The North American Probiotics Market

Billions of beneficial bacteria maintain human intestinal balance. For various reasons, including consumption of antibiotics and ailments such as constipation or diarrhea, this bacterial colony count gradually depletes, thus creating an imbalance within the human system. In order to maintain the guts microflora, which involve bacteria such as Lactobacillus and Bifidobacterium that line the human intestine and confer health-promoting properties, beneficial bacteria or probiotics must be administered through nutritional vehicles, such as food or dietary supplements.

Probiotics are a single or a mixed culture of live microbes that, when administered in adequate amounts, improve the indigenous microflora of the host. Specifically, the role of probiotics is to aid digestion and maintain good digestive health. On average, probiotic cultures may contain 1 million to several billion cells or colony forming units (CFU) per gram, which differ based on the strains used by the manufacturers. Probiotics are fortified in foods to effectively colonize the small and large intestines. Globally, the food and beverage industry is the largest end-user application segment.

In the field of probiotics, North America has tremendous growth potential because of consumers natural predisposition to taking supplements and consuming dairy products. Additionally, the increasing concern of consumers on preventive health care is driving market growth. In the United States alone, around 70 million adults suffer from digestive problems caused by poor consumption habits, high usage of additives for processing of food, and a high rate of antibiotic intake. Another key market trend is that probiotics are increasingly being positioned as a means to help address specific conditions such as allergies, travelers diarrhea and nosocomial infections in children.

Despite these key growth drivers, the market faces challenges. The greatest of these stem from low consumer awareness on the benefits of probiotics. In addition, many alternative probiotic strains in the market have similar properties, like improving gut health and enhancing the immune system, thus creating greater consumer confusion. Most industry players have made consumer education a top priority; however, many suppliers are not in direct contact with consumers, so they rely on the marketing ability of end-users. End-users like the dairy industry market their products as probiotic-formulated products; they rarely advertise the difference in strains and their effectiveness. Therefore, there is a vital need for substantiated health claims backed by independent scientific evaluations explaining the benefits. Scientifically backed claims that educate the consumer will ensure the commercial success of the probiotics.

Probiotics manufacturers have three main goals: to identify new applications for their strain, to differentiate their product by addressing various health issues and to expand in new geographical markets. However, all of these require substantial investment, of which profit margin is often squeezed by the end-user. To overcome these costs, culture suppliers have ventured more frequently into partnerships with distributors or even their competitors as a means to mitigate risk and the cost involved. This also allows companies to concentrate on core competences and optimize their resources.

The manufacturing of probiotic cultures is a schematic and complex process involving fermentation, concentration and lyophilization. Efficiency and viability of the probiotic strain depends on the CFU. The viability of the strain must be ensured by manufacturers before it is formulated, as this reduces the count of active probiotic cells in the lyophilized bacteria due to high compression, heat and mixing.

Stability of the probiotic culture is one of the major requisites of the probiotic industry. Most probiotic cultures available in the market are unstable at room temperature and require refrigeration or microencapsulation. In addition, most probiotics are unable to survive in the acidic pH of the stomach and are not able to fulfill their ultimate goal of colonizing in the gut. Consequently, another key industry challenge encountered by probiotic manufacturers is to develop a probiotic strain that is stable in the acidic environment of the human digestive system. The strain must also be safe for human consumption, withstand the manufacturing process, and possess a prolonged shelf life at room temperature.

In North America, the probiotics market for human nutrition has revenues of US$1.3 billion, with about 150 companies operating in this market. Nonetheless, it is consolidated with the combined revenues of the top three companies, Chr. Hansen, Danisco and Lallemand, which make up 70 percent of the total probiotic cultures market. Lallemand is a specialist in dietary supplements and both Chr. Hansen and Danisco focus on food and dietary supplements. Global expertise and technical capabilities have proven to be effective in securing market leadership for these companies. All three also have their manufacturing facilities and sales established in North America.

Consolidation is also evident in the dairy sector, the predominant end-user industry of probiotics. Sixty percent of yogurt probiotic brands in the United States are controlled by General Mills Inc., Stonyfield Farm and The Dannon Company. In Canada, 80 percent of the same segment is controlled by Yoplait, Danone Canada and Parmalat. In contrast, the dietary supplement segment is fragmented due to low-entry barriers, attracting numerous supplement manufacturers and distributors. Probiotics are also gaining momentum in the oral care and nutricosmetic domain, although the biggest contribution of sales revenue of probiotics comes from dairy-based food products. Dairy accounts for 63 percent of the total market, followed by dietary supplements at 36 percent market share, while infant formulas, cereals and oral care only account for 1 percent of total market revenues.

The increasing demand for probiotic-formulated food products in North America is evident from an increased number of product launches and offerings at the consumer level in recent years. The yogurt category forms the largest segment within the dairy sector, due to consumers recognizing fermented products contain live microorganisms, and has also been the most dynamic and fast growing among this type of food product. More than half of yogurt sold in the United States is formulated with probiotics, with drinkable yogurt also contributing a significant market share. Yogurts success as a probiotic product is due to its good taste, convenience, natural portion control and health benefits. Overall, the competitive factors influencing food probiotics market include taste and flavor, convenience, price and availability.

Consumers in North America are focusing on preventive health care as a response to increasing medical expenses. In the dietary supplement category, probiotics, prebiotics and enzymes have showed the highest growth rates. The major challenge in this segment is the loss of viable cell count in the final product, which is expected to be minimalized through the use of nitrogen packing for capsules, tablets and powder. As probiotic cultures are highly sensitive to moisture, dietary supplements are not available in liquid form. The biggest threat to this market segment is substitution of probiotics with prebiotics, which also acts as a digestive aid.

Price is determined by the number of cells or CFU in the product and the quantity of the strain included in the final product. Concentrations used for various applications differ, which leads to price variations. Most of the probiotic cultures used for fortification of dairy foods are produced in-house by manufacturers, therefore they are sold at a lower price than probiotic dietary supplements. Dietary supplements are mainly sold through distributors or are licensed from leading manufacturers, accounting for the high prices of dietary supplement-grade probiotics.

The manufacturer must strike a balance between pursuing self-interest and advocating for the industry in order for this fast developing market to survive. The main dilemma for the industry is how to attract first-time buyers and achieve significant penetration. A consistent supply of high-quality products is crucial for continuous market growth. It would be in the best interest of all market participants to cooperate among all players at the growth phase to facilitate further development.

Nandhini Rajagopal, Ph.D., is a Frost & Sullivan senior research analyst in the chemicals, materials and food practice.