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SpirE-Journal 2011 Q4

Healthy Foods

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Healthy Foods

It is well-known that the desire for a healthy lifestyle tends to rise with disposable incomes, and that it affects purchasing decisions. A rising tendency to consider health implications is a well-established fact among the emerging more affluent market consumers. However as populations age, a growing awareness of the costs of healthcare, particularly catastrophic illness care, is fuelling a new wave of preventive or wellness-oriented foodstuffs.

Good for Health products – Where We Are Now

It is well-known that health-enhancing qualities are attractive to more affluent consumers. This is far from a new phenomenon. Salads were popular among business executives in the US as far back as the 1970s. 

However, what is changing now is the birth of a new anxiety to avoid catastrophic illness in old age. As life expectancies extend and population worldwide age, the incidence of catastrophic illness such as recoverable cardiac arrest, cancer and various types of organ failure is rising. Major surgery to treat or prevent such conditions is increasingly common – think heart bypass surgery, angioplasty and organ transplants. 

Emerging markets such as China, India, Brazil and Indonesia have not been immune to this trend. What is unique about emerging markets, is that the weak public health infrastructures mean that the economic cost of such catastrophic illness is often extremely high – adding another dimension to the anxiety. China’s high savings rate, for example, is widely attributed to popular anxiety about insufficient medical insurance in old age. 

In line with this, consumers have begun to seek illness-preventing qualities in a broad range of products and services they buy, from fitness centers to health supplements to basic foodstuffs. The emphasis among the more affluent consumers has shifted from avoiding unhealthy products, such as French fries that are high in trans-fats, to seeking products that positively improve health – or rather, promise to do so. 

There is a broad spectrum of health and wellness products, of which this article will focus on foodstuffs.

Health & Wellness Food Products defined

Traditionally, the health & wellness food sector is segmented into three categories.

Natural or Organic Products

Natural or organic products are products which make much less use of fertilizers, herbicides, pesticides and other inorganic chemicals in farming or processing. Advocates claims to be able to taste and “feel” the difference.

Functional Products or Nutraceuticals

Food with ingredients added to impart a medical benefit is considered functional food. Products which have been fortified with components to provide special health or physiological benefits are considered as fortified food. Examples include iodized salt and fibre-enriched biscuits.

Nutraceuticals, which subsume much of the health supplements space, are yet another category, which provide reportedly health-giving ingredients of food products in easy-to-consume form.

“Good for Health” (GFH) Products

The “Good for Health” category includes products with low levels of non-essential ingredients like sugar, low-density lipoprotein cholesterol and saturated fat.

Organic Food

Organic food refers to crops grown without petroleum or sewage sludge based fertilizers and synthetic pesticides. Organic livestock are provided access to the outdoors and are not given any antibiotics or growth hormones. 

The main driver of organic food demand is that more consumers are now opting for tasty, healthy and environmentally friendly foods that, in their perception, would help to reduce the risk of catastrophic illness such as cancer. Organic foods are also seen by advocates as “greener” in terms of deploying a more sustainable production process. 

Organic Food Market

The organic food market is a significant niche in the broader food category. In India, for example, the production of organic food has increased over the past few years and was valued at USD129 million at the retail level in 2009. However, about 70% of the food produced has been exported. Supermarkets stock very little organic food due to a low level of awareness domestically. In future, organic food is expected to grow with the rise in consumer awareness in urban areas. 

Retail sales of organic food in Japan reached USD673 million in 2010. Japan’s organic food market is the largest in Asia, with demand exceeding supply. The Japanese organic food market is forecasted to grow at a staggering 30% a year. The main driver for this trend is the ageing population in Japan, who are more inclined to consume healthy food that keeps major illnesses at bay. 

Trade sources believe that the organic food market in Malaysia has been experiencing rapid growth of around 20% per annum for the past few years. The market was estimated at close to USD50 million in 2010. The organic food market in Singapore was valued at USD53 million in 2008 whereas the organic food market in the Philippines was valued at USD9.8 million, but growing rapidly at 10% to 30% per annum. 

Organic food, while remaining a niche segment, has now become a part of mainstream mass-market retailer’s inventory. Many supermarkets in large Asian cities would now carry some organic produce. Often, this is located in a separate section within the supermarket. 

What are Nutraceuticals?

According to the Foundation for Innovation in Medicine (FIM), a US-based non-profit organization, a nutraceutical is a food, dietary supplement or medical food that has a health benefit including the prevention and treatment of disease. Nutraceuticals are usually extracts of food having a medicinal effect on human health. The category includes dietary supplements and medical foods meant for the prevention or treatment of disease. 

Traditionally, nutraceuticals were restricted to a medicinal form such as a capsule, tablet or powder. Now, nutraceuticals are available in the form of products such as probiotic drinks. The basic ingredient of a nutraceutical is one or more antioxidants, dairy-based products, minerals, nutritional oils, plant extracts, probiotics, proteins, amino acids, soy based ingredients and/or vitamins.

Nutraceutical Market Facts

Growing annually at a compound rate of 4.4% from 2002 to 2010, the global nutraceuticals market was worth an astonishing USD128.6 billion in 2010. This is not surprising, given the high price of many health supplements and the widespread captive customer base in the 21st century, served by retail chains such as the US-based GNC. 

The nutraceuticals market is forecasted to hit USD180 billion by 2017, after growing at a CAGR of 4.9% from 2010 to 2017. The main reason for this growth is the aging population and the shift towards preventive therapies. Rising affluence is another important driver. 

The functional food segment is the dominant contributor to the nutraceutical market. This segment is forecasted to contribute 64.6% to global nutraceutical revenues by 2017. It is forecasted that the functional food market will account for 85% of Japan’s overall nutraceuticals market in 2017. 

One rapidly growing category within nutraceuticals is infant nutrition. Health supplements providing Omega-3 fatty acids to children (particularly EPA and DHA) have been flying off the shelves in Asia, where there is intense pressure on children to succeed academically. Private education is a sunrise industry in emerging markets. For the same reasons, supplements that purportedly enhance performance in competitive examinations are also poised for growth. 

Bottled Water in the Asia Pacific

A great deal of attention has also been drawn to that most basic of nutritional products – fresh water. Many cities in emerging markets still lack a supply of potable (i.e. drinkable) water from the tap. While this had prompted consumers to boil tap water in the past, the demand for products that promise a supply of clean and even health-giving water has grown in the 21st century. Bottled water fortified with various vitamins and minerals are a fast-growing category, including in-house water coolers, water filtration systems, bottled mineral water or even bottled distilled or filtered water. 

The Asia-Pacific bottled water market showed a compound annual growth rate of 12.1% for the period from 2006 to 2010, and reached USD20.5 billion in 2010. Revenues in mainland China and South Korea grew 22.3% and 7% respectively during the same period, to a total of USD10.1 billion and USD1.3 billion in 2010, respectively. 

The volume of bottled water consumed in the Asia Pacific increased by 9.8% between 2006 and 2010, to reach 40 billion liters in 2010. This consumption volume is forecasted to rise to 57.6 billion liters by 2015. 

China and Japan are the two dominant contributors to the bottled water market in the Asia Pacific by value, contributing 48.9% and 24.5% respectively of the total. This is followed by South Korea and India, with shares of 5.7% and 4.6% of total market revenue respectively. 

The top three market players in the Asia Pacific bottled water market, Groupe Danone, Tingyi (Cayman Islands) Holding Corp and Coca-Cola Company, together accounted for 43.1% of total market volume in 2010. 

The health benefits of drinking purified water or mineral water have not been without controversy. Critics have been known to question the benefits of bottled as opposed to tap water, and some European governments have even taken the step of running advertising campaigns to persuade consumers to drink tap water instead of bottled equivalents. However, the category continues to grow from strength to strength – perhaps fuelled by a lingering distrust of the claims of public water authorities. 

Conclusion: The Outlook for the Health & Wellness Sector

It has been the contention of this journal that privatised healthcare and related products will see major market growth in the years to come. This is a function of the inability of public healthcare systems in emerging economies to keep pace with growing affluence. 

Food products that claim to avert adverse medical conditions will see growing interest among middle-class consumers for whom basic calorific requirements have long since ceased to be an issue. 

However, while the sector has accrued considerable revenues, it has also attracted its fair share of products and services that make controversial if not dubious medical claims. Some of such products are distributed via multi-level marketing systems, where sales agents themselves are not qualified to assess the medical claims made by the principals. 

Going forward, the greatest gains in this space will be made by firms that are able to combine the advantages of distribution reach, affordability and credibility. This market still has a great deal of growth potential for vendors who develop products with demonstrable evidence behind the medical claims they make – and who have the commitment to develop trusted brands to sell them.

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