Potential for functional foods in the Indian market

India is one of the fastest growing economies in the world and ranks among the top ten most popular destinations for investment.  Recent policy reforms have been designed to accelerate the pace of foreign investment and although entering the market is still a complex, multi-step process, the potential of the functional foods category is exciting.

China, southeast Asia, and India are all rapidly growing functional food markets, each experiencing growth in double digits. According to Frost & Sullivan, the global nutraceuticals market stood at around US$175 billion in 2016, of which India had approximately 2 per cent, worth $3.0 billion. Growing at a CAGR of 17.1 per cent, the Indian market is expected to reach $4 billion by 2020. Functional food in India is currently still in its infancy, catering mostly for sophisticated city dwellers but the young population of dual income households, with a rising income, and growing awareness of healthier eating, has led to strong growth in this sector.

So where are the opportunities?

Project consultant and recent President of the India Food Processors Association, Mr Sagar Kurade, said in an interview, that the major growth is in malted health beverages, baby food, sports nutrition, edible oils and fortified milk.

“Fortified/functional packaged food is benefiting strongly from rising disposable income levels in India, with this encouraging many consumers to trade up to value-added products. These products are also benefiting from a strong health and wellness trend, with many increasingly focused on obtaining optimum nutrition. Consequently, consumers are increasingly willing to pay more for fortified/functional packaged food.”

Ayurvedic medicine is growing across the globe but what is popular in India right now?

Mr Kurade explained: “The ancient Indian traditional medicinal system Ayurveda has been practiced for millennia and is still very much accepted. For example, with Chyavanprash and botanicals such as brahmi, ashwagandha etc. Spices such as garlic, turmeric, chilies and many other ingredients with health benefits, have also been used for centuries as part of the Indian diet. A few year ago, fortified premixes began appearing, such as adding vitamin A to Vanaspati and iodine to salt. Recently we have seen fortification of milk with vitamins A and D. The high incidence of diabetes, cardio vascular disease, osteoporosis and arthritis in India is increasing demand for functional food but import duty on functional food is about 46% and this is what makes it a difficult task to import such commodities.”

However, there are numerous examples of companies that are already successful in this sector. For instance, in 2016, Cargill India was the leading player in fortified/functional packaged food, and remains so, with over 20% value share. This company continues to dominate in India with its fortified vegetable and seed oil, where it has 69% share and owns the strong Gemini and Sweekar brands.” Gemini is fortified with vitamins A, D and E, while Sweekar was acquired in 2011 and relaunched in 2012 with HOSUN (a high oleic sunflower oil) fortification, offering high levels of mono-unsaturated fatty acids. Such brands benefit from wide distribution and affordable pricing.

Gaining regulatory approval is one of the major roadblocks preventing Indian companies launching products within from their existing portfolio. So at present the sector relies a great deal on imports to cater to this small but rapidly growing market. 

How can companies wishing to enter the functional food market in India take their first steps?

The easiest way is to find a distributor or a joint venture partner to sell your products. This is one of the aims of many visitors to Fi Europe and the upcoming ingredients show for 2018, Fi India. Another option is to acquire an existing company and profit from their contacts, or to set up a new company as a green field project with investment from backers.

So where do we stand regarding health regulations? What is the current process for new functional foods entering India? Foods Imported into India have to follow the Food Safety Standards (FSS) Act, its rules and regulations. If the food items are standard, the importer needs just an FSSAI licence and to comply with FSSAI regulations for sale and distribution. However, if a new or unknown food article is introduced for import, it requires product approval under Section 22 of the 2006 FSS Act.

In February 2017 The Food Safety and Standards Authority of India (FSSAI) published new regulations for functional foods in India’s official Indian New Delhi Gazette. Products affected by these new regulations include: nutritional supplements, nutraceuticals, special dietary foods, and medical or therapeutic food products. Earlier, in November 2016, FSSAI issued a notice to impose its functional food standards, but it also granted a one-year implementation period to allow businesses to adjust. Full enforcement of these standards is expected around January 1, 2018 (GAIN IN6145). Industry sources report that the private sector will have sufficient time to adjust and come into full compliance by then. The full text of these regulations can be accessed via FSSAI’s website http://www.fssai.gov.in/.

How successful can a young company expect to be in India?

One of the questions frequently asked is: is the infrastructure good enough to support new industry?

The Government of India is expected to invest highly in the infrastructure sector, mainly highways, renewable energy and urban transport, prior to the general elections in 2019 with many initiatives currently being undertaken and even more in the pipeline. The Indian Government has already planned extensive investment for India’s north eastern region regions bordering China, Bhutan, Bangladesh and Myanmar ($US0.7billion) for instance, as well as a scheme for an integrated cold chain, with a number of projects eligible for assistance.

The last decade has seen healthy growth in India for both food and beverage and pharmaceutical sectors. While some segments in food and drink grew at between 12-25% CAGR, pharmaceuticals grew at around 15%. Nutraceuticals is a big opportunity for India with its huge population and need for nutrition and well-being and will ride on the growth of food & beverage as young consumers become increasingly health conscious. It seems likely then, that the nutraceutical market in India is to experience exponential growth. As people age more complications set in, and with people taking less exercise, or focusing on workouts they are becoming more dependent on functional foods to support body balance, with an inevitable dependence on nutraceuticals.