Matevž Ambrožič
Hello ladies and gentlemen, and welcome once again to our podcast. My name is Matevž and I’m Marketing director at PharmaLinea and I’m very happy to be joined here today by Mr. Amit Shukla who is the VP of global consumer health at IQVIA.
Amit Shukla
Thank you, thanks a lot.
Matevž Ambrožič
Mr. Amit was kind enough to join us here today in Geneva right before Vitafoods and we have come together to have a conversation on the global status of the consumer health market. And a little bit more specifically about neutraceuticals and how to innovate ways to win, basically. And I’d like to start off by asking you, Mr. Amit, what is the current status of the global consumer health market and what’s the outlook for the future, just as an overview to start with.
Amit Shukla
Sure, absolutely. Well, thank you for inviting me here, really I always love to come back to Geneva. I used to work here for Procter & Gamble several years ago, so it’s always a beautiful city, doesn’t change much, and is absolutely welcoming, so thank you for that. I think the consumer health industry, and that’s why we are all here for Vitafoods as well, it’s an absolutely brilliant industry. You know, it’s done really well through COVID, I mean we saw so many therapy areas and categories getting challenged during COVID, but consumer health was able to really do very well through that and the last year that just ended, 2023, the growth of the industry has been 4% plus. That’s lower than what it was in 2022, which was about 10%, but the good thing is that some markets are down because of interest rates and everything is doing much worse than Europe. China is down because of its own economic challenges and stagflation and other things, but APAC and India is covering for that so we think that the industry is going to get through this phase of price increases and commodity price increases and input cost increases and really come out even stronger. But the prediction that we are making for 2024 plus the next 3 years or so is about a 6, 7% growth and that’s a very powerful place to be because it’s always in comparison. So look at the only two therapy areas out of pharmaceuticals’ 27 different therapy areas that are growing faster than 6, 7% would be oncology and immunotherapy, two very distinct areas. Oncology is certainly a large base as well, but immunotherapy is a very small base. Besides these two growing in double digits nothing in pharmaceutical neutrals is growing as fast some parts of neutral certainly growing faster but again it’s all about global expansion, getting into new markets, getting into new regions, and not being just in North America or Europe.
Matevž Ambrožič
What do you think are the major macroeconomic or even let’s say consumer habit trends that are driving this growth? Why do you think the outlook is so optimistic? Is there a way of life that’s just continuously in this new fashion since a couple of years now? Has the pandemic created an effect that’s lasting? Has the effect been there before the pandemic even or is it completely disconnected to that? What’s fueling the growth?
Amit Shukla
Sure, so there are multiple big mega trends that are driving that. One of them is global population. So clearly global population is growing at about 2% so we expect that at least double or triple of that self-care would grow because people want to take control of their health. The second is COVID has made a big paradigm shift in people’s habits. People used to go to a doctor get a prescription. They gradually realize that prevention was better than treatment so they’re investing a lot in neutraceutical supplements, taking care of their health proactively. That’s why you see categories like digestive and oral are doing really well in the current environment, even 3 years after COVID has ended. The third is aging. A massive, you can say it’s a challenge, but you can also see it as an opportunity as well, you know. So globally the population is aging at a much rapid pace than it’s ever happened in the last 80 years or so. So in that environment also you will see that people need to take care of themselves proactively. So that’s driving that. The fourth thing that I would say is the income that’s increasing in the emerging markets. So emerging markets, when I say it includes emerging groups of consumers in parts of the US, parts of Europe, but also developing markets in Europe as well, especially around Central Eastern Europe, where people’s category index is going up, people’s ability to propensity to spend on new diets, new medications, is growing up, out of pocket ability is growing up, and then certainly in Middle East, Africa, and Asia you’re also seeing a growth in income so that’s also bringing people to be more aware about not just treatment and infection but also about dietary supplements, probiotics, vitamins, all of that is now becoming increasing part of this.
Matevž Ambrožič
You mentioned these emerging markets where people are just starting to have some notable disposable income that then goes toward self-care. Could you mention perhaps a few of such markets or maybe even regions where you think if one is looking for expansion into new markets? Because a lot of our listeners, I think, are interested which are the markets that are not yet so saturated in in consumer health and have now these kind of fresh populations with disposable income for consumer healthcare products.
Amit Shukla
Absolutely, I am glad you asked that question, but I mean first and foremost I’ll start with India. I mean India’s next 5 years forecast of vitamins and supplements is 13%, you know massive opportunity, and 13% – 8% of that is volume 5% is price because their inflation is about 3, 4%. Even through this high inflation period as well, so great opportunity because the disposable income is increasing with the top 250 million of the population. So massive market for companies to come in and the barriers are very low because you can manufacture the product there. There’s a lot of third-party suppliers there, a lot of CDMOs there, a lot of clinical CR based out of India, so massive opportunity. Then I would look at countries like the Middle East, look at Dubai, Saudi Arabia. Again, 40 million population, very big opportunity. Then you look at Vietnam, Thailand, Philippines, Malaysia, excellent opportunities. Yes, Singapore might be saturated, but in these countries absolutely the sky is the limit and then let’s not forget LATAM, a brilliant opportunity in LATAM as well and same in Central Eastern Europe as well. You know, Poland might have a higher category index for several of these categories, but you look at Romania, Bulgaria, Croatia, Adriatic, massive opportunity in these markets to really … Baltics, let’s not forget Baltics. So a lot of smaller companies here. The big companies are still trying to figure out how to enter these markets, but this is the right time to go in and really be able to source product from different places, brand them, and capture the market.
Matevž Ambrožič
Excellent. If we stop a little bit in the CEE market because you mentioned it, we see Stada as a brilliant example of not shying away from these smaller markets and joining them together in one big opportunity, if you will that’s grossly put from, I can say, but you know, it’s functioning a little bit better. Could you perhaps take any winning strategies from what they do, how they address these little markets? Little in in parenthesis. And how this can be applied to other companies?
Amit Shukla
I mean Stada has done something very smart. They have not gone against the big collets and really sort of created a replication of their strategy. So, they could have done what Kenvue or Haleon has done which is have one brand that goes across multiple markets, has very similar architecture. What they do, what I call, and this is not the name they use but I call it, it’s called a string of pearls. So they take brands that are sleeping in different markets, they’ve been potentially tail brands for Sanofi or Haleon or other companies and they take them and they revitalize them. They take the equity of those brands, they invest behind it, they bring it back to distribution levels that are commensurate to those brands, and are able to connect with the consumers and shoppers in these markets. They also are able to price them correctly as well, so that it doesn’t feel like they’re trying to milk them. Because their intent is to grow those brands and then what they’re doing is at the back end. They’re looking at how to create a platform for development of these brands in a cohesive manner so that you don’t have a different product in Romania from Czech Republic to Bulgaria, and that’s working for them. I think that’s it’s a complex strategy for a company to manage but they really doing it well and they’re keeping it simple, so I really applaud them for the effort they’ve put in. And they’re able, why I say that it’s a string of pears, because they’re able to then operate in that mode across multiple markets. There are companies in all of these markets that are smaller, but they operate in one or two markets, they don’t operate in all the markets, whereas Stada has been able to do that. Another company that I would certainly mention is Teva. Teva has also used a similar strategy as well. They’ve got several brands in Central Eastern Europe that are regional in the markets, they have present in few of the markets, and they’re really growing them as well. So again excellent strategy. Certainly it helps you compete with the larger players and do it more efficiently, and if I’m not mistaken they also have a bit of a policy of independent decision-making to a certain extent this attached from the from the HQ right with the local subsidiaries. If I’m not mistaken.
Matevž Ambrožič
Do you think that’s contributing to the success?
Amit Shukla
Oh, absolutely, I think it gives you a lot of empowerment on the ground in terms of how to go to market, how to really distribute the product, how to really invest behind it. Each market has its own P&L and again that is something I wouldn’t say is unique to start up. That’s what most other consumer health companies have started doing because they’ve also realized that you can’t control the entire business from one central location in Europe. You have to disintegrate the power structure and give a lot of autonomy to the local markets and control some elements, so like you know R&D platforms, innovation strategy, brand equity, brand packaging, these things you should have centrally controlled otherwise you’ll have the same brand in 10 different formats, in 10 different packagings, in different countries. You don’t want that. In the end your brand is your brand, and we’ll talk a little bit about other formats as well, but brand equity is extremely important. But we’re not saying that it has to be exactly like Apple iPhone 15, looks the same everywhere in the world, wherever you go the packaging is exactly the same. That’s not what we’re recommending, but having control over some elements is important. But letting the countries having autonomous control over some of the other elements and really having full control over the go-to-market strategy is really the direction to go to, especially in consumer health.
Matevž Ambrožič
Excellent. Moving back, we dove a little bit into the Stada rabbit hole, but let’s move further back up, just towards the growth that we were talking about. What kind of percentage of that growth, or it doesn’t have to be that exactly, what’s the role of innovation, of new products in that growth? Or is it other means that contribute to that in the future?
Amit Shukla
Innovation is, I’ve shown it in some examples before, there’s a term we track called “freshness index”. “Freshness index” basically means what is the sales that is coming from products that have launched in the last 3 years and what’s that contribution to your overall sales. So we track that for all the categories in consumer health and I can say that you know in consumer health typically that number ranges around 10 to 15%. So remember markets growing at about 6, 7%, “freshness index” growing at about 10,15%. That’s really powerful because usually innovation is the largest driver. In the last couple of years pricing has been a key driver because input cost went up, cost of manpower went up. But if you go back to 10 years, last 10 years innovation has been the largest driver of growth in consumer health. If innovation in “freshness index” drops below 10%, it’s very challenging to achieve 5, 6, 7% growth for the total business. So one of the biggest pushes we give and guidance to companies is have an innovation strategy that’s at least 3 to f5 years out. Start thinking about it now. Innovation alone won’t do it so you have to have a strong go-to-market strategy, you have to have a strong distribution strategy, you have to have a strong e-commerce strategy, you have to have a commercial innovation strategy around packaging sizes, bottles, pills, how many smaller packs, bigger packs, all of that. But core innovation product formulation, product innovation, new claims is absolutely important to drive consumer health. We don’t do tons of clinicals in consumer health, we do some clinicals in consumer health, but usually consumer health you have to really find the right claims, do the right studies, but also do a lot of work in terms of finding the right formulations that could really benefit the consumers in those categories.
Matevž Ambrožič
What do you think is the role that food supplements specifically are playing and will play in the total consumer health space? Do they present better opportunity for most companies or is it a more, because it’s more open, there’s less of a barrier to enter with new products? Is it more competitive, should pharma companies look more into food supplements or leave that let’s say not totally but as a the main strategy for the smaller players that can go also D2C and can be more agile? Is it worth it for them to basically play in this field?
Amit Shukla
Sure, I mean again it goes back to the mega trends. So people are aging, people are open to taking care of their health, people are more interested in self-care, they’re not as excited about going to a doctor and waiting in a clinic for half a day. And then out of pocket they have the money to be able to spend, so in that environment no company should stay out of the food supplement business. It is going to be the entry point for you to really sell other products in your category, especially in treatment especially in prescription. So food supplements is going to be increasingly a way for consumers to enter into your brand, enter into your company, enter into your geography. If you look at the business we track in consumer health in OTC, 22% of the global market is food supplements and vitamins, massive. Now there are regulated food supplements and unregulated food supplements, some with claims that are qualified, some without, but the market’s huge, nobody can turn their eyes on it. I mean you look at companies like Nestlé, they acquired Nature’s Bounty in the US, a $5 billion acquisition, massive. And they can use the power of the R&D to really reinvigorate several of these brands. And consumers are willing to pay a premium for food supplements that offer claims, that offer science that supports them, with better packaging, with better formulations. So clearly this is the space to be and you can see now we can buy $2 a bottle of food supplements and you can buy $80 a bottle of food supplements as well, so there’s massive opportunity and innovation in this space.
Matevž Ambrožič
A little side note side, a question over there Amit for the listeners, do you use supplements and if so which if you are willing to share with us?
Amit Shukla
Absolutely, absolutely. So I use magnesium, which is now very popular, I use some combination supplements of vitamin C as well, and calcium. These are areas I always tell people that you should be supplementing your overall health with supplements and some markets the category development is much better so I come from the US, I live in New York. It’s a lot easier to access a lot of good products both D2C as well as in retail environments. In some other countries a lot of education is required for people to understand and then remember, we are only talking about adults, there is the whole pediatric food supplement range as well that is starting to become huge and meaningful.
Matevž Ambrožič
The 22% that you mentioned of the share of the total consumer health market is that growing or falling?
Amit Shukla
It’s growing. It slowed down a lot so during COVID times. In 21 and 22 the food supplement business was growing at about 15%. Now that’s slowed down a little bit but it’s come down to about 5, 6%, that’s a very healthy place to be because it basically weeds out a lot of smaller players, it weeds out a lot of players who were not really backed by science, but the bigger players have stayed on, they’ have also revisited their innovation strategy, their whole planning and architecture for their brands way to invest. So it’s not like a lot of people are throwing money on the wall now but few players, they are hunkering down. Several companies have got acquired, several e-commerce players that came in to just cash on the trend have also gone out of play, but the big ones who’ve really been able to build their brands are staying on and investing and we are seeing some examples of companies that used to be like Ritual, which used to be a company in the US, used to have a very subscription based direct to consumer model, is now getting into retail as well. Now they’re distributing their product and pharmacies, so very similar to in lot of e-commerce spaces Amazon was an e-commerce player, now is in a retail store as well with their brands. So that’s what we will start seeing is a lot of these players will expand and be more stabilized across both omni-channel environments.
Matevž Ambrožič
Is it correct that we see the movement from both ends then, D2C brands coming into the retail space and vice versa? Also so am I correct in deducing that the way to win in the end if you’re a big enough brand is going both ways?
Amit Shukla
Absolutely, and again big driver of that um omni-channel environment is the regulations. The regulations for food supplement are some of the easiest for cough, cold, for pain, for digestive. You might need a little bit more harder regulations to surmount but for most players the food supplement regulations are a lot easier in most markets. In the US you just need to communicate that this is the product you’re launching, you don’t need to get a registration done before you launch. Europe is a lot easier as well and in that environment you will certainly see products coming in from different players, both from pharmaceutical players, OTC players, but also from native food supplement players in the market. The second thing is the channel. Vitality that exist for food supplements is much broader, you can sell a food supplement in e-commerce, you can sell at D2C, you can sell at subscription, you can put it in a retail store, in most countries you can put it in a mass market store as well. So that broad coverage also makes this area extremely attractive for both types of homes.
Matevž Ambrožič
Speaking of doing D2C, doing D2C well, and speaking of Ritual in particular, I found it quite fascinating that as a D2C brand in essentially as it was doing vitamins, as it was doing essentially, now they expanded a little bit into probiotics, prebiotics, postbiotics, even melatonin for sleep, and so forth, but essentially it was a prenatal vitamin and they have a goal now as I saw in their communication that they want to have all of their products clinically studied on the level of the finished formulation by the year I think it was 2030 or something like this. This I found very interesting that they would go into such level of investment as a D2C company that is typically, unfortunately that’s the case, not so big on clinical substantiation, but is more prone to just doing the marketing very well instead of backing it up with claims. Because obviously they’re not communicating directly with doctors. Why do you think that Ritual has this as a strategy and is really investing in backing up the formulations with clinical studies?
Amit Shukla
So Ritual is an interesting example of a company that started with personalizing white vitamins and supplements. They found success in that route because there is a percentage of the people, maybe small, who are willing to personalize medications for themselves and these are the same people who are seeing medications in treatments being personalized and now in food supplements as well. Now when they saw the success here, they see that as an opportunity to really be able to expand their footprint and take business from other players who are creating the same vitamins and supplements. But for everybody in the same bottles and pills across all types of channels, so they are now investing, I mean they have gone to be a subscription-based business in 3 years to $100 million. With that type of size they have the profitability to be able to invest in clinicals and if they invest in clinicals even if they don’t do it for the entire range as they say even, if they achieve it for half of it or one third of it, the amount of goodwill they’ll create, the amount of credibility they’ll create is really going to be a serious competitor for most of the established brands in the market. And then based on those clinical data they will be able to expand globally as well.
Matevž Ambrožič
Speaking about personalization as you mentioned, there is now I think in my view one of the most exciting times in the industry because of all of the development of wearable devices, of digital health ,of all the data that we see, that each consumer basically gathers of all the vital signs that they can produce and track. And I wonder what you think is the role of nutraceuticals here or how food supplement companies can take advantage of all of this spread of wearables, of apps, and also the willingness of consumers to use them and to provide data to brands and to apps and so forth? How can supplement brands as they are they can be quicker than drugs and medical devices, how can they utilize this better to get a jump start on the market, and really have that also as a major growth driver in the future?
Amit Shukla
Absolutely, excellent question. We talk a lot about the three levels of innovation, so there is the innovation around the bottles and pills. With your core formulation and the product. The second is commercial innovation, and the third is services innovation. A lot of the large companies are not investing in consumer health and OTC in driving service innovation. They’re experimenting a lot, so don’t get me wrong, they’re putting in a lot of money, but they want credible proof of improvement before they actually bring these products to market. Several of the smaller ones are really looking at this data and saying how can I monetize it and that when we talk to consumers and shoppers and patients they are very willing to share the data as long as it’s secure, as long as it’s held private, as long as it’s used in a consolidated manner across for meta-analysis. They are very comfortable sharing the data because every consumer and shopper has this belief about doing good for the society, and this is their way of sharing their data and vitals to really make sure how can they help the larger society, how can medicines be developed faster, how can they be developed cheaper. So we are very confident that there’s tons of data available and we at IQVIA also capture a lot of this data as well. And then share it with players to help development of new products, development and generation of new insights. But clearly what needs to be done is how does the company that does a lot of the wearable development and the data tracking is able to connect with the right companies that are doing R&D and formulation work so that they can create in tandem offerings that are based on this. And then once these offerings are created and personalized, how can they continuously be improved with the data that’s being captured from the patients that are using it, so that’s where it takes time. Look at iPhone. I mean the iPhone is only 10 years old, we used to use phones with buttons and manual phones before analogs, so it takes time. I think some of these technologies have what I call a tipping point to it you know that it goes slow slow slow and then suddenly it escalates. We saw this in the MedTech industry, I mean people didn’t understand what was in-vitro diagnostics but once COVID testing came and people started doing it at home, people just got really comfortable with how to handle liquids and tubes and collect samples and be able to ship them. It’s a matter of time before personalization, which is sort of moving at this point seems like a glacial pace, will suddenly reach its tipping point and then 5 years later we would be sitting here and saying “Wow, everybody’s eating personalized medications and food supplements, who could have imagined this would be happening.”
Matevž Ambrožič
Excellent and this is I think a beautiful segue for the finish of our podcast. I hope that in 5 years’ time, we get to sit here again, if not even sooner, and recheck these thoughts, these predictions, if they were correct. Until then, thank you so much for the insights, Mr. Amit Shukla and thank you also to our listeners for tuning in, and see you next time.
Amit Shukla
Thank you, thanks a lot everybody.
