Europe

By Anne-Katrin Nuzum

The European Nutrition Industry is a dynamic market that provides opportunities for investors, local and global marketers as well as acquirers of food and supplement ingredient technologies for international markets.

With an estimated size of about $55.8B in revenues in 2003, the challenge for new market entrants as well as existing players in this market is to determine attractive and less attractive segments in this fairly fragmented market. Europe is hardly one single market with different consumer attitudes, languages, distribution channels, competitive dynamics, established brands, required investments; even regulation vary significantly between the different regions.

As a result of high growth rates and significant consumer and market attention, some of the more attractive segments are organic foods, functional foods for overall wellness, weight loss / meal replacement supplements and several specialty dietary supplements.

The past five years have seen a boom in the organic food market with sales across Europe doubling since 1998, as European consumers are now spending twice as much on organic food as they did then. Opportunities lie in several areas, such as creating trusted consumer brands that can arch over several product categories, as well as providing reliable access to organic and non-GMO ingredients. A wider availability of products will also most likely drive down prices, one of the remaining obstacles to increased consumption among a wider range of consumers.

While many countries across Europe are more “traditional” in their choice of foods, functional foods and beverages have made a surprisingly big impact on this market. Rather targeting a single health benefit, products that focus on overall wellness have been highly successful. The most successful product categories are vitamin A/C/E drinks, prebiotic and probiotic yoghurts, and meal replacement bars. Weight loss is an increasing concern, although consumers have not yet fully caught onto the low-carb trend seen in the U.S. – the focus is still on more balanced solutions to a healthy weight.

With a population of about 400 million, Europe’s dietary supplement market, including vitamins, minerals, herbals/botanicals, specialty supplements, weight loss, meal replacements and sport nutrition supplements still shows significant growth potential. However, in the past, the overall European dietary supplement market has been fairly stagnant with only 3.5-4% growth, which was mainly slowed by a stagnant herbal/botanical market in Germany– the backbone of the European dietary supplement market.

There were also several other challenges to the European supplement market such as changes in product distribution (cross over from traditional pharmacies into mass markets, driving down prices and reducing the overall value of the segment); uncertainty about regulatory changes and implications (leaving investors and new product developers cautious); increasing competitive pressure and a growth of private label products (both driving down the overall value of the category). However, sports nutrition, meal replacements, and specialty supplements have seen stronger growth in the 4-6% range, driven by attractive, high-interest conditions (weight loss, joint health) and attractive ingredients (fish oils, fibers). Additionally, fragmentation among the leading brands in each market is very high. Opportunities for new dietary supplement players to enter markets seem to be limited, due to the fact that they are either fairly concentrated already, such as the UK, or highly competitive and fragmented.

Aside from several global botanical extracts and fine chemicals manufacturers that are headquartered Europe, there are also several small start-ups and university spin-offs in Europe that are developing innovative ingredient technologies. Global players in functional foods, food ingredients, pharmaceuticals, or dietary supplements, who maintain an active and concentrated acquisition or licensing strategy in these markets, can find attractive opportunities to expand their portfolio.

The European food supplement directive, accepted two years ago, has sparked a lot of discussion about its impact within Europe and abroad. Current changes in dietary supplement regulation across Europe leaves food and supplement companies feeling that it is challenging to keep up to date with requirements and they are hoping for support from their suppliers. Leading players of food and supplements in more liberally-regulated countries, such as the UK or the Netherlands, fear a significant contraction of the market as a consequence of the regulatory changes.

While the current regulatory situation seems challenging and the market seems to be fairly stagnant in many areas, opportunities still exist for nutrition industry players at the retail and ingredient levels within Europe as well as from outside countries. The European market will also get smaller, as the countries in this continent will continue to merge. However, a detailed knowledge of the specific market segment to be entered will remain essential.