functional foods & beverages india_2012

Functional Foods andBeverages India 2012

Maximizing the opportunityMaximizing the opportunity

Agenda

1 Overview 1

2 Emerging categories of focus 6

3 Outlook 12

Page

OverviewSection 1

PwCFunctional Foods and Beverages • Maximizing the opportunity

1

Draft

Increasing “self care” needs of consumers has created hugeopportunities across several food and beverage segments

Section 1 – Overview

Evolution of wellness foods:Evolution of wellness foods:

Naturally healthy

(INR 25 - 28 bn*)

Food products with nochemicals, additivesor artificialsubstances, but havenatural health benefits

Better for you

(INR 5 - 7 bn*)

Food products withlower levels of “badingredients/nutrients.For e.g. reduced fat/reduced sugar foods

Functional foods:

(INR 85 - 90 bn*)

Food products fortifiedwith ingredients orproduced / suitablymodified to provide adistinct health benefit

Nutraceuticals:

(INR 40 - 45 bn*)

Food supplementscontainingnutritional/ medicinalingredients sold inmedicinal form

Pharma foods

Convergence of food &pharma addressinglong term diseasespecific needs

PwC26 July 2012Functional Foods and Beverages • Maximizing the opportunity

2

Source: PwC Research and Analysis

First wave ofcommercially

popular“wellness” food

Traditional withwide-spread

consumeracceptance–

recently beingcommercialized

Usually encapsulated(pills & capsules) or

in the form ofnutritional powders

and liquids

Emergence of a newindustry driven by“self-care” needs of

consumers

* Numbers in brackets indicate market sizes in FY11

Driven by increasingpenetration in

existing categoriesand emergence of

new categories

Draft

The Indian market for functional foods, beverages andnutraceuticals has doubled during the last 6 years


Functional foods, beverages and nutraceuticals(INR bn)

Functional foods

64

25

19

24 132

-

20

40

60

80

100

120

140

(INR bn)

Functional beverages

51% 4%

2%

23% 19%

0% 20% 40% 60% 80% 100%

2011

Bread, biscuits & cereals Confectionery

Dairy products Vegetable and seed oil

Others


3

-

2005

Functio

nalfo

ods

Functio

nalbeve

rages

Nutr

aceutic

als

2011

86% 8% 6%

0% 20% 40% 60% 80% 100%

2011

Health food drinks Soft drink concentrates

Energy, sports drinks & others


Draft

There are several growth levers for these categories in India


Pre 1990 Current

Health drinkpowders

Biscuits

Drinkconcentrates

Health drinkpowdersBiscuits

Cereals

Drinkconcentrates

Energy drinks

Chewing gum

Bread

Confectionery

Milk

TeaSoups

AttaRice

Increased penetration acrossexisting categories

Emergence of new categories

Penetration across basic foodproducts

Eggs

Water


4

Biscuits

Cereals

Fruit juices

Sports drinks

YogurtVegetable oil

Soups

Nutrition bars

Noodles

products

Micro segmentation


Draft

...each targeting specific/combination of functional benefits tomeet consumer needs


Driven by an increasingneed to look good and feel

good

Driven by increasingly activelifestyle among the young

working populationgood

Mature category – driven bynew products targeted at

niche consumer segments

High growth segmentdriven by a young

population –

High incidence of cardiac

Targeted at women and theelderly –high growth category

globally, there exist hugeuntapped opportunities in India

Driven by increasingconsumer awareness levels

Changing lifestyles andincreasing incidence of dining

working population


5

ailments even amongyounger consumers

increasing incidence of diningout resulting in higher emphasis

on digestive health

Understanding consumer need gaps and identifying key segments to focus on is critical

Key ingredients include fibre rich foods, probiotics, phyt0 – chemicals, soy based ingredients, omega-3acids, vitamins, minerals, etc.


Emerging categories of focusSection 2


6

Draft

Anti-ageing food is still a niche segment in India; As today’s highlyaware middle aged population start ageing this category presentshuge potential

Section 2 – Emerging categories of focus

43%50%

Indian population over 40 years of age

Indian populationThe per capita spend on anti-aging products

29%

0%

10%

20%

30%

40%

2011 2041

Current population of 40+ Indians is higherthan the US population

Indian populationof 40+ Indians is

expected toincrease from 340mn to 675 mn in

2041

Key categories for anti-aging Key ingredients for anti-agingOpportunities for nutri-

cosmetics (nutraceuticals

The per capita spend on anti-aging productsin India is less than USD 1 compared to a

global per capita spend of over USD 25


7

Customization for Indian markets is critical – local taste & preferences, vegetarianism, preferencefor natural products etc

Key categories for anti-agingcould include mental/cognitive

health, heart health, skinhealth, etc.

Key ingredients for anti-agingcould include

antioxidants, carotenes,flavonoids, resveratrol, etc.

cosmetics (nutraceuticalstargeted at looking young) and

cosmoceuticals (use ofbiologically active ingredients in

cosmetics)

Source: US Census Bureau, PwC Research and Analysis

Draft

Indian nutraceutical market is expected to be driven by growth insegments such as Ayurceuticals


Indian nutraceutical market:

• Indian nutraceutical industry is expected to grow fromINR 44 bn in FY11 to INR 56 bn in FY15

• Currently dominated by domestic pharmaceutical andinternational supplements players

• Growth is being driven by dietarysupplements, primarily vitamin and mineralsupplements

Key trends:

• Indian consumers place a high amount of trust in• Nutraceuticals sold as OTC products require

heavy investments in product promotion and

• Major segments could include bodybuilding, weight control, diabetescontrol, sports nutrition, mealreplacement, etc

• Naturally derived substances, aminoacids, soy-based and protein & peptidesupplements could drive growth


8

traditional products which could drive growth ofAyurceuticals – ayurvedic ingredients delivered inpackaged nutraceutical forms

• Increasing usage of encapsulation and nanoceuticalssimilar to prevailing global trends

point of purchase visibility

• Educating stakeholders across the valuechain from physicians to retailers ischallenging

• Pricing is a barrier


Draft

Novel foods are a new segment of growth globally. There is a needfor defining and regulating novel foods segment in India


Novel foods : Do not have a significant history of consumption or are produced by a method that has notpreviously been used for food

1previously been used for food

Globally, countries such as the European Union, Australia, China, Canada, etc. have introduced regulationspertaining to marketing and sales of novel foods

2

Some foods defined as novel in other countries are traditional to India while there are other new foods beingintroduced in India which need to be identified as novel

3


9


Under the purview of the Food Safety and Standards Authority of India. Currently defined as “an article offood for which standards have not been specified but is not unsafe”

4

Detailed definitions, identification of novel food categories and approval/ labeling norms specific to Indiaare critical

5

Draft

Entry of new domestic and international players has providedgrowth impetus to the Indian market


Increasing focus on “Goodfor You”

Domestic companies tryingto maximize the opportunity

Keytrends

for You”• Increasingly larger number of food

manufacturers are positioning on the“good for you” platform

─ Studies have shown that globally companies with “good for you”positioning report stronger salesgrowth and higher profits

to maximize the opportunity

• Companies already operating inthese segments are leveraging ontheir existing brand strength toexpand into new categories

• New entrants in the wellness spaceare trying to unlock opportunities

International playerslooking to India for growth

Growing the market byeducating customers


10

looking to India for growth

• JVs with Indian companies, Licensingand repackaging agreements, Marketingpartnerships, Sales & distributionagreements, Technical collaborations

educating customers

─ Tying up with physicians and retailers for educating customers

─ Providing free samples to customers

─ Clinical trials to demonstrate quantifiable benefits


Draft

Convergence of pharma and packaged foods has pioneered“Pharma Foods”


Both Pharma and FMCG companies bring distinct competencies that complement each other

Pharma

• Demonstrated R&D expertise

• Leverage on existing scientific advanceswhich have applications in other domains

• Experience with meeting health relatedregulatory criteria

• Trust factor

FMCG

• Existing packaging systems anddistribution channels

• High retail reach and consumer connect

• Strong consumer brands and marketingstrength

• Need to enter new wellness productsegments while minimizing R&D costs

PharmaFood

Examples:


11

• Nestle has set up Nestlé Health Science S.A. and the Nestlé Institute of Health Sciences to focus onpersonalized health science nutrition

Examples:

• Merck KGaA has entered into a cooperative agreement with food company Clover Corporation to globallymarket 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 withDuPont’s soy product—Solae phenyl isothiocyanate protein using GM’s production facilities


OutlookSection 3


12

Draft

The FFB and nutraceuticals market is expected to grow at c. 10% toreach c. INR 192 bn. The Indian market is expected to outperformgrowth in global market

Section 3 – Outlook

Indian market is expected to grow at c. 10%compared to growth of c. 6 – 7% in the global market

Growth is expected to be driven by categories such asenergy & sports drinks, confectionery, etc.compared to growth of c. 6 – 7% in the global market

20%

25%

30%

35%

40%

Market outlook*

Hotdrinks

Vegetableoils

Confectionery

Energy & Sportsdrinks

CA

GR

20

11

-2015

Dairy products

energy & sports drinks, confectionery, etc.

132

24

2412 192

50

100

150

200

250

Functional foods, beverages & nutraceuticals(INR bn)


13

0%

5%

10%

15%

0% 10% 20% 30% 40%

Nutraceuticals

drinks

Bread, biscuits &cereals

oils

Concentrates

Current relativemarket share (2011)

Dairy products

* Bubble size indicates current market size in INR bn (2011)

-

2011

Functio

nalfo

ods

Functio

nalbeve

rages

Nutr

aceutic

als

2015

Others


Draft

There are several key points to consider while strategizing futuregrowth in this segment

Section 3 – Outlook

How is Indian consumer

1

What are the big bets for thisindustry in India? Whichsegments should you focusyour resources on?

2

How is Indian consumerbehaviour expected to evolve?How do Indian consumersdiffer from their globalcounterparts? How will thisimpact the evolution of theindustry?

How can you effectivelypartner with various players

How can you overcomechallenges that exist in the


14

3

partner with various playersin the eco-system to maximizeopportunities?

4

challenges that exist in theIndian market?

Thank youThank youRashmi UpadhyaAssociate Director - StrategyE-Mail: [email protected]: 080-40797059

© 2012 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers,” aregistered trademark, refers to PricewaterhouseCoopers Private Limited (a limited companyin India) or, as the context requires, other member firms of PricewaterhouseCoopersInternational Limited, each of which is a separate and independent legal entity.