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The international markets report.

The global marketplace has become very dynamic in the context of nutraceuticals. NW's International Markets Report offers a comprehensive look at the latest regulatory developments, trends and issues facing nine regions around the world.

Australia & New Zealand: The Lands of Opportunity

The market opportunity for U.S. manufacturers entering the Australian and New Zealand markets took a leap forward last year when the Australian and U.S. governments agreed to implement a Free Trade Agreement (called AUSFTA) between the two countries. This in turn has resulted in the elimination of tariffs and makes the process of entering the Australian market a simpler and faster one for U.S. exporters.

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From the retail manufacturer's perspective, the combined markets of Australia and New Zealand represent a market population size of 24.5 million people, with a mean age across the population of both countries of 35 years. Australia and New Zealand both rank highly in the GDP per capita for developed countries, which means their consumers are not unduly constrained when it comes to consumer spending. In 2003, U.S.-based Health Strategy Consulting (HSC) published a market report on the Australian and New Zealand complementary medicine market. HSC estimated a total nutrition market value for Australia and New Zealand of AUS$2.9 billion, broken down as functional foods (AUS$1 billion), organic (AUS$0.8 billion), supplements (AUS$0.9 billion), and natural personal care (AUS$0.2 billion). They also argued that compared to other developed world markets, New Zealand and Australia have much potential for growth. Based on this report, Australia and New Zealand rank just behind Canada in terms of size of the functional food market (expressed in terms of dollar value).

A quick synopsis of the Australian and New Zealand consumer reveals a predominately well educated and affluent middle class for both countries. The acceptance and usage of the more traditional dietary supplements is high for both and there is good evidence that consumers are seeking the benefits of functional foods both from a nutrition and convenience perspective.

There are over 2100 retail health stores throughout Australia. Some of the major chains include Health Life, Go Vita, GNC-LiveWell and Good Life. There are approximately 450 health retailers in New Zealand with Health 2000 being the largest retail chain and Hardy's Healthy Living being the next largest.

Given the proximity to South East Asia, there is a strong Asian community and culture in both countries, representing opportunities for products based on Traditional Chinese Medicine. An example of this would be deer velvet (soft antler), which is widely available and accepted throughout New Zealand.

In May 2005, U.S.-based multinational healthcare company, Cardinal Health, published data pertaining to consumer preferences and trends in the Australian vitamin, mineral and dietary supplement market. The report examined consumer purchasing patterns over a period of five years up to 2005. The data indicated that 74% of the Australian population had taken one or more vitamin, mineral, herbal or nutritional supplements in the previous 12 months. While there has been moderate but consistent growth in vitamins and minerals, the largest growth appears to be with non-herbal dietary supplements. This growth appears to be driven strongly by younger women aged 20 to 30 years. To a lesser degree, growth can also be attributed to 44- to 54-year-old women. Finally, growth has also been observed among men and women in the 55+ age group. And a similar consumer trend profile could be expected within the New Zealand market.

It may seem along way to travel to access a new market, but Australia and New Zealand maybe worth taking a closer look at, especially since the free trade agreement (AUSFTA) between the U.S. and Australia came into effect on January 1st last year. The real impact of AUSFTA is that Australia has been able to eliminate all agricultural tariffs. This was a significant development, especially since in the past Australia typically maintained tariffs as high as 30% on certain dairy products, as well as tariffs of 4-5% on fresh and processed fruits and vegetables, processed foods, some grains, oilseeds and other products. The other advantage of AUSFTA is that regulators on both sides of the agreement have worked to eliminate the bureaucratic barriers to trade. Be advised, however, that the strict phyto-sanitary standards that existed in both Australia and New Zealand are still in effect today.

But while AUSFTA certainly represents an opportunity for U.S. natural products manufacturers, there are still some very important regulatory factors to consider in both Australia and New Zealand. The agency currently responsible for dietary supplement regulations in Australia is the Therapeutic Goods Administration (TGA). All complementary medicines, such as herbals, nutritional supplements, vitamins, minerals, aromatherapy, homeopathic medicines and Traditional Chinese Medicine, fall within the governance of the TGA. Most complementary medicines available for sale in the natural products market are referred to as "Listed Medicines" and can be found on the TGA's approved list. The process of approval for a new product requires an application to be submitted to the TGA. This can take six to eight weeks, after which the product is issued a unique AUST L number. All approved "Listed" complementary medicines appear with an "AUST L xxxxx" number printed on the product label. But for those products that for whatever reason are not included in the TGA list, there is a separate path to market called the "Registration" process. Unlike the "List" process, which covers a majority of dietary supplements and involves a review of both safety and quality, the registration process carries the additional burden of demonstrating the efficacy of the product. Registered products can be identified in the market with an "AUST R xxxxx" number on the label. While the cost of this registration process will vary depending the specifics of each product, one would expect just the application cost alone to be considerably higher than the application cost of the "List" process, and could take well over a year for approval in some cases.

For a U.S. exporter, the cost of regulatory compliance, including GMP certification, is something that requires careful review if entry into the Australian market is to be considered.

To ease this process there are several consulting companies in Australia like Robert Forbes and Associates Pty Ltd, which specialize in navigating the regulatory requirements of the TGA and assist companies with the submission process. A more comprehensive list of regulatory and technical consultants can be found on the website of the Complementary Healthcare Council of Australia (www.chc.org.au).

Despite the success of the Australian TGA in managing the health and well-being of its citizens, it is expected that by mid-2007, the TGA will be disbanded, replaced instead with the joint Australia and New Zealand Therapeutic Products Authority (ANZTPA-www.anztpa.org). This new entity will retain the same regulatory standards that exist in Australia under the current TGA; it will just be extended to include New Zealand. The cost of compliance with this regulatory standard for retail manufacturers in New Zealand has yet to be calculated.

From the Australian regulatory perspective (and from mid-2007 the New Zealand regulatory perspective), the rule of thumb has been if it looks like a drug, then it will be regulated as such. On the other hand, if it looks like a food then it doesn't fall under TGA jurisdiction. In other words, no "therapeutic" regulations would apply to food, which means no health claims can be made.

Since the functional food and beverage sector is one of the greatest growth opportunities for retail manufactures, it is important for the future of this market segment that the regulatory authority for food and beverage provide definition and clarity around functional or novel foods. The responsibility for regulatory oversight in both Australia and New Zealand falls under the joint Food Standards, Australia & New Zealand (FSANZ). This authority is separate from the TGA (soon to be ANZTPA) and deals with all things food and beverage related.

In the same way that the FDA has provided retail manufacturers with Qualified Health Claims for those who meet specific ingredient standards, FSANZ has also been putting together a list of approved health claims for foods and beverages. Until now, only nutrient "content" claims have been allowed, such as "this food is high in fiber," as have some health maintenance claims. However, there is a prohibition on other types of health claims, with the exception of claims about the benefit of maternal consumption of folate to prevent neural tube defects.

In recognition of the innovation and positive health benefits represented by functional foods and beverages, there has been a significant, positive change for the food industry, with a wide range of claims permitted providing incentive for continued innovation.

FSANZ has developed a claims classification framework for Functional Food and Beverage, which sets out criteria for two levels of claims: The "General" level claim and the "High" level claim. The essential difference is general level health claims do not reference a serious disease or biomarker, and most important, will not be subject to pre-market approval by FSANZ. High level health claims, however, are those claims that do make reference to a serious disease or biomarker and will be pre-approved by FSANZ before they can be used in conjunction with specific products.

In addition to both the general and high level claims, FSANZ has also provided a short list of approved claims. These are broadly based on approved claims from Health Canada's Natural Health Products Directorate (NHPD), which seeks to make the connection between health and diet. The following approved claims are listed in the standard:

1. Sodium (with or without potassium) AND hypertension

2. Fruit & vegetables AND coronary heart disease

3. Whole grains AND coronary heart disease

4. Saturated fat and/or trans fat AND elevated serum cholesterol or heart disease

5. Calcium (with or without Vitamin D) AND osteoporosis

6. Folate AND neural tube defects

7. Omega 3 fatty acids AND coronary heart disease

These approved claims are available to a manufacturer, who can demonstrate that their product meets the specific ingredient and serving requirements listed in the standard. More detail on these health claims can be found on the Food Standards Australia & New Zealand website, www.foodstandards.gov.au.

Whether you are a manufacturer of dietary supplements or functional foods and beverages and are looking to export to Australia or New Zealand, there are a couple of key points to consider. From mid-2007 both countries will appear as one market, albeit from a regulatory standpoint. Unlike the U.S. where FDA has a regulatory responsibility for both dietary supplements and food, Australia and New Zealand have two distinct regulatory authorities, one for dietary supplements (ANZTPA) and one for food and beverage (FSANZ).

A free trade agreement is in place between Australia and the U.S. and an even more comprehensive economic development agreement (CER) exists between Australia and New Zealand. Economic prosperity has been the hallmark of both economies since 2000. This has provided both the stimulus and the means to motivate a well-educated and affluent middle class to maintain high levels of consumer spending. However, with economic prosperity comes the health consequences of a developed nation. The rising incidence of cardiovascular illness, obesity and diabetes are amongst the plethora of health concerns confronting both these countries. That's why this is the perfect time for nutraceuticals to make their way to the Australian and New Zealand markets.

About the authors: Paul Altaffer is on the product and business development team at RFI Ingredients, Blauvelt, NY, a manufacturer of innovative natural ingredients and custom formulations for the functional food and dietary supplement industries. He was previously the founder and president of Nat-Trop, an ingredient company now operated by RFI that develops and trades primarily in South American products. He can be reached at 415-334-7199; E-mail: paulo@rfiingredients.com. Grant Washington-Smith has over 17 years of experience across a variety of businesses in the natural products industry. For the past six years he has worked in business development and brand management for Alticor Inc. Prior to arriving in the U.S., Grant was involved in marketing and business development throughout New Zealand, Australia and the Asia/Pacific region. His focus has been on the commercial development of the novel and the innovative. He can be reached at gwashin@worldnet.att.net.

By Grant Washington-Smith

Business & Brand Development

Canzus Partners

San Francisco, CA

&

Paul Altaffer

Product & Business Development

RFI Ingredients

Blauvelt, NY

Canada: The Status of Natural Health Product Regulations

A multi-year consultative development process led to Canada's Natural Health Products regulations, a system that most agreed would bear watching as a possible model for other regions where the distinctive characteristics of natural health products could be recognized and the products treated as neither foods nor drugs, but as an entirely separate class of products. We're now two-and-a-half years into the new regulatory environment. Apparently what began as good regulation in theory has come up against serious challenge and criticism. Most agree, though, that when fully implemented and enforced, these regulations have the potential to create a unique environment where consumers have access both to a broad range of natural health products, and access to information in the form of substantiated health claims. But there is still a long way to go.

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The History of Natural Product Regulation

In January of 2000, Phil Waddington was appointed Director General of the Natural Health Products Directorate (NHPD) of Health Canada. The Directorate was tasked with the responsibility of framing and implementing regulations and guidelines for natural health products, based on 53 recommendations of the Standing Committee on Health, and after a thorough consultative process with stakeholder groups across the country. The objective of the regulations was and remains "to ensure that Canadians have ready access to natural health products that are safe, effective and of high quality while respecting freedom of choice and philosophical and cultural diversity."

Canada's Natural Health Products (NHP) regulations came into effect on January 1, 2004, covering vitamins and minerals, herbal remedies, homeopathic medicines, traditional medicines (i.e., traditional Chinese medicines), probiotics, and other products like amino acids and essential fatty acids.

The regulations apply to companies involved in manufacturing, packaging, labeling or importing natural health products. As these regulations were phased in, a risk oriented enforcement strategy was developed by NHPD to transition existing available products on the market to make the change to the Natural Health Products environment.

Critical Aspects of the Regulations

The NHP regulations outline Good Manufacturing Practice (GMP) standards, which must be followed by those involved in manufacturing, packaging, labeling or importing of products or ingredients. This requires that facilities involved in these operations obtain a Site Manufacturing License from NHPD. As of January 1, 2006, all facilities were required to have this license and NHPD enforcement action was initiated in this area.

Requirement for a Claim

Applicants must submit evidence to support a claim they wish to make associated with the product, with NHPD allowing therapeutic claims, risk reduction claims and structure-function claims, in addition to non-specific claims. Claims are sub-divided into either traditional or non-traditional use. NHPD has established criteria for the evaluation of the evidence to support the conditions of use of the product, including totality of evidence.

Natural Product Numbers (NPNs)

All natural health products offered for sale are required to have product licenses by the time the regulations are completely phased in on January 1, 2008. Any products with an identified health risk are an immediate priority for NHPD enforcement activity. As far as enforcement for non-compliant products is concerned, NHPD has divided products into six categories based on risk, and as of today, deadline dates have passed for three of the categories, including products on Health Canada's listing of New Drugs, isolates, amino acids, fatty acids, concentrated volatile oils and extracts other than those prepared by traditional methods and algal, bacterial, probiotic, fungal and non-human animal materials. Deadline dates for the other categories have recently been revised (see Table 1).

The process of acquiring an NPN involves submitting a product license application to NHPD along with safety and efficacy information to support the claim. Companies making submissions receive an acknowledgement letter (and number) when the file is logged by NHPD, informing them that the product is in the queue. Health Canada is currently focusing its compliance efforts against NHPs that have not been issued submission numbers by Health Canada, acknowledgement of receipt of a complete Product License Application including all required information.

NHPD has posted numerous monographs, so if a company wishes to make a simple monograph claim, they need only refer to the monograph and a shorter turnaround time theoretically applies. This compares to a lengthy, some would claim impractical turnaround time for more complicated submissions.

It quickly became apparent under the new regulations that the NHPD would be unable to deliver the quick turnaround times it originally predicted and that a backlog of product submissions would evolve. In its most recent communications, NHPD has identified steps it is taking to reduce the backlog of over 10,000 product license applications pending, stating it "can no longer afford to accept poor quality applications--all incomplete submissions are being returned." The immediate impact of this measure was a reduction of 500 in the number of product submissions backlogged.

Another development post-January 2004 was the ability of ingredient suppliers to provide ingredient master files to NHPD. Finished product manufacturers would then reference these ingredient master files in their product license applications. One challenge to this system is that the ingredient files are not reviewed for completion by NHPD until they are actually referenced in an NPN submission. Conceivably, this means that a deficient ingredient master file might not trigger any action until months or even years after it was created by the ingredient company, if no finished product references it. Only then would the NPN applicant and presumably master file creator be notified of a deficiency.

Site Licenses Mandatory

As of December 31, 2005, all companies involved in the manufacturing, packaging, labeling, and importing of Natural health Products must carry a Site License. According to the regulations, a company must have standards and practices regarding product manufacture, storage, handling and distribution in order to obtain a site license. This process involves a company self-assessment and submission of an application.

Other Recent Developments and Observations

In an April presentation to industry, NHPD admitted that because of the current backlog in product approvals, a system redesign would be required for a long-term solution. NHPD performance to date was communicated including 13,200 product and site license applications received since 2004,1,570 product licenses issued, 290 site licenses issued, and a current rate of 28 applications received per day compared to an output of eight licenses per day. As of April, the backlog stood at 11,340 applications. NHPD has increased evaluation staff to 126 people, and established an objective of processing 72 licenses per day by 2007. Another objective expressed by NHPD was its desire to expand the list of monographs from the current 86 to over 300 by December 2006.

On the positive side, NHPD has eliminated its backlog in logging and analysis of submissions, allowing it to focus on evaluation. The NHPD also communicated its objective to post application forms online by June, publish new guidance documents by summer 2006, and allow online submissions by the end of 2006. As it reviews the regulations, it expects to eventually establish a cost recovery system once performance standards are being met. NHPD has also eliminated its backlog of Clinical Trials approvals, intending to keep this backlog clear in the future.

Other recent communications from NHPD involve marketing and enforcement strategies. In April, NHPD advised that using the term "NPN Pending" on labels was formally prohibited, a transition strategy many in the industry had been using to enable new product introduction due to lack of movement on the backlog.

Two-and-a-half years into the current regulatory environment has left everyone frustrated at the promise of the new regulations not being met.

According to Robert Ross-Fichtner, director of compliance consultants Focal Point Research, "The new regulations allow products to legally make health claims that were either difficult or impossible to make prior to 2004. The optimism of these new regulations has been dampened by the difficulty in getting applications for new products approved in a timely way." In fact, Ross-Fichtner continues, "Some companies that strictly adhere to compliance with regulations have walked away from the Canadian market, or are postponing plans until lead times to approval become more certain."

Alicia Wojewnik of Dicentra, Inc. commented, "One of the biggest frustrations is inconsistency of reviewers, as frequently each requests different items. We've experienced cases where new requirements for quality are suddenly introduced, such as effectiveness tests for preservatives, or an animal tissue form of vitamin D is required. And when you use the information line set up by NHPD, a response is rare. It seems as though they're confused and disorganized and the answers, instead of being thorough, are only partially relevant."

On the positive side, Ross-Fichtner pointed out the hiring of more front line personnel. Further, Ms. Wojewnik highlighted the monthly and quarterly communications issued by NHPD as providing excellent general information about the status of NHPD, as well as compliance and enforcement.

The most critical aspect of the NHP regulations from an industry perspective, is ability to get products through the system in a compliant, cost effective and time efficient manner. Here NHPD is facing its biggest challenge and industry's biggest frustration. According to Mr. Ross-Fichtner, "The length of time to get a Product License into the system, and then approved is the issue. NHPD is more than aware of this and are announcing improvements to the process."

The backlog and measures taken to address it are also challenging. Ms. Wojewnik confirmed, "NHPD automatically rejects all incomplete submissions. For example, applications with lots of references are being rejected if two full-text copies of each essential reference are not provided. This requires reams of paper, and CDs containing the referenced attached are not permitted and are not reviewed. Even if the reference comes from the NHPD itself, it is still required as two full text hard copies with the application."

In the End ...

The Canadian regulations are clearly an example of where theory and practice have yet to become aligned. There is optimism that the model is viable, but the devil is in the details. A clear example of this issue is the strategy regarding food and beverage products containing natural ingredients. Early on in the approval process, NHPD granted an NPN to Red Bull energy drink, a move that was of interest to food and beverage companies who hoped that the new environment might enable them to make health-related claims. Currently, though, NHPD and its sister Directorate (Foods) are engaged in branch level review to determine what the evaluation process for such products will ultimately be, in the meantime freezing all pending product applications, including drinks, bars, spreads and juices.

To its credit, NHPD continues its open, consultative approach with industry and with consumers. It has been honest in stating its challenges and from leadership on down appears committed to providing the access to products outlined in its mission. In the future, the resources NHPD is allocated and the level of its ongoing dialogue with industry will be key factors in determining the success of this particular regulatory model.

About the author: Len Monheit is the president and CEO of NPI Center, Mississauga, Ontario, Canada, a major online resource for the dietary supplement, personal care and functional food industries. He can be reached at 877-463-0110; E-mail: len@npicenter.com; Website: www.npicenter.com.

By Len Monheit

President & CEO

NPI Center

Mississauga, Ontario, Canada
Table 1

Old Priority Dates          New Priority Dates*

Priority 4-June 1, 2006     Priority 4-June 1, 2007
Priority 5-January 1, 2007  Priority 5-January 1, 2008
Priority 6-June 1, 2007     Priority 6-June 1, 2008

*Category 4 includes plants, plant materials; extracts prepared by
traditional methods, volatile (essential) oils other than those that are
concentrated and indicated for internal use; category 5 includes
vitamins and minerals; and category 6 includes homeopathic medicines.


China: The Next Nutraceutical Behemoth

It's no secret that China is fast becoming a global powerhouse, and its impact has certainly been felt in the nutraceuticals industry, especially in ingredient segments where labor is a major component of manufacturing costs. So while the first stage of evolution for China was simply being a net supplier to the global nutraceuticals industry, China is now entering the next phase of its evolution where it will eventually become a net consumer of nutraceuticals.

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Economics

Underlying this phenomenon are some key macroeconomic trends, which are important to recognize to understand the potential of the Chinese market. For a major economy like China to become a net consumer of high-value products like nutraceuticals, it must have an economy of sufficient size, with adequate spending power to pay for these products.

Today's Chinese economy exceeds $8.2 trillion, compared to the U.S. economy at $12.5 trillion (Economist Intelligence Unit-EIU). This means that China has the power today to produce and consume approximately two-thirds of the goods of the world's largest economy. What is more impressive is that China is growing so much faster than the U.S. that the two nations will essentially be equal in size by 2015 (EIU). The implications of this growth are staggering for nutraceuticals. The nutrition industry in China has grown slightly faster than the Chinese economy every year since at least 1995, and if that trend continues the Chinese nutrition industry will total at least $22.5 billion by 2015 (see Figure 1).

However, China is still developing and much of the population lives in poverty, so growth in disposable income is an important consideration. The population has not had a lot of money to spend in the past, which is why they have essentially only been suppliers to the industry and not consumers. That is changing though. Private expenditures in China are expected to double by 2010 and triple by 2015, according to the EIU. This means that by 2015 the Chinese nutraceuticals industry could grow to just under $25 billion just by maintaining its share of private spending.

Urbanization is a major driver of these trends. In fact, nutraceutical companies should understand that they are not targeting the entire 1.4 billion people living in China when they enter the market. The 30% of the population living in the more heavily populated coastal provinces controls 63% of the entire Chinese economy (National Bureau of Statistics, China). In fact, the majority of the population that do not live in these provinces earn less than $2 per day and don't have the means to buy nutraceuticals. So in actuality, the population that will have the best access to the means needed to buy nutraceuticals is slightly larger than the U.S. population. Also of note, according to the UN Populations Division, by 2025 nearly 55% of the Chinese population will live in these provinces. This could broaden the potential consumer base of nutraceuticals to just under 800 million people and contribute significantly to growth.

Health Conditions

If economic growth and urbanization are not enough evidence of the future growth of nutraceuticals, health demographic trends also support these growth forecasts. The aging population is a major underlying growth force in the largest nutraceutical industries in the world (U.S., Japan, Europe). The "One Child" policy in China has created a similar demographic trend; in fact by 2050 there will be twice as many people in China over the age of 50 as there will be under the age of 20. Both urbanization and aging have created a number of health epidemics that nutraceuticals can help address with efficacious products.

Aging populations and urbanization create catalysts for health problems, like stress, more time spent at work, greater wealth, fattier foods, less exercise, etc. China certainly has its share of health problems, and all indications point to them worsening as the years go on. Take hypertension and arthritis, potentially the two largest health crises facing the world's largest country. Hypertension afflicts more than 41% of the population over the age of 35, according to the World Health Organization (WHO). This is also an aging problem, as more than 55% of the population over the age of 50 are hypertensive. Arthritis, the classic aging problem, afflicts over 100 million people in China--that is one-third of all arthritis sufferers in the world! And as the Chinese population gets older, there will be even greater demand because nearly half of all Chinese over the age of 50 already have the condition. The changes in Chinese society have led to a number of other epidemics, including borderline high cholesterol and hyperlipidemia, diabetes, heart disease, lack of fiber and more. Heart disease alone is responsible for 21% of all deaths in China, and this is a largely treatable and preventable condition in which nutraceuticals can play a vital role.

Prevention

Additionally, prevention is vitally important in China, and perhaps helps de-risk an entry into the country. Burrill & Company estimates that in China the average consumer pays 67% of their healthcare costs because there is limited health insurance. In countries that are developing economically, healthcare expenditures usually increase at a much faster rate than inflation or the economy because the standards of care tend to norm to high Western levels. This is very costly and creates a strong incentive for consumers to avoid hospitalization. The size of the Chinese nutrition industry was estimated by be worth nearly $8 billion in 2004 by Nutrition Business Journal (NBJ), San Diego, CA, and $12.5 billion in 2005 by Frost & Sullivan. These estimates don't marry up perfectly, but it is clear that there is already a significant consumer base buying nutraceuticals for prevention. In fact, the foundations of Traditional Chinese Medicine are all about prevention, so culturally the Chinese have already accepted that you can get health in a tea or from a plant. (See Table 1 next page.)

Entering the Market

While all of the macro trends are clearly in place, actually entering the market may be more difficult. Most international companies will need to find the right partner and the right distribution channel, understand the regulatory environment, establish a relationship with the consumer, and in a dynamic country like China, have a strong opinion on what the future holds.

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Laws and Regulations: In China, it has been common practice for thousands of years to consume substances (e.g. ingredients, supplements) with putative health benefits. Only in the last decade or so has the Chinese government published laws and regulations in order to standardize industry practices, which historically have been regulated at the regional, not national, level.

The first such national law, the Food Hygiene Law of the People's Republic of China, was adopted on October 30, 1995, and it defined food as "any finished product or raw material (i.e., primary material related to the function of health food) intended for people to eat or drink, as well as any product that has traditionally served as both food and medication, with the exception of products used solely for medical purposes." Such definition provides for the inclusion of both foods and nutrition supplements (known as dietary supplements in the U.S. and food supplements in the EU). This law includes two Articles of particular importance, including Article 22 (If any food is declared to have special effectiveness in healthcare, the product itself and the product description must be submitted to the health department of the State Council for examination and approval. The health department of the State Council shall formulate the hygiene standards and regulations concerning the production and marketing of said product.) and Article 23 (Any food declared to have special effectiveness in healthcare must not be harmful to human health. The contents of the product description must be truthful and the functions and ingredients of the product must conform thereto and must not be fraudulent.), which provide general rules on the definition of, requirements for, as well as examination and approval of health foods, including the active ingredients (i.e., raw materials).

In June 2003, the State Food and Drug Administration (SFDA) took over the responsibility of health food registration approval from the Ministry of Health (MOH). The SFDA's Department of Drug Registration is completely responsible for the approval of health food, including nutrition supplements. In accordance with the Food Hygiene Law of the People's Republic of China and the Administrative Licensing Law of the People's Republic of China, the Interim Administrative Measures for Health Food Registration (Decree No. 19) were promulgated by the SFDA and went into effect on July 1, 2005. With these provisions, the responsibility for the assessment and review of food safety, effectiveness, quality control, and labeling content was assigned formally to SFDA and its subsidiaries.

Health Claims: In contrast to the scientific rigor (i.e., well-substantiated scientific evidence collected according to strict scientific procedures with the results published in peer-reviewed journals) employed by the U.S., Canada and many countries in Europe, Chinese regulations rely more on long established and accepted practice and experience developed in Traditional Chinese Medicine (TCM).

In China, health claims are allowed on health foods provided requirements for public health are met and the claim in question does not employ medical jargon or terms likely to be confused with pharmaceuticals (Article 19 of the Advertisement Law of the People's Republic of China). Wording exaggerating the efficacy of the products may not be used in advertisements and the advice stating, "this product cannot substitute any medicine" must be clearly shown. Since August 1, 2005, no health food advertisements have been allowed to be released in the media prior to examination and approval by food and drug administration departments at the provincial level.

Currently, 27 functional claims have been published and are allowed to be associated with a health food. These include: enhanced immunity; sleep improvement; relief of physical fatigue; enhanced tolerability of oxygen deficiency; help in the protection against the harms caused by radiation; increase in bone density; helps in the protection against chemically induced liver damage; relief of eye fatigue; eliminate acne; eliminate chloasma; improve moisture of skin; improve oil content of skin; weight loss; help in lowering blood glucose, improve growth and development; antioxidation; improve nutritional anemia; help in memory improvement; adjust enteric bacteria colony; promote lead excretion; promote digestion; assists in decreased clearing of the throat; helps in the protection of gastric mucosa; promote lactation; catharsis; helps in lowering blood pressure; and helps in lowering blood lipids.

Each health food product can apply with the SFDA for association with no more than two health functions. If the health food function(s) is/are outside the published scope, the application of registration can still be submitted but the applicant would need to have conducted functional testing (animal, human or both) to support the claim.

Finding the Right Partner: Because language is a barrier for most international companies in China, finding the right partner is critical. China is a trader nation and the number of supplement distributors numbers in the dozens. However, unless a company has strong Chinese marketing and regulatory support in-house, it may make more sense to partner with an actual marketer of nutraceuticals.

The health food side is somewhat fragmented; there were 848 companies in the market in 2002, generating $2.4 billion in sales. What is interesting is that the five largest companies in this sector (Brain Platinum, focus: brain health; Wanji, focus: ginseng foods; Gold Partner, focus: multivitamin foods; Taitai, focus: women's health vitamin foods; and Kangfulai, focus: ginseng foods) accounted for 34% of health food sales, but are very narrowly focused. These companies have an existing distribution system and understand how to market to their consumer bases. In fact, these companies are as good at marketing as any U.S. or European company. However, consumers have lost a little bit of trust in these companies because of a crackdown on aggressive weight loss claims (this sounds a little like Western markets in that regard!).

On the supplement side, Amway is by far the largest company in the market with approximately $470 million in sales in 2003, probably bringing in close to a billion in sales today. The most popular types of supplements in China include calcium, zinc, iron, and multivitamin supplements, led by Centrum, 21 Gold Vita, and Happy Growing. Until recently, 90% of supplements have been sold through pharmacies in China, according to multiple sources. However, direct selling is expected to take a much larger portion of the market with recent regulatory changes. In fact, network marketing companies have been trying to enter the market for years, but only recently has the government issued licenses to market directly to consumers--and even then only within a strict framework.

Regionality is also a driving factor. Each Chinese province is like a separate country with its own culture and language. Consumer approaches to nutraceuticals are very different as well. In provinces with industrial manufacturing bases, consumers tend to be more price and value oriented, but in commercial and financial centers seek out higher quality products. The bottom line, however, is that consumers want nutraceuticals, it is just a matter of how you position a product to align with their varying values.

What is particularly interesting is that consumers have little trust in the claims made by health food companies today, but they do trust supplement manufacturers. It makes sense to assess your product and the capabilities it needs in order to succeed in China. If you need clinical credibility rather than marketing, partnering with a supplement company may make more sense. Alternatively, if your product needs more education, partnering with a direct marketer may be the best option.

Summary

All of the foundation elements for growth in nutraceuticals exists in China today: economic development, increasing access to health outlets and products, growing rate of health problems that need treatment options, and incentives for consumers to take preventive action. Because the health food industry is relatively young in China, existing regulations and associated terms remain somewhat ambiguous and may continue to change after a trial period. One of the major challenges in promulgating requirements for health foods (including raw materials) and nutrition supplements is enforcement. Ultimately, entry to the health food market by products of dubious benefit will become more restricted and consumers will be wary of ineffective products. Additionally, advertising for health foods will be better supervised to prevent manufacturers from making false claims about the supposed benefits of their products' functions.

About the authors: Adam Ismail business development manager, Health & Food Technologies, Cargill, Inc., Minneapolis, MN. He can be reached at 952-742-2609; E-mail: adam_ismail@Cargill.com. Harry Rice, PhD, is senior scientist, Regulatory & Scientific Affairs, Cargill, Inc. He can be reached at 952-742-4627; E-mail: harry_rice@cargill.com.

Disclaimer: The opinions expressed in this article are those of the authors and do not represent the opinions or advice from Cargill.

References furnished upon request.

By Adam Ismail

Business Development Manager

Cargill Health & Food Technologies

Minneapolis, MN

&

Harry Rice

Senior Scientist, Regulatory & Scientific Affairs

Cargill, Inc.

Minneapolis, MN
Table 1 Nutraceutical Aids for Prevention of Serious Health Conditions

                                                Age    Potential Urban
Condition         Selected Nutraceutical Aids*  Group  Population Need**

Cardiovascular    Phytosterols, Beta glucans    All     80 million
Disease           Omega-3s, Chromium
Depression        Omega-3s, SAM-e, St. John's   All     21 million
                  Wort Folic Acid, Iron
High              Phytosterols, Beta glucans    All;    12.6 million;
Cholesterol       Fenugreek, Soy                >60      8.5 million
Borderline        Phytosterols, Beta Glucans    All    200 million
High Cholesterol  Fenugreek, Soy
Diabetes          Alpha Lipoic Acid, Brewer's   All;    25.2 million;
                  Yeast Chromium, Fiber         >50     10.8 million
Hypertension      CoQ 10, Omega-3s              >35;    73.8 million;
                  Potassium, Soy                >50     49.5 million
Arthritis         Glucosamine, Chondroitin,     All;   100 million;
                  MSM Omega-3s, SAM-e,          >50     45 million
                  Boswellia

*Healthnotes database
**Calculated and extrapolated by the authors from WHO surveys and data,
UN Populations Data, and the Chinese Statistical Yearbook


Europe: Getting a Handle on Harmonization

The European market for supplements and herbal products is valued at approximately [euro]7 billion, and it is growing at a rate of 3-5%. A lot of the strong growth is coming from Scandinavian countries, as compared to Central and Eastern Europe where the supplement market is developing strongly from a lower baseline. In Germany, the market for vitamins, minerals and herbals is very complex, even though most herbal products are regulated as drugs. The herbal drug market in Germany took a hit a couple of years ago when restrictions were placed on reimbursements. However, initial losses have been recovered almost completely and the market is starting to grow again.

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There are three major growth areas on the European supplement market today. These include, broadly speaking, risk reducers like probiotics and prebiotics, cholesterol reducers, and supplements promoting bone and heart health; an assortment of antioxidants; life-stage and gender nutrition products tailored to specific needs; and slimming solutions. Other growth areas include energizing and relaxing supplements, various brand extensions, and products offering multiple benefits.

These areas of growth reflect the consumers' growing interest in intrinsically healthy products, as well as the fact that a growing population is faced with increased risk of disease, like those that stem from circulatory issues and obesity. Also, the population is aging--in a matter of 25 years, one in five Europeans will be over 65 years old. Consumers are focused on extending middle age and improving quality of life during those years, which in turn aids growth in supplement and herbal products markets.

In general, the economic state of Europe has been dominated by consolidation. As a result, the main market channels, retail, pharmacy and supermarkets, show little growth. However, newer market channels like multilevel marketing, mail order, and Internet sales are clearly growing at a faster rate.

The Impact of Harmonization

The European supplement market will have to undergo major changes over the next five to 10 years due to a continuing harmonization process of the different regulations in the European member states.

Historically, dietary supplements and natural products were regulated very differently from country to country, leading to a situation where the majority of products could not be sold in all European member states in the same formulation. In some countries, the dosages of vitamin and mineral products were very much restricted, while in other countries very high dosages, comparable to the situation in the U.S., were possible.

The most extreme situation occurred in herbal products where some countries like the U.K. and The Netherlands had a very liberal attitude and allowed practically all herbal products as unlicensed or supplement products on their markets. However, in other regions, predominantly Germany and France, most herbal products were regarded as drugs.

Two main regulations are trying to harmonize this situation. On the one side, there is the Supplement Directive 2002/46/EC, which dictates what vitamins, minerals and other well-defined ingredients can be regulated as supplements, but herbal products are not part of the existing regulations. A problem that remains unresolved relates to dosages that are permitted for the individual vitamins and minerals; these dosages need to be defined on a national level.

The other regulation, the Traditional Herbal Medicinal Products Directive (THMPD) 2004/24/EC, was supposed to be implemented by member states in October last year. This directive says herbal products, which have been on the market for at least 15 years, with an additional 15 years outside of Europe, must be regulated under this directive. They require a drug registration file (drug master file) with a complete quality dossier including analytics, stability testing, GMP production, etc. While there is no need to prove efficacy, safety and traditional use must be documented on a literature basis.

Since the THMPD will change the entire market for herbal products in Europe, specifically in those countries where herbal products are currently regulated as supplements or are non-licensed (i.e., in the U.K., in The Netherlands, and several other member states), the producers of herbal products will need to develop drug quality files and complete drug registration dossiers, both of which are costly and time consuming. Companies' will have to go through the registration process in order to legally keep their products on the markets long-term.

Unfortunately, many products will probably disappear because manufacturers can only invest in a limited amount of products. As a consequence, many interesting combinations of products from other hemispheres, like Traditional Chinese Medicines or Ayurvedic medicines, will likely disappear after a transition period, or by 2011.

In addition to a complete restructuring of the natural products and vitamins/mineral markets in Europe, the claims for food products and, accordingly, food supplements will be harmonized based on the newly agreed upon Food Labeling Directive 2000/13/EC. Basically, the directive states that all claims need to be scientifically proven in well-controlled, peer-reviewed published studies. Therefore, various interpretations of supplement claims in Europe will be harmonized on a very stringent level, demanding clinical trials for the exact product or formulation, which intends to make the respective claim.

Certainly, the harmonization in Europe will be hard on those manufacturers that have experienced easy access to the markets with their products, saving on things like documentation. On the other hand, manufacturers in countries that had more strict requirements will be in a better position long-term since the quality of their products has already been documented and proven on a higher level, often requiring a drug dossier.

Specifically in the herbal products market, Germany has always been a dominant country in Europe, with approximately 45% market share. This is a result of high acceptance of herbal drugs not only by consumers but also by pharmacists, physicians and the entire medical community. This experience in the development of drug files can help other European countries learn to adapt their products to those requirements.

There is also the issue of Novel Food regulation. Most recently, there have been discussions related to changing those regulations. It is hoped this new discussion period will change the present situation and bring more innovation to European companies producing novel food products and ingredients (See NUTRACEUTICALS WORLD'S June issue, page 32, for more details on Novel Food regulation.)

Conclusion

Claims restrictions and the subsequent need for clinical trials to substantiate claims will lead to more research in the field of supplements and natural products. In the end, this will certainly spur new growth for the whole market segment, especially since consumers will more firmly believe that the claims on product labels are grounded in solid science. For the future, expect increasing demands in quality dossiers for natural products, as well as more companies conducting clinical trials to substantiate claims.

About the author: Dr. Joerg Gruenwald is president of analyze & realize ag, a specialized business consulting company for herbal medicine, dietary supplements and functional foods, and author of the PDR for Herbal Medicines. He can be reached at Waldseeweg 6, 13467 Berlin, Germany; 49-30-40008100; Fax: 49-30-40008500; E-mail: jgruenwald@analyze-realize.com; Website: www.analyze-realize.com

By Joerg Gruenwald

President

analyze & realize ag

Berlin, Germany

India: A Challenging Growth Market

Globally, India has been one of the last big bastions of home cooking, where traditional ingredients, meal routines and fresh ingredients dominate. Processed and ready-to-eat food and beverages are relatively new entrants to this market. Nevertheless, they are sectors that are growing at a rapid pace, fueled by higher disposable incomes and the entry of a large number of women into the workplace. While urban Indians crave the convenience of instant or ready-to-cook foods, there is also mounting concern about the nutritional content of such foods, as well as skepticism whether such foods can match the balanced nutritional properties of the traditional diet. In order to overcome such apprehensions, marketers are turning to fortification and using nutritional ingredients to position their products on the twin planks of health and convenience.

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The Indian Food Processing sector in 2005 was valued at $65.6 billion, $20.6 billion of which can be attributed to value added products. The Indian food industry on the whole has been exhibiting a growth rate of 6% annually over the last four years and this is expected to rise to 9% annually in the next five years. Recognizing the potential of this sector, the Indian government has marked it as a priority sector for bank credit. Consequently, a principal of $2.2 billion has been allocated to renew the financing of loans within the food processing sector. Products such as ice-cream, condensed milk, preparations of poultry, meat, and fish, pasta, pectins and yeast have been fully exempted from excise duties, whereas the same on instant food mixes and ready-to-eat packaged foods has been reduced from 16% to 8%. These measures are expected to further boost the growth of the sector and provide opportunities for small and medium scale enterprises that can provide nutritional ingredients for the food and beverage industry.

The Wellness Platform

Broadly, if we analyze the spectrum of benefits that nutritional foods and beverages offer consumers globally, it could be represented as follows: In the Indian market, products have conventionally been present either in the general wellness market or on a platform of disease prevention (see Figure 1).

Within the general wellness segment, mineral or vitamin fortification has been the most commonly used platform. Calcium fortification especially has been one of the fastest growing segments--calcium usage (for both food and feed applications) grew nearly 14% between 2004 and 2005. The benefits of calcium in terms of bone strengthening have also been well advertised by many product categories, including non-food categories such as toothpaste.

It is interesting to note, however, while approximately 2.3 million tons of calcium was consumed by the Indian market in 2004-05 (non-pharma usage), only 7% was used by the dietary supplement industry, and another 3% in the food and beverage industry; the bulk of the usage was in the animal feed industry. The figure is even lower for other minerals such as iron and iodine. Currently, it is pharmaceutical formulations, which are the key users of vitamins and minerals. The majority of Indian consumers does not see the need for additional supplementation through over-the-counter (OTC) dietary supplements. In fact, they use these products only on a prescription basis. Clearly there is a long way to go before fortification becomes commonplace in the Indian market.

Within the food and beverage market, products that have been quick to use fortification are those aimed at children, such as biscuits, jams and cornflakes. In these categories, brands compete not just with each other, but with traditional Indian snacks and breakfast foods, which are often perceived to be more nutritious. While advertising to children is usually focused on fun and freebies, marketers have been adding minerals and vitamins to persuade mothers to buy. In mature categories such as malted food beverages, fortification has become commonplace. Fortification still largely comprises of adding vitamins and minerals, although soy protein is emerging as a promising ingredient.

Newer ingredients such as essential fatty acids and probiotics have yet to make inroads to the Indian market. This is partly because the Indian diet, which places emphasis on including yogurt and other dairy products in meals, is itself rich in probiotics. Further, store bought yogurt is still a relatively new phenomenon. However branded milk and milk beverages is a fast growing area. In fact, one company, Heritage Foods, has already launched probiotic-enriched milk.

Another category that has witnessed increased fortification is branded "atta" or wheat flour, a staple in most Indian households. As consumers move to branded atta from buying and getting their wheat ground at neighborhood mills, marketers seek to nullify the price difference by providing value addition through fortification. This is done using either minerals and vitamins, or additional dietary fiber. Edible oil is also a growing market for fortification, as some state governments have attempted to address vitamin deficiencies by making the addition of vitamin A and D to refined oil mandatory.

The Disease Prevention Platform

Apart from general wellness, disease prevention is the other platform where health foods and dietary supplements have been positioned. Edible oils took the lead in this area, positioning specially blended high PUFA (polyunsaturated fatty acid) oils for cholesterol lowering and heart disease prevention. Herbal supplements have also positioned themselves in the area of disease prevention, with cholesterol lowering and diabetes treatment and prevention as the key focus areas. Some of the companies active in the herbal supplements arena are international multilevel marketing companies such as Herbalife International and Amway.

However, this is currently a gray area in the Indian market. Unlike the core pharmaceutical and food sectors, which they infringe upon, nutraceutical products are not regulated by any specific well-defined law. Such a nebulous situation had also prevailed in other Asian markets, creating confusion for both marketers and consumers as to what ingredients and claims can be marketed or trusted. To combat this, in the absence of government regulation, the Health Supplements Industry Association of Singapore (HSIAS) has developed its own code of ethics for all members.

Despite the regulatory challenges, disease prevention is a segment that is poised to grow in the Indian market, given the changes in lifestyle and the increasing occurrence of heart disease, diabetes, stress and obesity, especially among urban middle and upper class consumers.

To summarize, while the Indian consumer is slowly becoming used to processed and store bought foods, it may not necessarily follow a western model, where fresh cooking has been significantly eliminated in many households. The implications for food and beverage marketers are that while nutritional ingredients and health foods present an attractive means to bring consumers to the processed foods area, products that complement rather than seek to substitute the diet stand a better chance of survival and success. In the meal chart, breakfast has been the most susceptible to change, while lunch and dinner continue to be dominated by traditional homemade meals. Taste will continue to be a critical factor, and companies will need to customize their products to the Indian palate. This has been borne out by the experience of companies such as Kellogg's, who realized that the hot milk preferred by Indians did not really go well with cornflakes.

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In terms of ingredients, protein fortification, especially soy, has the potential to grow, as it addresses the needs of a very large vegetarian segment of the population. Besides fortification of regular-use foods, the opportunities are immense for health foods and beverages in areas such as light snacking, at home and on-the-go drinks, hunger appeasement in between meals and niches such as products for the weight conscious and diabetics.

Packaged snacking (chips, traditional Indian savories) is another high growth category, currently showing year on year growth rates of about 35%. Fortification is currently negligible here, indicating opportunities for adding new ingredients or for healthy alternatives such as fortified baked snacks and low fat snacks. These are the areas where consumers are most prepared to experiment, offering opportunities for innovative marketers who can gear their products to meet consumer needs.

About the author: Aparna Singh is a program manager on the Chemicals Materials and Foods team at Frost & Sullivan India, Haryana, India. She can be contacted through Abha Kaul at akaul@frost.com.

Editor's Note: In India, Frost & Sullivan's work in the Food and Beverage industry includes areas such as nutraceuticals and nutritional ingredients, other ingredients, flavors and animal nutrition. In order to provide a view of the growing opportunities in the Indian nutritional products market, Frost & Sullivan will present a concise one-day summit titled "Fortified Foods & Supplements: A Vista of Opportunities for Indian Manufacturers," which is scheduled for July 28, 2006, in Mumbai, India.

By Aparna Singh

Program Manager, Chemicals Materials & Foods

Frost & Sullivan

Haryana, India

Israel: The Nutraceutical Jewel of the Middle East

From beautiful coastal cities, to picturesque desert landscapes, to lush vegetation, the country of Israel plays host to many climates and therefore a variety food offerings and export opportunities. Currently, according to the Israel Export & International Cooperation Institute, Israel's food and beverage industry is exporting $425 million worth of products a year, 50% of which is going to European Union nations, 15% to Eastern Europe and EFTA countries, 18% to the U.S., 11% to the Far East, 2% to South America and 3% to the rest of the world.

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Citrus produce used to be the hallmark for the Israeli food industry, but over the last several years the country has evolved into a powerful force in the export of everything from fine wines to exotic delicacies to health foods. This in turn has spurred some interesting developments in functional foods, beverages and supplements.

Within the Israeli market itself, vitamins and dietary supplements are currently leading the OTC (over-the-counter) healthcare segment, growing 7% in 2004, according to Euromonitor International. "Vitamins and dietary supplements are relatively new to Israel's OTC healthcare market," Euromonitor claims. "However, in recent years these products have become the most interesting and dynamic." Given the recent success of the pharmaceutical industry in Israel via companies like Teva Pharmaceuticals, Israel has become a fruitful ground for the growth of health-related products.

For now, the vitamins/supplements and functional foods markets in Israel are competitive rather than complementary. Euromonitor points out, for example, "The demand for calcium food supplements will be affected by new calcium enriched milk and mineral water products. Therefore, if consumers get enough calcium from their food then they will not need to buy supplements."

That said, Euromonitor believes increasing penetration of functional foods with all their health claims will increase the awareness of healthy living and likely affect the consumption of vitamins and dietary supplements in a positive way.

What follows is a snapshot of a handful of Israeli companies that have become very active in the nutraceuticals market, whether they are offering foods and beverages, supplements, ingredients or delivery technologies.

Adumim Food Ingredients/NutraLease: New Nanotechnology Innovations

Located just outside of Jerusalem, Adumim has been active in the food ingredients business since 1977, and today is a leading supplier of specialty food ingredients, emulsifiers, emulsions and premix formulations. In June 2005, the company's controlling group was restructured, and a financial group joined the company to chart a new course for growth backed by strong financial resources. As the company maintains its firm hold on the Israeli market, Adumim is looking to expand its offerings to the rest of the world. To that end, it is collaborating with companies like Parsippany, NJ-based PL Thomas to expand distribution of its products and technologies.

Adumim is also a majority shareholder in a company called NutraLease, an R & D company churning out a variety of product applications for the nutraceutical, functional food and cosmetic markets, with a specific focus on nano-emulsions, or what it calls nano-sized self-assembly structured lipids (NSSL). This nano-emulsion technology allows for the incorporation of insoluble active health ingredients to various products. Leading the charge in nutraceutical development for Adumim and NutraLease is Dr. Eli Pinthus, PhD, who has been surveying the latest developments in the nutraceuticals market since 1996.

NutraLease's nano-emulsions serve three functions: they provide a vehicle for incorporating otherwise insoluble components into products (food, pharmaceuticals, cosmetics, etc.) where such incorporation was not previously possible; they dramatically improve the bioavailability of substances delivered in NSSL form; and they improve the stability and in some cases control the release the substances delivered in NSSL form. Some examples of potential application include: phytosterols in edible oils, phytosterols in ice cream and dairy products, and oil soluble vitamins in water, soft drinks and dairy products.

Together with Shemen Industries Ltd., the largest oil manufacturer and supplier in Israel, NutraLease has already developed a formulation to fortify canola oil with phytosterols where based on FDA's approval that was given to all food products that are fortified with phytosterols, the consumption of this oil can help in reducing the risk of heart disease.

Algatechnologies: Astaxanthin Advancements

Situated on a Kibbutz wedged between Jordan and Egypt, under an hour from the Red Sea in Israel's Arava desert, Algatechnologies is perfectly situated to produce and commercialize a potent antioxidant--astaxanthin. According to the company, sunlight and favorable temperatures provide the ideal growing conditions for its AstaPure astaxanthin.

Algatechnologies was established in 1998 when it acquired a patented biotechnology process for the commercialization of astaxanthin. In this highly controlled cultivation system, the company uses tubular bioreactors set up in different configurations. Most recently, it more than doubled the capacity of its production facility. Since the expansion has been completed, the company claims it is the largest supplier of natural astaxanthin for human consumption. And further expansion is expected over the next year, according to Ed Hofland, chairman of the company.

Algatechnologies' astaxanthin grows from haematococcus cells, which begin the journey through the tubular processing system as green biomass. As the algae continue to travel through the tubular system, the biomass gets to a point where it is exposed to the intense desert sun. In defense, the algae becomes stressed, fashioning a deep red color. The red biomass is then delicately dried and shipped to the U.S. for supercritical extraction.

The company's patented tubular system allows it to avoid contamination issues, which can sometimes occur in open pond systems. Further, the system provides a consistent and reliable source of astaxanthin, which is extracted using no organic solvents.

As far as potency, Algatechnologies claims astaxanthin crosses the blood-brain barrier, something carotenoids like lycopene and beta-carotene are incapable of doing. In addition, astaxanthin is 500 times stronger than vitamin E.

Due to its strong antioxidant effects, astaxanthin has application in the prevention of conditions related to oxidative stress, such as age-related macular degeneration (AMD), cataracts, Alzheimer's, Parkinson's, skin health and aging in general. In fact, Algatechnologies has already initiated preclinical and clinical studies in order to prove the beneficial effects related to the use of its astaxanthin in a variety of human applications.

Algatechnologies is 22% owned by the Kibbutz on which it sits and the remainder is owned by a U.K.-based investment firm. Its specific products include AstaPure dry biomass, which contains 3.5-4% astaxanthin; AstaPure 10% standardized oleoresin (supercritical C[O.sub.2] extraction); AstaPure 2.5% beadlets; and AstaPure 2% water dispersible beadlets. Its newest products include AstaPure 2.3% astaxanthin beadlets and AstaPure .4% astaxanthin NSSL (nano sized self assembled liquid structures), designed for liquid dietary supplements and beverages.

Enzymotec: Enhancing the Value of Enzymes

Enzymotec is a biotechnology company founded in 1998 by Dr. Basheer Sobhi, an award-winning biotechnology researcher, under the auspices of the Naiot Technological Center business incubator. Dr. Basheer, a renowned expert in the field of enzymatic biocatalysis, had initially developed the AMIET technology platform, which enables the improvement and enhancement of enzymes and enzymatic processes.

Using these technologies, Enzymotec develops and produces innovative lipid-based biofunctional ingredients for dietary supplements, functional foods and advanced infant nutrition products. The company's main product categories include brain health (SharpPS), heart health (CardiaBeat) and infant nutrition (InFat).

Enzymotec's SharpPS is comprised of phosphatidylserine (PS), a natural building block in the human brain that is crucial for normal brain activities and function. As PS levels decrease with age, consumers need to supplement to maintain appropriate levels and therefore appropriate brain function. Most recently, the company added SharpPS Gold to its offerings. SharpPS Gold, which is a PS-DHA (docosahexaenoic acid) conjugate that mimics the natural PS structure found in the human brain.

The company's product CardiaBeat is positioned to address several cardiovascular disease (CVD) risk factors at once. According to Ezymotec, this ingredient has been shown in tests to lower LDL cholesterol, balance the LDL/HDL ratio, lower triglycerides and prevent atherosclerotic plaque formation. CardiaBeat contains an ideal combination of DHA, eicosapentaenoic acid (EPA) and phytosterols. Most recently, CardiaBeat received Generally Recognized as Safe (GRAS) approval by an expert panel, paving the way for its use in a wide variety of food applications.

On the clinical research front, Enzymotec recently conducted a trial on 90 children who have attention deficit hyperactivity disorder (ADHD/ADD). The study, conducted at the Tel-Aviv Sourasky Medical Center, demonstrated the potential of a natural, safe and effective alternative to those concerned about the psychiatric stimulators commonly used for ADHD treatment. In this study, researchers used a chocolate spread to deliver the active ingredient.

"In this double-blind, placebo-controlled trial, we showed that daily consumption of a unique, natural lipid-based carrier lead to a significant improvement in cognitive performance, as observed by the TOVA test scores," said Dr. Dori Pelled, director of clinical research, Enzymotec. "The fact that this novel ingredient is based on decades of research in the field of brain-lipids and their relation to cognition leads us to high confidence in these results."

Most recently, Enyzmotec unveiled a new cognitive health ingredient called alphaGPC, also known as alpha-GPC or choline alphoscerate. According to the company, it has been used for some time as a dietary supplement positioned to improve mental performance.

Floris: Israel's Supplement Leader

Leading Israel's expanding supplement market, Floris manufactures medicine, vitamins, herbal remedies, nutritional supplements and cosmetics. The factory was established in 1985 by two brothers: Rafi and Yonatan Ben Shimon, both of whom are pharmacists and graduates of the University of Strasbourg, France.

In 2004, The Massout Yitzhak Moshav purchased 50% of the company shares. The Moshav is the owner of the "Albaad" factory, which is third in the world in the production of wet wipes. The acquisition of the factory by Massuot Yitzhak made it possible for Floris to begin exporting products worldwide. In October 2004, Floris bought 100% of Hadas Natural Company shares. As a result of the acquisition, the company's factory expanded. This purchase officially made Floris not only a leading manufacturer, but also the largest, most influential one in Israel.

One of its leading products is a vitamin/mineral fortified product delivered as chocolate coins. Intended for children, Floris is looking to expand distribution of this product outside of Israel. Making use of an innovative microencapsulation technology from another Israeli company, Karmat, Floris was able to deliver a product for children that is healthy and tastes good at the same time. This is because some of the "problem" nutrients were successfully masked so as not to cause any off flavors in the finished product.

Frutarom: Forging Ahead in Fine Ingredients

Firmly focused on flavors and fine ingredients, Frutarom is making the most of its 70-history by providing solutions to manufacturers in the dietary supplement, functional food and personal care markets. Frutarom has a portfolio that comprises over 14,000 products, focusing on flavors and fine ingredients, and it markets and sells these products to over 3500 customers worldwide.

In recent years, the company has experienced significant growth and much improved profitability, with sales increasing from $101 million in 2001 to $196 million in 2004. Much of this growth was a result of organic growth, strategic acquisitions and further margin expansion.

Under the company's Flachsmann brand, Frutarom Switzerland has developed, manufactured and marketed a range of ingredients for use in the pharmaceutical, nutraceutical and functional food industries. As brands and seals of quality, "Flachsmann" and "EFLA" stand for technologically superior extracts, standardized, validated and produced according to ISO 9001 and PIC-GMP guidelines.

With EFLA HyperPure, Frutarom's patented technology, undesirable lipophilic residues and contaminants are eliminated, enabling even more product safety through innovation. Competent R & D customer service, reliability and tailored solutions add up to what characterizes the Flachsmann brand, according to the company.

Most recently, Frutarom unveiled a new ingredient, EFLA 955 Wild Green Oat Neuravena Special Extract. Prepared from a scientifically selected wild accession of Avena sativa and manufactured from the plant's aerial parts, the extract targets mental health due to its effects on serotonin. The company has undertaken research to substantiate its safety and efficacy. According to Susanne Fassler, marketing communication manager, "The development of our green oat product started with bioassays. We really wanted to build the evidence behind the traditional usage of green oat products, so we looked at several thousand green oat plants and tested them for their bioactivity and safety profile in in vitro assay systems, focusing on the central nervous system."

Through its research, Frutarom found its green oat ingredient to possess physiologically relevant inhibitory activity of two enzymes that are closely connected to mental health--monoaminoxidase B (MAO-B) and phosphodiesterase 4 (PDE 4). "This was a very exciting development for us, considering the pharmaceutical activity going on in the area of phosphodiesterase inhibitors," Ms. Fassler said. "Monoaminoxidase inhibitors are also currently used by pharmaceutical companies in the areas of mood enhancement and stimulation."

For the future, Frutarom plans to initiate studies in animals to establish more efficacy for indications like cognitive support and concentration based on the bioactivity it has seen with some of its other in vitro studies. Ms. Fassler added, "This is a natural solution to stress, mood imbalance and cognitive impairment. But we also see some use in people with chronic fatigue." EFLA 955 has application in food supplements, as well as functional foods and beverages.

Gadot Biochemicals: The Creative Calcium Company

Gadot Biochemicals is a multinational company located minutes from the Port of Haifa on the northern coast of Israel. It has been a publicly traded company since May 2005. With an annual turnover of approximately $85 million, more than 90% of its product offerings are exported. Since 2001, the company has been growing approximately 20% per year.

Its diverse portfolio of ingredients enables it to supply companies in the food, beverage and detergent industries worldwide. Within the nutraceuticals industry specifically, the company provides a variety of enrichment minerals for use in food and beverage fortification.

The enrichment minerals segment brings in approximately 7% of the company's total revenues. Its ingredient offerings include calcium (TCC, TCC-VitD3, TCP, Gadocal+, Gadocal Gold, Gadolin Calcium and Gadophit), magnesium (Gadolin magnesium, Gadomag+) and zinc (TZC and Gadozinc+), which are used to fortify everything from baby food to health food to beverages and dairy products. The advantage of these products lies in their ability to enhance absorption in the body. And all products are GMO-free and Kosher-certified.

One of the company's latest innovations is Gadocal Extreme, which is a highly soluble patented calcium source designed especially for the fortification of syrups and concentrates. According to Gadot, fortification of syrups with Gadocal Extreme ensures a very stable solution, while completely preventing the sedimentation of the calcium in the long run.

Presently, the company is looking to acquire businesses in the U.S. and Europe in an effort to expand its reach and maintain its robust growth. To this end, it will continue to focus its development activity on enrichment minerals and market tailor-made solutions to the global nutraceuticals market.

Herbamed: Developing Bio-Nutraceuticals

Herbamed is a privately owned company dedicated to the development, manufacturing and marketing of what it calls "Bio-Nutraceuticals." Herbamed has a close relationship with leading academic and medical institutions in Israel, which has aided the company in the development and introduction of its patented, proprietary Emulsome (Ultrasome) technology for use in water-insoluble nutraceuticals.

The first product making use of this technology is its Ultrasome CoQ10. According to the company, clinical trials have proved the efficacy and safety in geriatric populations and those awaiting heart transplants. Ultrasome CoQ10 can be used in tablets, capsules, effervescent tablets, drinks and solids (bars, powered drinks, etc).

Herbamed also offers a variety of other products like Prostacal, CitruShape, FluVir and O'life. Prostacal combines Opuntia pollen powder and zinc for use in those with benign prostatic hyperplasia (BPH). CitruShape is an orange flavored bar containing vitamins, minerals and fiber, and is positioned for those addressing weight management and digestive issues. An open study on 116 subjects showed that the snack's fibers reduce blood cholesterol levels and improve the HDL and LDL ratio. FluVir is an anti-influenza syrup derived from special fractions of the herb hypericum perforatum (St. John's Wort). Clinical trials have demonstrated that FluVir reduces a flu attack to a period of 24-36 hours, as compared to 5-6 days when not treated. Lastly, the company offers O'life, which is a product consisting of olive leaves and is positioned for those with diabetes and high blood pressure.

Karmat: Mastering Microencapsulation

Karmat specializes in the development, production and marketing of microencapsulated products and food ingredients using a Wurster fluid-bed coating system. Seventy percent of the company is owned by Aroma Synth, and 30% is owned by Wisconsin-based Coating Place, Inc. (CPI), a contract manufacturing organization specializing in pharmaceutical grade Wurster fluid bed coating services for encapsulation of solid particulate materials like powders, granules, crystals and capsules.

Through its innovative microencapsulation technologies, the company is targeting the functional food industry, particularly in the areas of plant sterols and cholesterol reduction, turmeric and cardiovascular protection, and vitamin D/calcium and bone health. Saul Koder, CEO, believes in the importance of protecting functional ingredients in formulations in order for consumers to reap the health benefits.

Also important in the company's endeavors is nanotechnology. Karmat is looking at combining the strengths of probiotics and resistant starch using "smart" delivery systems and molecular nanocapsules. The goal is to wrap the probiotic bacteria in nanoscale delivery vehicles consisting of resistant starch. Currently, the company is at pilot scale development of this technology.

LycoRed: The Carotenoid King

Primarily known for its advances in carotenoids, more specifically lycopene, LycoRed Natural Products Industries has expanded both its range of ingredients and delivery technologies in recent years through internal growth and acquisition. Today the company, which brought in $50 million in sales last year, supplies natural carotenoids and a wide range of other nutritional ingredients and delivery technologies to the dietary supplement and functional food industries worldwide. Armed with a new corporate image, it hopes to become the international leader in carotenoids and fortification ingredients going forward.

LycoRed carotenoid heritage started with Lyc-O-Mato natural tomato lycopene complex. According to the company, Lyc-O-Mato's development began in the tomato fields and continued through extensive clinical research and consumer marketing. Over the years, LycoRed acquired Nutriblend and Biodar, whose expertise is now fully integrated with that of LycoRed. This merger of experience has allowed for expansion into production of microencapsulated ingredients, vitamin and mineral premixes and integrated fortification solutions.

LycoRed expanded its ingredient offerings further when it purchased Buckton Scott Nutrition last November. The purpose of the acquisition was to portray LycoRed as a "one-stop-shop" for dietary supplement and functional food companies in the U.S. and abroad. In this way, it is able to provide integrated fortification and technical solutions for foods, beverages and dietary supplements.

The company's most recent acquisition took place on June 12th when it purchased the Pharmachem subsidiary H. Reisman, a major player in the U.S. carotenoid market. According to LycoRed, the addition of H. Reisman's natural carotenoid range provides synergy and expands LycoRed's position in the market. Further, H. Reisman possesses significant experience in value-added carotenoid formulations and manufacturing. Following this acquisition, LycoRed and Pharmachem will continue to work closely together.

LycoRed has achieved some major goals with its Lyc-O-Mato ingredient, such as the ability to offer forms that increase solubility in beverages and/or solve stability issues in supplements. Most recently it launched Lyc-O-Mato Red for the fortification of liquid and paste applications. It delivers three times more lycopene than ordinary tomato paste, providing marketable benefits via ease of handling. The new ingredient can be used to fortify a wide variety of foods and beverages, including breads, confectionary products, cereals, soy meat substitutes and smoothies.

Razei Bar Industries: The Sambucol Story

Established in 1991 by Dr. Madeleine Mumcuoglu, Razei Bar, located in the heart of Jerusalem, was launched following years of research on a specific standardized extract of the black elderberry (Sambucus nigra L.), which was later branded Sambucol. This extract contains a potent antiviral compound, AntiVirin, as well as a high amount of three flavonoids.

Given her background in virology and immunology, focusing on the black elderberry was a natural extension of Dr. Mumcuoglu's studies. Throughout the past 20 years, she has subjected Sambucol to a battery of clinical trials, illuminating its role in the production of white blood cells. In these studies, Sambucol was shown to specifically impact influenza A and B by shortening the duration and/or lessening the symptoms of this sometimes deadly virus.

Today the company remains committed to its mission to spread the use and knowledge of the anti-viral properties of the black elderberry and to improve the well-being of consumers affected by the flu and flu-like infections. To this end, Sambucol was recently put to the test in the case of bird flu.

These recent laboratory trials, conducted by John Oxford of Retro-screen Virology Ltd., a research institute at the University of London, found Sambucol to be at least 99% effective against the avian flu virus H5N1. It was especially effective at neutralizing the infectivity of the virus in cell cultures. These results were subsequently presented during the "International Conference on Bird Flu: A Central Role for Antivirals," which was held toward the end of January this year.

Dr. Mumcuoglu says that while these results are encouraging, there is still more work to be done. "I would never suggest that Sambucol could be used as a bird flu treatment at this stage, but this certainly gives us a reason to push forward with additional research to establish more efficacy," she said. According to Dr. Mumcuoglu, researchers will continue their work with Sambucol and bird flu. In fact, another study is already under way.

Solbar Industries: Serving the Soy World

Acquired by Kibbutz Hatzor in 1987, Solbar has grown from a small Israeli company to a global player in the world of soy. Since 2001 the company has worked hard to manage its rapid growth, growing 30% annually and eventually reaching $150 million in sales. With this growth came many challenges and opportunities. One of those challenges included managing infrastructure. As a result, Solbar restructured its operations last year to create two divisions: a commodity division for production, sales and crushing of oil and soybeans in Israel; and a specialty division for R & D, production, marketing and sales of isolated and concentrated soy proteins, textured soy proteins and soy isoflavones to the global market.

Following this reorganization, the company signed agreements with three major distributors in France, Benelux and Scandinavia, as well as the Czech Republic, Slovakia and Poland. These agreements pertain to the distribution of its full range of specialty functional soy protein concentrates and isolates and textured products.

But perhaps the biggest endeavor for the company to date is its recently established operations in China. This newly constructed facility is responsible for producing functional soy protein concentrates, textured soy concentrates and steam-textured soy proteins.

With regard to nutraceuticals in particular, Solbar maintains a vast portfolio of soy-based ingredients for dairy, bakery, functional food, cosmetic and dietary supplement applications. These include isolated soy proteins (Solpro 910, 950), traditional protein concentrates (Solcon, Solcon F), textured proteins (Contex, Bontex, Soytex), and isoflavones (Solgen 3/S, 10, 10/S, 15, 20, 30, 40, 40/S; Solgen SR, Solgen C; Nutragen 3/10, 10).

By Rebecca Wright

Editor

Japan: A Regulatory Update for Functional Foods & Nutraceuticals

This update focuses on recent developments in the regulation of functional foods and nutraceuticals in Japan. With nearly 600 individual product approvals, the most dramatic growth has taken place in the FOSHU (Foods for Specified Health Uses, "Tokuho" in Japanese) market in Japan. This market has developed over the past 13 years and is currently worth $6 billion at retail.

[ILLUSTRATION OMITTED]

The State of the FOSHU Market

Although the official report on the FOSHU market prepared by the Japan Health Food and Nutrition Food Association (JHNFA) indicates that FOSHU sales grew only 11% between 2003 and 2005, the opportunity for new FOSHU functional ingredients and products with new health claims remains strong. Truly new health claims are less common, however, in part related to the time and expense necessary to develop the clinical data in support of the claims being sought. Even though there were 171 new FOSHU product approvals during the past two years, most of the new products were formulated with previously approved functional ingredients (i.e., indigestible dextrin for intestinal health or blood glucose control).

In its official FOSHU summary, JHNFA does list 10 new "active" ingredients in FOSHU products approved in 2004 and 2005. There were five blood pressure control ingredients: wakame (a seaweed) peptide, nori (another seaweed) penta-peptide, sesame peptide, acetic acid and GABA (gamma-aminobutyric acid). LC1 lactic acid bacteria, bifidus Bb12 (Bifidobacterium lactis), and coffee bean mannooligosaccharide (mannobiose) were approved as gut regulation active ingredients. Green tea fluoride for tooth health and a broccoli and cabbage-derived natural amino acid for cholesterol control were the final two new actives.

There are unofficial reports from Japan that a new FOSHU health claim category related to fatigue and/or stress is expected to be approved, perhaps by this time next year. A consortium of companies is generating the necessary supporting information for the new category, including development of appropriate biomarkers and analytical procedures, as well as possible claims and clinical study expectations. There are similar reports that the important weight loss/weight maintenance category will also gain FOSHU status over the next couple of years. If just these two new categories are accepted by the Ministry of Health, Labor and Welfare (MHLW), the FOSHU market potential will significantly increase, as each of the categories is already active in Japan in a non-FOSHU format.

At the same time, the FOSHU umbrella has expanded in other ways to allow a broader range of health claims in a modified format. These are referred to as the "New" FOSHU by JHNFA in its May 2006 publication entitled "Claims Regulation in Japan," defined as:

* Qualified Claims for FOSHU: no established evidence, but test results suggest evidence

* Standardized Claims for FOSHU: clinical trials necessary for safety only (limited to three dietary fibers and six oligosaccharides)

* Reduction of Disease Risk Claims for FOSHU: calcium and osteoporosis, folic acid and neural tube disease

Although there is interest in the qualified claims opportunity in particular, as it would seem to encourage the use of new "active" ingredients, in practice there are no marketed products using such qualified claims. Two new products have apparently been "approved," although it is not yet clear if the qualified claims permitted will be identified on the label as having come from the new regulatory process.

Foods With Nutrient Function Claims (FNFC)

This is the other formal category of foods with health claims in Japan that allows specific on-label claims, but in this case without the need for prior product approval by the Ministry. The category allows claims for 12 vitamins and five minerals, as long as the vitamins and/or minerals meet specified limits on a per serving basis. JHNFA refers to the FNFC category as a "Standard Regulation System," in comparison to FOSHU, which is regarded as a "Product-based Approval System".

The FNFC health claims are in widespread use in Japan, although with unknown commercial success. It is not clear whether or not the use of the approved generic vitamin and mineral claims has resulted in increased product sales. The claims (i.e., vitamin C: "a nutrient which helps to maintain healthy skin and mucosa, and has an anti-oxidizing effect" for products with 24 mg to 1000 mg per serving) are not particularly exciting. The source of the vitamins and/or minerals in the products can be either from natural sources or fortification, which is a useful option.

Foods for Special Dietary Uses

These foods are regulated under the Health Promotion Law, and include both product-based approvals (for medical purposes) and standard foods. This was the original regulatory category that includes Foods for Medical Purposes, Foods for Pregnant Women, Foods for Infants, and Foods for the Elderly. The FOSHU category was added to this list of Foods for Dietary Uses at the time it was established. All of the products are allowed to use a special on-label mark (different from the FOSHU logo), identifying the product type. Low sodium soy sauces are included under these regulations, as well as hypoallergenic rice, which was moved from FOSHU to a Food for Medical Purposes designation several years ago.

"Unregulated" With Respect to Health Claims

In terms of on-label health claims for foods, the JHNFA describes all other types of foods as "unregulated," including the majority of health foods. This simply means that on-label health claims for all other foods are not legal in Japan. It is possible to use summaries of scientific findings as promotional materials, but these are being discouraged by MHLW. It is certainly the case that television promotion is being used, including testimonials from popular professors and medical doctors clearly designed to enhance the sales of certain products and ingredients. This practice is widespread, and is still being cited as the reason for the original cocoa "boom" in Japan several years ago, which eventually led to the development of the large cocoa polyphenol-rich chocolate market in Japan.

For health foods specifically, the Japan Health Food Association has developed, with industry involvement, relatively simple monographs for well over 50 popular health food ingredients, including safety and efficacy information. The latest monograph approved was for bilberries, a popular source of anthocyanins that most Japanese understand to have potential eye health benefits.

There is also encouragement from MHLW to certify facilities (or parts of facilities) with qualified organizations for GMP (Good Manufacturing Practices) compliance. JHNFA is one such organization involved in the certification process, and the Japan Institute for Health Food Standards is another.

Other Regulations Impacting Functional Foods and Nutraceuticals

It is worth mentioning briefly four other important regulatory areas with on-going activity related to foods. On May 29th, the Ministry began enforcing expanded regulations for agricultural chemical residues in foods and food ingredients. The BSE ("mad cow") import ban for U.S. beef is back in effect, pending clarification of new quality issues. For packaged food and beverage products, there are new developments in the Containers and Packaging Recycling Law to consider, as Japan continues to struggle with food packaging waste disposal. A planned 2007 Codex Alimentarius meeting to be held in Japan has begun to generate regulatory-related discussions, especially in terms of issues and opportunities that might eventually develop. The future promises to be interesting as well as challenging.

Note: Important sources of information for this article are Japan Health Food and Nutrition Food Association reference documents, the ifia Japan 2006 Guidebook, and the Japanscan Food Industry Bulletin published in the U.K.

About the author: Ron Bailey is president of California Functional Foods and has been an independent consultant for over 20 years, focusing primarily on the transfer of food technology between the U.S. and Japan. He can be reached at 165 Almond Street, Ashland, OR 97520; 541-488-3184; Fax: 541-488-3274; E-mail: bailey@mind.net.

Ron Bailey

President

California Functional Foods

Ashland, OR

Nutraceuticals in Latin America: Brazil and Beyond

As this issue goes into circulation, the World Cup will be well on its way, and the world's attention will be directed to soccer! Nowhere in the world is soccer viewed with such tremendous passion as Latin America, where many of the countries literally stop to watch their teams play. Consumers of health and wellness products are equally passionate, making Latin America well worth watching for consumer and product development trends.

[ILLUSTRATION OMITTED]

Latin America is considered the fourth largest market for functional/healthy foods and nutraceuticals in the world. According to research from Euromonitor International, Latin America consumed nearly $22 billion in nutraceuticals, functional foods and dietary supplements in 1995 (see Table 1), and the market is expected to nearly double to $37 billion by 2010. The population of Latin America is relatively young and growing. This next generation of Latin Americans is being raised in a "globalized" world, which means they are aware of global trends and are participating in global economies as consumers and producers. In addition, Latin Americans share a similar cultural heritage and values with their North American and European counterparts.

Although the political and regulatory environments in each country are somewhat different, the largest countries of the region have demonstrated the capacity to overcome earlier difficulties, are growing and are considered stable. This is certainly true for the two largest countries in the region: Mexico and Brazil. This is also true, to varying degrees, in the next group of countries: Argentina, Chile, Columbia, Peru and Venezuela.

According to the Brazilian Institute of Metabolism and Nutrition (IMeN), Brazil is expected to generate more than $1.9 billion per year in sales of dietary supplements by 2020. Fifty-two percent of dietary supplement consumers are men, while 48% are women, with preferences for sports drinks, vitamins and minerals.

Brazilians have experienced a significant change in perception toward nutraceuticals recently. Hippocrates' (400 BC) old saying "let your food to be your medicine and let your medicine be your food" rings true today as consumers become more aware of health and wellness issues and express a willingness to change their lifestyles.

As the market interest for functional foods, nutraceuticals and other wellness products grows, there is also a rising demand for the development of norms and standards regulating the identity, product quality, labeling and claims for these industries. In 1999, Anvisa (Agencia Nacional de Vigilancia Sanitaria), Brazil's equivalent to the FDA, published two bodies of legislation (18 and 19), which established the standards, guidelines and regulations for functional foods in Brazil. Next, in 2000, the agency introduced RDC 94, requiring manufacturers to print nutritional information, storage and product lot numbers, as well as ingredients and functional claims for the products (claims must be proven through scientific research) on all its labels. Manufacturers are restricted to the types of claims that can be made, and they may not make claims associated with the prevention or curing of disease states. The only permissible claims relate to certain foods and/or ingredients that may reduce the risk of certain conditions or improve general health.

Brazilian Demographics

The Brazilian market is composed of a relatively young and increasingly well informed people, as well as an ascending middle class that has the potential for growth and diversification. The Brazilian market currently offers a wide array of products with concentration in the areas of bioactive ingredients such as fiber, probiotics, flavonoids, plant sterols and fatty acids. The preferred forms and applications for these products include: cereal bars, energy bars, cereals, energy drinks, isotonic products, dairy products, and others (Corpo a Corpo Magazine, 2005). The more common and widely consumed nutraceuticals in Brazil inclulde soy (protein), guarana, mate (stimulants) and acai (antioxidant).

Every year, Anvisa receives more than 2000 requests for approval of new products with functional/nutraceutical properties. This demonstrates that the interest the Brazilian industry has for this market is in great ascension.

The World Health Organization (WHO) recognizes the traditional use of biodiversity as an important instrument in developing new pharmaceutical products (WHO, 2002). However, the scarce technological innovation in researching and developing natural products is one of the most remarkable characteristics of countries in development. Because of this, it is extremely important that there be a great deal more emphasis placed on developing studies of popular plants already widely used in Brazil.

A further benefit of this kind of local development is that the costs, vis-a-vis developed countries, is much lower, and other developmental barriers are greatly reduced. Brazil's rich biodiversity presents excellent opportunities for product development for the growing nutraceuticals market. Two examples that have been en vogue in Latin America and around the globe are acai, also known as the "Brazilian berry," and mate, the "drink of the Gods."

Acai's Popularity

Acai (Euterpe oleracea Mart.) is a small dark purple fruit, the product of a palm tree, which grows wild in the Amazonian jungles of Brazil, and where natives have benefited from its powerful health properties for generations. According to studies performed by the Rio de Janeiro Federal University in Brazil, the juice of acai not only provides the people with a lot of energy, but it also combats many illnesses. These studies have been corroborated by those carried out at Santa Catarina Federal University and Belem Federal University in Brazil. Researchers have also claimed it has an antioxidant capacity five times higher than ginkgo biloba (Centroflora Group's monograph on acai) and it is also said to fight free radicals (DeLucca & Suttie, 1969) due to its high content of anthocyanins. Anthocyanins are powerful antioxidants that may slow the body's premature aging.

Acai also has abundant, high quality fatty acids, 60% of which are monounsaturated and 13% polyunsaturated (Lubrano et al., 1994). These fatty acids are said to work in decreasing the amount of LDL cholesterol, while maintaining normal levels of HDL cholesterol. An article recently published in the Journal of Agricultural and Food Chemistry (Fapesp Agency newsletter, 2006) claims the antioxidant content of acai may also possess the ability to destroy cancerous cells. Specifically, the study showed that acai extracts were able to stimulate 86% of leukemia-tested cells. In the Brazilian food industry, acai has been widely used in dairy products, cereals, energy bars, smoothies and drinks by those who exercise as well as those interested in the nutritional advantages of the fruit.

Magnificent Mate

Native to the South and Southeast of Brazil, mate (Ilex paraguariensis Saint Hil.) is one of the most popular and traditionally used herbs from South America. Mate is considered a national treasure, and it is widely consumed nationally and internationally as a tea, functional food and dietary supplement. In the U.S., mate dry extracts are enjoying tremendous new popularity for their use in diet and weight loss products. Though mate is primarily consumed as a tea in Brazil, it has an interesting chemical profile (methylxanthines and polyphenols) that has received a great deal of attention worldwide. It is thought that the antioxidants found in mate are quickly absorbed, and therefore may contribute to its potency. Its reported thermogenic effects may be (PubMed), as observed in a few Paraguayan communities, related to its reputation as an effective diuretic, metabolic enhancer and mild laxative (Alonso, 1998).

Mate also has roots in traditional medicine. It is used, for example, in oral preparations to reduce fatigue, increase appetite and aid in digestion (Lorenzi e Matos, 2002). In the Brazilian food industry, mate has been used mostly in drinks, juice mixes, cereal bars, teas and in its natural state (leaves infusion).

About the author: Danielle Freitas is the North American account manager for Centroflora Group, Sao Paulo, Brazil. Centroflora is a leading developer and manufacturer of botanical and fruit extracts for the pharmaceutical, cosmetic and food industries in South America. She can be reached at 55-11-4133-1125; E-mail: daniellefreitas@centroflora.com.br.

References furnished upon request.

By Danielle Freitas

North American Account Manager

Centroflora Group

Sao Paulo, Brazil
Table 1

Source: Euromonitor International
Retail value rsp--US$ mn--current prices

                                           Current             Forecast
                                           2002      2005      2010

Latin America
  Functional and Healthy Beverages
    Fruit/vegetable juice & coffee --           9.8      29.9      60.1
    Organic
    Soft drinks -- Fortified/functional     1,629.0   2,693.4   3,934.5
    Hot drinks -- Fortified/functional        522.9     861.7   1,250.6
    Soft drinks -- BFY                      1,355.1    2,11.5   3,095.4
    Hot drinks -- BFY                         128.7     221.5     294.0
    Beverages -- Naturally healthy (NH)     2,173.0   3,038.5   4,104.8
    Soft drinks -- Naturally healthy (NH)   1,723.2   2,309.8   3,118.5
    Hot drinks -- Naturally healthy (NH)      449.8     728.7     986.3
  Vitamins and dietary supplements          1,015.2   1,517.9   1,970.4
    Vitamins                                  664.2   1,011.5   1,337.7
    Dietary supplements                       262.0     400.3     514.1
    Tonics and bottled nutritive drinks        40.8      53.8      62.0
    Child-specific vitamins and dietary
    supplements                                48.3      52.4      56.5
  Herbal/traditional products                 402.2     519.5     591.5
  Slimming products                           333.1     438.6     526.4
  Analgesics                                1,002.7   1,203.6   1,315.5
  Cough, cold and allergy (hay fever)       1,457.1   1,800.8   2,035.5
  remedies
  Digestive remedies                          792.7   1,042.3   1,204.5
  Medicated skin care                         665.1     851.4     960.0
  NRT Smoking cessation aids                   12.5      16.0      31.8
  Eye care                                    115.7     128.4     144.4
  Ear care                                     10.5      10.8      10.6
  Adult mouth care                             20.0      26.1      31.3
  Calming and sleeping products                40.2      54.9      71.6
  Wound treatments                             78.6     111.0     130.3
  Child-specific OTC healthcare               374.8     439.8     474.4
  Allergy care                                134.4     160.5     186.1
  Totals                                   15,461.6  21,834.6  37,296.2
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Publication:Nutraceuticals World
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Geographic Code:8AUST
Date:Jul 1, 2006
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