In the past 10 years, the Medical Nutrition (“MN”) sector has shown significant evolution of its sales and marketing approach. For a long time, this sector targeted dietitian teams based in hospitals with relatively simple product lines segmented by age groups (paediatric vs. adult), product formats (enteral vs. sip) and flavours.
But the context changed as hospital budget constraints driven by national government cuts put pressure on the costs associated with MN, which has often been regarded by payers and healthcare professionals (“HCPs”) as a mere commodity.
In response, MN manufacturers started adopting a different go-to-market approach, focusing on specific therapeutic areas and bringing some disease-specific innovations to the market in order to fight back commoditisation. Disease-specific MN products are intended to be so uniquely suited for a specific patient group that they can justify a premium price and still obtain better payers’ subsidies, provided they are supported by enough scientific and health-economic evidence.
By offering something uniquely suited to a disease rather than a generic nutritional solution, Medical Nutrition Companies hope to gain broader hospital recognition (including from specialist doctors) instead of being systematically referred to the “Dieticians’ floor” or “the kitchen”. This subsequently increases their chances of becoming core components of treatment protocols alongside pharmaceutical drugs.
Where do MN companies stand today against the adoption of a “disease-specific” model?
By analysing the way the top 4 global MN manufacturers present their product portfolio on their global websites we can see a concerted shift towards a “disease-specific” model (see table below).
Among these companies, Nestle Health Science and Nutricia Advanced Medical Nutrition appear to be leading the shift toward a disease-specific approach; they are broadly spread across numerous adult and paediatric pathologies.
Fresenius seems to have opted for a narrower pathology focus, maintaining a more holistic positioning of MN, except for a few “star” therapeutic areas.
Finally, Abbott has maintained a more traditional segmentation by age group, which leads to a list of products which offer minimal mention on the underlying pathologies they target. This positioning is interestingly in exact contrast with Nestle’s and Nutricia’s although they cover a similar breadth of medical conditions.
Our analysis shows that none of these companies rely today on a broad malnutrition concept suitable for undefined sets of therapeutic areas. This exposes the (perceived) necessity among industry leaders of increased specialisation to cope with hospital budget pressures.
What does it mean for sales and marketing organisations?
The shift toward a disease-specific positioning of MN has many consequences on the way marketing and sales teams of MN companies operate.
First, marketers and sales representatives of MN companies should align their internal structure to the therapeutic areas they intend to play in. In sales, medical expertise becomes as critical as nutritional knowledge and commercial flair. This most likely entails hiring new talents with a pharma background and/or a medical degree. The cost of the sales force may subsequently increase to align with the pharmaceutical industry.
Second, it requires the addition of Medical Affairs team members dedicated to proving the health-economic benefits of an innovative disease-specific product vs. a more generic one; this is because, nowadays, few medical products and solutions, as effective as they may be, will get adopted by payers and HCPs without solid health-economic evidence proving better or quicker therapeutic outcomes and shorter hospital stays.
Finally, it adds layers of complexity to marketing teams’ portfolio management strategy at the country level. On one hand, they need to continue to serve their current markets, and on the other, they are expected to prioritise the adoption of therapeutic areas based on the incidence-based opportunity these represent. As a result, it wouldn’t be a surprise if marketing managers struggle to decide how to update their product mix without putting at risk the health of their P&L.
Balancing the future “Perfect” and the current “Good” is possible
These are some of the questions that may arise in these marketing organisations:
What medical conditions should we prioritise?
In which ones can we offer more value to patients?
Which ones are easier for us to support based on our current set-up, the current level of medical awareness and protocols and the structure of the medical channels they relate to?
As a result, which ones truly offer the best combination of patient value and capability fit, and should therefore be our priority number one?
Do we already have products in the market to support these medical conditions?
And if not, does our global company have adequate products that are not currently present in the target country that we could add and launch?
Assuming no incremental budget, can our team prioritise these disease-specific initiatives whilst still serving our current customers and the bestselling products in our existing portfolio?
In fact, there is often a fear that shifting the focus onto a specific pathology or new product can undermine the many efforts over the years by sales and marketing teams to develop their existing portfolio and sales.
But standing still is never a solution so how to go about it?
Can we help?
Sector & Segment can help MN companies to navigate through these complex issues and come up with solutions that measure the pros and cons of different portfolio “scenarios”.
Over the years, our team has conducted 80 strategic projects in 25 countries across 12 therapeutic areas of Specialist Nutrition, helping its clients to develop product and disease specific propositions.
Understanding the factors that shape the market ofISO 17020 accredited firms and how opportunities emerge.
Critical to the health, safety, and competitiveness of countries globally are thethousands of testing, inspection, certification, and calibration firms that ensure conformity to global standards across industries. In a globalised world, these companies form an integral part of any country’s trade strategy by raising standards and building confidence between trading partners. Domestic demands for safer and higher quality products also require improved assessment mechanisms. These factors, and others, have set the stage for this often shrouded market to deliver consistent growth and opportunities for those with the right knowledge.
Sector & Segment combines deep sector expertise with data-driven insight to provide targeted and actionable reports. Our insight is based in our unique databanks that cover entire ecosystems of companies and customers. Over the past 6 months, we have processed more than 150,000 data points related to more than 2,200 accredited inspection bodies present in 13 Latin American countries.
Leveraging some insights from our analysis1, this piece focuses on the factors shaping the ISO 17020 inspection market in Latin America from politics, to geography, to trade relations. Grounded in our primary research, it highlights trends shaping the market as well as emerging opportunities.
The inspection market in Latin America varies widely across both countries and end-user sectors. Though broadly connected to a country’s trade relations and state of economic development, the inspection market is shaped by myriad other factors such as domestic politics, policies, geography and competitive advantages. In examining the more than 2,200 accredited inspection bodies that make up the Latin American inspection market, Sector & Segment has been able to identify those factors that unify the market, as well as those which make each country unique.
External Growth Drivers
In many cases, the development of a country’s ISO 17020 accredited inspection market is linked to their historical export strategy. A well-established inspection market can reduce trade barriers by acknowledging and conforming to a global set of standards.
Mexico’s inspection market clearly reflects this; it is host to the largest number of inspection firms in Latin America. In order to capitalise on the benefits of NAFTA, Mexico has aligned itself with U.S. and Canadian standards which are often based in mutually accepted testing, inspection, and certification. Even if NAFTA should begin to fray, a well-established inspection market would ensure its goods are regarded as high quality among other countries.
What is Inspection?
Inspection refers to the predominantly private market of firms that assess conformity to defined or general requirements. These firms can assess products, processes, installations, and services. In doing so they confirm quality, safety, or functionality.
Inspection also includes national and transnational organisations which set standards and accredit these private firms to perform conformity assessments.
The complexity of goods traded also plays a role. Mexico largest export categories are machines (such as electronics and household appliances) and transportation (including cars and trucks). These highly technical categories face scrutiny from a variety of actors including governmental industry bodies, insurance firms, and companies seeking to protect their reputation. Inspections performed by ISO 17020 accredited bodies ensure traceability to international standards.
In contrast,Brazil’s largest exports are vegetable and mineral products. While there are undoubtedly standards when it comes to those products, they do not require the technical precision of cars, Mexico’s top export product.
An established inspection market also creates the opportunity to increase trade with countries that maintain higher regulatory standards. This is evident when comparing Chile and Argentina. Although the two countries both exported approximately $70bn worth of goods in 2016, Chile, which has an established inspection market, exported almost twice as much to the United States.
Internal Growth Drivers
While Latin American countries seeking to boost trade face many of the same external pressures, the local context is equally, if not more important when seeking to understand the present and future of an inspection market. The political impetus to liberalise an economy, for example, is closely tied to the health of its ISO 17020 accredited inspection market. This may be a key factor in Argentina’s historically weak accredited inspection market, as well as the reason for its recent growth. In recent years, Argentina has shown a spike in accredited inspection firms in the industrials sector.
In contrast, Colombia has had a series of liberal governments that have pushed for a more liberalised economy. This includes internal pressures for higher standards in domestically consumed products, services, installations, and processes. The result is that Colombia has the second largest number of accredited inspection bodies in Latin America. Much of this market is concentrated in the transportation and automotive sector which represents only 2% of Colombia’s exports. The health of Colombia’s inspection market in an end-user sector that is not export-driven reveals the importance of internal pressures.
Policies raising domestic standards can have an outsized impact on the inspection market. Domestic demands for greater environmental protection, for example, can lead to the emergence of environmental policies founded on inspections that assess conformity to environmental standards. This can lead to not only higher environmental inspection requirements, but also higher inspection requirements in the associated end-user sectors. As such, inspection industries can emerge overnight to accommodate these changing contexts.
In the interest of protecting the environment, Peru enacted a series of environmental policies in 2016 targeted at the energy and industrial sectors. This led to spikes in growth of inspection firms in the environmental, energy, and industrial sectors. In the last two years the number of inspection firms in Peru concerned with environmental inspections has doubledand number of firms in concerned with either energy or industrial inspections rose by over 80%.
Health of a ISO 17020 Market
While external factors can play an important role in the development of an accredited inspection market it is ultimately internal factors that have the most impact on the health of the market. Establishing and developing such a market typically requires political will and targeted policy aimed at increasing exports, liberalising the market, or enacting higher standards.
These internal pressures will continue to intensify as the countries grow wealthier and citizens demand higher environmental and safety standards. The example of Peru in particular is likely to be replicated by other countries experiencing the negative impacts of either negligent firms or climate change. The data gathered by Sector & Segment reveals not only that the number of accredited bodies in Latin America is growing as a whole, but that capturing the opportunities in any one market requires precise data and sector expertise.
Sources:OEC: AJG Simoes, CA Hidalgo. The Economic Complexity Observatory: An Analytical Tool for Understanding the Dynamics of Economic Development. Workshops at the Twenty-Fifth AAAI Conference on Artificial Intelligence (2011).
1. More information available in our 160-page report “Industry Analysis of the ISO 17020 Accredited Inspection Bodies in Latin America” published in July 2018