If you want to be in Latin America, you want to be in Brazil – but watch out for those regs. Mark J. Tallon sifts through the trends and demographics defining the region and takes a close look at Brazil's big role.
As one of the BRIC (Brazil, Russia, India, China) countries predicted to share increasing dominance of the world economy, expectations for Brazil's economic growth have been high. Yet despite its rich source of food ingredients such as soybeans and botanicals (e.g. mate tea, camu camu and guarana), the country lags behind other developing food markets such as Venezuela.
Although Brazil may not be reaching its lofty growth potential, signs suggest the functional food and beverage markets are flourishing. For example, in 2009 the soy beverage market had $497 million in total sales. And in spite of concerns about the fragile recovery from the global recession, forecasts for Latin America and specifically Brazil are robust. According to Brazil's central bank, gross domestic product growth for 2010 could reach 7.3 percent, which is the nation's fastest expansion in 24 years.
Nutrition Business Journal (NBJ) data suggest a jump in sales across all supplement categories in 2009, including vitamins and minerals (up 18 percent), herbs and botanicals (eight percent), sports and speciality (16 percent).
According to NBJ, the reason for the interest in Brazil's functional food and dietary supplement market is that the economy is stable, inflation is under control and wages are on the increase. These conditions allow for an increase in spending by the lower middle class, about 200 million people. Although the economic downturn suppressed sales in some markets (US, UK and Japan), sales in Brazil for food, beverages and supplements have grown substantially.
Brazil’s healthy food market expansion is also affected by urbanization, with convenience emerging as a category trend in 2005. Until the late '50s, Brazil was mostly rural, but now more than 80 percent of the population lives in urban areas. These changes in population demographics will have significant implications for food and drink design, and will likely increase the demand for convenience-driven products.
In addition, the aging population is a perfect fit for supplements companies. According to Euromonitor, the over-60 market is going to contribute about 13 percent of Brazil's total income. It's not surprising that in 2008, calcium supplements (bone health) were the number one best seller, followed by other well-known anti-aging products, such as Ginkgo biloba for cognitive function and circulation. The next big push is expected to be with fish oils, particularly DHA for cholesterol management and as a cardio protectant, and beauty foods fortified with antioxidants such as vitamins C and E.
Barriers to entry
"The problem in Brazil is government after government keeps changing the regulations because most of the people in charge of regulations know nothing about the industry," said Jose Perez-Gomez, Nordic Naturals VP sales, Latin America and Caribbean markets. "As a company, once you think you're done, the regulators come back to you and request one more new document or sample, or they want to see documentation in a different way. Brazilian consumers, however, are ready for us. They're ready for our products."
Current regulations stipulate that importers must register their productd with Brazil's health surveillance agency, the Agência Nacional de Vigilância Sanitária (Anvisa). Anvisa currently receives more than 2,000 requests for products with functional or health-delivering properties. Additionally, the functional effects suggested on labels and in marketing must be substantiated for evaluation. Manufacturers are required to submit the following information:
- Product name;
- Consumption provided or recommended by the manufacturer;
- Purpose, conditions of use and nutritional value, when appropriate;
- Scientific evidence to confirm the efficacy claim of function or health
Brazil has taken an extremely active role in enforcement. Noncompliance in Brazil is a major issue, and something as simple as a nutritional data error on product labels will violate the Resolution of the Collegiate Board of Directors (RDC) 360/03, which guarantees the rights of nutrition and food safety and consumer protection laws.
These violations can result in suspension of product sales and/or manufacturing, after a warning, fine, confiscation and a ban of the product. One significant example is the Anvisa ban of "Tahitian Noni" in October 2007, when the product was racking up sales of $500 million a year. The ban was imposed because of suggested medicinal claims placed on its labels and ads. The impact was dramatic: According to Euromonitor, dietary-supplements sales grew 13 percent the year before the ban, and only two percent the year after.
Restrictions on ingredient dose in 1998 also damaged market growth when a limit of 100 percent of RDA was imposed for vitamins and minerals added into foods. Any product with a higher level for any given nutrient could be considered a drug and not a food. The most serious implication was that such a product could be sold only through pharmacies.
Major players in the Brazilian supplements market, including Wyeth, Bayer and Merck, are investing heavily in promoting the dietary-supplements category. Because of the dose regulations, companies have begun to offer products with RDAs all under 100 percent, allowing them to sell to channels such as supermarkets.
Also, it was considered that a functional food could not be presented in a pharmaceutical form, such as a pill or capsule, which restricted dietary-supplements growth. However, as part of the evolution of the food industry, Anvisa issued a rule to cover what is known as "bioactive compounds" offering a clear category for these products. But plant parts and extracts, botanicals and herbals are still covered by pharmaceutical regulations and cannot be sold in supermarkets.
De-regulation on the horizon
The regulatory landscape is changing and Brazil's de-regulation is in progress. On Aug. 9, 2010, Anvisa announced that the registration requirement will be lifted for 15 food categories. The inclusion of 'foods for athletes' will open up a significant opportunity for companies in this category.
With this action, Anvisa intends to reduce the number of food registrations that arrive at the agency by 47 percent. "Beyond this process of reducing bureaucracy, we will be able to concentrate efforts in action to improve the sanitary control of foods commercialized in Brazil," said Maria Cecília Brito, director of Anvisa.
Any entry into the market will help position your company as an early adopter and aid in brand recognition as the market evolves. However, a clear long-term strategy to meet local compliance requirements and consumer trends are the keys to success. If you are willing to study the market, the benefits can be significant as shown with MLM company Herbalife, which grew its net sales 14 percent in 2008 to $18.8 million. As a stable market with predictable growth, Brazil and Latin America as a whole are an option for those searching for almost virgin territory.
Other emerging market opportunities
1. Eastern Europe & Turkey
Favorable regulatory decisions have been made that will open up new-product opportunities.
High-level dialogue is creating a more positive regulatory environment.
The groundbreaking FOSHU regulation has not evolved and is suffocating the market. However, the oversight recently given to the Ministry of Consumer Affairs bodes well.
Will its model be a food- or drug-based law?
5. Asean nations
Harmonized regulations across 10 nations by 2015 is being done for trade purposes, not to create regulatory barriers.
Mark J. Tallon, Ph.D., is founder of NutriSciences Ltd., a consultancy firm specializing in health-claim substantiation, product development and technical writing. www.NutriSciences.com