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INTERVIEW

"Speciality market is likely to reach $80.3 b by 2018"

Monday, 07 July, 2014, 08 : 00 AM [IST]

Zeon Lifesciences Ltd offers sort of a one-stop solution for multiple dosage form requirements. The company specialises in speciality ingredients, nutraceuticals, and herbal & Ayurvedic products. It offers products in the form of dry and wet blended powder, tablets, capsules, and tonics with ingredients like proteins, multivitamins, and antioxidants. Dr Vivek Srivastav, chief scientific officer, Zeon Lifesciences Ltd, Uttar Pradesh, in an email interaction with Harcha Bhaskar delves into the details on his company in particular and the speciality ingredients market in general. Excerpts:

How big is the global speciality food ingredients market? At what rate is it growing?
The speciality food ingredients market is likely to reach $80 billion by 2018.

Fuelled by the increasing number of health-conscious consumers and their changing food preferences, the global speciality food ingredients market is estimated to reach $80.3 billion by 2018, up from $57 billion in 2012, according to a new report from MarketsandMarkets. In 2012, North America led the global market with the largest share followed by Europe in terms of market value.

Nutraceuticals are leading speciality ingredients with the largest market share and are estimated to grow at a significant rate due to high penetration levels in end-use industries. Demand for premium products is set to propel the growth of various ingredients. Enzymes are projected to exhibit robust growth in the coming years, while demand for acidulants, flavours, colours, emulsifiers and so on are also seeing remarkable growth.

The report examines how food colours, acidulants, food and beverage enzymes, speciality starches, food emulsifiers, food and beverage starter cultures, sugar substitutes, food preservatives, hydrocolloids, food flavours, and functional food ingredients are being used in applications, including bakery, confectionery, dairy, convenience foods, beverages, meat and seafood products, and functional food products.

The figure above shows the trend of the specialty food ingredients market in terms of type. The speciality food ingredients market value is projected to reach $80,323.4 million by 2018. Functional food ingredients (nutraceuticals) are the leading speciality ingredients with the largest market share and are estimated to grow at a significant rate due to high penetration levels in end-use industries. Demand for premium products is set to propel the growth of various ingredients. Enzymes are projected to exhibit robust growth in the coming years. Demand for acidulants, flavours, colours, emulsifiers and so on is also steaming ahead with a remarkable CAGR.

The global speciality food ingredients market has grown considerably in the last few years and is estimated to grow at a rapid pace in the near future. Factors such as the growing consumer preferences towards health & taste and soaring consumption in emerging economies are helping the speciality food ingredients market grow. The increasing innovations in the industry help to drive down the cost of production, incorporate additional benefits in the products, and launch new types of products. This acts as an important driver for the speciality food ingredients market. However, the numerous regulations and consumers’ food safety concerns act as hurdles in the growth of this market.

Where does India stand in speciality foods market? Is there any rise in awareness and usages of these products?
India is the world’s second largest producer of food next to China, and has the potential of being the biggest with the food and agricultural sector. The food processing industry is one of the largest industries in India- it is ranked fifth in terms of production, consumption, export and expected growth. The food industry is on a high as Indians continue to have a feast. Fuelled by what can be termed as a perfect ingredient for any industry - large disposable incomes - the food sector has been witnessing a marked change in consumption patterns, especially in terms of food.

The government has formulated and implemented several plan schemes to provide financial assistance for setting up and modernising food processing units, creation of infrastructure, and support for research and development and human resource development in addition to other promotional measures to encourage the growth of the processed food sector

“Health claims are growing in importance for the Indian consumer – and consumers are now much more aware about the ingredients in the food and drink products they choose and the benefits of choosing healthily. The primary driver for the increase in these claims in India is the consumer perception of added additives or preservatives in food being considered unsafe and concerns about food safety and long term toxicity of these chemicals on their future health.”

What are the various products your company offers? How and where can these products be used in the F&B industry?
We offer various formulations based on customised and non-customised products development, some of them are health promoting protein supplement and protein nutrition for different physiological functions for specific health benefit, pharmaconutrition supplement, sports nutrition and gym supplements, multivitamin and mineral products for specific dietary use, mother and child nutrition, weight management supplement, malted milk food, energy drinks, critical care nutrition, antioxidant supplement, dietary supplement diskettes, botanical supplements and so on.

Which are the various companies or clients they are supplied to?
We are a research-oriented, reliable partner to a large number of world-class health & wellness organisations. Some of our distinguished clients are Danone, GSK, Herbalife, Ranbaxy, Zydus, Heinz, Himalaya, Lupin, Meijji, Meyer, Apollo Pharmacy, Sami Direct, Intas, Alkem, Uth Healthcare, Indoco Remedies, Kepler Healthcare and so on.

Are the products made available by the company natural or synthetic? What are the raw materials used?
To formulate different products to derive health benefits, ingredients get selected on basis of quality and target efficacy to fit best in formulation either to be used as a single ingredient or in combination with other ingredients to impart synergistic effect. There are variety of ingredients, which come under active ingredients - active nutraceutical ingredient (ANI) e.g. vitamins, minerals, amino acids and micronutrients. These are normally of synthetic origin while there are number of additives like colourants, flavours and excipients which are majorly synthetic in origin, however, the market is well placed with natural alternatives of these ingredients. Botanicals are preferred ingredients for food and nutraceutical products, which offer both prophylactic and therapeutic effect and obviously they are nature’s precious gift. There is great demand for enzyme, protein substitutes, biological ingredients, standardised botanicals, oils and fatty acids and so on, which are becoming popular in the food industry as a major stake.

What are the various innovations happening in your company? Is there any new product launch in the offing?
We became more strengthened, when we thought of reinforcing our R&D, which has developed number of formulations based on customised and non-customised need, however, every product has a rational blend of nutrients, which provide efficacy based on quality and scaleup to cater a demand of hour. We have developed number of products which have covered nutrition and pharmaconutrition.

From multivitamin and mineral supplement for special dietary use to product for critical care nutrition, every formulation merely ignored science and scientific validation of the ingredients and their usage. We are working on supplements for atypical critical care like cancer, HIV, and organ failure. Apart from this, we are also focussing on botanical therapeutic products for immunity & stamina, adaptogen, diabetes and other metabolic disorders, which will provide supplementing, preventing and therapeutic benefits.

What is the fastest growing trend noticed in this sector? What are the factors that contributed to this trend?
Emerging markets, transactions and improved consumer and customer understanding are the likely strategies of choice for future growth.

The basic contributing factors are

Total speciality food sales in 2012 topped $85.87 billion.
Cheeses and cheese alternatives is the largest category, with $3.6 billion in 2012, followed by yogurt and kefir at $2.3 billion.
The fastest-growing categories include energy bars and gels, shelf-stable functional beverages, frozen fruits and vegetables, yogurt and kefir, and eggs.
Only three of the 51 speciality food categories (excluding other categories) declined between 2010 and 2012: rice cakes, pudding and shelf-stable desserts, and refrigerated pasta and pizza sauces.
Segments that underperformed include frozen lunch and dinner entrees; oils and vinegars; baking mixes, supplies and flour; and pickles, peppers, olives and other vegetables.
Snacks had the most new product introductions, followed by meat, poultry and egg products.
Snacks led all categories in new product introductions, followed by meat, poultry and egg products.
Gluten-free food (38 percent) and convenient / easy-to-prepare (37 percent) were the most likely characteristics to be included in manufacturer development plans for 2013.
Average annual sales for specialty food manufacturers are $1.71 million.
Ninety-five percent of specialty food manufacturers recorded sales increases in 2012.
Importers report that Mediterranean is the fastest growing cuisine, followed by Latin, Italian and Vietnamese.
The size of the average speciality food store is slightly over 5,000 sq ft, with 1,366 SKUs. Nearly 2,000 customers purchase each week.
Ninety-five percent of speciality food stores carry all-natural products and 88 per cent feature local, which is defined as being produced within 200 miles of the location.

Few years back this concept was not known. How the sector got established and evolved over the years?
Most leading food companies are expecting around half their business to continue to come from established markets in future. Innovation and differentiation is the key to success in developed markets. Some food companies are responding to the pressures in these markets by:
Investing more in social media and online platforms to learn more about consumers and potentially sell directly to them. Differentiating themselves and adding value by customising products to the needs of different consumers and channels

Emerging markets are seen as holding the key to future growth for food companies. The opportunities are significant, but so are the complexities. Each market is unique, requiring companies to build new consumer insights, rethink product development and adapt market strategies that reflect local learning.

Food consistently accounts for the greatest volume of deals in the consumer products sector. Key trends driving current deal activity include: The search for scale and new product opportunities in developed markets, The pursuit of emerging market growth by developed world businesses, Expansion into the developed world by emerging market companies. The assertion of control in joint venture or similar structures by domestic companies in emerging markets.

The scale opportunities from consolidation are still compelling and we may continue to see transformational deals — either defensive mergers or strategically enhancing acquisitions. More companies appear to be focussing on "bolt-on" deals in emerging markets.

Which are the different forms of speciality products available in market?
Products: Sugar substitutes, acidulants, speciality starches, enzymes, food preservatives, emulsifiers, colours, flavours, hydrocolloids, stature cultures, nutraceuticals & functional food ingredients.

Applications: Dairy products, bakery and confectionery foods, convenience foods, functional foods, beverages, meats, and seafood.

What are the various things to be taken into consideration while developing speciality products?
A.   Ingredient selection
b.   Formulating system
c.   Manufacturing unit operation selection
d.   Initial cost analysis
e.   Physical and microbiological characteristics evaluation
f.   Quality evaluation procedures (including testing protocols)
g.   Safety evaluation (including initiation of Hazard Analysis Critical Control
   or HACCP development)
h.   Functionality testing
i.   Sensory testing
j.   Stability and shelf life determination
k.   Packaging and labelling requirements
l.   Pilot production
m.   Full legal and regulatory assessment
n.   Semi-production run and cost analysis
o.   Consumer testing
p.   Preliminary data evaluation
q.   Full production run and cost analysis
r.   Final selection of control and HACCP procedures
s.   Test marketing
t.   Full data evaluation

What are the consumer demands, drivers of this market?
The global speciality food ingredients market has grown significantly, especially over the past few years. Although growing at a stable growth rate at present, the industry is expected to witness exponential growth in the near future. This growth is attributed to the changing customer preferences towards their traditional diet, inclusion of imported, gourmet and speciality foods in the daily diet and changing preferences towards eating healthy foods. Increasing awareness towards healthy and tasty foods is contributing to the rising demand for these ingredients in the global market. Advancing technology in terms of innovative products and their uses in the food and beverage industry also have a major role in the current condition of the global market.

According to the latest research reports, the speciality food ingredients market is set to grow at a steady CAGR of over 5.8% from 2013 to 2018. At the estimated CAGR, the industry is expected to grow worth $80,323.4 million by the end of the year 2018. Rise in the disposable income, changing dietary preferences, innovative products, and swiftly changing lifestyles across the emerging markets are some of the major drivers for the global market. The industry is currently dominated by the developing regions like North America and Europe. However, the Asia-Pacific region is set to take over these developed regions during the forecasting period.

The rising incidence of diabetes and obesity in both developed and developing countries is driving consumers and governments to focus more on healthier lifestyles and in turn, increasing demand for ingredients from food and beverage manufacturers in the health and wellness space.

Here are four emerging food trends:
1. Ingredient Transparency. Supply chain and brand ingredient transparency are a must. Consumers are smarter and more resourceful than ever. Internet and smartphones give them unlimited access to any answer they want or need.
2. Food = Health. The old adage, “You are what you eat,” isn’t just something you hear from your grandparents anymore. Consumers are holding this as a tried and true dietary principle. So much so that many suppliers, restaurants and supermarkets are catering to new (and very common) dietary needs.
3. Alternatives are in. Meaning high fat, hyper processed foods are out. Think Greek yogurt instead of mayonnaise or avocados for butter. Today’s consumers are slightly less concerned about price and quantity, and are looking to maximise that healthy food without the extra calories.
4. Social Media Communities for Weight Loss. With so much talk about food taking place online, is it any surprise that today’s tech-savvy consumers are turning to their online communities for support in their journeys towards a healthier lifestyle? Consumers are adopting an “It takes a village” mentality when it comes to weight loss.

What are the challenges faced by the sector? Your comment on FSS Act?
Food companies face a challenging and volatile environment. The need to understand changing consumer needs, innovate effectively and put goods on the shelf at a price that works for manufacturer, customer and consumer continues.
1) Regulatory
2) Food Safety
3) Need for more marketing intelligence
4) Management Capability

Insight on FSSAI:The challenges faced by the Authority are primarily threefold: the sheer quantum of licensing and registration work to be undertaken by the state governments, upgrading / strengthening food testing laboratory infrastructure for monitoring and surveillance purpose and harmonisation of product standards with Codex, wherever feasible. Consumers are also important stakeholders and we are focussing on making them aware about the provision of the Act, its implementations and their role through various campaigns. A well-informed consumer can also help greatly in demanding safe food and spreading the message of food safety.