New Ventures Biodiversity Investor Forum for the AndeanAmazonian Region

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New Ventures Biodiversity Investor Forum for the
Andean-Amazonian Region

• Opportunities Challenges in EU and USA Markets
  regarding Natural Ingredients for Food,
  Pharmaceuticals Cosmetics

Lima 3 June 2004 Bert-Jan Ottens ProFound -
Advisers In Development
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Presentation

• Description of relevant market developments and
  trends in the Natural Ingredients for Food,
  Cosmetics and Pharmaceuticals
• Opportunities for ingredients from the
  Andean-Amazonian region (ITC)
• Requirements for strategic development of the
  natural ingredients sector

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Market Developments Food Ingredients (1)
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Market Developments Food Ingredients (2)

• US dietary supplement market estimated at US
  4-5 billion at retail level double-digit growth
  throughout most of the 1990s
• In USA many natural health products classified as
  dietary supplements (thus subset of food
  regulations), or as non-drug cosmetics, neither
  requiring pre-marketing authorisation, hence
  promoting their use
• Australia, Canada and of the European Union (EU)
  consider products as drugs and consequently
  require pre-marketing authorisation, hence
  limiting innovation and new opportunities
• Consumers increasingly having higher demands
  regarding convenience, ethnic, safe, health and
  organic food

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Market Developments Food Ingredients (3)

• Food ingredients market for industrial use will
  continue to increase high demands on technical
  innovation and safety high spending on RD seen
  as critical to compete successfully in the
  marketplace
• Food manufacturing industry to be highly
  innovative, formulate and bring new ingredients
  to the market quickly investing in manufacturing
  capability, culinary resources, technical
  advances and sensory services to meet the demands
  of the market
• Changes in the food manufacturing/ingredients
  industry marked by concentration, globalisation
  and partnerships
• Food ingredient trade channels characterised by
  more direct B2B transactions for further
  manufacturing

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Market Developments Food Ingredients (4)

• These changes in food manufacturing have
  important implications for suppliers such as
• Only room for a limited number of suppliers and,
  to succeed, one needs to be a technically
  knowledgeable partner
• Fulfil and/or complement customers RD function
  high investments in RD often constituting a
  problem for developing country producers
• Size of manufacturing plants
• Partnership arrangements with key customers
• Develop value-added products

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Market Developments Food Ingredients (5)

• Important implications for suppliers (2)
• Innovation as a key to competitive advantage
• Tracking and tracing introduction of chain
  management and labelling systems, through which
  products can be traced back to the producer
• Emphasis on food safety requires continuing
  developments in the areas of traceability, food
  safety assurance schemes, hygiene and training
  initiatives

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Market Developments Cosmetic Ingredients (1)

• EU worlds largest producer of cosmetic products,
  USA and Japan following at a distance
• Main EU producers are multinational companies
  like Unilever (The Netherlands), LOreal
  (France), Wella (Germany), Sanofi (France), and
  Beiersdorf (Germany)
• Many of these operating across a wide spectrum,
  involving other sectors such as pharmaceuticals,
  chemicals, food and/or household products.
• Increasing consumer sophistication and interest
  in all things natural
• Domination of mass and prestige market companies
  and their large advertising budgets

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Market Developments Cosmetic Ingredients (2)

• Changing demographics (ageing population) and
  increasing demand for therapeutic products
  (cosmeceuticals)
• Most companies sourcing raw materials in many
  countries materials usually passing through many
  hands before reaching manufacturing company
• Most companies lack satisfactory details on its
  origin more important that materials meet their
  specifications and prices, though this is slowely
  changing in view of consumer safety
• Partnerships created for sourcing of raw
  materials, often with express purpose of
  environmental and social objectives, and sharing
  of commercial benefits alternative marketing
  campaigns

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Market Developments Cosmetic Ingredients (3)

• Traders and brokers still fulfil important
  functions, viz.
• purchase of oils throughout the world or from
  specific geographic areas
• analysis and quality control
• rectification of the oil to fit the commercial
  standards
• blending
• sale to users

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Market Developments Pharmaceutical Ingredients
(1)

• Global demand for herbal medicines increased
  dramatically during the last ten years
• Herbal medicines growing at a faster rate than
  conventional chemical drugs
• Herbal medicines range of product types raw
  herbs (dried or fresh), others which are
  processed to varying degrees, including tinctures
  and extracts
• Trade in herbal medicines estimated at E 10
  billion annually and growing in excess of 10
  annually according to Nutrition Business
  Journal, global sales for herbs/botanicals
  accounted for E 18.5 billion of sales in 2000

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Market Developments Pharmaceutical Ingredients
(2)

• Major market is Europe, accounting for some 38
  percent of the world market leading European
  market is Germany, accounting for over 42 percent
  of the European market, followed by France (25),
  Italy (9) and the UK (8)
• Medicinal plant trade is largely conducted
  through Germany, which is the leading market for
  exporters in developing countries
• Large European markets (Germany and France) are
  consolidating, while smaller markets show
  stronger growth New markets at a global level
  include Brazil, Argentina, Mexico, India, China
  and Indonesia

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Market Developments Pharmaceutical Ingredients
(3)

• Increase in demand for natural medicine also
  strongly related to the rise of the green
  consumption movement (alternative or complement
  pharmaceutical drugs)
• The entry of large pharmaceutical and
  Over-The-Counter (OTC) companies placed botanical
  medicines more strongly on the mass market.
• Increased advertising budgets and media attention
  for botanical medicines contributing to rapid
  growth consumer demand.
• Increased emphasis on safety, efficacy and
  quality resulted in more research and
  development, a shift towards standardised
  products, and requirements for high-quality raw
  materials expanded RD improved the legitimacy
  of botanical medicines

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Opportunities for Andean Ingredients (1)(José A.
Da Luz ITC Market Analysis Section, based on
Market Study by Josef Brinckmann ITC Consultant)

• Fairly established products (requiring quality
  control and expansion of supply)
• Native and with great acceptance cats claw stem
  bark, maca root and maté leaf
• Native and also accepted cayenne fruit, guarana
  seed, maté leaf, pau darco bark, ipecac rhizome
• Non-native black tea leaf, ginger rhizome

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Opportunities for Andean Ingredients (2)(José A.
Da Luz ITC Market Analysis Section, based on
Market Study by Josef Brinckmann ITC Consultant)

• Relative newcomers (some associated with
  European-made natural products) (requiring
  investment and consumer education)
• Boldo leaf, chuchuhuasi bark, condurango bark,
  dragons blood croton, neem leaf, purple corn
  extract
• Mostly unknown products
• Requiring educational and promotional activities
  in order to create awareness and demand from
  natural product formulators

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Requirements for Strategic development (1)

• Implementation of regulations concerning WHO
  guidelines on GMP and GACP, HACCP, tracebility,
  documentation logistics
• Identification of external services required
  (e.g. credits, technology, legal framework,
  quality control), in particular related to
• Business planning, costing/pricing, export market
  planning.
• GMP/GACP/HACCP on the basis of national
  legislation.
• Supply chain management, including TDS, MSDS, and
  required RD.
• ISO 90002000, ISO 14000

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Requirements for Strategic development (2)

• Include sustainability criteria and value chain
  approaches in Business Plans
• Development of Total Quality Management Systems
  and Control (GACP, GMP, SOPs, HACCP)
  Certification
• Facilitation of partnerships between suppliers
  and buyers (B2B) focus on value-addition
• Help suppliers to develop Export Management Plans
  as part of the Business Plan assist in cost
  calculation and pricing

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Requirements for Strategic development (3)

• Some additional points taken from recent UNCTAD/
  CBI B2B seminar in Milan (on the InCosmetics
  Trade Fair)
• Link up with formulators of buyers instead of
  marketing departments get info on needs of the
  clients of the buyers (!)
• Pricing and dealing with competition with similar
  products uniqueness important driver, espec.
  social and environmental sustainability criteria
• Replacement or new products? Patenting important
  restricting factor for potential suppliers
• New (food) products face considerable
  administrative hurdles. For novel food products
  difficult to change regulations in the short run.
  Interpretation of the regulation is not clear