Food Industry in Brazil: Food Products for Special Purposes

Interview with Carlos Eduardo Gouvêa, President of ABIAD (Brazilian Food Industry Association for Special Purposes and Similar) and Director of CMW Saúde

What was ABIAD created for and what is its focus?

ABIAD is the Brazilian association for special purposes food products. It was created in 1986 so it has been in existence for quite some time. It was created initially to defend the interests of diet products – special products for dieting that at that time were almost going to be considered to be drugs instead of food products. That would have been a big problem for the industry because the registration process is very tedious; there is a much more difficult process for medicine and drugs than food.

Since then, we have been defending the industry in creating legislation which is as convergent as possible with other countries. The idea is to be able to introduce a new product that comes from another country into Brazil in the shortest possible time. Today we still don’t have this scenario. Unfortunately, we have to follow several guidelines which are much more Brazilian-minded in terms of legislation than European or even American. There are big differences.

The main purpose of ABIAD, which has about 40 members from very big multi-national companies like Nestle, Abbott and Danone among others but also several Brazilian companies that are growing quite quickly in different markets, is to defend all of those different categories – functional food, infant nutrition, clinical nutrition, sports nutrition, diet and light, and more. The focus is to create markets and foster them in order to guarantee access to patients and consumers to more innovative products.

What are the major challenges that the association is facing in Brazil?

The main challenge is legislation. ANVISA, the National Health Surveillance Agency, which regulates the market under the Ministry of Health, is still posing several barriers to entry for different products. Because we have developed categories under different legislations, sometimes we follow more of the European guidelines and sometimes we try to go for the American guidelines, but most of the time the reality is that it is a mixture. Codex Alimentarius is normally followed but from that point onward, Brazilian regulators tend to create their own ideas. This creates a major barrier for entrance because sometimes a company that produces a product with a scale in one factory has to use different recipes – one for each market, or at least one for Brazil.

What we try to do is always keep in mind that the safety of the product, is especially in regards to the consumer, is very important. We can have one general recipe, one general product, that could be acceptable in different countries, including Brazil. Having said that, we try to get a very good, high-quality, innovative product but also at a good cost in order to make it more accessible. That is also very important.

Is it not just a barrier of entry that the Brazilian government puts up so that Brazilian companies won’t have to compete with foreign companies?

I would say that what Brazil, in particular the government, is trying to do is decrease their deficit in the trade balance. Today, especially in the health sector, we are far from a surplus. We are importing much more than we are exporting. In the food industry, that is not the case; however, in the special purpose food sector, where the health sector is mostly the objective, we still see that. For enteral nutrition, most of the products are imported, and the same applies for infant nutrition. It is also the case for vitamin and mineral supplements.

So, what the Ministry of Health is trying to do through the Industrial Complex of Health, is trying to attract foreign investment for the country and especially looking for local production. Local production in the end would actually attract investment, generate employment, create education and training, and other benefits that would last for a long time. Taking that into consideration, what they have been offering is a lot of funding with special conditions and sometimes contracts with the Ministry of Health for those products that are targeting public health programs.

If you are going to invest in local production and eventually transfer technology for that specific product, they would offer to a public company, such as Fiocruz or another, even a five-year contract for that particular product and situation. So there are interesting conditions and special funding conditions that would enable foreign investors to come and actually do some business in a long-term relationship with Brazil. I would say that it’s not simply a kind of import/export situation or national versus international companies; no, it’s really looking for investment in the country in order to have a better capability, not only to supply the public health programs with local products – it doesn’t matter whether it comes from a multi-national based in Brazil or not – but also to have an export platform being created for other countries with better conditions.

What is the main message that the association wants to relay at this time?

We are making a very big effort in order to have a more simplified relationship in certain areas. Enteral nutrition is one of these areas and vitamin and mineral supplements is another. It is work that has been going on for more than five years with international corporations, trying to bring the best examples and benchmarks to show that some innovative products can be brought into the country with very good outcomes for the community and population as a whole.

Then, to discuss this with ANVISA has been one of our biggest challenges. We want to show them how we can have an excellent product, that is new and with several publications or studies, but with different conditions than the country was accepting at that time. To change the regulator’s mind, showing that there is another kind of way to overlook a certain product, is the biggest challenge. For that we have been finding and have been able to find corporations with regulators from the European Union and even from the FDA.

Let’s talk about your own company now. Could you please introduce what your company is about?

CMW Saúde is a company that I and my two partners founded in 2005. Since then, we have been focusing on niche areas in the nutritional and diagnostics business. In terms of nutritional areas, we have been developing and marketing products for very key niche areas like inborn errors of metabolism – so genetic disorders like Phenylketonuria, Maple Syrup Urine Disorder and Homocystinuria, among others. Babies, when they are born, undergo neonatal screening and if they are found to have one of these disorders, they should immediately go on a very restrictive diet, normally without the specific amino acid. That is one area with very specialized products that are high technology, almost pharmaceutical grade, but are still food products.

Another very interesting area that has been growing quite a lot is in allergies. Children between birth and two years of age may be found to have a severe allergy, normally to cow’s milk protein or other proteins. About six to eight percent of children have this condition, so it is a market that has been developing as the diagnostics for allergies are improving as well. Doctors, normally pediatric gastroenterologists, are increasingly finding cases of allergies, many of whom have to go on a specific diet or they will have a severe case of malnutrition.

Another area of nutrition in which we have been working for quite some time is clinical nutrition which includes enteral nutrition, which is normally tube-feeding, and parenteral nutrition, which goes directly into the vein. With these markets we are covering both public and private sectors. The public sector is really very important, especially for allergies and metabolic disorders. Then we have some other special areas of diagnostics as part of our business for tropical diseases and controlling pesticides and toxicity. We have a product for Acetylcholinesterase detection in public workers, for instance. If a person has been exposed to a pesticide, they can get a very high toxic content and this should be detected as soon as possible for the proper treatment. We have a product and equipment that allows detection in four minutes.

What are the areas in which you think your business can grow and what is the potential for your business to be further associated with international companies?

CMW has been growing quite quickly in its few years of existence. We have come from nothing to almost eight to ten million dollars of turnover, basically by using our knowledge in certain areas that are niche. We really have to focus on the knowledge that we can have and show to the market, but also at the same time on the high technology of these products that are being introduced. I would say that in the future what we are looking for is a competitive advantage through strategic alliances.

It’s really key to have a product that is unique or in an area that has not yet been properly worked like this, but that can be further developed. We are not afraid of conquering new spaces and going for areas where no one has gone before because that is exactly where you make the difference and will succeed, with a unique product, high technology and good knowledge.

We are always looking for new strategic alliances that we can develop, not only for Brazil, which is a fantastic market and quite well-developed in certain areas with a good public health system that can absorbed new products for specific uses, but also for Latin America. We have been working in Argentina, Chile, Paraguay, Columbia, Peru and Mexico with very good local partners that are developing the same kind of areas that we are in those respective countries.

Again, tell us more about what can happen with the public sector. You mentioned that the government may fund some development.

Brazil has some interesting characteristics. One is that we have a unified health system called SUS. SUS is basically a very strong arm of the Ministry of Health that provides any Brazilian citizen with the right to proper treatment and the right to life. Any citizen in Brazil, by the constitution, is entitled to have proper treatment or therapy. Considering that, if the person cannot afford it, there will be a public health program specifically targeting therapy.

With that in mind, the Brazilian government has been trying to bring into the country this technology and provides funding, with special conditions, for local production if that’s the case, or eventually even a transfer of technology that would target a public program and then would be less dependent on imports in the future. Of course, this means that we would be able to go for the specific area in very good conditions for a certain period of time and if the decision is to go even for a transfer of technology, we would be entitled to royalties for the rest of the life of that product. So, it is quite interesting. Considering that in Latin America we are talking about the biggest consumer market, of course you would give enough conditions to go to other countries with a good scale.

So initially it is funded by the government.

Yes, the government would fund and probably give the purchasing power. So you could make a contract of supply with the Brazilian government for a period of time. Of course, these are conditions that exist; it would need to be worked out properly.

Do you think that is a good model?

So far, with the companies with which we have been working, we have been able to grow quite significantly.

What do you think you are good at in this case?

Knowledge of the market, expertise in niche areas, and exposure to the Brazilian government relationship, but in particular it is the knowledge of the market.

Do you see areas where you can push the development of a strategic alliance with other foreign companies?

I think this would be particularly in the health sector. It doesn’t matter if it’s medical devices, diagnostics or the food sector, but in these areas I think we would be in the best condition to go for a very interesting and strategic alliance with another partner elsewhere. It’s very important to have a product or a line of products that are unique and based on science. It doesn’t matter if it’s too expensive or not; the point is really whether it is going to make a difference to that consumer or patient. Is there science behind it? Is there any other competitive advantage that we can explore? If so, we want to discuss it.

What is your dream for your company over the next five years?

In terms of product portfolio, it is really to grow and be in the front line of many innovative areas in the health sector, to bring breakthroughs to the market and to enter some areas for which there is currently no therapy available. We want to bring solutions for those areas. We want to bring hope for many patients who have no hope today. That is a very nice dream to strive for.

In terms of turnover, it is really to grow within five years to three or four times our current turnover. In terms of geographic presence, it is really to be very well-structured in Latin America, counting on those partners with very solid structures and replicating the same kind of business model that we have. Today we are still beginning. In some countries like Columbia we are doing quite well and in Chile we are growing quite quickly. But I think we need to have very solid foundations in the next three to four years.

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