5 minute read 18 Feb 2022
Smart healthcare solutions

Confluence of food, pharma, ayurveda, and tech to redefine the nutraceutical sector

By Angshuman Bhattacharya

EY India Partner and National Leader - Consumer Product and Retail Sector

Focused on operations improvement and Growth Strategy formulations in consumer centric businesses. Advises clients on cash flow orientation and turnaround implementation strategies.

5 minute read 18 Feb 2022

Show resources

  • The Sunrise Consumer Health and Nutrition Sector report

Scientific orientation powered by technology-enabled customer engagement will pave way for the rise of India’s Consumer Health and Nutrition sector.

In brief

  • There is an increasing interest from companies and investors to enter the consumer foods and nutraceuticals segment, as it promises huge growth headroom and strong margin potential.
  • Consumer education is key, and digitized ecosystems with D2C delivery models need to be developed to create the right customer engagement ecosystem.

Health and wellness industry in India

COVID-19 has created the biggest seismic shift taking health and immunity to the center stage. Indian consumers have opened their wallets to fitness classes and activities, consuming natural foods, health supplements, and following specialized diets.

Customers embracing digital platforms on health subjects is a new reality, opening a range of opportunities for companies in the sector. As growth begins to stabilize in more developed countries such as the US, attention is turning to emerging markets with a fast-expanding middle class. Consumers have started to realize the benefits of spending today for a healthier tomorrow. In India, with relatively suboptimal access to health infrastructure, this could pave the way for a new balanced model of managing health. 

The pandemic has accelerated the “proactive healthcare curve”, paving the way for fortified foods, supplements, natural and ayurvedic products.

While many of the European and Asian nations have adopted functional foods and supplements, the Indian consumer is still predominantly showing preference for “better for you” foods and home remedies.

Ayurveda and herbal are increasingly becoming “back to roots” answers to modern problems.

At one end of the spectrum are “better for you” foods and beverages targeting wellness, and on the other, are more pharmaceutical products aimed at illnesses. At the cusp of the two, lies a huge opportunity for functional foods, supplements, and nutraceuticals— the next big wave of consumption and opportunity.

Construct of health and wellness products in India

The consumer health products market size in FY21 was INR1.03t and witnessed a compound annual growth rate (CAGR) of 14% over the last three years (FY18-21). This, on one hand, comprises healthy variants of foods and beverages such as digestive biscuits, low fat snacks and on the other hand, comprises dietary supplements. 

In the first wave of adoption, consumers have opted for healthy variants of food, which represents ~70% of the health products segment.

Dietary supplements at INR331b is a fast-growing market, and manifests itself in herbal supplements, vitamins and minerals and proteins. COVID-19 has acted as a catalyst to fuel the demand of dietary supplements, as consumers increasingly are adopting these specialized products for preventive health and well-being.

Dietary supplement including herbal supplements, vitamins, minerals, and proteins is estimated to be an INR331b in FY21

Dietary supplement is estimated to be an INR331b in FY21
  • Health and Wellness foods

    Consumers are actively looking out for brands with incremental nutrients like protein, fiber, vitamins, calcium, and minerals, enhancing the purpose of basic foods. The market breaks into “better for you” products such as “baked not fried”, “low sugar” and functional products like fortified juices and protein shakes. Most large food players have adopted functionalization in their product portfolio to differentiate and drive value for consumers.

  • Dietary supplements

    This segment, always considered to be high potential given the growing lifestyle diseases, has witnessed an accelerated adoption curve, post COVID-19. Over the last year, the demand for herbal supplements and vitamins and minerals such as vitamin C and zinc have witnessed growth of over 25%.

The future looks to be very interesting for the dietary supplements market, as more companies from the pharmaceutical industry and the FMCG industry enter the market, invest in product technology and brands, and influence consumption habits amongst consumers.

Which are the big consumer bets?

Diverse needs and multitude of available solutions make it difficult for companies to decide on the innovation funnel. There are large and established needs like heart health, blood pressure, menstrual care, allergies, but consumers have preferred adopting the medicinal route for many of them. Our analysis suggests three clear criteria for establishing the innovation bets for a company:

  • How widespread is the need? (addressable consumer base)
  • How serious is the illness/ wellness need?
  • What is the efficacy of the preventive solution

Pharmaceuticals + FMCG = Nutraceutical’s market in India

Product technology, solution efficacy and medical advice of pharmaceuticals coupled with marketing, demand creation and push based distribution of FMCG companies. Many companies from pharmaceutical and FMCG industries want to discover this sweet spot. From a category attractiveness perspective, the gross margins of formulation driven products are much higher than foods products, making this play interesting. Companies are working hard to establish differentiated planks on the concept of inner and outer wellness. Additionally, the growing interest in natural and ayurvedic products has encouraged companies already active in the area to assert their credentials more strongly, while also attracting the attention of players from pharmaceuticals.

Consumer companies are keen to build their medical credentials and capabilities, with the aspiration to eventually achieve higher margins available from these products across their portfolio. They have an inherent advantage in branding, consumer market expertise, and access to mass distribution channels. However, they are still learners in the fields of scientific innovation, regulatory affairs, and medical marketing expertise.

In the next five years, we expect consumer product companies to invest in demand creation and increasing consumer education using virtual equivalents of multi-level marketing (MLM), medical representative models, social media-based influencing, and direct-to-consumer (D2C) approaches.

Industry challenges in realizing future potential

  • Consumer awareness and education

    The need of the industry is to build awareness through a channel, which can provide guidance to the consumer. D2C platforms are the future way to build this consumer engagement platform. Companies could also have a hybrid model of physical and digital, much like the transformation witnessed with insurance and travel agents.

  • Brand credibility and efficacy

    Once the need is established, there would be a need to build credibility of brands over generics. It may be a tough ask to brand a multivitamin product and premiumize, given cheap generics from competition.

  • Continuous science-based innovation

    Consumer companies would have to transition from being “excitement” and “functionality” drivers to “performance” drivers. This would require rapid innovation, a science-based approach to claims and efficacy, and partnerships/ joint ventures/ licenses on access to proven technologies.

  • Evolving regulatory environment

    Being at the cusp of food, Ayurveda and pharmaceuticals, the regulatory environment comes under the purview of different authorities like Food Safety and Standards Authority of India (FSSAI), Ministry of Ayush and the Central Drugs Standard Control Organization in India.

Outlook on private equity and strategic M&A transactions

Nutrition and wellness categories have been attracting both strategic and financial investors and this interest has only increased with the pandemic. Strategic players driven by their need to short circuit the product development lifecycle and acquire capabilities and / or channels (D2C) that some of these businesses have built. Financial investors on the other hand are attracted by growing target market, strong unit economics and high growth that these businesses are experiencing.

Key imperatives to unlock growth

  • Micro segmentation based on age, gender, need and price to develop more consumer-centric value proposition.
  • Create new digital opportunities across the entire value chain including personalized self-care services (tie-ups with nutritionists) and growing e-commerce platforms.
  • Humanize digitally enabled solutions.
  • Adopt a 360-degree approach in product development and brand building through the lens of an integrated physical, emotional, and mental ecosystem.

Show resources

  • Download: The Sunrise Consumer Health and Nutrition Sector report


India might be a late entrant to the heath supplement game, but COVID-19 has brought a renewed focus on healthy lifestyle habits and diet, which is expected to further boost the adoption of preventive healthcare solutions. The growing social media penetration and vernacular content platforms have also broadened the healthcare horizon for Indians. In the end, a win-win for all — for companies, this segment provides a great combination of growth, profitability, IPR driven competitive moats and long-term consumer franchise. Consumers benefit from better health and living, and the society in general from a reduced healthcare burden.

About this article

By Angshuman Bhattacharya

EY India Partner and National Leader - Consumer Product and Retail Sector

Focused on operations improvement and Growth Strategy formulations in consumer centric businesses. Advises clients on cash flow orientation and turnaround implementation strategies.