China Leads Emerging Markets Poised For Strong Nutrients Sales Growth

Global sales of nutrients, herbals, minerals and vitamins should reach $23.7 billion by 2015, according to the Freedonia Group. Firms seeking to cash in on this growth should consider China, where sales will surpass the U.S. by 2020, making it the largest national market for nutraceuticals.

Global nutraceutical sales will grow at 7.2% per year to $23.7 billion by 2015, as demand increases in emerging markets for nutrients with confirmed health benefits used in supplements and functional foods, according to an industry research firm.

The fastest growing nutrients will include proteins, fibers and functional additives, the Freedonia Group predicts in the report “World Demand for Nutraceutical Ingredients.” In addition, the firm agrees with other researchers that naturally derived substances will grow the fastest among the three major nutraceutical types – nutrients, herbals and vitamins and minerals (Also see "Supplement Sales Will Slow, Bright Spots Are Brain Health And Energy" - Pink Sheet, 13 Feb, 2012.).

Firms seeking to cash in on this growth should consider China, where demand for nutraceuticals will surpass that of the U.S. by 2020, making it the largest market for the ingredients, according to Cleveland-based Freedonia (see chart, (Also see "BRIC Nutraceutical Ingredient Demand Grows" - Pink Sheet, 20 Feb, 2012.)).

China’s increased demand comes partly from new food safety regulations the country adopted in 2009 that provide consumers greater quality assurance for fortified and functional foods and beverages.

China’s Regulatory Changes Spur Growth

Total demand for nutraceutical ingredients in China will increase 11% annually to $4.34 billion in 2015, at which point the country will lag behind only the U.S. market’s demand. But by 2020 China’s demand will exceed that of the U.S., reaching $6.85 billion, according to Freedonia.

China’s increased demand comes partly from new food safety regulations the country adopted in 2009 that provide consumers greater quality assurance for fortified and functional foods and beverages, the report explains (Also see "China Passes Food Safety Law Following Melamine Infant Formula Disasters" - Scrip, 5 Mar, 2009.).

China instituted the changes after milk contaminated with melamine killed and sickened infants, which frightened consumers away from new nutraceutical offerings – especially those produced domestically – and held down the categories’ sales and growth opportunities, according to the report.

The melamine scare helped drive sales of imported infant formulas as consumers rejected domestic brands they perceived to be of questionable safety. However, higher prices for imported products deterred some sales and prompted several nutritional firms, including Abbott Laboratories Inc., Mead Johnson Nutrition Co.andPerrigo Co. PLC’ssubsidiary PBM Products, to expand in the region to better serve the population’s demands .

China’s expanding retail distribution network also helped spur sales of nutraceutical products, according to Freedonia. Large chain stores expanding to the country, such as Wal-Mart Stores Inc., offer broad lines of fortified and functional foods and beverages including nutritionals, traditional and Western dietary supplements.

Additionally, with a large aging population interested in supplements and functional foods to prevent and treat health problems and with income levels rising across the country, nutraceutical products “are expected to fare well in the burgeoning Chinese consumer market,” the report notes.

Brazil’s Competition Is Stiff

Nutraceutical product sales also will fare well in Brazil, India and Russia as increasing economic prosperity allows these countries to expand and diversify their food, beverage, processing and pharmaceutical industries, Freedonia says.

“Although continuing to be afflicted with widespread poverty, Brazil is experiencing fast growth in the number of affluent and middle class residents who are better educated and more health and wellness conscious,” according to the report.

It adds the country’s population is aging, which means more people need and have the means to buy nutraceutical products to alleviate health concerns. As a result, Brazil’s demand for nutraceutical ingredients will increase 8.5% annually to $370 million in 2015, Freedonia predicts.

While Brazil’s expanding market may be tempting to firms, competition is stiff. Companies in the country already are expanding their functional food and supplement lines and have flooded the market with more than 100 new nutraceuticals in the past two years, according to the report.

In addition, “based on the activities of its large agricultural sector, the country is more than self-sufficient in the supply of nutrient and natural ingredients such as soy proteins, grain fibers and herbal and botanical extracts,” the research firm notes.

However, it adds, fish oil and probiotics firms likely will find a niche here as the country relies heavily on outside sources for “higher value substances.”

Russia Seeks “High Value” Nutraceuticals

Niche opportunities for high value-added nutraceutical products also are growing in Russia, where demand for nutraceutical ingredients will increase 7.8% annually to $255 million in 2015, Freedonia says.

It explains “an older, aging population pursuing healthier lifestyles and dietary habits will underlie growth” in Russia, as will improving economic conditions that will increase the level of internal and external investment in Russia’s food, beverage and drug industries.

Russia’s distribution network also is expanding, which makes reaching the three-fourths of the population that resides in urban areas easier, the report notes.

An appealing aspect of Russia’s market is the 50,000 food and beverage processors and 500 drug makers in the country that are “major” customers of nutraceutical ingredients, according to the report.

Poor Distribution Hampers India

As in the other BRIC countries, India’s “rising income levels, expanding urbanization, widening end-product availability and trends toward healthier lifestyles” will drive up demand for nutraceutical products 9.8% annually to $1.5 billion in 2015, Freedonia predicts.

Firms interested in exporting nutraceuticals to India can target the approximately 25,000 food and beverage processing firms and 10,000 drug makers as existing and potential customers, many of which are large multinational firms, such as Nestle Health Science SA, [Kellogg Co.] and Danone, which recently acquired the nutraceutical firm Wockhardt Ltd. (Also see "Danone Buys Wockhardt's Nutrition Brands That Abbott Won Then Lost" - Pink Sheet, 8 Aug, 2011.).

A downside to the Indian market is only about 30% of the population can afford nutraceutical products regularly and distribution is poor beyond major economic centers, the report notes.

[Editor’s note: This story also appeared in “The Tan Sheet,” Feb. 20, 2010.]