Insights on Indian market

Compiled by Dr. Dilip Ghosh nutriConnect nutriConnect, Sydney, Australia 2009 1

Health is the top need state in India

Concept of health is different in India compared to west. Health in India is about not falling sick. This is very much related to tough competition in every field and falling sick means falling behind. This is especially true for kids and strivers (20 29 years old). Based on this understanding, two areas of health are very important in India immunity defence (both strivers and kids) and mental equity/brain power (kids). Health is also connected to social factors. People want to project themselves in such a way that people around him/her see that he/she is taking care of self and family. The graphic on the top shows two important segments of these expressive needs social better for you and look at me. All of these indicates importance of brand, image and badge value of a product.

Consumption occasion:
Traditionally most of the food consumption used to be at home with family. With change in society such as, nuclear family, rapid urbanization, womens participation in work force changing the pattern of food consumption. Number of out of home and on the go consumption is increasing. This gives rise to single serve packaged food over traditional multi serve and family packs.

Distribution channel:
Though the numbers of super markets are increasing in India, yet the distribution remains predominantly ambient. Even the products, which are sold chilled at the point of sell are stored and distributed at ambient temperature. The average ambient temperature in India is about 350 C. So the product, which is robust and able to survive this temperature, has better chance of success.

Taste:
Fusion is the modern trend in India in music, dresses and also in food. A perfect blend of Indian taste and western convenience has bright chance of success. Two very recent examples are PepsiCo Nimbooz and Nestle Maggi atta noodles.

Value for money:

Indian consumers are serious about value for their money. People will buy only that stuff that they cant make at home. This is especially true for kids products and this is the one reason why powders beverage always has been done better than RTD beverage. Other than the value for money factor, one psychological factor plays important role. Mothers, even if very busy, get satisfaction in preparing foods for kids. Considering this insight, product containing a unique ingredient (e.g., probiotics cant be used in homemade yoghurt) or format has more chance of success.

Major trends in healthy, convenience and indulgence foods

TREND 1: Food As Health Healthy food is becoming a fast-growth category, particularly in cash-rich middle class Indian. Rising awareness and affluence have made health food products accessible to a larger segment of the population. Several savvy marketers are already riding this trend. Amul has introduced a range of functional products, from energy drink Stamina to Probiotic Ice-creams, Probiotic Lassi and Curd, and High Calcium Milk; Reduced Salt Butter Frito Lay, the snack food division of PepsiCo was one of the first to do away with transfat and MSG across the entire range of its foods. Recently, it also began using rice bran oil to reduce the saturated fat content in its snacks. Dabur has a very Indian range of vegetable juices. ITC Foods is combining fun and food with Benne Vita Flax Seed biscuits, with ingredients that lower cholesterol levels and maintain gut health. TREND 2: Food As Convenience-Cum-Novelty Changing lifestyles and the modified eating habits of Indias growing urban population have propelled its processed food industry. 30 million upper and middle class Indians consume packaged food and 200 million more are projected to do so in the next three years. According to a study, the Indian Ready to Eat market is estimated to grow to US$ 727.09 million by 2015 from the current $ 32.09 million. Some major players include ITC Foods (Indian Tobacco Company), MTR Foods, Kohinoor, Amul, Rajbhog Foods, Ethnic Kitchens and Tasty Bite. TREND 3: Food As Control Many companies in the food sector have jumped on the bandwagon to provide healthier alternatives to liberate consumers from the ill-effects of fattening products. The magic word Sugar-free products are doing well in India. Major players are Zydus Cadila Healthcare (Gums and fruity drink), Amul, Mother Dairy (Probiotic frozen desserts), Nestle (Chocolate), UB Group (Diet whisky and Vodka), Kelloggs (Cereal and snacks). TREND 4: Food On-The-Go The market is estimated at US$ 3 billion, with 50 percent comprising the organized snacks category. This category, growing at a healthy 30 percent annually, is sub-divided into the traditional segment (bhujia, chanachur), western segment (potato chips, cheese balls) and the newly established finger snacks segment, an adaptation of traditional offerings to the western format. Haldiram and Bikanerwala Foods are still concentrating traditional Indian snacks such as masala peanuts to cocktail samosas, Bhujias as well as ready-toeat chaats, but Frito Lay and the newest MNC entrant ITCs Bingo are trying to make their western products in Indianized taste. TREND 5: Food As Instant Pick-Me-Up Though the market is flooded with energy supplements and energy bars, its energy drinks that are creating a buzz with the young crowd. The popular energy drinks in the Indian market are Phantom, Red Bull, Effect and Gatorade. The Indian giant Amul is also entering this big market sector.

TREND 6: Food As Natures Kitchen India has always had a penchant for natural products both in food as well as in cosmetics and healthcare. Organic foods are now available, making it easy for those with the awareness and the pockets to turn au natural. Functional food, also termed as the nutraceutical products (a hybrid of nutrition and pharmaceutical), is any fresh or processed food claimed to have health-promoting ingredients apart from its basic nutritional function. The Indian functional food market, apart from the dietary supplements, is estimated to be about Rs.125 crore, and will grow with the introduction of relevant products in this space. The typical functional foods could be anything like the prebiotic, probiotic foods, omega fatty acids or even crops that naturally contain components that aid the body functions like soy, gluten or whey proteins. Thus, these would include fruits, vegetables, energy drinks, juices with or without preservatives, breakfast cereals and fresh dairy products-all imparting the desired health benefits and physiological changes. TREND 7: Food As Luxury Many brands are riding this trend by introducing up-market versions of mass-market brands. Parles variant, Milano, Britannias Pure Magic and ITCs Dark Fantasy, a cream-based Chocolate cookie are few examples of this category. TREND 8: Food As Discovery The Indian consumers culinary experimentation is not only restricted to different cuisines within India but outside India as well. With the Indian palate getting more and more experimental, out-of-the-box thinking and quality of food and service is getting more crucial. This new trend of experimentation can be seen across all segments of food, from the restaurants to the ready-to-eat, from the sauces to the ice-cream. Nestles Maggi ranges, MTRs ready-to-eat snacks ranges, Spencer, Yama Toya are currently dominating Indian market. TREND 9: Food As Guilt Free Sin The brand new trend is Guilt Free Sin, where consumers are now looking out for a tasty way to good health which allows them to indulge in food that they crave for along with keeping a check on their calorie intake and other dietary restrictions. Satva Foods has recently launched an entire range of products that helps consumers to eat healthy without giving up on the food that they like or get involved in a diet of bland, insipid food. Nohangover whiskies, macrobiotic beers and fruit infused desserts are just some of the delights ahead for Indian gourmets wanting to combine good health and good taste!

Nutraceutical market: Global and India

According to a recent report, the total market for nutraceuticals in India is growing at 21 per cent per annum. It is currently valued at INR 44bn (621m), but could be worth more than INR 95bn (1.34bn) in four years time (Ernst & Young and FICCI, 2009). As a concept, Nutraceuticals is still in its stage of infancy in India Of the global nutraceutical market of US$ 117 billion (INR 5148 billion), India has less than one percent share and is estimated to be around INR 44 billion in size. But it has been growing much faster than global rates at CAGR of 18% for the last 3 years driven by functional food and beverages categories
4

There are four key underlying drivers for this growth: Affluence of working population with changing lifestyles Reducing affordability of sick care, driving consumers towards wellness Increasing physician awareness and media penetration Increased accessibility due to emergence of newer distribution channels

The latent market in India is two to four times the existing market size (between INR 89 billion and INR 172 billion) with nearly 148 million customers

Functioanl beverages, 14%

Functional Foods, 54% Dietary supplements, 32% Indian nutraceutical market in 2008 is UD$ 1.0 billion

Key growth areas (RNCOS, 2008)

Food, beverages and tobacco industry dominates the Indian retail industry and is anticipated to grow at a CAGR of nearly 8% during 2008-2012. Soft drinks market is anticipated to grow at a CAGR of nearly 12% from 2008 to 2012, and major demand will be seen in health & energy drinks, bottled water and fruit juices. Snack food market is estimated to grow at an annual rate of 18% to 20% in coming few years, albeit from a small base of consumers. With growing health awareness and concern, the functional food & drinks market is set to grow rapidly in India. Changing lifestyle coupled with growing middle class population and changing eating habits, is anticipated to fuel 7%-10% growth in the Indian food service sector annually. Low per capita consumption of alcoholic drinks makes the country highly lucrative to expand, with wine consumption projected to grow at a CAGR of nearly 23% in volume terms.

Indian nutraceutical market in 2008 is 43.9 bn INR

Functional foods 23.9 bn INR

Dietary supplements 14.0 bn INR

Vitamin supplements 3.0 bn INR Mineral supplements 1.0 bn INR Macronutrients 2.2 bn INR Antioxidants 1.4 bn INR Tonics 1.4 bn INR Glucose powder 0.3 bn INR Extracts 4.0 bn INR

Functional beverages 6.0 bn INR

Nutrition fortified foods 22.7 bn INR Sports & energy drinks 0.5 bn INR Fortified juices 5.2 bn INR

Probiotic foods 1.2 bn INR

Key Findings
Food, beverages and tobacco industry dominates the Indian retail industry and is anticipated to grow at a nearly 8% during 2008-2012. Soft drinks market is anticipated to grow at a nearly 12% from 2008 to 2012, and major demand will be seen in health & energy drinks, bottled water and fruit juices. Snack food market is estimated to grow at an annual rate of 18% to 20% in coming few years, albeit from a small base of consumers. With growing health awareness and concern, the functional food & drinks market is set to grow rapidly in India. Changing lifestyle, coupled with growing middle class population and changing eating habits, is anticipated to fuel 7%-10% growth in the Indian food service sector annually. Low per capita consumption of alcoholic drinks makes the country highly lucrative to expand, with wine consumption projected to grow at a nearly 23% in volume terms.

Snapshots of products in Indian market

Key ingredients with health claims used by Indian nutraceutical companies

Ingredients Omega 3 & 6

Used by industry categories Functional foods (fortified foods): e.g. omega fortified malted beverages Probiotics Functional foods: probiotic yogurt Beta glucan Functional foods: e.g. oat enriched foods Phytoestrogens Functional beverages: e.g. soya milk drinks Tocopherols Functional foods: e.g. rice bran fortifies oil

Health claims as per industry sources Prevention from inflammatory and autoimmune diseases, also reducing cholesterol, and hence various heart risks Improve intestinal microflora and aid better digestive health Soluble fibre that soaks up the cholesterol Reduce the risk of many kinds of cancers, cholesterol and risk of coronary heart disease Cholesterol lowering potential. Prevent or delay heart disease and related complications, cataracts, macular degeneration Cure lethargy, arthritis, impotence, senility, anti-aging agent Prevent night blindness, skin problem, enhance immunity, protect toxins and cancers

Ginseng Beta-carotene

Dietary supplements: e.g. Tonics and stimulants Dietary supplements: e.g. Beta-carotene in antioxidants

Sources:
Ernst & Young and FICCI (2009) Nutraceutical- Critical supplement for building a healthy India. Food Safety and Standards Act, 2006 (Act no. 34 of 2006), 3rd Edition, 2009, International Law Book Company, 2009. India Consumer Trends 2009 Changing Food Habits-Technopak Outlook for Functional Foods and Drinks in India (2008). Bharat Book Bureau, India. Prevention of Food Adulteration Act, 1954 with Prevention of Food Adulteration Rules, 1955, 27th Edition, 2009, International Law Book Company, 2009. RNCOS (2008) Indian Food and Drinks Market: Emerging Opportunities. TATA Strategic Management Group (2009). The Health & Wellness Foods Industry in India. An Overview.