Driven by the growing awareness prompted by the impact of the Covid-19 pandemic, global sales of nutraceuticals have seen a substantial upsurge over the last few years. Nutraceuticals are defined as foods that combine the benefits of both nutrients and pharmaceuticals. They are generally categorized into two primary categories:
- Dietary supplements: vitamins, minerals, enzymes…
- Functional foods: prebiotics, probiotics, medical foods and fortified foods (from which ingredients like excessive sugar or salt have been eliminated, with additional beneficial nutrients incorporated).
Nutraceuticals offer targeted health benefits, like slowing the aging process and/or therapeutic features addressing various diseases including neuro-degenerative illness (e.g. Alzheimer), high cholesterol, obesity, heart disease, cancer, arthritis, and diabetes.
Demand for nutraceuticals is further reinforced by urbanization, causing people with higher purchasing power to prioritize health and effective remedies for chronic health conditions. Accordingly, as consumer awareness about the importance of healthy living continues to increase, DataHorizzon Research expects the global nutraceuticals market to grow at a compound annual growth rate of 11.4% by 2032, to $868.9 billion.
From a regulatory perspective, the EU treats nutraceuticals like regular food products, with standardized laws overseeing the use of vitamins, minerals, and their sources in production. Additionally, specific regulations, including a list of substances that may pose risks, protect consumers from potential health hazards. In the US, functional foods often lack a specific regulatory framework, leading to uncertainties for producers and consumers. Moreover, the FDA doesn’t conduct a prior safety assessment of dietary supplements before their release, but actively monitors and addresses issues like mislabeling or unsafe products once they’re in the market.
The dynamism of the global nutraceutical market reflects significant research findings, particularly those that have uncovered the intricate connection between the gut (i.e., the digestive system) and the brain, demonstrating the profound influence of neuron communication on various aspects of human well-being. And amid gut microbes playing a crucial role in controlling inflammation and creating various compounds that can affect brain health, microbiome lies at the heart of most nutraceutical R&D.
As investors, we distinguish between the players facilitating scientific progress (B2B enablers) and those directly catering to consumers (B2C companies). Notably, companies like Chr. Hansen, DSM and Novozymes operate as prominent B2B enablers, driving scientific advancements and providing crucial support for product development. Due to their significant pricing power stemming from their pivotal role in the industry, we tend to favor such companies in the sector.
One prominent B2B illustration pertains to the importance of omega fatty acids in human diet, supported by recent research indicating that higher levels of Omega 3 lead to larger hippocampus – a critical brain structure susceptible to degeneration in the advancement of Alzheimer’s disease. Moreover, the well-documented benefits of Omega 3 on heart health and longevity continue to position it as an essential ingredient in the nutraceutical market. In this context, Corbion‘s innovative fermentation process extracts omega-3-rich products from algae oil. This sustainable alternative to fish oil not only protects underwater biodiversity and reduces the carbon footprint but also eliminates harmful PCB residues, offering a healthier and environmentally friendly choice.
Nevertheless, on the B2C side, there are prominent players as well, such as Biogaia, a pioneering company in the probiotics or ‘psychobiotics’ market. The company’s probiotic products can alleviate symptoms of anxiety and depression while reducing the body’s stress hormone, cortisol. Moreover, Biogaia is making significant strides in new health arenas, as demonstrated by a recent paper in the scientific journal Nature. The article highlights a pivotal breakthrough, now patented, wherein Biogaia effectively tackled the oxygen sensitivity of a beneficial gut bacterium (Faecalibacterium prausnitzii), leading to a critical reduction in conditions like type 2 diabetes and cardiovascular disease.
Meanwhile, the nutraceutical industry is expanding its reach into traditional foods as well: General Mills garnered attention this summer, simply by elevating the vitamin D content in select cereals, aiming to provide 20% of the daily recommended amount, against the backdrop of the concerning fact that a staggering 96% of Americans are deficient in this vital nutrient, which plays a critical role in bolstering the immune system, maintaining muscle health, enhancing brain function, and favoring the absorption of calcium (which is crucial for preserving robust and healthy bones).
In the beverage sector, some of Celsius’ energy drinks, comprising epigallocatechin gallate (a natural antioxidant) and other key components, are formulated to suppress appetite and boost metabolic rates, aiding in weight loss by stimulating the nervous system and enhancing calorie and fat burning, surpassing the effects of exercise alone. Meanwhile, the effectiveness of these drinks has sparked discussions on social media, where some have mistakenly associated Celsius’ products with Ozempic, a Novo Nordisk GLP-1 drug increasingly utilized for managing obesity.
In the context of GLP-1 drugs, The Simply Good Foods Company‘s recent research underscores the appetite-reducing effects of these medications, steering consumer preferences toward products like their Atkins’ high protein/low-carb snack bars and their Quest brand. Anticipating a sustained opportunity, the company has established a sizable consumer base interested in or using GLP-1 drugs. To cater to this audience, it plans to direct personalized communication, messaging, and exclusive offers, highlighting the harmony between the drug and its products, as a dependable support system throughout and after the medication period.
In conclusion, the rapid expansion of the nutraceutical market should remain steady, fueled by consumers’ increasing emphasis on preventive healthcare, the growing prevalence of lifestyle-related disorders, and the burgeoning interest in sports nutrition. Plant-based food could represent another important customer and driver for the nutraceutical industry, as plant-based food companies seek to improve their products’ health credentials (and counter consumers’ perception that they are overprocessed) to restore growth.
