The Indian nutraceuticals market estimated at around $2 billion in 2009 and growing at a compound annual growth rate (CAGR) of 15-18 per cent , is expected to grow to $5 billion by the year 2015, according to a Frost & Sullivan study last year.
Over the forecast period, the market is expected to witness an increase in competition in the form of top rung global players making a foray into the market, the study adds.
According to the study as the US and EU markets saturate, specifically for categories such as dietary supplements, India is being seen as the road to growth for most global health & wellness players.
The market is mainly driven by a rapid increase in India's urban population and flourishing industries which in turn pave way for economical growth. Product acceptance has increased with rising consumer awareness about health and wellness foods, the study points out.
The market for nutraceuticals is dynamic in a growing economy such as India with increase in consumer spending . Functional foods and beverages, which include fortified food and drinks, form the largest market segment in terms of market share.
Key trends
Changing lifestyle demands
With most households now needing a double income, the trend towards convenience foods has grown threefold. With this has risen the concern about nutritional value in such foods. Hence, foods fortified with wellness ingredients aid in providing consumers with more options
and ease of access even in remote destinations.
Increased awareness
Along with the consumers’ evolving consumption of healthy nutritional food products, the suppliers’ growing efforts on building brand identity and value have created wider awareness. Retail products fortified with nutrients such as omega-3 fatty acids and vitamins are now being considered essential parts of consumables rather than niche areas.
Expanded product offerings
Since 2005, while existing product portfolios have expanded, there have also been new entrants in the market.Competitive value propositions with respect to unique offerings have resulted in increased competition. Many existing companies are now bringing in high end products to the Indian market which were part of their “developed country” product portfolios. Such moves are aimed at addressing competition and taking advantage of changing consumer behavior.
Dietary supplement market
The market for dietary supplements in India is broadly classified into vitamin and mineral supplements, herbal supplements,protein supplements, and Chyawanaprash variants. These segments are further classified based on raw material sources and end use markets.
The Indian dietary supplement market is composed of over 500 participants. The vitamins and minerals supplement market is the most competitive, with over 100 participants. The key competitors are global multinational participants, such as Pfizer, with subsidiaries and local distribution offices. Large domestic manufacturers, including ayurvedic companies such as Dabur. Key competitive factors are innovation, pricing, and distribution. Numerous other companies occupy the “others” segment such as Himalaya, Sanat, Parry Nutraceuticals and Emami Herbals.
Functional food & beverages
The market for functional food & beverages in India is broadly classified into fortified foods and fortified beverages. These segments are further classified based on raw material sources and end use markets.
The Indian functional food and beverage market consists of less than 50 players due to its nascent structure. Key competitive factors are product attractiveness, pricing and distribution.
Key competitors are Indian FMCG participants such as Dabur, and global giants such as Pepsico and Red Bull GMBH. Other large domestic manufacturers such as the Amul Gujarat Co-operative Milk Marketing Federation (GCMMF).
Numerous other companies occupy the “others” segment such as Mother dairy, Ladakh Foods, Yakult, and Parle Agro.
The future trends for functional food & beverages include: new ingredient innovation, industry consolidation, increasing awareness, international market entrants, technology transfer and price- value competition.
Challenges faced by ingredients market
The key challenges faced by the ingredients industry are: absence of product validation and credibility;lack of product differentiation; lack of awareness ;expensive pricing catering to premium segments only and highly unstable formulations.
The way forward in the ingredients market include product diversification, product identity and market penetration.
Product diversification includes establishment of line variants Eg: Omega -3 oils into vegetable oils to provide penetration into the commodity sector.
Product identity includes creating brand and product equity. Eg The entry of Yakult has proved this factor due to their global brand recognition.
Value added focus: technical and formulation support, and new penetration possibilities of existing ingredients.
Market penetration includes customer retention especially in low volume markets such as probiotics, eg: Amuls probiotic ice- cream calls for a certain specification causing lesser threat from substitution.
This also includes focus on efficient logistics systems, distribution channels, and after-sales service.
Moreover it includes targeted marketing, advertising, and sales promotion campaigns that address specific needs of target consumers.
Key conclusions
The market for nutraceuticals in India is becoming increasingly competitive. The constant entry of foreign manufacturers has raised the standards expected of suppliers in this market.
Functional food, especially beverages, has become a huge growth area in the consumer segment. It has good growth potential with increasing awareness and evolving consumers who are ready to spend more on quality products.
Industry consolidation is increasing the volume of the organized sector: This is expected to result in strategic alliances and acquisitions in the forecast period.
The market is expected to witness increased product differentiation and value- addition aided by increasing spend on R & D even by domestic suppliers.