph.D.

9)      The Canadian Marketplace and Regulations for Dietary Supplements, January 18, 2010 by Peter Wojewnik

10)   Canada’s new Food Guide includes dietary supplements By Clarisse Douaud, 12-Feb-2007

11)  Ahmad, M.F., S.A. Ashraf, F.A. Ahmad, J.A. Ansari and M.R.A. Siddiquee, 2011. Nutraceutical market and its regulation. Am. J. Food Technol., 6: 342-347. URL: http://scialert.net/abstract/?doi=ajft.2011.342.347

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One Comment

  1. superb article.. very usefull!!

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