The evolving market landscape of the infant nutrition market in India

The infant nutrition market in India is one of the fastest-growing markets in the country and is expected to continue its growth trajectory in the coming years. According to recent reports, the Indian baby food market size amounts to USD 63.11 billion in 2023. The market is expected to grow at a CAGR of more than 6.55% during 2023-2027.

The increasing demand for formula milk among working mothers and the growing awareness of its benefits over traditional food items are some of the factors driving the growth of the segment. To help market players gain a comprehensive view of how this space is evolving, here’s an insightful conversation with a prominent expert in the infant nutrition market, Dr. Nandan Joshi, Head of Medical Affairs at the Nutrition division of Dr. Reddy’s Laboratories, and Preeti Kumari, a seasoned Manager in the Life Sciences vertical at Netscribes.

Preeti: In your experience, how is the development of infant formulae and meals changing in India? What are the recent innovations in this arena?

Nandan: As per WHO guidelines, an infant should be exclusively breastfed till 6 months of age followed by complimentary feeding and breastfeeding whenever required till the age of 2 years. Breastmilk/human milk remains the gold standard of the infant nutrition market. All the major infant formula manufacturers are involved in human milk research in partnership with the best universities
across the world.

It is impossible to replicate human milk, but you can certainly take inspiration from it and that is what is reflected in the recent innovations in infant formulas. It was discovered in the last couple of decades that human milk is rich in Omega-3 fatty acids, prebiotics, which are fiber that helps stimulate the growth of good bacteria in the intestine, and probiotics which are actually live bacteria that provide health benefits.

You will now see that the composition of infant formula has moved beyond just macro and micro-nutrients. Recent innovations in this space have Omega-3 fatty acids, prebiotics like Galacto-oligosaccharides (GOS) and Fructo-oligosaccharides (FOS), and probiotics like L Reuteri. All of this has been possible because the infant formula regulations have also changed for good in the last few years and provided opportunities to include some of these ingredients which were actually available in the developed markets for many years. I think this is what is driving the innovation.

Preeti: Absolutely! What is the role of infant nutrition products in disease management among infants? In five to ten years, how do you see this segment evolving?

Nandan: So, there are specialized infant formulas in the infant nutrition market that cater to specific conditions or diseases in infants. For example, pre-term formulas are developed for babies who are born before term and or who are born with a lower weight. Their nutrition requirements are different than a full-term baby and formulas need to be designed accordingly.

Similarly, lactose-free formulas are also available to meet the needs of babies who suffer from lactose intolerance. In 2018, FSSAI allowed the import of highly specialized formulas that were life-saving for kids suffering from inborn errors of metabolism like Phenylketonuria, Galactosemia, Tyrosinemia, etc. as well as hypo-allergenic formulas for infants suffering from cow milk allergy. So, these are technical names, but what it really means is, you know, these babies are not able to metabolize carbohydrate routine of fat. So, it could be life-threatening. To similarly help these babies, there are hypoallergenic formulas for babies suffering from cow milk allergy.

All the major infant formula manufacturers are currently working on bringing new innovations in this segment. This is a highly niche segment and the volumes are actually quite low. However, most of the companies are still investing here despite poor margins because these are lifesaving products and helpful to parents, babies, and healthcare professionals.

Preeti: Definitely! Coming to the market landscape, we understand that Nestle is the undisputed leader in the Indian infant nutrition market owing to its established brand image as well as broad product portfolio. However, the rest of the market looks highly fragmented and competitive. Given your experience and expertise, what are your perspectives on this?

Nandan: That’s a great question. Nestle is a global leader in the infant nutrition market and has built an excellent reputation and credibility for themselves among consumers as well as
healthcare professionals. So, it is not surprising that they have done the same in India. The only difference is that they entered India much earlier compared to other multinational companies and had the first-mover advantage and a monopoly for many years.

However, that has changed in the last 15-20 years or so with other companies like Abbott, Danone Nutricia, and Reckitt entering India. Nestle’s market share has definitely been impacted but they still have a lion’s share in this category. It will take many more years before that scenario will change. While other companies have to strive hard for doctor recommendations and consumer acceptance, Nestle has the advantage of being a household name. Mothers and mothers-in-law who have used Nestle’s infant nutrition products when they were new mothers are now recommending the same to their daughters and daughters-in-law. So, you can imagine the loyalty. But I would say it’s slowly changing and I think it will evolve over a period of time.

Preeti: So, the long-term market presence is one of the biggest factors responsible for Nestle success in India. Okay. Now, seeing a favorable demographic scenario in India and the use of target population breaks like the number of babies born per day or per hour and the growing population in India, we assumed that the demand for infant nutrition must be constantly rising in the nation. So, what is your stand on this?

Nandan: Okay. Now see, that’s a very common misconception. A huge population doesn’t always equal to huge business potential, especially in India. There are a few reasons for that. As per NFHS-5, almost 64% of infants are receiving exclusive breastfeeding for the first 6 months of their life. This was 55% in the NFHS-4 survey.

India has done really well when it comes to adhering to WHO recommendations on breastfeeding. In China, only 21% of babies are exclusively breastfed. Whenever babies are not exclusively breastfed during the first 6 months or when they start with complementary feeding at the age of 6 months, the most preferred second food is cow or buffalo milk. The nutrient composition of cow or buffalo milk is not suitable for babies less than 1-year-old and may lead to certain deficiencies, for example, iron deficiency anemia.

However, in India, cow milk consumption is very common in babies, and it starts as early as 3 months of age. Another challenge is the cost of the formulation. Not everyone can afford even basic infant nutrition formulas. So, milk powders are used as a source of nutrition for babies where parents cannot afford infant nutrition formulas.

So because of all these reasons, despite having favorable demographics, the growth in the infant nutrition market is very conservative in India compared to other countries. As a standalone its growth is good. But compared to other countries, it’s still very conservative.

Preeti: Yes. Breastfeeding is one of the most preferred nutrition for babies in India, and as you mentioned, the market is highly conservative in India. It is also highly regulated where in advertisements of these products are banned, and breastfeeding is always preferred by parents and the government. So, in such a scenario, what are the key strategies adopted by major players to strengthen their presence in the Indian infant nutrition market?

Nandan: Yes, as you rightly mentioned, as per Infant Milk Substitute (IMS) Act, the promotion of infant nutrition products is not allowed. So, this makes it extremely challenging for companies to market their products. Now, the key strategies revolve around you know, a few things. So first of all, let’s say bringing differential innovation. So, you have to bring differentiated innovation still within the framework defined by the standards. Second, create awareness among pediatricians about the science behind your innovation.

Next is developing innovative communications to capture the attention, and build the credibility of the company in the minds of pediatricians as well as consumers through publicity initiatives. For example, the importance of the first 1000 days, common challenges faced by infants during early life, and how to address them.

So certain tips for mothers in terms of nutrition management of babies with certain conditions, like low birth weight, lactose intolerance, cow milk, allergy, etc. And all of these are non-branded communication campaigns to build the credibility of the organization. So, these are a few things that you’ll see that most of the companies are using and you’re seeing different innovative approaches to drive their growth in this market.

Preeti: Yes. Now, so far in this market since companies can’t directly brand their product, they are trying to raise awareness among consumers about the importance of nutrition in babies. In this light, what are the key growth avenues or areas of opportunity in the Indian infant nutrition market?

Nandan: So, if you look at the IMARC report, the Indian baby food and infant formula market is expected to have a CAGR of 6% over the next 5 years. It will be primarily fueled by rapid urbanization, an increase in nuclear families, an increase female working population; also rising parent concerns about babies’ nutrition, and increased awareness about different options available.

I think these are some of the things and along with that, the availability of the product on e-commerce platforms will help improve the visibility and access to infant nutrition products. So, I think these are a few things that will sort of help growth in the next few years to come.

And I think what we have seen earlier is mothers used to depend a lot on doctor recommendations for some of these things. I think now we see this slowly shifting and they’re making more and more decisions after reading through the product information on the website and then making an informed decision about the same.

Preeti: Yeah. So, the growing awareness level and education among females in India is also one of the factors responsible for the same. Coming to my final question, given how highly regulated and still driven by innovation the current market is, what are your predictions for the coming 5 to 10 years?

Nandan: There’s no easy answer to that question. But I think the key to success if you call it the key to success, will be to bring our science-based differentiated innovations. There is no alternative to that. You need to bring in new science, keep innovating and keep investing in innovation and bring differential products while making sure that the product is available both offline and online.

Also, it’s extremely important to create awareness about the products in a unique way that is different than the other players. While doing that you have to maintain the highest level of ethics and integrity, especially when you’re operating in this category. I think probably that could be you know a key to success.

Disclaimer: All the views expressed in this article are personal views and do not represent the views of Nandan’s current or previous employers.