As a company, Plethico through it’s acquisition in Natrol US, spreading the same to our stronghold markets of CIS, South-East Asia, GCC, and Africa would help take things forward. This is a high focus area for the Plethico sales team.

What are the major factors that would drive the nutraceuticals market, both in India and abroad?

The nutraceutical industry is witnessing varying levels of maturity in different regional markets and serves divergent consumer groups and education levels. However, many regional markets share common growth drivers in various aspects.

The largest regional markets for nutraceuticals include the US, followed by Europe and Japan. Aging population, growing healthcare spending, and rising interest towards self-medication and preventive healthcare have been the key market drivers in these markets.

Sales in other markets, including Asia-Pacific and Latin America, are driven by economic growth, growing disposable incomes and an expanding middle-class. The nutraceuticals industry is likely to witness healthy growth rates in these markets in medium-to-long run.

Plethico is today present in the US, the UK, the GCC and the South-East Asian markets. So as far as nutraceuticals is concerned, we are well entrenched.

Do you feel threatened by the presence of large global food companies that have set up functional food or nutraceutical divisions?

The large conglomerates are slowly realising the changing consumer preferences, which could also be a reason which had influenced the changed FDA stand on quality parameters in the US starting June 2008. There is news that large players are moving into this segment and for growth they will start buying out many small players.

The new changed laws, effective from June, would render many small players open to such attempts. This will clearly lead to consolidation in the nutraceuticals industry and the survival only of the fittest. This is expected to lead to major improvement in the margin game.

As far as Plethico’s approach is concerned, we have not focused on herbal generics sold as food supplements or functional food, but our focus has been on formulations and branding.

How big are factors such as branding are, market promotion and channels for the nutraceuticals market?

Depending on the markets that one is present, the importance of quantum of brand promotion, advertisements and channels would vary. However, one thread remains common to all — branding is of paramount importance irrespective of markets.

Pricing is not a major issue in any of the markets but depending on the market in which one is present, the operational profit gets squeezed because of high marketing costs due to brand promotion or the overbearing proportion of the distribution players such as Walgreen, Wal-Mart, Costco, etc in the US. They derive huge negotiating powers based on their market reach.

In the nutraceuticals market, vitamins have remained a major category. Do you see it changing?

The worldwide market for nutraceutical ingredients is expected to grow rapidly, owing to the availability of clear clinical evidence on safety and health benefits. Additionally, the advent of new applications is expected to push up the demand for essential minerals, magnesium and calcium; herbal extracts green tea and garlic; and soy protein nutrients. Besides, growth would also be witnessed in the functional beverage and food additives such as sterol esters, lutein, probiotics, lycopene and omega-3 fatty acids, and non-herbal extracts such as coenzyme Q10, chondroitin and glucosamine.

What about new areas which are expected to grow in future?

Minerals and nutrients segment is set for rapid growth due to the growing acceptance of health benefits. Consequently, maximum growth is anticipated from broadening applications in functional food and beverages and meal supplements. Other potential growth opportunities are expected from isoflavones and soy proteins, calcium and magnesium, lycopene, probiotics, omega-3 fatty acids and psyllium fibers.

In the nutraceutical vitamin ingredients, natural vitamin E formulations made from non-genetically modified plants would witness the maximum gains due to their acceptance in the EU and other countries such as Brazil that ban food compounds manufactured using biotechnology.

How would you categorise the Chinese competition in the nutraceuticals market?

Changing lifestyles and unbalanced diets are leading to an increase in health-related problems among the general Chinese population. As a result of this, an increasing number of people in China are becoming more health conscious. These factors along with the increase in medical costs are driving the growth of the Chinese nutraceuticals market.

The market is also likely to benefit from the regulations for health food registration that were finalised in 2005 and the ongoing approval of direct sale administrative regulations. Presently, taste, convenience, and style are the major factors influencing the consumers’ purchasing decisions, but health considerations are likely to play a more important role, as consumer awareness of the benefits associated with nutrition to health and well being improves.

As far as margins are concerned, any player with herbal generics would face pressure, whilst players in the formulations especially using traditional Chinese medication (TCM) would stand to gain as there is huge demand to CTM products globally.

Plethico got listed on the stock exchanges in May 2006. Looking back, how do you sum up the progress made by the company?

When we did our IPO, we had stated objectives such as upgrading a plant, spend on R&D unit, getting into organic farming, acquiring an OTC / domestic herbal /nutraceuticals company, amongst others. We were successful in achieving most of them, apart from deferring the acquisition. In October 2007, we acquired Natrol Inc, a NASDAQ listed ‘synergistique herbal nutra’ company for $81 million. So, the company is proud and completely satisfied. Apart from growth and business front, the company is also more strong and bigger by way of strategic moves.

Are not there disconnect between the promises made my manufacturers and the quality delivered by products in this industry?

As far as sports nutrition is concerned there are no regulations put in place by the Government, as such, our products conforms to US Standards (because the major competitors are from the US which also include ‘Prolab’ from Natrol as well). We are in tune with US standards of disclosures and claims on industries front and the US as you know is a regulated market.

As far as confectionary space is concerned, we do not make any claims and finally as far as Herbal OTC is concerned all our claims and quality parameters are strictly as per Pharma line. We test on assay basis the ingredient content level in the finished products, so we are pretty much confident that based on the above, our products are neither stating what is beyond, what is prescribed nor is our quality levels below the norms that we claim it to have. So, we are pretty much in tune with the time and perhaps well ahead of any regulatory requirements in India.

There are concerns that herbal products taken from any two sources are not same…

It is true that herbal products taken from two sources do not necessarily have the same potency. This leads to some concerns of batch to batch variations in efficacy, based on the potency of the material used which, unlike a drug, is completely crystallised formulations which is precise in nature.

But, we saw opportunity here and hence our foray into standardisation for the advanced markets. We clearly believe that with standardisation, consumer education and stringent Government regulation falling into place, it will help the consumer to develop confidence in the products being churned out in today’s market.

What steps have you, as a manufacturer of herbal drugs and nutraceuticals, taken?

Plethico already started the process of putting in place all that a manufacturer has to do to build up consumer confidence and as such our motto is ‘Pledged to Ethics’ which is reflective of what this industry really should be aspiring to achieve.

We are pretty-much compliant on the current regulations and we actually welcome any further stringency in regulations as this will help the industry to consolidate and thus boost the consumer confidence in herbals. This in our opinion is the way forward. The current trends of growing consumer interest in organic foods, functional foods, and dietary supplements are all indicators of what we are focusing on today.