Demand for healthier food is a mainstay of the industry landscape in markets like the UK but it is increasingly gaining traction in emerging markets. Euromonitor International’s Mickael Dominguez analyses the growth of the health and wellness category in India.
With ever increasing supermarket shelf space occupied by health and wellness products, rising consumer awareness of the necessity to switch to healthier options and an economy which remained strong throughout the recession, the Indian packaged food landscape has changed for the better.
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Health and wellness has grown to become a key component of the Indian lifestyle, noticeably changing consumer behaviour towards food, but also impacting domestic players, pushing them to not only reformulate their products to cater for demand for “superfoods” but also to fight the increasing level of competition from multinationals, which see this emerging market as a potential goldmine.
Better-for-you (BFY) packaged food in India posted impressive current value growth of 126% over 2004-2009 in US$ fixed exchange rate terms, and in 2010 it was estimated to increase by further 22%, showing that it remains India’s favourite health and wellness format, despite reaching maturity in many other countries.
Naturally healthy and fortified/functional foods, which until recently were considered niche products, are set to become increasingly popular with both Indian consumers expecting extra benefits from their food and manufacturers committed to adding value to their existing formulas.
Better for you: More than just reduced fat
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By GlobalDataAccording to Euromonitor International data, the BFY category in India was worth US$3.bn in 2009, up 16% in fixed US$ exchange rate terms on the previous year. The entire category has been boosted by the impressive performance of BFY reduced-fat milk, which has established a presence in most Indian fridges.
While in many countries BFY food is reaching relative maturity, in India its full potential is yet to be exploited. A vast number of niches remain untapped.
With over 30 million people diagnosed, India has the highest number of diabetics of any one country in the world. Some estimate the rate of individuals with IGT (Impaired Glucose Tolerance) to be as high as 8% in rural areas. IGT leads, in many cases, to Type 2 diabetes.
Therefore, it would be no surprise to see demand for BFY reduced-sugar products, such as confectionery, bakery or dairy products, which accounted for sales of only US$2.9m in 2009, become more prominent in the near future, if not by choice, by necessity.
Naturally healthy: An emerging category in which competition is set to become fiercer
It is with breakfast that India has seen the most noticeable switch from traditional Indian foods eaten for centuries to a more westernised, but also healthier, choice. An increasing number of Indians, mostly from the younger generations, are turning to high-fibre breakfast cereals and away from traditional paratha.
While this choice may be seen as a loss of identity by some, others will say that the move is for the best as high-fibre cereal is a much healthier alternative to the flat bread which has a high fat content.
This new market opportunity has not gone unnoticed by large multinationals. The past few years have seen a large influx of companies which until now had been relatively inactive in the Indian market.
PepsiCo and Heinz have both launched their own range of high-fibre cereals, Quaker Oats and Complan Nutri Bowl Muesli, respectively, but the local giant Britannia Industries is still far ahead in terms of market share. However, this could change, and what was once an easy ride for Britannia could become more complicated in the near future as the competitive environment is set to intensify.
United Biscuits, the world’s third-largest biscuit manufacturer, perfectly illustrates the increasing level of strong foreign competition. In early 2010, the company launched its iconic McVitie’s brand, which the company claims to be the first digestive biscuit ever created. The fact that United Biscuits chose to acquire a manufacturing facility in Himachal Pradesh instead of resorting to imports shows how much faith it has in this market.
Probiotics gaining momentum
Demand for fortified/functional food in India is higher than ever. Most manufacturers have understood that a generation of young, educated and health-conscious Indians expect more from their food than just a feeling of satiety. Over 2004 and 2009 the fortified/functional category posted current value growth of 76% to reach estimated sales of US$1.1bn in 2010.
Bakery is to date the most favoured category when it comes to fortified/functional food, offering brands like Kellogg‘s Corn Flakes, a cereal fortified with iron, vitamins and minerals, and Parle G, a glucose-fortified biscuit. This is a highly fragmented and competitive category with a significant number of different options offered to the consumer.
However, fortified/functional dairy is quickly catching up on bakery, and what started as a craze is now becoming more and more acceptable. And while the whole category rests on the success of milk and flavoured milk drinks fortified with calcium or vitamins, the demand for probiotics is gaining momentum.
In terms of health-friendly dairy products, sour milk drinks, which include the popular Indian lassi, is still far ahead, in terms of sales, of probiotic yoghurts, with sales of US$6.8 million in 2009 compared to US$1.3m for probiotic yoghurts. But this could soon change.
In 2008, Yakult, in partnership with Danone, launched its world famous brand of probiotic yoghurt. At the time of the launch, fortified/functional yoghurt was practically non-existent in India. During its first year, Yakult’s sales reached US$470,000, then US$1.08m the next, only to double again in 2010 to reach estimated sales of US$2.05m.
At this rate, fortified/functional probiotic yoghurt is set to become a key product in the Indian health and wellness market.
While multinationals have introduced their own brands of fortified/functional yoghurts, some local companies have come up with interesting product developments linking innovation with tradition.
Mother Dairy, a company based in Delhi, re-thought the highly popular lassi, an Indian icon. The company combined probiotics and prebiotics to offer a sour milk drink which is clearly positioned as a digestive health product.
However, too many exaggerated, false and generalised claims used by Indian probiotics manufacturers have led to growing consumer scepticism, and whilst the Indian Council of Medical Research (ICMR) has established guidelines with regard to claims on packaging, many consider these as too lax. Regaining consumer trust might be the biggest challenge health and wellness products, and probiotics in particular, will have to face.
