The economic crisis has hit the EU hard, and coupled with a severe health and nutrition claim clamp down, the past years have been challenging for the European nutra industry.
But healthy ingredient suppliers – big and small – have proved resilient with profit-sales levels that may have decelerated but which continue to outperform other sectors of the broader food industry.
And the healthy divisions of the biggest food enterprises continue to produce good results and attract more resources to ongoing R&D efforts.
What can we expect in 2013?
Ongoing Big Pharma interest
There is a lot of talk about the convergence of food and pharma, much of which is just that – talk – but the pharma blockbuster golden years have passed (for now), generic drug battles have ramped up, and so the industry makes no secret of its interest in the nutrition sector, be it food supplements, OTCs, infant or other functional foods.
Pfizer has bought into food supplements (Ferrosan). GlaxoSmithKline is invested in sports drinks (Lucozade), Merck has supplements businesses like Seven Seas; Bayer almost bought number 2 US supplements business Schiff before being trumped by British consumers goods company Reckitt Benckiser.
Other factors are increasing the attractiveness of the nutra sector, such as recession-hit, cash-strapped consumers increasingly keen to, “self-medicate” as Reckitt Benckiser noted at the time of its €1bn+ Schiff bid.
Bayer, which missed out on that Schiff deal, echoed the sentiments of many pharma players not to mention analysts, in saying it was “absolutely open” to other nutra industry buys
And of course there is the Nestlé’s multi-billion investment in the power of foods and nutrients to maintain health and offer therapeutic benefits in Nestlé Health Science and its adjuncts, set up in 2010 and operational since 2011.
And don’t forget Big Food – all of the biggest players have made public pledges to ‘health-ifying’ their offerings in a climate where cash-strapped governments are seeking to reduce public health care costs bloated by diet-related illnesses like obesity and diabetes.
Expect the trend for the Coke’s, Nestlé’s and Kraft’s of the world to snap up niche functional drink and food brands to continue in 2013.
The last 2-3 years have seen some heavy consolidation within ingredients supply as big players like ADM, BASF, DSM, Naturex and Nexira have gobbled up a plethora of smaller and really rather large players. Martek, Ocean Nutrition Canada, Pronova, Cognis, Vitatene, Natraceutical, Burgundy, Tournay and more have all been snapped up recently
The most voracious – DSM – which has spent more than €2bn buying others, said it was “done for awhile” after paying €500m for blends giant Fortitech, but couldn’t help itself by adding fibre to its range by buying oat beta-glucan specialist, Swedish Oat Fibre, just before the year closed down.
And what of DuPont? It paid about €5bn for Danisco at the beginning of 2011 – an investment it is said to be more than pleased with to go with its Solae soy business. Is it eyeing other sectors?
Expect this kind of activity to continue bolstered by the likes of Nestlé who are also interested in reaching way back down the ingredient chain, especially with start-ups and tech providers.
Question is, what effect will this consolidation have on innovation and R&D spends at a time when the regulatory clamp down around claims is simultaneously squeezing incentive to perform research whilst making new endeavor more imperative than ever?
After years of ambiguity the EU nutrition and health claims regulation (NHCR) is law. Now it is time for enforcement.
That looks like being quite a job for local authorities unlikely to apply the law in the same way, within one country, let alone among different EU member states.
But there is likely to be some high profile claim busts that may bring a lot of negative publicity to the healthy foods and supplements sectors. PR agencies may be in for a busy year…As will the advertising watchdogs charged with policing the expected ‘hit and run’ proliferation of web-based claims seeking to avoid the strictures of the NHCR.
There may be no R&D and NPD exodus to Asia and elsewhere as some have forecast, but the mooted disincentivisation caused by a draconian law on innovation is real and will become more noticeable on store shelves and at industry trade fairs.
Promises to be yet another interesting year…stay tuned...