Presentations from Nutraceuticals India, held in October 2012 and provided by conference organiser UBM India.

1. Sizing up the market for Nutraceutical Products in India and forecasting opportunities in the
long term
Nutraceuticals India 2012
October 2012
Presented by: V. Chaitra Narayan , Program Manager, Frost & Sullivan
© 2012 Frost & Sullivan. All rights reserved. This document contains information that is the sole property of Frost & Sullivan.
No part of it may be circulated, quoted, copied or otherwise reproduced without the prior written approval and consent of Frost & Sullivan

2. AGENDA
• Megatrends Shaping the Nutraceutical Market
• Global Market Overview
• Indian Market Snapshot
• Nutraceutical Value Chain
• Opportunities for India
• Way Forward

3. MEGATRENDS SHAPING THE NUTRACEUTICAL MARKET
Health, Wellness, and Well-Being: Booming Population:
The health and wellness industry is poised for a
Sustained population growth will result in a shift of focus from high
radical change with information technology taking consumption regions such as the US and Europe to high-population
the forefront in research and development, countries like India and China. It is expected by 2020, that 37 percent
diagnostics, and monitoring. In future, diagnostics of GenY (aged 15-34) will be centered in India and China, with Asia as
will become less invasive, preventative, and image- whole accounting for 61 percent of 2020s GenY population
based. Medicines will be marketed as molecular
and personalized drug cocktails. However, given
World Population: Breakdown by Region
current levels of Government spending on 2010 2 (Global), 2020 2020
healthcare, it is expected that the consumer’s 1.8
focus will shift from treatment-based remedies to 6.83 7.55
preventive remedies. The evolving definition of Billion 1.6
Billion 1.2
0.47
health, wellness, and well-being will become the 1.4
0.16
Population in Billion
new value proposition for companies across this 1.2
0.09
2.1
0.19
sector and an important factor of differentiation. 0.07
1 0.47 0.57
0.33
0.8
0.63 0.22
The evolving definition of Health,
2.56
Wellness, and Well-being 0.6
0.37
0.12
0.44
0.23
0.21 0.51
0.4
0.07
0.26
Mind Body Soul 0.2 0.44
0.22 0.13
0.36 0.11 0.33
0.22 1.69
Mood 0.14 0.07 0.13
Sight/vision Personal values 0
Stress levels Africa Rest of Asia Latin America,
Caribbean and
North America Europe India China
Touch and feel Personal Oceania
Mental health fulfilment 65 Years and Above 35-64 15-34 0-14
Smell/breathing
Sense of Self image/self
optimism Sound Population in
actualization
Attitude Temperature Billion
Security Wellness Source: U.S. Census Bureau, 2010, and Department of Economic
and Social Affairs of the United Nations
Safety
3

4. GLOBAL NUTRACEUTICALS MARKET – CONSUMER-DRIVEN
GROWTH
Global Nutraceutical Market, 2011
Total Market Size: $149.5 Billion
ROW The global nutraceuticals market in 2011 was estimated to be $149.5
16% Billion, with the US, Europe, and Japan being largest regional
India markets accounting for nearly 93 percent of the global nutraceuticals
1% USA demand. These markets are nearing maturity, with exceedingly high
36%
per capita spends on nutraceutical products, thus forcing
Japan manufacturers to look at developing countries such as India and
22%
China, which have considerably lower per capita spend on
nutraceutical products, as key growth regions for their nutraceuticals
portfolio
Europe
25%
Market Size at 5-year Forecast Global Market, 2011
Market Market
End of Forecast Market Growth
Stage Revenues
Period Rate
US, Europe, and Japan
are the largest markets,
while India, China, and
Growth $149.5 B $210 B 7.0% Brazil are key growth
geographies
(2011) (2016) (CAGR)
ROW= Rest of the world; CAGR = Compound annual growth rate
4

5. CUSTOMIZATION OF NUTRACEUTICALS WORLDWIDE
With increasing concerns about side-effects resulting from chemicals and introduction of synthetic additives in
Going Natural foods, consumer demand for natural alternatives has increased dramatically. The industry responded to such
demand by focusing on customization of products to focus on natural alternatives for established variants.
Cultural Nutraceuticals manufacturers understand that various cultures have specific requirements for products. The
Differences latest trend is understanding such cultural requirements and focusing on these. For instance, in India, omega-
3, a traditionally non-vegetarian product, has been developed with vegetarian variants.
Nutraceutical ingredients have typically been positioned as natural and healthy alternatives to traditional
medicine. However, one of the primary challenges being faced by these products is the difficulty in formulating
Formulation
these products into traditional food and beverage products. For any food or supplement manufacturer looking
Efficiency
to add functional ingredients to their products, the key issue of stability must be addressed as soon as possible
during the product development process. Such challenges have caused for innovative product presentation to
ensure ingredient viability and stability.
With increasing sophistication in nutraceuticals and demand for personalized medicine growing, consumer
demand for products with specific health benefits has been skyrocketing. This is particularly apparent in
Specific Health Europe, where nutraceutical products have now been split into various segments based on health benefits.
Benefits These segments such as heart health, eye health, digestive health, joint health, and so on, are gaining
immense popularity with manufacturers positioning themselves to specifically focus on certain health
avenues.
5

6. TOTAL INDIAN NUTRACEUTICALS MARKET = 1% OF THE GLOBAL MARKET
Indian Nutraceutical Market, 2011
The Indian nutraceuticals market was valued at $1,480 Million in
2011. Dietary supplements was the largest category accounting Functional
Foods
for 64 percent of the market, driven primarily by the 24%
Functional
pharmaceutical sector in the form of vitamin and mineral Beverages
12%
supplements.
Market Size at 5-year Forecast
Market Revenues End of Forecast Market Growth
Period Rate
Dietary
$1,480 M $2,731 M 13.0% Supplements
64%
(2011) (2016) (CAGR) Growth of dietary supplements will be
spurred by growing demand for dietetic
supplements from an increasingly urban,
fitness-conscious, young population
6

7. DIETARY SUPPLEMENTS MARKET
Competitive Structure
Dietetic Number of
21% Companies in the Over 500
Vitamin Market
and
Chyawanpr $950 M Mineral
ash
Competitive Branding, Price, Key
48%
8% Factors Benefits
Seniors (> 50 years)
Herbal Adults (25-50 years)
23% Key End-user
Young adults (15-25
Groups
years)
Sportsmen and athletes
Pfizer, Ranbaxy, Elder
Major Market
Unit: USD Mn Pharmaceuticals, and
Participants
Dabur, etc.
Sanofi-Aventis and
Notable
Universal Medicare;
Acquisitions and
Reckitt Benkiser and
Mergers
Paras Pharma
7

8. FUNCTIONAL FOODS MARKET
Others Competitive Structure
13% Fortified
Baked Number of
Goods
Companies in the 25-30
24%
Market
Fortified $350 M
Edible Oils
26% Fortified Competitive Factors Perceived Value
Malted
Functional Health
Dairy Drinks Children (5-15 years),
8% 29% Key End-user Groups Families and Seniors
(>50 years)
Major Market GlaxosmithKline,
Participants Yakult-Danone
Yakult Honsha and
Unit: USD Mn Notable Acquisitions
Danone Group formed
and Mergers
a JV to enter India
8

9. FUNCTIONAL BEVERAGES MARKET
Competitive Structure
Energy Number of Companies
12-15
drinks in the Market
10%
$180 M Functional
Others Juices Competitive Factors Branding
3% 84%
Sports
Drinks Young Adults (15-25
3% years)
Key End-user Groups
Sportsmen and athletes
Major Market Red Bull, PepsiCo, Parle
Participants Agro
PepsiCo and Tata Global
Beverages have formed a
Unit: USD Mn Notable Acquisitions
JV to create Nourish Co,
and Mergers
which currently
produces fortified water
9

10. THE NUTRACEUTICALS VALUE CHAIN
Basic raw material comprises
roughly 50-75 percent of ingredient
ex-factory cost
Nutraceuticals Ingredient
Basic Raw Material Supplier
Manufacturer
Nutraceutical
ingredients
account for
nearly 60-80 Contract Manufacturer
percent of the
ex-factory cost
for dietary Marketing and (Re)packaging costs + Marketer’s
supplements margin form nearly 50 percent of the product
MRP
In functional foods, nutraceutical
Dietary Supplement Co. Functional Food Co. ingredients usually account for 10-
25 percent of the ex-factory cost
Depending on the channel, cumulative margins
Distributor/Retailer of participants across the retail channel can vary
from 12-25 percent of the MRP
Consumer
10

11. OPPORTUNITY ASSESSMENT FOR INDIA: PRODUCT/BRAND DIFFERENTIATION
AND HIGHER PENETRATION WILL BE CRUCIAL FOR SUCCESS
• The market is expected to witness growth of 12-15% in the next 5 years. 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
Indian market. 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 and wellness players. Vitamin and mineral
supplements are expected to retain majority share in this segment.
• In functional beverages, an increase in uptake of enhanced drinks and energy drinks is expected, primarily
driven by a young, urban, working population. In functional foods, diabetic foods are expected to witness
highest growth, as consumers tend to perceive a healthy lifestyle as an alternative to insulin.
Market Penetration
Product Identity •Penetration Efforts: Required
especially in low-volume markets
•Creating brand and
such as Probiotics. For example,
product equity. For
Amul’s Probiotic ice cream calls for
example, the entry of
a certain specification causing lower
Yakult has testified this
threat from substitution
Product-Line Differentiation factor due to its global
recognition •Targeted marketing, advertising,
•Establishment of line variants. For and sales promotion campaigns that
example, Omega-3 oils into •Value-Added Focus:
address specific needs of target
vegetable oils to provide Technical and formulation
consumers
penetration into the commodity support and new
possibilities for existing
ingredients
11

12. WAY FORWARD: CUSTOMIZATION THE KEY REQUIREMENT TO
TARGET A DIVERSE POPULATION
As middle-class purchasing power increases, manufacturers The latest trend for nutraceuticals manufacturers is
need to focus on traditional brand identity allowing understanding such cultural requirements and focusing on
consumers to connect with the brand on a cultural level (for specific product formats. For instance, omega-3 developed
example, B Natural’s range of juices). The industry needs to with vegetarian variants has gained traction with the large
focus on inclusion of natural extracts (with proven health Indian vegetarian population.
benefits) for their products.
Traditional Cultural
Wisdom Differences
Formulation Specific Health
Efficiency Benefits
Formulation remains one of the primary challenges being With increasing sophistication in nutraceuticals, consumer
faced by these products. For any food or supplement
demand for products with specific health benefits has been
manufacturer looking to add functional ingredients to their
on the rise. Nutraceutical products have now been divided
products, the key issue of stability must be addressed as into various segments based on health benefits. These
soon as possible during the product development process.
sectors such as heart health and eye health, allow
Innovation product presentations have thus been used to manufacturers to position themselves better in India.
ensure ingredient viability and stability.
12

13. About Frost & Sullivan
Frost & Sullivan, the Growth Partnership Company, has been partnering with clients to support the development of
innovative strategies for more than 50 years. With 40 global offices and more than 1800 industry consultants and
analysts across North America, South America, Europe and Asia Pacific, the company offers strategic information and
advice in almost all countries in the world.
Frost & Sullivan serves an extensive clientele that includes Global 1000 companies, emerging companies, and the
investment community by providing comprehensive industry coverage that reflects a unique global perspective and
combines ongoing analysis of markets, technologies, econometrics, and demographics.
Frost & Sullivan’s South Asia, Middle East and North Africa team works across the entire industrial and technological
spectrum with leaders and challengers, as a strategic business partner. Its vast portfolio of services and advisory
“We Accelerate Growth” competencies include custom strategic consulting, market intelligence, summits and conferences and management
training.
CHEMICALS, MATERIALS AND FOODS PRACTICE
Frost & Sullivan's Chemicals, Materials & Food practice provides global industry analysis, growth consulting, market research, market forecasts and insights into
emerging technologies. This enables our clients to address current trends and challenges, identify new technologies and take advantage of growth opportunities.
Our Chemicals, Materials and Foods Growth Partnership Services subscription offers comprehensive coverage of key market sectors, namely:
Food & Beverage Ingredients markets
Food, Drugs & Cosmetics
Specialty & Fine Chemicals
Petrochemicals and derivatives
Building Materials
Packaging
Paints & Coatings
Adhesives, Sealants and Resins
Plastics, Polymers and Downstream applications
This comprehensive coverage ensures that we are fully equipped to provide clients with a complete assessment of opportunities, both inside and outside their
current marketplaces. Our uniquely broad perspective allows us to quickly and effectively support clients in identifying and qualifying new growth opportunities.

14. Contact Details
For More Information Contact:
Hema Thakur
Chemicals, Materials & Foods
Practice, South Asia,
Tel: +91 (0) 22 6160 6666;
Fax: +91 (0) 22 2832 4713;
E-mail: hthakur@frost.com
Learn more at www.frost.com