Nutraceuticals have been steadily coming to prominence in the western markets of North America and Europe over the last 30 years. As these markets reach maturity, Terravana believes the time has come to expand the infant nutraceuticals markets in Asia. Having begun in Japan during the 1980s, the modern nutraceuticals industry is the natural descendant of Eastern medicine, developed over centuries in various Asian countries.
With India accounting for only 1% of the global nutraceuticals market, we aim to extract the benefits from Indian-origin products using leading technology, ensuring the production of high quality nutraceuticals to this burgeoning market segment. Specifically, this will see the company scale up an existing business in southern India, leveraging its expertise and our business acumen to provide us with our most profitable and lucrative segment.
Our nutraceuticals processing plant will manufacture two products: Garcinia Cambogia, a weight loss supplement based on tamarind extract, and Curcumin, a cancer research drug based on a turmeric extract. India is the largest producer and exporter of both curcumin and garcinia. These products are currently manufactured in Andhra Pradesh (India) and the raw materials needed are procured from small farms in neighbouring districts.
We will create a completely self-sufficient production plant from an existing boutique facility. By implementing an equipment upgrade, we will be able to boost its proven track record, improving on both scalability and profitability. It will have a flexible supply chain as we establish an export channels for direct sales into the United States. Because of its narrow focus, we will be able to adapt to and capitalise on changing industry trends in future.
Our total investment in the nutraceuticals line is $5 million. In the first year of operations, we estimate production of 54 tons of Garcinia Cambogia and 50 tons of curcumin, equating to a cumulative revenue of $3.2 million.
Using food as medicine has been practised by ancient civilizations, from the Egyptians and the Sumerians to the Chinese and the Indians. As techniques have become more sophisticated and technology has developed, this convergence of food, biomedical research and technology was coined “nutraceuticals” by Stephen L. DeFelice, founder and chairman of the Foundation of Innovation Medicine, in 1989. The link between nutrition and pharmaceuticals, two of the foundations of modern thinking on health and wellbeing, is clear.
Depending on the product, nutraceuticals may claim to prevent chronic diseases, improve health, delay the aging process, increase life expectancy, or support the normal functioning of the body. Such products are increasingly becoming part of daily life for many in the west, encompassing dietary supplements such as vitamins and minerals, herbal mixtures, and protein supplements; functional foods such as omega fatty acids, probiotics, branded iodinated foods and branded wheat flour; and functional beverages, including energy and sports drinks, and fortified juices and waters.
Dietary supplements contain nutrients derived from food products and concentrated in liquid or capsule form. In order to sell these products to U.S. markets, companies must register their manufacturing facilities with the Food and Drug Administration. Functional foods, on the other hand, are enriched or fortified foods close to their natural state. This practice can either restore the nutrient content of a foodstuff to the levels it contained before processing, or adds complementary nutrients.
In 2015, the global market for nutraceuticals was valued at $182.6 billion, with the United States, Europe and Japan accounting for almost 93% of global demand. As these markets reach maturity, manufacturers are looking at emerging players such as India and China to supplement production.
The functional food segment accounted for almost one third of the total, making it the largest sub-segment within nutraceuticals. Forecasts suggest compound average growth for the entire segment at more than 7% per year to 2021, to create a market worth almost $280 billion. Market leaders maintain gross profit margins of between 60% and 70%.
Having developed on the outskirts of the pharmaceutical industry, regulation is less prevalent, allowing for new formulations and technologies to be trialled. As consumers demonstrate greater awareness of the effect of food and pharmaceuticals on their bodies, nutraceuticals are becoming increasingly popular among a demographic with higher disposable income than their predecessors. Furthermore, lifestyle choices such as vegetarianism and gluten-free regimes are prompting a move to fortified food items to supplement restricted diets.