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3A Business Consulting

Global Market for Sports Nutrition and Dairy Ingredients

2014-2019

Published May 2015

Global Market Analysis

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Report Outline

Introduction and Methodology

Sports Nutrition Market and Dairy Ingredients used

Global Sports Nutrition Market Data and Trends

Key Players and Distribution Channels

Ingredient Volume Usage and Major Users

Ingredient Applications and Product Launches

Key Dairy Ingredient Companies

Dairy Ingredient Trade Analysis

Report Summary

Appendix (Volume Estimates for Key Markets)

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Market Research Approach - Sports Nutrition Markets and Dairy Ingredients used

Protein powderReady-To-Drink RTDSports barsOther products –gels, tablets, etc.

GlobalWestern EuropeEastern EuropeNorth AmericaLatin AmericaAustralasiaAsia PacificMiddle East

Value per marketVolume per marketCAGR 2014-2019

Import and export per market

WPCWPIMPCMPI

Top 20 global sports nutrition companies Top 20 global brands per marketDistribution channels

Consumer segmentsProduct trendsConsumer trends

Application/ usage of dairy ingredients

WPCWPIMPCMPI

Competitive structure

Key dairy ingredient companies focusing on sports nutrition

ProductScope

MarketScope

Key Players

Global Market Trends

DairyIngredients

in SN

DairyIngredients

Trade Analysis

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Methodology- Definition of Sports Nutrition

Sports Nutrition products are positioned in the marketplace as improving physical endurance, increasing muscle growth/development/mass, or speeding recovery after exercise The products are sold in powder, bar, ready-to-drink, gel or tablet formatsBoth protein and non-protein based products are included

However, sugar based drinks often positioned as sports nutrition (e.g. Gatorade), energy drinks (e.g. Red Bull), and energy bars (e.g. PowerBar) are not included

The Sports Nutrition category definition includes bars with more than 20 grams of protein in absolute volume, irrespective of packaging size

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Methodology for Research- Data Sources and Abbreviations

The building input blocks of this report:

Market access

databaseEuromonitor

UN

Comtrade

National bureaus of statistics

3A publications

and database

Mintel database

Industry sources and interviews

Company Reports

Abbreviations:

Sports nutrition is some places abbreviated as SNWhey protein concentrate / isolate is abbreviated as WPC/WPI, and some places as WP when mentioned together (including WPH)Milk protein concentrate / isolate is abbreviated as MPC/MPI, and some places as MP when mentioned together (including MPH)Ready-to-drink protein sports drinks are abbreviated as RTD’s

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Methodology for Volume Estimations- Calculating Product and Ingredient Quantities

The percent retail value shares of the four categories within SN (e.g. 64% for protein powders) are multiplied with the market value for each market. This results in a value estimate for each SN category. These values are then divided by an estimate for the average price of the relevant product category (e.g. EUR 25/kg for protein powders), resulting in an estimate for the total volume of each product consumed in each marketThe resulting volume estimates are then multiplied by the average percentage of protein content of the respective product category (e.g. 75% for powder), and further multiplied by the percentage of the protein type out of the total amount of protein in the category (e.g. 70% WP out of the total 75% protein by volume in protein powders, meaning that 52.5% of the total weight of protein powders is derived from WP) This respective protein volumes are then subsequently converted to ingredient volumesSumming the results of the above calculations for each product type in each market, leads to the reported estimates for WP and MP used in SN Below the assumed percentage shares of market value, protein content and protein types in the four product categories are summarized together with the assumed average retail prices (excl. VAT)

Note 1: The quantity estimates for RTD is for fluid RTD’sNote 2: 3A assumes that the growth for each product category will be equal. Products such as bars and RTD's are favoured for their convenience, however, protein powders are cheaper for the same amount of proteinNote 3: The protein ingredient category “Other” includes egg protein, soy protein and other vegetable proteins, together with dairy-based protein ingredients at a lower protein concentration than 80%. Casein/caseinate at above 80% protein are included in the MP category and are assumed to constitute approx. 15% to 25% of the quantities herein

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Methodology for Application Analysis- Application Trends for Ingredients in Sports Nutrition

Methodology implications:

The used database (MINTEL) does not record all launches in SN, particularly given internet sales. However, the examples shown are thought to be representative of all product launches

WPI

WPC

WP

MP MPI MPC Geography:Global and Key Regions

Time Frame:January 2010 – March 2015

Text:”Sport” and Word Variants

Ingredients:

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Methodology for Trade Analysis- Estimating Import and Export Quantities

Inter-EU trade of the protein ingredients are not directly obtainable. Main sources used to assess trade flows include national statistical bureaus combined with UN ComtradeAccording to industry sources the following HS-codes are used for WP and MP in the EU:

WPC80+ and WPI are traded under HS code 35022091“Milk albumin, including concentrates of two or more whey proteins, dried (for example, in sheets, scales, flakes, powder)”Not all trade statistics are available to the 8-digit level, and in these cases the 350220 code is used. As this code also contains other related products, the methodology chosen to estimate WPC80+/WPI quantities is to only consider bilateral trade values at above USD 8/kg

MPC 80+ and MPI are traded under HS-code 35040010“Other protein substances and their derivatives, not elsewhere specified or included Milk protein concentrates”

Before 2010, the HS code used was 350400, and thus includes other products than MPC80+/MPI. Thus, the methodology adapted for estimating trade quantities is to only look at import from countries known to export substantial amounts of MPC/MPI. These countries are Switzerland, Netherlands, Germany, Ireland, France, Lithuania, Hungary, New Zealand, Australia and the U.S. Further, only bilateral trade flows valued at above USD 6/kg are considered

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Global Sports Nutrition Market Data and Trends- Global Summary

North America

61%Western Europe

16%

Australasia

8%

Asia Pacific

6%

Latin America

6%

Eastern Europe

2% Middle East and

Africa

1%

2014 Regional Market Shares on

Global Sports Nutrition Market in %

4,95,3 5,5 5,7

6,3

7,1

7,78,1

0

1

2

3

4

5

6

7

8

9

Fore

cast

CAG

R 2

014 -

2019 in %

Forecast CAGR 2014-2019 in %

The North American Sports Nutrition market exhibits highest forecasted CAGR with 8,1% in the period between 2014 and 2019

For Middle East and Africa a remarkable CAGR of 7,7% for the period 2014-2019 is estimated which is above the estimated global CAGR of 7,1%

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Global Sports Nutrition Market Data and Trends- North America to remain dominant

-100

0

100

200

300

400

500

600

0 1 2 3 4 5 6 7 8 9 10

Exp

ecte

d v

alu

e gr

ow

th 2

01

4-2

01

9 in

USD

mn

CAGR 2014-2019 in %

North America

6202

Western Europe 1621

Australasia765Asia Pacific

590 Latin America583

Eastern Europe221

Middle East and Africa114

Vertical axis represents expected value growth per year within the respective region in USD mn over the period 2014-2019

Horizontal axis represents the CAGR for the period 2014-2019

This chart shows that North America will remain the major growth market over the forecast period

Bubble size and number in the bubbles represent actual market size in USD mn

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Ingredient Volume Usage and Major Users- Calculating Global Ingredients Volume usage in 2014

Applying the calculation method explained in the methodology, the estimated volumes of SN consumer products are used to calculate the volume of high-concentration protein ingredients used in SNThis results in the 2014 volume estimates below:

2014 Volume estimates (‘000 MT)

Consumer products

Protein ingredients

WP MP OtherTOTAL

ingredients

TOTAL 545 199 52 47 298

Protein powder 303 187 40 40 267

Protein bars 32 3 6 2 11

Protein RTD 162 5 5 4 14

Other SN 48 3 2 1 6

Note: methodology described in the introduction section applied

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Companies % market share 2014 Estimated protein usage ('000 MT)

Glanbia Plc 14% 41

Hormel Foods Corp 7% 22

General Nutrition Centers Inc 5% 13

NBTY Inc 4% 13

MusclePharm Corp 3% 8

Post Holdings Inc 2% 7

GlaxoSmithKline Plc 2% 5

Abbott Laboratories Inc 1% 4

Twinlab Consolidation Corp 1% 4

Weider Global Nutrition LLC 1% 4

Atlantic Grupa dd 1% 3

Vitaco Health Ltd 1% 3

Clif Bar & Co 1% 2

Hut Group Ltd, The 1% 2

Iovate Health Sciences Inc 1% 2

Labrada Nutrition Inc 1% 2

Sun Bros LLC 1% 2

Ajinomoto Co Inc 1% 2

Amino Active International Pty Ltd 1% 2

Herbalife Ltd 1% 2

Meiji Holdings Co Ltd 1% 2

Private Label 1% 2

USN (Pty) Ltd 1% 2

Universal Nutrition Inc 1% 2

Otsuka Holdings Co Ltd 1% 2

Others 49% 144

Total 100% 297

Note 1: Calculation based on % market share and total Global 2014 market of 298,000 MT of protein ingredients

Note 2: Estimates may vary ±10%. Assuming constant market shares, 2019 estimates would be approx 35% higher

Ingredient Volume Usage and Major Users- Estimated Protein Ingredient usage in 2014

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Global Sports Nutrition Market Data and Trends - Worldwide SN Market will keep on growing

Market size (USD mn)

Volume estimates (‘000 MT)2010 2014

CAGR 10-14

CAGR 14-19

2019E

TOTAL VALUE 6641 10096 11,0%

TOTAL VOLUME 358 545

11,0% 7,1%

768

Protein powder 199 303 427

Protein bars 21 32 46

Protein RTD 106 162 228

Other SN 32 48 68

Despite the current difficult economic outlook, the global sports nutrition market is estimated to grow 7,1% annually towards 2019

Protein powder and protein RTD are the two big product categories

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Global Sports Nutrition Market Data and Trends- Global Sports Nutrition Trends (1)

Unlike many packaged food and other consumer packaged goods industries, sport nutrition is witnessing strong growth rates across a wide spectrum of global markets, including some of the most mature consumer markets in the world (e.g. North America). The prospect of growth in stable, business-friendly markets is a major draw for investors

Growing fitness and health trend to stave off lifestyle diseases are opening the minds of mainstream consumers. A growing number of producers are capitalizing on the opportunity by reformulating and repackaging sports nutrition to appeal to less sophisticated consumers and retailers alike

Protein products account for the vast majority of sports nutrition sales. While ingredient preferences vary by market, in general, protein has benefited from its “food-like” character and has established itself as the category’s most ubiquitous ingredient. Whey derived ingredients are the most important proteins, however there is a increasing trend among health and environmentaly concerned consumers towards plant derived proteins (e.g. Soy protein, pea protein)

Global Growth

Entering mass market

Protein on top

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Key Players and Distribution Channels- Top 20 Brands in Sports Nutrition

775

533

467

451260

220

164

143

131

129

125

117

100

98

87

83

82

80

79

78

76,00

0,00 200,00 400,00 600,00 800,00 1.000,00

Optimum Nutrition

Muscle Milk

BSN

GNC

MusclePharm

Cytosport

Maxinutrition

Body Fortress

MET-Rx

PowerBar

Twinlab

Weider

Isopure

Myoplex

Precision Engineered

Clif Bar

Labrada

Worldwide Pure Protein

Sunwarrior

Multipower

Aussie Bodies

Retail Value RSP in USD mn

2014 Top 20 Global Brands Brand Owning Company

Optimum Nutrition Glanbia Plc

Muscle Milk Hormel Foods Corp

BSN Glanbia Plc

GNC General Nutrition Centers Inc

MusclePharm MusclePharm Corp

Cytosport Hormel Foods Corp

Maxinutrition GlaxoSmithKline Plc

Body Fortress NBTY Inc

MET-Rx NBTY Inc

PowerBar Post Holdings Inc

Twinlab Twinlab Consolidation Corp

Weider Weider Global Nutrition LLC

Isopure Glanbia Plc

Myoplex Abbott Laboratories Inc

Precision Engineered NBTY Inc

Clif Bar Clif Bar & Co

Labrada Labrada Nutrition Inc

Worldwide Pure Protein NBTY Inc

Sunwarrior Sun Bros LLC

Multipower Atlantic Grupa dd

Aussie Bodies Vitaco Health Ltd

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Capabilities Resources VRIO Competitive Advantage (CA)

Spotting trends and meeting mass markets needs in order to developproducts that are demanded

High investments in R&D as well as acquisitions of established companies like BioZone Pharmaceuticals

Value: Yes, female, consumer health and wellness products are stongly demanded

Rare: No, many companies follow the trend of producing for mass market and new customer segments

Imitable: Yes

Organization: -

MusclePharm did very well in the last five years but their market orientation and innovativeness are not the key source for a CA. Rather they are a prerequisite to be able to compete with companies like Glanbia

Strong market orientation, building in the voice of the consumer and innnovativeness are a must in this branch to succeed

Strong communicationand advertising via celebrity and athlete endorsers

High advertising budget (28 mio USD, 16% of revenue) and social capital

A strong network of famous endorsers spreading and promoting the products also via private channels, which gives MusclePharm free coverage and high/ trustworthy reach within their targets (e.g. Arnold Schwarzenegger, Tiger Woods or Jan Selter)

Value: Yes, trustworthy sources have high value for the company and high value to the customer

Rare: Yes, social capital and networks of contacts are rare and difficult to built up

Imitable: No, difficult to imitate or copy

Organization: Network well established in the organisation and endorsers are tied to the company (e.g. Arnold Schwarzenegger with his own product lline)

The social capital and the strong effort in advertising are the (temporary) CA of MusclePharm Corp and definitely their key to success. Tying important people to the company and linking them with consumer and products have been key to success and will probably remain it in the near future

Key Players and Distribution Channels- An Internal Analysis of Muscle Pharm Corp

Note 1: VRIO= Valuable, Rare, Imitable, Organization

Note 2: Method applied from B. Barney, J. (1995). Looking inside for competitive advantage

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Ingredient Applications- ”Sport” and Milk Protein 2010-2015

0 20 40 60 80 100 120 140

USA

Germany

Brazil

Norway

France

Japan

UK

Australia

Mexico

Canada

Top 10 Countries in Milk Protein Product Launches per Region

between 2010 - 2015Number of Variants per Category

410 launches recorded globally

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Romania

Nutrition & Santé

Mar 2015

Snack/Cereal/Energy Bars

Country:

Company:

Date Published:

Sub-Category:

Italy

Enervit

Feb 2015

Snack/Cereal/Energy Bars

Country:

Company:

Date Published:

Sub-Category:

Poland

Activlab

Feb 2015

Meal Replacements & Other Drinks

Country:

Company:

Date Published:

Sub-Category:

Germany

DM Drogerie Markt

Feb 2015

Snack/Cereal/Energy Bars

Country:

Company:

Date Published:

Sub-Category:

Ingredient Applications- “Sport” and Milk Protein 2010-2015 product examples

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Summary- SWOT for Sports Nutrition facing the Global Market (1)

SWOT

Weaknesses

Opportunities Threats

• Fastest and easiest way to get proteins after exercise

• Young and healthy image

• The industry has managed to become mainstream

• Expanding distribution platform

• investment in lifestyle branding and gourmet formulations, helping to overcome lingering perceptions of bad taste and texture

• Taste and mouth feel of many flavoured products are still somewhat flat

• SN products are not as appealing as fresh food

• High product prices exclude potential consumers

• Unhealthy additives (e.g. creatine) in a health-care market

• Sports nutrition as fastest growing category in consumer health segment

• Growth stimulates investment

• People are taking more control of their health and looks

• Obesity fighting

• Aging people becoming more focused on retaining muscle mass

• Increased gym membership rates

• Customers wants to be incorporated and engaged -> co-creation of value

• Non-threatening formulas, formats and retail channels will become increasingly important

• Competition is intensifying, e.g. increase in private label products

• Consumer trends towards more natural products with similar benefits, e.g. chocolate milk

• Tainted products damage consumer trust

• Increased government regulations

Strengths

Exte

rn

al

Exte

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In

tern

al

In

tern

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Global Sports Nutrition Report – Project Management and Costs

3A Business Consulting team:

– Managing partner - Tage Affertsholt

– Junior consultant - Stefan Raff

Report available in PDF format – in total more than 90 slides – from June 2015

EUR 3,400

Time

Team

Cost