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China – A New Frontier in the Probiotics Market

It was first introduced in Japan in the early 80’s where it was marketed as a functional food. It was primarily used for fortifying the food with ingredients that provide health benefits. They are called Probiotics. According to the WHO, Probiotics are termed as “live micro-organisms, which when administered in adequate amounts, confer a health benefit on the host”.

In view of the health benefits probiotics are able to provide, the demand for the use of probiotics in food has increased exponentially in the regions of USA, Europe and Japan. Recently there has been a cultural shift in the market scenario. In view of recent events such as EU rejecting all the claims related to probiotic ingredients resulting in the weakening of the probiotics market. Along with it, Japan market which was once globally the largest market for Probiotics has stagnated with lessened consumer spending. Whereas the demand is ever present in the North American region. But scope for investments and opportunities is relatively minimum in this region. This can be attributed to the strong presence of the major market players who have thoroughly penetrated and consolidated their position. This has led to a situation where companies are looking to expand their market base venturing into untapped markets.

Coming to untapped markets, there is no better fit than China in terms of the potential and promise it holds for probiotics. This is majorly due to the fact that China has a huge cattle and dairy presence globally. Naturally this will act as a huge base for fortifying foods which can be made using probiotics. Along with this, it is estimated that more than 90% of the Chinese are lactose intolerant. Despite this there is major push to encourage them to drink milk primarily due to the fact that milk is very good for health. To overcome this major hurdle, the Chinese populace are showing a lot of interest in using yogurt which is fortified using probiotics. This scenario has created a huge demand for probiotics in China. As a result the Asia Pacific market for probiotics is on the rise. The Chinese market is currently growing at a forecast compound annual rate of 13% which is higher than the likes of Japan.

This trend has been observed by major companies all over the world and have identified China as huge market for probiotics. The probiotics demand will pave the way for functional foods to thrive in the Chinese market. Accordingly probiotics can be used in making other products for the likes of infant food and dietary supplements.

From a competitive landscape point of view, top companies from all over the world have started businesses in China. Yakult, one of the market leaders in the field of probiotics have managed to open three production facilities along with starting sales of their products in two other places. This is just for the year 2014 alone. They have also planned to open branches in four more locations. This has been the trend in China since 2011. Similarly the likes of DANONE, DuPont, General Mills, CHR Hansen Holdings and Nestle have followed the same approach. All the above companies have either started production plants, sold their products or acquired the local companies and made their entry into the Chinese market. Despite Japan being the major market in the Asia Pacific region, China is expected to show greater growth when compared to the likes of Japan. Japan currently accounts for about 45% of the Asia Pacific market for probiotics, followed by China which accounts for more than 25%

But this is expected to change in the near future. After the Chinese market, the Indian market for probiotics has the greatest potential. This can be attributed to the fact that India is the largest exporter of cattle and has the largest livestock population globally which amounts to nearly 512 million numbers. This is an indirect indication of the probiotics potential India holds. Introduction of probiotics in India can improve the health of the population as well.

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