With the advent of new segments such as functional foods and cosmeceuticals, the market for herbs and botanicals has changed significantly over the past decade. This has opened up new opportunities for manufacturers, allowing them to position botanicals and other natural ingredients in products that no longer have to compete with only synthetic medicinal ingredients.
In fact, the greatest potential for new herb and botanical products currently lies in the food sectors, as companies harness the current global consumer interest in natural and functional foods. Some of the latest opportunities include exploring botanical alternatives to animal-sourced ingredients such as omega 3 fatty acids from fish, or finding natural alternatives to artificial additives such as preservatives or colorings. New varieties of fiber are also being discovered, opening up areas for new product development. Other growth sectors include cosmeceuticals and the emerging category of beauty foods.
The growth and development of these new segments add to the diversity of the herbs and botanicals market. But, these developments also complicate market analysis because the definitions of segments and categories vary, therefore leading to diverging figures. As an example, if we include soy and algae in the herbal category, we would end up with figures much higher than those given here.
In the drug segments, interest in herbal alternatives to synthetic drugs is increasing globally. This is reflected in an increasing interest in complementary alternative medicine (CAM) and traditional medicinal systems (TM) (i.e., Traditional Chinese Medicine, Ayurveda and other Asian systems).
However, the growth of the herbal/ botanical drug market is not as pronounced as that of the food segments. One reason for that is the long product research and development time, most notably on the drug registration side. In spite of this, there has been a positive development in the U.S., opening up the herbal drug market, which is a sign for future growth of that segment.
In Europe, the Traditional Herbal Medicinal Products Directive is expected to have a positive impact on the market because it allows access to the market via a simplified registration procedure without having to carry out unnecessary safety and efficacy assessments. Also, a registration in one country of Europe will apply to all other EC member states, eliminating the hassle of navigating different regulatory requirements for different countries, which was a major downside of the old system.
On the supplement side, a new directive has come into effect. It is still not clear which herbs and botanicals will be able to remain on the market as supplements, so it is difficult to make predictions on successful future supplement ingredients at this time. However, many pharmacologically active herbs will probably need to be registered as herbal medicinal products.
Global Trends & Market Drivers
The herbs and botanicals market, as it applies to the dietary supplement, self-medication and functional food segments, is driven by consumer demographics and health concerns. Broadly speaking, these trends include anti-aging, weight control, joint and bone health, digestion/ immunity, cardiovascular health/ diabetes, cognition/memory, female/ male health and the growing wellness and beauty trends. Another trend benefiting the herbs and botanicals market is the natural and exotic ingredients trend, which is taking off in functional foods, as well as medicinal products.
With the continued sedentary and hectic lifestyles of industrialized regions of the world and the relative increase of the senior segment of the world population, these trends are expected to grow.
At the same time, consumer education about the functional benefits of herbs and botanicals is increasing. Together with increased confidence due to solid science behind the products, market entry for new ingredients is becoming easier.
On the other hand, bad press continues to affect the herbs and botanicals market, most notably whenever an herb, such as St. John's Wort, ginkgo or black cohosh, is reaching a certain market size and beginning to infringe upon the profits of synthetic competitors.
The most recent example involves St. John's Wort and a study concluding that the herb doesn't work for Attention Deficit Hyperactivity Disorder (ADHD). Published in the June 11th issue of JAMA, the study compared St. John's Wort (300 mg) to a placebo in 54 children (ages 6-17), who took one of the two treatment options for eight weeks. In the end, researchers said the herb didn't work any better than placebo.
Following publication of the study, the headline of a New York Times article read: "St. John's Wort Fails to Help Kids With ADHD." The reporter referred to the use of St. John's Wort for ADHD as "common" for parents who want to avoid giving their children drugs. The article also said the study results represent "another blow for herbal supplements." Finally, it said, "The research follows other studies with disappointing results for alternative remedies such as echinacea for the common cold, saw palmetto for prostate problems."
In response, the American Herbal Products Association (AHPA), Silver Spring, MD, came forward to point out several crucial flaws. First and foremost, said AHPA president Michael McGuffin, the marketing of St. John's Wort for ADHD is very uncommon, not common as insinuated in the New York Times article. In fact, the supporting reference for the authors' assertion was a survey conducted in 2000-2001, which found five out of 117 children with ADHD had taken St. John's Wort at some time in their life. According to AHPA, these five children had not necessarily taken St. John's Wort for ADHD and were not necessarily taking it at the time of the survey. In other words, this is hardly a supportive reference for the researchers' assertion.
Furthermore, AHPA points out, the authors admitted that the product had seriously degraded by the end of the trial. "The degradation of the product to less than half the amount of the marker compound means the quality of this product was seriously impaired by the end of the study," said Mr. McGuffin. "Overall, this is a study of an uncommon use of St. John's Wort that used a poor quality product."
Market Size & Growth
According to a&r estimates, the global market for herbal remedies across all segments (excluding soy, algae and fiber) currently brings in about $83 billion. Depending on the segment, growth is steady, ranging between 3% and 12%. Herbal dietary supplements ($11 billion) and herbal functional foods ($14 billion) make up over a third of the market. The global herbal pharmaceutical industry (including drugs from herbal precursors and registered herbal medicine) contributes $44 billion. Herbal beauty products make up the remaining $14 billion of the market.
In the global cosmetics market, herbal ingredients are estimated to have a 6% share of the market, and are exhibiting the strongest growth, between 8% and 12 %.
In terms of geography, the global herbal medicines/ supplement market is divided among Germany (28%), Asia (19%), Japan (17%), France (13%), Rest of Europe (12%) and North America (11%).
In 2006, the top three herbs featured globally in medicines, supplements and functional foods were ginseng, ginkgo and noni. Table 1 shows the sales for these and other popular herbs worldwide.
This list is not expected to change much through 2008, though it is possible that plants currently under attack by the synthetic pharmaceuticals industry may decline in sales going forward. To offset this, other ingredients such as Coleus forskohlii and the so-called "superfruits" are soaring. However, there is currently no obvious single herbal "blockbuster" or rising star among the botanicals.
Among preferred botanicals used in cosmeceuticals are grape seed, bilberry, acerola, baobab, turmeric, ginkgo biloba, white and green tea, red clover, soy, tomato, comfrey, papaya, rosemary, wheat, evening primrose oil, sweet potatoes, carrots, olives, flax, aloe vera, coffee plant, centella asiatica, avocado and passion fruit.
Around the Globe
Asia. In 2003, the Asian market for herbal supplements and herbal medicines (excluding Japan) brought in $2.4 billion in sales, which rose to $5.8 billion in 2004 and $6 billion in 2005. Today, the Asian market (excluding Japan) is estimated to be worth about $6.4 billion. This increase is expected to continue. In Japan alone, the market is worth well over $2.6 billion today.
India. The Indian healthcare market is valued at $7.3 billion, 60% of which is controlled by pharmaceutical drug manufacturers, while 30% is controlled by Ayurvedic medicine manufacturers. Other TM/CAM products account for the remaining 10% of the market.
The Indian supplement market is growing very rapidly, because supplements and nutraceuticals are viewed as lifestyle products. Popular supplement categories include joint care, hair loss, memory and childcare products. Also in high demand are immunity products and multivitamins.
The market has received new impetus through Ayurvedic Umami and Siddha medicines, reflecting consumers' interest in natural remedies without the side effects of prescription drugs. Accordingly, domestic consumer goods companies have been investing in their Ayurvedic product portfolios.
China. Consumer sales in the nutrition industry are enjoying healthy double-digit growth, reaching over $8 billion in sales in 2007. Most growth is coming from Hong Kong and Taiwan, and is linked to soaring supplement sales in vitamins and minerals, complementing a strong history in herbal and botanical products. Sales of herbal medicines as commercial products are estimated to be about $3.5 billion.
China has a 10% share of the global supplement market. Within the Chinese market, however, supplements account for only 4% of OTC (over-the-counter) sales. Most likely hampering growth is the fact that the average consumer does not consider it necessary to take daily supplements. Considering that the per capita intake in China is 50% lower than that of other Asian populations, the supplement market here is not quite developed.
Vitamins represent the largest supplement category in China, which brought in $630 million in sales in 2006. Vitamin formulations are becoming more complex. Today they are being combined not only with minerals, but also with herbal and specialty ingredients.
Major market drivers in China include the aging population and female customers. Women's supplements related to beauty and well-being will keep developing, and supplements for cholesterol, blood glucose, improving sleeping quality and mental clarity will benefit. The market for children's products also looks promising.
Meanwhile, the Chinese supplement market continues to grapple with trust issues in part related to the March 2007 melamine scandal as well as instances of adulterated or contaminated products.
Indonesia. The health food supplements market in Indonesia grew 509% between 2002 and 2005. For the near future, sales prospects look good, with steady growth projected in the range of 15% to 25% over the next two years.
The market for dietary supplements (excluding traditional Indonesian herbs or jamu) was estimated to be $260 million in 2006, exhibiting a growth rate of 25%.
Increasing awareness of preventative health measures has created a larger demand for a variety of health food supplements, leading to excellent opportunities for U.S. health food supplement manufacturers. U.S. health food supplements maintain over 50% of the total import market share and enjoy a sterling reputation in Indonesia.
Locally produced health foods consist mainly of herbal health drinks that appeal to a down-market segment. Indonesian traditional herbs (jamu) are not classified as food supplements.
Imports account for over 80% of the Indonesian supplement market, about 60% of which are U.S. products. Of special interest are products related to weight loss and appearance, chronic disease like hypertension and osteoporosis, stamina, sexual health and vitamins.
Japan. At the end of 2005, the market size of Japan's herbal market was estimated to be around $2.5 billion. Unfortunately, the nutrition market contracted in 2006, due to a long period of economic stagnation and is currently estimated to be worth about $26 billion, down 2% from 2005. A reason for this decline, apart from economic considerations, may be a new "Health Promotion" act that severely limits expression of health benefits on nutritional products.
The developed Japanese nutrition market needs a rising star every few years, but there haven't been any since CoQ10 and alpha lipoic acid. This contributed to the negative growth in 2006, when the supplement market in Japan declined 12% to $9 billion, making it smaller now than it was three years ago. Reasons for this development include changing regulation, food safety and contamination, as well as lack of new ingredients.
Most hot ingredients of three years ago, such as CoQ10, alpha lipoic acid and Agaricus, have lost 15% to 20% of their market. Consequently, companies within these industries have lost 10% to 15% of sales.
The only bright spot in the struggling Japanese supplement market is the government initiative around metabolic syndrome, which may be what nutrition businesses need to get back to healthy profits.
Beer yeast, propolis, banaba, Japanese plum, chlorella, barley verdure, vegetable juice, collagen, royal jelly and mulberry are the most popular ingredients in Japan right now.
U.S. In 2005, U.S. herb and botanical sales were at $4.4 billion, with an estimated growth rate of nearly 4%. Retail sales of herbal/botanical products suffered a decline due to bad press and politics surrounding controversial ingredients in 2003, but the market seems to have recovered since, at least marginally. In 2006, sales grew to $4.6 billion, and they are currently estimated to be about $4.8 billion. This type of growth is expected to continue.
Raw material sales, on the other hand, are at their lowest level since 1995, declining by 41% since 1999. Raw material supply to the U.S. is increasingly dominated by imports from China/India, reaching about 50% of global imports in 2002 and shifting further.
Top-selling herbs and botanicals in the U.S. include non-ephedra combination herb blends, growing 51% from 2003 ($958 million) to $1.4 billion in 2004. This is followed by noni juice (4% growth to $203 million in 2004) and green tea (45% growth to $160 million in 2004). Garlic, echinacea, saw palmetto, ginkgo biloba, ginseng and soy, all high-ranking among the top-selling herbs, experienced some declines from 2003 to 2004, whereas mangosteen juice, ranked at #10 among the top-selling herbs, grew 200% to $72 million in 2004. Other top-selling herbs and botanicals are, in order: milk thistle, black cohosh root, psyllium, St. John's Wort, horny goat weed, cranberry, valerian, aloe, maca and evening primrose.
Europe. The European market for herbal supplements and herbal medicines is currently worth $7.4 billion. An analysis based on data from IMS Health put the global European OTC market for herbal drugs at approximately $4.95 billion in 2003.
Sales development was $7.1 billion in 2003 and fell to $6.9 billion in 2004 due to poor economic performance in many European countries, health reforms and changing regulations in Germany, the largest European market. By 2005, sales development recovered slightly and rose to $7.1 billion.
Germany is the largest European market, with a 27% share, followed by France (24%), Italy (12%) and the U.K (9%).
With the participation of new EC countries in the herbal market business and various local changes in the EC markets, market share distribution shifted from 2003 to 2005. In 2003, Germany held a 39% share, while the rest of Europe (excluding France, Italy, and the U.K.) held a 20% market share. In 2005, Germany's share had declined to 27%, while the rest of Europe (again, excluding France, Italy, and the U.K.) held a 28% share.
Germany. Germany is the largest single European market. In fact, no other European country has reached Germany's high sales volume of herbal drugs and homeopathic/anthroposophic drugs. According to the Bundesverband der Arzneimittelhersteller (BAH), $1.81 billion worth of herbal and homeopathic drugs were sold in Germany in 2004, representing a third of the European self-medication market, which is worth about $5.8 billion.
Indications in self-medication for herbal drugs (not counting homeopathic drugs) include, in order of sales volume: cough/cold ($311 million), circulation ($252 million), digestion ($145 million), relaxation/sleep ($116 million), pain including muscles/joints ($71 million), tonics/geriatrics ($36 million) and all other indications ($192 million).
German sales figures for herbal remedies declined between 2003 ($2.8 billion) and 2005 ($1.9 billion). This was likely the result of health reforms, cutting down on reimbursements for many herbal remedies, and negative PR related to drug interactions, affecting herbs such as St. John's Wort and kava kava.
The dominant sales channel in Germany is pharmacies (35%), followed by drugstores (24%). Supplement trends are geared toward condition-specific products (i.e. for menopause and inner/outer beauty).
France. France's market share is 24%, making it the second largest European market. Sales for herbal remedies rose slightly from $1.65 billion in 2003 to $1.73 billion in 2007. Dominant trends in the market continue to focus on condition-specific marketing (i.e. women's health concerns and aging).
Pharmacies are the dominant retail sales channel, accounting for almost three-quarters of supplement sales.
Italy. Italy's market share in the EC is 12%, making it the third largest market in Europe. Sales figures for herbal remedies have risen slightly in Italy, from $0.75 billion in 2003 to $0.89 billion in 2007.
In Italy, taking dietary supplements for well-being is not quite mainstream. But things are starting to change in this respect, although most of this growth is coming from vitamins and minerals. There was a 14% rise in supplements in 2003 and 10% in 2006.
During the same period, herbal supplement growth was stagnant due to falling consumer confidence resulting from excessive claims, as well as efficacy, cleanliness and dosage issues. Garlic, ginkgo biloba and ginseng were flat, and St. John's Wort declined 10% for suspected drug interaction. Echinacea, still a novelty in Italy, grew 7%. Slimming products in general are up 1.5%.
U.K. The U.K.'s share of the European market is 9%, making it the fourth largest European market. Sales of herbal remedies showed a slight rise from $0.5 billion in 2003 to $0.7 billion in 2007.
Despite an otherwise robust economic expansion, supplement growth is flat or declining in the U.K., mostly due to price-cutting. British shoppers have also fallen prey to negative press, and an uncertain regulatory environment pending legal action related to the EU Food Supplement Directive has stifled product development.
Spain. The Spanish economy has grown since 2003, but taking supplements is not a strong tradition. Only 8% of Spain's adult population takes supplements (compared to 40% in Germany).
Total supplement sales grew by 7% in 2003, of which vitamins, led by multivitamins, accounted for most of the sales. Of the herbal supplements, products to improve appearance and artichoke for weight loss were the hottest, with sales up 11% in 2003. Other leading products were evening primrose oil (up 10%), also linked to weight loss. Garlic rose 9%, while St. John's Wort and echinacea grew around 4%.
In 2006, yearly growth rose 10%. Spain is currently the European country with the largest percentage of health and beauty product consumers, with 93% of Internet users saying they buy such products, compared to 74% on average throughout Europe.
On the downside, Spain has restrictive, outdated herbal regulations. Products containing herbal ingredients are classified as medicines unless they are included on a list of permitted plants drawn up in 1973. Items not on this list have to go through a pharmaceutical approval process. This provokes uncertainty in operators, consumers and authorities.
Rest of Europe. Among the remaining European countries, Scandinavia, Poland and Spain witnessed slight increases in sales from 2003 to 2005, while sales in the remaining countries have remained flat.
Supplement sales in Belgium have grown 10% annually for the last three years. The changing EU claims regulation is expected to have a negative effect. The Netherlands experienced growth of 4% in 2004, slowing to 1.5% in 2005, and remained flat in 2006. Products showing remarkable growth are fish oil, which grew 6.1% in 2006, and glucosamine. Also, the aging population increased usage of dietary supplements from 27% in 2004 to 36% in 2006. Changing regulations are likely to have a huge impact on the liberal situation for herbs in The Netherlands.
Eastern Europe (Poland, Czech Republic, Romania) contributed only 3% to the global supplement market last year, but sales are growing fast. Generally speaking, the more developed the economy, the more developed the food supplements market. The market is fast developing, especially in Romania and Ukraine.
Australia/New Zealand. Herb and botanical sales are currently $0.45 billion in Australia and New Zealand. Sales development was $0.3 billion in 2003, rising to $0.4 billion in 2004 and increasingly slightly since then.
The New Zealand supplement market has been growing 5% annually, rebounding following a downturn between 2000 and 2002.
The awareness of and interest in herbal supplements are rising, following a growing trend among Australians to concentrate on health instead of disease.
Latin America. Sales of herbal and botanical products in Latin America are worth $0.9 billion. The sales development was flat, rising from $0.8 billion in 2003 to $0.9 billion in 2004 and holding steady.
Dietary supplements in Brazil are classified either as medicine or as food supplements. The fastest-growing categories include weight loss and sports nutrition. Chitosan is a top seller in weight management, while protein supplements are popular in sports nutrition. In addition to low-dose vitamins, the food supplement category includes products such as guarana, chitosan, fibers, fish oil, borage oil, lycopene, lutein, evening primrose oil, DHA, lecithin and aloe vera.
Rest of the World. Estimates of herb and botanical sales in all other regions not mentioned previously, and excluding Australia/New Zealand and Latin America, are just below $1 billion. Generally, figures are hard to estimate, and the figures that do exist vary wildly from source to source.
Discovery of New Herbs & Botanicals
The search for new active ingredients has a long history in the pharmaceutical industry, but less so in the nutraceutical and food industries. This has changed recently, since the historic Bayer natural products research platform was outsourced in a management buyout by the company InterMed Discovery, offering food companies access to a database to look for new food ingredients, based on their biological activity.
The database features tens of thousands of plants, fractionated and tested in over 100 bio-assays. Many of them are food plants and can therefore be used for the discovery of new active compounds. Most recently, Cognis acquired an interest in InterMed Discovery GmbH and at the same time signed a cooperation agreement to access one of the world's largest natural product databases. It has also been granted exclusive access to selected potential active ingredients for specific applications in functional foods and dietary supplements as well as personal and home care products. This is proof of the industry's high interest in this novel approach and we can expect many new compounds to come out of that new resource in the future.
The herbs and botanicals markets around the world are still far from realizing their full potential. And market expansion, particularly in the functional food and self-medication sectors, is dependent on consumer education. In herbals, as in everything else, if consumers do not understand the benefit of a product, they will not buy it.
New ingredients and new benefits for known ingredients are still being discovered, a sign that the full potential of the market has not yet been realized. Looking at the individual market segments, future ingredients for weight control include green coffee extract, Fraxinus excelsior seed extract, probiotics/synbiotics and alginate-pectin calcium gel. Coccinia indica, banaba leaf and maitake mushroom are promising future ingredients with blood sugar lowering properties. Cocoa polyphenols, Blumea balsimifera, beetroot juice and Epimedium grandiflorum have recently shown cardiovascular benefits. For joint and bone health, olive extract, Epimedium brevicornum and green tea catechins are being studied.
In the wellness category, Kigelia pinnata, gotu kola and cocoa flavanols and catechins are promising future ingredients with anti-aging properties. Omega 3 fatty acids, the well-known group of ingredients responsible for everything but starting your car in the morning, are being applied to gut health products. The growing cognitive health segment is expected to see Rhodiola rosea, olive extracts and cocoa flavanols in future products.
For these ingredients, preliminary and promising studies have been performed, and many are currently being tested for application in functional foods, which are expected to rise to prominence. Also, ingredient efficacy and therefore claim substantiation is expected to have the highest impact on new product development in the herbal and botanical markets, together with consumer education. This, of course, will require a larger investment in new products and their marketing.
The changing regulatory situation in Europe makes things difficult to predict, but it is safe to say that new product development, especially in the herbal supplement segments, will be slower in the near future. The new segments of functional food and nutricosmetics, however, will continue to experience a double-digit growth rate and play host to many exciting new concepts.
Consumer demand for more nature and more exoticism in food will lead to an increased use of herbs and botanicals in functional food, which will, at least in part, offset the present slower growth of the herbal drug markets.
When the international harmonization of herbal regulations is more settled, and definitions of herbal supplements, herbal drugs and herbal food ingredients are clear, another growth phase of the complete category will take place. Regardless of what happens, however, new products and concepts based on solid science will be the winning strategy for international success going forward.