The document provides an overview of the functional foods and beverages market in India. It notes that the market has doubled in size over the past 6 years to INR 132 billion in 2011. Key growth segments include energy drinks, dairy products, and confectionery. The outlook expects continued strong growth of around 10% annually to INR 192 billion by 2015. Emerging categories that could drive future growth are discussed as anti-aging foods, Ayurceuticals (Ayurvedic nutraceuticals), and novel foods. Convergence between the pharmaceutical and food industries is also highlighted through the emergence of "Pharma Foods."

1. Functional Foods and
Beverages India 2012
Maximizing the opportunity

2. Agenda
Page
1 Overview 1
2 Emerging categories of focus 6
3 Outlook 12

3. Section 1
Overview
Functional Foods and Beverages • Maximizing the opportunity
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4. Section 1 – Overview Draft
Increasing “self care” needs of consumers has created huge
opportunities across several food and beverage segments
Evolution of wellness foods:
Naturally healthy Better for you Functional foods: Nutraceuticals: Pharma foods
(INR 25 - 28 bn*) (INR 5 - 7 bn*) (INR 85 - 90 bn*) (INR 40 - 45 bn*)
Convergence of food &
Food products with no Food products with Food products fortified Food supplements pharma addressing
chemicals, additives lower levels of “bad with ingredients or containing long term disease
or artificial ingredients/nutrients. produced / suitably nutritional/ medicinal specific needs
substances, but have For e.g. reduced fat/ modified to provide a ingredients sold in
natural health benefits reduced sugar foods distinct health benefit medicinal form
Traditional with
Driven by increasing Usually encapsulated
wide-spread First wave of Emergence of a new
penetration in (pills & capsules) or
consumer commercially industry driven by
existing categories in the form of
acceptance– popular “self-care” needs of
and emergence of nutritional powders
recently being “wellness” food consumers
new categories and liquids
commercialized
* Numbers in brackets indicate market sizes in FY11
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5. Section 1 – Overview Draft
The Indian market for functional foods, beverages and
nutraceuticals has doubled during the last 6 years
Functional foods
Functional foods, beverages and nutraceuticals
(INR bn)
140 2%
24 132
2011 51% 4% 23% 19%
120
19
100 0% 20% 40% 60% 80% 100%
25
80 Bread, biscuits & cereals Confectionery
64 Dairy products Vegetable and seed oil
60
Others
40
Functional beverages
20
-
2005
2011
Functional foods
Functional beverages
Nutraceuticals
2011 86% 8% 6%
0% 20% 40% 60% 80% 100%
Health food drinks Soft drink concentrates
Energy, sports drinks & others
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6. Section 1 – Overview Draft
There are several growth levers for these categories in India
Pre 1990 Current
Increased penetration across Water
existing categories Milk
Health drink
Drink Biscuits
concentrates Atta powders
Emergence of new categories Drink Rice
Chewing gum
Health drink concentrates Eggs
powders Confectionery Cereals
Penetration across basic food Tea Energy drinks
Biscuits Bread
products Soups
Fruit juices
Cereals
Vegetable oil
Nutrition bars
Yogurt
Micro segmentation
Sports drinks
Noodles
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7. Section 1 – Overview Draft
...each targeting specific/combination of functional benefits to
meet consumer needs
Driven by an increasing Driven by increasingly active
need to look good and feel lifestyle among the young
good working population
Mature category – driven by Targeted at women and the
new products targeted at elderly –high growth category
niche consumer segments globally, there exist huge
untapped opportunities in India
High growth segment
driven by a young Driven by increasing
population – consumer awareness levels
Changing lifestyles and
High incidence of cardiac increasing incidence of dining
ailments even among out resulting in higher emphasis
younger consumers on digestive health
Key ingredients include fibre rich foods, probiotics, phyt0 – chemicals, soy based ingredients, omega-3
acids, vitamins, minerals, etc.
Understanding consumer need gaps and identifying key segments to focus on is critical
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8. Section 2
Emerging categories of focus
Functional Foods and Beverages • Maximizing the opportunity
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9. Section 2 – Emerging categories of focus Draft
Anti-ageing food is still a niche segment in India; As today’s highly
aware middle aged population start ageing this category presents
huge potential
Indian population over 40 years of age
50% 43%
Indian population
40% The per capita spend on anti-aging products
of 40+ Indians is
30%
29%
in India is less than USD 1 compared to a
expected to
global per capita spend of over USD 25
20% increase from 340
10% mn to 675 mn in
0% 2041
2011 2041
Current population of 40+ Indians is higher
than the US population
Opportunities for nutri-
Key categories for anti-aging Key ingredients for anti-aging cosmetics (nutraceuticals
could include mental/cognitive could include targeted at looking young) and
health, heart health, skin antioxidants, carotenes, cosmoceuticals (use of
health, etc. flavonoids, resveratrol, etc. biologically active ingredients in
cosmetics)
Customization for Indian markets is critical – local taste & preferences, vegetarianism, preference
for natural products etc
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10. Section 2 – Emerging categories of focus Draft
Indian nutraceutical market is expected to be driven by growth in
segments such as Ayurceuticals
Indian nutraceutical market: • Major segments could include body
building, weight control, diabetes
• Indian nutraceutical industry is expected to grow from control, sports nutrition, meal
INR 44 bn in FY11 to INR 56 bn in FY15 replacement, etc
• Currently dominated by domestic pharmaceutical and
international supplements players • Naturally derived substances, amino
• Growth is being driven by dietary acids, soy-based and protein & peptide
supplements, primarily vitamin and mineral supplements could drive growth
supplements
Key trends: • Nutraceuticals sold as OTC products require
• Indian consumers place a high amount of trust in heavy investments in product promotion and
traditional products which could drive growth of point of purchase visibility
Ayurceuticals – ayurvedic ingredients delivered in
packaged nutraceutical forms • Educating stakeholders across the value
• Increasing usage of encapsulation and nanoceuticals chain from physicians to retailers is
similar to prevailing global trends challenging
• Pricing is a barrier
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11. Section 2 – Emerging categories of focus Draft
Novel foods are a new segment of growth globally. There is a need
for defining and regulating novel foods segment in India
1 Novel foods : Do not have a significant history of consumption or are produced by a method that has not
previously been used for food
2 Globally, countries such as the European Union, Australia, China, Canada, etc. have introduced regulations
pertaining to marketing and sales of novel foods
3 Some foods defined as novel in other countries are traditional to India while there are other new foods being
introduced in India which need to be identified as novel
4 Under the purview of the Food Safety and Standards Authority of India. Currently defined as “an article of
food for which standards have not been specified but is not unsafe”
5 Detailed definitions, identification of novel food categories and approval/ labeling norms specific to India
are critical
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12. Section 2 – Emerging categories of focus Draft
Entry of new domestic and international players has provided
growth impetus to the Indian market
Increasing focus on “Good Domestic companies trying
for You” to maximize the opportunity
• Increasingly larger number of food • Companies already operating in
manufacturers are positioning on the these segments are leveraging on
“good for you” platform their existing brand strength to
─ Studies have shown that globally expand into new categories
companies with “good for you” • New entrants in the wellness space
positioning report stronger sales are trying to unlock opportunities
growth and higher profits
Key
trends
International players Growing the market by
looking to India for growth educating customers
• JVs with Indian companies, Licensing ─ Tying up with physicians and retailers
and repackaging agreements, Marketing for educating customers
partnerships, Sales & distribution ─ Providing free samples to customers
agreements, Technical collaborations ─ Clinical trials to demonstrate
quantifiable benefits
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13. Section 2 – Emerging categories of focus Draft
Convergence of pharma and packaged foods has pioneered
“Pharma Foods”
Both Pharma and FMCG companies bring distinct competencies that complement each other
Pharma FMCG
• Demonstrated R&D expertise • Existing packaging systems and
• Leverage on existing scientific advances distribution channels Pharma
which have applications in other domains • High retail reach and consumer connect Food
• Experience with meeting health related • Strong consumer brands and marketing
regulatory criteria strength
• Trust factor • Need to enter new wellness product
segments while minimizing R&D costs
Examples:
• Nestle has set up Nestlé Health Science S.A. and the Nestlé Institute of Health Sciences to focus on
personalized health science nutrition
• Merck KGaA has entered into a cooperative agreement with food company Clover Corporation to globally
market and distribute products with Merck’s omega-3 ingredient HiDHA
• DuPont Protein Technologies has joined with General Mills (GM) to develop and market new products with
DuPont’s soy product—Solae phenyl isothiocyanate protein using GM’s production facilities
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14. Section 3
Outlook
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15. Section 3 – Outlook Draft
The FFB and nutraceuticals market is expected to grow at c. 10% to
reach c. INR 192 bn. The Indian market is expected to outperform
growth in global market
Indian market is expected to grow at c. 10% Growth is expected to be driven by categories such as
compared to growth of c. 6 – 7% in the global market energy & sports drinks, confectionery, etc.
Functional foods, beverages & nutraceuticals Market outlook*
(INR bn)
250 40%
CAGR 2011-2015
200 12 192 35% Energy & Sports
24
drinks
24 30%
150
132
25%
100
Confectionery
20%
Hot
50 Vegetable
drinks
Dairy products
15% oils
- Others Nutraceuticals
Functional foods
2011
2015
Nutraceuticals
Functional beverages
10%
5%
Concentrates
Bread, biscuits &
cereals
0%
0% 10% 20% 30% 40%
Current relative
* Bubble size indicates current market size in INR bn (2011) market share (2011)
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16. Section 3 – Outlook Draft
There are several key points to consider while strategizing future
growth in this segment
How is Indian consumer
What are the big bets for this behaviour expected to evolve?
industry in India? Which How do Indian consumers
segments should you focus differ from their global
your resources on? counterparts? How will this
1 impact the evolution of the
industry? 2
How can you effectively How can you overcome
partner with various players challenges that exist in the
in the eco-system to maximize Indian market?
opportunities?
3 4
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17. Thank you
Rashmi Upadhya
Associate Director - Strategy
E-Mail: p.rashmi.upadhya@in.pwc.com
Phone: 080-40797059
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