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Nutraceuticals

:
The future of
intelligent food
Where food and
pharmaceuticals converge

kpmg.com

The term
‘nutraceuticals’ was
coined in the late
1980s to describe
food products that have
a medicinal benefit.
This fast-growing sector
includes functional foods
(such as vitamin-enriched
products), nutritional
supplements, sport
drinks, and medically
formulated foods.

© 2015 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International.

April 2013 2  The Economist. dairy products. global market for functional foods certainly presents a big opportunity: sales are predicted to reach US$250 The nutraceuticals industry is likely to see food and pharma billion by 20181. As the industry expands. Successful companies will have to hit the bullseye in six main areas: technology. though. for example. Deal-making skills will be $5 trillion worldwide food industry4. a Swiss entity. Product cycles are much impact can be lessened by making healthier choices longer in nutraceuticals than in food. the main Competitive landscape players have to assure a steady supply of such ingredients This convergence of medicine. to take one example. The potential gains. country plus tenacious marketing to navigate the vagaries of national tastes. Nutraceuticals Industry. supply chain management and corporate deal-making. to prevent people from times. 1  Sector Report.com/node/238647 3 http://www. Competitive advantage ways to persuade people to make better choices about will be gained by those companies with a superior product their diet. that remind optimize the product portfolio in each country. and incentivize people to make better dietary choices The potential market for nutraceuticals may be large.aspx 4  Pegasus Agritech.uk/industry-info/knowledge-hub/global-industry/Pages/industry-market-. but it is small in relation to the of incubation of future winners. compliance. These pill-replacing ‘apps’ could global blockbuster product will require top-class regulation invigorate demand for new nutraceutical products compliance with a patchwork of regulations in each designed to promote wellness. companies collaborating for an advantageous position. Member firms of the KPMG network of independent firms are affiliated with KPMG International. therefore. food and technology is as plant extracts. strategy. marketing. This is substantial when compared with the $900 billion There will be many mergers. Supply chains will gradually become companies compete for dominance of the sector. preventative healthcare.abpi. Big pharma and big food companies are not strong expertise in large-scale manufacturing and global known for being nimbly entrepreneurial. obesity and cardiovascular not just new ‘superfoods’. and likely to create a battleground in which food and pharma omega-3 fish oils. of the pharmaceuticals industry. quoting Nutrition Business Journal http://www. technology and labelling to be on computer applications. whose bets and wait patiently for results. by linking diet to health. Life Sciences Global Chair. will be considerable: ever getting ill. and this should play to earlier in life. Food companies have at a premium. the strengths of pharma which is accustomed to long lead such as a health-promoting diet. Healthcare research. whey proteins. Bourne Partners. so they will have logistics that reach into mass markets of consumers. to do a number of things that go against their corporate but their research expertise does not go as deep as that cultures: be bold. roughly five times larger than in 19992. will need to consider the implications: conditions such as diabetes. supple and patient. Global food market http://pegasusagritech. all at the same time. product strategy. The emphasis of the research may. .economist. The logic seems simple: an ageing Companies who thrive are likely to be those that place bold population gives rise to lifestyle-related diseases. Consumer Markets KPMG International KPMG International Background Achieving success Nutraceuticals is expected to play a central role in Technology is going to play a crucial role in success. Nutraceuticals: The future of intelligent food | 1 Where food and pharmaceuticals converge Chris Stirling Willy Kruh Global Chair. but also disease. September 9th. but a and promote exercise. juggling ingredients. This leads to a sharper focus on measures.com/hydroponics/global-food-market © 2015 KPMG International Cooperative (“KPMG International”). both publicly and Future ‘superfoods’ could tackle the underlying causes of privately funded. The vertically integrated to ensure stability. many divestments and a lot pharmaceuticals market3. 1999.org.

One example is Alpo’s prevalence is rising2. for example estimated that over 100 million people globally gluten and lactose.com/Markets-and-Trends/Global-probiotics-market-to-grow-6. Enhancing brain glucose metabolism degenerative brain diseases.nih. the human intestine (known as gut flora)3. Many consumers purchase some form of ‘probiotic’ product and the market is growing4.nutraceuticalsworld. some symptom relief. function.gov/pubmed/11590374 4 http://www. from Pipeline: There is continued investment into indigestion through to more serious conditions ‘free from’ products.com/issues/2013-03/view_features/gut-instincts-the-right-moves-for-protecting-digestive-health/#sthash. They have a positive and claiming to have many other health benefits effect on the millions of organisms that live in over cow’s milk.int/medicines/areas/priority_medicines/BP6_11Alzheimer. Member firms of the KPMG network of independent firms are affiliated with KPMG International.nih. . such looking to food products to help slow disease as Neurozan. With large investments happening in this area.2 | Nutraceuticals: The future of intelligent food Key nutraceutical product hot spots BRAIN HEALTH AND AGING Background: The WHO predicts that by 2020 Pipeline: There are a range of products in the over 65 million people will have dementia pipeline that attempt to improve cognitive and that the prevalence of other neuro.int/mediacentre/factsheets/fs317/en/ 7 http://ajcn. Scientists are increasingly claim to enhance normal brain function. As adults become more aware progression and treat symptoms.nutraingredients.full. This is driven by the like celiac disease motivate consumers to increasing number of people claiming to be look to over-the-counter symptom relief.nutrition.ncbi. It is intolerant to certain ingredients.nlm.org/content/8/4/445.pdf 8 http://www.8-annually-until-2018 5  According to a recent survey 1 in 3 people claim to be ‘intolerant of gluten’ 6 http://www.gov/health-information/health-topics/digestive-diseases/Pages/default. There is also successful treatments is rising but has proved an increasing number of products which unsuccessful so far.aspx 3 http://www. like Alzheimer’s.pdf 2 http://www.who.niddk. a Swiss entity. The pressure to produce of some products. like Accera.dpuf © 2015 KPMG International Cooperative (“KPMG International”).who.who. Household products (like successful almond milk product offering an Yakult and Actimel. there will be innovative products hitting the market within five years. although few people have a are effected by ‘gut health’ problems and the diagnosed intolerance5.ynH0QZIG. 1 http://www.int/diabetes/en/ 9  http://www. to delay cognitive decline has been the target is also increasing1. of cognitive disease there will be a greater market for preventative treatments. GASTROINTESTINAL HEALTH Background: Gut health issues. see page 14) help to provide alternative for people with lactose intolerance.

. and can also help to prevent the onset has registered approval to claim it can increase of type 2 diabetes. Products which can demonstrate activity (plaque break down). and creating momentum for nutraceuticals. will have wide reaching impacts on the disease. One product which can reduce the impact of diabetes for developing traction is a soluble fibre gum that sufferers. Member firms of the KPMG network of independent firms are affiliated with KPMG International. Imperial College. Vitabiotics © 2015 KPMG International Cooperative (“KPMG International”). BUT WILL INTEREST HIS PATIENTS IN THE CARE OF THE HUMAN FRAME. a low glycaemic index linked to the consumption of high fat and high sugar substitute for diabetics. and the third is through Fibrinolytic fibrinolysis. The first is to reduce cholesterol. insulin sensitivity following successful trial results. with opportunities for pharma and food companies to get involved in the disease/care pathway. Chair of Infectious Diseases. London and Non-Executive Director. Professor Ajit Lalvani. CardioMax is an omega-3 based choices including a poor diet. Foods which release number of studies looking at food products that sugars slowly enable better glucose control re-sensitize the body to insulin9. a Swiss entity. Any food and drink even a small health benefit in this area will prove that can demonstrate progress in these areas to be successful. “ The shift in healthcare from treatment to prevention is encouraging clinicians and patients to think differently about health and disease. the research is being conducted to endorse second is to reduce the circulation of free. ENDOCRINE HEALTH & DIABETES Background: The WHO estimate that 347 Pipeline: Recent success stories include million people worldwide have diabetes8. with most one cause of death globally6. It is the number that focus on cholesterol reduction. European Food Standards Authority (EFSA) Sustained exposure to high blood glucose is approved Benecarb. There are also a sugar content foods. DIET AND IN THE CAUSE AND PREVENTION OF DISEASE. There are three nutraceutical produced by SevenSeas which main opportunities for nutraceuticals in heart claims to support a healthy heart. THOMAS EDISON CARDIO & HEART HEALTH Background: The impact of cardiovascular Pipeline: There is already a suite of products disease (CVD) is significant. Nutraceuticals: The future of intelligent food | 3 THE DOCTOR OF THE FUTURE WILL GIVE NO MEDICATION. Preliminary health. which use a combination radicals (which contribute to plaque formation of ‘natural enzymes’ to help promote in arteries). products like Naticor. The risk of evidence supporting the role of Vitamin E and contracting CVD is associated with lifestyle omega-37.

Pfizer sells a range mass-market distributors. or novel-tasting traditional drugs. Yet. Member firms of the KPMG network of independent firms are affiliated with KPMG International.4 | Nutraceuticals: The future of intelligent food Food versus pharmaceuticals Food companies have a greater understanding than Among the pharmaceuticals companies with a strong pharmaceuticals of nutrition and food formulation. but there hasn’t been a significant products. Abbott owns some of the decades of consumer research and relationships with leading nutritional product brands. There is also the question of how to accommodate that are needed to come up with major breakthroughs. food competence to influence behavioral change on a wide businesses lack some of the in-depth scientific resources scale. Instead. struggle to adapt to the faster pace of the nutraceuticals but what will it take to build one? Whether it grows market. a merger of the nutraceuticals portfolios of Furthermore. from sports drinks available on supermarket shelves to prescription drugs for patients with serious medical conditions © 2015 KPMG International Cooperative (“KPMG International”). salt or fat levels. and it’s only a matter of time before the than consumers. . the battle for dominance in the nutraceuticals enable them to generate new compounds. a Swiss entity. sales and marketing resources. with Innovation in food tends to involve modest improvements such products typically delivering smaller margins than such as reduced sugar. Nutraceuticals cover a wide range of products. food companies may struggle to achieve the kind of game-changing breakthroughs By complementing each other’s strengths (and necessary to open up new nutraceutical markets. despite a commitment to innovation. a nutraceuticals powerhouse will emerge. companies have attempted wider public awareness campaigns for nutraceuticals. weaknesses). An organizational culture devoted to blockbuster drugs and long research cycles may At some point. acquisitions and sell-offs. consumer-oriented brands within existing portfolios. Johnson & Johnson makes well in nutraceuticals include those that have created products to lower cholesterol and dietary supplements for separate health divisions. and people who are lactose intolerant. organically or by acquisitions or a combination of the two. Some pharmaceuticals launched global health improvement plans. plus wider market seems a long way off. one yet. have the However. there has been a blurring of the line demarcating the two industries and an active market Pharmaceuticals companies face a different set of for corporate transactions involving relatively small difficulties. As a result. if any. Food companies who are doing of dietary supplements. acquired successful brands. Only a small number of pharmaceutical fight spills over into corporate takeover wars. most of their efforts are Functional ‘superfoods’ probably have an important role to aimed at medical professionals and pharmacists rather play in the struggle. They have strong research departments. despite their large and lifestyle related diseases is already in full swing. shareholders could be impatient over the a big food company and a big pharmaceuticals company longer development times associated with nutraceutical might make sense. But the war against chronic ties to the scientific community. but few. certain key attributes will be required. plus presence in nutraceuticals. products. These maneuvers are preliminary stakeholder relationships and regulatory structures that skirmishes. companies have a consumer arm.

a Swiss entity. Nutraceuticals: The future of intelligent food | 5 Nutraceuticals represent an exciting new opportunity for food and pharmaceutical companies to diversify CHALLENGES RELEVANCE OF NUTRACEUTICALS PHARMA Declining return on R&D investment New sector with lower R&D costs COMPANIES ‘Patent cliff’ New revenue source Pressures on health budgets Most purchases are by consumers Regulatory oversight Less onerous regulatory requirements FOOD Slow-growing Fast growing COMPANIES Retailer-owned brands Source of differentiation & higher margins Retailer power Innovative products increase bargaining power Internet marketing Accepted channel for new products © 2015 KPMG International Cooperative (“KPMG International”). . Member firms of the KPMG network of independent firms are affiliated with KPMG International.

was the first country to recognize functional food officially. 1 http://www. This calls for sophisticated and supple logistics bowel disease. shopping habits. where programs such market. but of each country.medicinalfoodnews. Pharmaceutical Government policies don’t just deter. a Swiss entity. Nutraceuticals is likely to benefit from the trend suspicious of exaggerated health claims. as long as they Consumer companies have the intelligence available to do not claim to treat or prevent a specific disease. the largest market. pest and disease-resistant amounts of sugar or fat. with personalized DNA ahead of any new laws. and – with the help packaging. and using the information Canada operates a similarly demanding process.aspx © 2015 KPMG International Cooperative (“KPMG International”). and any nutraceuticals will require patience. a company can consumer lifestyles. which Consumer companies are already experts in collecting data. They can also steer the market towards healthier. Member firms of the KPMG network of independent firms are affiliated with KPMG International. pharmaceutical companies may be able to personalize in 19843.org/content/faq 3 http://www. and they are highly conditions. diabetes and inflammatory preferences. analyzing behavior and lifestyle. The most successful exponents invest of pharmaceuticals companies – devise holistic regimes considerable resources in lobbying and engaging with incorporating things like behavioral change and biofeedback. In the technology which aids this movement will be key. Nutraceuticals may seem too regulations. Japan personalize dietary advice.S. any product that claims to be a nutraceutical has to be certified first by the European Food Safety Authority. . EU. and has the world’s second largest nutraceuticals over-the-counter nutraceutical products to supplement market. Consumers are already being given the opportunity to where necessary. or withdrawn them if the rules change. but unless projected sales justify the effort. and genomics reports widely available. Physicians will be able to predict patients’ to supply the precise ingredients and print the appropriate reactions to different compounds. pricey for emerging economies. deep pockets and a company that fails to acknowledge this is likely to fail. regional level. In both to target their customers with tailored offers based on their cases. Epigenetics and nutrigenomics recognize that each individual has different nutritional requirements and The lack of harmonized rules means that companies responds to food in different ways. by applying schemes such modification and marker-assisted selection is helping as so-called ‘fat taxes’ on products containing excessive farmers breed stronger.co. helps the heart and blood vessels4. willingness to place risky bets. such as vitamin A-enriched ‘golden rice’ and oilseeds companies are accustomed to dealing with complex containing ‘healthier’ oil.uk/channels/supermarkets/tesco/tesco-reveals-clubcard-healthier-eating-plans/343589. make a claim about a structure or function – for example that pomegranate juice. as the non-profit HarvestPlus2 are using biofortification to produce crops containing higher amounts of vitamins and minerals.com/vol01/issue2/japan 4 https://www. a by-product of national public education campaigns for Using technology. and Japan. the various food and supplement bodies at a national and.com/library/article19. have to pass stringent government tests. nutraceuticals do not baskets and tailoring suggestions for healthier eating1. varying the nutritional claims and even also reduce the chance of developing conditions such as the ingredients. fortified. Another is that of personalized medicine. Personalization is also exemplified by genomics. obesity. Companies will need to One reason is that consumers cannot agree whether achieve genuine breakthroughs to tackle a wide range of nutraceuticals are food or drugs.6 | Nutraceuticals: The future of intelligent food Technological boldness Compliant marketing Much of the technological progress in the field of The market for nutraceuticals is not global. only a small proportion of claims are approved. therefore using and creating each country regulates nutraceuticals differently. foods themselves will also become healthy eating.S. depending on the rules and consumer cardiovascular disease. to prepare for changes take this into their own hands. they can sometimes companies must establish a route to target these health help to promote the consumption of functional foods as conscious individuals with personalized solutions. by contrast. Both food and pharmaceuticals crops.thegrocer. By linking diet to the must adapt their marketing strategies to the regulations genome it may be possible to not only boost health. and with prudent partnerships. The (often controversial) use of genetic more responsible offerings.drfuhrman. tests the product to see whether it lives up to its claims.article?utm_source=rss_feed&utm_medium=rss&utm_campaign=rss&redirCanon=1 2 http://www. but they are the prime they have often dropped nutraceutical products in a given beneficiaries of these innovations.. In 2013 Tesco unveiled plans to use their Clubcard data to tackle obesity.harvestplus. which But for a label to assert that it “prevents cardiovascular tailors treatments closely to an individual’s genetic disease” requires the approval of the FDA. In the U. by looking at shoppers’ In the U. profile.

Member firms of the KPMG network of independent firms are affiliated with KPMG International. Nutraceuticals: The future of intelligent food | 7 Global nutraceuticals market by country/regional share 1 14 EUROPE % 22 JAPAN % 30 U.S. a Swiss entity. 2010 figures. © 2015 KPMG International Cooperative (“KPMG International”). % 34 REST OF % THE WORLD The annual global nutraceuticals market is expected to be worth US$250 billion by 2018 1  Euromonitor. .

which covers cannot be used until approved for inclusion all foods and food additives. Only around 10 percent of the has used to certify the product’s safety claims could be substantiated. which Register of Nutrition and Health Claims. supplements. a Swiss entity. and Good following detailed scientific testing by the Manufacturing Practice regulations from company and subsequent review by the 2007. cure.. A range of regulations apply. treat or prevent a disease Between 2008 and 2011 the EFSA evaluated • must notify the FDA if wishing to use any ingredient not sold before October 2.S. cure. These are mainly overseen by under the category of vitamins and dietary the European Food Safety Authority (EFSA). • must guarantee the identity.758 food-related general health claims 15 1994. Member firms of the KPMG network of independent firms are affiliated with KPMG International. . Under these the manufacturer: EFSA. The EFSA also sets maximum and minimum levels of ingredients to be added • is responsible for ensuring the safety of to supplements. treat or prevent a disease. strength and composition of their supplements (deadline for compliance by all manufacturers was June 2010). the Federal If a product is not on this certified list it Food Drug and Cosmetic Act.8 | Nutraceuticals: The future of intelligent food A snapshot of global regulations EU United States A complex range of regulations applies to nutraceuticals in the EU. with the notification containing to see if they were supported by scientific information the manufacturer/distributor evidence. nutrition and health claims must be authorized at an • cannot claim the product will diagnose. mitigate. covers dietary supplements.S. nutraceuticals mainly come product type. EU level. • must make no false or misleading claims mitigate. depending on the In the U. © 2015 KPMG International Cooperative (“KPMG International”). Labels cannot contain supplements it makes or distributes claims that their product will diagnose. purity. which also evaluates claims and has a public notably the Dietary Supplement Health and Education Act (DSHEA) from 1994. healthcare plans reimburse medical foods. In 1988 the FDA awarded ‘orphan drug’ status to medical foods to encourage their development and some U.

and refer to products sale and import of nutraceuticals in containing dietary ingredients India are regulated under the Food that have reported beneficial Safety and Standards Act (FSSA). which reduction claims are not allowed. Foods for specified health uses India (FOSHU) require pre-marketing The manufacture. © 2015 KPMG International Cooperative (“KPMG International”). distribution. Member firms of the KPMG network of independent firms are affiliated with KPMG International. a Swiss entity. The State Food and Drug Administration (SFDA) is in charge of dietary supplements and registration. Disease risk strong than for pharmaceuticals. approval. Nutraceuticals: The future of intelligent food | 9 China China has a lengthy and costly registration process. oversees the SFDA and the approval of new novel food ingredients. Finally. storage. The Ministry of Health (MOH). Japan Foods with nutrient function claims are not heavily regulated and simply must satisfy the standards for the minimum and maximum daily levels of twelve vitamins and five minerals. . may impact Indian producers’ ability to produce nutraceuticals for export. the Administration of Quality Supervision Inspection and Quarantine (AQSIQ) controls all the imports and exports. The physiological effects and required manufacturing oversight is less promote health. with three main entities involved in policing the industry.

which the coffee company.bloomberg. so farms in East Africa3. Tomorrow’s success stories: The big players must show patience when investing in start-ups. Supply chain risks can be used to provide their products a red color.aspx 2 http://www. They may resist attempts to be subsumed into a bigger corporate environment. Many innovative young companies are passionate about nutrition and value their independence. related ingredients.org/NPA/Communications/SIDI. for example. Member firms of the KPMG network of independent firms are affiliated with KPMG International. a Swiss entity. and of sterilization. which has around 140. In such instances. Such vertical integration not only companies must consider carefully how to access and gives greater certainty of supply. or to produce new. investors may have to settle for a smaller share. nutraceutical companies collect detailed information about suppliers using the Standardized Consumer perception is also essential.S. In the U.org/pmmi/2011/07/01/danone-acquires-complan-food-uk/ 3 http://www. With supplements manufacturer Complan Food UK in 20112. it also lays a foundation assure supplies of essential ingredients or flavorings. Starbucks. had to reformulate some of their provides data on the (wild or cultivated) sources of beverages when consumers reacted to the use of ‘natural ingredients.000 milk supplements have come under intense scrutiny. was manufacture. companies are aimed at securing stable. irrespective of the potential financial rewards. This extract. . tomato-based extract.com/news/2014-07-18/danone-buys-40-of-kenya-s-brookside-to-expand-african-footprint.html © 2015 KPMG International Cooperative (“KPMG International”). for developing new uses of existing materials. may be subject to replaced with lycopene. derived from an insect.10 | Nutraceuticals: The future of intelligent food Supple supply chains Technological prowess and marketing smarts are not A number of recent acquisitions of food and beverage all that’s required to build a nutraceuticals powerhouse. for increasing consumer concerns about food safety. in the strawberry sauce (base) used in their Strawberries & Crème Frappuccino® blended beverage and Strawberry Banana Smoothie.pmmireports. the growth of mold or even toxins. Having acquired nutritional attention to every stage in the supply chain. Cochineal was high: sun-dried materials. Information on Dietary Ingredients protocol1.. a natural. Danone purchased a 40 percent stake in Kenya’s quality of the raw materials used to create nutraceutical Brookside Dairy in 2014. high-quality Manufacturers of functional foods must also pay close supplies of raw materials. 1 http://www. the methods of agricultural process and cochineal extract’. the example.npainfo.

. Nutraceuticals: The future of intelligent food | 11 © 2015 KPMG International Cooperative (“KPMG International”). a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International.

of its first deals.com/mediacentre/pressreleases/2014/UnileversellsSlimFasttoKainosCapital.com/images/descargas/eng/investors/relevant_facts/2014-6-26-HR-de-NdP-Fusion-NTC-LRJ-ing-def. Whether or not the first company to move. cereal maker Post Holdings of the U. wellness. . ending months of speculation that it would sell the unit6.walgreensbootsalliance. by contrast. was the Such mergers are small in comparison with the size of US$30 million acquisition of PhD Nutrition.pdf © 2015 KPMG International Cooperative (“KPMG International”).au/media-centre_detail. it sold its Slim-Fast diet unit to Kainos Capital. beauty and personal care. The new entity plans to sell its science- investment fund.aspx 6 http://www. Some are investing in start-ups.html#axzz3OdO0fJS0 7 http://higgrowth. it may be better Lucozade and Ribena to Japan’s Suntory3.and medium-sized consumer brand businesses although there is no apparent move to enter consumer within health.unilever.com/news/release/734 8 http://natraceutical.ft.com/intl/cms/s/0/37f5b7aa-8154-11e4-b956-00144feabdc0. The fund takes merged7. B&B Investment Partners. should the start-up prove latter’s production of vitamin supplements. One markets.com/media/pressreleases/allpressreleases/nestle-sells-powerbar 5 http://www. a leading the global nutraceuticals market. a global pharmacy Jofre merged with nutritional supplements specialist chain created at the end of 2014) launched a specialized Natraceutical8. Member firms of the KPMG network of independent firms are affiliated with KPMG International. successful. It only takes one sizeable Other companies have been re-balancing their product acquisition to change the dynamics of the industry. Alliance Boots Spanish pharmaceuticals multinational Laboratorio Reig (now part of Walgreens Boots Alliance1. Nestle many mergers in the future. food and pharmaceuticals companies are for the acquirer.12 | Nutraceuticals: The future of intelligent food Investing in nutraceuticals Faced with technological. and portfolio.M. In June 2014. and the fragmented structure of the taking advantage of the growth of nutraceuticals in nutraceuticals industry suggests that there will be different ways. In a rapidly changing market. 17 November 2014 3 https://www.aspx?view=637 4 http://www. announced in November 2014. as companies scramble for the choicest assets. Danone.4 in order to focus deal making skills of a high order are needed to gain the on a few winning products.com/ 2  B&B Investment Partners flexes muscles with PhD Nutrition deal. In 2013. On the pharmaceuticals side. regulatory and logistical The sale of product lines creates new opportunities challenges. on small. said in December 2014 that it would keep its medical nutrition business.nestle. abandoning companies that don’t fit their then other big companies in the field will be forced to strategy.com.gsk. of bigger transactions to come. GSK sold its nutritional drinks brands respond. combining the former’s capability in the varying stakes in these entities and then tries to buy a manufacture of powder and capsule products with the majority share at a later date. Integrity has set up a venture capital fund with the aim of investing Nutraceuticals and Cornerstone Research & Development in early-stage nutraceuticals businesses.. a private equity firm5. a Swiss entity. More recently to take the initiative rather than wait for others to make Nestle unloaded its sports nutrition PowerBar brand to their move. Unilever said in July 2014 that advantage. 1 http://www.S. but they are a harbinger producer of protein powder and nutrition bars2. which focuses based nutritional products through its medical channels. City A. In April 2014.

Member firms of the KPMG network of independent firms are affiliated with KPMG International. © 2015 KPMG International Cooperative (“KPMG International”). a Swiss entity. Nutraceuticals Industry. April 2013. Bourne Partners. . Nutraceuticals: The future of intelligent food | 13 Nutraceuticals M&A on the rise1 200 Number of deals 150 100 50 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 IPOs of nutraceutical companies Private nutraceutical companies acquired/merged Public nutraceutical companies acquired/merged 1  Sector Report.

.14 | Nutraceuticals: The future of intelligent food FOOD NUTRACEUTICALS General health ALMOND BREEZE VITABIOTICS SEVA Immunity ELLA’S Child/baby KITCHEN CHOCO-MILK PEPTO Sports/energy LUCOZADE HORLICKS Brain/mental SODA-LO OAT WELL Cardio/heart YAKULT Joint/bone ACTIVIA TO Gastrointestinal Weight management HERBALIFE PEPSI SPECIAL Diabetes Other GENVIDA LYCORED © 2015 KPMG International Cooperative (“KPMG International”). Member firms of the KPMG network of independent firms are affiliated with KPMG International. a Swiss entity.

. Nutraceuticals: The future of intelligent food | 15 PHARMA RESHAPING NUTRACEUTICALS Nutraceuticals offers opportunities for pharmaceuticals companies to make their products more consumer-oriented. FORTINI PEDIALYTE Yakult: From food to health • Beneficial health claims but does not purport to be a cure OPRO • Branded with science and research and medically manufactured • Set up a microbiological research center looking into probiotics • Published research papers to demonstrate health benefit • Began as a consumer ‘healthy drink’ and is now prescribed by physicians (although still available over the counter) Accera (‘Axona’): From health to food • Medical claims about metabolism of sugars in the brain OLERASEL • Associated itself with a specific medical condition: Alzheimer’s • Branded and aligned to scientific evidence RESVIDA XLS • Prescription only MEDICAL • FDA warning due to regulatory uncertainty over medical claims These examples show that innovation is coming from both directions. a Swiss entity. the field is open. Adding vitamin supplements or omega-3 could potentially transform a mainstream food substance. © 2015 KPMG International Cooperative (“KPMG International”). and for food producers to create brands with a medical image. Neither industry has sufficient advantages to corner this market. while brands traditionally associated with pills could broaden into drinks and snack bars. so successful nutraceutical companies will have to keep their eyes on competitors from both food and pharmaceuticals. Member firms of the KPMG network of independent firms are affiliated with KPMG International.

a Swiss entity. KPMG believes that companies will have to excel in six areas: Technology – Personalized healthcare is likely to lead to a proliferation of nutraceutical products. Member firms of the KPMG network of independent firms are affiliated with KPMG International. Companies will have to place strategic bets on technological breakthroughs to achieve results. . Product strategy – Only the best product strategists are going to make a profit by developing a powerful portfolio of technologies and brands. © 2015 KPMG International Cooperative (“KPMG International”).16 | Nutraceuticals: The future of intelligent food Characteristics of success: Daring to win To succeed in the brave new world of nutraceuticals. Blockbusters may be few and far between. Regulation – Regulations around nutraceuticals vary from one country to another and are changing all the time. Manufacturers will have to work closely with governments to anticipate market opportunities that arise when the rules are altered.

Avoid high risks by paying close attention to each stage of the chain. Deal-making – Companies may be able to make up for their weaknesses in certain areas by being quick and decisive corporate deal- makers. Member firms of the KPMG network of independent firms are affiliated with KPMG International. . Successful companies will have to develop a highly nuanced global marketing campaign that can exploit economies of scale while adapting to national preferences. Supply chain – As researchers explore ever- more exotic locales for ‘miracle’ ingredients. only the most flexible supply chain is going to produce the goods. Success in the nutraceuticals market will depend on an ability to take  the long view while adeptly seizing short-term opportunities as they arise. They can put together a strong product portfolio through a program of acquisitions and divestments. a Swiss entity. © 2015 KPMG International Cooperative (“KPMG International”). Nutraceuticals: The future of intelligent food | 17 Marketing – Consumer tastes are likely to be fickle in the field of nutraceuticals. Speed will be of the essence.

Although we endeavor to provide accurate and timely information.stirling@kpmg.bryant@kpmg. All rights reserved. funding and implementing mergers and acquisitions.stott@kpmg. Contact us Chris Stirling Chris Stott Global Chair. nor does KPMG International have any such authority to obligate or bind any member firm. food and nutraceuticals sectors • assessing risks across an R&D portfolio and can help you create an effective strategy for this fast-growing market.KPMG’s nutraceutical credentials KPMG’s global network of member firms work with We help clients with issues such as: some of the world’s biggest companies across the • managing a product lifecycle pharmaceuticals.tuckey@kpmg. market planning.uk T: + 44 (0)20 7311 4626 E: benjamin.ohrenstein@kpmg.com Willy Kruh Dr. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Our expertise spans • building research partnerships with academia key areas such as product management.kpmg. including financial due diligence.uk www.co. sales and marketing. T: + 44 (0)20 7311 8849 Nutraceuticals Lead UK E: robert. there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future.uk Robert Ohrenstein Ben Bryant Global Head of Private Equity Registered Personal Trainer.co. R&D and other specialists innovation. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à- vis third parties. KPMG International provides no client services.co.com © 2015 KPMG International Cooperative (“KPMG International”). logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International Cooperative (“KPMG International”). Member firms of the KPMG network of independent firms are affiliated with KPMG International. Lizzie Tuckey Global Chair. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. a Swiss entity. • structuring and incentivizing sales and marketing mergers and acquisitions. Life Sciences Head of Food and Drink for the UK T: + 44 (0)20 7311 8512 T: + 44 (0)113 231 3825 E: christopher.uk E: christopher.ca E: lizzie. The KPMG name. teams • new market entry planning • planning. Consumer Markets Nutraceuticals Lead UK T: + 1 416 777 8710 T: + 44 (0)20 7694 2511 E: wkruh@kpmg. and joint ventures. Create Graphics | CRT032247 | March 2015 .co.