How COVID-19 has impacted medical devices: the case of wound care

Dec 18, 2020 | Medical Devices

How COVID-19 has impacted medical devices: the case of wound care

As healthcare systems across the world scrambled to contain the spread of COVID-19 in the spring of 2020, resources were shifted away from many areas of healthcare to treat patients with the virus. The stay-at-home public health messaging advised people, at least initially, to avoid unnecessary healthcare to reduce transmission and as a result many consultations and procedures in other areas of healthcare were cancelled or done remotely.

It comes as no surprise that amidst a public health crisis that medical devices, an industry that is inextricably tied to healthcare systems – from clinical trials to prescriptions – has not escaped the unprecedented negative impact of the pandemic. To be sure, not all medical devices have been impacted negatively; as products deemed to be vital for the treatment of COVID-19, notably ventilators, personal protective equipment (PPE) and equipment needed for diagnostic tests, were prioritised. Governments did what they could to ramp-up manufacturing capacity, approval and delivery, to avoid shortage of these and as a result some of these devices have experienced growths of over 300%[1]. Other devices, not essential to treating or preventing the spread of the virus, have been side-lined and have experienced sharp declines in their usage. Devices used in hospitals have been particularly impacted, due to reallocation of resources and drop in hospital visits, though devices in other areas such as in dentalcare have also seen declines. Whether in decline or not, what is common to all areas of medical devices is a shift towards digital health, a shift that presents players with both challenges and opportunities.

How the pandemic affected wound care

Due to the staggering number of cancellations and postponements of elective surgeries (estimated to be at around 28 million worldwide[2]), there has been a sharp decline in the use of hospital-based wound care products. In some instances, clinics have temporarily closed altogether. One surgery department in New York used to see around 350 patients a week with vascular issues before the pandemic[3]. In March, it largely shut down; staff shrank from 25 to four as they were triaged to ICU or sent home to work remotely. Hospitals have also reported a decline in emergency department visits, likely due to the change in patient behaviour as a result of national lockdowns and stay-at-home messaging[4]. This has meant a reduction in trauma-based wounds, with the exception of burn wounds which have remained more or less stable.

Treatment of chronic wounds has been impacted too, though not to the same extent as surgical ones. As clinics and other facilities became potential hotspots for transmission, healthcare professionals were forced to adopt new forms of treatment. Given chronic wounds are often associated with underlying conditions – such as diabetes – that are also conditions that make people more vulnerable to COVID-19, it is unsurprising that patient behaviour changed, given the risk of exposure to the virus. Of those that continued treatment, 76.1% stated that the pandemic changed their treatment one way or another[5]. As consultations and patient monitoring moved online, treatments were simplified by nurses to allow familiars or patients themselves to make the dressings. In the case of missed appointments it was reported that 12.8% of patients did not have their wound dressing changed during the pandemic, contributing to the overall reduction in use of products as well as leading to an increased number of patients with untreated, worsening wounds.

Wound Care players with more hospital focus were more affected

Of the key players in the market, including 3M, Smith & Nephew, Mölnlycke, ConvaTec and Coloplast, none came out of the first quarter of 2020 unscathed. All companies reported declines in revenues, with Advanced Wound Care and NPWT being amongst the worst affected segments. Companies such as Smith & Nephew that were most associated with hospitals, and therefore exposed to the cancellations of elective procedures, fared worst. On the other hand, companies such as Mölnlycke and Coloplast that focus more on homecare have proved more resilient and quicker to recover. Coloplast reported 2-4% overall growth in Q2 (though it was -2% in wound care)[6], whereas Smith & Nephew faced a sharp decline in revenue with -29.3% of negative growth[7]. Within Smith & Nephew’s portfolio, wound care was more resilient with only -17.6% decline (compared with -34% in Sports Medicine and Orthopaedics), but has been far slower to recover, due to the continued closures and changes to patient behaviour throughout summer.

China and, to some extent, Germany were quicker to bounce back

As with all aspects of the pandemic, there has been an unevenness across geographies in terms of impact and recovery. In Europe, differences in responses and preparedness brought about significant variations in the impact on the broader healthcare industry. Germany is widely reported as being the least impacted, whereas the UK is amongst the worst in terms of hospital admission rates, with over 516,000 cancelled surgeries[8].

Some companies have reported a speedier recovery in the US compared with other markets. However, within the US itself there is great unevenness in recovery, as New York and New Jersey continue to grapple with an enormous burden of transmission, whilst hospitals in Seattle move to restart elective procedures. Smith and Nephew reported slow recovery in emerging markets, with a negative growth of -14.5%, mainly due to restrictions in India, South Africa and Latin American markets, offset by a return to growth in China in the summer[9].

Future outlook: demographic trends are likely to revert revenue declines

Looking ahead, it is critical to recognise how declines in revenues for some medical devices are situated within a changing landscape of healthcare, catalysed by the pandemic. Whilst most healthcare systems are still grappling with the virus, the eventual return to elective procedures in hospitals will allow companies to recapture at least some of the growth experienced before the pandemic. In the case of wound care, growth was at 4.6% CAGR, and demand is likely to continue to increase, assuming the continuation of demographic trends – an ageing population and growing prevalence of diabetes and vascular diseases. This is particularly the case for chronic wounds, which continue to be a significant burden for many countries (the UK National Health System spends £5bn each year treating them[10]) and which may have worsened for many patients during the pandemic.

Opportunities to capitalise on the growing importance of digital health

The pandemic has given healthcare a digital makeover. Digital health has boomed in 2020 and is unlikely to fizzle out, as remote healthcare options are cheaper and more convenient for many patients. Even during the summer as the virus waned, the proportion of face-to-face appointments remained far lower than prior to the pandemic. Both healthcare professionals and patients have shown a willingness to adapt. Remote appointments have shot up across the world: in the US, remote visits to Mayo Clinic, a healthcare provider, rose from 4% to 85%, whilst in China Ping an Good Doctor, an online health portal, had 1.1bn visits at the height of the pandemic[11]. Regulators and governments have also facilitated this shift, passing laws urging reimbursement of online services and facilitating approvals of these.

Companies in the medical devices industry should capitalise on these changes, particularly as global digital health revenues are estimated to rise from $350bn last year to $600bn in 2024[12]. Critically, companies would be advised to rapidly scale up their digital capabilities and develop online support for their devices as they are increasingly likely to be used in a homecare setting. With increased patient engagement and comfort, digital and remote healthcare could propel all areas of medical devices into greater growth than before the pandemic. If, however, companies fail to reorientate their portfolios towards these new healthcare needs and innovations they may miss out on this opportunity.

L. Binet

[1] https://www.ipsos.com/sites/default/files/ct/publication/documents/2020-04/a-look-at-chinese-economy-and-medtech-part2-covid-19-series.pdf

[2] https://www.vanguardhealthcare.co.uk/news-and-events/elective-surgery-cancellations-during-the-pandemic-could-reach-28-million/

[3] https://www.generalsurgerynews.com/In-the-News/Article/11-18/Wound-Care-During-COVID-19/61120

[4] https://jamanetwork.com/journals/jamainternalmedicine/fullarticle/2768777

[5] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC7311334/

[6] https://www.coloplast.com/Documents/Investor%20Relations/Announcements/2020/10_2020_FY201920_Financial_Results.pdf

[7] https://www.smith-nephew.com/news-and-media/media-releases/news/smithnephew-second-quarter-and-first-half-2020-results/

[8] https://www.vanguardhealthcare.co.uk/news-and-events/elective-surgery-cancellations-during-the-pandemic-could-reach-28-million/

[9] https://www.smith-nephew.com/global/assets/pdf/corporate/smith%20nephew%20third%20quarter%202020%20trading%20report.pdf

[10] https://www.theguardian.com/lifeandstyle/2019/jul/29/uncomfortable-ugly-painful-the-hidden-health-crisis-hitting-2m-britons

[11] https://www.economist.com/leaders/2020/12/05/the-digital-surge-in-health-care

[12] https://www.economist.com/business/2020/12/02/the-dawn-of-digital-medicine

Current Review of Clinical Testing Compliance to Global Standards in Latin America

Nov 5, 2018 | TIC

Current Review of Clinical Testing Compliance to Global Standards in Latin America

Understanding the factors that shape the market of ISO 15189 accredited clinical laboratories and how opportunities emerge.

The medical testing market is a small but critical part of a country’s healthcare services. By offering testing and diagnostic services, medical testing laboratories support a variety of other medical practitioners by making them able to better treat or prevent illnesses in their patients. In this highly specialised field, accreditation to ISO 15189 testifies to the technical competence of clinical laboratories and conformity to international standards.

What is Medical Testing?

Medical testing is the assessment of specimens in a laboratory in order to better diagnose or treat patients. Accreditation includes conforming to quality management, technical, as well as safety and ethical standards.

The ISO 15189 standard, however, does not have especially high uptake in Latin America. Not only is the standard not mandatory, but other competing international standards are available to medical testing laboratories. The result is that, within Latin America, ISO 15189 accredited laboratories typically represent less than 1% of the total population of medical laboratories.

Despite this, the number of laboratories maintaining ISO 15189 accreditation is rapidly growing among certain types of facilities. We find that the need for international recognition is a critical driver when it comes to unmandated uptake of ISO 15189 accreditation. Ultimately, however, widespread use of ISO 15189 will depend on future regulation or incentives, as evidenced by countries like France.

ISO 15189: Limited uptake in Latin America

Government intervention plays a key role in the uptake of ISO 15189. At this time, only a few countries including Australia, Latvia, France, and the Netherlands, mandate accreditation to ISO 15189. For such countries, mandatory accreditation allows medical testing laboratories to become a key pillar of the healthcare system since the standards are highly technical and laboratories undergo regular audit.

Lacking such government intervention, however, laboratories often seek other, less burdensome forms of accreditation or no accreditation at all. Among the tens of thousands of medical testing laboratories in Latin America, only 111 are accredited to ISO 15189. In any given country, ISO 15189 accredited laboratories account for less than 1% of the total laboratories. Part of the reason for this low uptake is the fact that accreditation is not mandated and that medical testing laboratories often opt for other ISO standards which, though less sector specific, also attest to the quality of the laboratory.

ISO 15189 is a particularly stringent standard in that it uses quality management systems similar to ISO 9001, and testing standards similar to ISO 17025, but also contains additional technical standards specific to medical testing laboratories. Without regulation mandating use of ISO 15189, medical testing laboratories have some leeway in terms of how they attest to the quality of their work while still using internationally recognized standards.

Aspiring to be recognised internationally appears to be the main reasons for getting accredited

Given that accreditation to ISO 15189 is not mandatory, and less stringent alternatives are available, medical testing laboratories within Latin America are a unique group. Though they might typically offer the same types of services as unaccredited laboratories, ISO 15189 accreditation affirms a higher degree of competence. In examining the sum of the accredited medical testing laboratories in Latin America, Sector & Segment has been able to identify the key characteristics of accredited bodies in the region.

ISO 15189 accredited medical testing laboratories are predominantly national firms. That is to say they only operate within a single country. Out of all of the accredited laboratories examined, only one was a global firm: Quest Diagnostics operating in Mexico. It is likely that for firms such as Quest Diagnostics seeking to expand globally, ISO 15189 accreditation helps to build a strong reputation and meet both local and global standards.

Accredited medical testing laboratories also tend to offer services to the market rather than simply for internal use. This makes sense, as non-mandatory accreditation largely serves as a tool for demonstrating competency and technical expertise to clients or external parties. In a small minority of cases, however, internally-oriented laboratories also stand to benefit from accreditation since it helps testifies to the overall credibility within an institution or company.

Much more variety exists within the types of services offered by these accredited laboratories. While the majority of accredited laboratories focus on offering services in the field of medical testing (which belongs to the broader field of TIC, “testing, inspection, and certification”), 44% engage in a wider variety of business. In the case of laboratories, this could mean offering hospital or non-test related research services.

Within medical testing services available, most ISO 15189 accredited laboratories ultimately specialize in a few key medical areas. On average, accredited laboratories in Latin America offer services in four medical areas. Most commonly, those are the core commercial areas in medical testing: Clinical Chemistry, Haematology and Coagulation, Immunology, Immunochemistry and Endocrinology, and Urinalysis.

The number of medical areas that laboratories operate across varies significantly by country, along with the number of test methods used and tests executed. Mexico’s medical testing laboratories, for example, on average cover 4 medical areas, 28 test methods and 58 tests. Whereas Ecuador’s laboratories cover 2 medical areas, 20 test methods, and 27 tests.

Because uptake of ISO 15189 is limited in most countries, it is hard to draw any conclusions. Uruguay has only one accredited laboratory, but it covers 6 medical areas and conducts more than 70 tests. In examining accredited medical testing markets in Latin America, each country has to be examined individually in order to fully understand its needs and opportunities.

What makes accredited laboratories stand out from non-accredited laboratories?

Because Mexico is host to the most developed market of accredited ISO 15189 laboratories, it gives us a broader indication of how accredited laboratories are distinct from other laboratories, and what the motivating factors might be for attaining accreditation. We find that accredited laboratories in Mexico tend to be far larger than those that are not accredited, and also more likely to be publicly run.

The vast majority of medical testing laboratories in Mexico are small operations. 94% of laboratories in Mexico have fewer than 10 employees. In comparison, accredited laboratories tend to be much larger – only 27% of accredited laboratories have fewer than 10 employees. Furthermore, 13% of accredited laboratories have more than 250 employees. These larger organizations stand to benefit more from accreditation since they can spread the cost of accreditation over business, improve their reputation, and standardize management practices and technical competencies across a large number of laboratories.

Accredited laboratories in Mexico are also much more likely to be publicly run. 13% of accredited laboratories are public compared to only 1% of all laboratories in Mexico. This is likely because accreditation is often closely tied to government regulation and is driven by the government’s aim of improving domestic quality. In the case of Mexico, the Mexican norm NMX-EC-15189-IMNC, which establishes the ISO 15189 standard locally, was put into place in 2005 and has been promoted as a way of improving quality ever since. As such, public entities are likely expected to cooperate in the drive towards standardization and higher standards.

In countries with less developed markets, accredited laboratories tend to be elite institutions and points of reference for other laboratories and organizations in the country. In Uruguay, for example, the only ISO 15189 accredited laboratory claims to serve over 80 institutions across Uruguay. As the only ISO 15189 accredited laboratory in Uruguay, it is able to distinguish itself from all other medical testing laboratories in the country.

In some cases, these laboratories also provide services internationally or aim to have international recognition in a particular field. In such cases, laboratories are able to leverage their ISO 15189 accreditation to support that image. In Brazil, for example, one of the country’s 3 accredited laboratories is the Mendelics Analise Genomica SA, which aims to be recognised as a global reference for genetic diagnostics and interpretation.

ISO 15189 is growing in popularity in Latin America

Although ISO 15189 remains a voluntary standard across Latin America, the number of laboratories has shown significant growth in the last five years. Between 2013 and 2018, the number of laboratories in Latin America grew by a CAGR of 21%.

In cases such as Ecuador and El Salvador, an accredited medical testing market only emerged recently. In 2013 neither country had any ISO 15189 accredited bodies but by 2018 they had 8 and 2 accredited bodies respectively. Argentina, which evidenced the strongest growth in the examined years, went from having 1 accredited body to 11.

Most of the laboratories being accredited are not seeking to generate a reputation in highly specialised fields. Instead they are focusing on core medical areas such as Clinical Chemistry, Haematology, and Immunology, Immunochemistry, and Endocrinology. We find that medical areas which are most common also tend to be some of the fastest growing within Latin America. This shows that within the relatively young Latin American market, demand is primarily for highly competent laboratories that can perform staple medical tests.

This growth is a testament to the increasing popularity of the standard across Latin America. Although accredited laboratories remain a small proportion of the total number of laboratories, larger laboratories, especially those seeking some form of international recognition, are turning to ISO 15189 accreditation. Wider uptake, however, will likely require some form of government regulation or incentive.

Sector & Segment are committed to continue tracking the evolution of the regulation and ISO 15189 accreditation uptake over time.

How India’s intense competition in the powdered health-food drink space will ultimately help Indian kids get better nutrients

Oct 31, 2018 | Medical Nutrition & Consumer Health

How India’s intense competition in the powdered health-food drink space will ultimately help Indian kids get better nutrients

Two important acquisitions in the Food & Beverage space are impending in India: H. J. Heinz’s Complan and GSK’s Horlicks and Boost brands¹. These 3 brands are believed to represent almost two-thirds of the Indian children’s Health-Food Drink (HFD) market that is estimated to be worth between US $ 860 million² and over $1 billion (70 billion Indian rupees)³ in annual sales. As a result, strong contenders are currently bidding to acquire these brands: global consumer-goods giants Unilever, Nestle and Coca-Cola for Horlicks and Boost, and Zydus Cadila Group (a leading Indian pharmaceutical company) for Complan.

The current position of the brands for sale is being shaped by mixed factors. On the positive side, Horlicks and Complan are market leaders with a lot of heritage in a strong category. But, on the negative side, they are quickly losing market share to a variety of contenders – both international premium and local affordable players.

Stuck in the middle, these heritage brands are being squeezed; keeping pace without carefully revisiting ingredients, tastes and pricing could be a challenge. Buyer beware.

Horlicks, Boost and Complan: Historic Leaders of the HFD space

The market of HFDs in India emerged in the 1950s with the introduction of Horlicks, a malt-based nutritious drink. Horlicks quickly grew in popularity, especially in South and East India where availability of milk was scarce³.

Other brands including Boost (also owned by GSK) and Bournvita (currently owned by Mondelez) followed. As the market matured, brand-extensions were launched including “Junior Horlicks”, a junior range targeting 2 to 6-year-olds, which was launched in 1995.

Capitalising on their uptake among Indian families, these brands worked hard to achieve a broader and broader distribution in the general trade (small store format), even in rural areas. This put them at the centre of health nutrition for children after breastfeeding and weaning.

The past 15-20 years were particularly prosperous for these powder-based malted HFDs. They saw a steep boost in sales driven by the emergence of an Indian middle class and their desire maximize the physical and intellectual development of their children. These parents regard nutritional supplementation as an important way to help their toddlers, pre-schoolers and grade-schoolers to reach their full potential – a belief positively reinforced by frequent marketing and advertising campaigns targeting these families, especially on TV.

But this context also accelerated the uptake of other types of child-nutrition solutions. Boosted by the growth of the modern trade (larger store format) and e-commerce, new competition was able to gain visibility and reputation among parents. The household names Horlicks, Boost and Complan are now being challenged by a variety of other national and international brands that take advantage of limitations among those household brands, such as high sugar content or limited amounts of growth-related nutrients in their formulation.

Challenger # 1: HFDs with better nutrients (e.g. Nutricia’s Protinex)

As a consumer segment, educated middle-class Indian parents are concerned with the amounts of what they consider unhealthy or desirable nutrients and are particularly keen on scrutinizing food labels.

International companies have seen this as an opportunity to launch new HFDs with additional nutrients or the same nutrients as traditional HFDs but in higher quantity. For example, Danone Nutricia’s Protinex was launched to fill a gap in HFDs with high protein content. Its “tasty chocolate” formula contains 8g of protein per serving vs. 3.9g for Junior Horlicks Stage 1 and 5.9g for Complan Jar Royale Chocolate. Furthermore, it also beats competitors on the concentration per serving of most other vitamins and minerals in the formula – making it a “no brainer” for label-reading parents able to pay a premium for a product with better nutrients (as Protinex costs almost twice as much per serving as Junior Horlicks).

Challenger # 2: Paediatric Nutrition (E.g. Abbott’s Pediasure)

In 2000, Abbott launched Pediasure, specially formulated for children aged 1 to 10 years old and conceived of as a full meal replacement for picky eaters. Together with Ensure (targeting adults but also frequently taken by children), Pediasure is estimated to have a 10% market share of the HFD market; and both brands continue to grow quickly².

This success is attributed to Abbott’s commercial strategy which capitalises on the critical role played by paediatricians in recommending nutrition formulas to parents. In order to boost recommendations, Abbot’s representatives visit these healthcare professionals (HCPs) and educate them about the important role of complete nutrition in a child’s brain and physical development. In parallel, the advent of a large educated middle-class of parents also resulted in a more hands-on approach to children’s health monitoring with regular routine visits to HCPs. And the fact that they could afford these premium products ultimately created a snowball effect for Pediasure and Ensure.

Abbott also promotes its products directly to consumers (D2C) and are widely available in mass distribution channels. This “double-hat” approach, both medical and D2C, is not specific to India but has been the trademark of Abbott Nutrition for market entry around the world: first Abbott Nutrition targets HCPs to drive recommendation of their brands, then after 5-10 years, when their medical reputation has been established, they introduce D2C communication and aim for mainstream distribution to encourage broader product adoption. As in many Asian markets, this approach is paying off in India.

Challenger # 3: Growing-up Milks (e.g. Mead Johnson’s Enfamil)

Parents’ concern with the ingredient content of nutritional option has paved the way for the growth of adjacent nutritional categories, particularly growing-up milks.

A large reason why malt-based HFDs had been so successful in India was the fact that milk was not easily available and, when it was, its quality was poor. In contrast, malt-based HFDs were both accessible and able to mask an unpleasant milk taste³.

These historic success factors, however, are losing their relevance. A variety of infant milk formulas are now accessible, and most of them have “follow-up” toddler versions. Mead Johnson’s Enfamil Stage 3 is a particularly strong player in the space and has adopted a message around physical and brain development, competing head to head with traditional malted HFDs who leverage similar marketing lines.

Growing-up milks are sold at a premium price point; for example, Enfamil Stage 3 is four times more expensive than Junior Horlicks on a one serving basis. However, urban middle-class parents are willing to pay that higher price to provide what they perceive as better-quality nutrition, in line with the child-feeding practices of North American and European countries.

Challenger # 4: Local affordable HFDs (e.g. Patanjali’s Powervita)

The 3 types of contenders that we have laid out all have in common that they are led by premium brands owned by international companies (Abbott, Danone Nutricia and Mead Johnson). But leading HFDs’ competition also comes from the opposite side of the spectrum where local, affordable brands cater to rural families and urban working classes with low incomes. For example, Patanjali’s Powervita has a similar packaging look to Horlicks and Bournvita but is cheaper – ₹ 7.8 per serving (based on Amazon India prices) vs. ₹ 15.1 for Horlicks Junior and ₹ 8.2 for Bournvita.

The differentiation of local HFDs is not just on price but also on the brand’s identity, ingredients and taste. For example, Powervita is inspired from traditional ayurvedic medicine and borrows its marketing terminology from that space: “Shatavari promote health energy level and boost immunity” and “Shankhpushpi & Brahmi [is] good ayurvedic remedy for memory and brain”. In fact, Patanjali was co-founded by a very popular guru, Baba Ramdev, and, as such, has a lot of appeal among families with strong traditional Indian values⁴.

Beyond ayurvedic ingredients, the adaptation to local tastes can also appeal to Indian consumers. “Badam” (almond in Hindi), present in MTR’s Instant Badam Drink Jar is a good example. The importance of meeting local tastes has even been recognised by international players like Abbott that now manufactures locally its nutritional products with Indian flavours – e.g. “kesar badam” (saffron & almonds) for Pediasure⁵.

Although local HFDs represent a small amount of the total value of the HFD market due to their lower pricing, there are successfully taking some volume shares from most established players, slowing down the adoption of traditional brands Horlicks and Complan among Indian families emerging from economic scarcity.

Final thoughts

While Horlicks and Complan’s brand equity should still continue to attract socially ascending families to its products once they can afford them, the growth will certainly be lower than would have been originally predicted based on pure socio-economic factors.

The long-term future of Horlicks, Boost and Complan will very much depend on the type of innovation they manage to bring to the market in both tastes and ingredients. A substantial increase in protein, vitamin and mineral content could certainly help them to stay relevant, ultimately benefitting Indian children.

Marie-Élisabeth Maigre

¹ https://timesofindia.indiatimes.com/business/india-business/coke-zydus-to-bid-for-krafts-brands-complan-glucon-d/articleshow/65694532.cms

² See Redseer’s publication “Health Food Drinks on the Road to Transition” (http://redseer.com/wp-content/uploads/2018/06/health-food-drinks-hfd-market-in-india-on-a-road-to-transition.pdf)

³ https://economictimes.indiatimes.com/industry/cons-products/food/whoever-buys-horlicks-must-reckon-with-better-informed-consumers-in-a-rs-7000-crore-market/articleshow/63560169.cms

⁴https://www.india-briefing.com/news/ayurveda-india-fmcg-market-consumer-preferences-natural-organic-products-17395.html/

⁵https://www.business-standard.com/article/companies/abbott-to-launch-nutritional-products-in-indian-flavours-114101600800_1.html

The promising potential for the Energy Inspection market in Mexico

Sep 14, 2018 | TIC

The promising potential for the Energy Inspection market in Mexico

Driven by new technical regulations and improved surveillance of existing ones, the Energy end-user sector in Mexico is a key growth area for firms engaged in the accredited inspection industry. Both accredited inspection firms as well as equipment suppliers stand to benefit from this rapid ongoing change.

A Revolution in the Mexican Energy Infrastructure

The increased demand for the services of accredited Energy inspection companies and associated equipment suppliers began in 2013 with the liberalization of the Mexican energy market. This historic change allowed hundreds of private investors and companies to enter the market but also demanded new regulation to manage risks and support public outcomes. In this new environment, accredited Energy inspection firms play a crucial role in ensuring new quality standards and regulations are being met.

Market liberalization inspired conversation about the future of Energy regulation in Mexico and continues to shape the market today. Topics such as licensing, renewables, energy infrastructure, among others, are being reviewed by Mexico’s Ministry of Energy with the aim of developing more forward-looking energy policy and regulation.

Opportunities in Energy inspection

Opportunities for conformity assessment bodies focused on Energy will span a variety of associated environments and industries. In order to raise standards and prepare Mexican infrastructure for the future, the Mexican government is turning to technical regulations and standards as a means of enforcement (see table).

In many cases this will require accredited Energy inspection bodies that can certify quality and conformity in products, processes, and installations. In the case of transportation, for example, the expected need for electric vehicles charging stations will come with two new opportunities: inspections of the installations and of the energy providing system (legal metrology).

Buildings	• Integrate and apply energy efficiency codes in local construction regulations (state and/or municipal).
Buildings	• Maintain, update and strengthen the Energy Efficiency Technical Regulations and their evaluation systems.
Industry	• Unify criteria to request environmental and energy information for large energy users.
Industry	• Develop incentive programs, accreditations and recognitions to promote Energy Management Systems (EnMS).
Transportation	• Develop technical standards for electric vehicle charging systems.
Municipal public services	• Update technical standards related to the design and operation of municipal services with integrated ICTs, associated with the concept of smart cities.
Agro-industry	• Develop technical standards applicable to equipment and systems used in agriculture.
Energy bids	• Obligations of renewable energy

Demand continues to outstrip supply in Energy Inspection

Although the cost of Energy inspection is high, the market remains unable to keep up with the demand for accredited Energy inspection firms. This is especially true for inspections concerning electrical interconnections and natural gas in which there are only a few bodies available to meet the hundreds annual of inspection requests.

In the case of inspections of electrical interconnections, the number of bodies providing inspections is insufficient to meet the number of requests from industry. As it stands, there are 10 inspection units that must provide for nearly 800 requests for inspection per year. Furthermore, the number of requests for inspection of interconnection is expected to continue growing at 4% per year.

In the case of natural gas, the number of inspection bodies nearly meets demand, but the number of requests for inspection in this field is expected to increase rapidly in coming years. In Mexico there are currently only 15 inspection bodies accredited to the NOM-001-SECRE-2010 natural gas standards. Unless these bodies manage to significantly increase their capabilities, this number will have to grow rapidly to meet the 10-20% growth in demand expected over the next six years.[1]

More to come

Demand for accredited Energy inspection firms and associated equipment suppliers is unlikely to diminish in the near future. Sector & Segment expects the number of technical regulations focused on energy to continue growing as the Mexican Ministry of Energy implements the energy transition strategy, energy reforms, new regulations and new technical standards. As these changes are implemented, demand for accredited Energy inspection firms and OEMs will increase as a way of ensuring quality and conformity.

Sector & Segment Team

[1] https://www.gob.mx/cms/uploads/attachment/file/356363/2018_08_03_Unidades_de_verificacion.pdf

Peru: The Fastest Growing Market in LATAM for ISO 17020 Inspection

Aug 1, 2018 | TIC

Peru: The Fastest Growing Market in LATAM for ISO 17020 Inspection

Assessing drivers of growth in the Peruvian ISO 17020 inspection market and implications for Latin America.

Critical to the health, safety, and competitiveness of countries globally are the thousands 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 analysis[1], this piece focuses on Peru, the fastest growing accredited inspection market in terms of number of accredited inspection firms in Latin America. It examines the reasons behind Peru’s explosive growth and some implications for the broader Latin American market.

Even among the strong growth present in the Latin American accredited inspection industry Peru has shown itself to be exceptional. Between 2012 and 2017 the number of accredited inspection bodies grew at a CAGR of 57%, outpacing all other countries in the region. The source of this growth lies in a series of policies targeted at advancing the protection of the environment initialised in 2013, alongside regulation targeted at rational use of energy, drinkable water, air quality, and manufacturing quality, among others. The result is that Peru has an abundance of young accredited inspection firms that have been founded to meet these growing regulations.

This growth has not made Peru the Latin American industry leader in any end-user sector. Peru remains the 6^th largest country by total number of accredited inspection bodies. It has, however, become the second largest country in terms of accredited bodies in consumer goods, and the third largest in environment. More importantly, the growth shows exactly how powerful policy can be in stimulating the inspection industry.

Demands for better protections

Within Peru, growth in the accredited inspection industry has spanned several end-user sectors. The strongest growth has been present in consumer goods, but energy, environment, and industrials in Peru have all displayed above average growth for Latin America in those sectors.

The overall accredited inspection growth that has been witnessed in Peru can be tied back to Peru’s overall economic growth. Between 2005 and 2015 Peru’s GDP grew at an average of 5.8%. Strong economic growth has perhaps created two opportunities: the government has had the leeway to increase regulation without fear of overburdening the economy, and citizens have become more demanding when it comes to consumer protections.

This is reflected in the rising number of technical standards being published each year in Peru. In the years following 2012, the number of technical standards published by the government and associated technical bodies have grown almost exponentially. While not all of these technical standards are related to the ISO 17020 accredited inspection market, the trend reveals both the aims and actions taken by the government to boost quality and transparency.

Key Sectors

According to data gathered by Sector & Segment, consumer goods and energy have been the strongest growth area in terms of the number of accredited inspection firms in Peru. Our findings are reflected in government priorities. 16% of all standards published between 2012 and 2017 were related to food, beverage, and clothing manufacturing and a further 10% were related to the manufacture of electrical equipment.

By looking at the committees responsible for the creation of standards, it is also evident why environmental inspection has experienced such strong growth. The technical committees responsible for the rational use of energy and environmental management have been highly active, producing 138 technical standards between 2012 and 2017.

Opportunities remain in Peru

No exponential growth lasts forever but opportunities still remain in Peru. In 2017 new technical standards appear to still be focused at energy, the environment, industrial goods, but also construction. The Peruvian accredited inspection market will have to continue to grow quickly to meet this influx in technical standards.

Although Peru has taken significant steps towards establishing its inspection market, there remains much potential within the country. Based on our analysis of the number of accreditation firms relative to both population and GDP, Peru continues to lag behind the broader Latin American market. This helps to explain the rapid increase in technical norms and standards which seek to level the playing field.

A model to emulate in other developing countries?

The growth evidenced by Peru also offers some insights into the future of the inspection market in Latin America. Environmental inspection has been long neglected but policies such as those enacted in Peru could generate further opportunities in their respective countries. Only six Latin American countries currently have any accredited environmental inspection bodies and only three of those countries have more than five bodies in total.

Furthermore, in Latin America there are several other countries with broadly undeveloped accredited inspection markets. Should those governments opt to follow Peru’s example with stronger consumer protections and industry standards there could be future booms in accredited inspection.

Peter Hays

[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

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