Emerging Markets #2

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.

http://www.functionalingredientsmag.com/content/print.aspx?topic=Regulation-relaxation-may-unlock-Brazils-massive-natural-products-market

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