February 15, 2016
As the dietary supplement supply chain has become more global, so follows the finished product end of the chain, albeit more slowly. Country-specific regulations tend to focus more on finished dietary supplement and food products than ingredients and raw materials, and selling to the general population is a different business than selling to manufacturers.
The extra challenges in selling finished supplements in emerging markets around the world can be overcome with the right approach and the right assistance from experts. Such is the case with South America, a biodiverse land where raw materials, especially botanicals used traditionally by indigenous peoples, have become popular in North America and Europe nutrition markets. Here in the fourth largest continent, the Amazon Jungle may be the “lungs of the world" as well as the “natural pharmacy of the world." Not only have pharmaceuticals been developed from tropical rainforest plants, but many popular botanical products have escaped from the jungle, including açai, cat’s claw, sangre de grado, maca, guayasa and sacha inchi (Incan peanut). Even in South America’s subtropical forests there are prized botanicals such as yerba mate. The continent’s rugged and enormous mountains have also contributed to natural health with quinoa and amaranth among the most popular. Turning to the sea, the famous Humboldt Current off of Peru is a dominant source of fish oil raw materials.
One of the biggest challenges in selling finished dietary supplements in South America is the varying regulations among the 12 sovereign nations. For instance, Brazil has more developed dietary supplement regulations than does either Peru or Ecuador. Further, basic vitamins and mineral supplements may face relatively few regulatory hurdles, save some dose-versus-daily allowance limitations in some places, but products containing specialty ingredients, such as probiotics and omega-3s, not to mention botanical ingredients, can be classified in different regulatory categories in different countries. On top of all of this, claims regulations can be narrow in many South American countries.
The good news is there are efforts to improve the regulatory climate for dietary supplements in South America. ALANUR, an alliance of Latin American countries, was created in 2011 as the first food supplements association to service this region, and has been working with global regulatory experts, as well as the International Alliance of Dietary Supplement Associations (IADSA), to help countries develop supplement regulations and to help harmonize the existing regulations in countries such as Brazil, Colombia and Argentina.
In South America, the most populous countries—Brazil (208 million), Colombia (49 million), Peru (31 million), Argentina (42 million), Venezuela (32 million)—tend to be the biggest dietary supplement markets. At the top sits Brazil, with a 2015 dietary supplement compound annual growth (CAGR) of 3 percent to reach a total US$1.3 billion. Euromonitor International reported health and wellness trends remain strong in Brazil, and consumers there are willing to pay for products that help improve their general health and well-being. This has made vitamins popular, as well as fortified/functional foods and beverages. Bayer leads the supplement market in Brazil on the strength of its 27-percent share of vitamins with its Redoxon brand. Pfizer, Herbalife, Amway and GNC are also popular brands in Brazil.
Brazil is crazy about sports including soccer/futbol and fighting, especially mixed martial arts (MMA) varieties. Sports nutrition product sales grew 15 percent there in 2015, reaching US$186.3 million following heavy investment by big companies and a boost from the Arnold Classic Fair held in Rio de Janeiro in 2015. Integralmédica SA Agricultura e Pesquisa led the way (15-percent share) in the sports nutrition market after years of big investment in marketing, advertising and sponsorships such as the Ultimate Fighting Championship (UFC) MMA event in Brazil. Euromonitor International projected a 9-percent CAGR for sports nutrition to push 2016 sales in Brazil to US$300 million, limited somewhat by the economic downturn looming over the country. In fact, the market research firm expects the slowing economy to force consumers to increasingly switch to economy brands in 2016.
Consumers in Colombia have become more aware of the need to supplement with nutrients they are not getting from their modern diets reflective of busier lifestyles. This, according to Euromonitor International, has pushed vitamin and dietary supplement sales to positive rates, with ongoing growth tied to consumer interest in improving energy and immunity, among other health goals. Companies have done a good job communicating with Colombians about the multiple benefits daily intake can have on general well-being, immune function, skin health and vision.
Amway called Colombia its biggest market in South America, but the leader in vitamins and dietary supplements is Pfizer Colombia SA, which enjoys an 18-percent share on the strength of its Centrum and Caltrate brands. Euromonitor International noted these brands are backed by strong advertising and region-specific endorsements. The firm predicted the growing senior population (over 65), which is slated to rise 5 percent annually over the next few years, will also drive sales. Overall, vitamins and dietary supplements should experience a 2-percent CAGR, according to Euromonitor analysis.
One boost to the market in Colombia is the Pacific Alliance, a Latin America free trade bloc formed in June 2012 by Colombia, Chile, Peru and Mexico. In addition to furthering free trade, with an eye toward China/Asia, this alliance focuses on well-being and socioeconomic inequality. Factoring in the newest member Costa Rica, the Pacific Alliance accounts for 230 million people across its member countries and represents the eighth largest world economy. With an estimated 2015 gross domestic product (GDP) of US$1.9 trillion, according to the International Monetary Fund (IMF), it is bigger than Brazil’s economy of US$1.8 billion GDP, which is down from US$2.2 billion in 2013.
Mercosur, also known as the Southern Common Market, is an older Latin America trade bloc founded in 1991 and driven by the southern countries including Brazil, Argentina, Bolivia, Paraguay, Uruguay and Venezuela. Together Mercosur and the Pacific Alliance account for more than 80 percent of South America’s foreign trade and more than 90 percent of its GDP. However, the two groups are at odds.
Mercosur is bigger in terms of both GDP and population, but its growth is opposite to Pacific Alliance’s. Political and economic woes in Brazil, Argentina and Venezuela have left many Mercosur countries considering a switch to the Pacific Alliance, which has fostered more ties to the United States.
Many of South America’s economies are seeing a decline from recent years of prosperity due to the falling commodities prices worldwide, driven largely by China’s economic woes. South American countries used the prosperous times to address socioeconomic inequality, which enabled consumers to spend more on their health and wellness.
The dietary supplements markets in Pacific Alliance countries are reflecting the bloc’s early growth success. Fernando Cruz, senior research analyst at Euromonitor International Chile, called out Peru as one market to watch for fast growth. “We recommend special attention be paid to Bolivia and Peru, which are expected to record the fastest growth rates for the period 2016 to 2020," Cruz said, predicting 4-percent and 3-percent CAGRs, respectively. “In the first case, growing consumption of natural products such as herbal/traditional dietary supplements products containing ginseng and Echinacea will support performance over the next five years. For Peru, the keys are local ethnic ingredients, such as … maca, which [is] linked to digestive and sexual health, as well as to the general health of the immune system."
In fact, Cruz noted maca is part of one the interesting ingredient trends Euromonitor International has identified involving a move toward more ethnic products such as quinoa and amaranth, particularly in Peru, Chile, Ecuador and Bolivia. “These products are gaining terrain in herbal/traditional dietary supplements due to their association with energy enhancement, protein and fiber content," he explained. On the specialty side, he reported fish oils/omega fatty acids are enjoying popularity across South America. “The widely known benefits for cardiovascular health along with a low per capita consumption of natural sources of omega-3, -6 and -9 fats, like fish or nuts, continue to be key drivers for demand."
Like the United States, Peru faces a presidential election in 2016, which tends to create concern in Peruvians about the economic future. Plus, Peru is experiencing a slight economic deceleration. Still, vitamins and dietary supplement growth in 2015 was 7 percent, up slightly from 2014, and the purchasing power of Peruvians increased enough to push up their average yearly spending on health. The conservative estimate of growth of supplements, according to Euromonitor, is 3 percent over 2016.
In Chile, demand increased for vitamins and supplements as Chileans continue to take more control over their health and have better access to health information. They are more aware of the preventive benefits of supplements and are willing to spend on supplements that can contribute to a healthy diet, according to Euromonitor International. Companies are using all available media to reach Chileans, with ads on television, radio, newspapers and the internet. However, despite the improvements, the growth may be somewhat limited by the overall economic issues facing the entire continent.
The dietary supplement market is well-established with middle and upper class populations in Argentina, with mid-income consumers trending toward functional and fortified foods and beverages, while higher income consumers opt for pills tablets and some drinks. However, growth is expected to be relatively flat over the next couple of years (1 percent CAGR), as economic slowing coupled with inflation and consumer confidence concerns cause the market to underperform, according to Euromonitor International.
In the other Mercosur country facing debt and inflation concerns, Venezuela has seen sales of functional and fortified products slow drastically, owing to an adverse business environment characterized by restrictive import and export regulations, according to Euromonitor International. This has forced Venezuelans to rely more on pills and tablets for nutritional supplementation. While consumer awareness of the benefits of supplementation is expected to rise, the regulatory and economic situations will cause problems with product availability.
The sale of dietary supplements in South America will continue to depend on the ability of the individual sovereign countries to develop better regulations, hopefully in harmonization with other South American and Latin American countries. Also, these countries will have to find a way to hold onto and advance socioeconomic improvements from recent boom years that were tied to global commodities pricing that has been declining. The trade alliance and supplement trade association efforts will be key to these developments, and companies looking seriously at these markets would do well to get involved in these efforts by participation and investment. This is not a time where companies can just jump easily into ready-to-sell markets developed fully by predecessors; most of these markets are developing and improving right now.
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