In the past two years, words like comorbidity, immunity boosters, and supplements have become household terms. The COVID-19 pandemic has changed life in many aspects, and our focus on health is one of them.
The startup space has taken notice of the change and D2C (direct-to-consumer) nutrition startups, catering to the needs of children and adults alike, have gained traction.
“Nutrition is understood differently today than it was yesterday. We are a nation that has typically believed in natural nutrition, and supplemental nutrition has not been recognised as much. For instance, the US is a very supplement-enabled market. When nutrition comes in the format it is in today, people are ready because we are talking about natural nutrition going out of our diets. Because of this, the market is marked for a boom,” Harish Bijoor, Brand Strategy Specialist, Harish Bijoor Consultants tells YourStory.
The nutrition supplement space has seen a change in consumer behaviour and demographic.
“What was earlier a fitness enthusiast market is now a proactive health aware market. More consumers are taking care of their bodies and have actively increased consumption in this category,” explains Rahul Chowdhri, Partner at Stellaris.
The nutraceuticals market in India is expected to grow from an estimated $4 billion to $18 billion by the end of 2025. The dietary supplements segment constitutes over 65 percent of the nutraceutical market and is growing at a rate of 17 percent and is likely to grow at 22 percent per year, especially when preventive health has become the focus for all in the current pandemic, said a 2020 report by the International Trade Administration.
India’s nutraceutical industry is expected to hold at least 3.5 percent of global market share by 2023.
New brands and markets
Another important reason for the rise of nutraceutical startups in India, says Rahul, is the emergence of online brands in new categories and formats.
The existing brands did not have formats like powder, liquid, tablets, gummies, melt strips, and so on. Similarly, there is an emergence of brands that have product lines that are natural, Ayurvedic, and plant-based to meet the demand for such products.
This is, however, not a novel concept as brands like Himalaya that also dabble in this space have been around for quite some time now. But, nutrition and nutraceutical startups have received significant attention from investors in 2020 and 2021. While many of these companies were founded in 2015 and 2016, many secured funding only recently.
According to data by Tracxn, out of the top 50 startups in the segment, 20 have received funding in 2020 and 2021.
“What we found really interesting about this market is that protein deficiency in India is incredibly high, huge and widespread. Something like 70 percent of the urban population, adults and kids are protein deficient and this kind of protein deficiency, especially in a child’s development, has a massive subsequent impact on their growth on their physical growth, even their mental growth,” says Cathy Guo, Manager, Investments and Portfolio at Antler.
“This kind of prevailing protein deficiency in the Indian diet presents a massive opportunity,” Cathy adds.
The space is also seeing a boom due to increased penetration of modern forms of retail including hyper and supermarkets, and D2C and ecommerce channels. There is also an increased number of non-grocery retailers, such as drugstores, mass merchandisers and retail chains which are expanding their selections in
the supplement category.
Diversification
The D2C nutrition market, which includes products that are essential supplements to a person’s nutrient intake, has also bolstered the growth of two adjacent markets — health food market and the beauty product segment.
The health food market has brands such as Mumbai-based Snackible, Jaipur-based Gladful, Mumbai-based The Green Snack Co, Delhi-based Habbit Health and Nutrition, Lucknow-based Keeros, and Noida-based Poshtick, among others.
“The offering here is to introduce a product in your existing mainstream eating habits (breakfast-lunch-snack-dinner cycle). It is a much larger market but also more crowded,” says Rahul of Stellaris.
Similarly, D2C nutrient startups like Oziva and Gynoveda are diversifying to add beauty products to their offerings. The beauty product industry is already seeing trends of conscious buying, vegan beauty and sustainability.
“Looking better and eating better are both super core needs, and brands want to diversify the problems they tackle,” says Cathy.
“This also means higher revenue per user, because in the D2C space, if you can acquire one user digitally then sell them products under the same brand or even in a house of brands strategy, that obviously means better economics.”
Legacy brands
The nutraceutical market also sees participation from legacy FMCG companies — Unilever, Dabur, Nestle – that have launched food and beverage ranges that are healthy alternatives to their existing products.
However, Cathy alleges that legacy companies are still behind and their pace of innovation is different.
She says, “They are heavily offline. They do not have the DNA or understanding to suddenly operate like a D2C brand. We’re riding on the digital transformation of society, and marketing through digital channels where this consumer hangs out like YouTube, Instagram, Meta (earlier Facebook), Tik-Tok.”
The problem with large FMCG companies is also the long-drawn processes that have to be followed to address issues in order to innovate.
Ankit Chona, Co-founder and MD of Phab, explains that a startup’s strength lies in the ability to quickly revise a product as more often than not, it is its core offering. However, for a legacy company, it may just be one of the many on its catalogue.
Looking Ahead
“The problem in the space is lack of product differentiation; it is that these are commodities and not brands. Commodities who have become early adopters of the D2C format will do very well in the early years and will do very well but once these nutrient supplements become known, the market will return to ideal competition,” says Harish.
“So the need of the moment is differentiation, branding, and the entire process of ensuring visibility for the brand.”
As we enter a post-pandemic world, we can see the D2C nutrition startup space getting crowded. However, entrepreneurs and investors in the space agree that the demand for dietary supplements and healthy food and beverages is here to stay.
“Consumers will knock out any brand that lingers anywhere close to preservatives, trans fats or excessive levels of processed sugar. At the same time, as adults switch to a cleaner lifestyle, we can anticipate a spurt in healthier, kid-friendly snacking options too,” says Phab’s Ankit.
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