Grant Washington-Smith & Paul Altaffer11.01.08
Forecasting trends in the nutraceuticals, functional foods, over-the-counter (OTC) and skin care markets during these turbulent times is a risky business. And there is little doubt that the horrible financial picture in the U.S. will soon reflect on other parts of the world. So what does this mean for Latin America? Will market growth simply slow or face a real downturn? And what will this do to growth prospects?
Latin America has gone through several boom years. Much of that growth has been fueled by high demand and prices for commodities, liberalizing economic policies throughout the region, large inflows of money and strong consumer growth.
Although there has been economic turbulence and political tension in several Latin American countries, the major market trends have been set largely by Brazil and Mexico, the two largest economies in the region. According to data presented by Euromonitor International, Brazil is by far the largest market in Latin America for OTC products. While annual GDP growth rates during the past several years in Brazil have been modest, the past two or three years have produced 4-5% growth per year. Growth in the OTC markets, however, has far outpaced the GDP growth rate in Brazil, and for that matter, Latin America.
This article is largely concerned with what is described by Euromonitor International as the Vitamin and Dietary Supplement category of OTC. There are, however, many blurred lines between product lines and definitions. Terms like "nutraceuticals," "dietary supplements," "cosmeceuticals," "functional foods," "nutrigenomics" and "nutricosmetics" are often used to describe the kinds of products in the category, but that may be represented under different industry sectors such as skin care and foods.
Latin America consumes more vitamins ($1.5 billion in 2007) compared to dietary supplements ($762 million in 2007) (see Table 1). And the consumers are not as brand conscious when it comes to nutraceuticals. Also, traditional medicine is going global with broad acceptance of TCM (traditional Chinese medicine) and Ayurveda (traditional Indian medicine). Wellness drinks and superfruits are also emerging, as well as exotic lines featuring "Amazonian" products.
Brazil and Mexico together currently represent nearly 75% of Latin America's consumption of OTC healthcare products and 67% of vitamins and dietary supplements. The populations of these countries are growing, and aging. Further, several countries are shifting from primarily rural to urban economies, with higher productivity and wages. This also means stress and a host of related illnesses have surged in Latin America, where heart disease, diabetes, obesity and cancer are becoming more prevalent.
Brazilians especially are more aware of the importance of maintaining a healthier lifestyle. This represents a significant opportunity for companies looking at Latin America as an investment option. Competition is tight however, with the major players well established and investing considerable money into promoting their products and brands.
The regulatory framework in Latin America is relatively new. The larger market countries like Brazil and Mexico have fairly well established regulations for OTCs, but the capacity to enforce regulations is limited in many cases. Vitamins and dietary supplements are only recently being viewed as a separate class of products from pharmaceuticals and foods. There is still quite a bit of work to do before Latin America catches up with regulatory structures existing in Europe, the U.S. or Japan.
Brazil's ANVISA (Agencia Nacional de Vigilancia Sanitaria) regulates pharmaceuticals and therapeutic goods for the country. It has been successful in introducing a host of regulations that bring Brazil close to global standards. Enforcement again is an issue, with little resources available. There has been a great deal of effort by ANVISA to unify regulations through the South American common market, called Mercosur. However, it is unlikely that such an effort will conclude successfully in the near future.
A special word of caution should be made regarding claims. Regardless of regulations, the thought that "what seems too good to be true usually is" is beginning to take hold as many marketers have made outlandish claims for products that delivered very little. As the markets evolve, so will consumer awareness toward product benefits and potentially deceptive claims.
As for channels of distribution, Latin America is proving to be an excellent market for direct selling models. This is especially true in the vitamin and dietary supplement market, as well as the cosmetic/skin care industry. Many people recognize the Avon brand in Brazil, where it combines staggering growth rates with improving market share over the top two skin care and cosmetic companies. OTC pharmaceuticals, on the other hand, are distributed primarily through pharmacies, with significant inroads being made in certain countries (like Mexico) for supermarket distribution, especially for generic drugs.
Euromonitor International forecasts continued growth in Latin America, with double-digit growth expected in the vitamin and dietary supplement categories for Brazil. This is due in large part to the growing awareness of the impact of nutrition on healthy lifestyles and the introduction of greater numbers of people to the consuming class.
No one knows what 2009 will bring for the industry, but given the solid fundamental economic and political state of Latin America's engine (Brazil), the best guess is that 2009 will bring a soft landing, rather than a crash to the region, and the future (beyond 2009) shows distinct promise.
Latin America has gone through several boom years. Much of that growth has been fueled by high demand and prices for commodities, liberalizing economic policies throughout the region, large inflows of money and strong consumer growth.
Although there has been economic turbulence and political tension in several Latin American countries, the major market trends have been set largely by Brazil and Mexico, the two largest economies in the region. According to data presented by Euromonitor International, Brazil is by far the largest market in Latin America for OTC products. While annual GDP growth rates during the past several years in Brazil have been modest, the past two or three years have produced 4-5% growth per year. Growth in the OTC markets, however, has far outpaced the GDP growth rate in Brazil, and for that matter, Latin America.
Market Definitions and Growth
This article is largely concerned with what is described by Euromonitor International as the Vitamin and Dietary Supplement category of OTC. There are, however, many blurred lines between product lines and definitions. Terms like "nutraceuticals," "dietary supplements," "cosmeceuticals," "functional foods," "nutrigenomics" and "nutricosmetics" are often used to describe the kinds of products in the category, but that may be represented under different industry sectors such as skin care and foods.
Latin America consumes more vitamins ($1.5 billion in 2007) compared to dietary supplements ($762 million in 2007) (see Table 1). And the consumers are not as brand conscious when it comes to nutraceuticals. Also, traditional medicine is going global with broad acceptance of TCM (traditional Chinese medicine) and Ayurveda (traditional Indian medicine). Wellness drinks and superfruits are also emerging, as well as exotic lines featuring "Amazonian" products.
Brazil and Mexico together currently represent nearly 75% of Latin America's consumption of OTC healthcare products and 67% of vitamins and dietary supplements. The populations of these countries are growing, and aging. Further, several countries are shifting from primarily rural to urban economies, with higher productivity and wages. This also means stress and a host of related illnesses have surged in Latin America, where heart disease, diabetes, obesity and cancer are becoming more prevalent.
Brazilians especially are more aware of the importance of maintaining a healthier lifestyle. This represents a significant opportunity for companies looking at Latin America as an investment option. Competition is tight however, with the major players well established and investing considerable money into promoting their products and brands.
Regulatory Framework
The regulatory framework in Latin America is relatively new. The larger market countries like Brazil and Mexico have fairly well established regulations for OTCs, but the capacity to enforce regulations is limited in many cases. Vitamins and dietary supplements are only recently being viewed as a separate class of products from pharmaceuticals and foods. There is still quite a bit of work to do before Latin America catches up with regulatory structures existing in Europe, the U.S. or Japan.
Brazil's ANVISA (Agencia Nacional de Vigilancia Sanitaria) regulates pharmaceuticals and therapeutic goods for the country. It has been successful in introducing a host of regulations that bring Brazil close to global standards. Enforcement again is an issue, with little resources available. There has been a great deal of effort by ANVISA to unify regulations through the South American common market, called Mercosur. However, it is unlikely that such an effort will conclude successfully in the near future.
A special word of caution should be made regarding claims. Regardless of regulations, the thought that "what seems too good to be true usually is" is beginning to take hold as many marketers have made outlandish claims for products that delivered very little. As the markets evolve, so will consumer awareness toward product benefits and potentially deceptive claims.
Distribution Channels
As for channels of distribution, Latin America is proving to be an excellent market for direct selling models. This is especially true in the vitamin and dietary supplement market, as well as the cosmetic/skin care industry. Many people recognize the Avon brand in Brazil, where it combines staggering growth rates with improving market share over the top two skin care and cosmetic companies. OTC pharmaceuticals, on the other hand, are distributed primarily through pharmacies, with significant inroads being made in certain countries (like Mexico) for supermarket distribution, especially for generic drugs.
Euromonitor International forecasts continued growth in Latin America, with double-digit growth expected in the vitamin and dietary supplement categories for Brazil. This is due in large part to the growing awareness of the impact of nutrition on healthy lifestyles and the introduction of greater numbers of people to the consuming class.
No one knows what 2009 will bring for the industry, but given the solid fundamental economic and political state of Latin America's engine (Brazil), the best guess is that 2009 will bring a soft landing, rather than a crash to the region, and the future (beyond 2009) shows distinct promise.
