Before the COVID-19 pandemic radically altered the country’s health and economic landscape, India’s nutraceutical market had given every indication of being on a solid growth path. As the country moves towards recovery, nutraceutical-market sentiment remains distinctly optimistic, not least due to the pandemic’s impact on Indian attitudes to health maintenance.
As a large emerging market with a fast-expanding middle class, India presents an attractive prospect for diversification, as growth levels out in more established territories for nutraceuticals. The country is close to China for sheer volume of potential consumers. China currently has a population of around 1.45 billion compared with roughly 1.4 billion in India.
However, a significantly larger proportion of the Chinese population - as much as 64%, excluding Hong Kong and Macau - than in India (about 35%) lives in urban environments. In urban settings, factors such as better access to healthcare, higher disposable income, health- and fitness-oriented lifestyles, body consciousness, new retail channels and increased exposure to acute or chronic diseases of affluence tend to encourage nutraceutical demand.
All things considered, though, India continues to offer considerable potential for growth from a modest base, currently estimated at 2-3% of global nutraceutical sales. Recent projections suggest that, with COVID-19 driving interest in preventive healthcare and immune reinforcement (e.g., vitamin C supplements), and with India lagging behind on global nutrition targets, the overall nutraceutical market is growing by as much 20-25% per year, and could reach $18 billion by the end of 2025.
With the easing of conditions for foreign direct investment in the sector, a number of nutraceutical multinationals are reported to be scoping out partnerships with local specialists. At the same time, though, food and pharmaceutical companies must address a number of regulatory, cultural, economic and structural challenges in the Indian market.
Foundations for growth
The foundations for growth are already in place: rising disposable income in some segments of the population - a trend that may open up once the impact of COVID-19 is absorbed – as well as increasing prevalence of chronic diseases, and willingness to pay for personal healthcare. These characteristics favour a shift towards health maintenance, early intervention and disease-risk reduction – key pillars of the nutraceuticals market, and all amplified by COVID-19, even though the pandemic has inevitably squeezed disposable incomes.
Health maintenance is all the more important in a country where access to publicly funded healthcare is deficient. Only around 32.8% of all health expenditure in India comes from the government – versus, for example, 50.8% in the United States, 40.7% in Brazil, 56.0% in China, 71.7% in Australia and 77.7% in Germany (WHO data for 2019). Heavy reliance on out-of-pocket expenditure in India imposes a stark choice between spending now to stay healthy, or storing up problems that may end in premature mortality or chronic morbidity.
The prevalence of non-communicable diseases, such as diabetes, cancer and heart disease, has reached 116 per 1,000 population. NCDs are responsible for around 65% of all deaths in India, with heart conditions alone accounting for around 28%. The number of people with diabetes is already estimated at more than 74.2 million and is expected to reach 93.0 million by 2030. The rapid spread of COVID-19, with around 516,000 deaths to date, has made people with life-threatening comorbidities all the more vulnerable.
COVID-19 has widened income disparities
If many Indians have to fall back on their own resources to stay healthy, money is undoubtedly tight. While recent years have seen bullish predictions for growth in average household incomes, successive waves of COVID-19 and India’s associated lapse into recession have changed the picture to one of ever starker income disparities.
According to the Mumbai-based think tank People’s Research on India’s Consumer Economy, the annual income of the poorest 20% of Indian households, which had risen constantly since 1995, plunged by 53% in 2020-21 versus 2015-16. Over the same five-year period, the richest 20% of the population saw their annual household income grow by 39%.
Nor has India’s previously flourishing middle class been spared. A recent Pew Research Center analysis found this population segment had shrunk by an estimated 32 million in 2020, versus what it might have reached had the pandemic not occurred. Meanwhile, the number of people classed as poor (incomes of $2 or less per day) increased by an estimated 75 million due to COVID-related recession.
This paints a complex scenario. The pandemic has created added incentives to ward off disease in general. At the same time, it has diminished significantly the personal resources to do so, other than in those wealthy segments of the population that, economically at least, are emerging from COVID-19 relatively unscathed.
Health and wellness have premium value
Not that consumer-health spending trends in India, also the subject of considerable optimism pre-pandemic, have ground to a halt. Despite the impact on nutraceutical revenues of COVID-related supply-chain disruption and retail closures, the overall indicators still look promising.
For example, a recent survey by consultants EY India found that 40% of respondents would pay a premium for health and wellness products, considerably more than their global counterparts at 29%. Moreover, the dietary-supplement market had prospered since the pandemic hit, with demand for herbal supplements, vitamins and minerals up by more than 25% in the last year, EY India noted.
This was coloured by renewed interest in home, herbal and ayurvedic remedies, whereas European and other Asian countries were leaning more towards functional foods and supplements. India’s enduring legacy of traditional herbal and ayurvedic medicines provides a rich local ingredient base for incorporation into nutraceuticals, while satisfying contemporary demand for natural and organic products in the wellness and food markets.
Other market watchers see a shift in attitudes to health that has only gained momentum from COVID-19, and is further accelerated by growing access to health information and products through digital platforms. According to Numb Research, India’s 443 million millennials are spending an average of Rs 4,000 ($52.48) per month on health and wellness services and products.
All of which suggests that, for all the health and economic disparities exacerbated by COVID-19, India’s nutraceuticals market still has plenty of room to grow. What it does require, though, is careful formulation, segmentation and customisation. For example, vitamin and mineral supplements, where tablet and capsule formats predominate, are still perceived by many Indians as medicinal and available only on prescription.
Incorporating herbal and other natural ingredients into supplements could help to remove barriers by aligning these products more with home remedies and self-medication. Exploring new formats, such as chewable ‘gummy’ supplements or vitamins in yoghurt, will position supplements more explicitly as foods with health benefits. At the same time, clear labelling and doctor recommendation can foster trust and scientific validity.
Pharmaceutical companies, with their strong R&D base and existing doctor networks, are perhaps best placed to build this kind of scientific aura. However, pharmaceutical manufacturers in India (e.g., Novartis) confine most of their health-nutrition activities to the dietary-supplement market.
Food companies, such as Nestlé, Danone, Unilever, Kellogg, and Yakult, are more engaged in functional foods and beverages. There are a few exceptions, such as Abbott’s longstanding commitment to child, adult and medical-nutrition brands such as PediaSure, Ensure or Glucerna.
Leading national players in the functional-foods segment include Amul - which launched a range of immune-boosting products like turmeric, tulsi (basil) and ginger milk during the pandemic - Dabur, Britannia and ITC. Indian companies also market ayurveda-based functional foods and dietary supplements (e.g., Dabur, Himalaya, Amway, Hamdard Laboratories, Baidyanath, Pantanjali).
For market entrants, India presents a number of unique challenges, such as:
Tailoring products to domestic tastes and preferences
These might include vegetarianism, Halal or Hindu dietary practices; traditional remedies, flavour and formulation preferences reflecting social and cultural diversity; or reluctance to see functional benefits in staple foods. Educational programmes on diet, nutrition and disease risk-reduction will help to clear a path for premium-priced nutraceutical brands. Mainstream food companies, with their long experience of consumer markets and varying tastes and textures, are likely to have the competitive edge here.
The right price point
Premium pricing of nutraceuticals in India may be viable for the urban middle class but not for the rural poor. Higher price points will require close attention to scientific evidence and professional endorsement that substantiate health claims. A comprehensive approach to the Indian market calls for a split-level strategy, with tailored branding, formulation, positioning, pricing, and distribution. There may be opportunities to penetrate poorer segments of the market on a platform of social responsibility, in tandem with non-government organisations or government fortification programmes.
An uncertain regulatory climate
Nutraceuticals have traditionally fallen under India’s Food Safety & Standards Act. They are treated broadly as food products, subject to manufacturing/quality standards and restrictions on claims to prevent or mitigate disease. Market players complained, however, that the lack of carved-out nutraceutical regulations was a recipe for confusion and expediency. For example, any food supplement in a ‘drug-like’ oral formulation was categorised as a medicine, with corresponding approval requirements, even if it was only making structure-function claims.
As a result, sector-specific rules, in the form of the Food Safety and Standards (Health Supplements, Nutraceuticals, Food for Special Dietary Use, Food for Special Medical Purpose, Functional Food and Novel Food) Regulations, were published in December 2016, with a compliance deadline of 1 January 2018. The new regulations established conditions for the manufacture, formulation, approval and sale of nutraceuticals, as well as for health claims, RDAs, scientific evidence and labeling.
They also included lists of permissible additives, vitamins, minerals, amino acids, plant ingredients, etc. Nonetheless, the potential for blurred lines or dual regulation of nutraceuticals has not fully receded. For example, the 2016 regulations allow for disease risk-reduction claims, but not for disease-prevention labelling.
More recently, there has been concern in the industry about recommendations from the Drugs Technical Advisory Board that vitamin products with doses above the recommended dietary allowance, and carrying prophylactic or therapeutic claims, should be governed by the Drug & Cosmetics (D&C) Act 1940. This would apply particularly to vitamins or multivitamins in drug-like formats such as tablets or capsules.
Dynamic new frontier
As these issues highlight, serious contenders in the Indian nutraceuticals market will need copious reserves of stamina, flexibility, ingenuity, sensitivity and patience. For those determined to stay the course, though, India still promises to be a dynamic new frontier in a global nutraceutical market where COVID-19 has created new impetus for health prevention.