The Nutraceutical market worldwide is expected to reach USD 177 billion by 2013, growing at a CAGR of 7%, driven by the fastest growing category of dietary supplements.1
Are the small/medium sized enterprises (SME) going to participate in this growth equally or will they be left out of the party? Having worked for the last decade with a number of such SMEs, Vedic Lifesciences has some insight to share. We shall discuss possible strategies to help Nutraceutical SMEs grow rapidly in the future.
Revenue growth by any firm could be achieved a) by going global, b) by growing sales within the domestic markets or c) by improving product life spans through constant investments in the value offered to the consumer. Bottom-lines can be improved by ensuring that at least some brands in the portfolio can command a premium pricing.
Growth by Going Global :
There may be challenges to domestic sales growth as competition from similar brands becomes fiercer and/or the distribution network becomes a bottleneck. On the other hand, going global requires an understanding of the foreign regulations and market conditions and the ability to identify and grow partnerships. Its imperative to partner with foreign companies who have the required regulatory expertise and marketing muscle to smartly overcome the deficiencies of the brand-owner company. A big opportunity to maximize profits is by moving up the “regulatory value chain”, meaning getting the same brand approved in a tougher regulatory atmosphere using supporting R&D data. Example, a manufacturer of a dietary supplement that is able to make only health claims in US can get the same product approved as a Natural Health Product in Canada and make medicine like claims. Importers will always prefer a brand that is already established in markets elsewhere provided the product can meet higher regulatory requirements in the importing country. Having an R&D dossier that was planned and compiled well will go a long way in establishing newer and rewarding markets in economies that may be doing better than the home market.
Domestic Growth:
Relaunching old brands in the domestic markets is a tougher challenge without a new marketing partner or infusion of new value into the product through R&D. Several global economies are still recovering, yet consumer choices for supplements and health foods are huge. In such a scenario, brands that don’t offer value will be wiped out. The cost of a well-conceived preclinical or even clinical program is still lower than an advertising campaign that companies spend on. But an ad can be only as good as the product it sells. A good ad will sell a bad product too, but only for a while. Whereas a good product doesn’t require much ad spend at all in today’s highly democratic and networked consumer world of social media and Web 2.0. Hence companies that do their own domestic marketing of wellness products may consider setting aside at least 50% of their previous year’s marketing and promotional budgets for R&D for the next 3 consecutive years.
Growth by Lifespan Extension:
History of health and wellness brands in most of the regulated world has shown that brands that are well-entrenched in the minds of the consumer psyche had a strong value proposition for the consumer in the first years of their launch. Value can be created through multiple ways and a universal technique remains evidence of health benefit or clinical efficacy. Stronger brands always last a lifetime and sometimes span several generations of consumers. Age-old Nutra brands can be ever-greened through continual R&D.
Profit Growth through Premium Pricing:
Only with innovation and value addition can a dietary supplement or health food rise above the clutter of other me-too brands. Consumers clearly will pay a dollar more for any specific and proven value over the other brands available. Intelligent R&D and smart marketing: neither can do without the other. Investment in only one of them without concurrent focus on the other can lead to disappointments in the short or long run.
The Road to Success via Product Innovation:
When all roads to business success seem to be going via product innovation, it is imperative to have a highly efficient R&D process in-house or outsource it to the most experienced and effective partner. A big reason why SMEs have shied away from own R&D so far in the nutraceutical industry worldwide is the wrong perception that R&D is risky and costly. R&D success must be ensured and costs contained for SMEs to be able to participate fully in the market growth that we are likely to witness in the Health and Wellness markets worldwide in the present decade. Research methods used by pharma do not offer the promise of risk-reduction and cost efficiency that nutraceutical companies look for. Nutraceutical companies need special research methods 2 , 3They must engage (early in the research program) a CRO that has the special skills and experience to handle such challenges specific to the natural product industry in order to participate in the competitive marketplace of wellness products today. Care must be taken that all research is compliant to the global regulations for such natural products. It must be further noted that the toughest global regulations for preclinical and clinical evidence for natural products are not difficult to comply with and are certainly not akin to drug regulations.
Cost-effective, speedy and compliant science is the starting point for building a great health and wellness brand for the world markets and maximizing ROIs in this sector.
Jayesh Chaudhary is Founder & Managing Director of Vedic Lifesciences Pvt. Ltd. For more information on growing your nutraceutical business you can reach him at vedic@vediclifesciences.com
or on +91 9821086665
References:
1. Ernst & Young, FICCI: NUTRACEUTICALS - Critical supplement for building a healthy India.
www.ficci-nutraceuticals.com
2. Chaudhary J: Is My Product Ready for Clinical Trials
Natural Products Insider Nov 23, 2009
www.naturalproductsinsider.com
3. Chaudhary J: Selecting Health Claims for Nutraceutical Clinical Trials
Natural Products Insider Dec 21, 2009.
www.naturalproductsinsider.com
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