Defining a Milkshake By “milkshake” I of course do not mean a dessert item purchased at a fast food drive-thru window. This milkshake is part of a product category commonly referred to as ‘medical nutrition,’ and includes liquid drinks, powdered substances, frozen fruit desserts, gelatin snacks and solid food items.
Blurring the lines between food and medicine, medical nutrition products are specially formulated to treat the many chronic diseases becoming increasingly prevalent worldwide, something that is making medical nutrition a sneaky, under-the-radar, growth opportunity.
The Players Involved
Although medical nutrition is a product category that combines food and medicine, the field is quietly becoming dominated mostly by the world’s largest food processing companies. Initially involved in the product category, the major pharmaceutical companies have decided to leave the market, conceding medical nutrition to those who have an expertise in selling and marketing food products directly to consumers (as opposed to big pharma’s expertise of marketing blockbuster drugs to health professionals).
Last year the Swiss food giant Nestle acquired the baby formula and medical nutrition division of Pfizer Inc. (NYSE:PFE). In 2009 Bristol Myers Squibb Co. (NYSE:BMY) spun-off its baby formula and pediatric medical nutrition division into the stand-alone company Mead Johnson Nutrition CO (NYSE:MJN). And in 2007 the French yogurt company Groupe Danone acquired the Dutch baby food, nutrition, and pharmaceutical company Numico. These three food companies, along with the recently demerged health care company Abbott Laboratories (NYSE:ABT), make up the major international players in the medical nutrition market. Each of these companies treat a variety of disease types and consumer demographics; with age groups spanning from unborn children to the elderly, and disease types ranging from malnutrition and diabetes to heart and liver disease.
Groupe Danone’s medical nutrition division, the maker of the previously mentioned Souvenaid Alzheimer’s treatment, currently comprised about 6% of the yogurt company’s net sales. Although 6% now, it is a fast growing segment for the company in emerging markets (China, Brazil and Turkey in particular), and should continue to grow in more developed markets once Souvenaid is available in more countries than just the United Kingdom.
Nestle’s nutrition division makes up about 7.8% of the company’s sales. Nestle has been on a bit of a shopping spree in recent years, expanding its presence in this huge growth area. In addition to the purchase of Pfizer Inc. (NYSE:PFE)’s medical nutrition division last year, Nestle also purchased Prometheus Laboratories in 2011 for the company’s cancer and gastrointestinal illness treatment products, Acera in 2012 for its Alzheimer treatments products, and purchased Pamlab just two months ago for that company’s diabetes medical nutrition products.
Mead Johnson Nutrition, the world’s largest baby formula maker, also specializes in a number of infant formula and supplement products for babies with severe intolerance and premature babies, as well as other medical nutrition products. These products comprise about 8% sales last fiscal year and have a huge presence in China, the company’s largest market.
Last but not least is Abbott Laboratories (NYSE:ABT). Since spinning off its pharmaceutical division into a separate company called AbbVie Inc (NYSE:ABBV), the newly demerged health care company’s nutrition division now accounts for more than 30% of sales (the company’s single largest division post-split). That number, though, does not separate out traditional baby formula sales from medical nutrition product sales (as the other three company’s sales do exclude traditional baby formula). Even still, Abbott Laboratories (NYSE:ABT) is a very large player in medical nutrition, with well-known brands such as Similac, Pediasure and Ensure.
The Fast Growing Market
It is estimated that the global medical nutrition market in 2012 was $27.2 billion. Current projections indicate that the market will grow tremendously in just a short few years. 2013 estimates for the market see it growing to $28.2 billion, with 2018 estimates expected to hit over $40 billion globally.
Today the largest markets for medical nutrition are North America, followed by Western Europe. Among those regions, the United States, United Kingdom and Germany are seen as the primary drivers with their increasingly overweight populations. Another driver is the growing elderly populations and increased instances of the various medical conditions that unfortunately come with the aging process.
Asia, particularly India and China, is also seen as a driver of growth, but for an entirely different reason. For these countries the medical need is for prenatal and newborn medical nutrition products, addressing the concerns expecting mothers have for their unborn children. In these countries premature births are on the rise, with two of the many contributing factors being preexisting chronic medical conditions of the mother and malnutrition of the unborn child. In India annually, 13.3% of all births are premature, of which about 8.5% very sadly result in the death of the child (the latter being the highest percentage of any country on record).
Foolish Bottom Line Whether it is premature births, obesity-related conditions such as diabetes, or Alzheimer’s and other neurological disorders, there is a definite medical need here that requires addressing. Traditional foods and medicines will of course play their part in addressing that need, as well as the blurring of the two, medical nutrition.
The article Alzheimer’s Milkshakes and the Growth of Medical Nutrition originally appeared on Fool.com and is written by Matthew Luke.
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