Contrary to expectations, the economic downturn has not managed to strangle the steady growth of the probiotics market. Euromonitor International’s ingredients market research data shows that global volume consumption of probiotic cultures in packaged food products reached 44,249 tonnes in 2009, up 5% on the previous year.
Indeed, global volume consumption is more than three times that of omega-3, making probiotic cultures the most successful functional ingredient in packaged foods after vitamins and minerals.
China finally overtakes Japan in 2009
The Asia-Pacific region accounted for half of global probiotic culture consumption in 2009, followed by Western Europe. North America, where consumers were initially reluctant to accept probiotics, trails behind, claiming less than 7% of global volumes. Due to its relative immaturity, this region was also the most dynamic in 2009, clocking up 10% volume growth. However, in terms of growth, Asia-Pacific continued to perform better than Western Europe, Eastern Europe and Latin America with 6% growth.
In 2009, China finally overtook Japan as the heaviest consumer of probiotic cultures, reaching over 10,000 tonnes. Euromonitor International predicts that by 2014 this will have risen to almost 18,000 tonnes, accounting for nearly 30% of global consumption.
Japan, which gave birth to the global probiotic yoghurt boom, is highly saturated and its market is gradually starting to contract. Volumes declined from 6,745 tonnes in 2004 to 6,204 in 2009. The highly developed markets of South Korea and Taiwan are also showing clear signs of stagnation.
Apart from China, which racked up a colossal 284% volume increase, Asia- Pacific’s most dynamic markets over the 2004-2009 review period were Indonesia and Malaysia, where probiotic culture volumes soared by around 60%.
Euromonitor International’s ingredients data shows that, overall, the vast bulk of probiotic cultures end up in yoghurt. In Asia-Pacific, drinking yoghurt accounted for 88% of probiotic culture input in 2009 – a share that barely altered over the review period. The rest went into spoonable yoghurts.
By contrast, in Western and Eastern Europe, the split is around 60/40 in favour of spoonable yoghurt, while in North America spoonable yoghurt accounted for 80% of probiotics consumption in 2009.
Lactose intolerance a major problem in Asia-Pacific
The vexatious reality of lactose intolerance affects around 75% of the global population. People whose bodies produce insufficient quantities of the enzyme lactase have trouble digesting lactose (the sugar found in milk) and they are therefore considered lactose intolerant.
There are varying degrees of lactose intolerance, with genetics the determining factor. Only around 3% of people of white Western European heritage suffer from this problem, compared with an estimated 90% of East Asians (including Han Chinese and Japanese people) and Southeast Asians. The peoples of Asian countries with a long history of dairy farming, for example in India and Mongolia, are much less affected.
Symptoms can be very irksome, ranging from mild abdominal bloating to severe flatulence, stomach pain and diarrhoea. Because the process of bacterial fermentation naturally uses up the milk’s lactose, fermented dairy products, and in particular probiotic yoghurts, are usually well tolerated by lactose-intolerant people for whom an equivalent amount of fresh milk would spell digestive troubles.
This partly explains why the global probiotic yoghurt boom kicked off in Japan, a country with a highly sophisticated and innovative packaged food market, whose emerging dairy industry was constrained by the fact that virtually its entire consumer base struggles with lactose intolerance to some degree.
Yakult Honsha got it right with its by now world-famous small bottles of well-fermented milk, which does not wreak havoc with sensitive Japanese digestive systems. The company is the Asia-Pacific region’s topmost yoghurt player with a 20% value share in 2008, and it ranks fourth in dairy overall.
Good news for sluggish probiotic supplements
The high prevalence of lactose intolerance in Asia-Pacific is not just going to spur on probiotic yoghurt and food sales, but also those of probiotic supplements. Although Asia-Pacific already constitutes the second biggest regional market for these products, accounting for over one quarter of the world’s US$2 billion retail value sales, it put in the weakest growth performance of all regions over the review period – a mere 9% – way below the global growth rate of 63%.
At some point in the future, Asia-Pacific’s rapidly rising dairy consumption (especially that of milk, which is among the most difficult dairy product to digest for lactose- intolerant people) is expected to boost the performance of probiotic supplements in the region.
Probiotic supplements can help alleviate the discomfort of lactose intolerance because the live bacteria contained in them help to break down the excess lactose in the upper intestinal tract of humans. This creates plenty of opportunities for dietary supplement manufacturers, including with regard to the development of specialist products.
For instance, US biotechnology company Ganeden Biotech was granted a new patent in May 2010 in its home market for a two-prong approach product called Digestive Advantage Lactose Intolerance, which combines the lactase enzyme with a probiotic bacteria strain.
Convenient, portable probiotic formulations such as these are a boon for lactose intolerance sufferers who want to avoid physical discomfort and social embarrassment, for example when eating out. Sticking to a 100% lactose-free diet is very hard to do, especially as many packaged and prepared foods have hidden dairy components.
Strong growth predicted for emerging economies
Euromonitor International anticipates buoyant dairy sector growth for several Asian- Pacific countries with highly lactose-intolerant populations. For example, dairy value sales in Vietnam are forecast to increase by 39% over the 2009-2014 period, while China’s should increase by 28% and those of Laos and Cambodia by 46%.
The long-term growth potential of these markets is immense. To illustrate, 2009 retail volume per capita consumption of pro/pre biotic drinking yoghurt in China amounted to just 0.6 litres, compared to 3.3 litres in Japan and 1.4 litres in Thailand. As for Vietnam, the category only really managed to gain a foothold in 2007, and per capita consumption remains below 0.1kg.
Laos and Cambodia are even more underdeveloped. In 2009, overall yoghurt retail value sales amounted to less than US$6 million for both countries combined, and pro/pre biotic yoghurts do not yet exist as a distinct category.
As for probiotic supplements, appreciable markets are confined to Japan, South Korea, Taiwan, China, Indonesia and Singapore. Much of the rest of the Asia-Pacific region needs substantial development and investment from forward-looking companies which are not afraid to help unlock its considerable potential.