Halal nutraceuticals gaining market share in $187 billion global industry

Photo: TORONTO, CANADA - MAY 07, 2014: Different types of vitamins and supplements on shelves in a pharmacy / Niloo / Shutterstock.com

The global nutraceuticals market was an estimated $187 billion in 2015. With a clear demand for halal-certified nutraceutical products, several mainstream players, such as Abbot Nutrition and Nestlé , have obtained halal certification for their products, and new players focused on the Muslim market, such as Noor Vitamins and HalalVital, are also entering the market. What are the opportunities for new entrants in the global halal nutraceutical market?

GLOBAL MARKET

The global nutraceuticals market was estimated at $187 billion in 2015, up from $166 billion in 2014, according to a report by Transparency Market Research. It is forecast to grow by 7.3 percent cumulative annual growth rate (CAGR) to reach a $279 billion market by 2021. Growing demand is driven by increasing awareness among consumers about the benefits of supplementing their diets, particularly in high-growth markets such as Asia Pacific.

Key regions in the nutraceutical market include North America, accounting for 40 percent share of the global market in 2014, followed by Asia Pacific.

Key players include Archer Daniels Midland Company; BASF SE; Cargill, Inc.; E. I. du Pont de Nemours and Company; General Mills, Inc.; Groupe Danone S.A.; Nestlé S.A.; and Royal DSM N.V. The five largest of these key players commanded over 50 percent of the market in 2014.

ISLAMIC DEMAND

Muslims spent an estimated $78 billion on halal pharmaceutical products in 2014, and this spend is projected to grow by 5 percent CAGR between 2014 and 2020, implying an $82 billion market by 2015 and a $106 billion market by 2020.

Given the widespread use of haram ingredients such as alcohol and pork-based gelatin in products like capsules, there is a clear need among Muslims for halal-certified nutraceutical products.

Nutraceutical products fall under the standards used by halal certifiers and require certification to be technically considered as such, most notably by global leading certification bodies such as Malaysia’s JAKIM, Singapore’s MUIS, and the United States’ IFANCA.

To address growing Muslim demand, mainstream nutritional products manufacturers, most notably Abbott and Nestlé, have sought halal certification, and other players have also had products certified as halal.

Abbott Nutrition is a division of Abbott, the multinational healthcare company. The nutrition division earned $7 billion in revenues in 2014, and the majority of its factories are halal-certified. The company began certifying its products as halal in 2003 to address demand in Southeast Asia as well as to meet halal import requirements established by Saudi Arabia. Signaling the importance of accessing the Muslim consumer, in 2008 Donald Sgontz, Manager of Halal and Kosher Programs at Abbott, told IFANCA that halal certification not only made good business sense but was the “right thing to do.”

Nestlé is a key player in both the halal food industry and a leading global manufacturer of nutritional products. The company is estimated to have earned revenues of over $6 billion globally for its halal-certified products, and its Nutrition and Health Sciences Divisions earned $13.5 million in revenues in 2014. Of its 468 factories, 159 have been halal-certified, and a broad range of nutritional products, such as its Lactogen infant formula and its Nesvita Pro-Bone Protection product lines, are produced by Nestlé Pakistan and are certified as halal by IFANCA.

Several other key players have entered the halal products market to access a broader customer base. Many of Archer Daniel Midland Company’s products were certified as halal by IFANCA in 2015, including its Clintose® Dextrose and Fibersol product lines.

Several leading Muslim-focused producers have also emerged over the last five years, such as U.S.-based Noor Vitamins and Netherlands-based HalalVital.

Noor Vitamins was launched in 2011 by NYU Stern MBA graduate Mohammed Issa. The company manufactures halal vitamins and dietary supplements using natural ingredients and has scaled to reach 13 countries in over five years as well as achieved nationwide distribution in the United States through pharmacies and national retailers. While halal is core to the company’s products, it also has a strong emphasis on high-quality ingredients, which has been integral to its success.

HalalVital is a relatively new player. Based in Netherlands but with global reach, it sells halal vitamins and minerals online. HalalVital undertook a fundraising campaign on equity crowdfunding site Symbid in 2015 and reached its target of $72,000. It seeks to generate revenues of $6.7 million by 2017.

CONSIDERATIONS AND CHALLENGES

There are several key considerations in addressing the global halal nutraceuticals opportunity.

Firstly, obtaining halal certification and navigating a confusing global landscape inhibits market entry.

According to a report on the Future of Halal Food Regulation by the International Trace Center in 2015, there is no widely accepted standard. JAKIM’s standards have often been used as a model, and the Standards and Metrology Institute of Islamic Countries (SMIIC) has sought to produce a commonly accepted standard, but differences remain across various standards. The extent to which they are fully adopted by certifying agencies also varies.

As a result of differing requirements internationally, Abbott, for instance, has had to obtain multiple certifications, including IFANCA, the Halal Council of Europe, and the Islamic Religious Council of Singapore (MUIS). This adds complexity to the supply chain and has cost implications.

Secondly, lack of awareness among consumers remains an issue. While a product may be certified, consumers may not necessarily seek them out without the benefit of a targeted marketing campaign.

Abbott benefited from being mentioned in several Muslim consumer publications, including IFANCA’s magazine, in 2008 and 2009. However, proactive use of digital marketing, including Muslim-focused advertising platforms, such as Muslim Ad Network and Halal Ad, as well as attendance at key events targeting Muslim consumers, such as the American Muslim Consumer Consortium Conference held in 2014, will help raise awareness.

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