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Nutraceutical industry, growing cluster by cluster

24 APR,2017 | Mumbai
Dr RB Smarta


Forming an ecosystem

In order to develop and prosper, Indian food industry and all its components need to be integrated. Forming an ecosystem is one such approach towards an integrated system.

The main components of a food ecosystem are Primary Processing Centres (PPCs), Collection Centres (CCs) and Central Processing Centre (CPC). Apart from these main components some of the other common infrastructure and facilities could be, Training Centres, Quality Assurance & Quality Control Units, Inventory, Safety equipment and facility services, Nutrition services, Operations, Warehouse and Transportation facilities, Information Technology centres, Waste disposal facilities etc.

Today the main factors that Indian food industry needs to deal with are:

•        Very favourable regulatory environment (business-friendly regulatory environment)

•        Proper promotional strategy, business model and organised campaigns etc.

•        Availability and consistency in raw materials, availability of finished products.

•        Education and awareness on state/district level increase the degree of penetration in rural areas.

The industry has lot of science and the issues of this industry are also related to product development, compatibility of different ingredients, trials on human beings, evidence to really provide the claims etc. Hence, it has lot of gestation funding which the entrepreneur or promoter needs to put in this high-risk area.

Considering this, we would like to create more facilities like we have done in pharmaceuticals and today we have surplus capacity in India to manufacture any formulations. From business point of view, it will commoditise the entire business and it would not remain at branding, marketing, selling level but it will go down to trading level.

Co-existence of pharma and nutra

The nutraceutical products are mainly associated with prevention of diseases, maintenance of health and general well-being, whereas the pharmaceutical products are clearly positioned for treatment of diseases. With the rise in new categories such as medical foods, nutraceuticals can also be positioned for treatment of diseases but only alongside drugs.

Thus, it is clear that for the overall well-being of an individual both nutraceuticals and pharmaceuticals are equally essential.

BOX

The above representation depicts the need for co-existence of nutraceuticals and pharmaceuticals for the well-being of humans.

Indian nutraceutical industry is worth about $ 2.2 billion and is projected to grow at 20 per cent to $ 6.1 billion by 2019-2020 and so is one of the rapid growing markets in the Asia-Pacific region. It is observed that the growth in nutraceutical industry world over is dependent on a smooth functioning regulatory system, increasing consumer demands and awareness; these are the factors that facilitate the growth of nutraceutical business. Though, at a nascent stage, the Indian nutraceuticals is strongly positioned for growth. Some of the reasons for India still being at a nascent stage are low consumer education and confidence, the lack of product regulation. But now things are falling into place with setting up of concrete regulation and guidelines and increasing awareness, confidence among the consumers.

In the future, India is poised to become one of the nutraceutical hubs with stronger potential among the emerging markets. India is an ideal location for manufacturing nutraceuticals products due to the immense wealth of biodiversity as well as availability of medicinal and herbal plants, good quality produce of fruits and vegetables, this will also aid in positioning India as a nutraceutical hub with great potential. India also has other advantages like qualified human resources, upcoming world-class R&D facilities and varied raw material aspects; these give our country a leading edge.

Formation of clusters

In business, clusters usually refer to the hubs of innovation, where many businesses and creative minds form a business culture that fosters development of new products.

But here we are referring to clusters vis-à-vis groups or segments.

As I have been mentioning in my earlier articles as well, the nutraceutical, nutrition and health industry is not only transitioning but also diversifying or getting segmented into various small clusters. Nutrition is a vast area which also involves a number of different aspects affecting it or playing a role in it.

Now with the upsurge of various new products in the market and with more and more companies entering and investing in the industry, there has been a lot of product clutter in the industry, which has given rise to various segments or clusters.

The consumer needs and industry have propelled these segmentations and now have a segment for almost every target consumer group.

The ever-changing consumer trends and lifestyle along with the industry’s strategy to concentrate on these consumer trends and deliver products based on consumers’ needs have aided the formation of numerous small and big clusters and segments. The constant evolution in consumers’ trends can be in some ways attributed to their response to geographic, demographic, and scientific advancement.

Nutrition clusters

As we move into 2017, we will continue witnessing exponential growth of nutraceutical market across all its segments as the market reaches new heights.

In the Indian nutraceutical industry, marketing focus on health claims, has brought about a change in segmentation dynamics. With the emergence of new sub-segments, evolution in nature of formats etc. the segmentation based on just the formats i.e. dietary supplements, functional foods and functional beverages seems inadequate.

As a result of the current format clutter in the industry, the marketing focus of nutraceuticals has moved to the health claim sector. This, in turn, has resulted in a parallel segmentation in the industry based on goal and disease-specifications. Within these segments there exists micro-segmentation which is mostly based on the age or gender. Example: Sub-variants of popular brands like Horlicks – divided into Junior Horlicks & Mothers Horlicks based on age groups.

Clusters of Nutrition:

Clusters can be classified on the basis of health conditions, formats/dosage forms and general well-being/health maintenance.

Clusters based on formats

Nutrients can be supplemented through various formats such as dietary supplements, functional/ fortified foods and functional beverages, all of which fall under the umbrella term nutraceuticals. These individual clusters are further segmented and micro-segmented. Functional foods are further segmented based on the type of product E.g. Dairy products, bakery products, fortified snacks, confectionary and others etc. In addition, the functional beverages segment also has sub-segmented into hot beverages such as herbal teas, green teas, fruit & vegetable juices, fortified drinking water, non-carbonated drinks, and dairy, dairy alternative drinks among others. Dietary supplements are divided into vitamins and minerals, proteins and peptides, and herbals and non-herbals. While functional beverages as a whole shows the best growth potential, when considered individually, various sub-segments and micro-segments, which fall under functional foods or dietary supplements, offer an excellent potential for growth, highlighting the need for a more relevant segmentation of products for the industry.

Clusters based on health conditions

The world is moving towards condition-based nutrition where nutraceuticals play a huge role. The general trend observed in the nutraceuticals industry is the movement from traditional formats to much focused products addressing specific conditions. This helps the customers select the right nutraceutical product based on their demographics, health benefits and purpose. E.g. heart health, bone health, women’s health, children’s health etc. Niche segments such as anti-aging, energy boosting, skin care, digestive care, etc. are also emerging as fast-growing categories.

Medical foods are another category that has been gaining popularity recently. Medical foods are dietary products that have been created for and intended to satisfy the nutritional needs of patients that cannot be met through their daily diet. The category has emerged from the realisation that certain dietary products produce healthcare benefits beyond that of their nutrition value

Clusters based on general health and well-being

In today’s fast-paced lifestyle it has become difficult for most people to get the daily required amount of nutrients in order to remain healthy.  Thus, more and more consumers are looking for other options to suffice their daily macro and especially micro nutrient requirements in order to maintain their health. The most commonly required nutrients are vitamins and minerals. The vitamins and minerals constitute about 48 per cent of the Indian dietary supplement market. Similarly, in the US, vitamins and minerals are the largest supplement category (with sales of $10.6 billion, up 5.4 per cent in 2014), ahead of specialty and herbal supplements. This suggests the need of consumers and their buying pattern accordingly.

Way Forward

Each of the clusters in the nutraceutical industry is growing at its own pace. With the individual growth of the clusters, the nutraceuticals industry is growing on the whole. For further growth of the clusters effective marketing and promotional strategies along with viable business models for each specific segment are essential. Thus, we can say that our nutraceutical industry is growing cluster by cluster.