Nutraceuticals … of megatrends and convergence
The Asia-Pacific region comprises of countries in South East Asia, East Asia, and Oceania that differ widely in terms of their culture and degree of economic development. Despite their difference, the food industry in the region has been growing persistently and is expected to have a 33% market share of the global food and beverage market in 2014. As APAC moves from a population that demands food security to a population that focuses on food quality, nutraceuticals have come into their own as the “heir apparent” for the changing face of the food industry. This growth can be strongly attributed to the megatrends that have been sweeping across the Asia-Pacific region in the recent years.
Where are we today?
APAC now dominates the global nutraceutical market at 35 per cent of the 174Bn market. However, its demands continue to pose challenges to the largely western focused nutraceutical industry. For instance, according to the 2013 Micronutrient Report, more than 40% of women are anaemic, nearly 20% of the population suffers from iodine deficiency disorders, and about 25% of children have subclinical vitamin A deficiency in the developing world. Few manufacturers outside of the Asian players have yet to target this opportunity and provide a viable solution. Mega-trends have long pointed out the rising of such gaps and directly tend to influence the actions of consumer and their spending behaviour, which in turn directly impacts the growth, performance, and productivity of the industry within the region.
Understanding APAC economies’ individual stories will emerge as the key trend across the nutraceutical industry as we peel away the layers of this enigmatic market. Whether it means addressing Japan’s ageing nutrition challenges, Hong Kong’s suspicion of nutraceuticals that aren’t produced with local ingredients, or Malaysia’s commoditisation of the industry, nutraceuticals will have to don different hats to cater to each of these markets.
Manufacturers will increasingly understand that APAC is a market within markets, a market where loyalty is key, but is also fickle and price sensitive. Each country has a different story, a different need, and no longer are they willing to buy products that are not targeted to their populace. The nutraceutical industry is fast learning this message. From formulation to packaging, this is an industry that is changing and modifying to suit local demands and incorporate local ingredients into global formulations. Indeed, probably the most riveting trend this year will be to watch global stalwarts take on Asian avatars in an aim to reach the world’s largest nutraceutical population.
Where do we go from here? Mega trends within the Asia-Pacific region
The following megatrends impact the nutraceutical demand and consumption within the Asia-Pacific region.
Globalisation – The increasing foreign direct investment, strategic trade agreements, and improved infrastructure within the Asia-Pacific region has made it easier for local players to seek global opportunities, and also for global players to seek local opportunities.
In many countries, western products have penetrated beyond the urban areas, hence fuelling demand for imports due to the increasing exposure of western food imports. In particular, imports that incorporate indigenous and native extracts into nutraceuticals are the most popular amongst the locals. On the other hand, some local foods have been modified to cater to the western taste buds, as well as locals who prefer the western version of the local nutraceuticals. For instance, local Korean red ginseng is experiencing a lot of demand outside of Asia, hence it has been modified with the incorporation of western ingredients. Also, in countries like Singapore and Australia, where there is a large mix of different cultures, the demand for international nutraceuticals such as guarana- and turmeric-based nutraceuticals is growing, which in turn is driving the growth of natural products in these countries. Additionally, the lack of local agriculture in some countries (e.g. Japan), along with the rising occurrence of food safety scandals, have driven increased interest in nutraceuticals and healthy eating.
Urbanisation – There has been a massive influx of people into urban areas. Urban growth rates are expected to be
the most rapid in South East Asia. It is expected that urban populations will increase by more than 580 million between 2000 and 2020 in the region. As a consequence, the rural population is likely to decrease rapidly and result in cities merging together, creating mega-regions and urban corridors to cater to the increasing population.
Increased disposable income and urbanisation of populations create demand for convenience foods and increase the
need for functional foods. Driven by high demand for the Nutraceutical Market, new research areas such as personalised nutrition and nanotechnology are bringing opportunities for new functional food products that are currently unimaginable.
Additionally, the increasing disposable income has led to the increase in demand for more sophisticated, high value, processed, and healthy food products. A combination of these two factors has worked in favour of the nutraceutical sector. For example, Malaysians are facing dramatic changes in urban lifestyles that have created health and nutrition problems, with rapid increases in obesity, hypertension, diabetes, and coronary heart disease rates. Heart health foods are thus a key growth area. The introduction of healthier ready-to-drink (RTD) products has enabled functional beverages to witness never- before-seen growth rates, while the breakfast goods markets continues to drive functional food demand.
GEN-Y Population – In many of the Asia-Pacific countries, the GEN-Y population is highly westernised and cosmopolitan. They tend to be image conscious and place importance on branded products. As a result, they drive the demand for western foods as well as value-added fortified foods. This has also resulted in the growth of the fortified food retail industry. GEN-Y tends to be highly weight conscious and most decisions are made based on calorific intake. This is driving the introduction of not only retail, but also food service options catering to the fortified food segment. In addition, the growing trend of gifting people with dietary supplements on special occasions is driving sales across APAC.
Health and Wellness – The incidence of various illnesses such as obesity, cardiovascular disease, and diabetes have been increasing in the majority of the countries within the Asia- Pacific region. For instance, increasing obesity rates in China, particularly amongst children are a huge concern. As a result, the demand for healthy snacks such as fruit bars, organic foods, and fortified functional foods (e.g. products fortified with vitamins and probiotics) has increased, as they serve as preventive measures against health problems. Also, the ageing population tends to focus on ‘health foods’, driving the supplement and nutraceutical market. Although concerns over the H1N1 flu virus have declined, the pandemic left a lasting impression and increased the consumer interest in immune- boosting supplements. Concerns about immune health have helped drive sales in vitamins and dietary supplements. Hence, the increasing consumer awareness of healthy eating fuel the demand for high-value food supplements and wellness related products.
Convergence – As megatrends continue to effect nutraceutical demand across the region, one particular trend is beginning to master them all. Convergence began as an idea to introduce successful alternate technologies from other industries into the health food sector, and it is fast becoming one of the cornerstones of doing business in the nutraceutical industry. This trend tends to effect the entire value chain – from using agro-bots to harvest raw materials and assess polyphenol contents, to using big data to store personalised information and provide personalised dietary supplements, to providing value chain transparency by using QR codes to tell the nutraceuticals story; this market is constantly being inundated with disruptive technologies. Convergence remains one of the most exciting trends of the day, and the constant innovation to bring these technologies into the nutraceutical sector is one that most industry experts are watching with baited breath, particularly in the APAC region.
As nutraceutical demands and consumer awareness continues to drive the market growth, APAC stands poised to capitalise on this trend, purely by virtue of its existing capabilities and traditional understanding of the health food sector. Key ailments expected to drive future Nutraceutical Market (as well as the ingredients) include joint health, gut health, bone health, and weight management. If current trends hold, healthcare spending will double by 2050 to claim 20-30% of GDP for some economies, providing huge opportunities for both export and domestic alternative therapies.
APAC possesses a rich raw material source, with a consumer base that is highly aware of such ingredients, and can provide not only options for developed regions like ANZ but also for the SEA region. Leveraging local ingredients in food fortification, such as avocado oil based antioxidants and green tea flavoured beverages, are a key area of growth; since investment in creating consumer awareness is minimal but return on investment is extremely high due to market familiarity with the ingredient. In addition, the entry of new technologies and megatrends led by the trend towards convergence will help make achieving this goal that much easier, but only if we strike when the iron is hot. The continued growth of this market will enable APAC to truly achieve its potential as a growing consumer market for nutraceutical products and market growth.
Ms Natasha D’Costa
Associate Director, Food & Agriculture
Frost & Sullivan
Natasha will be speaking at Vitafoods Asia Conference on 2-3 September, held alongside the exhibition in AsiaWorld-Expo, Hong Kong.