Nutraceuticals market looks healthy despite downturn

It all adds up

20 May 2009 00:00  [Source: ICB]

Functional foods and dietary supplements promise consumers vitality and good health. The nutraceuticals market itself is enjoying much the same effects

THOSE WANTING to adopt healthier lifestyles, prevent illness or manage their weight are increasingly turning to the nutraceuticals - or health ingredients - market. The sector has huge potential, and despite the global economic downturn and its significant impact on consumer spending, there still appears to be cause for optimism.

"The market has grown very healthily; there's been phenomenal double-digit growth in the past few years, albeit from a very small base," says Anna Ibbotson, industry manager, chemicals and materials at global consultancy Kline & Company.

"A key growth driver at the moment is disease prevention. For example, this supplement could protect you against X, Y and Z, and could help you to avoid a trip to the doctor's if you were in the situation where you lost your health insurance due to redundancy," she says.

"The market itself is rather small. For many products, you're talking about a global market of tens of tonnes as opposed to thousands of tonnes due to the actual quantities used within the finished products."

According to Ohio, US-based research firm Freedonia Group, demand in the US alone is forecast to reach $3.6bn (€2.7bn) in 2013, based on 4.3%/year growth from 2008.

The nutrients segment is expected to account for 47% of the total demand in 2013 - equivalent to $1.7bn. Growth over this period looks set to be strongest for the functional food additives, specifically omega-3 fatty acids, probiotics and sterol esters.

Research suggests that the fastest growth of 6.4%/year from 2008-2013 will be seen from nonherbal extracts, fueled by glucosamine, chondroitin and coenzyme Q10. Strong gains are also anticipated for some herbal extracts such as the "superfruits" pomegranate and cranberry, as well as green tea, resveratrol and acai.

Freedonia's previous global study, in 2006, predicted that worldwide demand for nutraceutical ingredients would climb by 5.8%/year to reach $15.5bn by the end of the decade.

"About 10 years ago, the nutraceuticals message was very much about general wellness - take this supplement and it'll enhance your wellbeing - but over the past five years, the trend is more towards promoting an ingredient to address a specific health issue," says Ibbotson.

"Rather than promoting a product, many companies are now pushing the wellness issue or concept," she says. "Things like resveratrol or epigallocatechin gallate, for example, are where the strong growth is, as companies can create a strong marketing story and take that to the consumer."

Although many firms have announced disappointing figures across their various markets during a dismal financial results season, the nutrition sector continues to perform well.

Major players such as Germany's BASF and Swiss-based ingredient supplier DSM Nutritional Products both remain confident for their respective businesses despite the current gloom.

"It's significantly less negatively affected than most of the other industry segments, but there is clearly a shift in consumer demand and habits," says Martin Jager, head of BASF's Nutrition Ingredients business.

"We see, for example, that in the US, there is increasing demand for dietary supplements to prevent the need for more expensive medical treatment. On the other hand, the consumer is also shifting away from the more expensive brands towards the private-label products."

He adds: "We see a slowdown but we expect that, over the next 12-18 months, demand will recover and the price pressure will ease a little when the consumer has moved back to branded products again."

Jager says that robust demand could partly be attributed to aging populations and a desire to improve the quality of life, as well as to prevent illness.

With GDP also increasing in emerging markets such as Brazil and China, he adds, dietary supplements are becoming increasingly popular outside the traditionally strong US, European and Japanese markets.

"We saw very strong demand for dietary supplements in China before and during the Olympic Games [in 2008], because they supported faster recovery after exercise," says Jager. "During that time, the market was very strong, coming from a very low level. It has cooled down a little since but there are still significant growth rates being realized there."

Other countries such as India, however, have not yet seen such a strong uptake. This is because of two main factors, he says: the number of people that can afford to pay for these supplements is a fraction of the overall population, and those that can are more likely to instead freshly prepare their food.

INNOVATION REMAINS A PRIORITY 

"[Innovation is] essential for the business - especially in the sense of improving the handling and application characteristics of existing molecules," says Jager. "We will continue to invest in innovation; it is an unchanged priority for us."

BASF is particularly upbeat following the launch of its range of Universal Formula products in March. The company has created formulations of all major vitamins and carotenoids - pigments found in plants - that fulfill all regulatory requirements in Asia, Europe or the US. This results in a significantly less complex supply chain and purchasing process for the customer, less risk of mixing up ingredients, and flexibility that allows inventories to be optimized - all important factors in these times, he says.

DSM Nutritional Products, meanwhile, is also seeing rising sales for health foods and dietary supplements and decent demand, says Philipp Siebrecht, global business manager. If anything, products promoting health and wellbeing are even more of a priority for money-conscious consumers.

In just over a year since DSM launched its ResVida brand in March 2008, the high-purity form of the natural ingredient resveratrol is selling strongly, and Siebrecht is optimistic about growth in the market.

The current financial crisis is turning people to drink - but for purely medicinal reasons. Resveratrol - a natural ingredient found in red wine - shows particular promise and has been lauded as having significant health benefits. It has been proven to help minimize the risks of heart disease, as well as improving locomotor skills - the basis of human movement, and preserving learning abilities and endurance.

Resveratrol occurs naturally in a number of plants, including grapes, mulberries, peanuts, white hellebore and a Chinese plant called giant knotweed.

"A lot of people know about the benefits of red wine when drunk in modest quantities," says Siebrecht, referring to a phenomenon known as the French Paradox that suggests that there are fewer cases of obesity and heart disease in France, despite a full-fat diet and a penchant for wine drinking.

"DSM managed to extract that molecule, and we now supply it to the functional food industry, which adds it to its dietary supplements or beverages and food products," he says.

One way to increase life expectancy is to slightly reduce calorie intake, says Siebrecht. Researchers have found that low doses of resveratrol in the diet of mice mimic this effect.

DSM has enhanced the qualities of resveratrol and provides a 99% pure form. A dose of 30-200mg a day could have a positive effect on health; just 30mg would be the equivalent of five or six bottles of wine but without the obvious health implications.

Although the nutraceuticals market is a relatively new concept, dating back only a few decades, it has boasted strong, almost unwavering growth in its short lifespan.

While other sectors are struggling in the economic gloom, players are still largely upbeat - at least while consumers still have a healthy appetite for functional foods and supplements.

WHAT ARE NUTRACEUTICALS?
The term nutraceutical was coined in 1989 by Stephen DeFelice, founder and chairman of the US-based nonprofit organization The Foundation for Innovation in Medicine (FIM). According to FIM, a nutraceutical is a food, dietary supplement or medical food that has a health benefit including the prevention and treatment of disease.

Hear the interview with Philipp Siebrecht, global business manager at DSM Nutritional Products

By: Andy Brice
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