NBJ Supplement Business Report 2015

Transcription

Supplement
Business Report
2015
© 2015 Penton
Table of Contents
The 2015 Supplement Report
1 Executive summary ...............................................................................................................................................6
2 Market Data & Overview .......................................................................................................................................8
2.1 US Nutrition ............................................................................................................................................................9
2.1.1 Category Sales, Growth, and Forecast.................................................................................................9
2.1.2 Channel Sales, Growth, and Forecast ................................................................................................ 14
2.2 US Dietary Supplements .............................................................................................................................. 15
2.2.1 US Supplements vs. Nutrition Industry ............................................................................................ 16
2.2.2 Product Category Sales, Growth, and Forecast ................................................................................. 16
2.2.3 Top Companies .................................................................................................................................... 19
2.2.4 Deals of the Year .................................................................................................................................20
2.2.5 Top Supplements ................................................................................................................................25
2.2.6 Channel Sales, Growth, and Forecast ................................................................................................28
3 Consumer Survey .................................................................................................................................................29
3.1 The Core User ............................................................................................................................................... 30
3.2 Consumer Survey ..........................................................................................................................................33
3.3 NEXT Concepts ..............................................................................................................................................39
4 Vitamins .............................................................................................................................................................42
4.1 Overview ........................................................................................................................................................43
4.2 Product Category Sales, Growth, and Forecasts .........................................................................................47
4.3 Channel Sales ............................................................................................................................................... 58
4.4 Top Companies ............................................................................................................................................. 60
4.5 K2
............................................................................................................................................................. 61
5 Herbs & Botanicals ..............................................................................................................................................63
5.1 Overview ....................................................................................................................................................... 64
5.2 Product Category Sales, Growth, and Forecasts .........................................................................................66
5.3 Channel Sales .................................................................................................................................................71
5.4 Top Companies .............................................................................................................................................. 73
5.5 DNA Infrastructure........................................................................................................................................ 74
5.6 CBD ............................................................................................................................................................. 75
5.7 Essential Oils ................................................................................................................................................ 80
© 2015 Penton
www.nutritionbusinessjournal.com
2
Table of Contents
6 Sports Nutrition ...................................................................................................................................................82
6.1 Overview ........................................................................................................................................................83
6.2 Product Category Sales, Growth, and Forecasts ........................................................................................ 86
6.3 Channel Sales ............................................................................................................................................... 90
6.4 Top Companies ..............................................................................................................................................92
6.5 Hydration .......................................................................................................................................................93
6.6 Protein .......................................................................................................................................................... 94
7 Minerals ............................................................................................................................................................. 97
7.1 Overview ....................................................................................................................................................... 98
7.2 Product Category Sales, Growth, and Forecasts .......................................................................................100
7.3 Channel Sales .............................................................................................................................................. 105
7.4 Top Companies ............................................................................................................................................ 106
8 Meal Replacements ........................................................................................................................................... 107
8.1 Ovedrview ....................................................................................................................................................108
8.2 Channel Sales ...............................................................................................................................................110
8.3 Top Companies ..............................................................................................................................................111
9 Specialty Supplements ...................................................................................................................................... 112
9.1 Overview ....................................................................................................................................................... 113
9.2 A Microbiome Boost for Gluten Free ........................................................................................................... 113
9.3 Product Category Sales, Growth, and Forecasts ........................................................................................ 117
9.4 Channel Sales .............................................................................................................................................. 125
9.5 Top Companies ............................................................................................................................................ 126
9.6 Opportunities in the Microbiome ................................................................................................................127
10 Condition Specific .............................................................................................................................................. 128
10.1 Overview ...................................................................................................................................................... 129
10.2 Product Category Sales, Growth, and Forecasts ....................................................................................... 134
11 Ingredients & Innovation .................................................................................................................................. 139
11.1 Overview ......................................................................................................................................................140
11.2 Algae ...........................................................................................................................................................140
11.3 Experiential Ingredients ............................................................................................................................. 143
11.4 Branded Ingredients ................................................................................................................................... 144
11.5 Supplement Startups ................................................................................................................................. 146
© 2015 Penton
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Table of Contents
11.6 Liposomal Delivery ......................................................................................................................................148
11.7 Non-GMO Supplements.............................................................................................................................. 150
12 Sales Channels & Distribution .......................................................................................................................... 154
12.1 Overview ...................................................................................................................................................... 155
12.2 Scaling the Individual.................................................................................................................................. 155
12.3 Retail ........................................................................................................................................................... 158
12.4 MLM ........................................................................................................................................................... 162
12.5 Mail Order .................................................................................................................................................... 166
12.6 Internet ........................................................................................................................................................ 168
12.7 Mass ............................................................................................................................................................ 171
12.8 Practitioner ...................................................................................................................................................174
13 Regulatory Outlook ............................................................................................................................................177
13.1 Regulatory Overhaul ................................................................................................................................... 178
13.2 TGA—The Australian Regulatory Model ......................................................................................................181
13.3 Getting Ready for FSMA ............................................................................................................................. 185
13.4 Comparing the Third-Party Certifiers......................................................................................................... 189
13.5 Our O-Ring Opportunity.............................................................................................................................. 192
13.6 Q&A with Anahad O’Connor ....................................................................................................................... 193
14 Definititions and Acknowledgements ............................................................................................................. 195
15 Company Profiles.............................................................................................................................................. 200
Abbott Laboratories (Ensure, EAS) ................................................................................................................... 201
Atkins Nutritionals ............................................................................................................................................ 203
Atrium Innovations (Garden of Life, Pure Encapsulations, Douglas Labs, Seroyal) ...................................... 206
Basic Research/ Zoller Labs (Zantrex, Relacore, Leptopril, etc.) .................................................................... 209
Valeant/Bausch & Lomb (Ocuvite, PreserVision)............................................................................................... 211
Bayer (One A Day, Flintstones............................................................................................................................ 213
Bluebonnet Nutrition Corp. ................................................................................................................................ 216
Carlyle Group - NBTY........................................................................................................................................... 218
Church & Dwight (Northwest Natural Products, Nutrition Now) ..................................................................... 221
Capstone (Cornerstone Research and Development, Integrity Nutraceuticals) .............................................223
Hormel Foods (CytoSport)..................................................................................................................................225
Delavau ...........................................................................................................................................................228
DSM (i-Health) ................................................................................................................................................... 230
Glanbia (Optimum Nutrition, BSN, Isopure)......................................................................................................233
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Table of Contents
GNC (contract manufacturing) ...........................................................................................................................236
Helen of Troy/Healthy Directions (Doctor’s Preferred) .................................................................................... 238
International Vitamin Corporation.................................................................................................................... 240
Iovate (Hydroxycut, MuscleTech) .......................................................................................................................242
Twinlab Consolidated Corporation (TwinLab, Metabolife) ...............................................................................245
Jarrow Formulas ..................................................................................................................................................249
Kikkoman (Country Life, Allergy Research Group ............................................................................................. 251
Liberty Interactive (Bodybuilding.com) .............................................................................................................254
Life Extension .....................................................................................................................................................256
Matrixx Initiatives .............................................................................................................................................. 258
Metagenics......................................................................................................................................................... 260
Natural Alternatives ...........................................................................................................................................262
Natural Factors Nutritional Products ............................................................................................................... 264
Natural Organics (Nature’s Plus)........................................................................................................................266
Nature’s Products, Inc. ...................................................................................................................................... 268
Nestlé
............................................................................................................................................................271
Nordic Naturals ................................................................................................................................................... 274
NOW Foods ......................................................................................................................................................... 277
Nutraceutical International Corporation........................................................................................................... 280
Perrigo
...........................................................................................................................................................282
Pfizer (Centrum, Alacer) .................................................................................................................................... 284
Pharmavite (Nature Made) ............................................................................................................................... 286
ProCaps Laboratories......................................................................................................................................... 288
Procter & Gamble (Metamucil, New Chapter) .................................................................................................. 290
Reckitt Benckiser (Schiff, Airborne) ...................................................................................................................292
Reliance Private Label Supplements .................................................................................................................295
ReNew Life Formulas, Inc. ................................................................................................................................. 297
SAN Corporation .................................................................................................................................................299
Schwabe NA (Nature’s Way, Enzymatic Therapy, Integrative Therapeutics, Wellesse) ................................. 301
Standard Process ............................................................................................................................................... 304
Swanson Health Products ..................................................................................................................................307
Threshold Enterprises Ltd. (Source Naturals, Planetary Herbals) .................................................................. 309
Kainos Capital (SlimFast) .................................................................................................................................... 311
USP Labs ........................................................................................................................................................... 313
VitaQuest International ..................................................................................................................................... 315
Xymogen ............................................................................................................................................................317
© 2015 Penton
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Table of Contents
1. Executive
Summary
© 2015 Penton
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Table of Contents EXECUTIVE SUMMARY
1.0 Executive Summary
It won’t be news to anyone that recent times have been hard for the supplement industry. The past couple of years have seen studies
linking Omega 3s to cancer; Dr. Oz getting eviscerated before Congress, dismantled in the press, and attacked by fellow physicians
calling for him to resign his teaching post at Columbia University; class-action lawsuits around protein adulteration; and a new scandal
around BMPEA in sports supplements.
For 2014, growth in the supplement industry slowed to 5.1 percent. That’s not just down from 7.5 percent in 2013; it’s the slowest
growth the industry has seen since 2010. Vitamins and specialty supplements seem to have taken the brunt of things.
And that’s all before the New York Attorney General investigation hit herbs and botanicals so hard that anything with the word
“supplement” anywhere in its description or business plan has felt the pain. Indications right now are for flat to negative growth for all
segments of the industry in 2015—and that’s assuming things don’t get worse.
According to our own consumer research, 11.7 percent of people say they trust supplements less now than they did a year ago. It’s
gotten to the point that even industry insiders are talking about new regulations—and even a rethinking of DSHEA—in terms of when,
not if.
Lousy media, negative research, government investigations, class-action lawsuits, and calls for more oversight: That’s a brutal mix.
And yet we’re talking about growth. After a 5.1 percent bump, the overall US supplements industry is worth $36.7 billion—the highest it’s ever been. We are very confident in both that number and our growth estimates. So far in 2015, and despite the NY AG investigation, we haven’t seen a negative impact on herbs and botanicals in the natural channel. Minerals actually grew at an even faster rate in
2014 than 2013, thanks both to calcium seeming to regain its footing and magnesium’s continued strength.
An industry that can not just survive those headwinds but can continue to find growth opportunities despite them is indeed strong.
In the specialty category, melatonin and probiotics saw growth rates in the mid teens. That’s down from highs of over 20 percent,
but those rates were unsustainable. These products are still booming, and the emerging science on the microbiome points to even more
interest in the gut and digestion in coming years.
Letter vitamins had another bad year, up just 3 percent, versus 6.3 percent in 2013. But vitamin A/Cartenoids (11.5 percent) were a
particular bright spot, and vitamin D (8.1 percent) continues to show strength.
Still, there’s no denying that the overall industry is dealing with difficult times and facing, at best, an uncertain future. Just the prospect of a regulatory overhaul or a class-action lawsuit or an attorney general investigation or a consumer trend toward whole foods and
away from supplements would be enough to lose sleep over. Facing all of those simultaneously adds up to a transformative moment.
To help industry not just ride out that change but actually steer it, NBJ has compiled the report you our now reading. In the pages
that follow, we investigate the regulatory prospects facing the industry, take a look at consumer sentiment, and report on a special study
to identify and understand the core supplement consumer. If the industry needs to find its center, that’s the place to start.
Of course, that’s all in addition to deep, quantitative dives into all the segments that make up this industry.
This report includes:
•
•
•
•
•
•
Sales and growth through 2014 and forecasts through 2020 for NBJ’s six supplement categories: vitamins, minerals, herbs and botanicals, specialty supplements, meal replacement, and sports nutrition supplements
NBJ’s Top 100 Dietary Supplements in the US, ranked by sales
Analysis and forecasts for every distribution channel (mass market, natural specialty, multilevel marketing, direct media, practitioner, and internet) for each product category
Consumer surveys
Deeply reported coverage of the top trends and events shaping the supplement industry
SWOT analyses and profiles for the top 50 companies in the industry
© 2015 Penton
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Table of Contents
2. Market Data
& Overview
© 2015 Penton
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MARKET DATA & OVERVIEW
2.1 US Nutrition Industry
Four straight years of accelerating growth for the US nutrition industry seems to have come to an end, as last year’s slowdown in
growth looks like it’s here to stay for at least the next few years. Still, that leaves the industry with predicted annual growth of over 8
percent through 2020—a very healthy clip, thanks to natural & organic foods.
The segment grew at 12.5 percent in 2014, which is right in line with the CAGR for this space through 2020. Natural and organic
foods is the only category with a CAGR in double digits. The continued strength in the segement is why, even though supplements are
growing, they represent a shrinking share of the overall nutrition space—21.9 percent in 2014, down from 23 percent in 2013. In 2003,
that figure was 30 percent.
NBJ consumer surveys have revealed an overarching shift in sentiment toward food and away from supplements. The market data
would seem to bear that out.
2.1.1 Category Sales, Growth, and Forecast
US Nutrition Industry Sales and Growth 2000-2020e
14%
$300,000
12%
$250,000
10%
$200,000
8%
$150,000
6%
$100,000
4%
$50,000
2%
0%
$0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015e 2016e 2017e 2018e 2019e 2020e
Sales
Growth
Source: Nutrition Business Journal ($mil., consumer)
© 2015 Penton
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US Nutrition Industry Sales by Product, 2014
Natural and Organic Personal Care
9.5%
Supplements
21.9%
Functional Food
30.4%
Natural and Organic Food
38.2%
Source: Nutrition Business Journal (consumer)
2004
US Nutrition Industry Sales by Product, 2004-2014
2005
2006
2007
2008
2009
2010
Vitamins
6,887
7,148
7,485
7,778
8,528
9,133
Herbs & Botanicals
4,288
4,378
4,558
4,756
4,800
Sports Nutrition
2,129
2,250
2,392
2,595
Minerals
1,738
1,811
1,849
Meal Replacements
2,329
2,300
Specialty/Other
3,081
Supplements
2011
2012
2013
2014
9,576
10,115
10,644
11,315
11,656
5,037
5,049
5,302
5,593
6,033
6,441
2,793
2,947
3,218
3,579
3,999
4,517
4,872
1,937
2,055
2,171
2,259
2,333
2,412
2,504
2,630
2,362
2,461
2,577
2,658
2,754
3,166
3,635
3,938
4,250
3,512
3,921
4,390
4,704
5,053
5,352
5,704
6,170
6,593
6,843
20,453
21,399
22,567
23,918
25,457
27,000
28,209
30,198
32,453
34,900
36,692
Natural & Organic Foods
21,290
24,356
28,035
32,752
34,014
35,836
38,781
42,765
48,048
53,876
60,706
Functional Foods
Natural & Organic
Personal Care
25,283
27,536
30,394
33,261
35,605
36,500
38,165
41,073
43,927
47,346
51,050
5,526
6,349
7,240
8,950
10,105
10,354
10,969
11,874
13,114
14,431
15,865
Nutrition Industry
72,551
79,641
88,236
© 2015 Penton
98,881 105,182 109,690 116,125 125,909 137,541 150,553 164,313
10
US Nutrition Industry Sales by Product, 2015e-2020e
2015e
2016e
2017e
2018e
2019e
2020e
12,098
12,629
13,232
13,872
14,536
15,233
Herbs & Botanicals
6,777
7,154
7,576
8,050
8,566
9,117
Sports Nutrition
5,270
5,730
6,239
6,786
7,393
8,069
Minerals
2,773
2,927
3,092
3,263
3,430
3,601
Meal Replacements
4,576
4,905
5,270
5,669
6,078
6,497
Specialty/Other
7,105
7,457
7,871
8,364
8,910
9,503
Supplements
38,599
40,802
43,280
46,004
48,913
52,021
68,386
76,856
86,188
96,464
107,732
120,363
Functional Foods
54,882
58,768
62,722
66,781
70,979
75,226
Vitamins
Natural & Organic Personal Care
Nutrition Industry
17,409
19,054
20,792
22,575
24,404
26,265
179,275
195,480
212,982
231,824
252,028
273,875
US Nutrition Industry Growth by Product, 2014
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
Source: Nutrition Business Journal (consumer sales)
© 2015 Penton
11
2004
US Nutrition Industry Growth by Product, 2004-2014
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Vitamins
3.5%
3.8%
4.7%
3.9%
9.6%
7.1%
4.8%
5.6%
5.2%
6.3%
3.0%
Herbs & Botanicals
3.4%
2.1%
4.1%
4.3%
0.9%
5.0%
0.2%
5.0%
5.5%
7.9%
6.8%
Sports Nutrition
7.0%
5.7%
6.3%
8.5%
7.6%
5.5%
9.2%
11.2%
11.7%
13.0%
7.9%
Minerals
-1.5%
4.2%
2.1%
4.7%
6.1%
5.7%
4.1%
3.2%
3.4%
3.8%
5.0%
Meal Replacements
-7.6%
-1.2%
2.7%
4.2%
4.7%
3.1%
3.6%
15.0%
14.8%
8.3%
7.9%
Specialty/Other
11.5%
14.0%
11.7%
12.0%
7.2%
7.4%
5.9%
6.6%
8.2%
6.9%
3.8%
3.1%
4.6%
5.5%
6.0%
6.4%
6.1%
4.5%
7.0%
7.5%
7.5%
5.1%
14.5%
14.4%
15.1%
16.8%
3.9%
5.4%
8.2%
10.3%
12.4%
12.1%
12.7%
Supplements
Functional Foods
Natural & Organic
Personal Care
7.5%
8.9%
10.4%
9.4%
7.0%
2.5%
4.6%
7.6%
6.9%
7.8%
7.8%
12.3%
14.9%
14.0%
23.6%
12.9%
2.5%
5.9%
8.3%
10.4%
10.0%
9.9%
Nutrition Industry
8.5%
9.8%
10.8%
12.1%
6.4%
4.3%
5.9%
8.4%
9.2%
9.5%
9.1%
US Nutrition Industry Growth by Product, 2015e-2020e
2015e
2016e
2017e
2018e
2019e
2020e
Vitamins
3.8%
4.4%
4.8%
4.8%
4.8%
4.8%
Herbs & Botanicals
5.2%
5.6%
5.9%
6.3%
6.4%
6.4%
Sports Nutrition
8.2%
8.7%
8.9%
8.8%
8.9%
9.2%
Minerals
5.4%
5.6%
5.6%
5.5%
5.1%
5.0%
Meal Replacements
7.7%
7.2%
7.4%
7.6%
7.2%
6.9%
Specialty/Other
3.8%
5.0%
5.6%
6.3%
6.5%
6.7%
Supplements
Functional Foods
5.2%
5.7%
6.1%
6.3%
6.3%
6.4%
12.7%
12.4%
12.1%
11.9%
11.7%
11.7%
7.5%
7.1%
6.7%
6.5%
6.3%
6.0%
Natural & Organic Personal Care
9.7%
9.5%
9.1%
8.6%
8.1%
7.6%
Nutrition Industry
9.1%
9.0%
9.0%
8.8%
8.7%
8.7%
© 2015 Penton
12
US Nutrition Industry Compound Annual Growth Rate by Product Product, 2014-2020e
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
© 2015 Penton
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2.1.2 Channel Sales, Growth, and Forecast
US Nutrition Industry Sales by Channel, 2014
Practitioner
2.7%
Internet
3.1%
MLM/Network marketing
5.8%
Mail order, DRTV, Radio
2.5%
Natural and specialty
29.0%
Mass market
56.9%
US Nutrition Industry Sales by Channel, 2004-2014
Natural and Specialty
Mass Market
Mail Order, DRTV, Radio
Multi-Level/Network
Practitioner
Internet
Total
© 2015 Penton
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
21,895 24,053 26,365 29,192 30,399 31,836 33,862 36,277 39,885 43,999 47,576
39,391 43,423 48,757 55,495 59,512 61,976 65,592 71,555 77,870 85,105 93,570
1,954
2,085
2,229
2,383
2,850
3,017
3,173
3,352
3,576
3,810
4,059
6,404
6,771
7,136
7,419
7,527
7,404
7,454
7,974
8,591
9,049
9,522
2,007
2,159
2,339
2,581
2,688
2,910
3,117
3,403
3,738
4,112
4,452
900
1,149
1,411
1,810
2,205
2,546
2,927
3,349
3,881
4,477
5,133
72,551 79,641 88,236 98,881 105,182 109,690 116,125 125,909 137,541 150,553 164,313
14
US Nutrition Industry Sales by Channel, 2015e-2020e
Mass Market
Multi-Level/Network
2015e
2016e
2017e
2018e
2019e
2020e
51,551
56,046
61,080
66,548
72,404
78,767
102,678
112,404
122,757
133,855
145,795
158,723
4,331
4,617
4,915
5,225
5,557
5,918
10,027
10,542
11,099
11,691
12,284
12,881
Practitioner
4,799
5,164
5,553
5,976
6,415
6,871
Internet
5,889
6,707
7,577
8,528
9,572
10,715
179,275
195,480
212,982
231,824
252,028
273,875
Total
US Nutrition Industry growth by channel, 2004-2014
Mass Market
Multi-Level/Network
Practitioner
Internet
Total
2004
8.3%
8.5%
7.1%
7.3%
10.7%
21.6%
8.5%
2005
9.9%
10.2%
6.7%
5.7%
7.6%
27.7%
9.8%
2006
9.6%
12.3%
6.9%
5.4%
8.3%
22.7%
10.8%
2007
10.7%
13.8%
6.9%
4.0%
10.3%
28.3%
12.1%
2008
4.1%
7.2%
19.6%
1.5%
4.2%
21.8%
6.4%
2009
4.7%
4.1%
5.9%
-1.6%
8.3%
15.5%
4.3%
2010
6.4%
5.8%
5.1%
0.7%
7.1%
14.9%
5.9%
2011
7.1%
9.1%
5.7%
7.0%
9.2%
14.4%
8.4%
2012
9.9%
8.8%
6.7%
7.7%
9.9%
15.9%
9.2%
2013
10.3%
9.3%
6.5%
5.3%
10.0%
15.3%
9.5%
2014
8.1%
9.9%
6.5%
5.2%
8.3%
14.7%
9.1%
US Nutrition Industry growth by channel, 2015e-2020e
2015e
2016e
2017e
2018e
2019e
2020e
8.4%
8.7%
9.0%
9.0%
8.8%
8.8%
Mass Market
9.7%
9.5%
9.2%
9.0%
8.9%
8.9%
6.7%
6.6%
6.5%
6.3%
6.4%
6.5%
Multi-Level/Network
5.3%
5.1%
5.3%
5.3%
5.1%
4.9%
Practitioner
Internet
Total
7.8%
7.6%
7.5%
7.6%
7.3%
7.1%
14.7%
13.9%
13.0%
12.6%
12.2%
11.9%
9.1%
9.0%
9.0%
8.8%
8.7%
8.7%
2.2 US Dietary Supplements
As a percentage of total nutrition industry sales, dietary supplements have steadily lost share over the past decade to higher-growth
categories like natural and organic food. The supplement market held 21.9 percent share in nutrition last year, down from 23 percent a
year prior and down from 30 percent in 2003.
NBJ anticipates that total nutrition industry growth will continue to outpace supplements through 2020, growing at a CAGR of just
8.5 percent, versus 6.9 percent for supplements.
© 2015 Penton
15
2.2.1 US Supplements vs. Nutrition Industry
US Dietary Supplements vs. Total Nutrition, 2004-2014
Supplements
Growth
Total Nutrititon
Growth
Supplements as % of
total nutrition
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
20,453
21,399
22,567
23,918
25,457
27,000
28,209
30,198
32,453
34,900
36,692
3.1%
4.6%
5.5%
6.0%
6.4%
6.1%
4.5%
7.0%
7.5%
7.5%
5.1%
72,411
79,625
88,496
98,819 107,414 111,955 118,543 128,556 140,330 153,474 167,244
8.6%
10.0%
11.1%
11.7%
8.7%
4.2%
5.9%
8.4%
9.2%
9.4%
9.0%
28.2%
26.9%
25.5%
24.2%
23.7%
24.1%
23.8%
23.5%
23.1%
22.7%
21.9%
2.2.2 Product Category Sales, Growth, and Forecast
Sales by Product, 2014
Specialty
18.6%
Vitamins
31.8%
Meal supplements
11.6%
Minerals
7.2%
Herbs and botanicals
17.6%
Sports supplements
13.3%
© 2015 Penton
16
US Dietary Supplement Sales by Product Category, 2004-2014
2004
6,887
4,288
2,129
1,738
2,329
3,081
20,453
Vitamins
Herbs & Botanicals
Sports Supplements
Minerals
Meal Supplements
Specialty/Other
Total
2005
7,148
4,378
2,250
1,811
2,300
3,512
21,399
2006
7,485
4,558
2,392
1,849
2,362
3,921
22,567
2007
7,778
4,756
2,595
1,937
2,461
4,390
23,918
2008
8,528
4,800
2,793
2,055
2,577
4,704
25,457
2009
9,133
5,037
2,947
2,171
2,658
5,053
27,000
2010
9,576
5,049
3,218
2,259
2,754
5,352
28,209
2011
10,115
5,302
3,579
2,333
3,166
5,704
30,198
2012
10,644
5,593
3,999
2,412
3,635
6,170
32,453
2013
11,315
6,033
4,517
2,504
3,938
6,593
34,900
2014
11,656
6,441
4,872
2,630
4,250
6,843
36,692
US Dietary Supplement Sales by Product Category, 2015e-2020e
Vitamins
2015e
2016e
2017e
2018e
2019e
2020e
12,098
12,629
13,232
13,872
14,536
15,233
Herbs & Botanicals
6,777
7,154
7,576
8,050
8,566
9,117
Sports Supplements
5,270
5,730
6,239
6,786
7,393
8,069
Minerals
2,773
2,927
3,092
3,263
3,430
3,601
Meal Supplements
4,576
4,905
5,270
5,669
6,078
6,497
Specialty/Other
7,105
7,457
7,871
8,364
8,910
9,503
38,599
40,802
43,280
46,004
48,913
52,021
Total
US Dietary Supplement Growth by Product Category, 2004-2014
Vitamins
Herbs & Botanicals
Sports Supplements
Minerals
Meal Supplements
Specialty/Other
Total
2004
3.5%
3.4%
7.0%
-1.5%
-7.6%
11.5%
3.1%
2005
3.8%
2.1%
5.7%
4.2%
-1.2%
14.0%
4.6%
2006
4.7%
4.1%
6.3%
2.1%
2.7%
11.7%
5.5%
2007
3.9%
4.3%
8.5%
4.7%
4.2%
12.0%
6.0%
2008
9.6%
0.9%
7.6%
6.1%
4.7%
7.2%
6.4%
2009
7.1%
5.0%
5.5%
5.7%
3.1%
7.4%
6.1%
2010
4.8%
0.2%
9.2%
4.1%
3.6%
5.9%
4.5%
2011
5.6%
5.0%
11.2%
3.2%
15.0%
6.6%
7.0%
2012
5.2%
5.5%
11.7%
3.4%
14.8%
8.2%
7.5%
2013
6.3%
7.9%
13.0%
3.8%
8.3%
6.9%
7.5%
2014
3.0%
6.8%
7.9%
5.0%
7.9%
3.8%
5.1%
US Dietary Supplement Growth by Product Category, 2015e-2020e
2015e
2016e
2017e
2018e
2019e
2020e
Vitamins
3.8%
4.4%
4.8%
4.8%
4.8%
4.8%
Herbs & Botanicals
5.2%
5.6%
5.9%
6.3%
6.4%
6.4%
Sports Supplements
8.2%
8.7%
8.9%
8.8%
8.9%
9.2%
Minerals
5.4%
5.6%
5.6%
5.5%
5.1%
5.0%
Meal Supplements
7.7%
7.2%
7.4%
7.6%
7.2%
6.9%
Specialty/Other
3.8%
5.0%
5.6%
6.3%
6.5%
6.7%
Total
5.2%
5.7%
6.1%
6.3%
6.3%
6.4%
© 2015 Penton
17
US Dietary Supplement Maret Share by Product Category, 2004-2014
2004
33.7%
21.0%
10.4%
8.5%
11.4%
15.1%
100.0%
Vitamins
Herbs & Botanicals
Sports Supplements
Minerals
Meal Supplements
Specialty/Other
Total
2005
33.4%
20.5%
10.5%
8.5%
10.7%
16.4%
100.0%
2006
33.2%
20.2%
10.6%
8.2%
10.5%
17.4%
100.0%
2007
32.5%
19.9%
10.9%
8.1%
10.3%
18.4%
100.0%
2008
33.5%
18.9%
11.0%
8.1%
10.1%
18.5%
100.0%
2009
33.8%
18.7%
10.9%
8.0%
9.8%
18.7%
100.0%
2010
33.9%
17.9%
11.4%
8.0%
9.8%
19.0%
100.0%
2011
33.5%
17.6%
11.9%
7.7%
10.5%
18.9%
100.0%
2012
32.8%
17.2%
12.3%
7.4%
11.2%
19.0%
100.0%
2013
32.4%
17.3%
12.9%
7.2%
11.3%
18.9%
100.0%
2014
31.8%
17.6%
13.3%
7.2%
11.6%
18.6%
100.0%
US Dietary Supplement Market Share by Product Category, 2015e-2020e
2015e
2016e
2017e
2018e
2019e
2020e
Vitamins
31.3%
31.0%
30.6%
30.2%
29.7%
29.3%
Herbs & Botanicals
17.6%
17.5%
17.5%
17.5%
17.5%
17.5%
Sports Supplements
13.7%
14.0%
14.4%
14.8%
15.1%
15.5%
7.2%
7.2%
7.1%
7.1%
7.0%
6.9%
Meal Supplements
11.9%
12.0%
12.2%
12.3%
12.4%
12.5%
Specialty/Other
18.4%
18.3%
18.2%
18.2%
18.2%
18.3%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
Minerals
Total
US Supplement Sales by Product Category, 2000-2020e
$16,000
$14,000
$12,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
2000
2001
2002
2003
Vitamins
2004
2005
2006
Herbs/ Botanicals
2007
2008
2009
Sports Supplements
2010
2011
Minerals
2012
2013
2014
Meal Supplements
2015e
2016e
2017e
2018e
2019e
2020e
Specialty/Other
© 2015 Penton
18
2.2.3 Top Companies
Top 50 Dietary Supplement Companies in 2014
Wholesale Revenue ($mil)
Growth
Company Name
2013
2014
2014
Carlyle Group - NBTY
1,966
2,0021
2%
Pharmavite*
1,413
1,388
-2%
Perrigo*
647
683
6%
Abbott Labs/Ross Products (Ensure, EAS)
541
567
5%
GNC (contract manufacturing)*
551
531
-3%
Glanbia (Optimum Nutrition)
464
505
9%
Reckitt Benckiser (Schiff)
496
504
2%
Bayer (One A Day, Flintstones)
490
473
-4%
Schwabe NA - Nature’s Way Products (Enzymatic Therapy,
Integrative Therapeutics)
395
436
10%
Pfizer (Centrum, Caltrate)
445
418
-6%
Atrium Innovations (Garden of Life, Pure Encapsulations,
Douglas Labs)
317
354
12%
CytoSport
317
341
8%
Iovate (Hydroxycut, MuscleTech)
210
262
25%
NOW Foods
234
250
7%
Nestle (Boost, Carnation)
218
249
14%
Basic Research/ Zoller Labs
167
212
27%
International Vitamin Corporation
215
211
-2%
VitaQuest Intl*
193
203
5%
Church & Dwight (Northwest Natural Products/Nutrition
Now)
189
198
5%
Procter & Gamble (Metamucil, Align Minerals, New Chapter)
188
195
4%
Valeant Pharmaceuticals
172
184
7%
Nutraceutical International Corporation
182
178
-2%
Natural Factors Nutritional Products
161
175
9%
Standard Process
141
152
8%
Healthy Directions (Helen of Troy)
146
152
4%
Cornerstone Research and Development*
146
149
2%
Metagenics
140
148
5%
DSM
135
143
6%
Life Extension
131
139
5%
ReNew Life Formulas, Inc.
104
129
24%
Nordic Naturals
120
126
5%
Kikkoman (Country Life, Allergy Research Group)
117
122
5%
© 2015 Penton
19
Top 50 Dietary Supplement Companies in 2014
Wholesale Revenue ($mil)
Growth
Company Name
2013
2014
2014
Jarrow Formulas
119
117
-2%
Arizona Nutritional Supplements*
117
117
0%
Delavau*
104
105
1%
Twinlab
113
99
-1%
86
93
7%
115
93
-19%
S.A.N. Corp.
80
85
6%
Natural Organics (Nature’s Plus)
91
77
-15%
Natural Alternatives*
73
77
6%
Nature’s Products, Inc. (Rainbow Light, Champion Nutrition)
79
73
-7%
Bluebonnet Nutrition Corp.
75
71
-5%
Atkins Nutritionals
70
64
-8%
Threshold Enterprises Ltd. (Source Naturals, Planetary Herbals)
66
64
-4%
Matrixx Initiatives (Zicam)
60
62
4%
Universal Nutrition Corp.
53
59
12%
Vitatech International*
55
57
4%
Nexgen Pharma
54
57
5%
Similasan USA
53
56
7%
Nature’s Best (Isopure)
Kainos Capital (Slim Fast)
*Companies with a substantial portion of revenues from contract manufacturing of supplements.
Source: Nutrition Business Journal [$mil., net sales (gross sales minus any returns, discounts or allowances)]. In the top company list, company revenues listed are wholesale for supplements only (including
contract manufacturing.) rounded to the nearest $10 million, not entire company revenue. List does not
include raw material companies or firms selling primarily through the multi-level marketing channel. Some
revenues are estimates that have been compiled through information provided by company executives,
industry analysts and reputable published material. NBJ makes every effort to be accurate, but revenue
figures are not the result of audits and are not guaranteed to be accurate. Errors and omissions are unintentional. In the company universe table depicting wholesale sales, revenues for non-retailer contract
manufacturing were subtracted to avoid double counting.
2.2.4 Deals of the Year
In 2014, M&A returned in a big way as a viable corporate growth strategy. The value of announced global M&A reached $3.5 trillion
last year—an increase of approximately 47 percent—marking the strongest level of deal-making since 2007. While a large number of
multi-billion-dollar strategic transactions dominated the news, several other key trends emerged, including companies using M&A to
lower tax burdens (so-called “tax inversions”), heavy cross-border activity, a robust middle-market M&A landscape, and strong participation from both corporate acquirers and private equity.
A number of factors contributed to this increase, such as continued low interest rates and easy access to debt, strong corporate
© 2015 Penton
20
balance sheets flush with cash, an improving unemployment picture, increasing consumer confidence, and a robust capital markets
environment. But these factors have largely been in place for a while now. So what changed? Confidence.
Specifically, it was the confidence derived from a number of years of strong financial performance and broadly improving economic
conditions that signaled to management teams and boards of directors that things may have finally turned a corner and that the future
outlook is positive. This boost in confidence has, in turn, enabled companies to once again embrace M&A as a viable growth strategy.
Backed by solid fundamentals, and with growth across most all levels of the industry expected to continue, the nutrition industry
also experienced the highest levels of M&A activity in years. The NBJ’s Top 10 Deals of 2014 accounted for approximately $7.4 billion in
total transaction volume, indicating an average transaction size of more $740 million. That figure was somewhat skewed by Archer Daniel Midland’s $3 billion acquisition of WILD Flavors GmbH. But even excluding the ADM deal, average transaction size is still nearly $500
million. That signals a depth and breadth of M&A activity that the industry has rarely, if ever, experienced.
Announce Date
Acquiror
Target
Transaction Value $M
Jul-14
ADM
WILD Flavors GmbH
3,000.0
Jun-14
Treehouse
Flagstone
860.0
Sep-14
General Mills
Annie’s
820.0
Apr-14
TPG Capital
Chobani
750.0(1)
Mar-14
Balchem Corporation
SensoryEffects
567.0
June-14
Hormel
CytoSport (Muscle Milk)
450.0
Jul-14
Kroger
Vitacost.com
280.0
Jan-14
CCMP Capital / Stockton Road
Jamieson Laboratories
271.0
Mar-14
KIND Snacks
VMB Partners Minority Stake
220.0
Jun-14
Helen of Troy
Healthy Directions
195.0
Sep-14
WhiteWave
So Delicious Dairy Free
195.0
Dec-14
Pharmavite
FoodState (MegaFood)
195.0
(1) Second-lien loan with warants; converts into minority equity ownership position
“We continue to see strong interest across all channels of distribution and up and down the supply chain, and strategic interest
remains high,” says William Hood, a managing director at Houlihan Lokey who advised on three of the top deals of the year in 2014
and who has been one of the most active M&A advisors in the industry. “What is different this year is that a number of companies that
haven’t participated in the past have now entered the market, such as Pharmavite, and interest from outside the industry continues to
broaden, with companies such as Kroger and Helen of Troy making sizeable acquisitions of nutrition companies.”
With those trends in mind, here are NBJ’s Top 10 Deals of 2014.
ADM acquires WILD Flavors GmbH
On July 7, ADM announced its largest acquisition ever, the roughly $3 billion purchase of the Swiss ingredients company WILD
Flavors GmbH, one the largest global suppliers of natural ingredients to the food and beverage industries. This transaction ranks as NBJ’s
Top Deal of 2014 not only because of size but also because of the transaction’s significance in a number of key areas, all of which highlight a number of longer-term trends:
Diversification away from commodity product and price volatility: One trend that surfaced long ago but has gained momentum over the past decade is the move of raw material, mineral, and ingredient suppliers and processors away from the commodity
volatility and pricing risk associated with their core commodity products and into lower volatility, higher-value-added products. The
acquisition of WILD enables ADM—known primarily as one of the world’s largest agricultural processors of products such as corn,
soybeans, wheat, cocoa, rice and oilseeds—to make a significant move into the natural ingredients and flavors business, complementing
© 2015 Penton
21
its own specialty ingredients business by adding more than 3,000 customers and roughly $1.2 billion in revenues. The combined specialty
ingredients businesses will provide customers with higher-value-added products and solutions that are often much less volatile than
commodity-like products and is expected to generate sales of approximately $2.5 billion. That’s far short of ADM’s stated objective of $10
billion but still a bold move in the right direction.
Capturing a larger share of profit margin across the value chain: Another prevalent trend over the past few years has been
the migration of companies up the nutrition-industry value chain, not only in an effort to diversify away from the commodity volatility
and risk, as noted above but also—and perhaps more importantly—to capture significantly more of the profit margin available to companies across the value chain. By providing higher-value-added products, manufactured/branded products, and complete solutions to
customers, companies can often generate profit margins in the mid to high teens. That’s significantly more than is typically generated by
more commodity-based products, which often have profit margins in the single digits. The addition of WILD’s broad portfolio of natural
ingredients and flavors, as well as its strength in offering food and beverage companies complete flavor systems, will enable ADM to
benefit from the higher profitability associated with these types of products and likely enhance the company’s position with key customers through the offering of complete flavor solutions.
Extending into large, high-growth categories: The increasing trend of consumers choosing healthier products and lifestyles
has generated strong growth within the broader nutrition industry and boosted the size of a number of categories, such as active/sports
nutrition and healthy snacks. In order to participate in this category growth, companies have been forced to innovate and acquire. Those
that don’t see their competitive positions within the industry erode. ADM has embraced this challenge head on by acquiring a leader in
natural flavor and ingredient, with strong offerings in natural and organic food products, functional foods, and beverages—categories
that have been experiencing and are expected to continue to experience growth rates well above industry averages. The WILD acquisition thus positions ADM to benefit from these growth categories.
The WILD acquisition is in line with ADM’s strategic goal to build a world-class specialty-ingredients business and follows the
company’s formation of its ADM Foods & Ingredients Wellness group in March of 2013, the addition to management of this group and
the launch of several organic growth projects. Given the benefits of diversification, higher product and service margins, and enhanced
growth—and on such a large scale—it is easy to see why this deal tops the NBJ list in 2014.
Treehouse Foods acquires Flagstone Foods
Private label has been a key growth area for many companies. Store brands like Safeway’s O Organics, Costco’s Kirkland Signature,
Kroger’s Simple Truth, and Whole Foods’ 365 have continued to take share from the giant food companies, and other large retailers,
seeing the significant profit potential in private label, have started to enter the category. Healthy snacks is another category experiencing
double-digit growth over the past few years. So it came as no surprise when TreeHouse Foods, a leader in the private-label category and
one of the most active consolidators in the food industry, announced in June the acquisition of Flagstone Foods for $860 million. The
transaction is significant as it enabled TreeHouse to acquire the number-one company in the private label categories of trail mix and
dried fruit, adding more than $700 million in revenues in private label and healthy snacks.
General Mills acquires Annie’s
In a textbook case of a big food company purchasing one of the fastest-growing brands in natural and organic, General Mills
announced in September its $820 million acquisition of organic darling Annie’s Inc. Likely one of the most visible transactions of the
year—and an expensive one by any measure—the announcement put to rest months of speculation over who would be the ultimate
buyer of one of the hottest brands to emerge in the past decade. Annie’s, most well-known for its healthier version of boxed mac-andcheese and organic salad dressings, had been on most large food companies’ radar screen. In 2012, however, the company completed
an initial public offering and debuted as an independent public company, backed by robust sales growth, a strong competitive position,
and a good pipeline of soon-to-be-launched innovation. Annie’s brief stint as a public company was ultimately cut short by the General
Mills’ purchase, however, as the food giant added another key brand to its Small Planet Foods stable of organic brands, which includes
Cascadian Farm, Muir Glen, LARABAR and Food Should Taste Good.
TPG invests in Chobani
Rumors have been circulating for quite some time about the potential timing of a Chobani IPO. And given the size of the company—well over $1 billion in annual sales—as well as the strength of the capital markets last year, one might have guessed that 2014 was
the year for the maker of the top-selling Greek yogurt. But a 2014 IPO was not to be. On April 23, Chobani announced that it had secured
$750 million in investment from TPG Capital, one of the premier private equity firms in the US. The new capital was secured to fund
new product growth and to invest in the company’s international distribution. It came in the form of a second-lien loan with warrants.
© 2015 Penton
22
Absent any missteps, the sizeable TPG investment will likely be enough capital to get Chobani to an IPO, if it so chooses.
Balchem Corporation acquires SensoryEffects
On March 31, Balchem Corporation announced the $567 million acquisition of Performance Chemicals & Ingredients Company, a
privately held supplier of food- and beverage-ingredients systems under the SensoryEffects brand. The acquisition added $260 million
in revenues, enabling Balchem to diversify away from chemicals, animal and plant nutrition, and industrial products and further into
food and beverage, adding three key segments: flavor, cereal, and powder systems. It will also enable Balchem to benefit from selling fully
customized solutions to customers.
Hormel Foods acquires CytoSport
Protein has been one of the hottest categories in recent years, as evidenced by a number of key M&A transactions, including Premier Nutrition, Chobani, Isopure, Wisconsin Specialty Protein, Solbar, Dymatize, Milk Specialties, PowerBar, and many others. What is
interesting to note about the protein category is the strong strategic interest in these companies from a wide range of potential buyers.
The traditional food and beverage companies are no longer the key purchasers of these assets. Participants from across the food and
beverage industry are getting in on the protein feeding frenzy. The cereal-maker Post Holdings was one of the first to enter the category
in a big way with purchases of Premier Nutrition, Dymatize, and PowerBar. In July, Hormel Foods also entered the fray, announcing the
$450 million acquisition of CytoSport Holdings, the maker of the ready-to-drink protein beverage MuscleMilk. The acquisition was a
bit offbeat for Hormel, who is best known for its namesake chili and products like Spam and Dinty Moore beef stew. But it expands the
company’s product offerings in protein and offers a strong entrée into a significant growth category.
Kroger acquires Vitacost.com
In perhaps one of the year’s most interesting transactions, Kroger, known as a leader in conventional grocery, announced the $280
million acquisition of Vitacost.com, an online seller of vitamins, supplements, natural foods, and other health-related products. The deal
was small for Kroger, which has annual revenues over $100 billion, but it is significant for the company as it provides the technology
expertise and platform Kroger needed to compete with the likes of Amazon, FreshDirect, and other online home-delivery companies and
platforms. It appears that Kroger made the decision to purchase an existing platform rather than start its own from scratch.
CCMP acquires Jamieson Laboratories
Following the 2013 landmark acquisition of Atrium Innovations by Permira, January 27 brought another significant Canadian transaction: the purchase of Canada’s largest retail vitamins, minerals, and supplements (VMS) brand. After a 92-year history as a privately
owned operation, Jamieson Laboratories Ltd. announced the sale of the company to CCMP Capital Advisors, a New York-based private
equity firm, for $271 million.
Helen of Troy acquires Healthy Directions
On June 11, Helen of Troy Ltd. announced the $195 million of Healthy Directions. This marked the company’s third acquisition in
health and wellness over a four-year period but its first major foray into the vitamins, minerals, and supplements industry. The acquisition expands Helen of Troy’s revenues by 10 percent and gives it a strong foothold in the attractive and growing direct-to-consumer VMS
category. Of particular note is that Healthy Directions’ gross profit margin in 2013 was a full 30 percent higher than that of Helen of Troy,
likely one of the key attractions in the acquisition.
Whitewave acquires So Delicious
WhiteWave Foods Company, one of the top consolidators in the natural and organic industry, struck again on September 17 when
it announced the acquisition of So Delicious Dairy Free for $195 million. So Delicious is a leader in non-dairy, 100 percent plant-based,
non-GMO foods and beverages and has been around for more than 25 years. This acquisition is a strong complement for WhiteWave’s
SILK and Alpro brands and will provide the company with an additional brand in plant-based offerings.
Others to Watch
In addition to the NBJ’s Top Deals of 2014, there was a considerable amount of M&A and financing activity across the broader nutrition industry, making 2014 one of the strongest years ever. Post Holdings, Omega Protein and Snyder’s-Lance continued their transformations toward healthier offerings with the acquisitions of PowerBar ($150 million), Bioriginal ($73 million) and Late July Organic
Snacks (increased investment), respectively. Additionally, a number of key brands were acquired, including Rudi’s Organic Bakery, which
was bought by Hain Celestial for $61 million; Nature’s Best, which was acquired by KeHe Distributors for an undisclosed amount; Van’s
Natural Foods, which was gobbled up by Hillshire Farms for $165 million; and Isopure Company, which was purchased by Glanbia for
approximately $153 million.
© 2015 Penton
23
HONORABLE MENTION
Pharmavite acquires FoodState
Pharmavite’s acquisition of FoodState fell just outside of NBJ’s Top 10 list but certainly deserves an honorable mention. The transaction is significant for a number of reasons. Among them, it marks the first time Pharmavite, one of the largest manufacturers of
high-quality vitamins, minerals, and dietary supplements has entered the M&A market with a sizeable transaction—surprising given the
company’s leading industry position, the continued frothiness of the M&A market, and the fact that its parent, Otsuka Pharmaceutical
Co. Ltd., likely has very deep pockets. Additionally, the transaction is significant in that brings increasing credibility to the natural/practitioner channel of distribution and is further proof of concept for whole foods as vitamins.
In acquiring FoodState, Pharmavite will add the MegaFood and Innate Response whole-food supplement brands to its portfolio.
The company’s Nature Made brand ranks as the number-one Pharmacist-recommended brand across eight key vitamin and supplement
segments.
Rodney J. Clark is managing partner and founder of Aspect Consumer Partners, an M&A, strategic and corporate finance advisory
boutique focused on the healthy segments of food, beverage, beauty and consumer products. Email him at [email protected].
© 2015 Penton
24
2.2.5 Top Supplements
Top 100 Dietary Supplements by US Sales, 2008-2014
2008
2009
2010
2011
2012
2013
2014 14 growth
MultiVitamins
4,684
4,799
4,949
5,164
5,364
5,639
5,664
Sports Supplements
2,793
2,947
3,218
3,579
3,999
4,517
4,872
Meal Supplements
2,577
2,658
2,754
3,166
3,635
3,938
4,250
B Vitamins
1,137
1,218
1,316
1,460
1,637
1,784
1,877
Vitamin K, H, Others
879
1,053
1,112
1,180
1,283
1,405
1,532
Probiotics
425
527
626
760
968
1,195
1,365
Homeopathics
795
872
900
981
1,037
1,138
1,196
Calcium
1,120
1,183
1,229
1,217
1,200
1,174
1,150
Fish/Animal Oils
833
976
1,103
1,169
1,234
1,168
1,135
Vitamin C
900
969
966
1,000
998
1,031
1,041
Vitamin D
234
425
551
605
652
710
767
Glucosamine/Chondroitin
942
911
878
830
813
780
740
Magnesium
309
341
379
435
502
583
680
CoQ10
436
450
480
519
558
607
607
Vitamin A/Carotenoids
333
334
345
377
396
426
455
Melatonin
111
133
159
202
259
324
378
Iron
275
302
316
324
332
344
368
Vitamin E
361
336
337
329
314
320
320
Plant Oils
253
254
268
278
292
309
312
Digestive Enzymes
201
204
209
217
228
243
251
Noni Juice
271
272
263
269
245
225
229
Mangosteen Juice
205
205
192
194
184
173
176
Turmeric
43
59
68
83
108
135
163
Cranberry
73
87
97
113
126
141
149
0
0
98
101
107
128
148
Saw Palmetto
123
124
125
125
134
145
145
Bee Products
104
98
97
102
113
130
140
Echinacea
124
132
115
117
124
139
140
Green Tea
135
156
145
151
151
129
135
Milk Thistle
95
101
98
108
115
126
131
SAMe
111
123
122
123
124
127
125
Goji Juice
142
127
114
108
101
108
119
Fruit & Vegetable Supplements
48
75
77
87
97
109
117
Psyllium
88
103
114
121
118
107
116
Multi-Herbs
© 2015 Penton
0.4%
7.9%
7.9%
5.2%
9.0%
14.2%
5.1%
-2.0%
-2.8%
1.0%
8.1%
-5.1%
16.7%
0.1%
6.7%
16.7%
6.8%
0.1%
0.8%
3.1%
1.8%
1.5%
21.0%
5.6%
15.3%
0.3%
7.9%
0.8%
4.3%
4.1%
-1.0%
10.4%
6.9%
7.7%
25
2008
2009
2010
2011
2012
2013
2014 14 growth
5 HTP
90
92
93
96
100
104
109
Chromium
99
96
86
89
94
98
108
Zinc
76
79
77
85
94
102
108
Garlic
124
112
107
104
109
108
107
Maca
69
75
82
79
90
104
106
Potassium
81
82
85
91
95
100
104
Green Foods
75
74
77
83
90
99
103
Acai
82
182
188
151
105
101
97
Valerian
61
68
69
77
90
92
95
Ginkgo Biloba
99
95
90
90
94
93
92
Aloe
59
61
64
73
87
89
91
Ayurvedic Herbs
39
49
53
58
73
83
88
Ginseng
84
83
77
80
79
83
82
MSM
104
94
86
84
83
81
80
DHEA
50
55
56
62
68
77
79
Garcinia
29
28
27
40
42
74
75
Stevia
62
63
68
70
73
73
75
Elderberry
45
57
52
54
57
70
73
Selenium
61
57
54
54
59
65
72
Ginger
46
49
52
55
60
64
68
Fenugreek
37
38
42
46
52
59
62
Black Cohosh Root
50
51
54
56
55
59
60
St. John’s wort
55
57
56
54
54
56
56
Other Chinese Herbs
31
34
35
38
43
49
51
Olive Leaf Extract
31
35
40
42
46
50
50
Red Yeast Rice
31
35
39
39
41
39
44
Astragalus
29
37
33
38
41
45
44
Cascara sagrada
51
57
55
49
44
42
44
0
0
38
36
37
36
44
30
33
30
32
35
42
43
Resveratrol
Oregano
Cinnamon
0
0
26
30
32
35
40
Grapefruit Seed Extract
40
37
39
37
36
39
40
Kava Kava
19
21
22
32
35
38
38
Peppermint and other mints
17
21
24
30
32
36
38
Senna
38
34
34
41
43
37
38
Horny Goat Weed
26
29
31
36
35
35
37
© 2015 Penton
4.8%
9.9%
5.5%
-1.3%
2.3%
4.3%
4.0%
-4.1%
2.4%
-1.2%
2.8%
5.8%
-0.7%
-1.7%
2.4%
0.4%
1.5%
3.7%
10.7%
6.4%
5.5%
1.8%
0.7%
3.9%
1.4%
13.0%
-1.1%
5.0%
20.8%
2.0%
14.7%
2.2%
2.2%
6.5%
2.8%
6.1%
26
2008
2009
2010
2011
2012
2013
2014 14 growth
Gelatin
45
42
39
38
37
37
36
Evening Primrose
31
31
34
34
35
38
36
Bitter Melon (appears we incorrectly
were calling this Citrus Aurantium/
Bitter Orange)
20
21
23
24
28
33
33
Hawthorne
27
28
29
30
33
32
33
Goldenseal
31
31
28
30
31
33
32
Mushrooms
24
25
26
29
29
32
32
Cayenne
21
25
25
28
27
30
31
Soy
50
47
45
50
39
34
28
Licorice Root
19
19
20
23
23
25
26
Bilberry
31
29
28
27
27
26
24
Grape Seed Extract
25
27
24
25
24
26
23
Tribulus Terrestris
14
15
16
17
22
23
23
Pau d’arco
22
21
21
22
22
23
23
Slippery Elm
22
23
21
20
20
21
22
Rosehips
22
20
22
25
22
20
21
Pycnogenol/ Pine bark extract
11
11
12
12
14
18
19
Vitex (chaste tree)
13
13
14
14
15
18
18
Chamomile
15
14
17
18
16
17
18
Willowbark
9
9
14
16
18
16
17
Feverfew
14
13
14
15
17
17
16
Lycopene
23
19
17
15
16
15
15
9
13
12
12
14
14
15
Yohimbe
19
20
19
19
17
15
14
Gymnema Sylvestre
10
11
12
13
13
14
13
Papaya
11
11
12
13
11
13
13
Cat’s claw
12
11
13
14
13
13
12
Guarana
26
16
16
14
12
13
12
Horsetail/Silica
1
2
4
6
13
11
11
Spirulina
6
6
6
8
9
11
11
14
13
11
13
12
12
11
23,674
25,204
26,550
28,431
30,484
32,661
34,171
Hops
Horse chestnut
Top 100
© 2015 Penton
-1.4%
-3.1%
0.0%
2.2%
-4.0%
-0.6%
4.4%
-15.9%
3.6%
-6.9%
-11.8%
0.1%
-3.9%
5.0%
2.7%
3.5%
0.4%
7.1%
5.1%
-5.1%
-0.3%
2.6%
-9.0%
-2.0%
3.2%
-4.3%
-7.2%
5.4%
5.3%
-8.8%
4.6%
27
2.2.6 Channel Sales, Growth, and Forecast
US Dietary Supplement Sales by Channel, 2004-2014
Natural & Specialty
Mass Market
Mail/DRTV, Radio
Multi-Level/
Network
Practitioner
Internet
Total
2004
7,284
6,167
1,255
2005
7,725
6,104
1,289
2006
8,245
6,277
1,334
2007
8,710
6,657
1,370
2008
9,379
7,182
1,393
2009
9,843
7,952
1,488
2010
10,301
8,351
1,566
2011
10,969
8,802
1,632
2012
11,756
9,283
1,701
2013
12,729
9,863
1,770
2014
13,480
10,087
1,835
3,863
1,454
431
20,452
4,193
1,552
538
21,401
4,392
1,681
640
22,568
4,541
1,844
795
23,918
4,581
1,926
998
25,458
4,454
2,100
1,162
26,999
4,412
2,245
1,332
28,208
4,811
2,454
1,528
30,196
5,267
2,687
1,765
32,458
5,569
2,953
2,016
34,899
5,862
3,177
2,251
36,691
US Dietary Supplement Sales by Channel, 2015e-2020e
2015e
2016e
2017e
2018e
2019e
2020e
Natural & Specialty
14,316
15,241
16,266
17,376
18,576
19,887
Mass Market
10,302
10,698
11,196
11,783
12,428
13,125
Mail/DRTV, Radio
1,904
1,977
2,053
2,130
2,212
2,299
Multi-Level/Network
6,175
6,489
6,837
7,210
7,574
7,929
Practitioner
3,401
3,635
3,888
4,171
4,465
4,771
Internet
2,500
2,763
3,039
3,336
3,658
4,009
38,598
40,803
43,280
46,006
48,913
52,020
2013
Market
Share
36.5%
28.3%
5.1%
16.0%
8.5%
5.8%
100.0%
2014
Market
Share
36.7%
27.5%
5.0%
16.0%
8.7%
6.1%
100.0%
Total
US Dietary Supplement Sales and Growth by Channel, 2012-2014
Natural & Specialty
Mass Market
Mail/DRTV, Radio
Multi-Level/Network
Practitioner
Internet
Total
© 2015 Penton
2012
11,756
9,283
1,701
5,267
2,687
1,765
32,458
2013
12,729
9,863
1,770
5,569
2,953
2,016
34,899
2014
13,480
10,087
1,835
5,862
3,177
2,251
36,691
2013
Growth
8.3%
6.2%
4.1%
5.7%
9.9%
14.2%
7.5%
2014
Growth
5.9%
2.3%
3.7%
5.3%
7.6%
11.7%
5.1%
2012
Market
Share
36.2%
28.6%
5.2%
16.2%
8.3%
5.4%
100.0%
28
Table of Contents
3. Consumer
Survey
© 2015 Penton
29
CONSUMER SURVEY
3.1 Consumer Survey
Who is the Core Supplement User?
In troubled times, any industry would do well to focus on its core values and—by extension—its core consumers. Periods of healthy
growth offer an opportunity to expand the circle, but in times of crisis, as less dedicated consumers drop out of the picture and the circle
shrinks, everything comes back to the core. Brands who lose sight of that have nothing to fall back on.
The supplement industry is clearly in troubled times. From the New York Attorney General investigation to the Dr. Oz implosion to
repeated studies calling supplement efficacy into question to a growing consumer sentiment that a healthy diet on its own will supply all
essential nutrients, the supplement industry is being battered.
With that in mind, NBJ and the NEXT team set out to define and identify the core supplement user (CSU), with the goal of providing
insights and context that individual brands and industry groups can use to strengthen their positions, even in these troubled times. We
used interviews with industry insiders, along with NBJ’s own data and research, to develop screening criteria to create a representative
group of CSUs. We then conducted in-depth interviews to explore the values and beliefs that drive their behaviors with regard not just to
supplements but health and wellness in general.
What we found: CSUs are committed to supplements as part of their lifestyles, regardless of negative media stories and journal studies. That the commitment stems from three main things: A dedication to holistic wellness, intellectual curiosity, and a sense of personal
responsibility for their own health needs.
These consumers focus heavily on food choices. But while they feel strongly that their healthy diets meet their nutritional needs,
they still rely on supplements as key parts of their overall approach to health and wellness. The main benefits for them are prevention,
nutritional enhancement, and avoidance of prescription medication.
Our research also suggests that, for these users, supplements are a belief-driven industry. CSUs are independent thinkers who value
personal experiences over media stories and journal studies. The key question driving their health and wellness decisions is not what
others are saying but, rather, “How does this make me feel?”
Defining the Core Supplement User’s Values
Holistic
Wellness
Core
User
Intellectual
Curiosity
© 2015 Penton
Personal
Responsibility
30
CONSUMER SURVEY
Holistic Wellness
• View that food is nutrition
• Focus on addressing root of health conditions, not symptoms
“The core user is a conscious consumer who has a healthy lifestyle that focuses on local, organic, and non-GMO food to ensure they are getting
the proper nutrition.”—Debra Stark, owner, Debra’s Natural Gourmet
Intellectual Curiosity
• Drive to make informed decisions
• Lack of faith in mainstream trends/marketing/news
• A belief that they do not trust anyone blindly
“This consumer values intelligence. She has an appreciation for knowledge and science and does her own research.”—Robert Craven, CEO,
MegaFood
Personal Responsibility
• Desire to be less reliant on medical intervention/pharmaceuticals
• Belief that a preventative approach will require less invasive medical treatments
• Belief that they are prolonging their lives
“They want to be empowered to take care of their own healthcare. They are focused on prevention.”—Don Summerfield, co-founder, Pharmaca
Identifying the Core Supplement User
Motivations
Major medical events are often key catalysts for respondents to change their lifestyles. “I was in a bad car accident that
caused a spinal cord injury, and I’ve been suffering from migraines since. After numerous bad experiences at the doctor, I tried an integrated-medicine doctor. He recommended I try an anti-inflammation diet…I no longer have to take migraine medicine since making
major changes to my diet and lifestyle.”—Kerra
Personal experiences drive CSUs, even when the resulting lifestyle choices make for difficult social situations. “There are
a lot of negatives. It can be socially isolating because people don’t understand it or don’t believe it. However, I know how much better I feel,
which makes it worth it.”—Melissa
Beliefs
Intuition drives food choices. “We aren’t vegan or vegetarian; we are balanced. We eat what makes us feel good and our bodies
feel good.”—Dawn
No one type of diet defines the CSU. Respondents cited myriad diets, including vegan, vegetarian, raw paleo, gluten-free, dairyfree, etc.
CSUs stress the nutritional importance of buying organic, local, and non-GMO products. Respondents stated that they
prefer these types of products because they are more nutritious and have the added benefit of being environmentally friendly.
Mind and Body
They believe physical activity promotes mental wellbeing. Respondents stated that they thought it was important to get up
and move daily, with many claiming that exercise was the one thing they did for themselves.
Mindfulness and positive attitude are essential. “For me, wellness encompasses so many different things. There is the physical,
the food and diet, spiritual, and your mindset and outlook on life. I think so many people don’t realize that you can be physically active
and eat healthy, but without the right mindset, you might not be healthy.”—Julie
© 2015 Penton
31
CONSUMER SURVEY
Traditional Medicine
CSUs believe traditional medicine and doctors are for emergency care—not for disease management. Respondents said
traditional doctors are good for things like broken bones but that they do not understand how to prevent or manage disease. “Don’t get
me wrong: Doctors have a purpose. But they are not the place I go first. I think doctors are really just there for when you need them.”—Indira
They see prescription drugs as a last resort, not a first line of defense. “The majority of doctors aren’t educated in natural
methods and turn to drugs first, versus last. I have a friend who is 60 and has diabetes. Her doctor put her on medicine, then gave her
injections. She just had to have surgery to amputate her toes. None of that would have been necessary if he would have recommended a
healthier diet.”—Vicky
They believe a healthy lifestyle is key to disease prevention. “I think if your body is healthy, it can fight off any disease.”—Emily
CSUs trust personal experiences over medical advice. They believe that they know their bodies better than any medical professional. “I listen to my body. You have to trust your own instincts, because there is so much controversial information out there.”—Emily
Their information approach: Personal experience + advice + research. CSUs are constantly seeking out new information and
believe they are their own best health advocates. “I read everything and never trust one source. I want to be well versed about health and
wellness.”—Kerra
CSUs like to share their knowledge and lead their friends and families toward healthier lifestyles. They believe that their
personal experiences plus their own research makes them experiential health and wellness experts.
Supplements
CSUs see supplements as preventative insurance. Though respondents view food as the most important source of nutrition,
they see supplements as essential for preventing illness. Supplements they seek out: Multivitamins, Vitamin D, Omegas.
CSUs who follow vegan or vegetarian diets, in particular, believe they need to augment their diets with vitamins and
minerals. Supplements they seek out: B12, enzymes.
Some respondents turn to supplements when they are feeling under the weather or want to avoid prescription medications. Supplements they seek out: Herbs and botanicals, essential oils, zinc. “I think essential oils are really important. I have a bunch
of them in my medicine cabinet, and they have been critical in getting me off prescriptions for my migraines and even helped get my
daughter off antidepressants.”—Dawn
CSUs are aware of quality issues in the supplement industry. Respondents seek out whole foods and quality supplements that
do not contain fillers or additives. “Supplements can’t be a solution to a crappy diet. You need to eat a whole-food, minimally processed
diet for the supplements to be effective. Supplements aren’t going to change the fact that you’re eating fast food and not going to the gym.
And cheap, low-quality supplements are a waste of money.”—Deborah
CSUs value their personal experiences over news stories and journal studies. “When I hear negative press, I start doing my
own research and apply some common sense. Sometimes you just need to test to see what you believe and how it makes you feel.”—Julie
These users are the foundation of the nutritional supplement industry. Their sense of themselves as independent thinkers is key to
their sense of self. For them, personal experience is paramount, but they back that up with research from sources they trust. Those tend
not to be traditional media and science outlets. CSUs look to sources in the holistic wellness space and value the sense of discovery that
comes from seeking out this information.
For Core Supplement Users, supplementation is not an isolated act but an essential component of a holistic approach that focuses
on food, activity, and supplements to maintain health and avoid reliance on the traditional healthcare industry.
To best reach and serve these consumers, brands and industry groups need to think about both their messages and how they get
them out. Messaging around preventative healthcare and especially around how good it feels to be healthy will have traction with CSUs,
as will language around fulfillment and pride in taking personal responsibility for one’s own health. “This is good for you,” won’t have as
much traction as “You know what’s good for you.”
© 2015 Penton
32
CONSUMER SURVEY
Given CSU’s strong and growing belief in the power of a healthy diet, supplements should be positioned not as an end or even as a
separate category but as an essential component of a three-pronged approach to wellness that includes supplements, diet, and exercise.
In terms of getting those messages out there, it’s important to remember that CSUs value discovery. Telling these consumers what
you want them to hear won’t have nearly the same traction as putting a message out there in ways that make it easy for them to discover
it. Think: Social media and blogs and practitioners in the holistic-wellness space.
As the supplement industry looks to find its center, the core supplement user is there to help.
3.2 Consumer Survey
Trust has long been the foundation of the supplement industry. Consumers don’t feel immediate benefit from most supplements
and instead rely on a faith that it will all be worth it in the end.
Right now, NBJ sees indications that the trust may be shifting away from supplements and toward food.
Bad news about supplements arrives simultaneously with a rising awareness of organic foods, a dynamic that undoubtedly raises
questions for consumers who had long purchased supplements as a hedge against the lack of nutrition in processed foods. Food gains at
the expense of supplements. Trust in supplements may still be the issue but what happens if it simply moves to food? That kind of trust
could be hard to win back.
Food is growing faster than supplements. With the trust dynamic indicated in the NBJ consumer survey, it’s hard to see that changing soon.
Total Food vs. Natural and Organic Food and Supplements & Growth
18.0%
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
2000
2001
2002
2003
2004
2005
2006
2007
Total Food
2008
2009
2010
2011
Natural and Organic Food
2012
2013
2014 2015e 2016e 2017e 2018e 2019e 2020e
Supplements
The importance of food cannot be questioned and messages like “You are what you eat” and “Good health begins with good food”
reflect ancient and ubiquitous beliefs. For years, however, supplements were seen as a complement to a good diet. Both were important.
Both were trusted. Supplements can no longer rely on that relationship. An NBJ survey reveals that food now ranks as the number one
reason that people stop taking supplements. People now put their faith in food over supplements, rather than food with supplements.
© 2015 Penton
33
CONSUMER SURVEY
US Sports Nutrition Sales by Channel, 2014
I believe that I get enough nutrition from my diet
34.9%
All other reasons selected to quit
65.1%
Nutrition Business Journal survey conducted May, 2015
Not surprisingly, the most popular supplements have the most to lose. Core supplement users show more faith than the casual consumers and the supplements most commonly purchased by the less committed shoppers show the biggest drops. Multi and single letter
vitamins were the most likely supplements to see reduced use, followed by probiotics, whey protein, minerals and omega-3s.
That loss of faith in supplements presents a daunting question: Can the supplement industry convince former users that food isn’t
meeting their nutrition needs at the same time that the Whole Foods Market effect drops more an more consumer confidence into their
grocery carts? NBJ survey results present a nuanced picture of a difficult task. The target audience makes all the difference.
© 2015 Penton
34
CONSUMER SURVEY
Core Natural Consumer Trust of the Supplements Industry
I trust supplements a lot less
3.8%
I trust supplements much more
5.9%
I trust supplements a bit less
15.7%
I trust supplements a bit more
21.3%
Unchanged
53.3%
Nutrition Business Journal survey conducted May, 2015
Among core natural consumers organic and non-GMO foods averaged a score of 8.7 and 8.1 respectively on a scale of 1 to 10, with
supplements finishing at a 7.3 score–virtually tying with essential oils. While that score might imply hope, when we move the focus to
general consumers, the picture darkens.
For general consumers, supplements finish near the bottom for most trusted category, below even pharmaceuticals. Ranking ahead
of weight-loss products on trust is surely not something to brag about.
© 2015 Penton
35
CONSUMER SURVEY
General Consumer Trust of the Supplement Industry
I have always trusted supplements fully
9.1%
I have never trusted supplements
31.4%
I still trust supplements but slightly less
5.8%
I trust supplements more
7.6%
I no longer trust supplements
5.9%
I trust supplements about the same
30.5%
I trust supplements less
9.6%
Nutrition
Business
Journal Survey
Nutrition Business
Journal
Survey Conducted
May, 2015Conducted May, 2015
The lack of faith in supplements, coupled with organic and non-GMO food being clearly the most trusted categories for both
consumer groups, suggests little profit in targeting food as the culprit in bad nutrition. One answer, instead, appears to be presenting a
supplement as something close to food. Whole-food supplements have been lapping growth rates for traditional supplements. Though
the size of the whole foods market is small, and the price point much higher, that success cannot be ignored. Moving closer to food may
be a key tactic in holding on to consumers, or even bringing them back.
© 2015 Penton
36
CONSUMER SURVEY
Whole Food vs. Total Supplement Growth, 2010-2018e
18.0%
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
2010
2011
2012
2013
Whole food
2014
2015e
2016e
2017e
2018e
Total supplements
Specialty supplements and herbs and botanicals are the few areas where supplements might find success differentiating from foods.
The product benefits here are harder, or impossible to find in food. However, the media’s tendency to highlight negative news and its
ability to control the message makes this difficult, especially in the general consumer group.
As consumers put more and more faith in food, many are undoubtedly asking whether they need supplements at all. According to
research detailed in the previous article on “core supplement users,” it appears that consumers who choose supplements do so with specific conditions or a consistent belief that their nutrition needs are not being met by food. Vegans, for instance, may need vitamin B12.
Others see supplement as an insurance policy, providing whatever nutrients they might be missing. It may be difficult to separate falling
trust in supplements from increasing confidence in food as complete nutrition, but it is not a challenge the industry can afford to ignore.
Which Statement Best Reflects How You Seek Nutrition Information?
General: Nutrition is complicated. I consult multiple sources.
General: Nutrition should be left to the experts
Core: Nutrition is complicated. I consult multiple sources.
Core: Nutrition should be left to the experts
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
Source: Nutrition Business Journal survey conducted June, 2015. Percentage of respondents who fully endorsed sentiment shown.
© 2015 Penton
37
CONSUMER SURVEY
Which Statement Best Reflects Your Belief About RX Drugs and Medical Treatments?
General: RX drugs and medical treatments are a last resort in proactive
disease management
General: Rx drugs are critical to proactive health and disease
management
Core: RX drugs and medical treatments are a last resort in proactive
disease management
Core: Rx drugs are critical to proactive health and disease
management
0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% 45.00%
Which Statement Best Reflects Your Belief About Health, Food and Nutrition
General: Illness can be solved or prevented through foods
General: Medical Science has improved the lives of people
Core: Illness can be solved or prevented through foods
Core: Medical Science has improved the lives of people
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
© 2015 Penton
38
CONSUMER SURVEY
3.3 NEXT Trend Data
NEXT Trend provides proprietary pre-shelf natural products data, future trend insights, a consumer segmentation, an innovation
lab, custom research and extensive industry expertise that helps companies quickly recognize and act on emerging, high-growth market
opportunities.
NEXT Trend assists consumer packaged goods companies, retailers, suppliers, distributors and investment firms identify key
market drivers; predict which products and ingredients are poised for widespread adoption; develop targeted, localized go-to-market
strategies; and minimize risk and accelerate speed to market with a fast, affordable, early product concept filter.
NEXT Trend’s exclusive pre-shelf data includes 35+ top trends, 70,000+ products, 2,000+ ingredients and attributes, and 1,000+
product categories.
Diet and Nutrition Products Categories at Expo West 2015 by Category
% UPCS EW’15
Specialty Formula Supplements
31%
Snack, Energy & Granola Bars
15%
Energy, Protein & Muscle Recovery Drinks
10%
Digestive & Fiber Supplements
8%
Herbal Supplements
8%
Vitamins
5%
Homeopathy
5%
Green Supplements
3%
Fatty Acid Supplements
2%
Antioxident Supplements
1%
Other
12%
Source: NEXT Trend Database
© 2015 Penton
39
CONSUMER SURVEY
TOP 10 Certifications in the Diet and Nutrition Aisle
Organic
Kosher
Gluten Free
Non GMO
Vegan
Religious
Sustainability
Vegetarian
Specialty
Humane
31%
15%
10%
85
8%
5%
5%
3%
2%
1%
TOP 10 Certifications by Growth
Religious
Natural
Specialty
Sustainability
Humane
Vegan
Kosher
Non GMO
Glycemic
Vegetarian
% Growth
261%
72%
56%
46%
36%
24%
12%
10%
7%
5%
© 2015 Penton
40
CONSUMER SURVEY
TOP 10 Marketing Claims in Diet and Nutrition Aisle
Gluten Free
49%
Natural
Special Diets
Non GMO
Allergen Free
Organic
Additives
Made in USA
Dairy Free
Environmental
44%
33%
30%
26%
23%
20%
20%
18%
17%
TOP 10 Health Claims in the Diet and Nutrition Aisle
Digestion
Minerals
Protein
Fiber
Vitamin
Energy
Low Fat
Immune
Sodium
Heart
37%
20%
18%
18%
17%
10%
9%
7%
5%
2%
TOP 10 Health Claims by Growth
Brain
Energy
Inflammation
Diabetic
Immune
Joint
Digest
Heart
Protein
Plant Sterols
% Growth
187%
135%
132%
92%
72%
61%
51%
47%
27%
11%
© 2015 Penton
41
Table of Contents
4. Vitamins
© 2015 Penton
42
VITAMINS
4.1 Overview
Supplement makers have much to worry about from a skeptical public—as seen in the NBJ Consumer Survey chapter, trust in supplements appears precarious—but no corner of the industry is set to take a harder hit than vitamins. Weighted heavily toward the casual
end of the consumer spectrum, the letter vitamins cannot depend on the faith of the core user. Indeed, trust in supplements among the
general public trends far lower than what we found in core natural buyers.
Not surprisingly, vitamins suffered heavily in the barrage of negative media the industry has seen over the past several years. The
Annals of Internal Medicine published the much-publicized “Stop Wasting Money on Vitamin and Mineral Supplements” piece in
December of 2013 and the growth rate for the market fell by more than half, from 6.3 percent to 3 percent. The total supplement market
also slowed, but by much less, dropping to 5.1 percent, but with vitamins accounting for nearly a third of all supplement sales, the category represents a large piece of that decline. Multivitamins in particular showed a stunning drop in growth. In 2013, multivitamin sales
climbed 6.5 percent. The next year, that growth plummeted to .4 percent.
There are few signs of hope in the numbers. NBJ estimates suggest growth will largely remain trapped in the 5 percent range through
the end of the decade. However, just as few could have predicted the Annals of Internal Medicine headline, it is still possible that positive
media attention could sway sentiment in the other direction.
Does nature-identical fit on the clean label?
There are three big open secrets in the natural products industry. For one, consumers don’t even consider the fact vitamins might
not be natural. After all, vitamins are substances that the body needs for survival but that it cannot make on its own and that must thus
be obtained through diet. They’re essential, so they must be natural, right? Nope. As any industry insiders will attest, most vitamins are
synthetically manufactured.
Here’s another one: “Natural” is such a compelling phrase that ingredient suppliers routinely characterize their synthetically produced nutritional bioactives as “nature-identical.” This means that these substances are, from a molecular point of view, exactly the same
as if they were derived from a natural source.
That sounds great, except that sometimes the natural alternatives contain other ingredients and cofactors that might deliver additional benefit. Astaxanthin is one such example. The natural version is a carotenoid cocktail, whereas the nature-identical source is pure
astaxanthin. All of the research showing human benefit has been conducted on the natural complex, whereas most of the astaxanthin
used to color farmed salmon is the nature-identical version. Who’s to bless and who’s to blame?
Vitamins slip under the radar here: Nobody refers to them as nature-identical even though they are similarly synthesized.
This matters because, as words and definitions in the food industry shift, lawyers are lining up to take advantage of the confusion. In
this age of transparency, it’s becoming more and more important to agree on baseline definitions.
© 2015 Penton
43
VITAMINS
US Vitamin Sales and Growth, 2000-2020e
12%
$16,000
$14,000
10%
$12,000
8%
$10,000
6%
$8,000
$6,000
4%
$4,000
2%
$2,000
0%
$0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015e 2016e 2017e 2018e 2019e 2020e
Sales
Growth
War games
In one notable recent case, suppliers of natural astaxanthin, who create
cade to point out how different the various sources are,” says Oran Ayalon, PhD,
the Dr. Oz-annointed blockbuster by growing algae in open-sunlight
ponds or sometimes tubes, banded together against DSM when the world’s
largest supplier introduced a “nature-identical” astaxanthin source. The
director of R&D at Algatechnologies, one of three suppliers that formed NAXA.
resulting group, Natural Algae Astaxanthin Association (NAXA), formed in
January 2014.
forms, from a consumer perspective, it may all simply come down to what
each ingredient looks like on a product label. As there is no law requiring that
a manufacturer must state how each ingredient is produced, it will be up to
the individual brand holder to decide just how transparent this product should
really be. And, more than likely, that brand holder will have to hold its breath a
While most astaxanthin comes from microalgae, some comes from phaffia
yeast. “The problem with this source is that the yeast produces very small quantities of astaxanthin, so the producers genetically mutate the yeast to produce
more,” says Bob Capelli, VP of sales at astaxanthin supplier and manufacturer
Cyanotech. “This process doesn’t seem very natural.”
And that’s a problem within the so-called natural astaxanthin world. When
DSM introduced its nature-identical astaxanthin into the human nutrition market after 25 years in aquaculture, it had the effect of uniting the natural crowd.
While the two sides bicker over physiological benefit and safety of their two
little bit, in the hopes that consumers will either be blasé about source or not so
keen about transparency.
It’s like the old saying: You can be only two out of three of cheap, good or fast.
You can make it cheap and good but it won’t come fast, or you can make it good
and fast but it won’t be cheap. So maybe with astaxanthin, for example, it can be
good and cheap but it won’t be natural. If it works, will anybody really care?
“With the recent introduction of synthetic astaxanthin made from petrochemicals, which is being marketed as ‘nature identical,’ it has become very important
for the astaxanthin producers who have developed the market over the last de-
© 2015 Penton
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VITAMINS
The problem with natural
The Organic and Natural Health Association (ONHA) is a recently formed group comprising industry veterans brought together to
define the term “natural.” While the group says that consumer buy-in is paramount—which would suggest a drive toward clarity—it has
nevertheless suggested that “natural” has room for “nature-identical.” The reasoning, says Michael Lelah, chief research scientist with Mercola, is that though most vitamins are synthetically manufactured, they have the exact same chemical forms as their natural counterparts.
“Perhaps there’s some expandability in how we define those particular vitamins,” Lelah says. “There are ingredients that may have
the same chemical formula but a different chemical structure, and now you’re going outside the area of natural.”
More provocatively, ONHA members have suggested that the standard for a natural definition could change based on the quantity
of a nutrient in a product. Like Lelah, ONHA President Todd Harrison, a Washington, D.C., attorney, is open to shifting the definition
based on the category, since, for example, dietary supplements and cosmetics are used in far smaller quantities than food products.
“Big and small companies need an honest discussion about what’s natural,” Harrison says. “What’s natural for food may be different for dietary supplements, and that may be different for cosmetics. All of these have differences. A ‘minimally processed’ definition of
natural will rule out every supplement. It’s transparency. All you’re asking for is transparency.”
And that—transparency—brings us to the third dark secret of the supplements industry, especially as it relates to China. In a
1,000-person survey by the United Natural Products Alliance and Functional Ingredients magazine, more than 70 percent of consumers
said they believed that supplement ingredients were sourced in the U.S. And a similar number said that if they ever learned that their
supplement ingredients were sourced from China, they would change their buying habits.
Of course, the truth is that China actually supplies more than two-thirds of supplement ingredients in the U.S. The industry likes to
push the idea that “It’s not where it’s made, but how it’s made,” and that pablum might satisfy responsible industry members, but it’s too
nuanced an argument to change the reflexive responses of the typical American consumer.
The “natural” term itself has been run over so many times by marketing vehicles that it is on the verge of meaninglessness. And the
industry’s semantic games don’t seem to help. As one commenter on newhope360.com said about ONHA’s efforts to have different definitions of “natural” for different categories of ingredients: “If you want consumer buy-in, offer a standard that reckons with whether products
are actually sourced and produced naturally. Shoppers are asking for transparency and quality standards. In the face of that, exceptions for
nature-identical synthetic supplements, and weaker standards for things we ingest in smaller quantities, are a little offensive.”
Clean label sounds appealing
Might nature-identical, bio-identical ingredients thread the needle and satisfy label-reading consumers’ burgeoning search for the
elusive “clean-label” ingredients?
From a consumer perspective, “clean label” simply means simplicity and transparency—fewer ingredients overall and none that
sound like chemicals. It is a direct pushback on the food-science movement that has characterized America since World War II, and it’s
gaining momentum.
“This trend wasn’t here last year,” says Len Zapalowski, CEO of Mazza Innovation, which produces technology for non-hexane botanical extracts. “Something has changed in the last 12 months. The environmental story is getting more important. It’s changing peoples’
behaviors.”
Moves toward transparency and clean labels have given rise to such post-modern conceits as “whole-food supplements”—vitamins
and the like derived directly from whole-food sources, such as vitamin C from organic oranges, as opposed to synthetically produced in a
facility in China. Transparency has also driven the “Just Label It” campaign in various states to mandate the labeling of genetically engineered food products.
Though “clean label” remains without an official definition, global ingredient supplier Ingredion commissioned a number of focus
groups, shopping visits, and expert interviews in the UK, US and Germany to at least narrow things down. Its research revealed three consumer expectations around clean label:
• Additive free (so food makers should remove or replace food additives)
• Simple ingredient lists
• Minimal processing
© 2015 Penton
45
VITAMINS
The question then arises over whether nature-identical ingredients have a place within the clean-label world. Synthetic manufacturers like BASF tout their sustainability efforts. And nature-identical ingredients are, if nothing else, elegantly sustainable. So the answer, for
now, seems to be, Why not? If there’s wiggle room with vitamins, why wouldn’t there be with astaxanthin or any other ingredient manufactured via synthetic or natural extraction processes?
Caveat: In the moving target of today’s transparency movement, there may come a time when a company needs to justify its every
ingredient choice so bloggers—responsible or otherwise—can investigate it thoroughly. But so far, there has been no big reveal on vitamins, no blockbuster tirade by a health avenger, about the non-labeled manufactured methodology of an ingredient – although the food
processing methods of organic as well as GMO labeling surely comes closest.
NBJ Bottom Line: Nature-identical ingredients scorecard: Sustainable? Yes. Transparent? Not really. Clean-label? Maybe. Natural? Is
that even a word worth its salt anymore?
US Vitamin Sales vs Total Supplement Sales, 2004 - 2014
Vitamins
Growth
Total Supplements
Growth
Vitamins as % of
Total Supplements
2004
2005
2006
2007
2008
2009
2010
2011
2012
6,887
7,148
7,485
7,778
8,528
9,133
9,576
10,115
10,644
3.5%
3.8%
4.7%
3.9%
9.6%
7.1%
4.8%
5.6%
5.2%
20,453
21,399
22,567
23,918
25,457
27,000
28,209
30,198
32,453
3.1%
4.6%
5.5%
6.0%
6.4%
6.1%
4.5%
7.0%
7.5%
33.7%
33.4%
33.2%
32.5%
33.5%
33.8%
33.9%
33.5%
32.8%
2013
2014
11,315 11,656
6.3%
3.0%
34,900 36,692
7.5%
5.1%
32.4% 31.8%
US Vitamin Sales vs Total Supplement Sales, 2015e - 2020e
Vitamins
Growth
Total Supplements
Growth
Vitamins as % of
Total Supplements
© 2015 Penton
2015e
2016e
2017e
2018e
2019e
2020e
12,098
12,629
13,232
13,872
14,536
15,233
3.8%
4.4%
4.8%
4.8%
4.8%
4.8%
38,599
40,802
43,280
46,004
48,913
52,021
5.2%
5.7%
6.1%
6.3%
6.3%
6.4%
31.3%
31.0%
30.6%
30.2%
29.7%
29.3%
46
VITAMINS
4.2 Product Category Sales, Growth, and Forecasts
US Vitamin Sales by Product Category, 2014
13.1%
Vitamin D
6.6%
Vitamin A
3.9%
Multivitamins
48.6%
B Vitamins
16.1%
Vitamin E
2.7%
Vitamin C
8.9%
© 2015 Penton
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VITAMINS
Multivitamins
Vitamin C
Vitamin E
B Vitamins
Vitamin A/
Carotenoids
Vitamin D
Vitamins Total
2004
3,828
806
659
878
US Vitamin Sales by Product Category, 2004-2014
2005
2006
2007
2008
2009
2010
4,140
4,322 4,492
4,684
4,799
4,949
836
864
880
900
969
966
451
409
389
361
336
337
937
998 1,039
1,137
1,218
1,316
243
44
429
6,887
253
51
479
7,148
290
72
530
7,485
315
108
555
7,778
333
234
879
8,528
334
425
1,053
9,133
345
551
1,112
9,576
2011
5,164
1,000
329
1,460
2012
5,364
998
314
1,637
377
605
1,180
10,115
396
652
1,283
10,644
2013
5,639
1,031
320
1,784
2014
5,664
1,041
320
1,877
426
455
710
767
1,405 1,532
11,315 11,656
US Vitamin Sales by Product Category, 2015e-2020e
2015e
2016e
2017e
2018e
2019e
2020e
Multivitamins
5,762
5,919
6,128
6,355
6,590
6,838
Vitamin C
1,055
1,072
1,089
1,104
1,118
1,132
Vitamin E
321
322
325
332
340
349
B Vitamins
1,980
2,093
2,209
2,330
2,456
2,586
485
517
553
590
628
667
Vitamin D
828
892
961
1,031
1,103
1,175
1,667
1,812
1,968
2,130
2,301
2,485
12,098
12,629
13,232
13,872
14,536
15,233
Vitamins Total
US Vitamin Growth by Product Category, 2004-2014
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Multivitamins
4.1%
8.2%
4.4%
3.9%
4.3%
2.4%
3.1%
4.4%
3.9%
6.5%
0.4%
Vitamin C
4.7%
3.7%
3.3%
1.8%
2.3%
7.7%
-0.4%
3.6%
-0.3%
4.6%
1.0%
Vitamin E
-7.0%
-31.5%
-9.4%
-4.8%
-7.2%
-6.9%
0.3%
-2.4%
-4.7%
2.1%
0.1%
B Vitamins
7.7%
6.7%
6.5%
4.1%
9.4%
7.1%
8.0%
11.0%
12.1%
9.0%
5.2%
Vitamin A/
Carotenoids
4.5%
4.0%
14.7%
8.6%
5.7%
0.5%
3.4%
9.1%
5.1%
3.8%
6.7%
Vitamin D
2.8%
15.7%
42.3%
49.4% 116.5%
81.9%
29.6%
9.8%
7.8%
9.3%
8.1%
5.0%
11.8%
10.5%
4.8%
58.4%
19.7%
5.7%
6.0%
8.8%
10.7%
9.0%
Vitamins Total
3.5%
3.8%
4.7%
3.9%
9.6%
7.1%
4.8%
5.6%
5.2%
6.3%
3.0%
© 2015 Penton
48
VITAMINS
US Vitamin Market Share by Product Category, 2004-2014
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Multivitamins
55.6%
57.9%
57.7%
57.8%
54.9%
52.5%
51.7%
51.1%
50.4%
49.8%
48.6%
Vitamin C
11.7%
11.7%
11.5%
11.3%
10.6%
10.6%
10.1%
9.9%
9.4%
9.1%
8.9%
Vitamin E
9.6%
6.3%
5.5%
5.0%
4.2%
3.7%
3.5%
3.3%
2.9%
2.8%
2.7%
B Vitamins
12.7%
13.1%
13.3%
13.4%
13.3%
13.3%
13.7%
14.4%
15.4%
15.8%
16.1%
Vitamin A/
Carotenoids
3.5%
3.5%
3.9%
4.0%
3.9%
3.7%
3.6%
3.7%
3.7%
3.8%
3.9%
Vitamin D
0.6%
0.7%
1.0%
1.4%
2.7%
4.7%
5.8%
6.0%
6.1%
6.3%
6.6%
6.2%
6.7%
7.1%
7.1%
10.3%
11.5%
11.6%
11.7%
12.1%
12.4%
13.1%
100.0%
100.0%
100.0%
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
100.0%
Vitamins Total
US Vitamin Market Share by Product Category, 2015e-2020e
2015e
2016e
2017e
2018e
2019e
2020e
47.6%
46.9%
46.3%
45.8%
45.3%
44.9%
Vitamin C
8.7%
8.5%
8.2%
8.0%
7.7%
7.4%
Vitamin E
2.7%
2.6%
2.5%
2.4%
2.3%
2.3%
B Vitamins
16.4%
16.6%
16.7%
16.8%
16.9%
17.0%
4.0%
4.1%
4.2%
4.3%
4.3%
4.4%
Vitamin D
6.8%
7.1%
7.3%
7.4%
7.6%
7.7%
13.8%
14.3%
14.9%
15.4%
15.8%
16.3%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
Multivitamins
Vitamins Total
© 2015 Penton
49
VITAMINS
US Vitamin Product Category Sales Growth, 2000-2014
140.0%
120.0%
100.0%
80.0%
60.0%
40.0%
20.0%
0.0%
-20.0%
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
-40.0%
MultiVitamins
Vitamin C
Vitamin E
B Vitamins
Vitamin D
Vitamins Total
US Vitamin vs Dietary Supplement Sales Growth, 2001-2020e
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015e 2016e 2017e 2018e 2019e 2020e
Vitamins
Supplements
© 2015 Penton
50
VITAMINS
US Multivitamin Sales & Growth, 2001-2020e
$8,000
12%
$7,000
10%
$6,000
8%
$5,000
$4,000
6%
$3,000
4%
$2,000
2%
$1,000
0%
$0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sales
2011
2012
2013
2014
2015e 2016e 2017e 2018e 2019e 2020e
Growth
US Multivitamin Sales by Channel, 2014
Direct Channels
40.0%
Natural & Specialty
38.7%
Mass Market
21.3%
Source: Nutrition Business Journal
Source: Nutrition Business
Journal (consumer sales)
© 2015 Penton
51
VITAMINS
US Vitamin A Sales and Growth, 2001-2020e
$800
16%
14%
$700
12%
$600
10%
$500
8%
$400
6%
4%
$300
2%
$200
0%
$100
-2%
$0
-4%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sales
2011
2012
2013
2014
2015e
2016e
2017e
2018e
2019e
2020e
Growth
Source: Nutrition Business Jounral ($mil., consumer)
US Vitamin A Sales by Channel, 2014
Direct channels
37.5%
Nautral and specialty
38.9%
Mass market
23.7%
© 2015 Penton
52
VITAMINS
US Vitamin B Sales & Growth, 2001-2020e
14%
$3,000
12%
$2,500
10%
$2,000
8%
$1,500
6%
$1,000
4%
$500
2%
$0
0%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sales
2011
2012
2013
2014
2015e
2016e
2017e
2018e
2019e
2020e
Growth
US Vitamin B Sales by Channel, 2014
Direct channels
24.2%
50.5%
Mass market
25.3%
© 2015 Penton
53
VITAMINS
US Vitamin C Sales and Growth, 2001-2020e
$1,200
9%
8%
$1,000
7%
6%
$800
5%
$600
4%
3%
$400
2%
1%
$200
0%
$0
-1%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sales
2011
2012
2013
2014
2015e
2016e
2017e
2018e
2019e
2020e
Growth
US Vitamin C Sales by Channel, 2014
Direct channels
20.0%
43.5%
Mass market
36.6%
© 2015 Penton
54
VITAMINS
US Vitamin D Sales and Growth, 2000-2020e
$1,400
140%
$1,200
120%
$1,000
100%
$800
80%
$600
60%
$400
40%
$200
20%
$0
0%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sales
2011
2012
2013
2014
2015e
2016e
2017e
2018e
2019e
2020e
Growth
US Vitamin D Sales by Channel, 2014
Direct channels
21.4%
42.4%
Mass market
36.2%
© 2015 Penton
55
VITAMINS
US Vitamin E Sales and Growth, 2000-2020e
$900
5%
$800
0%
$700
-5%
$600
-10%
$500
-15%
$400
-20%
$300
-25%
$200
-30%
$100
$0
-35%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sales
2011
2012
2013
2014
2015e
2016e
2017e
2018e
2019e
2020e
Growth
US Vitamin E Sales by Channel, 2014
Direct channels
23.0%
48.0%
Mass market
29.0%
© 2015 Penton
56
VITAMINS
US Other Vitamin Sales and Growth, 2001-2020e
70%
$3,000
60%
$2,500
50%
$2,000
40%
$1,500
30%
$1,000
20%
$500
10%
0%
$0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sales
2011
2012
2013
2014
2015e
2016e
2017e
2018e
2019e
2020e
Growth
US Other Vitamin Sales by Channel, 2014
Direct channels
45.6%
Nature and specialty
37.4%
Source: Nutrition Bsuiness Journal (consumer sales)
© 2015 Penton
Mass market
17.0%
57
VITAMINS
4.3 Channel Sales
US Vitamin Sales by Channel
Practitioner
7.5%
Mail Order
6.3%
41.3%
Internet
4.7%
16.1%
Mass Market
24.0%
US Vitamin Sales by Channel, 2004-2014
Natural/Specialty
Retail
Mass Retail
MLM/Network
Marketing
Internet
Mail Order
Practitioner
Total
© 2015 Penton
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2,772
1,801
2,925
1,705
3,141
1,702
3,252
1,764
3,591
1,996
3,790
2,299
3,949
2,441
4,182
2,534
4,406
2,636
4,683
2,798
4,819
2,802
1,285
133
505
390
6,887
1,414
170
515
421
7,149
1,442
200
541
459
7,485
1,471
238
552
500
7,777
1,530
291
579
540
8,527
1,517
334
600
593
9,133
1,549
370
629
638
9,576
1,636
411
653
698
10,115
1,711
456
680
755
10,644
1,799
507
708
820
11,315
1,880
551
729
874
11,656
58
VITAMINS
US Vitamin Sales by Channel
Practitioner
7.5%
Mail Order
6.3%
41.3%
Internet
4.7%
16.1%
Mass Market
24.0%
US Vitamin Sales by Channel, 2004-2014
Natural/Specialty
Retail
Mass Retail
MLM/Network
Marketing
Internet
Mail Order
Practitioner
Total
© 2015 Penton
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2,772
1,801
2,925
1,705
3,141
1,702
3,252
1,764
3,591
1,996
3,790
2,299
3,949
2,441
4,182
2,534
4,406
2,636
4,683
2,798
4,819
2,802
1,285
133
505
390
6,887
1,414
170
515
421
7,149
1,442
200
541
459
7,485
1,471
238
552
500
7,777
1,530
291
579
540
8,527
1,517
334
600
593
9,133
1,549
370
629
638
9,576
1,636
411
653
698
10,115
1,711
456
680
755
10,644
1,799
507
708
820
11,315
1,880
551
729
874
11,656
59
VITAMINS
4.4. Top Companies
Top 20 Vitamin Companies in 2014
Company Name
Pharmavite*
Perrigo*
Pfizer (Centrum, Caltrate, Alacer)
Valeant Pharmaceuticals
Church & Dwight (Northwest Natural Products/Nutrition Now)
Schwabe NA
Atrium Innovations (Garden of Life, Pure Encapsulations, Douglas Labs, Alcrea Health*)
Standard Process
NOW Foods
Natural Alternatives*
Swanson Health Products
ProCaps Laboratories (Andrew Lessman)
Life Extension
Nutraceutical International (Solaray, Cal, NatraBio, Zand, others)
Vitamin Sales
Growth
2013
2014
2014
707
694
-2%
472
467
-1%
388
403
4%
397
383
-3%
338
313
-7%
172
184
7%
165
156
-6%
138
145
5%
97
71
69
63
65
68
58
58
51
52
46
49
95
78
76
71
70
67
63
62
56
55
48
48
-2%
10%
9%
12%
8%
-1%
9%
6%
9%
6%
5%
-2%
Source: Nutrition Business Journal [$mil., net sales (gross sales minus any returns, discounts or allowances)]. In the top company
list, company revenues listed are wholesale for supplements only (including contract manufacturing.) rounded to the nearest $10
million, not entire company revenue. List does not include raw material companies or firms selling primarily through the multi-level marketing channel. Some revenues are estimates that have been compiled through information provided by company executives, industry analysts and reputable published material. NBJ makes every effort to be accurate, but revenue figures are not the
result of audits and are not guaranteed to be accurate. Errors and omissions are unintentional.
© 2015 Penton
60
VITAMINS
4.5 Vitamin K2 is ready for prime time
Vitamins have cache above most other supplements by virtue of their definition: Essential for life, they have to be taken in by
dietary means.
“The word ‘vitamin”’ brings with it a certain connotation: It’s required to achieve optimal health,” says Eric Anderson, senior vice
president of sales and marketing at NattoPharma, supplier of the MenaQ7 brand of K2, which established the market and has conducted
most of the clinical research behind the long-chain menaquinone-7 form. “This is now demonstrated in human clinical studies based on
evidence from population studies, which show that those who consume vitamin K2 have healthier bones and hearts.”
Vitamin K2 works by activating two critical proteins: osteocalcin, which brings calcium to bones, and matrix GLA, which takes
calcium out of arteries. Its boilerplate marketing copy is elegant: Vitamin K2 takes calcium out of your arteries, where you don’t want it,
and puts it in your bones, where you do.
“The common link is calcium,” says Anderson. “Everyone knows calcium is good for building strong bones, but few understand the
detrimental effect it can have on the vascular system. If the body is not properly utilizing calcium in the bones, it ends up in the soft
tissue, where it can do serious harm.”
Two K2 studies stand out. The first was an observational study conducted in Rotterdam, the Netherlands, which followed 4,800
healthy men and women over age 55 and found that the top 20 percent of K2 users showed a 50 percent cut in heart attacks, a 50 percent drop in cardiovascular-related deaths, and 25 percent fewer deaths overall in those in the bottom 20 percent.
The second study was published in April of 2015. The double-blind, placebo-controlled intervention trial found 180 mcg/day MenaQ7 for three years with 244 healthy postmenopausal women led to significant reversal in arterial stiffness, which is linked to one out of
every four American deaths.
“Vitamin K2 is now recognized as being the last identified vitamin with a deficiency in the West,” says Anderson. “Here is a vitamin
that provides clinical health benefits.”
So why have we not heard of it?
What’s needed now is a major CPG company or supplements brand to pick up and champion K2—as Schff ’s MegaRed did with krill
or Rexall Sundown’s Osteo Bi-Flex did with 5-Loxin.
“The company that gets the next Pfizer buyer will become the market share leader quickly,” says Anderson. “We need a marketing
company behind it.”
If that giant mainstream marketing company were to make a deal with a K2 supplier, the supplier would be expected to break even
at best. But that’s to be tolerated, because it’s the second-, third-, and sixth-generation marketers that would pay full value, and everyone
would benefit from the expansion of the pie thanks to the first-generation marketing giant that would build consumer understanding
and acceptance of this new ingredient. It remains to be seen whether that will happen in a standalone K2 supplement or integrated into
an existing multi format.
Because K2 helps hearts and bones, the obvious first target could be postmenopausal women. But because the prime determinant
of whether a woman will get osteoporosis is her peak bone mineral density as an adolescent, K2 should be formulated into children’s
multivitamins as well.
An efficacious dose in micrograms—1/1,000th the quantity of milligrams—makes it easier to integrate into formulas. While somewhat expensive at about 3 cents per daily dose, the cost has dropped by at least half over the last five years, as more brands have picked
up on K2. That’s according to Francis Foley, president of Xsto Solutions, the exclusive North American sales and marketing partner of K2
Vital, the brand from Norwegian K2 maker Kappa Biosciences.
“Our sales are growing 70 to 100 percent year-on-year growth,” says Egil Greve, president and CEO of Kappa Biosciences. “This
growth requires bigger volume, and bigger volume creates better scale advantages, bringing the cost down which again contributes to a
broader reach.”
© 2015 Penton
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VITAMINS
Innovations make a good thing better
Kappa Biosciences scientists found stability issues when K2 was combined with minerals. They theorized minerals were physically
shearing the long K2 molecule during the mixing phase. In response, they developed a beadlet form of K2 powder, called K2 Vital Delta,
which essentially adds an armor coating to protect the K2 molecule.
“As time goes on and more formulation demands are created, it is likely new K2 product forms will be created,” says Foley. “It’s possible we will be looking at MK-9 as a source of menaquinone in the future.”
NattoPharma won the 2015 NutrAward for best new ingredient with its K2 crystal form of K2, branded MenaQ7 PURE, a crystalline,
all-trans menaquinone-7. The higher the percentage of trans, as opposed to cis (these denote the arrangement of atoms within a molecule), the greater the purity. That affects the biological activity of the ingredient.
“Ingredients sold should be tested and guaranteed all-trans,” says Greve. “We do, however, on a regular basis, find K2 ingredient
vendors with as low as 15–17 percent trans levels and a high level of impurities. Naturally, these products are offered at a lower cost.”
The original K2, old-school, shorter-chain menaquinone-4 K2 remains on the market, available from the likes of AIDP. It was developed first, by researchers in Japan, where it remains a pharmaceutical drug.
“The science on MK-4 has been a great inspiration for current research on MK-7,” Greve says. “MK-4’s resemblance to MK-7 is evident, the biggest difference being bioavailability and dosage. MK-4 has only a 1.5-hour half life and requires dosages in milligram quantities, whilst MK-7 has a half life of 72 hours and is dosed in microgram quantities.”
So while vitamin K2 is growing quickly in its acceptance, it remains for now a niche. But the scientific dossier is showing provocative results, ingredient innovations are delivering flexibility to formulators, and the price per dose is hitting the sweet spot. Here we have
a vitamin—with a study published in a major journal demonstrating a vitamin-deficiency disease tied to bone and heart health—that
could save millions of lives.
At the NutrAward ceremony in Anaheim, California, this past March, Frode Bohan, NattoPharma’s chairman of the board, summed
up the ingredient’s prospects: “We believe vitamin K2 will be the next vitamin D3.”
SWOT ANALYSIS
STRENGTHS
• Research shows it not only reverses atherosclerosis, but spectacularly reduces risk of heart attacks and overall deaths.
• It’s an official vitamin—that makes it easier to accept as a new supplement ingredient.
• Research shows positive effects with as small a dose as 45 mcg, up to 180 mcg. Tiny!
• Along with blockbuster nutrients calcium and vitamin D, K2 could be the “tri-essential” of bone health.
WEAKNESSES
• K2 is presently a niche product and technically challenging to manufacture, so the market has not been widely exploited.
• Ingredient buyers’ confusion about cis vs. trans issue regarding ingredient purity.
• Stability challenges make it difficult to formulate with minerals.
• Expensive—but price is dropping dramatically.
• Most research to date on MK-7 is conducted by same research team. (This is starting to change.)
OPPORTUNITIES
• The ingredient is one major marketer away from becoming the next blockbuster.
• Huge categories: heart and bone health, as well as children’s health.
• If MK-7 is better than MK-4, why not MK-9?
• Potential for new product development from K2-only supplements to multi’s, foods to beverages.
• Awareness is growing, and primary applications are seeing more and more research support.
THREATS
• Price
• Ingredient buyers who are unaware of ingredient quality issues and shop solely on price, which could lead to substandard product
and health effects that do not meet the hype.
© 2015 Penton
62
5. Herbs &
Botanicals
© 2015 Penton
63
HERBS & BOTANICALS
5.1 This, too, shall pass
In February, when the New York attorney general alleged that herbal supplement brands carried by major retailers had none of the
ingredients claimed on the label, it seemed to be a full-on catastrophe.
One truth is it might still be too early to tell.
Another is that the effect might not be the disaster many feared . NBJ estimates call for the herbs & botanicals to grow in 2015, not
at the rate seen in the prior two years but not falling through the trapdoor some might have predicted. Projections have growth slowing
from 7.9 percent in 2014 to 5.2 percent in 2015—from from the precipitous freefall seen in multivitamins last year.
The bigger problem is in the long term. Long after the New York headlines are likely to fade from memory, the category is unlikely to
emerge as a bright spot for the supplement industry. As it has in the past, herbs and botanicals are set to mirror the growth of the total
supplement market. Sales may not fall, but without a blockbuster ingredient, they are unlikely to show remarkable growth. This seems
especially troubling as millennials were beginning to show a notable interest in the category last year. If they walk away now, getting
them back could prove difficult.
Talk to many supplement makers and you might hear that industry’s standing has never been more precarious. You might hear that
the stakes have never been higher, the situation never more dire.
Or you could talk to Peter Hutt, who would dismiss it with a shrug.
“It’s yesterday news,” Hutt says of the New York attorney general’s herbal supplement investigation. “It’s already over.
The Washington attorney takes the long view from a long career. He was chief counsel for the FDA from 1971 to 1975, and he taught
Food and Drug law at Harvard University. He specializes in FDA law at Covington & Burling LLP. He’s seen everything, most of it more
than once.
US Herbs & Botanicals Sales and Growth, 2000-2020e
70%
$3,000
60%
$2,500
50%
$2,000
40%
$1,500
30%
$1,000
20%
$500
10%
0%
$0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sales
2011
2012
2013
2014
2015e 2016e 2017e 2018e 2019e 2020e
Growth
© 2015 Penton
64
HERBS & BOTANICALS
The New York attorney general’s actions are nothing more than a blip, Hutt says. “The worst thing the industry can do is going
around wringing their hands and worrying and creating more publicity.”
Hutt called actions like GNC’s settlement with the NYAG an example of keeping the story alive instead of letting it die a natural
death. “Otherwise it wouldn’t even have gone on as long as it has,” Hutt says.
He understands that bad news attracts readers, but he also notes that the steady stream of sensationalist stories means that none
stay in the public consciousness for long. The NYAG story will fade quickly, he says, “unless the industry itself were somehow to keep
stirring up the matter.”
Even the predictable class action lawsuits are business as usual from Hutt’s long-view perspective. They happen anyway. The suits
are filed. The suits are settled. “That occurs every time the FTC issues a press release and every time the FDA issues a warning letter,”
Hutt says. “That creates a minor upheaval that must be dealt with by the individual companies involved, but it doesn’t create a crisis for
the entire industry.”
US Herbs & Botanicals Sales vs Total Supplement Sales, 2004 - 2014
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Herbs & Botanicals
4,288
Growth
3.4%
Total Supplements
20,453
Growth
3.1%
Herbs & Botanicals as %
of Total Supplements
21.0%
4,378
2.1%
21,399
4.6%
4,558
4.1%
22,567
5.5%
4,756
4.3%
23,918
6.0%
4,800
0.9%
25,457
6.4%
5,037
5.0%
27,000
6.1%
5,049
0.2%
28,209
4.5%
5,302
5.0%
30,198
7.0%
5,593
5.5%
32,453
7.5%
6,033
7.9%
34,900
7.5%
6,441
6.8%
36,692
5.1%
20.5%
20.2%
19.9%
18.9%
18.7%
17.9%
17.6%
17.2%
17.3%
17.6%
US Herbs & Botanicals Sales vs Total Supplement Sales, 2015e - 2020e
2015e
2016e
2017e
2018e
2019e
2020e
Herbs & Botanicals
6,777
7,154
7,576
8,050
8,566
9,117
Growth
5.2%
5.6%
5.9%
6.3%
6.4%
6.4%
38,599
40,802
43,280
46,004
48,913
52,021
5.2%
5.7%
6.1%
6.3%
6.3%
6.4%
17.6%
17.5%
17.5%
17.5%
17.5%
17.5%
Total Supplements
Growth
Herbs & Botanicals as percent of
Total Supplements
That the trade groups are talking about isn’t surprising, Hutt says. It’s not something to worry about either. “Just because there’s
been a story doesn’t change anything they do,” Hutt says. “The fact that they are all thinking about this doesn’t mean it’s a crisis.”
© 2015 Penton
65
HERBS & BOTANICALS
US Top 10 Herbs and Botanical Sales and Growth, 2004-2014
Noni Juice
Mangosteen Juice
Turmeric
Cranberry
Multi-Herbs
Saw Palmetto
Echinacea
Green Tea
Milk Thistle
Goji Juice
Top 10 total
© 2015 Penton
2004
212
72
15
50
0
129
148
112
68
41
846
2005
232
125
24
57
0
132
150
143
83
58
1004
2006
252
147
31
66
0
129
125
139
91
65
1045
2007
274
190
40
78
0
125
126
134
93
93
1153
2008
271
205
43
73
0
123
124
135
95
142
1211
2009
272
205
59
87
0
124
132
156
101
127
1262
2010
263
192
68
97
98
125
115
145
98
114
1315
2011
269
194
83
113
101
125
117
151
108
108
1370
2012
245
184
108
126
107
134
124
151
115
101
1395
2013
225
173
135
141
128
145
139
129
126
108
1448
2014
229
176
163
149
148
145
140
135
131
119
1534
66
HERBS & BOTANICALS
US Top 10 Herbs and Botanical Sales and Growth, 2015e-2020e
2015e
2016e
2017e
2018e
2019e
2020e
Turmeric
196
233
276
323
375
433
Multi-Herbs
167
187
206
226
246
265
Noni Juice
233
239
245
251
257
263
Mangosteen Juice
180
187
195
204
213
221
Cranberry
156
163
169
175
181
187
Goji Juice
128
138
147
156
166
175
Green Tea
140
146
151
157
162
168
Psyllium
124
132
141
149
157
165
Milk Thistle
136
141
146
151
157
162
124
129
135
140
146
151
1585
1695
1811
1932
2058
2190
Top 10 total
US Top 10 Herbs and Botanicals Growth, 2004-2014
Noni Juice
Mangosteen Juice
Turmeric
Cranberry
Multi-Herbs
Saw Palmetto
Echinacea
Green Tea
Milk Thistle
Goji Juice
Top 10 total
© 2015 Penton
2004
7.7%
200.0%
25.4%
4.5%
2005
9.8%
73.3%
58.9%
13.4%
2006
8.4%
17.4%
28.8%
16.5%
2007
8.8%
29.8%
27.7%
17.5%
2008
-1.1%
7.8%
6.9%
-5.7%
2009
0.4%
0.1%
38.0%
17.9%
2010
-3.5%
-6.5%
15.0%
11.5%
-7.7%
-13.8%
47.8%
3.0%
50.0%
11.3%
2.7%
1.1%
27.6%
23.0%
42.7%
18.7%
-2.2%
-16.3%
-2.6%
9.4%
12.5%
4.2%
-3.1%
0.6%
-3.4%
1.9%
42.7%
10.3%
-2.1%
-1.6%
0.4%
2.2%
53.6%
5.0%
1.2%
6.7%
15.4%
6.4%
-10.9%
4.3%
0.4%
-12.7%
-6.7%
-2.2%
-10.1%
4.1%
2011
2.3%
0.9%
21.6%
16.9%
3.2%
0.5%
1.7%
4.3%
10.2%
-5.1%
4.2%
2012
-8.7%
-4.9%
30.6%
11.3%
5.8%
7.0%
5.8%
-0.2%
6.4%
-6.9%
1.9%
2013
-8.4%
-6.0%
25.2%
12.4%
19.6%
7.8%
11.6%
-14.6%
8.9%
7.1%
3.7%
2014
1.8%
1.5%
21.0%
5.6%
15.3%
0.3%
0.8%
4.3%
4.1%
10.4%
6.0%
67
HERBS & BOTANICALS
US Top 50 Herbs and Botanicals Sales, 2005-2014
Noni Juice
Mangosteen Juice
Turmeric
Cranberry
Multi-Herbs
Saw Palmetto
Echinacea
Green tea
Milk thistle
Goji Juice
Psyllium
Garlic
Maca
Green Foods
Acai
Valerian
Ginkgo Biloba
Aloe
Ayurvedic herbs
Ginseng
Garcinia
Stevia
Elderberry
Ginger
Fenugreek
Black Cohosh Root
St. John’s wort
Other Chinese Herbs
Olive Leaf Extract
Red Yeast Rice
Astragalus
Cascara sagrada
Resveratrol
Oregano
Cinnamon
Grapefruit seed extract
Kava kava
Peppermint and other mints
Senna
Horny Goat Weed
Evening primrose
Bitter Melon
Hawthorne
Goldenseal
Mushrooms
Cayenne
Soy
Licorice Root
Bilberry
© 2015 Penton
2005
232
125
24
57
0
132
150
143
83
58
29
73
160
55
57
5
53
105
57
29
93
25
42
39
32
26
58
61
25
36
14
35
34
0
25
0
35
18
13
29
20
40
23
25
35
27
18
72
15
36
2006
252
147
31
66
0
129
125
139
91
65
40
83
150
61
64
16
54
102
60
38
96
33
52
42
39
32
55
58
26
34
22
39
39
0
28
0
45
19
19
33
23
37
22
27
34
25
21
64
20
36
2007
274
190
40
78
0
125
126
134
93
93
44
85
137
66
72
30
62
107
62
39
95
33
59
41
45
35
53
56
28
32
27
40
46
0
28
0
40
20
19
36
24
33
20
29
34
25
21
57
19
35
2008
271
205
43
73
0
123
124
135
95
142
48
88
124
69
75
82
61
99
59
39
84
29
62
45
46
37
50
55
31
31
31
29
51
0
30
0
40
19
17
38
26
31
20
27
31
24
21
50
19
31
2009
272
205
59
87
0
124
132
156
101
127
75
103
112
75
74
182
68
95
61
49
83
28
63
57
49
38
51
57
34
35
35
37
57
33
37
21
21
34
29
31
21
28
31
25
25
47
19
29
2010
263
192
68
97
98
125
115
145
98
114
77
114
107
82
77
188
69
90
64
53
77
27
68
52
52
42
54
56
35
40
39
33
55
38
30
26
39
22
24
34
31
34
23
29
28
26
25
45
20
28
2011
269
194
83
113
101
125
117
151
108
108
87
121
104
79
83
151
77
90
73
58
80
40
70
54
55
46
56
54
38
42
39
38
49
36
32
30
37
32
30
41
36
34
24
30
30
29
28
50
23
27
2012
245
184
108
126
107
134
124
151
115
101
97
118
109
90
90
105
90
94
87
73
79
42
73
57
60
52
55
54
43
46
41
41
44
37
35
32
36
35
32
43
35
35
28
33
31
29
27
39
23
27
2013
225
173
135
141
128
145
139
129
126
108
109
107
108
104
99
101
92
93
89
83
83
74
73
70
64
59
59
56
49
50
39
45
42
36
42
35
39
38
36
37
35
38
33
32
33
32
30
34
25
26
2014
229
176
163
149
148
145
140
135
131
119
117
116
107
106
103
97
95
92
91
88
82
75
75
73
68
62
60
56
51
50
44
44
44
44
43
40
40
38
38
38
37
36
33
33
32
32
31
28
26
24
68
HERBS & BOTANICALS
US Ginseng Sales and Growth, 2000-2020e
70%
$3,000
60%
$2,500
50%
$2,000
40%
$1,500
30%
$1,000
20%
$500
10%
0%
$0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sales
2011
2012
2013
2014
2015e 2016e 2017e 2018e 2019e 2020e
Growth
US Turmeric Sales and Growth, 2000-2020e
80%
$500
$450
60%
$400
40%
$350
$300
20%
$250
0%
$200
$150
-20%
$100
-40%
$50
-60%
$0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sales
2011
2012
2013
2014 2015e 2016e 2017e 2018e 2019e 2020e
Growth
© 2015 Penton
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HERBS & BOTANICALS
US Saw Palmetto Sales and Growth, 2000-2020e
$160
15%
$140
10%
$120
$100
5%
$80
0%
$60
$40
-5%
$20
$0
-10%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sales
2011
2012
2013
2014 2015e 2016e 2017e 2018e 2019e 2020e
Growth
© 2015 Penton
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HERBS & BOTANICALS
5.3 Channel Sales
US Herb and Botanical Sales by Channel, 2014
Practitioner
11.5%
33.9%
Mail Order
10.6%
Internet
3.1%
MLM/Network Marketing
23.4%
Mass Market
17.3%
US Herb and Botanical Sales by Channel, 2004-2014
Total Supplements
Mass Market
MLM/Network
Marketing
Internet
Mail Order
Practitioner
© 2015 Penton
2004
1,399
708
2005
1,427
683
2006
1,490
686
2007
1,535
721
2008
1,558
766
2009
1,628
884
2010
1,661
919
2011
1,757
966
2012
1,864
987
2013
2,029
1,063
2014
2,186
1,116
1,272
49
476
384
1,326
54
485
403
1,414
59
490
419
1,471
73
502
453
1,442
85
492
457
1,385
95
547
498
1,254
104
578
533
1,285
113
600
579
1,347
139
625
630
1,431
169
653
688
1,509
202
685
742
71
HERBS & BOTANICALS
US Herb and Botanicals Sales and Annual Growth by Channel, 2012-2014
Total Supplements
2012
2013
2014
2013g
2014g
2012
2013
2014
1,864
2,029
2,186
8.8%
7.7%
33.3%
33.6%
33.9%
987
1,063
1,116
7.6%
5.0%
17.7%
17.6%
17.3%
1,347
1,431
1,509
6.2%
5.5%
24.1%
23.7%
23.4%
Internet
139
169
202
21.6%
19.7%
2.5%
2.8%
3.1%
Mail Order
625
653
685
4.5%
4.9%
11.2%
10.8%
10.6%
Practitioner
630
688
742
9.2%
7.9%
11.3%
11.4%
11.5%
5,592
6,032
6,440
7.9%
6.8%
100.0%
100.0%
100.0%
Mass Market
Total
© 2015 Penton
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HERBS & BOTANICALS
5.4 Top Companies
Top 20 Herb and Botanical Companies in 2014
Company Name
Schwabe NA
Basic Research/ Zoller Labs
Procter & Gamble (Metamucil, Align Minerals, New Chapter)
Pharmavite*
DSM
Cornerstone Research and Development*
Nutraceutical International Company
VitaQuest Intl*
Perrigo*
Gaia Herbs, Inc.
Nature’s Answer - BioBotanica
Standard Process
Healthy Directions (Helen ofTroy)
Vitamin Sales
Growth
2013
2014
2014
256
276
8%
119
131
10%
167
212
27%
126
157
25%
114
119
4%
113
111
-2%
65
69
6%
54
60
12%
58
60
2%
55
58
5%
45
45
-2%
39
41
5%
32
35
8%
31
35
13%
38
36
-6%
26
32
24%
30
32
7%
29
32
9%
28
30
8%
29
30
4%
Source: Nutrition Business Journal [$mil., net sales (gross sales minus any returns, discounts or allowances)]. In the top company list,
company revenues listed are wholesale for supplements only (including contract manufacturing.) rounded to the nearest $10 million,
not entire company revenue. List does not include raw material companies or firms selling primarily through the multi-level marketing channel. Some revenues are estimates that have been compiled through information provided by company executives, industry
analysts and reputable published material. NBJ makes every effort to be accurate, but revenue figures are not the result of audits and
are not guaranteed to be accurate. Errors and omissions are unintentional.
© 2015 Penton
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HERBS & BOTANICALS
5.5 The DNA Complications
Will barcode testing become the new industry standard?
The March agreement between GNC and the New York attorney general’s office that paves the way for GNC to use DNA barcode
testing—at least for incoming raw materials if not for finished-product extracts—raises several questions about how testing protocols
may reshape the supplements industry. Not least of those is whether the agreement—even if it is good news for GNC in the short term
(its stock price rose 7 percent on news of the compact)—will prove costly and unnecessary for the industry long term.
“I can’t tell you how many calls and emails I’ve received from people asking if we do DNA barcoding,” says Elan Sudberg, CEO of
Alkemist Laboratories, a third-party testing lab based in Southern California. “It’s the new expectation.”
Sudberg says that Alkemist does not currently offer DNA barcode testing because the technology has some maturing to do and the
testing protocols already in place—microscopy, macroscopy, HPLC, HPTLC—are quite sufficient for the job.
“There’s only one lab in our industry that does it; if the entire industry has to do it, they won’t be able to keep up,” he says.
That one lab is AuthenTechnologies, based in Northern California. In September 2014, the FDA awarded the firm an exclusive contract for up to three years to develop a collection of validated reference DNA sequences and reference materials for a variety of botanical
species.
“This is an exciting opportunity for us,” says Dan Reynaud, AuthenTechnologies vice president of business development. “We see
this as a significant step in the advancement of the FDA’s work toward using DNA as a routine method for regulatory activities.”
As part of the deal, GNC agreed to implement DNA barcode testing starting in 18 months, and for the ensuing 18 months to provide
the New York attorney general’s office results on a semi-annual basis. It’s unclear whether the New York AG’s office and the FDA, through
its vendor account with AuthenTechnologies, will be sharing the results with one another.
The reason for the 18-month lag is that it takes that long to gather authenticated type specimens for the appropriate herbs and then
do the work to identify and qualify the DNA, says Roy Upton, executive director and editor of the American Herbal Pharmacopoeia.
“It would be an impossibility for the market to handle this shift in testing protocols to use DNA barcoding everywhere,” Upton
tells NBJ. “For one, DNA can’t determine the plant part—whether it’s a flower or a root. Also, it’s not like you can pick up a book and it
has everything in it. The AG can’t realistically hold someone to a standard that does not exist.”
While the New York attorney general’s office did not say it in as many words (nor did the New York Times, in its breathless coverage),
DNA barcode testing is not appropriate for assaying botanical extract finished products. Indeed, as part of the deal GNC made with the
office, all of GNC’s allegedly compromised products are now allowed back on store shelves. The reason for that, of course, was that the
DNA barcode testing methodology employed by the attorney general’s office was not fit for purpose for the job at hand.
“He didn’t want to come out as back-pedaling,” says Dan Fabricant, president and CEO of the Natural Products Association.
The New York Times has piled on with a provocative editorial to advance its agenda of increased regulation of the supplements
industry.
“This editorial strongly encourages the other three retailers to adopt the same agreement, thus dramatically expanding the error of
mandated use of DNA barcode testing and adding substantial expense and time to the QA process,” says Loren Israelsen, president of
the United Natural Products Alliance. “This technique is little-used. There is little expertise, training or lab capacity to even adopt such
procedures. How, then, will all this work?”
Setting a poor precedent
Israelsen also notes that the GNC agreement sets a poor precedent for establishing testing methodologies and standards, which
have historically been done by organizations and experts “whose job it is to establish standards, methods, and reference materials
through an open collaborative and peer review-based process.”
Although the New York attorney general has gained the support of some dozen other state attorneys general in its campaign to
discredit supplements, much of the enthusiasm appears to die away upon the light of education.
“Over the past month, CRN has met with a number of state AGs around the country, and we are gratified that the concerns go away
once we’re given the opportunity to fully explain the issue,” says Steve Mister, president and CEO of the Council of Responsible Nutrition.
“In fact, an agreement between the NY AG and one of these companies earlier in the week explicitly stated that there were no issues with
© 2015 Penton
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HERBS & BOTANICALS
the herbal supplements being investigated, and because of this, the products were returned to the store shelves.”
Although some in the industry hope that the kerfuffle may go away, perception is reality, and there has unquestionably been some
harm done to the industry’s fortunes.
“The challenge with DNA barcoding is what is appropriate to satisfy the AG may have nothing to do with GNC,” Fabricant says.
“How does it help the consumer? The whole thing is a political grandstand. It’s unfortunate when an industry can be hijacked like this to
gain press coverage.”
Israelsen expresses a cautionary note: “Not since DSHEA has there been a single event with the potential to affect how the botanical
industry goes about its business.”
5.6 CBD: No High, But Lots of Buzz
Changing marijuana landscape brings both new and old challenges for
supplements industry
You can’t turn on the television these days without seeing a story about legalized marijuana and the “ganjapreneurs” who are advancing the nascent US pot industry.
Four US states have legalized cannabis for recreational use, and 23 now allow it for medical purposes. Across the country, enterprising pot enthusiasts have baked the plant into almost every food imaginable, synthesized it into ultra-concentrated oils, and even mixed
it into topical lotions.
Most of this entrepreneurial energy has focused on delivering the plant’s psychoactive chemical, tetrahydrocannabinol, or THC.
But a growing number of medical professionals and entrepreneurs are pushing products that contain cannabidiol, or CBD, one of the
non-psychoactive chemicals in the plant. There is a growing consensus that CBD holds a variety of therapeutic qualities. Health claims
range from reducing seizures in epileptic children and offsetting depression, to improving skin.
These entrepreneurs could be paving the way for the supplement industry’s next billion-dollar market. Before that happens, however, CBD entrepreneurs must overcome a handful of self-imposed hurdles, from unprofessional marketing and shady corporate dealings,
to an immature supply chain and political infighting. They must also find a way to win approval of the FDA, which recently deemed the
products unfit for sale as dietary supplements.
“The industry is not where we would ideally like it to be yet,” says Richard Rose, executive director of the Colorado-based Medical
Hemp Association. “We’re seeing a lot of rookie mistakes.”
© 2015 Penton
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HERBS & BOTANICALS
Cannabis Adult Use Legislation
Source: arcviewmarketresearch.com
A history of legislative change
Various federal regulations and statewide bans targeted cannabis through the first decades of the 20th century. In 1942, the final nail
was placed in the plant’s coffin when it was removed from the US Pharmacopeia, which effectively erased any therapeutic legitimacy. By
the time Congress passed the Controlled Substances Act in 1970—which lumped cannabis alongside heroin, cocaine and methamphetamines—US doctors had long since abandoned cannabis as a mainstream medication.
That’s not to say that individual physicians and cannabis enthusiasts stopped performing their own medical research on the drug.
Nobody knows for sure how many individuals smoked cannabis to treat cancer, epilepsy or glaucoma during its prohibition years.
Enough at-home research and personal clinical trails went on, however, for hundreds of advocates and doctors to believe in cannabis’
medicinal qualities through the ’80s and ’90s.
A group of early researchers founded the International Cannabinoid Research Society in 1992 in an effort to study the chemicals in
cannabis. In 1998, Dr. Geoffrey Guy persuaded the British government to license his company, GW Pharmaceuticals, to develop a cannabis extract for use in clinical trials. After contacting a Dutch seed company, Guy acquired strains of cannabis that were rich in CBD.
In the US, a seismic shift came in 2004, when the Ninth US Circuit Court of Appeals struck down a DEA regulation to criminalize
the possession and manufacturing of oil produced from cannabis varieties that contain very little THC—commonly called “hemp” or
“industrial hemp,” because of their use in rope and building material.
Advocates believe the ruling opened the door for entrepreneurs to acquire, possess, and sell hemp products—including oil, paste
and seed oil—so long as the hemp contains less than 0.3 percent THC. Since then, entrepreneurs have cited this ruling as the legal umbrella governing the industry.
Entrepreneurs, however, were still forbidden from growing the plant.
Longtime hemp entrepreneur Chris Boucher, vice president of CannaVest, the country’s largest hemp oil importer, says his early
hemp oil customers included shampoo companies, independent supplement manufacturers, and even pet food firms. The oil, Boucher
© 2015 Penton
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HERBS & BOTANICALS
says, comes from both the hemp seed, and from essential oils stripped from the stalk of the plant. Boucher says these companies were
drawn to hemp oil’s high protein, as well as its perceived health benefits.
Even though these companies complied with the law, Boucher says, they sometimes received letters from the DEA.
“[The DEA] threatened these mom-and-pop vitamin stores for selling hemp seed oil,” Boucher says. “It made no sense. The THC
value was like 10 parts per million. There’s more arsenic in your drinking water than that.”
Boucher and other entrepreneurs believe that CBD products are legal, but the rules are still opaque. On May 14, the FDA published
its interpretation of the legality of CBD products and said they cannot be sold as supplements. “Based on available evidence, FDA has
concluded that cannabidiol products are excluded from the dietary supplement definition,” the announcement said. “FDA also may
consult with its federal and state partners in making decisions about whether to initiate a federal enforcement action.”
US Legal Cannabis Market
The Gupta Effect
The CBD industry’s big breakthrough came in 2013, when CNN aired the first installment in a series called “Weed,” starring the network’s medical correspondent, Dr. Sanjay Gupta. The program chronicled the story of Charlotte Figi, a child who suffered from Dravet Syndrome, a form of child epilepsy. It told how Figi’s parents used an extract made from high-CBD cannabis oil to successfully treat the child.
Gupta’s story spurred a series of similar media hits in regional and national newspapers across the country.
CannaVest—which imports raw hemp paste from manufacturers in Eastern Europe, refines it in the US, and then sells it to various
marketing firms across the country—saw its business explode. “Our phones rang off the hook after [Gupta’s] story came out,” Boucher
says. “All of a sudden you see these people who are completely against marijuana become completely for CBD oil.”
Boucher says the Gupta report also opened the door for mainstream audiences to read recent studies done on CBD and how the
substance interacts with endocannabinoids, which are hormones that occur naturally in the human body. Cannabinoid receptors are
actually found throughout the brain, and CBD works through these receptors. A 2012 study in the journal Pharmaceuticals cited 34
different studies on CBD, with 18 of them conducted on clinical populations suffering from schizophrenia, cancer pain, Huntington’s
disease, insomnia, and other disorders.
“Experimental studies suggest that high-dose CBD may decrease anxiety and increase mental sedation in healthy individuals,” the
authors wrote.
Other reports cited CBD as impacting mood, stress, and the health of the nervous system. Exactly how CBD impacts receptors to
achieve these results is still unknown, as are the long- and short-term benefits of the treatment.
Stuart Tomc, CannaVest’s vice president of human nutrition, says the mainstream attention created a tipping point for CBD prod-
© 2015 Penton
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HERBS & BOTANICALS
ucts. “It’s the only ingredient where you don’t have to put anything on the label to sell it,” he says. “You just steer them to CNN.”
The new gold rush
A quick Google search for the terms “CBD,” “Hemp Oil,” and “Hemp Seed Oil” will unearth dozens of oils, pills, tinctures, drops, and
even chewing gum for sale on respected ecommerce retailers, including Amazon, Etsy, and even Ebay. Most of these products have come
to market within the last two years, Boucher says.
One recent CBD brand is the Nevada-based Life Enthusiasts, owned by Martin Pytela, a veteran of the aromatherapy market who
describes himself as a “healer.” Pytela says he started purchasing wholesale CBD oil and selling it after watching the Gupta report on CNN.
“We started seeing a lot of interest from people with twitches, seizures and wound management,” he says. “The other interest was
from the cancer crowd.”
US Cannabis Sales in Top Five States in 2013 & 2014
Pytela’s 100-milligram bottles retail for $25 each. He says the margin on his product is approximately 40–50 percent, comparable
to what he got for aromatherapy products. But unlike with these products, he says, he does not have to advertise the CBD, due to the
demand. He takes orders via his website or over the phone, then ships via mail. He says the only hurdles he’s encountered have come
from the payment processing service Paypal, which sent him a letter announcing it was terminating his service due to the products he
was selling.
Pytela says he’s found ways around PayPal and that CBD is now a major part of his business, accounting for 25 percent of his company’s revenues. That’s up from just 5 percent in 2013. And his total revenues have grown 50 percent since then.
“I could buy a kilo of raw CBD for $60,000 tomorrow and start putting it into my own bottles by the end of the day,” Pytela says. “It is
really like the gold rush right now.”
Familiar concerns about label claims and purity
The CBD boom has not been without its problems. A handful of companies drew the ire of the FDA in early 2015, when the agency
sent 18 warning letters to seven different firms that sell CBD-based products, telling the companies they needed to stop making health
claims in their marketing.
© 2015 Penton
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HERBS
DNA& INFRACTURE
BOTANICALS
One letter, to the Arizona company CBD Life Holdings LLC, read: “The therapeutic claims on your website and in promotional literature establish that the product is a drug because it is intended for use in the cure, mitigation, treatment, or prevention of disease. As
explained further below, introducing or delivering this product for introduction into interstate commerce for such uses violates the Act.”
Of course, these letters are not uncommon in the supplements industry, and numerous start-up companies learn the hard way that
they cannot make health claims on packaging or in promotional material. But other letters from the FDA spoke to a more problematic
issue. The agency says that it performed tests on the CBD products in question and that at least four showed no CBD.
Another troubling development came in November 2013, when an ex-employee of a prominent CBD manufacturer in Denver took
to Facebook and wrote about health concerns in the way CBD is manufactured. The post was eventually taken down, but the employee
called the raw CBD material, “crude and dirty hemp paste contaminated with microbial life.”
The developments fueled a schism in the CBD industry between industrial hemp entrepreneurs and the expanding number of
state-legal cannabis growers. The latter group, by and large, does not trust industrial hemp, since it is grown in China or Eastern Europe
and then transported into the United States. These growers and their patients have circulated literature that claims that CBD from cannabis plants carries greater potency and value than hemp and hemp seed CBD.
“The flood gates have opened, and now all of the CBD comes from hemp, which is an inferior source,” says Constance Finely, owner of
Constance Botanical Care in San Francisco. “Hemp has the legal edge, but it’s being pushed by a group of people who are irresponsible.”
But the most damaging development came in November 2014, when a CBD advocacy group commissioned a freelance journalist
to produce a 30-page report on the industry. The report, titled Hemp Oil Hustlers, painted a damning picture of the industry as a whole.
It highlighted alleged fraudulent corporate dealings by prominent CBD distributors and poked holes in the science behind many of the
medical claims associated with CBD. It also provided testing results that showed that some CBD oils contained heavy metals and other
contamination.
In the wake of the report, the company Medical Marijuana Inc. launched a $100 million lawsuit against the authors. CannaVest also
retested its CBD products alongside the authors, and both groups released a joint statement stating that CannaVest products did not
show contamination in follow-up tests.
One of the report’s authors, Martin A. Lee, confirmed the presence of the lawsuit and said, “there is good reason to be cautious” of
the CBD industry. Boucher called the report a “hit piece” but admitted it did considerable damage to the industry’s reputation: “When
you start talking about heavy metals and contamination, that scares people.”
Where the future lies
Whether CBD companies make a push into the mainstream supplement industry is yet to be seen. The industry could likely be
shaped by the recent FDA announcement. Whether the agency will pursue any action against CBD companies, however, is unclear. The
company HempMeds, owned by Medical Marijuana Inc, displayed its CBD products at the 2015 Natural Products Expo West. Already, a
handful of groups have reached out to industry organizations. The American Herbal Products Association (AHPA) has approximately 30
members from the cannabis and CBD space, according to Jane Wilson, AHPA’s director of program development.
AHPA has even produced a modular document of best practices and regulatory advice for how these companies can adhere to local
and federal regulations.
“We’re trying to educate a relatively new industry about how to comply with regulations from state to state,” Wilson says. “There are
a lot of resources we supply to the conventional supplement industry that apply.”
Other cannabis-specific groups are also working to improve the overall professionalism in CBD. The National Cannabis Industry
Association holds regular symposiums where best practices are disseminated. Medical Hemp Association’s Richard Rose coaches CBD
entrepreneurs on what they can and cannot put in their marketing.
A resolution to the CBD problem could be on the horizon. The 2014 US Farm Bill for the first time made a staunch demarcation between industrial hemp and cannabis, which cleared the way for some states to launch pilot research programs into the plant. Kentucky
alone will harvest 1,742 acres of hemp in 2015.
The move could be a step toward more government involvement and regulation, which Rose believes is what the industry needs.
“We need to improve the standards for the industry and then promote it,” Rose says. “I came out of retirement for this because you
can tell it needs some shepherding.”
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DNA& INFRACTURE
BOTANICALS
5.7 Essential Oils: Beyond the essentials
Ancient wisdom blends with modern appeal to invigorate the
essential oils category
A once sleepy category, essential oils have emerged to deliver staggering sales growth and a multitude of holistic product solutions.
The consumer trend toward plant-based foods seems to be driving increasing numbers of them to this product category. “Over the past
10-plus years, as part of the natural product category growth, there has been an increase in consumer demand for plant-based ingredients
and products,” says Tami Wahl, special regulatory counsel for the American Herbal Products Association. “Essential oils fit that need.”
Research from Iowa-based personal care manufacturer Aura Cacia shows sales in the overall category increased by 90 percent
between 2009 and 2012. Over the same period, the share of US households using essential oil products doubled from six to 12 percent.
“Things are growing in ways that we hadn’t seen before,” says Heather Ousley, marketing director for Aura Cacia. “What we determined
is that people are focusing on wellness in a holistic perspective. They are looking for ways to use essential oils for relaxation. They don’t
want to turn to pills or over-the-counter medicine.”
Regulatory compliance: an essential matter
Supplements still represent a small segment of the overall essential oils market but will
likely grow along with the rest of the category, making compliance an important topic for
companies interested in the space. Over the past year, doTerra and Young Living have received FDA warning letters for marketing their products as drugs through their websites
and social media outlets. “Most essential oils are for external use only and thus don’t go
into supplements,” says New Hope Natural Media Standards Manager Michelle Zerbib.
“The few that are edible, such as oregano, cinnamon, and peppermint, may be included
in a supplement, and that supplement can then make the appropriate structure-function
claims.
ucts properly. “AHPA has addressed these needs by developing guidance documents for its
members to ensure safety measures mirror the growth of this category,” Wahl says. “[We
offer] a guidance document to ensure essential oil products are labeled appropriately.”
And supplement brands aren’t the only ones that must be cautious of claims. Manufacturers of topical essential-oil products aimed at conditions like eczema, psoriasis, and other
forms of inflammation must also keep compliance top of mind. Plus, newly proposed
cosmetics legislation could affect personal care manufacturers interested in using essential oils, according to Wahl. A bill proposed in April would clamp down on ingredients and
require more transparency.
To help navigate future compliance issues as the category grows, trade organizations are
providing tools and resources necessary for companies to market and label these prod-
A one-stop shop
The demand for natural or holistic alternatives across all facets of life makes essential oils’ versatility in food and beverage, supplements, household products, and personal care another major contributor to growth, Wahl says. No longer just about patchouli and
diffusers, they appear in myriad products that are applied topically, inhaled, diffused, or taken orally, depending on the botanical type and
distillation method. Many products containing also serve multiple purposes. For example, external-use products like massage oils, bath
soaks, and household cleaners are often touted for their direct (moisturizing, cleansing) and indirect (energizing, relaxing) benefits.
To meet consumer demand for products featuring essential oils, more companies are entering the space or expanding their offerings. Direct sellers like doTERRA and Young Living—companies that have traditionally dominated the category—are no longer the only
players to watch, as companies in the natural retail market are investing in essential oil-based products.
Aura Cacia’s sales over the past three years reflect the growing interest in essential oils like lavender, peppermint, and tea tree,
which are among their top sellers. The company offers of range of essential oil-infused products, including skin care and massage oils,
but individual essential oils make up the fastest-growing category of its business.
The rising popularity of do-it-yourself health solutions, prevalent on social media outlets like Pinterest and Instagram, may have
something to do with this. And by inspiring shoppers to make their own massage oils, lotions, bath soaks, beverages, and other holistic
remedies, online movements give brands like Aura Cacia the opportunity not only to sell individual essential oils but also to become an
educational resource.
Chicago-based Now Foods has also taken notice of the tremendous opportunity in the space. The company—which manufacturers food, supplements, and personal care products—plans to expand its existing essential oil offerings while striving to keep prices
down, according to Kim Wells, personal care brand manager for Now Foods. “We are already working on expanding this line to offer a
greater variety of essential oils, including pure oils, blends and organics. It’s definitely a category we continue to invest in so we can bring
quality products to market that are affordable,” she says.
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Looking for healthy growth
With growth comes challenges, and the rapid boom in essential oils has sparked concerns over sustainable sourcing. “A secure
supply chain can be challenging, due to circumstances beyond the grower’s control, such as climate conditions and civil unrest,” Wahl
says. “Once a supply chain is disrupted because of such a circumstance, there is nothing a manufacturer can do short of having several
qualified suppliers in queue. Growing seasons and harvest periods are also critical and add a layer of complexity.”
For this reason, companies like Aura Cacia and Now Foods partner with their suppliers to map out anticipated demand, production
capabilities, and potential roadblocks—which can range from frost to excessive rain to disease. “We work closely [with our suppliers] to
forecast the volume we need and also for the best price without compromising the quality,” Wells says. “For some of our higher-volume
oils, we make sure we have multiple vendors approved, in case there is an issue or a crop shortage.”
Aura Cacia has always placed sustainability among its top initiatives, which gives the company an edge now that sourcing is more of
a concern. Well Earth, the ethical-sourcing program run by Aura Cacia’s parent company, Frontier Co-op, develops partnerships globally.
Functioning as a stringent fair-trade program for its products (the company has also earned USDA Organic and Fair Trade USA certifications for various products), Well Earth focuses on supporting social and environmental issues in the areas where it sources its ingredients—from Ukraine and Morocco—while delivering high-quality botanicals to the market.
DoTerra Sales of Essential Oils, 2008–2013
140
120
100
80
60
40
20
2008
2009
2010
2011
2012
2013
Sales
Source: Nutrition Business Journal ($mil., consumer sales)
Practical innovation
Both functionality and novelty seem to have a place in essential oils’ future. While certain up-and-coming oils will further expand
the category, Wahl thinks wellness concerns like relaxation and digestion present the biggest opportunity for attracting new users.
Ousley notes that convenience and education will be of paramount importance. Aura Cacia has been the first to bring several novel
oils to the US market, but without context and a smart delivery system, she says, the product won’t take off with consumers. “We are
trying to determine how we can deliver essential oils in packaged ways that will deliver solutions,” she says. The company’s latest efforts
include body cloths paired with essential oil blends and product kits that capitalize on the do-it-yourself movement, while simplifying
the process. Perhaps most of all, Ousley says, the company is focused on bringing information about the modern-day benefits and uses
of the oils to its retail partners and customers: “We are constantly thinking about what kind of content we should push out.”
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6. Sports
Nutrition
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6.1 Overview
Few supplement categories get more negative attention than sports nutrition. In 2013, it was USA Today’s award-winning “Supplement Shell Game” series shining the light on unsavory characters and dangerous ingredients. Before that it was DMAA. This year it’s
BMPEA and an HBO “Real Sports” segment rehashing old news about sports supplements use in the military. With DMAA front page
news, few might have thought 2013 would be a standout year, but NBJ numbers suggest it may be recalled as the good old days, with
growth set to slow by roughly half through the rest of the decade. Perhaps the incessant drumbeat of bad news has reached too many
ears.
That doesn’t mean the category isn’t a bright spot. Estimates hold it will still grow faster than the total supplement market in 2015,
at 8.2 percent, compared to the 5.2 percent predicted for the total supplement market.
But don’t expect a return to the 13.1 percent seen in 2013 any time soon.
Sports Nutrition Goes Back to the Future
Elite athletes—always the leading edge of the category—are spurning
sugary supplements for whole foods
When the 125-odd pro cyclists set out on this year’s 700-mile Amgen Tour of California bike race, they set out on the next wave of
sports nutrition. Food for each of the teams was provided by Skratch Labs, the Boulder, Colorado-based nutrition company run by sports
scientist Allen Lim, PhD. On the menu: sushi rice balls and whole grain cookies—among Lim’s various recipes that revolve around real
foods rather than engineered gels, bars, or hydration products.
“Elite athletes have been moving away from engineered food for a couple of years now,” Lim says. “Part of it is that after decades of
consuming these products, they’re sick of them. Part of it is an understanding that we still don’t know how nutrition works. The body is
extraordinarily complex, and every time we try to circumvent it with engineered foods there are problems.”
Stacy Sims, PhD., founder of Fairfax, California-based Osmo Nutrition, adds that the sports nutrition segment is witnessing the longterm effects of a generation of athletes who’ve been relying on gels, bars, and drinks. “They’re tired of the energy spikes, the bloating, even
the textures,” she says. “We’ve learned that we’re not as smart as nature—we’re still not even sure how supplemental Vitamin C works in
the gut.”
In practice, this athlete-driven push away from engineered foods with their artificial ingredients has given rise to a variety of new
players in the market, from Sims’ hydration line, which breaks down its product lines into women’s and men’s drinks, ostensibly to
account for the effect of a woman’s menstrual cycle on her nutrient needs, to Olympic distance runner Lauren Fleshman’s gluten-free,
non-GMO Picky Bars made with dates, nuts, and rice cereal.
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US Sports Nutrition Sales and Growth, 2000-2020e
$800
16%
14%
$700
12%
$600
10%
$500
8%
$400
6%
4%
$300
2%
$200
0%
$100
-2%
-4%
$0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sales
2011
2012
2013
2014
2015e 2016e 2017e 2018e 2019e 2020e
Growth
At the extreme end of the spectrum sits Exo, which sources the main ingredient for its protein bars from ground-up crickets. The
Los Angeles-based company’s bars are available in 150 stores nationwide, including Whole Foods stores in the New York City area and
various CrossFit gyms. The appeal, according to cofounder Greg Sewitz, is his product’s ability to deliver gluten-free, soy-free, natural
protein, healthy fats, iron and calcium without the processing needed to produce whey protein.
Beyond sports performance, another term making inroads in this segment is biohacking, epitomized by the meal-replacement drink
Soylent, which locked up $20 million in venture capital funding last January, with Silicon Valley powerhouse Andreessen Horowitz leading the funding round. In a blog post, AH general partner Chris Dixon explained why the firm, which is better known for its investments
in Skype, Twitter, and Facebook, made a commitment in this space. “Soylent is a community of people who are enthusiastic about using
science to improve food,” he wrote. “[But] if you look at Soylent as just a food company, you misjudge the core of the company, the same
way you would if you looked at GoPro as just a camera company.”
At stake is a slice of the US sports nutrition market, which topped $5.95 billion in 2014, according to Euromonitor International, a
global research firm for consumer products. That’s up from $4.74 billion in 2012 and one of the few bright spots in a packaged food business that has been slumping. (General Mills, for one, saw its second quarter sales slide 3.4 percent last year.)
But Euromonitor analyst Chris Dixon (no relation to Chris Dixon at Andreessen Horowitz) cautions that sports nutrition is still a
statistically insignificant category among the global food companies and that this whole-food trend won’t be jumping to big retail anytime soon.
“It’s not that big a deal,” he says. “The elite athlete and hard-core recreational athletes may be gravitating toward gluten-free, allergen-free, non-GMO products, but in terms of the mass market, it’s not what people are looking for.”
Still, Schmidt has seen a big jump in organics, pointing out Muscle Milk’s exclusive deal with Target last year to sell its line of organic
protein shakes and powders as indicative of a consumer-led desire for “healthier” ingredients. “In general, people don’t see sports nutri-
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SPORTS NUTRITION
tion as a food,” he says. “They see it as a supplement. When they grab that bar or tub of protein powder at Target or GNC, the first thing
they do is look at the percentages of RDA listed. They don’t really care about the ingredients and whether they’re artificial or not.”
That may be the case now, but upstart brands going all-in on whole foods can point to the history books as proof that elite athletes
tend to drive the category. Before PowerBars were in convenience stores, they were catching fire amongst triathletes in the 1980s. Gatorade started out 50 years ago in a lab as a hydration product for college football players. It now accounts for 74.2 percent of the $7 billion
sports-drink market.
“At the end of the day, athletes are people too,” says Lim. “They want to eat food. And if we can show the rest of the world that it
works, that there’s science behind it, we’ll be in a better place.”
US Sports Nutrition Sales vs Total Supplement Sales, 2004 - 2014
Sports Nutrition
Growth
Total Supplements
Growth
Sports Nutrition
as % of
Total Supplements
2004
2,129
7.0%
20,453
3.1%
2005
2,250
5.7%
21,399
4.6%
2006
2,392
6.3%
22,567
5.5%
2007
2,595
8.5%
23,918
6.0%
2008
2,793
7.6%
25,457
6.4%
2009
2,947
5.5%
27,000
6.1%
2010
3,218
9.2%
28,209
4.5%
2011
3,579
11.2%
30,198
7.0%
2012
3,999
11.7%
32,453
7.5%
2013
4,517
13.0%
34,900
7.5%
2014
4,872
7.9%
36,692
5.1%
10.4%
10.5%
10.6%
10.9%
11.0%
10.9%
11.4%
11.9%
12.3%
12.9%
13.3%
US Sports Nutrition Sales vs Total Supplement Sales, 2015e - 2020e
2015e
2016e
2017e
2018e
2019e
2020e
Sports Nutrition
5,270
5,730
6,239
6,786
7,393
8,069
Growth
8.2%
8.7%
8.9%
8.8%
8.9%
9.2%
38,599
40,802
43,280
46,004
48,913
52,021
5.2%
5.7%
6.1%
6.3%
6.3%
6.4%
13.7%
14.0%
14.4%
14.8%
15.1%
15.5%
Total Supplements
Growth
Sports Nutrition as % of Total Supplements
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SPORTS NUTRITION
Sports Nutrition by Product Category, 2014
Drinks (core sports)
10.5%
Pills
4.6%
Powder and formulas
84.9%
Powders/Formulas
Pills
Drinks (for core sports)
Sports Supplements Total
US Sports Nutrition Sales by Product Category, 2004-2014
2004
2005
2006
2007
2008
2009
2010
1,853 1,935 2,053 2,218 2,379 2,507 2,751
121
131
138
151
163
162
167
155
184
202
227
251
278
300
2,129 2,250 2,392 2,595 2,793 2,947 3,218
2011
3,067
187
325
3,579
2012
3,419
200
379
3,999
2013
3,867
213
437
4,518
2014
4,134
225
513
4,872
US Sports Nutrition Sales by Product Category, 2015e-2020e
2015e
2016e
2017e
2018e
2019e
2020e
4,432
4,782
5,165
5,570
6,016
6,509
Pills
239
253
269
285
302
318
599
695
806
931
1,076
1,242
5,270
5,730
6,239
6,786
7,393
8,069
Powders/Formulas
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SPORTS NUTRITION
US Sports Nutrition Growth by Product Category, 2004-2014
Powders/Formulas
Pills
2004
6.8%
5.0%
10.0%
6.9%
2005
4.4%
8.4%
18.7%
5.7%
2006
6.1%
5.0%
9.5%
6.3%
2007
8.0%
9.5%
12.5%
8.5%
2008
7.3%
8.2%
10.5%
7.6%
2009
5.4%
-0.5%
10.8%
5.5%
2010
9.8%
3.2%
7.9%
9.2%
2011
11.5%
11.9%
8.5%
11.2%
2012
11.5%
6.8%
16.7%
11.7%
2013
13.1%
6.7%
15.2%
13.0%
2014
6.9%
5.5%
17.4%
7.8%
2012
2013
2014
US Sports Nutrition Market Share by Product Category, 2004-2014
2004
Powders/Formulas
Pills
2005
2006
2007
2008
2009
2010
2011
87.0% 86.0% 85.8% 85.5% 85.2% 85.1% 85.5% 85.7% 85.5% 85.6% 84.9%
5.7%
5.8%
5.7%
5.8%
5.8%
5.5%
5.2%
5.2%
5.0%
4.7%
4.6%
7.3%
8.2%
8.4%
8.7%
9.0%
9.4%
9.3%
9.1%
9.5%
9.7% 10.5%
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
US Sports Nutrition Market Share by Product Category, 2015e-2020e
Powders/Formulas
Pills
© 2015 Penton
2015e
2016e
2017e
2018e
2019e
2020e
84.1%
83.5%
82.8%
82.1%
81.4%
80.7%
4.5%
4.4%
4.3%
4.2%
4.1%
3.9%
11.4%
12.1%
12.9%
13.7%
14.5%
15.4%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
87
SPORTS NUTRITION
US Sports Nutrition Product Growth Rates by Category, 2000-2020e
20.0%
15.0%
10.0%
5.0%
0.0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014 2015e 2016e 2017e 2018e 2019e 2020e
-5.0%
Powders/Formulas
Pills
US Sports Nutrition Powders and Formulas Sales and Growth, 2000-2020e
$7,000
14%
$6,000
12%
$5,000
10%
$4,000
8%
$3,000
6%
$2,000
4%
$1,000
2%
0%
$0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Sales
2010
2011
2012
2013
2014 2015e 2016e 2017e 2018e 2019e 2020e
Growth
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SPORTS NUTRITION
US Sports Nutrition Pills Sales and Growth, 2000-2020e
$350
14%
$300
12%
10%
$250
8%
$200
6%
$150
4%
$100
2%
$50
0%
$0
-2%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sales
2011
2012
2013
2014
2015e 2016e 2017e 2018e 2019e 2020e
Growth
US Sports Nutrition Core Sports Drinks Sales and Growth, 2000-2020e
20%
$1,400
18%
$1,200
16%
$1,000
14%
12%
$800
10%
$600
8%
6%
$400
4%
$200
2%
$0
0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Sales
2010
2011
2012
2013
2014
2015e 2016e 2017e 2018e 2019e 2020e
Growth
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6.3 Channel Sales
US Sports Nutrition Sales by Channel, 2014
Practitioner
7.1%
2.7%
Internet
17.2%
50.8%
8.8%
Mass market
13.4%
US Sports Nutrition Market Share by Channel, 2004-2014
Mass Market
Internet
Mail Order
Practitioner
© 2015 Penton
2004
1,114
432
244
111
85
141
2,129
2005
1,153
445
266
138
94
153
2,250
2006
1,231
458
274
168
96
164
2,392
2007
1,337
476
283
216
103
182
2,595
2008
1,444
445
285
323
104
192
2,793
2009
1,503
453
278
390
108
214
2,947
2010
1,638
493
289
452
113
234
3,218
2011
1,790
550
324
537
117
259
3,579
2012
1,984
624
357
628
122
285
3,999
2013
2,255
694
393
735
126
314
4,517
2014
2,476
653
430
836
130
346
4,872
90
SPORTS NUTRITION
US Sports Nutrition Sales and Annual Growth by Channel, 2012-2014
Total Supplements
2012
2013
2014
13g
14g
2012
2013
2014
1,984
2,255
2,476
13.7%
9.8%
49.6%
49.9%
50.8%
Mass Market
624
694
653
11.2%
-5.8%
15.6%
15.4%
13.4%
357
393
430
10.1%
9.5%
8.9%
8.7%
8.8%
Internet
628
735
836
17.1%
13.8%
15.7%
16.3%
17.2%
Mail Order
122
126
130
3.5%
3.3%
3.0%
2.8%
2.7%
Practitioner
285
314
346
10.2%
10.1%
7.1%
6.9%
7.1%
3,999
4,517
4,872
13.0%
7.9%
100.0%
100.0%
100.0%
Total
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6.4 Top Companies
Top 20 Sports Nutrition Companies in 2014
Sports Nutrition Sales Growth
Company Name
2013
2014
2014
343
373
9%
CytoSport
279
299
7%
Carlyle Group - NBTY (Natures Bounty, Sundown, Oseto-Bi-Flex, Ester-C)
177
203
15%
110
107
-3%
84
105
25%
Abbott Labs/Ross Products (Ensure, EAS, ZonePerfect, PediaSure)
92
96
5%
USP Labs
98
90
-9%
64
71
10%
Nature’s Best (Isopure)
61
65
7%
S.A.N. Corp. (Bolt, V-12, Tight)
60
64
6%
Athena Wellness Brands (Designer Protein)
49
55
11%
VitaQuest Intl (Windmill)* (formerly Garden State)
48
51
5%
NOW Foods
35
45
28%
Nutrex Research
40
42
5%
Universal Nutrition Corp.
36
41
12%
Gaspari Nutrition
54
40
-25%
Twinlab
45
38
-11%
All American EFX
35
37
6%
Nature’s Products, Inc. (Rainbow Light, Champion Nutrition)
40
37
-7%
VPX Sports
40
35
-14%
Source: Nutrition Business Journal [$mil., net sales (gross sales minus any returns, discounts or allowances)]. In the top company
list, company revenues listed are wholesale for supplements only (including contract manufacturing.) rounded to the nearest $10
million, not entire company revenue. List does not include raw material companies or firms selling primarily through the multi-level marketing channel. Some revenues are estimates that have been compiled through information provided by company executives, industry analysts and reputable published material. NBJ makes every effort to be accurate, but revenue figures are not the
result of audits and are not guaranteed to be accurate. Errors and omissions are unintentional.
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6.5 Hot Water
Hydration tests offer easy entry into personalized nutrition
Nearly half of Americans are going about their days dehydrated, many drinking as few as three cups of water a day. We all know we
should drink more water, but for top athletes to maintain peak performance it’s even more critical.
In a study published in the Journal of Physiology, researchers investigated what happens when we push our bodies to the limit but
don’t replenish our liquids. Using catheters and Doppler ultrasound technology, the team measured the blood flow of a group of cyclists
as they rode their bikes to exhaustion in high temperatures. They noted: “As they became dehydrated, the cyclists developed reduced
body mass, brain blood flow, and ability to exercise, as well as an increase in their internal body temperature.” Simultaneously, the researchers found that the athletes’ brains compensated by increasing the amount of oxygen they extracted from the athletes’ blood.
In spite of the body’s impressive ability to manage stress, there are companies working to tackle this universal problem. The first,
Electrozyme, pairs a fitness watch with inexpensive biosensors that read sweat for clues of failure: heat exhaustion, low electrolyte levels
and inadequate hydration. Alongside the wearable device are advanced analytics to create a “personalized wellness profile.” Using an
electrochemical sensor, the health platform gives the user “actionable, real-time information—and true metabolic insight,” says Electrozyme CEO Joshua Windmiller.
Electrozyme’s sensors came out of research in the UC San Diego Nano Bio- Electronics Lab and have already won several innovation
awards and grants. With numerous patents filed, the founders expect to commercialize their technology in 2016. Telecom billionaire
Mark Cuban, who invested $250K in their initial seed round—and whose other life is a sports-team owner—is just one of many investors
looking to Electrozyme to provide their pro-athletes with a not-so-secret weapon.
From the other side of the world comes iHydrate, an Australian company that has created a low-tech hydration test that starts with
spit. The company’s paper sensor is about the size of a stick of chewing gum and has multiple reactors and uses natural dye from purple
cabbage that changes color when licked, notifying users of their hydration levels: green for overhydrated, blue for just right, purple for
mildly hydrated, and brownish red for dehydrated.
The startup began as a part of the Coca-Cola Founders’ platform, which gave them access to Coca-Cola’s relationships, resources,
and reach while allowing them to retain complete ownership. Founder Franki Chamakie hopes to have his product on the market by
Q4 2015. It’s easy to imagine how seamlessly it could be added to the label of a Coke bottle. After you purchase the drink—of course—
you’ll tear it off, lick, and voila.
A third entry into this burgeoning market comes from Breathometer, who recently raised more than $80K on IndieGogo to
launch Mint, an entirely different monitor that measures hydration through breath. Still in development, the device is intended to be
placed in the user’s mouth, where it draws an air sample to measure the moisture level of the mucus membrane, which is the first place
dehydration symptoms occur. The device sends the data wirelessly to Mint’s Breathometer smartphone app with a measure not only of
hydration levels but also of bad breath. The product is slated to ship in August this year, and, no surprise, Mark Cuban and his “Shark
Tank” co-hosts are all investors.
Sensing a trend here? We are.
One area these founders haven’t spoken to is the health-care sector. But, as large segments of the population age out of an active
lifestyle and into a sedentary one, it would be a mistake to forget about it. According to a recent CDC study, “People who aren’t well-hydrated when they have a stroke are about four times more likely to have a worse outcome than people who’ve had more fluids, a new
study suggests.”
Because the dilemma of hydration applies to everyone, it is a niche market that could quickly grow into something more mainstream. As each of these solutions makes its way to market, manufacturers should be thinking about ways to tailor their technologies to
widely different demographics. We’re not all pro athletes, but we all need to drink more water.
© 2015 Penton
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SPORTS NUTRITION
6.6 Protein: Lawsuits Target “Protein Spiking”
As lawyers allege adulteration is rampant, AHPA urges FDA to change guidelines
on how proteins in food are defined
Adulteration is rampant in the protein market. And after years in the dark, consumers and lawyers are calling manufacturers out in
class-action lawsuits that could be just the start of an industry shakeout.
Frank Jaksch, cofounder and CEO of the analytical testing company ChromaDex, says as many as 50 percent of all the protein products he has tested have shown evidence of adulteration. While Jaksch is quick to point out that those findings are for just 50 percent of
what he’s tested and not necessarily representative of the entire market, they still point to a troubling lack of purity.
The method in question is known as “protein spiking,” “amino spiking,” or “nitrogen spiking.” It involves the addition of inexpensive
free-form amino acids and non-protein ingredients to increase a supplement’s nitrogen content. Since standard tests use nitrogen levels
as an indirect measure of protein content, such manipulation lets manufacturers cut costs associated with whey protein while still passing the tests.
But whey protein is a complete protein source that contains all of the essential amino acids necessary for building muscle tissue,
skin, hair, and fingernails. “Individual amino acids are not a substitute for protein,” Jaksch says. “Individual amino acids can be added to
a product and, depending on the qualities of that individual acid, it could confer some other benefits. But free-form aminos do not act as
proteins in the body.”
The first class-action lawsuit over protein spiking was filed in August 2014 in New York. A second, by the same legal team, was filed
in October. Nick Suciu III of Barbat, Mansour & Suciu, the lawyer leading both cases, says he has up to 10 more in the works. And while
he says he isn’t aware of any other law firms pursuing similar actions, copycat lawsuits are common in the class-action world. So these
current cases could be just the tip of the iceberg.
“We’ve known this has been going on for about four years,” says Anthony Almada, president and CEO of GENR8, a sports-nutrition
company. “It’s been the industry’s dirty little secret. This is why the notion that industry will police itself is bogus. Economic interest is
always protected before consumer interest.”
The first suit was filed against United States Nutrition Inc., Healthwatchers Inc., and parent company NBTY Inc., alleging that Body
Fortress Super Advanced Whey Protein contains less protein than advertised. NBTY is a company behind many popular and respected
brands, including Vitamin World, Solgar, Balance Bar, Ester-C, and Puritan’s Pride.
The plaintiffs are six men from Colorado, Florida, Pennsylvania, Oregon, Kentucky, and South Carolina, who purchased the protein
supplement at various stores in their home states over several years, according to the lawsuit filed in the US District Court for the
Eastern District of New York, where NBTY is based. They are seeking class certification and compensatory damages and are represented
by Suciu; Jonathan Shub of Seeger Weiss LLP; and Jordan L. Chaikin of Parker Waichman LLP.
The complaint states that the company features “the name of the ingredient sought by millions of American consumers, ‘whey protein,’ by predominantly featuring it … on the [product] containers.” The packaging claims that the product delivers 30 grams of protein
per serving, yet the suit states that scientific testing showed the actual content to be just 21.5 grams of protein per serving once spiking
agents were removed.
This, the lawsuit states, violates trade-practice and consumer-protection laws in multiple states.
“The whey protein industry is a growing and extremely competitive business environment,” the complaint reads. “However, the
price of wholesale whey protein keeps increasing and is usually purchased for roughly $15-$18/kilogram, making the profit margins on
whey protein very low.”
The second class-action suit, filed in California, claims that Giant Sports Delicious Protein contains 60 percent less protein than
advertised and that it is spiked with amino acids and other nonprotein compounds, such as creatine monohydrate.
Giant Sports is a New Jersey-based company selling bodybuilding and weight-loss products under the tag line “superior sports nutrition.” According to its website, the company is GMP-certified.
For Suciu, the lawsuits grew out of personal interest. A bodybuilder and self-described gym rat, Suciu started his legal work in the
dietary supplement world on the other side of the aisle, defending manufacturers against lawsuits. But within a few years, his sympathies
shifted.
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SPORTS NUTRITION
“I represented bodybuilding supplement companies in a few class actions,” Suciu says. “That’s what gave me the idea to go the other
way in terms of doing class-action work. I learned a lot about the science during my time there, and I thought I could do a better job on
the scientific side working with plaintiffs. I’ve been lifting and had that lifestyle for a while, and when I learned what was going on, it was
troubling to me.”
Whey Protein Concentrate Pricing, 2013 to 2014 price per pound
Source: Nutrition Business Journal estimates: ($mil., consumer sales)
Whey protein
One of the issues at the heart of these lawsuits is the rising price of whey protein, a once worthless dairy by-product that now powers a massive industry sector, valuable both to animal-feed purchasers and as a food ingredient. Wisconsin’s 113-year-old Alto Dairy used
to spread it on fields as a fertilizer but now sells the 80 million pounds of whey it produces at its cheese plant every year for about $0.70
per pound, double what it was selling for just four years ago. That rise is attributed in part to growing demand in Asia.
“The increasing price and the fear of actual lack of material in the future are pushing the large milk protein uses in sports and
infant nutrition to look for other options to replace the preferred proteins, even if only partly,” says a 2013 story on HealthGauge.com.
“This has resulted in increased use of vegetable proteins in the sports nutrition segments over the last years … The price for pea protein
concentrate has gone up 30 percent in the last months, reaching prices above €5.00 ($6.24) a kilogram. It is mainly the lack of material of
European source that is pushing prices up.”
Some relief might be on the horizon.
“Compared to a year ago August, exports were 20 percent lower for dry whey, 36 percent lower for whey protein concentrate and 11
percent lower for lactose,” HealthGauge.com says. “But cheese was still 11 percent higher. Due to increase in world milk production and
China’s much lower dairy imports than earlier in the year, world dairy product prices have declined substantially and are considerably
lower than US prices, lowering US exports.”
But Chromadex’s Jaksch doesn’t share the optimism that whey prices are going to let up anytime soon. “Why would they?” he asks.
“There’s no reason for them to go down. We keep seeing an increase in demand; protein has become synonymous with healthy weight
loss; its use is expanding. This is a trend I see just based on the number of calls we get of people trying to enter the market.
“People call us every day, literally from all over the world. People who don’t have protein ingredients who are trying to break in; people who have new novel proteins they think will change the protein game. Protein demand isn’t going down anytime soon.”
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SPORTS NUTRITION
How spiking works
Manufacturers are able to cut costs with spiking Jaksch says, because the industry standard for measuring protein levels—known as
the Kjeldahl nitrogen test—is easily fooled. According to John Travis, senior research scientist at NSF International, “The Kjeldahl method involves liberating reduced nitrogen as ammonia and then measuring the ammonia. Since this test determines the nitrogen content,
it is used to calculate the total grams of protein in a protein supplement. The Kjeldahl test could imply a given supplement contains
more whole protein than it actually does if the test measures a nonprotein substance simply by its nitrogen content.”
Jaksch points out that it was a reliance on nitrogen testing that led to the 1998 melamine scandal. Back then, product manufacturers, particularly in China, began adding melamine, a nitrogen-rich chemical sometimes used as fertilizer, to infant formula, wheat gluten,
rice protein concentrate, and corn gluten without setting off test alarms.
“When something passes the Kjeldahl method, all that tells you is that you have something in your product with a certain amount
of nitrogen in it,” Jaksch says. “That has some value only as long as you are doing other tests to prove the identity of your protein. At the
root of all protein spiking is the fact you are using a nonspecific test to measure protein.”
Which describes exactly how protein-product manufacturers are tricking the test. By adding inexpensive, nitrogen-rich free-form
amino acids, they make the total protein content look higher than it actually is.
Top amino spiking agents include arginine, which has three times more nitrogen than whey protein, and creatine, which has 1.5
times more nitrogen at less than half the price of whey protein, according to Tim Ziegenfuss, CEO of the Center for Applied Health Sciences, a clinical research group.
A simple fix
It isn’t as if coming up with an alternate test would be that expensive. While no single group has proposed a specific named test to
replace Kjeldahl’s, groups like Chromadex can run a series of tests on a product sample that determines: the source of the protein, its
bound and unbound amino acid profile, and the nitrogen content.
“A deep-dive study like that costs only $250 to $500 and takes about 10 days for the finished results,” Jaksch says.
The American Herbal Products Association (AHPA) is the first trade association to recognize a need for clarity in how protein is
labeled. In April, four months before the first class-action lawsuit came out, the association issued guidance on the labeling of protein in
food and dietary products, seeking to establish a standard for measuring protein content in food products.
“AHPA’s work in this matter started with the realization that FDA had written a regulation that is unclear, since it states that the
amount of protein in a food or supplement may be calculated as a factor of the product’s nitrogen content,” said AHPA President Michael
McGuffin. “But there are nitrogen sources that are not protein, which can lead to errors when calculating protein, even if in complete
compliance with FDA’s rule.”
The AHPA guidance defines protein as “a chain of amino acids connected by peptide bonds” and recommends that the protein content of foods and dietary supplements should be calculated based on that definition, and that nonprotein nitrogen-containing substances should not be included in that calculation. AHPA encourages all supplement makers to adopt this standard of measuring protein
content.
Sports nutrition giant Dymatize of Texas is one of the protein manufacturers who, from the beginning, has been supportive of AHPA’s efforts.
“Since many free amino acids and creatine cost less to formulate with than intact protein, this creates an opportunity for products
containing less real protein to be lower priced and thus more attractive on the retail shelf,” explains Robert Wildman, chief science
officer. “However, I have to believe that when the consumer buys a protein product with a specific protein claim, they think it is coming
from the protein(s) in the ingredient listing.”
Good news could be on the horizon for consumers. According to Wildman, the FDA will be amending labeling guidelines next year.
The agency could take that opportunity to say that protein listed on labels should come only from intact proteins, thus ruling out spiking
from a regulatory standpoint instead of leaving it up to the courts.
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7. Minerals
© 2015 Penton
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MINERALS
7.1 Minerals are a Bright Spot in a Slumping
Supplements Market
Minerals—unsung heroes of the nutrition world—are finally seeing their moment in the sun. Led by the double-digit growth in magnesium (and despite flat or slightly falling sales in longtime leader calcium), minerals as a whole “increased unlike any other category” of
supplements, says NBJ data analyst James Johnson.
“Minerals aren’t sexy, but their benefits are,” says Dave Chambers, director of national sales at Trace Minerals Research, which
specializes in microminerals but also makes the top-selling liquid magnesium brand. “Growing research on minerals has made the consumer more aware of their importance and, therefore, sales are up.”
Magnesium alone has been growing between 10 and 18 percent a year for the last decade, according to NBJ research, with 2014
finishing up with 16.7 percent growth, at $680 million.
Calcium, meanwhile, has been a billion-dollar ingredient for the last decade. However, its fortunes peaked in 2010 when sales
were $1.23 billion—darling of the supplements world. Ever since then it’s been on a slow decline, thanks to bad publicity around cardiovascular effects, to the point where it clocked in at $1.15 billion in 2014. NBJ forecasts a flat calcium market through 2020, with magnesium estimated to finally surpass calcium by 2020.
Chromium and zinc are the next two biggest mineral ingredients, both responsible for a $108 million market in 2014, according
to NBJ data. While NBJ is forecasting growth of both in the area of 7–8 percent until 2020, mineral insider Max Motyka predicts zinc will
be the next mineral to pop.
US Mineral Sales and Growth, 2001-2020e
$4,000
18%
16%
$3,500
14%
$3,000
12%
10%
$2,500
8%
$2,000
6%
$1,500
4%
2%
$1,000
0%
$500
-2%
-4%
$0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sales
2011
2012
2013
2014
2015e
2016e
2017e
2018e
2019e
2020e
Growth
“As many as 40 percent of elderly Americans have zinc-deficient diets,” says Motyka, who spent 22 years at mineral supplier
Albion until this past January and is now a consultant. “This situation will lead to an increased zinc market.”
Albion is a pioneer in amino acid mineral chelates, which are molecular linkages of amino acids and various minerals that the
body more easily absorbs. Albion built the chelated mineral market and, with other players now vying for market share, all the competitive attention has had the effect of building a robust mineral chelate market.
© 2015 Penton
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MINERALS
The other great innovation driving mineral growth is delivery formats. This is part of the larger movement around Millennials
preferring non-pill formats.
“Liquids, powders, and tablets are currently the most popular delivery formats,” says Chambers. “We’re looking into other potential formats that could be attractive to the market, such as effervescent tablets and gummies.”
With 5 percent growth forecast through 2020, the mineral market is expected to grow from today’s $2.6 billion market to $3.6
billion, according to NBJ estimates.
US Mineral Sales vs Total Supplement Sales, 2004 - 2014
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
1,738 1,811 1,849 1,937 2,055 2,171 2,259 2,333 2,412 2,504 2,630
-1.5%
4.2%
2.1%
4.7%
6.1%
5.7%
4.1%
3.2%
3.4%
3.8%
5.0%
20,453 21,399 22,567 23,918 25,457 27,000 28,209 30,198 32,453 34,900 36,692
3.1%
4.6%
5.5%
6.0%
6.4%
6.1%
4.5%
7.0%
7.5%
7.5%
5.1%
Minerals
Growth
Total Supplements
Growth
Minerals as % of
Total Supplements
8.5%
8.5%
8.2%
8.1%
8.1%
8.0%
8.0%
7.7%
7.4%
7.2%
7.2%
US Mineral Sales vs Total Supplement Sales, 2015e - 2020e
2015e
2016e
2017e
2018e
2019e
2020e
Minerals
2,773
2,927
3,092
3,263
3,430
3,601
Growth
5.4%
5.6%
5.6%
5.5%
5.1%
5.0%
38,599
40,802
43,280
46,004
48,913
52,021
Growth
5.2%
5.7%
6.1%
6.3%
6.3%
6.4%
Minerals as % of Total Supplements
7.2%
7.2%
7.1%
7.1%
7.0%
6.9%
Total Supplements
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MINERALS
US Mineral Sales by Category, 2014
Others
1.5%
Iron
14.0%
Potassium
4.0%
Selenium
2.7%
Calcium
43.7%
Zinc
4.1%
Chromium
4.1%
Magnesium
25.8%
US Mineral Sales by Product Category, 2004-2014
Calcium
Magnesium
Chromium
Zinc
Selenium
Potassium
Iron
Others
Total
© 2015 Penton
2004
993
175
119
75
62
70
209
34
1,738
2005
1,012
202
124
79
66
74
217
36
1,811
2006
1,007
240
115
74
65
74
237
37
1,849
2007
1,056
270
108
72
63
78
253
36
1,937
2008
1,120
309
99
76
61
81
275
35
2,055
2009
1,183
341
96
79
57
82
302
33
2,171
2010
1,229
379
86
77
54
85
316
35
2,259
2011
1,217
435
89
85
54
91
324
36
2,333
2012
1,200
502
94
94
59
95
332
37
2,412
2013
1,174
583
98
102
65
100
344
38
2,504
2014
1,150
680
108
108
72
104
368
40
2,630
100
MINERALS
US Mineral Sales by Product Category, 2015e-2020e
2015e
2016e
2017e
2018e
2019e
2020e
1,134
1,123
1,123
1,127
1,135
1,147
Magnesium
786
892
997
1,101
1,196
1,288
Chromium
117
127
137
147
158
168
Zinc
114
122
131
140
150
161
Selenium
80
88
98
108
118
129
Potassium
109
115
122
128
134
139
Iron
391
414
437
461
486
512
43
45
48
51
53
56
2,773
2,927
3,092
3,263
3,430
3,601
Calcium
Others
Total
US Mineral Growth by Product Category, 2004-2014
Calcium
Magnesium
Chromium
Zinc
Selenium
Potassium
Iron
Others
Total
2004
-5.0%
8.7%
12.6%
-5.8%
0.6%
-1.2%
3.1%
-7.3%
-1.5%
2005
1.9%
15.4%
4.6%
5.3%
5.3%
6.6%
3.9%
5.8%
4.2%
2006
-0.4%
18.5%
-7.4%
-6.7%
-0.7%
0.1%
9.0%
1.9%
2.1%
2007
4.9%
12.9%
-5.8%
-1.8%
-3.0%
4.3%
6.6%
-2.7%
4.7%
2008
6.0%
14.3%
-8.7%
5.1%
-2.8%
4.1%
8.8%
-3.9%
6.1%
2009
2010
5.6%
3.9%
10.4% 11.1%
-3.3% -10.1%
3.9% -2.8%
-7.9% -5.4%
1.1%
3.7%
9.7%
4.8%
-4.8%
4.5%
5.7%
4.1%
2011
-1.0%
14.8%
3.5%
10.8%
1.6%
8.1%
2.6%
4.9%
3.2%
2012
-1.4%
15.3%
5.1%
9.7%
8.8%
4.3%
2.4%
1.5%
3.4%
2013
-2.2%
16.2%
5.1%
9.0%
9.5%
4.9%
3.7%
3.5%
3.8%
2014
-2.0%
16.7%
9.9%
5.5%
10.7%
4.3%
6.8%
5.5%
5.0%
US Mineral Market Share by Product Category, 2004-2014
Calcium
Magnesium
Chromium
Zinc
Selenium
Potassium
Iron
Others
Total
© 2015 Penton
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
57.1% 55.9% 54.5% 54.5% 54.5% 54.5% 54.4% 52.2% 49.7% 46.9% 43.7%
10.1% 11.2% 13.0% 14.0% 15.0% 15.7% 16.8% 18.7% 20.8% 23.3% 25.8%
6.8%
6.9%
6.2%
5.6%
4.8%
4.4%
3.8%
3.8%
3.9%
3.9%
4.1%
4.3%
4.4%
4.0%
3.7%
3.7%
3.6%
3.4%
3.7%
3.9%
4.1%
4.1%
3.6%
3.6%
3.5%
3.3%
3.0%
2.6%
2.4%
2.3%
2.5%
2.6%
2.7%
4.0%
4.1%
4.0%
4.0%
3.9%
3.8%
3.7%
3.9%
4.0%
4.0%
4.0%
12.0% 12.0% 12.8% 13.0% 13.4% 13.9% 14.0% 13.9% 13.8% 13.8% 14.0%
2.0%
2.0%
2.0%
1.9%
1.7%
1.5%
1.5%
1.6%
1.5%
1.5%
1.5%
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
101
MINERALS
US Mineral Market Share by Product Category, 2015e-2020e
2015e
2016e
2017e
2018e
2019e
2020e
Calcium
40.9%
38.4%
36.3%
34.5%
33.1%
31.8%
Magnesium
28.3%
30.5%
32.2%
33.8%
34.9%
35.8%
Chromium
4.2%
4.3%
4.4%
4.5%
4.6%
4.7%
Zinc
4.1%
4.2%
4.2%
4.3%
4.4%
4.5%
Selenium
2.9%
3.0%
3.2%
3.3%
3.4%
3.6%
Potassium
3.9%
3.9%
3.9%
3.9%
3.9%
3.9%
14.1%
14.1%
14.1%
14.1%
14.2%
14.2%
1.5%
1.5%
1.5%
1.5%
1.6%
1.6%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
Iron
Others
Total
US Calcium Sales and Growth, 2001-2020e
20%
$1,400
$1,200
15%
$1,000
10%
$800
5%
$600
0%
$400
-5%
$200
-10%
$0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sales
2011
2012
2013
2014
2015e
2016e
2017e
2018e
2019e
2020e
Growth
© 2015 Penton
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MINERALS
US Calcium Sales by Channel, 2014
Direct channels
31.1%
47.6%
Mass market
21.3%
US Magnesium Sales and Growth, 2001-2020e
25%
$1,400
$1,200
20%
$1,000
15%
$800
$600
10%
$400
5%
$200
$0
0%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sales
2011
2012
2013
2014
2015e
2016e
2017e
2018e
2019e
2020e
Growth
© 2015 Penton
103
MINERALS
US Magnesium Sales by Channel, 2014
Direct channels
23.1%
Nature and specialty
42.2%
Mass market
34.7%
© 2015 Penton
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MINERALS
7.3 Channel Sales
US Mineral Sales by Channel
2.6%
Practitioner
7.4%
Internet
5.1%
12.3%
45..6%
Mass market
27.0%
US Mineral Sales by Channel, 2004-2014
Mass market
Internet
Mail Order
Practitioner
2004
660
622
254
43
57
101
1,738
2005
714
608
275
52
58
106
1,813
2006
751
592
280
58
59
110
1,850
2007
811
608
281
64
60
114
1,938
2008
879
648
270
78
61
120
2,057
2009
932
690
267
88
63
131
2,172
2010
969
715
271
98
66
141
2,260
2011
996
726
284
108
66
152
2,332
2012
1,058
713
297
118
67
166
2,419
2013
1,121
697
311
126
67
182
2,505
2014
1,199
709
324
135
68
195
2,630
US Mineral Sales and Annual Growth by Channel, 2012-2014
Total Supplements
2012
2013
2014
13g
14g
2012
2013
2014
1,058
1,121
1,199
6.0%
6.9%
43.7%
44.8%
45.6%
Mass market
713
697
709
-2.2%
1.7%
29.5%
27.8%
27.0%
297
311
324
4.7%
4.1%
12.3%
12.4%
12.3%
Internet
118
126
135
6.8%
6.9%
4.9%
5.0%
5.1%
Mail Order
67
67
68
0.2%
1.4%
2.8%
2.7%
2.6%
Practitioner
166
182
195
9.5%
7.2%
6.9%
7.3%
7.4%
2,419
2,505
2,630
3.5%
5.0%
100.0%
100.0%
100.0%
Total
© 2015 Penton
105
MINERALS
7.4 Top Companies
Top 20 Mineral Companies in 2014
Vitamin Sales
Company Name
Growth
2013
2014
2014
511
487
-5%
Pharmavite*
367
361
-2%
Pfizer (Centrum, Caltrate, Alacer)
107
104
-2%
67
74
12%
Perrigo*
65
71
10%
64
69
9%
Delavau*
63
63
1%
Schwabe NA
55
61
10%
55
52
-6%
VitaQuest Intl*
39
41
5%
Bayer Group
39
38
-4%
Nutraceutical International
38
37
-2%
34
34
-2%
29
32
9%
Kikkoman Corporation (Country Life, Allergy Research Group)
29
31
5%
30
30
2%
Church & Dwight (Northwest Natural Products/Nutrition Now)
28
30
5%
Jarrow Formulas
29
28
-2%
Standard Process
25
27
8%
ProPhase Labs (formerly Quigley Corp. (Cold-EEZE))
25
27
6%
© 2015 Penton
106
8. Meal
Replacements
© 2015 Penton
107
MEAL REPLACEMENTS
8.1 Category Looks to New Formulations,
Mass to Sustain Growth
Few industries would be disappointed with 7.9 percent growth, but the meal replacement category’s glory days may be recent
enough that an otherwise healthy increase in sales could still draw a wince.
As recently as 2012, meal replacements were sailing along at a 14.8 percent clip, but in a category anchored so tightly to the MLM
model, bad news at a single company can ripple across the whole market. NBJ estimates that MLM accounts for $1.4 billion of the $4.3
billion meal replacement market. While retail sales grew at 9.8 percent in 2014, sales in MLM trailed at 4.7 percent.
The bad news that broke up the party in 2013 was the implosion at ViSalus. A company that hit $623 million in 2012 was in free fall
the next year, plummeting to $351 million for 2013. Though far less dramatic, slowing growth for Herbalife’s North American sales likely
have had its own outsize effect for 2014. Herbalife accounts for roughly an eithth of the entire meal replacement market and sales grew
at 3.7 percent in 2014, a sharp decline from 2013’s 7.9 percent.
That MLM dynamic is not the entire story, of course.
As has happened for supplements, rising interest in natural and organic food as a complete nutrition answer may have some consumers more reluctant to base their diet on a meal replacement shake. Some may feel more confident in a smoothie that came out of
their shiny Vitamix (sales for the $400 blenders are up by more than 400 percent since 2011).
US Meal Replacement Sales and Growth, 2001-2020e
$6,000
15%
$5,000
10%
$4,000
5%
$3,000
0%
$2,000
-5%
$1,000
-10%
$0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015e 2016e 2017e 2018e 2019e 2020e
There are suggestions, however, that trends for meal replacement could shift. Orgain, a product presented as more closely aligned
with food, has its shakes in Costco. The warehouse chain has passed Whole Foods Market as the leader in organic sales and could become a trendsetter across the entire natural products industry.
Just as whole food supplements are a bright spot in supplements, whole food meal replacements like Orgain’s could offer an opportunity in meal replacement. Interest in plant-based proteins provides another angle. White Wave’s $550 million acquisition deal for Vega
is a sign that plant-based protein has arrived.
What we haven’t seen is significant growth in internet sales. Sales for the geek-centric Soylent “food replacement” still garner more
than their share of headlines. Soylent orders are internet based, but growth in internet sales for meal replacements, though high, is large© 2015 Penton
108
MEAL REPLACEMENTS
ly insignificant. NBJ estimates internet sales of meal replacements at $67 million. The 13.7 percent increase in sales stands for little when
the sales are so small.
Still internet, warehouses stores like Costco, and a broader array of channels not so dependent on MLM, might be the industry’s
best bet.
US Meal Replacement Supplement Sales vs Total Supplement Sales, 2004 - 2014
2004
2,329
Meal Replacement
Supplement
Growth
Total Supplements
Growth
Meal Replacement
Supplements as % of
Total Supplements
2005
2,300
2006
2,362
2007
2,461
2008
2,577
2009
2,658
2010
2,754
2011
3,166
2012
3,635
2013
3,938
2014
4,250
-7.6%
-1.2%
2.7%
4.2%
4.7%
3.1%
3.6% 15.0% 14.8%
8.3%
7.9%
20,453 21,399 22,567 23,918 25,457 27,000 28,209 30,198 32,453 34,900 36,692
3.1%
4.6%
5.5%
6.0%
6.4%
6.1%
4.5%
7.0%
7.5%
7.5%
5.1%
11.4% 10.7% 10.5% 10.3% 10.1%
9.8%
9.8% 10.5% 11.2% 11.3% 11.6%
US Meal Replacement Supplement Sales vs Total Supplement Sales, 2015e - 2020e
2015e
2016e
2017e
2018e
2019e
2020e
Meal Replacement Supplement
4,576
4,905
5,270
5,669
6,078
6,497
Growth
7.7%
7.2%
7.4%
7.6%
7.2%
6.9%
38,599
40,802
43,280
46,004
48,913
52,021
5.2%
5.7%
6.1%
6.3%
6.3%
6.4%
11.9%
12.0%
12.2%
12.3%
12.4%
12.5%
Total Supplements
Growth
Meal Replacement Supplements as % of
Total Supplements
© 2015 Penton
109
MEAL REPLACEMENTS
8.2 Channel Sales
US Meal Replacement Sales by Category, 2014
1.8%
Practitioner
Internet
3.3%
1.6%
9.9%
33.2%
Mass market
50.1%
US Meal Replacement Supplement Sales by Channel, 2004-2014
Mass Market
Internet
Practitioner
Total
2004
219
1,344
633
17
55
61
2,329
2005
216
1,239
709
18
56
63
2,300
2006
212
1,258
738
23
57
75
2,362
2007
228
1,297
775
26
58
78
2,461
2008
237
1,357
813
30
59
81
2,577
2009
235
1,453
783
32
63
92
2,658
2010
244
1,489
821
37
65
97
2,754
2011
284
1,625
1,034
45
69
109
3,166
2012
321
1,784
1,287
52
72
120
3,635
2013
372
1,952
1,347
59
75
133
3,938
2014
420
2,131
1,412
67
78
142
4,250
US Meal Replacement Supplement Sales and Annual Growth by Channel, 2012-2014
Total Supplements
2012
2013
2014
13g
14g
2012
2013
2014
321
372
420
15.8%
13.0%
8.8%
9.4%
9.9%
Mass market
1,784
1,952
2,131
9.4%
9.2%
49.1%
49.6%
50.1%
1,287
1,347
1,412
4.7%
4.8%
35.4%
34.2%
33.2%
52
59
67
14.1%
13.7%
1.4%
1.5%
1.6%
Internet
Practitioner
Total
© 2015 Penton
72
75
78
4.4%
3.6%
2.0%
1.9%
1.8%
120
133
142
10.6%
6.9%
3.3%
3.4%
3.3%
3,635
3,938
4,250
8.3%
7.9%
100.0%
100.0%
100.0%
110
MEAL REPLACEMENTS
8.3 Top Companies
Top 10 Meal Replacement Companies in 2014
Vitamin Sales
Company Name
Growth
2013
2014
2014
Abbott Labs/Ross Products (Ensure, EAS)
449
470
5%
Nestle (Boost, Carnation, Optifast)
209
239
14%
107
116
9%
Kainos Capital (Slimfast)
115
93
-19%
Atrium Innovations (Garden of Life, Pure Encapsulations, Douglas Labs)
60
67
12%
Atkins Nutritionals
70
64
-8%
59
61
3%
55
54
-3%
Kellogg (Special K)
39
41
5%
CytoSport (Muscle Milk)
38
42
9%
© 2015 Penton
111
9. Specialty
Supplements
© 2015 Penton
112
SPECIALTY SUPPLEMENTS
9.1 Overview
Specialty supplements is the catch-all term for supplements that don’t fit easily into categories like vitamins, minerals or herbs &
botanicals. For this report, we include DHEA, CoQ10, Melatonin and a handful of other niche products.
But in recent years, Specialty Supplements has really become a tale of two ingredients: fish oil and probiotics.
Few ingredients have traced the boom and bust arc of fish oil. In the last decade, the category saw growth nearing 45 percent. The
bust didn’t happen all at once—sales growth slowed to 5.6 percent in 2012—but then 2013 came and the once bright spot turned dark.
After a study was published linking Omega 3 blood levels to prostate cancer, on top of other research the same year showing no benefit,
fish oil sales hit the skids and stayed there. In 2013, sales fell by 5.4 percent. Numbers for 2014 aren’t as bad with a 2.8 percent drop but
NBJ projections have fish oil sales largely stagnant for the next three years. They appear unlikely to return to 2012 levels through the end
of the decade.
In this tale of two trajectories, probiotics is the hero. Now more than a quarter of the NBJ’s Specialty Supplements, probiotics are set
to grow by more than $1 billion in the next five yers, finishing the decade at $2.6 billion. Probiotics were under $1 billion when fish oil hit
its 2012 peak.
The contrast in the two ingredients offers a clear lesson for the industry. Bust doesn’t always follow boom, but when it does, the
effect can last years.
9.2 A Microbiome Boost for Gluten Free
Early this year, Nestle Health Science announced a $65 million investment in a nutritional push to improve the health of gut bacteria. And they are not the only ones looking for gold in bugs. The burgeoning field of the microbiome—the bacteria, fungi, viruses and
archaea that live in and on us—is earning sizable consumer interest and industry attention. Probiotic foods were a nearly $7 billion
industry by 2013—and are projected to jump to nearly $10 billion by 2018. And the probiotic supplement market, which brought in approximately $1.2 billion in 2013, is expected to almost double in size by 2018.
And for good reason. The gut microbiome, we are learning, is linked to numerous aspects of health—from inflammation and autoimmune diseases to weight gain and mood. As part of this gamut of health connections, researchers also have their eye on its role in
digestive disorders, including the fast-growing concern of gluten sensitivity. This market’s size and projected growth alone are enticing:
gluten-free products are forecasted to bring in some $14.4 billion by 2016—almost double the revenue from 2012.
Gut microbes and gluten sensitivity are a natural match—both scientifically and commercially. “There’s been a huge explosion in
funding a lot of microbiome research, and of course gluten sensitivity is a huge area to study,” says Florence Comite, a personalized precision medicine physician in New York City, who sees many patients who are trying to avoid gluten.
But with the rapidly evolving science and consumer awareness into both the health impacts of the microbiome and the nature of
gluten sensitivity, the landscape is likely to be a dynamic one, shifting toward more dialed-in products and greater customer interest in
healthful, effective products. “We will move into the new world as people make probiotics for very specific reasons,” says Joseph Murray,
a gastroenterologist who specializes in gluten sensitivity and intestinal inflammation at Mayo Clinic in Minneapolis. And that includes
diving into the still-perplexing world of gluten sensitivity.
© 2015 Penton
113
US Specialty Supplement Sales and Growth, 2000-2020e
$10,000
18%
$9,000
16%
$8,000
14%
$7,000
12%
$6,000
10%
$5,000
8%
$4,000
6%
$3,000
4%
$2,000
2%
$1,000
0%
$0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Sales
2010
2011
2012
2013
2014 2015e 2016e 2017e 2018e 2019e 2020e
Growth
Evolving science
We are only beginning to learn the extent of the microbiome’s ability to alter health. In 2013, researchers announced in the New
England Journal of Medicine that they were able to conquer severe Clostridium difficile infections in 90 percent of patients through a
wholesale transplant of a healthy person’s microbes. These strikingly positive results spurred increased confidence in the potential and
power of the gut microbiome to impact a range of health issues.
Food sensitivities are a logical avenue for microbiome research—and by extension, probiotic products. “There’s a perception that gut
microflora can alter sensitivities to food and gastrointestinal symptoms,” says Daniel Leffler, a gastroenterologist and director of clinical
research at the Celiac Center at Beth Israel Deaconess Medical Center in Boston. “And many patients are [already] on probiotics as one
way of potentially trying to alter the microbiome,” he says. “It’s clear that there is an interaction between intestinal sensitivity and the gut
microbiome. [But] it’s something we’re just beginning to understand.”
Gluten sensitivity itself—which can generate a variety of symptoms, including abdominal pain, bloating, upset stomach and headaches—has been the subject of some debate. For those that are severely allergic to gluten, a blood test can definitively diagnose celiac
disease. “Beyond that, you get into a grey zone,” says Murray, who also authored the book Mayo Clinic Going Gluten Free. For the rest of
these consumers, there is yet to be a reliable test for non-celiac gluten sensitivity. Even within those with non-celiac gluten sensitivity,
not all individuals are alike, adds Comite. “I think of it on a spectrum,” she says.
For many, gluten might not even be the problem. From his research Murray finds that many people who complain of gluten sensitivity are in fact allergic to another component of wheat. Though gluten is found in several grains, including barley and rye, many “gluten”
studies to date have focused on wheat-based foods, rather than gluten specifically. In short, Leffler says, “there’s a lot of confusion,
because it’s a confusing science.”
Adding in the microbial element is creating even more complexity. Patients with celiac disease show different gut microbe patterns
from healthy individuals. But little research has been done for non-celiac gluten sensitivity, in part because the population is so difficult
to define, Leffler notes. And Murray points out that many people who identify as gluten sensitive have already changed their diets, making sound gut studies even more difficult to run.
© 2015 Penton
114
The reason for that methodological hiccup comes down to microbes: “The main determinant of our flora is what they eat,” Murray
says. Food and supplements can have a rapid impact on gut microbe populations. “Your bacteria can change by tomorrow if you eat
something different,” he says. A 2013 study in Nature found that shifting healthy volunteers’ diets could drastically alter their microbe
profiles—even shifting them toward patterns of disease—in a matter of days.
Eliminating gluten is no exception. “Our bugs change when we go gluten free,” Murray says. A recent study published in the journal
PLOS ONE found that feeding mice a gluten-free diet indeed altered their microbiota. In humans, notes Leffler, a diet-induced shift in
microbe populations could increase or even trigger a food sensitivity. “It may be that some diets modulate gastrointestinal symptoms
because the type of food you eat modulates your microflora, and not because of the food directly,” he says.
Just how probiotics can reduce symptoms or gluten sensitivity itself is still a guessing game, even for some of the top physicians and
researchers. In his own practice, Leffler has found that probiotics do improve some patients’ symptoms, but there is no telling which
patients will benefit and which strains of probiotics will work. “A lot of trial and error—there’s no way around that right now,” he says.
Probiotic growth for gluten-free, with cautions
As probiotic products grow out of specialty stores and into mass retailers like Starbucks and Target, it is also a time of challenge for
makers, says Jeff Brams, general counsel and vice president of international for Garden of Life. “When the trend proliferates, you lose
some of the science and premium quality,” he says. “The more choices there are the more people start to compete on price and convenience. We’re concerned right now, to be frank, that things that have ‘probiotic’ on the label might not be as effective. If consumers start
to take something that doesn’t work, that’s not good for any of us.”
One of the largest challenges in creating effective probiotics for any application is the fact that bacteria are an extraordinarily
diverse group—much more so than types of wheat grass powder or forms of vitamin D. And we are still far from being able to prescribe
particular species, numbers of organisms, or dose duration for most health issues, making formulation still, to a large extent, an art as
much as a science.
The roles of probiotic products in the gluten-sensitive market could be large—and varied. As research develops, Leffler suspects that
we will zero in on bugs that are not necessarily breaking down the gluten itself, but rather modulating gut response or the immune system. He foresees a focus on strains that “are doing something to make the gut a little more tolerant.” And some manufacturers are already
expanding beyond microbes to help consumers process gluten, says Brams. His company’s Herbal Immune Balance line incorporates
both digestive enzymes and probiotics, along with extra nutrients that might lag in a gluten-free diet, he says.
As complementary supplements, prebiotics could also play an important role in boosting gut health for those going gluten free,
Murray says. “If you’re taking a lot of wheat out of the diet, you’re reducing the materials available for good, fermenting bugs in the colon,”
he notes. “You need to think about replacing them.”
Consumer concerns
A core group of about 1 percent of the US population must avoid gluten due to celiac disease. “They’re not trending or trying it out,”
Murray says. (In some countries, such as Sweden and Finland, some 2 percent of the population has celiac disease, he notes.) In many
cases, however, consumers may simply be curious about trying the diet. Comite says from her experience in private practice that many
patients come to her saying, “I’m hearing a lot about gluten.” In fact, as of early 2013, about one third of all adults in the US were trying to
reduce or remove gluten from their diet, according to The NDP Group’s Dieting Monitor.
Among all of these populations, “more and more patients are coming in asking about probiotics,” says Melinda Dennis, a registered
dietitian and nutritional coordinator for the Celiac Center at Beth Israel Deaconess Medical Center. They aren’t usually using the words
“microbiome” or “microbiota” she says, but “more people are interested in: ‘How are my gut bacteria responding?’ ‘Is there something I
should be doing?’”
In her practice, Dennis attempts to alleviate gluten-sensitivity symptoms by turning to “anything I can use to heal the gut and
restore it to its proper functioning order,” she says. That can include probiotics as well as vitamins, omega-3s, calcium, and digestive
enzymes (not to break apart gluten but to handle other symptoms, such a bloating). Her first choice is usually food based—kefir instead
of probiotic pills, asparagus instead of prebiotic powders. “Some people do not want to take a ‘medication,’ and they would call [supplements] a medication,” says Dennis, who is also the author of the book Real Life with Celiac Disease. Additionally, she says, consumers
want to know that the supplement itself is gluten free and—if they are troubled by other food sensitivities—that pills are made without
other potential irritants, such as fructose, soy, or corn.
© 2015 Penton
115
Future of microbiome treatments for gluten sensitivity
The huge growth in gluten free also carries risk. “There’s a lot of hype about gluten-free diets. There are a lot of promises,” Murray
says. “As those promises are not fulfilled, there is going to be swingback the other way.”
But he sees one key way to keep the momentum. “The big challenge for gluten-free suppliers is to make something that’s healthy,”
Murray says. “The way this trend will be going will be gluten-free and healthy.” And probiotics will likely play a role in that move, whether
they come in the form of food—such as kefir or a probiotic-fortified cheese—or in a pill.
Gluten as a sole point of sensitivity might also be challenged as new research and different dietary approaches emerge. “Gluten
sensitivity” could, for many people, be a mislabeling of challenges like fructose malabsorption or overgrowth of bacteria in the small
intestine, says Dennis.
The recent emergence and popularity of the low-FODMAP diet—reducing foods with fermentable oligo-, di-, monosaccharides and
polyols—has raised the question for many patients and researchers alike: “Is it gluten or is it FODMAPs?” says Dennis.
For any of these diets, Murray says, given the early days of the research, “if it doesn’t work, don’t keep at it. It is a significant change—
it’s not necessarily a healthy diet.” The low-FODMAP diet, for example, is low in fiber and can starve some of the good bugs that live in
the gut.
For the time being, probiotics have an edge over traditional medical treatments. They can move quickly to market, not requiring
the FDA approval that pharmaceuticals and invasive procedures do. That can come in handy for physicians and consumers, “especially
when we don’t have a whole lot else to offer,” Leffler notes. But Murray says that lack of FDA approvals could be a double-edged sword:
“Consumers have to be aware that the FDA is not really regulating these, that efficacy is not required” to be proven.
And finding that link—between organism and action—will be key. “The next frontier is not just identifying who they are but identifying what they’re doing,” Murray says of gut microbes. And these bugs do not live or act in isolation. The gut “is a community of interacting bacteria. Understanding what that community is doing and how that community is interacting with us is a huge challenge,” he says.
Comite agrees that a carefully curated collection of bacteria will likely be essential. “I think it’s naive to assume one strain of bacteria is
going to be enough,” she says.
Despite all of the scientific excitement and market hype, many researchers and doctors also remain realistic. “There will never be a
silver bullet probiotic” for gluten sensitivity, Leffler says. “But I think we’ll do a better job of saying this combination of probiotics does a
good job of relieving symptoms.”
© 2015 Penton
116
US Specialty Supplement Sales vs Total Supplement Sales, 2004 - 2014
Specialty Supplement
Growth
Total Supplements
Growth
Specialty Supplement as % of
Total Supplements
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
3,081 3,512 3,921 4,390 4,704 5,053 5,352 5,704 6,170 6,593 6,843
11.5% 14.0% 11.7% 12.0%
7.2%
7.4%
5.9%
6.6%
8.2%
6.9%
3.8%
20,453 21,399 22,567 23,918 25,457 27,000 28,209 30,198 32,453 34,900 36,692
3.1%
4.6%
5.5%
6.0%
6.4%
6.1%
4.5%
7.0%
7.5%
7.5%
5.1%
15.1%
16.4%
17.4%
18.4%
18.5%
18.7%
19.0%
18.9%
19.0%
18.9%
18.6%
US Specialty Supplement Sales vs Total Supplement Sales, 2015e - 2020e
2015e
2016e
2017e
2018e
2019e
2020e
7,105
7,457
7,871
8,364
8,910
9,503
Specialty Supplement
Growth
Total Supplements
3.8%
5.0%
5.6%
6.3%
6.5%
6.7%
38,599
40,802
43,280
46,004
48,913
52,021
5.2%
5.7%
6.1%
6.3%
6.3%
6.4%
18.4%
18.3%
18.2%
18.2%
18.2%
18.3%
Growth
Specialty Supplement as % of
Total Supplements
US Supplement Sales by Product Category, 2014
Others
20.8%
Probiotics
19.9%
Melatonin
5.5%
Homeopathics
17.5%
CoQ10
8.9%
10.8%
Fish/Animal Oil
16.6%
© 2015 Penton
117
US Specialty Supplement Sales by Product, 2004-2014
Melatonin
Probiotics
DHEA
Fish/Animal Oils
Plant Oils
Bee Products
CoQ10
5 HTP
SAMe
MSM
Gelatin
Digestive Enzymes
Homeopathics
Others
Total
2004
67
205
48
272
174
791
81
286
59
96
112
53
146
549
141
3,081
2005
73
243
50
379
193
849
89
343
68
99
109
49
165
649
154
3,512
2006
81
301
48
526
223
873
92
381
79
101
104
44
181
710
177
3,921
2007
93
366
49
695
253
920
95
413
83
102
105
44
196
781
197
4,390
2008
111
425
50
833
253
942
104
436
90
111
104
45
201
795
205
4,704
2009
133
527
55
976
254
911
98
450
92
123
94
42
204
872
224
5,053
2010
159
626
56
1,103
268
878
97
480
93
122
86
39
209
900
235
5,352
2011
202
760
62
1,169
278
830
102
519
96
123
84
38
217
981
243
5,704
2012
259
968
68
1,234
292
813
113
558
100
124
83
37
228
1,037
255
6,170
2013
324
1,195
77
1,168
309
780
130
607
104
127
81
37
243
1,138
273
6,593
2014
378
1,365
79
1,135
312
740
140
607
109
125
80
36
251
1,196
289
6,843
US Specialty Supplement Sales by Product, 2015e-2020e
2015e
2016e
2017e
2018e
2019e
2020e
Melatonin
438
508
580
658
738
820
Probiotics
1,535
1,716
1,909
2,124
2,365
2,636
82
87
92
98
105
112
1,119
1,113
1,120
1,137
1,161
1,189
Plant Oils
314
316
322
336
352
368
707
677
652
630
611
598
Bee Products
152
165
181
198
214
231
CoQ10
620
640
664
701
745
796
5 HTP
115
121
127
134
140
148
SAMe
126
127
128
130
132
134
MSM
79
79
79
79
79
80
Gelatin
36
36
36
37
38
39
263
275
291
308
325
341
1,211
1,271
1,344
1,428
1,519
1,606
307
326
346
366
387
407
7,105
7,457
7,871
8,364
8,910
9,503
DHEA
Fish/Animal Oils
Digestive Enzymes
Homeopathics
Others
Total
© 2015 Penton
118
US Specialty Supplement Growth by Product, 2004-2014
Melatonin
Probiotics
DHEA
Fish/Animal Oils
Plant Oils
Bee Products
CoQ10
5 HTP
SAMe
MSM
Gelatin
Digestive Enzymes
Homeopathics
Others
Total
2004
7.9%
17.0%
2.4%
44.7%
24.3%
1.9%
10.8%
11.3%
10.6%
4.3%
-2.7%
-8.6%
14.0%
17.3%
9.0%
11.5%
2005
2006
9.6% 11.0%
18.8% 23.9%
3.2% -3.2%
39.1% 38.9%
10.7% 15.4%
7.3%
2.8%
10.3%
3.4%
19.6% 11.2%
15.7% 15.9%
3.5%
1.7%
-3.1% -4.2%
-7.5% -10.6%
12.5%
9.6%
18.1%
9.5%
9.6% 14.8%
14.0% 11.7%
2007
14.1%
21.3%
1.7%
32.1%
13.6%
5.4%
3.2%
8.3%
5.8%
1.1%
0.5%
1.6%
8.3%
9.9%
11.2%
12.0%
2008
19.8%
16.3%
2.5%
19.8%
0.1%
2.4%
9.7%
5.6%
7.8%
9.1%
-1.0%
0.7%
2.8%
1.8%
4.0%
7.2%
2009
19.9%
23.9%
9.0%
17.2%
0.3%
-3.2%
-6.2%
3.2%
2.3%
10.6%
-9.5%
-7.1%
1.6%
9.7%
9.1%
7.4%
2010
19.4%
18.9%
3.3%
13.0%
5.6%
-3.7%
-0.6%
6.6%
1.6%
-1.0%
-8.0%
-6.3%
2.5%
3.3%
5.0%
5.9%
2011
26.8%
21.4%
9.0%
6.0%
3.8%
-5.4%
4.4%
8.2%
3.6%
1.1%
-2.8%
-2.4%
3.7%
8.9%
3.5%
6.6%
2012
28.2%
27.4%
11.1%
5.6%
5.0%
-2.1%
11.4%
7.6%
3.3%
1.2%
-1.3%
-1.3%
4.9%
5.7%
4.6%
8.2%
2013
25.0%
23.4%
12.2%
-5.4%
6.0%
-4.0%
14.4%
8.7%
4.8%
1.8%
-1.7%
-1.4%
7.0%
9.7%
7.2%
6.9%
2014
16.7%
14.2%
2.4%
-2.8%
0.8%
-5.1%
7.9%
0.1%
4.8%
-1.0%
-1.7%
-1.4%
3.1%
5.1%
6.0%
3.8%
US Specialty Supplement Market Share by Product, 2004-2014
Melatonin
Probiotics
DHEA
Fish/Animal Oils
Plant Oils
Bee Products
CoQ10
5 HTP
SAMe
MSM
Gelatin
Digestive Enzymes
Homeopathics
Others
Total
© 2015 Penton
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2.2%
2.1%
2.1%
2.1%
2.4%
2.6%
3.0%
3.5%
4.2%
4.9%
5.5%
6.6%
6.9%
7.7%
8.3%
9.0% 10.4% 11.7% 13.3% 15.7% 18.1% 19.9%
1.6%
1.4%
1.2%
1.1%
1.1%
1.1%
1.1%
1.1%
1.1%
1.2%
1.1%
8.8% 10.8% 13.4% 15.8% 17.7% 19.3% 20.6% 20.5% 20.0% 17.7% 16.6%
5.7%
5.5%
5.7%
5.8%
5.4%
5.0%
5.0%
4.9%
4.7%
4.7%
4.6%
25.7% 24.2% 22.3% 20.9% 20.0% 18.0% 16.4% 14.6% 13.2% 11.8% 10.8%
2.6%
2.5%
2.4%
2.2%
2.2%
1.9%
1.8%
1.8%
1.8%
2.0%
2.0%
9.3%
9.8%
9.7%
9.4%
9.3%
8.9%
9.0%
9.1%
9.0%
9.2%
8.9%
1.9%
1.9%
2.0%
1.9%
1.9%
1.8%
1.7%
1.7%
1.6%
1.6%
1.6%
3.1%
2.8%
2.6%
2.3%
2.4%
2.4%
2.3%
2.2%
2.0%
1.9%
1.8%
3.6%
3.1%
2.7%
2.4%
2.2%
1.9%
1.6%
1.5%
1.3%
1.2%
1.2%
1.7%
1.4%
1.1%
1.0%
0.9%
0.8%
0.7%
0.7%
0.6%
0.6%
0.5%
4.8%
4.7%
4.6%
4.5%
4.3%
4.0%
3.9%
3.8%
3.7%
3.7%
3.7%
17.8% 18.5% 18.1% 17.8% 16.9% 17.2% 16.8% 17.2% 16.8% 17.3% 17.5%
4.6%
4.4%
4.5%
4.5%
4.4%
4.4%
4.4%
4.3%
4.1%
4.1%
4.2%
100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
119
US Specialty Supplement Market Share by Product, 2015e-2020e
2015e
2016e
2017e
2018e
2019e
2020e
Melatonin
6.2%
6.8%
7.4%
7.9%
8.3%
8.6%
Probiotics
21.6%
23.0%
24.3%
25.4%
26.5%
27.7%
1.2%
1.2%
1.2%
1.2%
1.2%
1.2%
15.8%
14.9%
14.2%
13.6%
13.0%
12.5%
Plant Oils
4.4%
4.2%
4.1%
4.0%
3.9%
3.9%
9.9%
9.1%
8.3%
7.5%
6.9%
6.3%
Bee Products
2.1%
2.2%
2.3%
2.4%
2.4%
2.4%
CoQ10
8.7%
8.6%
8.4%
8.4%
8.4%
8.4%
5 HTP
1.6%
1.6%
1.6%
1.6%
1.6%
1.6%
SAMe
1.8%
1.7%
1.6%
1.6%
1.5%
1.4%
MSM
1.1%
1.1%
1.0%
0.9%
0.9%
0.8%
Gelatin
0.5%
0.5%
0.5%
0.4%
0.4%
0.4%
Digestive Enzymes
3.7%
3.7%
3.7%
3.7%
3.6%
3.6%
17.0%
17.0%
17.1%
17.1%
17.0%
16.9%
4.3%
4.4%
4.4%
4.4%
4.3%
4.3%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
DHEA
Fish/Animal Oils
Homeopathics
Others
Total
© 2015 Penton
120
US Fish and Animal Oil Supplements Sales and Growth, 2001-2020e
50%
$1,400
$1,200
40%
$1,000
30%
$800
20%
$600
10%
$400
0%
$200
-10%
$0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sales
2011
2012
2013
2014 2015e 2016e 2017e 2018e 2019e 2020e
Growth
US Fish and Animal Oil Sales by Channel, 2014
Direct Channels
21.7%
46.8%
Mass market
31.5%
© 2015 Penton
121
US Bee Product Sales and Growth, 2001-2020e
$250
20%
15%
$200
10%
$150
5%
$100
0%
$50
-5%
$0
-10%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sales
2011
2012
2013
2014 2015e 2016e 2017e 2018e 2019e 2020e
Growth
US Bee Product Sales by Channel, 2014
Direct channels
29.9%
59.3%
Mass market
10.8%
© 2015 Penton
122
US Probiotic Supplement Sales and Growth, 2001-2020e
$3,000
30%
$2,500
25%
$2,000
20%
$1,500
15%
$1,000
10%
5%
$500
0%
$0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sales
2011
2012
2013
2014
2015e 2016e 2017e 2018e 2019e 2020e
Growth
US Probiotic Sales by Channel, 2014
Direct channels
31.9%
29.6%
Mass market
38.6%
© 2015 Penton
123
US Digestive Enzyme Sales and Growth, 2001-2020e
$400
25%
$350
20%
$300
$250
15%
$200
10%
$150
$100
5%
$50
$0
0%
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Sales
2011
2012
2013
2014
2015e 2016e 2017e 2018e 2019e 2020e
Growth
US Digestive Enzyme Sales by Channel, 2014
Direct channels
25.5%
59.5%
Mass market
15.0%
© 2015 Penton
124
9.4 Channel Sales
2004
Retail
Mass Retail
Internet
Practitioner
Total
1,119
1,259
174
77
77
376
3,082
2004
Retail
Mass Retail
Internet
Practitioner
Total
© 2015 Penton
US Specialty Supplement Sales by Channel, 2004-2014
2005
2006
2007
2008
2009
2010
1,290
1,425
203
106
81
406
3,511
1,421
1,582
244
132
91
453
3,922
1,548
1,792
261
178
96
517
4,391
1,670
1,971
240
192
97
536
4,706
1,755
2,172
223
222
107
573
5,053
1,840
2,294
229
271
116
603
5,352
US Specialty Supplement Growth by Channel, 2004-2014
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
1,961
2,401
247
313
125
657
5,704
2,123
2,540
268
374
135
731
6,170
2,268
2,660
288
421
140
817
6,594
2,378
2,675
307
459
145
879
6,843
2011
2012
2013
2014
8.5%
7.7%
30.0%
40.0%
12.0%
23.0%
15.3%
13.2%
17.0%
38.0%
5.0%
8.0%
10.2%
11.0%
20.0%
24.0%
12.0%
11.5%
8.9%
13.3%
7.0%
35.0%
6.0%
14.0%
7.9%
10.0%
-8.0%
8.0%
1.0%
3.8%
5.1%
10.2%
-7.0%
16.0%
10.0%
6.9%
4.8%
5.6%
2.4%
22.0%
8.5%
5.2%
6.6%
4.7%
8.1%
15.4%
7.8%
8.9%
8.2%
5.8%
8.4%
19.3%
8.0%
11.4%
6.9%
4.7%
7.5%
12.6%
3.6%
11.8%
4.9%
0.6%
6.4%
9.2%
3.8%
7.5%
11.5%
13.9%
11.7%
12.0%
7.2%
7.4%
5.9%
6.6%
8.2%
6.9%
3.8%
125
9.5 Top Companies
Top 20 Specialty Supplement Companies in 2014
Vitamin Sales
Company Name
Growth
2013
2014
2014
Carlyle Group - NBTY (Natures Bounty, Sundown, Oseto-Bi-Flex, Ester-C)
491
508
3%
307
303
-2%
Pharmavite*
226
222
-2%
Schwabe NA
142
144
1%
Perrigo*
129
130
0%
Nordic Naturals
116
123
5%
102
111
9%
110
107
-3%
78
96
23%
Metagenics
87
92
5%
NOW Foods
87
90
4%
73
81
12%
DSM
70
74
6%
Matrixx Initiatives (Zicam)
60
62
4%
ProCaps Laboratories (Andrew Lessman)
57
60
6%
Similasan USA
53
56
7%
Healthy Directions (Helen ofTroy)
54
56
4%
International Vitamin Corporation (formerly Inverness Medical Nutritionals Group)
56
55
-2%
Proctor & Gamble (New Chapter)
53
55
4%
Barlean’s Organic Oils
58
54
-7%
© 2015 Penton
126
9.6 Microbiome
Healthy Activity in the Microbiome
By Rodney Clark
Aspect Consumer Partners
Things are certainly heating up in the “investment” microbiome these days, as in January two of the world’s largest consumer
products companies, Nestlé and Johnson & Johnson, placed sizeable bets in the space.
On January 6, Nestlé Health Sciences—which was founded in 2001 to play a key role in Nestlé’s transformation into the leader in
science-based personalized nutrition—entered the race for the lead in microbiome therapeutics with the announcement of a $65
million (Series D) investment in Seres Health, a clinical-stage therapeutics company focused on the discovery and development of
drugs to treat diseases of the microbiome.
This investment is significant in that it marks one of the first times a large, global food and health products giant has placed a big
bet in the emerging microbiome space. It is also important as it is provides Series Health, still an early-stage biotech company,
with the much needed capital and deep pockets of a large sponsor. This could help further its work on SER-109, a potential future
product aimed at preventing the recurrence of Clostridium difficile infection, as well as to advance the company’s pipeline of
other microbiome therapeutics.
Nestlé also announced plans to partner with Flagship Ventures, a Boston-based venture capital firm (and partner in Seres Health),
in supporting startups working in nutritional health and therapy. And while specific partnership terms were not disclosed, this is
further evidence of just how committed the company is to finding ways to link nutrition and health care. The investment follows
only a month after a previous $48 million round of funding, leaving Seres health well capitalized to continue its leading-edge work
in the field.
Close on the heels of the Nestlé Health Sciences move was the announcement on January 13 by Johnson & Johnson that it had
acquired, through its Jannsen Biotech division, the license rights to Vedanta Biosciences’ bacterial product VE202, the company’s
lead microbiome pharmaceutical candidate that has demonstrated efficacy in clinical trials. Vedanta notes that this candidate
product originated from work conducted at the University of Tokyo that showed that specific gut-dwelling bacteria control key
immune cells that combat autoimmune diseases.
Under the terms of the agreement, Janssen will develop and begin the commercialization process of the pharmaceutical candidate in inflammatory bowel disease. This investment follows an initial investment made in 2013 by J&J in Vedanta, which was
launched in 2010 by PureTech, a science and technology development company based in Boston. The license agreement is structured with an up-front payment and potential milestone payments that could amount to $241 million, with additional consideration related to commercialization.
This marked another large corporate player making a sizeable bet in the microbiome space in 2015—all before January had even
come to a close.
Rodney J. Clark is Managing Partner and Founder of Aspect Consumer Partners, an M&A, strategic and corporate finance advisory
boutique focused on the healthy segments of Food, Beverage, Beauty and Consumer Products.
Email him at [email protected].
© 2015 Penton
127
10. Condition
Specific
© 2015 Penton
128
CONDITION SPECIFIC
10.1 Overview
Observers might see the Condition Specific area as a both a reflection and an exception to trends across the supplement industry as
a whole. Where the natural and organic movement could convince consumers that less-processed whole foods can meet all their nutritional needs, multivitamins and other long-term benefit supplements might increasingly seem a thing of the past, But condition Specific
supplements can offer targeted benefits they may not see in food. Leafy greens are nutrition powerhouses but they’re not necessarily
going to help you sleep. So while supplements for general health are not up remarkably over the past ten years, bone health supplements
nearly doubled. Supplements for insomnia more than tripled.
At the same time, a general distrust in supplements can have a profound impact on the category as a whole, and specific ingredients are vulnerable to studies questioning efficacy. That makes laying bets in a niche category a tricky business, often profitable but
always precarious.
The Personalized-Nutrition Boom
What does the future of personalized medicine look like? Ask Jeffrey Bland. He’s already living it.
Over the past year, the nutritional biochemist and founder of the Personalized Lifestyle Medicine Institute has had his entire genome sequenced once, his gut bacteria assessed four times, and his blood, spit, and urine scrutinized quarterly to measure everything
from insulin sensitivity and inflammation to food allergies and nutrient absorption. He tracks his sleep habits, heart rate, and physical
activity via monitors around his wrist and chest. He analyzes and uploads the resulting data points to his personal account on the cloud,
which he frequently accesses to analyze changes to his diet, supplement choices, and exercise habits.
“I’ve learned a tremendous number of things about myself that I’ve already been able to put into action,” says Bland, one of 100
participants in the Hundred Person Wellness Project, a pilot research study by the Seattle-based Institute for Systems Biology (ISB). “It
has been extraordinarily empowering.”
US Conditions Specific Sales by Product Type, 2014
Supplements
8.2%
OTC
5.0%
Prescription drugs
86.9%
© 2015 Penton
129
CONDITION SPECIFIC
Bland’s ultra-quantified year has no doubt been an expensive one. (ISB reportedly budgeted $10,000 per subject.) And he is quick to
acknowledge that he, as a scientist, can interpret his data more readily than the average Joe could. But his experience says a lot about
how far the personalized nutrition/wellness movement has come—and where it’s headed. Twelve years after the completion of the
Human Genome Project prompted a flurry of direct-to-consumer DNA tests and “you have this gene so you should do this” advice, pioneers in the field have come to realize that, as Bland puts it, “it’s not so simple.” Our resident bacteria, bodily fluids, and easily trackable
biometrics also provide key pieces of the picture needed to accurately customize our path to wellness. And thanks to an infusion of
investment and an explosion of research, those fields are booming, too.
The ultimate key, says Bland, will be to bring all that information together swiftly and affordably in a form the average layperson can
understand. That day may not be so far off.
“We are already starting to see the intersection of genomics, phenotypic markers, and wearable devices with the power of informatics and big data,” says Bland. “We are moving from the age of the average to the age of the individual.”
US Supplement Sales by Conditions, 2014
Other conditions
33.1%
Sports, energy and weight loss
28.4%
General health
13.9%
Bone health
5.3%
Gastrointestinal health
5.7%
Heart health
6.7%
Immune system
6.9%
Here’s a look at what’s new and what’s next:
Gene sequencing:
What it tells us: In recent years, the field of nutritional genomics has discovered hundreds of genes that influence the way we
metabolize nutrients, perceive taste, regulate hunger, and respond to exercise. “We have figured out that your diet and genes absolutely
interact, helping to determine the best nutrients for you,” says Michael Nova, MD, PhD, chief innovation officer for San Diego-based
genetic testing company Pathway Genomics. For instance, the APOA, PPARG and FABP genes all influence fat burning and storage.
Depending on which variants—or single nucleotide polymorphism (SNPs)—you have, you may be better suited for a higher-fat or low-fat
diet. Some variants interfere with absorption of vitamins D and C or Omega 3s. People with those might consider supplements. Meanwhile, people with certain versions of the ACTN gene respond better to endurance sports, while those with others are better suited for
© 2015 Penton
130
CONDITION SPECIFIC
strength training. And where genome mapping cost $300,000 just five years ago, consumers can now map their genomes for $3,000 and
get readings of smaller chunks for just $100.
What’s new: Unlike DTC-predecessors (which have mostly ceased to exist in the wake of the Food and Drug Administration’s 2013
request that 23andMe discontinue its Personal Genome Service) most companies today route their services through practitioners. In
2014, New Orleans-based startup GenoVive began offering a gene-based weight-management system through physicians. Patients have
their saliva analyzed for 17 SNPs related to diet and exercise, and an algorithm assigns them a daily calorie count and one of four diets.
They can even have their customized meals and supplements delivered to their door daily.
“Those who stick to the closed-loop-system diet tend to lose more than those who do it on their own,” says founder Vic Castellon,
who lost 85 pounds on the plan. Six-year-old Pathway Genomics offers 12 categories of genetic tests, via 20,000 practitioners. Its most
popular tests, the Healthy Weight DNA Insight test and Pathway Fit test—a favorite among athletes—explore about 80 genes. With $14.4
million in revenue in 2013, $80 million from investors, and a 3-year-growth rate of 2,416 percent, Pathway was recently named No. 173 on
Inc. 500’s list of fastest-growing private companies.
What’s next: In September, with funding from the IBM Watson Group (a business unit dedicated to developing aps using the
Watson supercomputer), Pathway Genomics will roll out the Pathway Panorama mobile app. The app will tap into genetic information,
published research, medical records, GPS coordinates and info from wearable devices, and Watson to give users instant answers to questions like “What should I eat today, given what I ate yesterday?” or “I’m on a business trip: How far should I run and at what pace, given
the change in altitude?”
“It is basically a supercomputer in your hand that will grab any information you allow it to in order to give you a very personalized
answer,” says Nova.
US Supplement Sales by Conditions, 2004-2014
General Health
Cold/Flu-Immune
Sports/Energy/
Weight-Loss
Brain/Mental
Insomnia
Mood
Menopause
Heart Health
Joint Health
Sexual Health
Bone Health
Gastrointestinal
Health
Diabetes
Vision
Hair/Skin/Nails
Anti-cancer
Liver & Detox
Anti-aging
Top Conditions
© 2015 Penton
2004
2005
2006
2007
2008
2009
2010e
2011
2012
2013
2014
4,498
1,196
4,484
1,372
4,309
1,477
4,052
1,659
4,159
1,828
4,318
1,954
4,404
1,991
4,556
2,116
4,680
2,215
4,980
2,401
5,084
2,535
6,192
244
149
226
309
945
1,179
352
985
6,280
286
169
256
313
1,014
1,252
400
1,008
6,348
353
198
334
320
1,324
1,402
439
1,220
6,597
401
218
367
352
1,542
1,530
475
1,394
6,849
461
234
394
383
1,737
1,605
482
1,544
7,110
509
264
436
401
1,872
1,614
495
1,672
7,444
544
289
453
424
2,009
1,629
496
1,777
8,269
585
340
481
448
2,145
1,619
524
1,808
9,240
631
407
507
459
2,294
1,639
571
1,847
9,868
634
475
544
482
2,361
1,652
627
1,892
10,421
640
535
576
498
2,444
1,649
675
1,946
634
541
741
590
1,072
1,124
844
666
224
395
1,193
915
798
300
424
1,200
1,000
931
324
472
1,215
1,110
959
343
518
1,227
18,522
19,290
246
21,291
266
22,490
295
23,914
305
25,106
1,213
1,003
364
573
1,234
44
312
26,204
1,381
1,088
386
661
1,267
87
340
28,099
1,616
1,187
412
737
1,285
105
362
30,196
1,881
1,299
425
787
1,334
119
391
32,151
2,105
1,408
447
837
1,401
134
426
33,761
131
CONDITION SPECIFIC
Microbiome Testing
What it tells us: While all humans have roughly 99.9 percent of their genes in common, they vary greatly when it comes to their
microbiomes—in what species they host and in what proportion, says researcher Rob Knight, PhD. Some organisms, like lactobacillus and bifidobacterium, protect against pathogens, while others help extract carbohydrates and amino acids from food, or promote
immunity. A diverse microbiome is ideal, but poor diet, antibiotic use, and even lack of sleep and exercise can wipe out diversity. Knight
says that for some conditions, like obesity, the microbiome is better than DNA for predicting a person’s risk. The good news: Unlike the
genome, the microbiome can be easily changed.
What’s new: These are early days for testing and even earlier days for acting on results. Knight’s American Gut Project, which he recently moved from the University of Colorado-Boulder to the University of California San Diego, expressly states that it is a “pure science
project, not a fee-for-service business.” For $99, participants get a kit for collecting and sending back samples and, once the samples are
analyzed, a glimpse at what bacteria they host and how that bacteria compares to others. And every kit means more data for Knight and
his colleagues, who hope to get a better picture of what a healthy microbiome looks like, so people can someday try to emulate or restore
it.
San Francisco-based Ubiome.com is taking a more traditional business approach. Founded in 2012 by Stanford grad Jessica Richman, the company raised $350,000 in 10 weeks via Indiegogo.com and another $6.5 million via traditional tech-startup investments.
Richman concedes that Ubiome’s microbiome tests—which cost from $89 to $399—have been more of a “curiosity” so far. But that will
change this year, as the company moves to offering actionable science-based advice and collaborates with companies on new microbiome-based products.
What’s next: In September, Massachusetts-based Seres Health announced initial results of clinical trials on SER-109, the first
prescription “oral microbiome therapeutic” for the treatment of chronic Clostridium Difficile, a form of infectious diarrhea. A single dose
was capable of restoring diversity to the microbiome. After eight weeks, 29 of 30 patients were infection-free. The company has a whole
line of Health Ecobiotics in the pipeline to address infectious, metabolic, and inflammatory diseases. In 2014 it received $110 million
in investments, including $65 million from Nestle Health Sciences. Meanwhile, Ubiome has launched a crowdfunded dental-health
research project, in hopes of developing toothpaste and mouthwash to restore a healthy oral microbiome. And Richman says that major
CPG companies are interested in developing microbiome-based shampoos and acne medications. She says she would also love to work
with probiotic companies to help personalize supplements: “Our goal is to move very quickly to commercialize this research.”
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CONDITION SPECIFIC
US Supplement Growth by Conditions, 2004-2014
General Health
Cold/FluImmune
Sports/Energy/
Weight-Loss
Brain Mental
Insomnia
Mood
Menopause
Heart Health
Joint Health
Sexual Health
Bone Health
Gastrointestinal
Health
Diabetes
Vision
Hair/Skin/Nails
Anti-cancer
Liver & Detox
Anti-aging
Top Conditions
2004
2005
2006
2007
2008
2009
2010e
2011
2012
2013
2014
2.7%
-0.3%
-3.9%
-6.0%
2.6%
3.8%
2.0%
3.4%
2.7%
6.4%
2.1%
9.3%
14.7%
7.6%
12.3%
10.2%
6.9%
1.9%
6.3%
4.7%
8.4%
5.6%
-1.0%
10.6%
8.5%
2.3%
-1.3%
8.8%
2.3%
35.1%
-4.5%
1.4%
17.2%
13.2%
13.1%
1.4%
7.3%
6.1%
13.9%
2.4%
1.1%
23.2%
17.1%
30.8%
2.1%
30.5%
12.0%
9.6%
21.0%
3.9%
13.6%
10.1%
9.8%
10.0%
16.5%
9.1%
8.2%
14.2%
3.8%
15.0%
7.5%
7.2%
9.0%
12.7%
4.9%
1.4%
10.8%
3.8%
10.5%
12.6%
10.7%
4.6%
7.7%
0.6%
2.8%
8.3%
4.7%
6.9%
9.4%
3.9%
5.8%
7.3%
0.9%
0.3%
6.3%
11.1%
7.5%
17.7%
6.2%
5.5%
6.8%
-0.6%
5.7%
1.7%
11.7%
7.9%
19.8%
5.5%
2.5%
7.0%
1.3%
8.9%
2.2%
6.8%
0.4%
16.7%
7.1%
5.0%
2.9%
0.8%
9.9%
2.4%
5.6%
1.0%
12.6%
6.0%
3.3%
3.5%
-0.2%
7.6%
2.9%
10.8%
7.6%
16.9%
9.1%
13.8%
12.8%
7.2%
4.9%
6.2%
8.5%
19.8%
34.3%
7.4%
0.6%
9.3%
16.7%
8.0%
11.5%
1.3%
11.0%
2.9%
5.8%
9.8%
1.0%
9.3%
4.6%
6.2%
10.6%
0.6%
8.2%
10.7%
3.4%
2.4%
13.8%
8.4%
5.9%
15.2%
2.6%
96.8%
8.9%
17.0%
9.2%
6.7%
11.6%
1.4%
21.5%
6.3%
16.4%
9.4%
3.1%
6.7%
3.8%
12.7%
8.2%
11.9%
8.4%
5.2%
6.4%
5.0%
12.9%
8.8%
18,522
19,290
21,291
22,490
23,914
25,106
26,204
28,099
30,196
32,151
33,761
Blood Testing
What it tells us: To determine whether someone needs a supplement, or whether it’s working, there’s no better test than blood,
says Paul Jacobson, of Thorne Research. Unlike gene tests, which map propensity for disease, blood shows what’s happening now. “Your
blood regenerates every three to four months,” he says. “Let’s say you are diagnosed with high cholesterol and you want to get it down.
You can take our products, change the way you eat, and have your blood tested later to see if it’s working.”
Blood testing can also assess proteins associated with liver, lung, brain, and heart health; immune-cell activity; adrenal health; and
insulin sensitivity. And the advent of drop-in clinics, home test kits, and online practitioner consultation services has made it so a costly
doctor’s appointment isn’t necessarily required.
What’s new: Since 2014, Thorne has acquired a majority share of online health technology company Wellness FX and waded
heavily into the diagnostics business with a new motto “solutions beyond supplements.” Wellness FX clients drop by a stand-alone Quest
Diagnostics lab to give blood, and pay $78 to $1,000 for a blood panel. Options include thyroid, women’s health (which tests for hormones related to sleep and mood disturbance), sports performance, and heart health. Their results appear in an online dashboard, and
they consult with an online practitioner who, if appropriate, steers them toward supplements. Other supplement companies are also
partnering with diagnostic companies. Nordic Naturals steers customers to Lipid Technologies’ Holman Omega-3 Blood Spot Test, an
at-home kit which tests for Omega 3 levels, and Pure Encapsulations has collaborated with the Cleveland HeartLab to align supplements
with heart health biomarker tests.
What’s next: After what Jacobson describes as a “building year” for Wellness FX, the company is now focusing on partnerships with
health clubs, corporate wellness programs, and academic health research centers. Thorne recently rolled out a new line of supplements,
LipoCardia, to support lipid metabolism and heart health, and the EXOS line of sports nutrition products.
Bland believes that at a time when supplements have gotten a bad rap (sometimes deservedly), diagnostic testing may be key for
getting individuals the supplements they truly need and, via follow-up, separating the ones that work from those that don’t. “Give a supplement to a big group of people and, on average, it doesn’t do that much,” Bland says. “But supplements given to the right person at the
right dose at the right time can have a huge effect.”
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CONDITION SPECIFIC
Scanners, wearable trackers, and other gadgets
What they tells us: For the past several years, MLM company NuSkin has had its representatives use a “biophotonic scanner”—a
laser light shined on the palm of the hand—to measure antioxidant levels in prospective customers’ skin to assess the need for certain
supplements. The company has scanned 17 million people and offers a money-back guarantee if no measurable difference is shown in
eight weeks. “It is a cornerstone of our supplement category and a differentiating feature for our company,” says Joe Chang, the company’s chief science officer. In 2014 Thorne partnered with Itamar Medical Inc. to market EndoPAT, a non-invasive fingertip test that
measures blood vessel function. Results can be uploaded to a person’s Wellness FX dashboard and incorporated with blood tests to help
people make health decisions. Then there are wearable trackers, like those from FitBit, Jawbone, and Apple, which track activity, heart
rate, sleep, etc. in real time and can nudge users toward better behaviors.
What’s new: The smart fitness tracker market is expected to grow from $2 billion in 2014 to $5.4 billion in 2019, according to a
March report by market-research firm Parks Associates. Nearly 30 percent of US households already have one. And new wearables go far
beyond counting steps. Spire is a new clip-on device that measures breathing to map and analyze the user’s stress patterns and offers
suggestions for chilling out if it detects things getting too tense. What’s next: Through his role in the Hundred Person Wellness Project—the first phase in the Institute of Systems Biology’s
sweeping participatory wellness study—Bland was able to learn, via DNA testing, that he doesn’t synthesize Vitamin D well and he’s
better suited for strength training than endurance sports. His blood tests showed he had relatively high levels of mercury (likely from his
love of seafood) and has sensitivity to certain food additives. His FitBit tracker nudged him to move slightly more than he was. Within a
few years, everyone can have this experience. “As we get more information measured non-invasively, get it to the cloud where it can be
stored, develop algorithms for crunching it, and get it back to the user on their smartphone to personalize their unique questions, we
will have a transformative technology,” he says.
US General Health Condition Supplements Sales and Growth, 2004-2014
2003
2005
2007
2009
2011
2013
2015
8.0%
6,000
6.0%
5,000
4.0%
4,000
2.0%
3,000
0.0%
-2.0%
2,000
-4.0%
1,000
-6.0%
-
-8.0%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
© 2015 Penton
134
CONDITION SPECIFIC
US Insomnia/Sleep Aid Sales by Product Category, 2014
Supplements
24.4%
Pharmaceutical drugs
52.2%
OTC Drugs
23.4%
US Insomnia/Sleep Aid Supplement Sales and Growth, 2004-2014
2003
2005
2007
2009
2011
2013
2015
25.0%
600
500
20.0%
400
15.0%
300
10.0%
200
5.0%
100
-
0.0%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
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135
CONDITION SPECIFIC
US Joint Supplement Sales by Product Category, 2014
Supplements
7.6%
OTC
2.6%
Prescription drugs
89.8%
US Joint Supplement Sales and Growth, 2004-2014
1,800
2003
2005
2007
2009
2011
2013
2015
14.0%
1,600
12.0%
1,400
10.0%
1,200
8.0%
1,000
6.0%
800
4.0%
600
2.0%
400
0.0%
200
-
-2.0%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
© 2015 Penton
136
CONDITION SPECIFIC
US Gastrointestinal Sales by Product Category, 2014
Supplements
9.6%
OTC
34.8%
Pharmaceutical drugs
55.6%
US Gastrointestinal Supplements Sales and Growth, 2004-2014
2003
2005
2007
2009
2011
2013
2015
18.0%
2,500
16.0%
2,000
14.0%
12.0%
1,500
10.0%
8.0%
1,000
6.0%
4.0%
500
2.0%
-
0.0%
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
© 2015 Penton
137
CONDITION SPECIFIC
US Liver and Detox Supplement Sales and Growth, 2010-2020e
300
120.0%
250
100.0%
200
80.0%
150
60.0%
100
40.0%
50
20.0%
-
0.0%
2010
2011
2012
2013
2014
2015e
2016e
2017e
2018e
2019e
2020e
© 2015 Penton
138
Table of Contents
11. Ingredients
& Innovation
© 2015 Penton
139
INGREDIENTS & INNOVATION
11.1 Overview
From fermented krauts once used to prevent scurvy to an aphrodisiac root used as currency during the Inca Empire, what’s old—
really old—is new again and booming in the natural products marketplace. With the help of modern-day marketing and a bit of culinary
creativity, companies are putting new spins on heritage ingredients like cultured foods, quinoa, sprouted grains, and even coffee.
Others are using high-tech testing methods to guarantee their ancient remedies, like maca, are authentic or using new technologies
to insert powerhouse ingredients like krill and curcumin into new products.
Meanwhile, both startups and established brands are innovating around new formulations, branded ingredients, and more effective
delivery methods.
11.2 Algae
Green Revolution
With the promise of biofuels growing distant,
the algae industry is focusing on nutrition
On December 11, 2007, oil giant Royal Dutch Shell made headlines when it announced it was giving a whopping $80 million to a
group of Hawaii-based marine scientists to essentially grow pond scum. The resulting joint venture, Cellana, had big hopes of turning
fast-growing, environmentally sustainable, and oil-rich microalgae into biofuel. “Algae have great potential as a sustainable feedstock
for production of diesel-type fuels,” promised Shell Executive Vice President Graeme Sweeney, one of several oil executives to tout the
promise of “green crude” in the mid-2000s.
Eight years later, Cellana is still going strong, with more than $100 million in funding from government, VC, and angel investors
in addition to a six-acre state-of-the-art production and research facility in Kona, Hawaii. But with its relationship with Shell amicably
severed, it has shifted its focus toward developing algae-based omega 3s, proteins, antioxidants, and pigments meant for the gut rather
than the gas tank. “In many ways, we could now be viewed as a nutrition company with oil as a by-product,” says Cellana CEO Martin
Sabarsky.
Cellana is not alone. At a time when oil hovers at $50 per barrel, and some research predicts it would cost $240 to $332 per barrel to
produce algal fuel, the green crude dream has been replaced by a new Green Revolution, in which algae-based companies are developing
a host of new ingredients for supplements, food, and animal feed. Early this year, algae biofuel pioneer Solazyme unveiled its AlgaVia
line, which includes an algae-based protein, a fat-replacing algal flour and healthy algal cooking oil. In late 2014, Israel-based Qualitas
Health introduced Almega PL, one of the first algae-based EPA ingredients for supplements. DSM, which bought algal DHA pioneer Martek for $1 billion in 2010, continues to grow the algal Omega 3 market, as demand for vegan and non-fish sources rises.
Meanwhile, companies like Boulder-based Superior Ecotech and Michigan-based Algal Scientific are taking advantage of algae’s
CO2-munching ability to help breweries, ethanol-producers and other industries tackle their undesirable emissions while producing
nutritional by-products. Others, like Matrix Genetics, are looking at ways to boost yield and develop algae strains richer in the qualities
food and nutritional companies are looking for.
“Three years ago, biofuels was the predominant focus of the industry,” says Matt Carr, executive director of the Algae Biomass
Organization, a 50-corporate-member trade group, founded in 2008. “Today, companies are recognizing that the path to large volume
markets like biofuels is through higher-margin, smaller-volume markets like health and nutrition.”
Algal Protein, Fat, and antioxidants
When it comes to sustainability algae, as crops, are hard to beat. Rather than gobbling up land and water—and taking an entire
season to mature—algae grow in either brackish outdoor ponds or indoor bioreactors, sequester climate-altering CO2 in the process, and
© 2015 Penton
140
can be ready to harvest in a matter of days. Nutritionally, they pack a potent punch, containing as much as 40 percent heart healthy oils,
abundant vegetarian protein, and a plethora of antioxidants, including—depending on the strain—the coveted antioxidant astaxanthin
and the carotenoid beta-carotene.
“We use seven times less water per acre than soybeans and we get 10 times as much protein,” explains Gerry Cysewski, PhD, founder and chief scientific officer for global algae-ingredient supplier Cyanotech Corporation.
Cyanotech was among the first US companies to recognize the nutritional value of algae, launching its company in Hawaii in 1984
to bring protein-packed green spirulina ingredients to the masses. In 1996, it added astaxanthin to its offerings. “We went into nutritional products and other high value products right off the bat,” says Cysewski. “We have no interest in biofuels whatsoever. They will never
be practical.” That decision has paid off. Today, the company offers bulk algae ingredients to its global partners. But in the United States
it recently moved away from supplying ingredients (a move that some say will leave a supply gap in the astaxanthin market) and focused
instead on its branded Nutrex line of spirulina and astaxanthin. “Sales are just fantastic,” says Cysewski, citing a 50 percent year-overyear spike for its branded Bioastin astaxanthin supplements, which are growing in popularity due to their scientific link to eye and joint
health. “Astaxanthin is an extremely potent antioxidant with anti-inflammatory properties so it can address a number of health conditions. People will keep buying it as they discover it works,” he says.
Algae Ingredients by Aisle at Expo Conventions, 2013-2014
Snacks, cookies and candy
Other
2%
4%
Drinks
9%
Diet and nutrition
62%
Cosmetics (personal care)
23%
Source: NEXT Trend Database (2013 and 2014 Expo West and East)
Solazyme, a $60 million company founded in 2003 as a biofuel operation (it partnered with Chevron), has since decided that food is
going to be one of the core pillars of its growth, along with personal care, via its highly popular Algenist ingredient for anti-aging lotions
and its Encapso drilling fluids for oil and gas operations. In addition to being gluten-free, GMO-free, and vegan, its marigold-colored
powder, AlgaVia Flour (46 percent fat; 9 percent protein) was rolled out last year as a healthier-for-you fat replacement and is already
present in gluten and vegan baked goods, non-dairy creamers, and powdered beverages. “You can use it to replace eggs, oil, and butter
© 2015 Penton
141
and you can halve the amount of fat you have in the product without impacting taste or texture at all,” says Mark Brooks, senior vice
president of food ingredients for Solazyme. “From a scale perspective, our customers are moving to national grocery distribution soon.”
As of February, its algal protein (64 percent protein and 11 percent fat) and high oleic algal oil (high in Omega 9s with zero trans fat and
little saturated fat) are both Generally Recognized as Safe, making way for their use in protein-fortified foods and beverages and healthy
cooking oils. “With algae, you can improve the nutrition of the foods you love without sacrificing taste,” Brooks says. “And it comes from
a natural source. That’s the holy grail of the nutrition industry.” In 2014, Solazyme revenue was up 52 percent over the previous year.
Several other companies are eyeing algae as a more sustainable source of food for farmed salmon—which are typically fed other
fish—or as a more sustainable and toxin-free alternative to fish-sourced Omega 3 supplements.
“People talk about peak oil. We hit peak fish 20 years ago,” Sabarsky says, referring to the chronic overfishing that has led to concerns about the sustainability of marine Omega 3 fatty acid sources. He notes that fish get their Omega 3s from algae. Today, roughly 15
percent of DHA supplements are algal. He sees that percentage rising rapidly, in part due to the company’s pending line of ReNew Omega 3 high value oils, due out within a few years. “Companies like Martek and Cellana are cutting out the middle fish,” Sabarsky says.
Spirulina as an ingredient in Expo Products
140
120
100
80
-53%
60
40
20
0
Number of UPCs
Expo West 2013
Expo West 2014
Source: NEXT Trend Database (2013 and 2014 Expo West and East). Percentage change based on normalized data rate
Algae 2.0
With algae’s nutritional potential well established, the question now is this: How can it be grown at greater scale, in the most
sustainable way possible, while producing the compounds the nutrition industry is clamoring for? “In many of these markets, algae is a
newcomer so we have to be able to demonstrate that algae derived ingredients not only measure up on performance but also on cost,”
says Carr.
Seattle-based biotech company Matrix Genetics recently developed a technology to use genetic engineering to enhance Spirulina’s
inherent benefits. Spirulina is easy to grow, because it likes salty water (which other species don’t) and thus isn’t as vulnerable to pests. In
March, Matrix announced a new strain of spirulna that can double the yield of phycocyanin, a natural antioxidant used in supplements
and as a blue pigment in food. Going forward, the company hopes to use Spirulina as a photosynthetic workhorse to yield strains with
orange and red pigments, more amino acids, or higher levels of certain inherent vitamins, antioxidants, or peptides.
In Boulder, Colo., Superior Eco-tech—the brainchild of a group of PhD college buddies—is working with Upslope Brewery to build
a 400-square-foot demonstration greenhouse adjacent to the brewery. There, algae will gobble up the CO2 emitted as sugar is converted
into alcohol—and spit out a healthy algal paste. “U.S. breweries release more than a million tons of CO2 into the atmosphere every year,”
says co-founder Phil Calabrese, who hopes to ultimately scale the idea to larger breweries and ethanol plants. “That’s about equivalent to
© 2015 Penton
142
all of the CO2 output from motorists on the road in the state of West Virginia.”
Sabarsky stresses that the algae-for-fuel idea is not dead. But he says that in order to make it viable, it has to fit into a larger economic picture that works. Someday, rather than having companies take what they need from algae and discard the rest, as some already
do with DHA, he envisions an algae so robust that it could be made at large scale, and all of its desirable properties—EPA/DHA, micronutrients, protein, cosmetic ingrediengts, and fuel—could be separated out and sold with little or no waste. That makes sense, environmentally and economically.
“We are not just in this to do one-shot products,” Sabarsky says. “We are looking to fundamentally transform both the agricultural
and food industries.”
11.3 Experiential Ingredients
Do you feel that?
“Experiential” ingredients give consumers something they can feel
Most supplements fall under the “hope in a bottle” meme because the effects of supplementation cannot be tangibly felt in the short
or medium term. We take a multivitamin and hope, as published studies suggest, that we will suffer fewer heart attacks or strokes or
have less incidence of cancer. File under: Age gracefully.
But the most popular supplements are experiential, which, as the moniker suggests, give consumers a tangible experience. There’s a
reason most Americans over the age of 18 drink coffee every day. They can feel it, and quickly.
Herewith, the NBJ primer on experiential ingredients to perk up your product-development efforts:
Caffeine: The most popular experiential ingredients of the past 20 years rely on alkaloids, caffeine and ephedrine chief among them.
Aside from coffee’s wake-me-up properties and ephedra’s bronchial-dilating and cardiovascular-pumping effects, the two were routinely
combined with aspirin to form the basis of the billion-dollar weight-loss industry—until ephedra was pulled from the market in 2004.
Caffeine improves alertness, performance and mood, all within about 15 to 20 minutes. To keep regulators at bay, the smart move in
formulating is to not exceed 100 mg—the amount in a regular cup of coffee.
Energy Drink Sales and Growth, 2007-2017e
14,000
30.0%
12,000
25.0%
10,000
20.0%
8,000
15.0%
6,000
10.0%
4,000
5.0%
2,000
0.0%
-5.0%
2007
2008
2009
2010
2011
2012
Sales
2013
2014e
2015e
2016e
2017e
Growth
© 2015 Penton
143
Niacin: This is one of the few ingredients that is both a supplement and a drug, depending on dose. The tell-tale “flush” sensation
had long been thought to be a downside, and a cottage industry has risen up around innovations for “no-flush” niacin. Yet energy drink
companies sometimes add niacin to their products so consumers can feel a flush and believe its energy-enhancing properties are taking
effect. About 40-50 mg is enough to give most people a slight vasodilation effect.
L-theanine: At the other end of the spectrum from energy drinks and shots are relaxation products. Kava had been the leading
ingredient in this sector until it was banned in many countries around 2002. While most governments have backed off the ban, kava has
yet to get its groove back. L-theanine has taken its place. It is the alkaloid in green tea that gives a relaxation effect without making one
drowsy.
Sceletium: This African herb also contains alkaloids to give it anti-stress properties. Way back in 1685, the Dutch noted it as a
“cheerer of the soul.” Studies show a single 25 mg dose can make consumers become more focused and calm. It’s listed in the African
Herbal Pharmacopoeia as an anti-anxiety agent. A three-month double-blind, placebo-controlled clinical trial gave 37 healthy adult
volunteers 25 mg per day. Researchers noted that “unsolicited positive effects on well-being were noted in patient diaries by some participants taking extract Sceletium tortuosum (Zembrin), including improved abilities to cope with stress and sleep.” Translation: it made
happy, healthy people happier.
Lactium: Another patented stress reliever is this milk protein fraction supplied by Ingredia Nutritional. At a dose of 150 mg/day,
Lactium has been shown to reduce mood swings, snacking, tension, sleep issues, and other symptoms and side effects of stress.
Nitrosigine: This patented combination of arginine and silicon, supplied by Nutrition 21, has been found in clinical studies to
increase nitric oxide levels for between 30 minutes and three hours. Increased nitric oxide levels relax blood vessels, leading to increased blood flow. Yes, this is the same mechanism of action that erectile dysfunction drugs utilize. Nitrosigine is being positioned as a
sports-nutrition supplement that helps maintain healthy workout performance.
11.4 Choosing wisely in branded ingredients
It’s the age-old story among ingredient suppliers: How do I become the next Intel Inside?
In the nutrition raw materials space, only a select handful of ingredients have risen anywhere close to becoming a household name.
One is Ester-C, and that, alas, has been so successful that it is no longer an ingredient brand but a finished-product brand. Other suitors
would love to approach such success and recognition.
Branded ingredients start out with a sexy name and a jazzy logo. For some fraudulent hucksters of premium-priced branded ingredients, it all stops there. For bona-fide ingredient brands to fully justify price premiums, they need an ingredient that is truly unique, and
they must have some clinical evidence to back their claims. Beyond that, they also need regulatory status, such as GRAS certification or
an NDI dossier; intellectual property protection; staff available for formulation assistance; and, usually, a buff marketing budget to help
tell the story of this shiny branded thing.
The biggest impediment is properly playing the game of price versus cost. The world is full of ingredient buyers who know the price
of everything but the value of nothing. Because branded ingredients are more expensive than commodities, how to make that pitch?
“The mantra we hear more often than not is that companies want innovation,” says Michael Jeffers, president of Helios Corp., which
supplies only branded ingredients, including EstroG-100, for menopause relief, which is now in thousands of mass and natural-retail
stores nationwide. “There are companies that want to value-add SKUs with new technology that can be substantiated with three things:
safety, efficacy and performance. If we can validate that with our clinical evidence, it leads to opportunities for establishing business.”
Jeffers says that for Helios, the critical component is the gold standard of at least two randomized, placebo-controlled, human
clinical trials with different research groups using similar methodologies. “To have an ingredient that has a cost that’s significantly higher
than a competing product like black cohosh, we need to show better performance,” he says. “The thing we do to tip the scales when we
discuss innovation with a company that wants to differentiate from black cohosh is to demonstrate—through published research studies—enhanced safety, efficacy, and performance.
“But there’s also the business side. We tell them their order patterns are going to improve; we tell them they will generate more cash.
We have to outline the commercial benefits. We go from researchers to marketers, describing the marketing process and forecasting
commercial benefits.”
For Xsto Solutions, another supplier offering only branded ingredients, scientific backing is vital, but regulatory status is perhaps
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more so. With the FDA sending out warning letters on a regular basis these days, having one’s ingredient dossier properly zipped up
certainly makes sense.
“I do believe branded ingredients should have clear regulatory status,” says Dan Murray, VP of business development at Xsto. “You’re
asking people to buy into your brand, not buy into a warning letter. Clinical evidence, GRAS, IP—all those are certainly desirable and, I
would say, essential. There are times you can have success with a brand that meets most but not all. But if you’re going to call it branded,
you should have regulatory status.”
Jeffers says that inquiries about GRAS status come up, but less frequently over the past two or three years. That’s unexpected, given
reports that suppliers looking for ways to vouchsafe ingredient safety with regulators have been the choosing the GRAS route over the
FDA’s more complicated and expensive new dietary ingredient (NDI) requirements.
But Jeffers says having an NDI is critical: “It differentiates between other products with like formulations or differentiates with commodities.”
Additionally, while intellectual property protection is vital, it’s not worth the paper it’s printed on if a company does not intend to
aggressively defend its position.
“With the success of EstroG-100, we now have to be prepared financially,” Jeffers says. “We have to create a savings account to defend against potential knock-offs in the form of litigation and cease-and-desist letters. It might not happen for a few years, but how am I
going to come up with $50,000 to defend against a knock-off down the line? You have to spend to defend.”
Branded ingredients also require investments in the time and effort to educate about what makes them unique. This begins with
suppliers but definitely needs to involve finished goods brand holders.
“Education is our key,” says Xsto’s Murray. “We feel like the more educated a consumer is, the more they’re likely to appreciate the
value of our product.” His company offers a proprietary niacin formulation, called NiaXtend, backed by eight clinical studies that reveal
a unique low rate of flushing. The niacin “flush”—that reddening of the skin and palpitating of the heart—gave rise to ingredient innovations to quell that uncomfortable sensation (though some energy drink manufacturers add niacin specifically so consumers can feel the
rush and believe that translates to enhanced energy).
“We are certainly more expensive than plain niacin,” Murray offers. “When you look at commodity versus proprietary ingredients,
not everybody immediately recognizes proprietary, so when you brand it, you’re putting a fence around it and saying, ‘This is special.’ A
branded ingredient should come with something unique.”
Translating the story to consumers
When you add up all the attributes that differentiate branded ingredients from commodity products—uniqueness, research, patents, regulatory status, formulation expertise, marketing dollars—you get to the heart of that word made famous in Zen and the Art of
Motorcycle Maintenance: quality.
There’s more than one way to measure quality, but surely proper ingredient identity is the foundation. Adulteration and contamination have always been problems but have taken on added prominence in the wake of the recent New York attorney general’s actions
against botanical supplements. So branded ingredients can be an effective means of building consumer trust.
“‘Quality’ is an overused term,” says Trisha Sugarek MacDonald, director of research and development and national educator at
Bluebonnet supplements company. “To us, quality equals loyalty. We demonstrate quality by using branded raw materials and only certified non-GMO vegetarian capsules. And we go a step further than that and use natural and Kosher-certified. We have a rabbi on speed
dial. We really look to use high-quality natural products from start to finish. That’s one reason for our spectacular following.”
That following has enabled Bluebonnet to grow in the past 25 years into a large, full-service manufacturer with more than 700
SKUs—everything from amino acids and omegas to an entire herb selection. For ingredient brands that can check all the boxes Bluebonnet asks to maintain its high standards, that diligence could translate into healthy long-term relationships.
“We’re always looking for suppliers with the right pharmaceutical systems, quality-control testing and Kosher certified. We make
sure about purity, potency, dissolution, microbial and heavy metal analysis,” MacDonald says. “We sometimes have to ask suppliers
to meet our specifications that meet our quality specs; we do business in California [which means navigating Prop. 65’s stringent
heavy-metal labeling requirements]. We have to believe in a company’s science, quality, and history. Once we believe in that, then we put
their branded ingredient logos on our bottles. We want the best quality raw materials, and we want to highlight them.”
That is music to branded ingredient suppliers’ ears. While every supplier would like its logo on a supplement bottle (a la Intel
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Inside), that doesn’t always happen. Some suppliers require it, especially in the start-up phase, in order to establish the ingredient in the
marketplace. Others might ask for it but encounter resistance from manufacturers.
Usually, but not always, a branded ingredient supplier will require that manufacturers use efficacious doses that have been identified in published clinical trials. That’s because the suppliers do not want brand erosion to occur when consumers fail to find a benefit
from the supplement. Ingredient supplier Ganeden Biotech goes so far as to take products off store shelves and test them to ensure its
BC30 probiotic strain has been formulated with efficacious dosage levels. The company has had to turn away business from manufacturers who want to pay to have the BC30 logo on their labels but not enough to actually include sufficient amounts of the probiotic in
their products. That firm stance appears to be paying off for Ganeden. At the Engredea trade show in Anaheim in March, the company
announced that manufacturers have launched 17 new finished products with its BC30 strain in the past year.
If played right, brand names speak volumes. In the case of Biothera’s branded Wellmune ingredient, “when you put Wellmune on the
package, it communicates its benefit with its name itself,” says Dave Walsh, vice president for communications at Biothera. “In Europe
you can’t make a claim, EFSA is clamping down on everybody. But 79 percent of consumers associate Wellmune with enhanced wellness.”
The higher cost associated with branded ingredients do not faze a quality finished-product company like Bluebonnet one little bit.
While price is always a concern, value means more.
“Bluebonnet is a brand you trade up to; it’s not an entry-level brand,” says MacDonald. “We don’t want to sacrifice ourselves to inferior raw materials, and with that comes a price tag. We have a very loyal following. We’re not looking for the fastest growth, we’re looking
for consistent growth.”
11.5 Entrepreneurs Still Entering the
Supplement Space
As far as investors go, you can’t get better cachet than having Jay Z and Beyoncé on your books. The couple recently announced
their backing of 22 Days, a powder, bar and lifestyle brand launched by their personal trainer. The vegan diet supplements have been
quietly sold at juice bars and Vitamin Shoppe, but with the couples’ endorsement and funding, one can imagine a day when the goldwrapped bars will be seen peeking out of every purse and briefcase.
There’s a reason celebrities are jumping into the fray. The global supplement market is seeing huge growth, and the US is leading the
pack. In 2013, it pulled in $109.8 billion dollars with projections to grow at least 7 percent annually until 2020. This upward trajectory is
attributed to the increased focus on maintaining a healthy lifestyle, as well as the flip side, a growing elderly population.
In fact, despite recent lawsuits and negative press that have struck the supplements industry, entrepreneurs continue to enter the
space, often finding that food-based supplements are the easiest route in. These company founders are also exploring various ways to
raise capital—everything from old-fashioned credit-card debt to Silicon Valley-type angel investments to emerging crowdfunding methods. Starting a company is still tough, in any industry, but today’s founders have more options and routes to capital than ever before.
Three years ago, Lisa Curtis’ approach to funding her startup, Kuli Kuli, would have been illegal. She raised one hundred percent
of the initial startup capital for the company, which makes powders and bars from West African moringa trees, through crowdfunding
methods. But since the 2013 rollout of the JOBS Act—a federal law designed to encourage funding for small businesses—crowdfunding
has become a viable means of raising capital not just to fund individual products but to cover actual operating costs.
Kuli Kuli’s first campaign, on funding site Indiegogo, raised $53,000. More than half of that came in the first day of the campaign, a
level of enthusiasm that helped convince Curtis to quit her day job and commit to Kuli Kuli full time. A second campaign on AgFunder
raised more than $350,000, and the company was well on its way.
Curtis credits much of the appeal for crowdfunding contributors to Kuli Kuli’s social mission, which the company laid out in a video
on Indiegogo. Curtis hit on the idea for her company after discovering moringa while working as a Peace Corps volunteer in West Africa.
Locals introduced her to the tree’s nutritious, high-protein leaves when she was struggling with malnutrition. As her health improved,
Curtis saw the leaves not just as the basis of a viable food business but as a sustainable income source for the women in her village.
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When she returned home to the Bay Area, Curtis made bars out of moringa and began selling them at local farmers markets to get
feedback on price, flavor, and taste. When she was ready to expand, she turned to crowdfunding for its turnkey approach and messaging
platforms. Indiegogo’s stronger focus on social enterprise and fewer high-volume campaigns made it the top choice. Another benefit
of the platform is that it passes funds directly to the startup. And unlike Kickstarter’s all-or-nothing-model, Indiegogo campaigns don’t
need to hit their goals to keep the money.
Still, while Kickstarter is better known as a launch pad for hardware and creative projects, it has successfully funded more than
3,800 food-related campaigns to date. Kim LaPaglia raised the $15,000 she needed for Sant—a drink infused with garcinia indica—
through Kickstarter. And with new platforms entering the space—like Barnraiser, CircleUp, and Crowdfooding—crowdfunding seems to
be here to stay.
There are, of course, more traditional ways of kicking off a company—like debt financing and personal savings. In 2012, Arin Lal
and his business partner founded Shredz—a New Jersey-based herb- and mineral-based supplement company for weightlifters—with
$10,000 in credit-card debt. When that money ran out, Lal took $20,000 from his 401(k). It was a huge risk, but the company turned a
$90,000 profit in its first year and hit $5 million gross revenue in 2013. And Lal and his partner have still not taken outside investments.
“One of the things I always try to tell people is that money is not a real reason to not start a business,” Lal says. “What we did have,
that I believe to be more valuable than money, was knowledge, a clear vision, and a strong work ethic.”
Lal says one of the keys to Shredz’s success was how his understanding of the target consumer allowed for highly effective outreach.
The company used fitness expos, ambassadors in the body building world, and social media to cultivate a following. “I spent a decade on
social media understanding techniques and algorithms,” Lal says. The company now has 1.2 million Instagram followers, 634,000 likes on
Facebook, and 52,000 Twitter followers.
Additionally, Shredz has managed to keep everything in house—including R&D, fulfillment, graphic design, sales, and customer support—which keeps it nimble and able to respond to the marketplace. Lal says the company was a top fulfillment center until 2014, when
Shredz designed its own 30,000-square-foot warehouse and developed proprietary software to increase efficiency and speed up delivery
times.
Like Lal, Michelle White went the credit-card route to launch her startup, Michelle’s Miracle Cherry Works—maker of superfood-based tart cherry drinks—in 2001. She eventually went $90,000 into debt before she started gaining traction. “We did $64,000 the
first year and $150,000 the next year. Then it kind of took off,” says White.
She eventually flew to New York to seek investments, but only once she was sure investment was called for. “When you’re raising
money, it should be because you need it, not because you need it in reserve,” she says. Over the past decade, she has raised almost $1.5
million dollars, mostly through angel investors. While the company has yet to turn a profit, her sales have increased every year. “We’ve
spent so much to build the distribution network,” White says. “We’re close to turning it around.”
Equity funding remains the route to the biggest checks. Indeed, after the early adventures with crowdfunding, Kuli Kuli raised a
$250,000 angel round to fuel its growth. And Vitagene—a Bay Area supplement company looking to disrupt the bottled-pill business
through mail-order genetic testing and supplement home delivery—raised $1 million through a Silicon Valley network of angel investors
in about 45 days.
“What we are doing is effectively taking the complexity of science away from the consumer and bringing levels of efficiency to the
supply chain,” says Mehdi Maghsoodnia, one of Vitagene’s investors. “We send our recommendation to a large established pharmaceutical-quality supplier, and instead of shipping a generic bottle to GNC or Whole Foods, we’re going to send a personalized bottle to the
customer’s house.”
But scientists, clinicians and dieticians cost money, and the team is already planning its next round, which will go through the more
traditional venture-capital channels.
While Jay Z and Beyoncé are huge names, when it comes to venture capital, they’ve got nothing on the people Aloha.com has
brought to the table. The New York-based nutrition and wellness company, which launched in January 2014, has raised $4.3 million from
Silicon Valley VC behemoths like Khosla Ventures, Highland Capital Partners, and First Round Ventures.
“We founded Aloha.com with the goal of simplifying healthy eating by upgrading everything we consume to include the highest
quality and healthiest ingredients,” says founder Constantin Bisanz, a serial entrepreneur who sold an e-commerce fashion site to eBay
for $220 million in 2011, according to Forbes. That track record no doubt helped his fundraising this time around.
Bisanz says the company—which is primarily direct to consumer—has so far sold one million units of its powdered green juice
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pouches to more than 100,000 customers. “I would say one of the more challenging aspects of creating a niche company like ours is gaining customer trust,” he says. “This is because so many brands out there claim to be healthy but in reality are not,” Bisanz says.
Of course, for smart—and well-funded—entrepreneurs, that’s a perfect opening.
11.6 Liposomes enter the spotlight
Traditional pill-form supplements have two potential downsides: They’re often too big to be absorbed effectively by the body, or
they’re too fragile to survive the acids, enzymes, and flora of the gastrointestinal tract. Proponents of liposomal delivery say that it sidesteps these issues by encapsulating compounds in phosphatidylcholine—a lipid derived from soy or sunflower—which protects the
compounds and delivers them into the bloodstream.
The supplement industry is seeing an uptick in companies that use liposomal delivery (hello, Bulletproof Coffee!), including
LivOn Labs of Henderson, Nevada; RediSorb in Palo Alto, California; and Empirical Labs, Quicksilver Scientific, and Valilmenta Labs—
all neighbors of NBJ in the Colorado Front Range.
Christopher Shade, a PhD chemist and founder of Quicksilver Scientific, preaches the gospel of liposomal delivery to anyone
who will listen. “We’ve gotten so much great data on the positive effects of various phytochemicals, but you can’t easily get the blood
levels in humans to replicate those animal experiments,” he says about the published animal experiments conducted with intravenous
therapies. “Who wants to wheel about an IV stand for life? But swallowing pills is ineffective because absorption is so bad. Liposomes
solve this Goldilocks problem by dramatically increasing bioavailability.”
Shade founded Quicksilver Scientific in 2006 to do environmental analysis for mercury, but the business quickly pivoted to
begin testing people for heavy metal toxicity. “The Bush years dried up funding for environmental analysis, and so we turned to doctors
who needed testing of patients for heavy metal toxicity,” he says.
Algae Ingredients by Aisle at Expo Conventions, 2013-2014
VegiCap
Effervescent 1.2%
2.6%
Liquid
3.2%
Other
3.1%
Chewable
3.7%
Gummy
9.8%
Pill
49.2%
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This led to the development of his first product: Intestinal Metals Detox (IMD), a blend of highly purified silica with covalently
attached thiolic metal-binding groups that help clear heavy metals through the GI tract. He developed a glutathione product to support
this and, in turn, settled on liposome delivery to enhance absorption. That led to the creation of a full line of liposome nutraceuticals in
2008.
Phospholipid therapy, using both injectable and forms, has a well-established clinical history for repair and maintenance of liver
function, circulatory health, and neurological health. Liposomes are microscopic single- to multi-layer spheres made of phospholipids
(the basic building blocks of cell membranes) that encapsulate compounds in order to bypass the digestive processes that normally
degrade or limit compound absorption. The best-made liposomes can deposit their cargo intracellularly, enhance lymphatic circulation
of therapeutic compounds, and even cross the blood-brain barrier.
Most liposomes on the market today are made from phospholipids derived from raw lecithin or more expensive high-phosphatidylcholine phospholipid mixes, which more closely resemble the material of cell walls, aiding absorption. High-phosphatidyl choline
phospholipid mixes allow liposomes to be smaller and to bond more effectively with cell walls to deliver their compounds directly into
the cell,.
“Producing good liposomes is very difficult and requires good, hard science and exacting equipment,” says Asa Waldstein, general
manager of Empirical Labs, which has 15 full-time employees and operates out of a 13,000 square-foot facility.
Water-soluble compounds like vitamin C, Glutathione, and GABA require a more-durable liposome for encapsulation, essentially
a closed, spherical vesicle arranged into multiple concentric bilayer membranes. Oil-soluble compounds, like Vitamin D and Vitamin A
(and THC, for that matter) may be in liposomal walls or require lipid nanoparticles—microscopic lipid droplets that contain the compounds. Though substantially different from the structure of liposomes, they are equally sophisticated, and few companies have mastered the necessary engineering to deliver oil-soluble compounds.
“We’re the only liposome company that proves our product works,” Waldstein says. “We have a bioavailability study on our website
that shows blood levels, demonstrating the effect of our products.”
Founded by two herbalists, Empirical Labs has been in the supplement business for 25 years and branched out to produce products
with liposomal delivery about eight years ago.
“This is definitely the growth area of our business,” Waldstein says. “More liposomes are reaching more sectors of the supplement
market. They’re suitable for the anti-aging market, physical therapy, athletes, and much, much more.”
Empirical Labs had been licensing its liposomal manufacturing technology from Emek Blair, PhD, a local chemist who worked
part-time in the same office. As Empirical chose not to renew a dozen or so licenses, Blair decided to start manufacturing in his facility,
Valimenta Labs.
“Basically, my company turned from a contract R&D and IP licensing company to a fully integrated R&D and manufacturing facility
in January of this year,” says Blair. It’s not enough to have the vitamins absorb into your bloodstream at higher rates—bioavailability —
they also need to be delivered in a way that your body can use them—bioutilization. Liposomes are about true nutrition delivery.”
Blair explains that while clinical trials have shown that liposomes circulate in the blood a similar amount of time as IV delivery,
unlike IVs, liposomes do not cause drug levels in the blood to spike and then crash. This makes liposomes not only less invasive but also
potentially more cost-effective, since they can allow for better dose control. They essentially bring the power of intravenous therapy to
oral delivery. Lipid solutions can also be aerated or mixed into drinks.
According to Chris Turf, a licensed pharmacist and Quicksilver Scientific’s chief clinical analyst, pharmacists have been creating
emulsions and simple liposomes to enhance absorptions of drugs through the skin for about 15 years. And pharmaceutical companies
are keying in on the fact that liposomal delivery can affect the functional properties of drugs. Gilead Sciences, for instance, delivers AmBisome, a drug for treating fungal infections, via an injectable liposome.
“Delivery is king, right now,” Turf says. “More and more companies are entering this space.”
Emerging standards
While there are several companies in the liposome space, Quicksilver Scientific is the only one selling its products in clear bottles,
which Shade says the company does to showcase the clarity of its solutions. “Ours are in the 50-100 nanometer range, which means
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they’re clear and start absorbing immediately when they hit your mouth,” Shade says. “Larger liposomes in the 200–300 nanometer
range are opaque and do not absorb as well.”
But Empirical Labs isn’t concerned with oral absorption and instead targets delivery for the gastrointestinal tract.
“Liposomes are a model of milk,” says Blair, who adds that his company’s liposomes average 180 nanometers. “As fats do not dissolve
in water, liposomes form a suspension similar to milk and should be opaque.” As Empirical and Valimenta Labs’ manufacturing process
is based on a natural process found in nature, they tout their ability to manufacture at room temperature and room pressure, which, the
companies claim, avoids any breakdown of liposomal structure. Yet Quicksilver Scientific underscores the need for pressure to make
liposomes smaller.
These debates will likely rage on until the public clearly gravitates towards one liposome type or until the companies start voluntarily submitting their products for independent verification to third-party testers.
To date, Liposomal delivery of the antioxidant glutathione is the most prevalent product across the industry. Glutathione is integral
to multiple bodily systems. However, it breaks down in the gastrointestinal tract and is delivered into the blood as amino acids, which
are more difficult to absorb. So it benefits enormously from liposomal delivery. The potential for liposomal delivery of regulated drugs
and hormone therapies seems staggering yet would require FDA approval and all the attendant costs.
Market acceptance of liposomal delivery is encouraging more and more companies to enter the space, while the existing players
continue to expand. For its part, Quicksilver Scientific debuted a new brand in May, PuRxpressions, that sidesteps the doctors and sells
directly to consumers.
“I see liposomal delivery becoming a much larger part of industry,” Shade says. “It works. It’s that simple. And couple that with the
very best phytochemicals and synthetically derived compounds, and you have a very potent mix. From my perspective, the therapeutic
effects are undeniable. In time, when resources can be gathered for the proper clinical tests, the science and testing will bear this out.”
11.7 Dietary supplement companies face uphill battle
in the quest for Non-GMO Project Verification
The trouble with bright futures is that the way we’re supposed to get there isn’t always so clear. For Non-GMO supplements, the path
forward means treading an always tedious and sometimes treacherous path across some of the most dimly lit links in the supply chain.
Demand has clearly arrived, but supply is still playing catch up.
With Whole Foods promising to require labeling of genetically modified organisms by 2018, Vermont mandating the same by 2016,
and consumers already clamoring for all things non-GMO, supplement companies are lining up to get the coveted “Non-GMO Project
Verified” butterfly on their labels. Roughly 800 products from 100 brands have already made the cut, and 120 more soon will. SPINS
already ranks non-GMO varieties among the fastest growing categories of supplements, with 2014 sales topping $160 million by November, up 13.5 over the same period in 2013.
“Supplement companies are realizing that consumers are no longer basing their purchasing decisions on brand loyalty alone,” says
Kelly Mae Heroux, marketing manager for Food Chain I.D., a co-founder and technical administrator for the project. “They are also looking for the Non-GMO Project seal.”
But companies who have survived the verification process offer a word of warning to those mulling a similar move: “It took us two
years, and I was working 80 hours a week,” says Bethany Davis, director of regulatory affairs for FoodState (MegaFood) which had its first
five products verified in late 2013. “It was tedious.”
Thanks to the long and circuitous supply chains inherent to the industry, and a process some say is ill-suited for supplement-makers, verification won’t be easy. In some cases it won’t be possible.
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Non-GMO US Product Growth by Category, 2013
Source: Nutrition Business Journal estimates (consumer sales)
GMO sheep, human hair, and wayward honeybees
To boil the complex verification process down to the simplest terms, it is based on “testing, tracing, and segregation,” says Aaron
Sanger, director of standards and technical administration for the Non-GMO Project. Each company must provide documentation that
its major ingredients either have no risk of being derived via GMOs or have been tested for them and fallen below established thresholds
(0.9 percent for supplements). Additionally, all ingredients, however minor in the formula, must be traced throughout the supply chain
to determine GMO status. And to prevent GMO contamination, manufacturers must segregate ingredients that meet the standard from
those that don’t. Some “micro-ingredients” (present in less than 0.5 percent of the products) can, for now, be excluded from the process.
For companies that buy ingredients from international markets—where GMO standards vary by country, trade secrets are held
close, and language barriers can muddy even simple transactions—this can be a colossal undertaking.
“If you have a corn chip with five ingredients that is one thing,” says Sara Newmark, director of sustainability with New Chapter, the
first supplement company to achieve Non-GMO verification. Supplements, on the other hand, can contain dozens of ingredients, many
of them manufactured via a complex multi-layer process. “The verification process was created for food,” Newmark says, “and the supplement industry is trying to fit within that mold.”
Simply tracing the path of one single ingredient from source to shelf was initially a big challenge, especially if that ingredient came
from China, where stiff competition promotes secrecy. Companies seeking flowcharts that map the processes of Chinese suppliers often
run into roadblocks. “They consider it the recipe for their secret sauce,” Davis says.
As companies have realized strength in numbers via the new Non-GMO Working Group, suppliers have loosened up. But that greater transparency has revealed a minefield of hidden GMOs.
Vitamins are a particular trouble spot, with C often made using genetically modified corn as a fermentation medium, E sourced
from distilled oils from GM soy, and several of the Bs manufactured using genetically altered microorganisms.
GMOs are particularly ubiquitous in enzymes (Chymosin, alpha-amylase, lipase), which tend to be grown using high-risk crops or
GMO yeasts as feedstock and then used as processing aids or major ingredients. “Our standard has zero tolerance for genetically modified enzymes,” says Sanger, noting that they are not allowed, even as micro-ingredients. And probiotics are often cultured on GM sugar
beets or milk from cows raised on GM feed.
“It has been extremely difficult to get a probiotic verified,” says Sandy Kepler, who recently resigned her post as CEO of Food Chain
ID to launch her own supplements consulting company, Non GMO Global Inc.
Then there’s the animal problem. In Europe, products from animals raised on GM feed are excluded from the standard. But the
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Non GMO Project includes them due to concerns that GMOs in feed can alter the bacteria of the animal’s gut and ultimately end up inside the consumer. That means supplement manufacturers must not only assure the animal was not a product of cloning but must also
trace every morsel it ate throughout its lifetime.
For companies that make L-tyrosine, which is often sourced from human hair, this has been a nonstarter. “Obviously, no one is
going to map a human hair for the project. They are having to reformulate,” says Kepler.
Vitamin D, which is typically derived from lanolin (the greasy, yellow oil secreted from the skin of sheep) and gelatin capsules (derived from the boiled ligaments of cow and pig carcasses) has also proven problematic.
“These products from animals are often just collected from multiple farms as a byproduct of another industry,” says Heroux, of Food
Chain ID. “To demonstrate that all of those sources were following non-GMO feeding ration guidelines would be very complicated.”
Companies that use “micro” amounts of D in their multivitamins have been able to get a pass so far, but Davis says she knows of no
company with a lanolin-based D as a major ingredient that has been able to get verification. To complicate matters further, the microingredient variance (Variance #4) will expire on May 21, 2019, for “nutrients, vitamins, minerals or other active components,” meaning
that companies that don’t reformulate could lose their butterfly seal. “At this point, we will lose 80 percent of product verification in 2019
because of this,” says Davis, who has worked to get the seal on nearly all of MegaFoods 70-plus supplements. “Any product with Vitamin
D in it will lose it.”
Jeff Brams is vice president of product development for Garden of Life, a company known for its organic and non-GMO supplements, with 108 products boasting both seals. He stresses that “the process should be hard” to assure that only companies that deserve
the seal get it. But he and others have expressed concern that it can be simpler for a maker of a synthetic supplement to get verified than
for a whole-food supplement company.
Brams recalls Garden of Life’s attempt to use bee pollen, instead of chemicals, as a flow agent during their manufacturing process.
The bees were not genetically modified, and they pollinated in an area free of high-risk crops. But because he could not verify that they
were never exposed to a GM plant (perhaps in a nearby homeowner’s yard) verification was denied. “They wanted us to use chemical
flow agents instead of bee pollen if we wanted the seal. We said no.” Ultimately, he sought out an agent made from organic cranberries
and got the seal.
Compared to the process to get certified as USDA Organic, the Non-GMO Project is significantly more difficult, he says. “It’s the difference between preparing your taxes every year, and having the IRS come audit you for your past seven year history and ask you about
that dinner you had in 2005 with Sally. It’s very invasive.” In some areas, he charges, it borders on “absurd.”
“There are some points where the Non-GMO Project is simply not equipped to handle our industry.” Brams says. “If it does not learn
how to deal with this, there is going to be another organization that steps up.”
Innovation, transparency, and new competition
Criticisms aside, early adopters of the seal are quick to applaud the Non-GMO Project for ushering in a new era of supply chain
openness, sparking innovation among ingredient companies, and inspiring alternatives for ingredients that many consumers might be
horrified to know they are putting in their mouths.
“I have to pay respect where respect is due. The Project has done wonders for promoting transparency and that is a good thing for
our industry,” says Davis.
In response to the mounting Vitamin D problem, the European R&D company ESB Developments recently launched a lichen-based
D called Vitashine, which Garden of Life now uses. (Some manufacturers say it costs too much, isn’t concentrated enough and doesn’t
have the right consistency to be a viable alternative to lanolin).
Capsugel has developed a half-dozen Non-GMO Project Verified capsules, some derived from a synthetic polymer called hypromelllos; others from fermented tapioca. As a result, New Chapter is currently beginning a phase-out of its gelatin capsules. And numerous
other companies have begun to roll out non-GMO lecithins and maltodextrins for use in the manufacturing of supplements.
Well aware of criticisms that the standard is flawed, Sanger says the Project has not given up on the idea of creating a separate
process for supplements.
“It is an idea that we have considered and are still discussing but we definitely have some concerns,” he says. “The more versions of
something you have, the more confusing it can be, and the more confusing it is the less good it can do.”
© 2015 Penton
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In the meantime, competition to the Non-GMO Project is slowly brewing, with as many as seven alternative verification projects in
the works.
In 2013, Spring Valley, New York-based Natural Food Certifiers added GMO Guard to its roster of third-party certifications. The
Canadian company Nutrasource Diagnostics Inc. is expected to roll out a game-changing new test for the presence of non-GMOs in
finished products in 2015. Nutrasource officials declined to be interviewed by NBJ until after February.
If a national mandatory labeling law were to pass, such third-party certifiers would likely become “less vital” anyway, says Davis, as
the government would come up with its own definition of what Non-GMO means and create a set of rules companies must follow or
face regulatory action. For now, she advises companies entering the process to be prepared to commit at least one person half-time for six months solely to
the task, and start with just a few fairly simple products.
“Anywhere from 10 to 20 different unique statements can be needed on just one highly complex ingredient,” she warns.
Butterfly seal or not, FoodState insists its products have always been non-GMO. Now it’s taking matters into its own hands, launching a series of Tuesday afternoon webinars to show MegaFood consumers directly how it makes its products. The story is about a lot
more than their lack of GMOs.
“In the end, we don’t need a third party to help our consumers know who we are and what we do right,” says Davis. “We are committed to telling that story ourselves.”
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Table of Contents
12. Sales Channels
& Distribution
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SALES CHANNELS & DISTRIBUTION
12.1 Overview
For any industry, how much you sell depends so much on where you sell, but in supplements it could be more complicated than
that. Mass plays a larger role than ever, but natural specialty is still where new products and new categories are grown and moving into
mass too early could cost a brand the loyalty of that primary support network. The same is true of the internet, where race-to-the-bargain pricing can undercut margins quickly. Now even stores that could have been considered specialty are acting like mass–Sprouts and
Whole Foods are examples—and as mass moves into natural and organic the space for supplements beyond multivitamins and minerals
could easily grow.
All of that makes sales channel trends difficult to decipher.
We saw the internet sales for vitamins explode in the early part of the last decade and while some of the slowdown is related to the
effect of bigger numbers, it’s interesting that while ordering everything else off the internet has become ubiquitous we see growth in
online sales slowing noticeably for supplement. Online sales grew at 15 percent as recently as 2012 but slowed to 11.7 percent last year,
on its way to less 10 percent by 2020.
Mass is another big numbers game, but growth there slowed from 5.4 percent in 2011 to 2.3 percent in 2014, some of that likely due
to a stall in vitamin sales as casual supplement consumers stepped away in 2014, a reminder that every channel has its peculiarities.
No channel has more peculiarities than network marketing. There are many baskets, but most of the eggs land in only a few. That’s
why failed fortunes in one company can have an outsized effect on the whole industry. With the implosion of Visalus, MLM supplement
sales growth went from 9.5 percent in 2012 to 5.7 percent the next year. Uncertainty at Herbalife may have been part of what kept it even
lower, 5.3 percent, in 2014.
With every channel populated by a different kind of consumer and every channel offering a different kind of contact between the
seller and the buyer, an industry built on faith in a product with few direct and tangible qualities has to carefully tune its pitch, its product and its purveyor. That has always been true. It may be truer now that ever.
12.2 Scaling the Individual
Someday in the not-so-distant future, the average American will know intricate details about her genetic makeup, the biological
content of her intestinal tract, and the chemical complexion of her bloodstream. In this world, the concept of Nutrigenomics—the
understanding of how foods and the environment impact one’s gene expression—will be as accepted as brushing one’s teeth or icing
sore muscles. Millions of consumers will cite a laundry list of personal biological information when purchasing everyday products—from
sunscreen to bagels to fish sticks.
Someday this will happen—but it won’t be today.
In today’s world, these tools are largely confined to the early adopters in the growing market for personalized health and nutrition.
It’s been 12 years since the $3 billion Human Genome Project published its report on the makeup of human DNA, which ushered in the
new era of personalized nutrition and medicine. Nobody knows for sure how many Americans have bought in to the market. There are
still hurdles to growth, such as cost, confusion, and a general lack of consumer understanding. But the market now supports a long list of
successful ventures that do everything from sequence genes and test blood to track activity and map our population of microorganisms.
The one thing marketers can be sure of is that the market is guaranteed to grow. In a lecture at Singularity University’s Exponential
Finance conference in June 2014, the school’s Biotechnology chair Raymond McAuley predicted the opportunities to rise as the cost of
gene sequencing continues to drop.
“The marginal cost of a human genome by 2020 will be about a penny,” McAuley says. “That opens up a new world for us.”
To many marketers in the dietary supplement industry, mainstream acceptance of this market cannot come soon enough. That’s because many supplement companies are perfectly positioned to take advantage of the growing market. Nutrition Business Journal spoke
with entrepreneurs and marketers to discuss how hopeful companies should go about growing the early adopters into a mainstream
market for personalized products and services.
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US Supplement Sales by Channel, 2014
Internet
6.1%
Practitioner
8.7%
36.7%
16.0%
Mail order, DRTV, radio
5.0%
Pushing Science
Science presents a common roadblock for brands hoping to reach mainstream consumers, but those who are searching for avid customers do not always share that problem. It’s not that consumers do not understand the health claims but, rather, that they get bogged
down in the science behind the products. Also, mainstream consumers often equate confusing scientific explanations with gimmicks or
unscrupulous marketing.
“There’s a lot of junk science in the supplement industry, and it often masks the good stuff,” says Neal Matheson, a strategy and innovation advisor and former executive with Johnson and Johnson. “The trick is how do you find a way to break through?”
Opinions are split between which strategies to pursue. But all sources agree that, at the very least, a core explanation of the science
should be presented. Launched in 1998, the company Enzymedica produces enzyme supplements that aide in digestion and alleviate
abdominal stress. Two years ago, the company debuted a personalized service that identifies enzyme and dietary needs.
The service was focused primarily on casual users, and was based around an easy-to-use website. The company also rolled out its
products into mainstream chain stores, such as Whole Foods Market and Vitamin Cottage. Chairman and founder Tom Bohager says
the company faced challenges in educating new consumers about even the most basic concepts in enzyme deficiency. The more complex sides of the business often sailed over people’s heads entirely.
“They didn’t know about the product,” Bohager says. “Educating them was a big part of the puzzle.”
Instead of investing in a big-budget marketing campaign, Bohager says Enzymedica went to work producing educational booklets
and building easy-to-read pamphlets for point-of-sale displays. It also hired three full-time staffers to travel to retailers to discuss the
science. Bohager says that the staffers don’t dumb down the education but that they do attempt to put it into layman’s terms.
Bohager says the education campaign also allowed Enzymedica to cut through the chaff after copycat brands entered the market.
Not all companies, however, face those hurdles. San Francisco-based uBiome, which tests the microbiome of users, freely presents
its science with little or no editing. It has also attracted a number of high-profile scientists to sit on its advisory board, and the company
regularly touts its achievements to would-be customers.
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Co-founder Jessica Richman says that her customers have shown themselves to be hungry for information and smart enough to
understand exactly what they are paying for. “You should have something in your marketing for people at all levels,” she says. The average
person is way more informed than we think they are. There is a hunger for science.”
US Supplement Sales and Growth by Channel, 2011 - 2014
2011
2012
2013
2014
11g
12g
13g
14g
10,969
11,756
12,729
13,480
6.5%
7.2%
8.3%
5.9%
Retail-MM
8,802
9,283
9,863
10,087
5.4%
5.5%
6.2%
2.3%
Mail/DRTV, Radio
1,632
1,701
1,770
1,835
4.2%
4.2%
4.1%
3.7%
Multi-Level/Network
4,811
5,267
5,569
5,862
9.0%
9.5%
5.7%
5.3%
Practitioner
2,454
2,687
2,953
3,177
9.3%
9.5%
9.9%
7.6%
Retail-NHF, etc.
Internet
Total
1,528
1,765
2,016
2,251
14.7%
15.5%
14.2%
11.7%
30,196
32,458
34,899
36,691
7.0%
7.5%
7.5%
5.1%
Turning early adopters into a customer base
There is a common quest in the personalized nutrition space to expand out of the early-adopter market and into more casual users.
Again, there are multiple strategies to accomplish this goal. Perhaps the most compelling comes from Richman, who says uBiome is
working to expand its market by simply targeting other niche markets that may be interested in the service.
“We reached out to early adopters of every type imaginable,” Richman says. “We wanted to see which [groups] were most promising
from a client perspective.”
Richman launched uBiome alongside biophysicist Zachary Apte and molecular biologist William Ludington in 2012 with an $800
video and an online campaign on the crowd funding website Indiegogo.com. The concept was a hit with a small but dedicated group of
health-conscious customers in San Francisco and New York City, Richman says, and within a few months it had raised $351,000 in initial
seed funding.
Richman describes her early customers as “quantified selfers” and DIY types who were fearful of the commercialization of the health
care industry and eager to take health into their own hands. Ubiome quickly reached these customers through social media, conferences, and networking events.
To grow out of that early market, Richman attended conferences and regularly did media hits. But uBiome also looked for similar
communities of DIY and tech-focused enthusiasts and then formed partnerships with the existing brands serving them. Each partnership revolved around a scientific study.
A recent deal with the menstruation/pregnancy app HelloFlo put uBiome on the radar screen of young moms. UBiome reached out
to HelloFlo customers with a free kit to test vaginal microbiome at various points during pregnancy.
UBiome also launched a dental campaign alongside Dr. Jeremy Horst, a well-known dentist and PhD at UC San Francisco. The study
examines potential preventative care for dental diseases.
Along the way, Richman says, uBiome has also worked on smaller projects involving bacteria that live in air filters, the biome of
various animals and even the genital biome of transgender individuals.
Each partnership and research project brings uBiome to a new community of customers. Not all of them become regular customers, but enough do to maintain the company’s rapid growth. “Mass adoption often times isn’t really mass adoption—it’s lots of
independent little adoptions done for strange reasons,” Richman says. “It all comes back to reaching customers and finding out what
they are using it for.”
One customer at a time
The value of word-of-mouth marketing cannot be understated in this market, especially as the number of services and products
increases. Engaging customers at a one-to-one level is imperative, Matheson says, as the ecosystem of products becomes more crowded.
© 2015 Penton
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“The core message that needs to be communicated is that the consumer is in control,” hed says. “Direct marketing, social media marketing is a way to demonstrate exactly what the supplement does for you.”
Lori Ellsworth, Enzymedica’s vice president of marketing, says the company maintains a strong chain of communication with its
customers through direct email. The company also reaches out through Yahoo community groups to target smaller communities.
Richman says she originally opted for a face-to-face approach to uBiome’s marketing and made it a point to attend dozens of conferences and trade shows. The method led to some burnout, she said. Now, uBiome communicates via email and social media. But Richman says the company is quick to engage its users with a “human touch,” and not just pump out canned responses or marketing jargon.
“I think there is a market here for people who want to be involved in the product,” she says. “There’s an opportunity here to be more
thoughtful.”
12.3 Retail
Retailers Adjust to Changing Supplement Scene
It has been 20 years since Congress signed the Dietary Supplement Health and Education Act into law. It has been a decade since
ephedra was banned. Five years have passed since the beginning of the Great Recession. DMAA was blackballed a year ago. Is the dietary
supplement industry moving forward or going in circles? In many ways, today’s industry looks like yesterday’s. The market still hops from herb to herb and fad to fad just like it did in the late
1990s. Only now, instead of St. John’s wort and echinacea, it’s green coffee bean extract and açaí. We cascade through boom-and-bust
cycles of miracle science and media criticism. When the market’s hot, investors take note, money flows, and mergers materialize, just
like in the boom years after DSHEA was passed. When the market cools, investor interest abates. Case in point: GNC experienced a 35
percent drop in stock price in 2014, after negative studies on multivitamins and omega-3s began to wear down retail sales.
Nevertheless, the dietary supplement market is so varied and diverse that it has managed consistent growth throughout these
schizophrenic years. According to Nutrition Business Journal, US dietary supplement sales grew 7.5 percent in 2013 to reach $34.8 billion.
Preliminary forecasts suggest 2014 growth of 6.8 percent.
It’s remarkable that a market so dependent on novelty continues to chalk up such strong growth. This trend really speaks to
consumers’ mounting desire to take personal control of their health and to avoid putting faith in pharmaceuticals. It also speaks to the
power of marketers and TV personalities to make fads out of dust. (Consider raspberry ketones.)
While this industry may cycle through fads, regulatory hiccups, and financial chess, several phenomena have mounted in recent
years that could bring a potential sea change to the dietary supplement market. First off, the lines between drug and supplement continue to blur as the rise of personalized medicine and genomics has opened the door for democratized nutrition diagnostics. Additionally,
regulatory stirrings, such as the Food and Drug Administration’s pending New Dietary Ingredient guidance, have the potential to push
the industry toward a premarket approval model—one that more closely imitates the pharmaceutical industry. Finally, manufacturers
and suppliers continue to be frustrated by the irrelevance of intellectual property in dietary supplements and bemoan the lack of measurable ROI for new nutrition science. These growing tensions have many wondering whether DSHEA is still the most relevant regulation this industry could have.
Or is there perhaps a better model that could be implemented in the not-so-distant future?
On top of the contention, confusion, and unknowns, we’re also seeing a fast-changing natural retail market, growing consumer concern about genetically engineered ingredients, and repeated media scares regarding economically motivated adulteration and negative
science. As a result, we could be looking at a very different supplement industry in the next 10 years.
But first, let’s take a look at now.
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A view into retail
In 2013, natural and specialty retail sales of dietary supplements hit $12.7 billion in the US. These sales come from natural products stores both large and small, as well as specialty supplement outlets such as GNC and Vitamin Shoppe. Mass market sales, through
Walmart and other big-box stores and conventional grocers, hit $9.9 billion last year. So while natural and specialty still commands the
market, mass is close on its heels.
Sales growth for supplements at retail was strong through most of 2013, but it began to slow through the end of the year and into
the beginning of 2014, as a result of negative research studies and weather-chilled retail sales across the Midwest and Northeast. And although growth has since rebounded, the supplement industry may be on the verge of a plateau unless a new blockbuster category jumps
to the forefront.
That seems unlikely—at least for now. “I don’t see a huge breakout item like coenzyme Q10 or glucosamine,” says John Rorer, CEO
of Richard’s Foodporium, a chain of 18 small-format health food and supplement stores in Florida. Instead, he sees “lots of knockoffs
and variations” of existing products that use borrowed science and borrowed claims. Weight loss and antioxidants are some of the
biggest culprits.
US Natural and Specialty Channel Sales and Growth by Channel, 2011 - 2014
2011
2012
2013
2014
11g
12g
13g
14g
Vitamins
4,182
4,406
4,683
4,819
5.9%
5.4%
6.3%
2.9%
Herbs/ Botanicals
1,757
1,864
2,029
2,186
5.8%
6.1%
8.8%
7.7%
Sports Supplements
1,790
1,984
2,255
2,476
9.3%
10.8%
13.7%
9.8%
Minerals
996
1,058
1,121
1,199
2.7%
6.3%
6.0%
6.9%
Meal Supplements
284
321
372
420
16.0%
13.2%
15.8%
13.0%
1,961
2,123
2,268
2,378
6.6%
8.2%
6.9%
4.9%
10,969
11,756
12,729
13,480
6.5%
7.2%
8.3%
5.9%
Specialty/Other
Total
But other categories are flourishing. Protein is a star segment, although it comes with a host of pricing and supply chain issues.
Rorer, whose stores make roughly one-third of their revenue from supplements, says that probiotics, anti-inflammation aids, mood
enhancers, sleep supplements, and energy products are all moving off the shelf well.
More than ever, retailers need to stay abreast of emerging science and trends to compete in such a diverse supplement market. They
can’t expect to coast on the strength of a few standout products. Nor can they ignore the ever-increasing competition among supplement sellers, another hallmark of the last 18 months.
According to market analyst Scott Van Winkle of Canaccord Genuity, “Public retailers like Whole Foods Market, Natural Grocers,
and Sprouts have been underperforming because of competitive pressures.” Enemy number one: the Internet. The rise of online supplement peddlers means that even though sales growth looks diminished for retailers, manufacturers are enjoying heady days of distribution demand. So what incentive do supplement makers have to stand by retail? It remains to be seen how retail will hold up to outside
pressure from the Internet and other faster growing channels in the supplement space.
Vitamins
Herbs & Botanicals
Sports Supplements
Minerals
Meal Supplements
Specialty/Other
Total
© 2015 Penton
2004
2,772
1,399
1,114
660
219
1,119
7,284
US Natural and Specialty Sales by Product, 2004-2014
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2,925
3,141
3,252 3,591 3,790 3,949 4,182 4,406 4,683 4,819
1,427
1,490
1,535 1,558 1,628 1,661 1,757 1,864 2,029 2,186
1,153
1,231
1,337 1,444 1,503 1,638 1,790 1,984 2,255 2,476
714
751
811
879
932
969
996 1,058 1,121 1,199
216
212
228
237
235
244
284
321
372
420
1,290
1,421
1,548 1,670 1,755 1,840 1,961 2,123 2,268 2,378
7,725
8,245
8,710 9,379 9,843 10,301 10,969 11,756 12,729 13,480
159
A view into the future
The good news is retail is expected to remain the breadwinner channel for dietary supplements for the foreseeable future. As for
supplement sales channels outside of brick-and-mortar retail, specifically the Internet, growth prospects look promising—although very
messy. Changes in tax law and the rise of e-commerce giants like Amazon and the newly public Alibaba have upped the complexity and
competition for online dollars. Plus, consumers shop price—not brand—online, so the value proposition of one’s product must be unique
to the channel. Twinlab CEO Tom Tolworthy says he’s not sure how all of these factors will shake out for the Internet channel but that “it
isn’t going to be pretty.”
Meanwhile, natural retailers have begun a foray into Internet sales—Whole Foods Market, for example, recently announced a partnership with Instacart to provide one-hour delivery—but few are able to speculate on the outcome.
For now, the transformational energy in the supplement market is focused on personalized medicine—an opportunity as promising
as it is inaccessible under the current regulatory environment. “This may be the time when we start to blend with pharmaceuticals,”
Rorer says, “the same way that mom-and-pop blended with supermarkets to form supernaturals 15 years ago.”
US Natural and Specialty Sales and Growth, 1999-2020e
$25,000
14%
12%
$20,000
10%
$15,000
8%
6%
$10,000
4%
$5,000
2%
0%
$0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Sales
2010
2011
2012
2013
2014 2015e 2016e 2017e 2018e 2019e 2020e
Growth
The consumer market for personalized medicine, diagnostics, and genomics continues to grow and open up opportunities for
dietary supplements and nutrition to play a larger role in mainstream health care. Blood diagnostic services such as WellnessFX offer
built-in supplement recommendations. This is a big change, seeing as the dietary supplement industry was built on an abstraction we
call “prevention.” We can’t necessarily smell, taste or feel what supplements do in the body; we take it on faith that they’ll prevent our
bodies from deteriorating into disease. However, in the new information age, it has become possible to measure prevention—to give it a
shape and weight—without breaking the bank.
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US Natural and Specialty Sales by Product, 2015e-2020e
2015e
2016e
2017e
2018e
2019e
2020e
Vitamins
5,037
5,283
5,550
5,827
6,112
6,411
Herbs/ Botanicals
2,299
2,432
2,591
2,783
3,006
3,266
Sports Supplements
2,712
2,961
3,234
3,525
3,856
4,235
Minerals
1,287
1,379
1,473
1,562
1,644
1,725
471
527
588
654
724
797
2,510
2,659
2,831
3,025
3,234
3,454
14,316
15,241
16,266
17,376
18,576
19,887
Meal Supplements
Specialty/Other
Total
The main question is whether the current regulatory regime can support this changing market. As “personalized medicine” has infiltrated industry discourse, some companies have begun blurring the lines between supplements and medicine, although often to their
own detriment. Barlean’s, for example, prototyped a take-home blood test meant to measure an individual’s omega-3 levels. But FDA
deemed the product an unregistered medical device, prompting the company to pull it off the market. The industry has yet to figure out
how to innovate within this new personalized medicine paradigm without breaking the law.
US Natural and Specialty vs. Total Supplement Growth, 2000-2020e
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014 2015e 2016e 2017e 2018e 2019e 2020e
Total supplements
Source: Nutrition Business Journal (cosnumer sales)
Furthering the blurring boundaries between supplements and pharma, drug companies are increasingly interested in the supplement market, not only for its science-rich ingredients (consider omega-3s and Lovaza), but also for supplement manufacturers themselves. As revenues and margins shrink in the bloated pharma industry, the financial incentive to acquire mid-margin, high-growth
nutraceutical players has piqued.
© 2015 Penton
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As personalized medicine gathers steam, and the supplement and pharmaceutical industries continue to blend through mergers
and acquisitions, it’s still unclear where retailers would fit into this new paradigm. On the regulatory front, is it most advantageous to
leave the system as it stands under DSHEA and to sell iron alongside ashwagandha into perpetuity? Or is disruption necessary to bring
a certain class of supplements closer to a model of prescriptions and premarket approval for the sake of better consumer adoption and
proper usage?
Natural and specialty retailers remain the primary gatekeepers for consumer access to the supplement market, so their voices deserve to be heard on this issue. But where to direct them and to what end?
12.4 MLM
Challenges and Opportunities for Personalized Nutrition
in the MLM Channel
Personal nutrition would seem to favor the high-touch channels. Practitioners are obvious. But network marketing, which relies on
one-on-one contact, would seem to offer huge potential. In practice, however, companies in this space have struggled to deliver tailored,
personalized models.
Companies like Shaklee and USANA are seeing some success with proprietary apps that nudge customers to stick to their product
regimens, but FTC regulators have drawn the line at companies that have tried to use DNA analysis to suggest supplement regimens.
MLM distributors can become self-appointed “health coaches” with scant training, but their model is still one geared more toward volume than individualization.
“To sell something to lots of people every single month, it really can’t be personalized,” says Nutritional Products Consulting Group
President Bernie Landes.
That hasn’t stopped MLMs from trying. GeneLink and one-time subsidiary Foru International marketed a DNA-based regimen. Both
companies ended up settling with the FTC a year ago. Len Clements, founder of Inside Networking, says such stumbles are common,
especially as MLMs try to stay on top of the latest fads. Personalization offers a “next big thing” differentiator.
Though Clements consults for network marketers and says he is in favor of MLMs, he is quick to point out where the industry has
failed on the personalization front. One example he offers is Ideal Health, which charged $140 for a by-mail urine test and sold a pack of
vitamins allegedly based on the results. The model prompted users to submit a new test every six months. Clements says the company
floundered for a dozen years before Donald Trump bought in and it re-launched as the Trump Network in 2009. The name got attention,
but the drop off came quick. “It brought in about 25,000 people in a matter of 90 days,” Clement says. “They all left about as fast. The thing
fell apart.”
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US MLM-Network Marketing Sales by Product Category, 2014
Specialty
5.2%
Vitamins
32.1%
Meal supplements
24.1%
Minerals
5.5%
Sports supplements
7.3%
25.7%
IDLife offers an online assessment that Clements says is fatally flawed. For example, he did the assessment himself and checked
boxes for both menopause and prostate cancer to see what would happen. “Not only did the system not question that,” he says. “It suggested nutrients I needed for all these diseases.”
US MLM/Network Marketing Channel Sales and Growth by Channel, 2011 - 2014
2011
2012
2013
2014
11g
12g
13g
14g
Vitamins
1,636
1,711
1,799
1,880
5.6%
4.6%
5.1%
4.5%
Herbs/ Botanicals
1,285
1,347
1,431
1,509
2.5%
4.8%
6.2%
5.5%
Sports Supplements
324
357
393
430
12.4%
10.0%
10.1%
9.5%
Minerals
284
297
311
324
4.9%
4.4%
4.7%
4.1%
1,034
1,287
1,347
1,412
26.0%
24.4%
4.7%
4.8%
247
268
288
307
8.1%
8.4%
7.5%
6.4%
4,811
5,267
5,569
5,862
9.0%
9.5%
5.7%
5.3%
Meal Supplements
Specialty/Other
Total
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2004
1,285
1,272
244
254
633
174
3,863
Vitamins
Herbs/ Botanicals
Sports Supplements
Minerals
Meal Supplements
Specialty/Other
Total
US MLM/Network Marketing Sales by Product, 2004-2014
2005
2006
2007
2008
2009
2010
1,414
1,442
1,471 1,530 1,517 1,549
1,326
1,414
1,471 1,442 1,385 1,254
266
274
282
285
278
288
275
280
281
270
267
271
709
738
775
813
783
821
203
244
261
240
223
229
4,193
4,392
4,541 4,581 4,454 4,412
2011
1,636
1,285
324
284
1,034
247
4,811
2012
1,711
1,347
357
297
1,287
268
5,267
2013
1,799
1,431
393
311
1,347
288
5,569
2014
1,880
1,509
430
324
1,412
307
5,862
IDLife spokesman Scott Unclebach says that the assessment draws from more than 7,000 medical studies and that it is not a
marketing tool. “It is strictly an information-gathering program that matches the questions to proven science and thereby delivers the
nutritional recommendations based upon third-party medical data,” he says, adding that associates are taught not to make health claims
and that the company has had no contact with the FDA or FTC.
Clements says that if there were a legitimate personalized nutrition system working at scale and a price point to support an attractive compensation plan, the big companies would already be doing it. MLM is an experimental space, and smaller companies can experiment with less risk. If a small company finds success, one of the bigger players will quickly copy the model. The fact that they haven’t is
telling, Clements says.
The closest thing to personalization that has worked in MLM is mobile apps. They suggest plans based on lifestyle and provide a
nudge, both upstream and downstream, to ensure compliance. Mobile app developer H2 Wellness, which specializes in health-care applications, has designed several such MLM apps, which H2 founder Hooman Fakkis describes as “engagement” tools. For example, when
customers stop entering data on exercise, diet, and supplement intake, the MLM associate gets an alert. “They know Monday morning
who to call,” Fakki says.
US MLM/Network Marketing Sales and Growth, 1999-2020e
$9,000
12%
$8,000
10%
$7,000
8%
$6,000
6%
$5,000
4%
$4,000
2%
$3,000
0%
$2,000
-2%
$1,000
$0
-4%
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Sales
2010
2011
2012
2013
2014 2015e 2016e 2017e 2018e 2019e 2020e
Growth
The apps can include user self-assessment or integration tools for wearable fitness trackers. H2 has assessment-engine modules
© 2015 Penton
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ready to be customized with a questionnaire typically created by the client. H2 can offer much more functionality for its physician clients
but has to limit things when it comes to the MLM model. The company has a legal team examine every offering for DSHEA compliance.
US MLM/Network Marketing Sales by Product, 2015e-2020e
2015e
2016e
2017e
2018e
2019e
2020e
Vitamins
1,959
2,045
2,142
2,238
2,330
2,425
Herbs & Botanicals
1,588
1,674
1,764
1,861
1,960
2,054
Sports Supplements
467
505
545
587
633
681
Minerals
337
351
365
381
396
412
1,497
1,565
1,652
1,751
1,842
1,921
327
348
370
392
415
437
6,175
6,489
6,837
7,210
7,574
7,929
Meal Supplements
Specialty/Other
Total
For now, it may or may not be “personalized nutrition,” but it is the personal engagement that’s always been key to the MLM model.
“Several years ago we had to convince them that they need a digital engagement strategy,” Fakki says. “Now we don’t have to convince
them at all.”
US MLM/Network Marketing vs. Total Dietary Supplement Sales Growth, 2000–2020e
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014 2015e 2016e 2017e 2018e 2019e 2020e
-2.0%
-4.0%
Total supplements
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12.5 Mail Order
US Mail Order-DRTV-Radio Sales by Product Category, 2014
Specialty
7.9%
Meal supplements
4.3%
Minerals
3.7%
Vitamins
39.7%
Sports supplements
7.1%
37.3%
US Mail Order, DRTV, Radio Channel Sales and Growth by Channel, 2011 - 2014
2011
2012
2013
2014
Vitamins
653
680
708
729
Herbs/ Botanicals
600
625
653
685
Sports Supplements
117
122
126
130
Minerals
66
67
67
68
Meal Supplements
69
72
75
78
125
135
140
145
1,632
1,701
1,770
1,835
Specialty/Other
Total
© 2015 Penton
11g
3.9%
3.9%
4.2%
0.8%
6.0%
7.8%
4.2%
12g
4.0%
4.1%
3.8%
1.2%
4.2%
8.0%
4.2%
13g
4.2%
4.5%
3.5%
0.2%
4.4%
3.6%
4.1%
14g
2.9%
4.9%
3.3%
1.4%
3.6%
3.8%
3.7%
166
2004
505
476
85
57
55
77
1,255
Vitamins
Herbs/ Botanicals
Sports Supplements
Minerals
Meal Supplements
Specialty/Other
Total
US Mail Order, DRTV, Radio Sales by Product, 2004-2014
2005
2006
2007
2008
2009
2010
515
541
552
579
600
629
485
490
502
492
547
578
94
96
103
104
108
113
58
59
60
61
63
66
56
57
58
59
63
65
81
91
96
97
107
116
1,289
1,334
1,370 1,393 1,488 1,566
2011
653
600
117
66
69
125
1,632
2012
680
625
122
67
72
135
1,701
2013
708
653
126
67
75
140
1,770
2014
729
685
130
68
78
145
1,835
US Mail Order, DRTV, Radio Sales and Growth, 1999-2020e
$2,500
12%
10%
$2,000
8%
$1,500
6%
$1,000
4%
$500
2%
$0
0%
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Sales
2010
2011
2012
2013
2014 2015e 2016e 2017e 2018e 2019e 2020e
Growth
US Mail Order, DRTV, Radio Sales by Product, 2015e-2020e
2015e
2016e
2017e
2018e
2019e
2020e
Vitamins
748
770
794
818
846
877
Herbs/ Botanicals
721
757
793
830
867
906
Sports Supplements
134
139
143
147
151
155
Minerals
69
71
73
75
77
79
Meal Supplements
81
83
86
90
93
97
151
157
164
171
178
185
1,904
1,977
2,053
2,130
2,212
2,299
Specialty/Other
Total
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US Mail Order, DRTV, Radio Growth vs Total Supplement Growth, 2000-2020e
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014 2015e 2016e 2017e 2018e 2019e 2020e
Total supplements
12.6 Internet
Specialty
19.0%
Vitamins
23.0%
Meal supplements
2.9%
Minerals
4.7%
Herbas and botanicals
10.7%
Sports supplements
39.7%
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US Internet Channel Sales and Growth by Channel, 2011 - 2014
2011
2012
2013
2014
11g
12g
13g
14g
Vitamins
411
456
507
551
11.1%
10.8%
11.2%
8.8%
Herbs/ Botanicals
113
139
169
202
8.8%
22.4%
21.6%
19.7%
Sports Supplements
537
627
735
836
18.8%
16.9%
17.1%
13.8%
Minerals
108
118
126
135
10.4%
9.2%
6.8%
6.9%
45
52
59
67
22.0%
14.0%
14.1%
13.7%
Meal Supplements
Specialty/Other
Total
Vitamins
Herbs/ Botanicals
Sports Supplements
Minerals
Meal Supplements
Specialty/Other
Total
© 2015 Penton
2004
133
49
111
43
17
77
431
313
374
421
459
15.4%
19.3%
12.6%
9.2%
1,528
1,765
2,016
2,251
14.7%
15.5%
14.2%
11.7%
US Internet Sales by Product, 2004-2014
2005
2006
2007
2008
2009
2010
170
200
238
291
334
370
54
59
73
85
95
104
138
168
215
323
389
452
52
58
64
78
88
98
18
23
26
30
32
37
106
132
178
192
222
271
538
640
795
998 1,162 1,332
2011
411
113
537
108
45
313
1,528
2012
456
139
627
118
52
374
1,765
2013
507
169
735
126
59
421
2,016
2014
551
202
836
135
67
459
2,251
169
US Internet Channel Sales and Growth, 1999-2020e
$4,500
40%
$4,000
35%
$3,500
30%
$3,000
25%
$2,500
20%
$2,000
15%
$1,500
10%
$1,000
5%
$500
$0
0%
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014 2015e 2016e 2017e 2018e 2019e 2020e
US Internet Sales by Product, 2015e-2020e
2015e
2016e
2017e
2018e
2019e
2020e
Vitamins
599
652
713
778
848
923
Herbs/ Botanicals
240
278
314
351
390
430
Sports Supplements
944
1,058
1,178
1,305
1,442
1,590
Minerals
142
150
158
167
178
188
75
82
88
96
105
115
501
544
588
638
695
763
2,500
2,763
3,039
3,336
3,658
4,009
Meal Supplements
Specialty/Other
Total
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12.7 Mass
Specialty
26.5%
Vitamins
27.8%
11.1%
Meal supplements
21.1%
Sports supplements
6.5%
Minerals
7.0%
US Mass Market Channel Sales and Growth by Channel, 2011 - 2014
2011
2012
2013
2014
11g
12g
13g
14g
2,534
2,636
2,798
2,802
3.8%
4.0%
6.1%
0.2%
Herbs/ Botanicals
966
987
1,063
1,116
5.1%
2.2%
7.6%
5.0%
Sports Supplements
550
624
694
653
11.6%
13.3%
11.2%
-5.8%
Minerals
726
713
697
709
1.5%
-1.8%
-2.2%
1.7%
Meal Supplements
1,625
1,784
1,952
2,131
9.1%
9.8%
9.4%
9.2%
Specialty/Other
2,401
2,540
2,660
2,675
4.7%
5.8%
4.7%
0.6%
Total
8,802
9,283
9,863
10,087
5.4%
5.5%
6.2%
2.3%
Vitamins
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Vitamins
Herbs/ Botanicals
Sports Supplements
Minerals
Meal Supplements
Specialty/Other
Total
2004
1,801
708
432
622
1,344
1,259
6,167
US Mass Market Sales by Product, 2004-2014
2005
2006
2007
2008
2009
2010
1,705
1,702
1,764 1,996 2,299 2,441
683
686
721
766
884
919
445
458
476
445
453
493
608
592
608
648
690
715
1,239
1,258
1,297 1,357 1,453 1,489
1,425
1,582
1,792 1,971 2,172 2,294
6,104
6,277
6,657 7,182 7,952 8,351
2011
2,534
966
550
726
1,625
2,401
8,802
2012
2,636
987
624
713
1,784
2,540
9,283
2013
2014
2,798 2,802
1,063 1,116
694
653
697
709
1,952 2,131
2,660 2,675
9,863 10,087
US Mass Market Sales by Product, 2015e-2020e
2015e
2016e
2017e
2018e
2019e
2020e
Vitamins
2,825
2,890
2,978
3,085
3,202
3,325
Herbs/ Botanicals
1,134
1,160
1,193
1,232
1,275
1,322
Sports Supplements
633
653
690
733
781
834
Minerals
727
754
786
822
862
905
Meal Supplements
2,304
2,490
2,690
2,902
3,129
3,373
Specialty/Other
2,678
2,750
2,859
3,009
3,181
3,366
10,302
10,698
11,196
11,783
12,428
13,125
Total
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US Mass Market Sales and Growth, 1999-2020e
$14,000
20%
$12,000
15%
$10,000
10%
$8,000
5%
$6,000
0%
$4,000
-5%
$2,000
-10%
-15%
$0
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Sales
2010
2011
2012
2013
2014 2015e 2016e 2017e 2018e 2019e 2020e
Growth
US Internet Growth vs Total Supplement Growth, 2000-2020e
20.0%
15.0%
10.0%
5.0%
0.0%
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014 2015e 2016e 2017e 2018e 2019e 2020e
-5.0%
-10.0%
-15.0%
Mass market
Total supplements
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12.8 Practitioners, Get Ready
Russell Jaffe, M.D., came to integrative medicine more than 30 years ago. He worked in clinics, headed up research, and moved from
skeptic to outspoken proponent. But he’s never been more excited about personalized nutrition than he is right now, he says. The tools,
data, and proof have arrived.
“In the 20th century, we had to rely on faith,” says the founder of ELISA/ACT Biotechnologies, a company that specializes in delayed
allergy testing. “In the 21st century we have the evidence.”
That level of excitement for personalized nutrition is common across the practitioner space. The there are a lot of challenges to
overcome, including sorting out just who can use those tools, who can interpret that evidence, how those practitioners are vetted, and
how their results are validated. For consumers who want to get full benefit of the science, the most personal part of personalized nutrition may be the practitioner they choose.
“You have to start with somebody who really knows you as a person,” Jaffe says.
The growing mountain of increasingly precise data, combined with a leaps-and-bounds pace of discovery, will more than likely leave
consumers either bewildered or retreating to an online and app-based approach that could be closer to one-size-fits-all than the revolutionary promise presented by personalized nutrition. This where the practitioner steps in—or perhaps a whole team of practitioners,
with a doctor, nutritionist and health coach working together.
Few are ready for that type of practice. “The reality is that right now most of the nutrition world is ill-equipped,” says Michael Stroka,
executive director of the Certification Board for Nutrition Specialists (CBNS).
US Practitioner Channel Supplement Sales and Growth, 2004-2018e
12%
$4,500
$4,000
10%
$3,500
8%
$3,000
$2,500
6%
$2,000
4%
$1,500
$1,000
2%
$500
0%
$0
2004
2005
2006
2007
2008
2009
2010
2011
Sales
2012
2013
2014
2015e
2016e
2017e
2018e
Growth
Stroka, a certified nutrition specialist who participates in Personalized Lifestyle Medicine Institute conferences, describes three
different bodies of knowledge that are key for practitioner. “The first is the nutrients themselves,” he says. “The second is the mechanism
of the body, the pathophysiology of how the body uses those nutrients. And the third is the whole genomics world.”
The medical establishment generally ignores all three, Stroka says, but he also points out that few nutritionists understand genomics at any depth. He sees challenges for all practitioners. Certified nutritionist specialists need more training on genetics. Dieticians need
© 2015 Penton
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to rethink their population-based assumptions. MDs will need a nutrition focus most never got in medical school. Nurse practitioners
need the same. Naturopaths will require more insight on the genetics. Some chiropractors will be closer than doctors on the nutrition
but the genetic component is still outside the standard scope of practice for most of them.
That doesn’t prevent any of the modalities, whether MDs and chiropractors or certified nutrition specialists, from diving into personalized nutrition, Stroka says, but it raises a bar that will only keep rising as data and discoveries accumulate.
As is common across most industries, however, regulation lags behind technology. The FDA barred 23andMe from presenting information that could be perceived as a diagnosis, but Judy Stone, director of legislative policy for CBNS, says she has seen no regulation that
would keep a nutritionist from looking at a 23andMe report and giving advice on diet and supplementation. In 27 states, anybody can
dispense nutrition advice without a title or certification, she points out. Talking about genetics and nutrition might not be that different
from publishing a diet book that bases meal plans on ethnic heredity. “I think that raises the question of, Can you go to somebody with
your own data and say ‘Help me look at this. What do you think about this?’” Stone says.
New York physician Ronald Hoffman says he is not allowed to use 23andMe-type tests in his practice. But as a doctor who has been
promoting personalized nutrition since he published the Diet Type Weight Loss book in 1989, Hoffman says he sees rules about who can
give nutritional advice at a personalized level as an example of “pernicious” regulation.
“I think they are exceptional people who don’t carry certification,” he says. “I don’t urge more regulations. I urge more education and
consumer awareness so consumers can be more sophisticated in who can help them.”
Nathan Price predicts an explosion in the number of courses and training programs. A professor and associate director at the Institute for Systems Biology in Seattle, he says education is just one of several emerging business opportunities. “I think there’s going to be a
lot of new companies that are going to emerge that are going to be tapping into exactly that.”
The discoveries are happening quickly, Price says, everybody in nutrition and medicine will be hard tasked to keep up.
At ISB, a100 Person Wellness Project provided a blueprint for a 100K Wellness Project now under way. ISB is creating a profile for
each person that ranges from typical blood-draw biomarkers to genetic profiles and microbiome sequencing, repeated throughout the
year. What they are finding, he says, is “a tremendous amount of actionable information.” “As you make measurements you start to have
an understanding that something you do really works.”
Jaffee holds an MD and a Ph.D and says of the 70,000 patient database he helped build at Health Studies Collegium Foundation, “It
gets smarter every time we add a person.”
Still, both men agree that the limits of personalized medicine are as important as the potential. Jaffee believes much of the genetic
component is overstated. “Most people don’t understand the limits,” he says, explaining that epigenetics, the influence of biochemistry
on gene expression, is typically more important than the basic genetic blueprint. Price recalls a subject in the 100 Person Wellness Project whose hemochromatosis, was discovered during the testing protocols. “We referred that person back to the MDs,” Price notes. “We’re
not practicing medicine. We just found it because of the holistic approach that we take.”
Hoffman says he fears that genetics pose a “potential for this to grow into a little bit of 21st phrenology.”
All of this means practitioners will need to be careful about how they present themselves, or more pointedly, how they market
themselves. Price believes practitioners in personalized nutrition cannot simply point to a certification. They have to point to evidence,
science. “The positioning here among practitioner is going to have the gravitas, to have the evidence, to have the data to support the
programs that they are putting forward.”
This will be especially true in the early days as the first wave of patients will likely come armed with their own armchair research
and questions. “The early adopters going to be people who are willing to take on a pretty large fraction of that burden themselves,” Price
says.
Certified Nutrition Specialist and author Deanna Minnich says those well-informed first patients will help add legitimacy. They are
not guinea pigs but they are part of showing that the practice of personalized nutrition works outside a study population. “I think we are
in the transition phase,” Minnich says. Finding the right practitioners and avoiding the less-qualified/over-hyped claims advances the
cause of personalized nutrition in a very important way, Minnich says. “A lot of the onus is on the consumers.”
Those first patients will be very demanding, Price notes, and, because they are looking at the data coming from all the tests and
tools, they will know what’s working. “If somebody is selling you product that is not doing anything, you can know because you are
taking measurements,” Price explains.
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In the social media, where word-of-mouth gets a bullhorn, failures and success could change how personalized nutrition evolves.
Hoffman could imagine something like “a Watson super computer for every patient” but the practitioner will still be vital to the success
of the movement. “We have these amazing computers we hold in our hands, but if we use the wrong info and the wrong algorithm we’re
going to get the wrong outcome.” Clinical experience remains vital, Hoffman says. That’s the personal touch of personalized nutrition.
“I’ve never taken care of a statistic,” Jaffee says. “I’ve only taken care of people.”
When the success begin to pile up, when Price and ISB can present data from the 100K Person Wellness Project and the evidence
Jaffee champions becomes more widely accepted, is when the biggest development for personalized nutrition might happen and it won’t
happen in a lab. It will happen in an insurance actuary’s office. Personalize nutrition won’t only save lives. It will save money. Currently,
although employers are already employing wellness coaches to save on health insurance, few nutritionist services are covered. Medicaid
only covers limited diet counseling for diabetics, Stone says, and few insurance reimburse the cost of nutritionist consults.
Stroka is confident that will change.
“Ultimately, he says. “Efficacy wins out.”
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Table of Contents
13. Regulatory
Outlook
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REGULATORY OUTLOOK
13.1 The Regulatory Shakeup
It’s difficult to imagine an industry more plagued by uncertainty than nutritional supplements. Battered by negative headlines that
question supplement efficacy and safety —and now under attack from a coalition of attorneys general alleging outright fraud—supplement makers are on edge. It’s gotten to the point that some leading voices in an industry famously resistant to new regulation are calling
for changes to enforcement, guidance, and even to DSHEA itself.
No discussion of changes in supplement legislation can begin without mentioning Senator Dick Durbin. The Illinois lawmaker’s
Dietary Supplement Labeling Act has long been the legislative equivalent of Arbor Day; it comes up every year or two and gets ignored
every time. But the situation could be different this year. In an emailed statement to NBJ, Durbin’s office claims that support has been
growing for the bill he co-sponsors with Senator Richard Blumenthall of Connecticut, and attributes that new support to the New York
attorney general’s herbal supplements investigation.
In his statement, the senator contrasts a Council for Responsible Nutrition survey finding 82 percent of Americans confident in the
safety, quality and efficacy of supplements against a Journal of Community Health survey that showed “a majority of people (52%) are
unaware that these supplements on the shelves have not been tested for their safety and effectiveness.” The statement goes on to say
“Durbin believes that the actions taken by the New York Attorney General and press coverage help to close this safety information gap
for consumers.”
CRN President Steve Mister finds it easy to dismiss the Durbin bill as a perennial non-starter. “The sun will come up in the east,
and every spring, in odd numbered years, Senator Durbin will reintroduce the DSLA,” Mister says. The bill, however, has a tendency to
“morph” based on current events, Mister says. If nothing else, that keeps DSLA in the news, but it also offers the possibility of long-term
challenges based on short-term controversies. “If we were to see something that required DNA testing of the raw ingredients, we would
know there that came from,” Mister says.
Wheter or not passage is a legitimate possibility, Durbin’s bill at least opens the door to one of the supplement industry’s biggest
fears: pre-market approval.
FDA approved?
Durbin’s bill would empower the FDA to require that manufacturers prove their products were safe and that they delivered the
promised health benefits. Claims and safety may already be regulated under DSHEA, but Durbin’s bill states that a supplement manufacturer must supply “such substantiation to the Secretary as the Secretary may require.” That could move the FDA closer to the
pre-market-approval system that many describe as the worst-case scenario for supplement regulation. Marc Ullman, a New York lawyer
specializing in supplement regulations, says pre-market approval would create a pharma-like burden and dramatically slow product innovation. Ulman says that, given how slowly the FDA moves, such a requirement would impose unknown costs on companies and leave
them vulnerable to copycats. “Once there was a formula on the market, somebody else could copy it,” Ullman says. Unable to recoup the
costs of pharmaceutical-style studies, these companies would come to see product development as a bad investment.
American Botancial Council founder Mark Blumenthal is another critic of pre-market approval, noting that the many thousands of
supplements would simply overwhelm the FDA. Without a grandfather clause for products currently on the market, supplements would
effectively be banned. “The agency simply doesn’t have the resources,” Blumenthal says.
Still, putting aside vitamins and traditional formulations, many used for centuries, Blumenthal says some of the tools of pre-market
approval are already part of DSHEA. Requirements for new dietary ingredients basically mandate pre-market approval and regulations
on claims provide “post-market” approval, Blumenthal says. “It’s already there. It’s on the table. It’s been on the table since 1994.”
Todd Harrison, who practices law in the supplements field at Venable in Washington D.C., agrees that much of the approval process
is already in place. The agency can already requests substantiation of claims. “If you say no, then the agency has to make a decision
whether to sue you,” he says. “But most companies would probably go ahead and provide it.”
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Room for registration
Nearly all of the worst-case scenario speculation ends at pre-market approval. Registration of manufacturers and their products,
a primary piece of Durbin’s bill, draws little more than a shrug. Mister notes that the Food Safety and Modernization Act (see page TK)
already requires facilities to be registered, and he admits that not having a list of products is a vulnerability. Registration might make the
FDA’s enforcement more effective in some cases. “If they were going to do a recall on dMBA, they would know all of the companies that
had that in their products.” But Mister stops short of endorsing registration. “We don’t have a position on that. It has not been proposed.”
Harrison shows no such reticence, calling registration of companies and products “a very simple solution.” The responsible companies should have no worries about registering their products, he notes, and lack of registration would immediately call out the less
responsible players. “If you’re not registered with the FDA, your products would be deemed to be adulterated,” he says.
Ullman suggests that registration would work only if it were accompanied by adequate enforcement. Without enforcement, he
says—something the FDA is perceived to be unwilling or unable to provide—“all it would do is create more work for companies that
were complying.”
New regulations, or more effective enforcement?
For industry veteran Scott Steinford, the challenges facing the supplement industry are not signs that something has gone wrong
with the system. Rather, he says, they are a result of the fact that the system really never had a chance to work, due to things like inadequate oversight in the supply chain. The FDA should be demanding information on safety and toxicity of ingredients from raw-ingredient
suppliers, he says. Since responsible companies already have documentation and can easily produce it, such a requirement would immediately call out less conscientious companies. “It would level the playing field if ingredients were held to a certain standard for safety or
toxicity,” Steinford says, noting that GMPs stop short of raw ingredient suppliers. “The GMPs should be extended completely through the
supply chain.”
Fixing that, says Harrison, may require more than the standard industry argument that better enforcement of existing regulations
would solve the problem. The industry could be better off asking for new regulations. “I think one of the things is go to the FDA and say
‘FDA, you were right in the original position in 2003 that required raw material suppliers to be part of the GMPs. We need to fix that now
and we don’t think FSMA is going to be sufficient to do that.’”
According to Blumenthal, when GMPs were being developed, many people assumed that they would cover the supply chain. “We
were, frankly, surprised when the GMPs came out and they didn’t include the supply chain,” he says, adding that in the current situation,
a purchaser qualifies the supplier but that that’s the only real check on the suppliers. Blumenthal believes GMPs should be phased in for
smaller producers, but he also believes the FDA already has the power to put them into practice.
Even then, Steinford has doubts the GMPs go far enough. The phenomenon of GMP seminars is evidence to Steinford that current
regulation may be inadequate for ingredients. “There’s still, after all this time, not enough detail to be able to provide a true picture of
expectations,” Steinford says. “The devil is in the lack of details.”
Staking claims
Claims have always been a multi-pronged problem for the supplement industry. Regulations barring supplement claims about diagnosing, curing, mitigating, treating, or preventing diseases seem simple enough. But even those are open to interpretation. Companies
that invest in the necessary research can still see their claims overruled, while other companies blatantly flout the rules, ready to close
up shop and re-emerge under a new name with a new product if the FDA or FTC catch on. That resulting system disincentives research
and innovation and does too little to combat fraud, especially in categories like weight loss and erectile dysfunction.
According to Harrison, the accusation that brands are not doing enough research is pointless when the brands can’t even know
what research federal regulators would accept. He calls for a a system that would allow companies to submit their testing protocols
to the FDA prior to the study, and then make a health claim if the results were positive. With some IP protections in place to prevent
competitors from piggybacking on their work, Harrison says, companies would see quality research a more viable business opportunity.
“Even one year exclusivity is probably worth a lot of money,” he says. “You’d definitely recoup your research costs.”
It could also bring a legitimacy to the industry, he adds. “Call it the herbal medicine act of 2015.”
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Room for a reshuffle
The lack of adequate enforcement has been attributed to everything from bureaucratic inertia to an unspoken conspiracy by FDA
officials looking to nudge the industry into self-destruction, something that some could say is happening right now. Others have called
it an organizational problem. With enforcement under the auspices of the FDA’s Center for Food Safety and Applied Nutrition, supplements slip to low-priority status. Ullman calls supplements enforcement “a backwater division in a stepchild of a center.” The tools of
DSHEA are rarely put to use, he says. “It should be an institutional embarrassment that this hasn’t happened.”
The way Ullman sees it, if the organizational schematic were updated, enforcement of supplement regulations could get the attention and action it needs. “Best case for legal change, if the if there is going to be change, would be the creation of an office of dietary
supplements, which would then have a line item in the budget,” Ullman says, adding that the hypothetical office would be accountable
to Congress. “At least the agency would have to explain itself.”
Fight or fright
Regulatory reform with enough teeth to address the problems facing the industry will involve more than simply asking the FDA to
work harder. It will require new rules, be they pre-market registration, an extension of GMPs, clearer guidelines on research, a new organizational chart for supplements, or any combination of the above.
Should supplement companies be the ones asking for those rules? The industry has shown few signs that it would be ready to take
that kind of active role in reshaping the regulatory landscape. Mister argues that can CRN can “immediately point to ways that the FDA
has sufficient tools to regulate the industry” and that his group has the contacts in Congress to make that argument. The answer isn’t
new rules for the supplement industry, he says; it’s new rules for the FDA and a rethinking of how it spends its money. But beyond such
legislative changes, Mister says, industry will also have to clean house. “There’s a part of this industry that has to go,” he says. “Until Congress tells the agency to devote a certain amount of resource to dietary supplements, it’s not going to happen. It could take legislation in
the appropriations bill.”
Harrison believes budget allocations could make positive change, but he adds that the industry has to take a more aggressive
approach to reform. That could include a willingness to tinker with the holy grail of DSHEA. Without that willingness to discuss change,
Harrison says, the industry comes off like “a whining child” playing the role of the victim. “We, as an industry, moan and complain, and
say we’re being picked on.”
Aside from the perception problem, continued resistance probably won’t keep change from happening anyway, Harrison says. In
fact, it could further motivate Congress to act. “Congress likes to get involved when they don’t think a particular industry is doing what
they need to do,” he says.
Harrison believes that an openness to come to the table and talk about a retuning of DSHEA would send a signal that the industry
wants to be part of a solution. That gives Congressional supporters ground to stand on. “If they see that you are trying to do something,
it makes your champions in Congress better able to fight off the accusations of Durbin and Blumenthal.”
Durbin’s office isn’t expecting any such outreach. “While Senator Durbin welcomes the opportunity to work with industry to come
together on common sense solutions to help address the growing concerns both consumers and regulators have over dietary supplements, we have not seen an attempt from the industry to engage in that discussion,” his office told NBJ.
Perception, as the industry is learning, eclipses reality every time. Consumer trust could be nearing a tipping point. If that fails,
it could be open season on supplements. And if the weak enforcement were to lead to a real public health crisis, perhaps a commodity-level ingredient adulterated with life-threatening substances, all bets would be off. New legislation would come, with or without the
industry’s input.
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13.2 TGA: Industry Oversight the Aussie Way
In 1994, the US dietary supplements market underwent a seismic shift in its regulatory model when Congress passed the Dietary
Supplements Health and Education Act (DSHEA). Because supplements were regulated as foods and not drugs, the industry was liberated to freely market and innovate. The attendant presumption of safety meant the burden of proof fell on the FDA to pull any unsafe
products from shelves after they were already there. This is counter to the rest of the world’s regulatory models, which feature pre-market approval by regulatory bodies before supplements are allowed on the market. The boom time in the US market began before the ink
was dried on the legislation.
If anyone was in a position to take advantage of the new legal framework around supplements, it was Mark LeDoux. He ran a
37,000-square foot manufacturing facility called Natural Alternatives International and had sat on the Council for Responsible Nutrition’s
working group that provided part of the template for DSHEA. Yet with an inside track to profiting in the DSHEA era in the US, LeDoux
instead decided to look past it all and hold himself to the much stricter requirements of Australia’s notorious heavy-handed Therapeutic
Goods Administration (TGA).
“The sign outside my door says ‘International,’” LeDoux explains. “We were focused on not just the US market but also expanding
the business internationally. One quick way to do that is to go through the TGA. It allowed me to access 47 markets around the world.
Very few US producers have it. Even though it’s expensive, in the grand scheme of things it’s a huge differentiator.
“It’s no small undertaking. The process is labor- and capital-intensive. The first time we initiated the audit process, I believe it
took about four days of audits and an ensuing three months of planning and facility and system modifications to achieve success as a
TGA-certified facility. I daresay, very few companies in our industry know what an air shower is, much less have one deployed in their
operating facilities.”
LeDoux says he spends half a million every year maintaining his TGA certification. But it’s hardly held the company back. Today,
NAI has a 200,000-square-foot plant in California and a smaller office in Switzerland, and half of its business is abroad. The company
can do organic, is a leader in Prop. 65 issues around heavy metal testing, and spends north of $2 million a year on QA/QC alone. The
firm also has its own in-house testing labs with the full range of equipment, from microscopy to HPTLC. NAI’s entire US operations are
TGA-certified, including its raw material receiving; warehousing; internal laboratories; blending; powder processing and packaging;
tablet compression and coating; encapsulation; and consumer packaging systems.
TGA, what a world-class regulator looks like
The Australian standards are substantial. Top-line regs include pre-market notification of everything from product launch to advertisements, strictly audited GMPs, a tightly controlled positive list of approved ingredients, and post-market surveillance. But it’s the expertise of the enforcement agents that really makes TGA rise to the top. The industry legend is that you’d rather have FDA GMP auditors
living in your office for a year rather than have TGA agents audit your facility for four days.
The Australian regulatory structure views dietary supplements as “complementary medicines.” More than 1,600 new complementary medicines are listed every year, each one subject to pre-market approval by the regulatory agency.
Industry killer? Well, Australians spent $2 billion in out-of-pocket expenses on complementary medicines in 2011—and only $1.6
billion on pharmaceuticals. Sales of vitamins and supplements will overtake OTC medicines in 2015 for the first time, according to estimates by Euromonitor.
“It would have to be assumed that the role the TGA plays in regulating these products is a key component in ensuring consumer
confidence,” says Steve Scarff, director of regulatory and scientific affairs at the Australian Self Medication Industry (ASMI), a trade
group representing OTC and complementary medicine companies.
While technically operating under a pre-market approval scheme, the TGA separates supplements into “listed” and “registered” categories. Registered products—examples include glucosamine and Ester-C—are able to carry bonus health indications that listed ones cannot. The vast majority of supplements are merely listed, because they are considered to be of relatively low risk to consumers—essentially
equivalent to GRAS. However, even this permitted list of ingredients is “quite restricted,” according to an executive at a major Australian
supplement brand. This is mostly because having a new ingredient evaluated by the TGA is time consuming and expensive, and no intellectual property protections are granted. Two years and $100k later, and your competitor can say, “Thanks, and here’s my me-too.”
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Comparing regs: Australia vs America
AUSTRALIA
AMERICA
Positive list of ingredients
(ingredients are evaluated for safety and quality
before they’re permitted to be included in goods)
Negative list of ingredients
Included on a register,
with a market authorization number
No register of available goods
Therapeutic claims
Structure/function claims
Regulators can and do conduct their
own tests on finished products, typically in
response to specific issues to evaluate.
Private, for-profit third-party testing
companies conduct finished-product tests,
either to inform the public or shame manufacturers.
When brand holders (aka, “sponsors”) launch
a product, they have to certify that they hold
evidence to support therapeutic claims.
Structure/function claims must be truthful
and not misleading. Companies should have
scientific dossiers, per GMPs, but many do not.
“The Australian industry accepts that the higher standards imposed on us will lead to a higher cost base,” says Carl Gibson, CEO of
Complementary Medicines Australia (CMA), an association of stakeholder groups including suppliers, manufacturers, retailers, MLMs
and consumers. “But we believe consumers understand that quality is worth paying for. Our current beef is that there is no intellectual
protection for a large proportion of complementary medicines regulated by the TGA, which creates a disincentive to innovate or bring
new products to market.”
The TGA’s annual audits strictly enforce GMPs on aspects of manufacture including raw materials, excipients, dosage, testing,
labeling and packaging. “A manufacturer of complementary medicines is required to be licensed for all steps of manufacture, including
testing, dosage form manufacture, packaging and labeling,” Scarff says. “This requires inspection by the TGA and a license to be issued
before products can legally be supplied on the Australian market.”
The TGA licenses manufacturers to the Pharmaceutical Inspection Co-operation Scheme (PIC/S) standard of GMP. TGA has mutual
recognition arrangements with regulators of different countries that operate under similar PIC/S GMP standards. While TGA certification does not give carte blanche to markets in other countries, the PIC/S standard means a manufacturer has to go through a paper application process that takes a few weeks, rather than a significantly more time-consuming and burdensome full-site inspection process.
“The Australian evaluation process and manufacturing standards are typically viewed quite highly in other jurisdictions,” says Scarff,
“This may simplify pathways to importing and selling Australian complementary medicines. However, other countries will have their
own specific requirements surrounding ingredients and dosages, labeling and claims, so products that are approved for supply in Australia may not necessarily be compliant with the requirements for those countries.”
Even so, LeDoux says it was the right call to get TGA certified and take his quality-stamped products around the world instead of
hiring 47 sales agents in 47 different countries.
Under the TGA system, no products may be sold without TGA pre-approval, and brand holders have to certify when they launch a
product that they hold evidence to support the claims. This is tested post-market by the TGA.
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can structure/function. For example, a calcium/vitamin D supplement claim in Australia is, “Calcium with vitamin D to help maintain
healthy bones, bone density and muscles.” In America, a structure/function claim might read, “Calcium builds strong bones. Vitamin D
helps contribute to bone health.”
“Australia has a strong regulatory system,” Scarff says. “This ensures that complementary medicines adhere to stringent principles of
quality and safety, confirming that the ingredients claimed to be in products are actually included, and that testing for contaminants and
toxins confirm that purity specifications are achieved.”
The best there is—but perhaps not perfect
Even with a zipped-up regulatory model, the TGA is not afraid to change regulations based on shifting circumstances. In 1999, the
TGA added new regulatory provisions that, among other things, required pre-approval of advertisements in print or broadcast media.
Loophole: TV infomercials and Internet ads do not receive pre-approval (though they are still subject to the same restrictions on advertising to consumers).
Marketing products on the Internet represents an additional loophole for consumers. That’s because global mail and the web are
beyond the reach of the TGA, so consumers can access products that are not necessarily TGA certified.
Apart from these considerations, a nagging question remains related to the very same issue that dogs the supplements market in
the US—ingredient quality. In a global supply market, with questionable material being produced around the world, can’t unscrupulous
manufacturers acquire cheap material?
“Global supply pathways are always going to provide their own unique sets of challenges,” says Scarff. “The advantage of the positive
list of ingredients utilized in Australia is that quality standards are specified from the outset, so any raw material supplier, regardless of
where they are globally, must supply materials that adhere to these standards.”
In addition, manufacturers must have strict testing protocols in place that confirm the quality and identity of these materials
or they risk losing their manufacturing license. Like in the US, the onus lies with manufacturers to remain GMP-compliant, although
third-party testing labs also are required to be licensed by the TGA.
“I do not believe that the TGA is specifically validating individual test results, but they do audit manufacturers on a one- to threeyear cycle, and they will be reviewing in detail both the processes that the manufacturer operates and their test results,” says a major
Australian brand executive who requested anonymity. “My sense is that it would be difficult for a manufacturer to consistently forge
C of A’s in this environment.”
Seeing a hole in the regulations on the supply side, in 2012 the two leading trade organizations, ASMI and SMA, launched a Good
Supplier Practice guideline to provide transparency of the expected standard of quality management for local agents and suppliers, along
with a Vendor Qualification Questionnaire. Gibson says the guidelines are “strictly enforced” by the trades.
Can a TGA system renew confidence in the US system?
The dietary supplements industry in the US today is at a bit of a crossroads—born of being in the crosshairs. Consumer confidence
in supplement quality is at historic lows, and nobody seems to have answers. Some of the leading metrics for the collapse of consumer
trust include:
• Third-party groups like ConsumerLab and Consumer Reports test products from store shelves and the score is never 100 percent
satisfactory.
• The New York Attorney General’s kangaroo court nevertheless did significant and, perhaps, lasting damage to consumer confidence that what’s listed on the label is in the bottle.
• The New York Times, which leads media coverage throughout the country, always comes down on the side of more rigorous regulations no matter the industry, and it has never been a fan of supplements. It has made hay aplenty from the New York attorney
general’s ham-handed sting operation.
• Yes, DNA barcode testing is inappropriate for botanical extracts, but let’s just call that the wrong weapon for the right war. Three
of the leading botanical organizations—American Botanical Council, American Herbal Pharmacopoeia, and the University of Mississippi’s National Center for Natural Products Research—have established a Botanical Adulterants Program for a reason. Identity
and quality issues around botanicals is a significant issue.
• The FDA issues 483s and more damning Warning Letters on a weekly basis to companies not complying with aspects of GMPs—
and while some are minor like not having written SOPs, on occasion they reflect practices that give no thought to product quality.
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•
Sports supplements and weight-loss pills are adulterated with pharmaceuticals so often that it sometimes seems like the only
thing keeping those sectors going are consumer ignorance of the problem and a greater dollop of hope that a miracle pill will
solve their vanity issues.
• Fly-by-night internet-only supplements of questionable veracity are easily available, and nobody seems to be able to do anything
about it.
“Give me a break,” LeDoux says. “I’ve been at this 35 years. I’m getting tired of seeing these products sold on late-night TV with these
potentially fatal combinations of drugs masquerading as supplements. America is the only country that doesn’t require pre-market registration. Every other market I sell into, whether it’s Russia, the Middle East, Scandinavia, pick it, you have to tell people, ‘Here’s what I’m
selling, here’s what’s in it, here’s where it’s made,’ and then they give you a document that says ‘good to go’ and you sell it.
“The concept of pre-market notification and listing in Australia is something I think we would do well to adopt in the US The industry needs to clean up its act. Perception becomes reality quickly.”
Whoa, Nellie! You mention “pre-market approval” to the US supplements industry and you can see hackles being raised from a mile
away.
“Our critics seem to go straight to pre-market approval as the answer in search of a problem,” says Steve Mister, president and CEO
of the Council for Responsible Nutrition.
Mister says that while the stricter regulatory models of Canada and Australia have their benefits, the burden is too great when considering costs to register products and the lag time between filing and approval. As noted earlier, registering a new ingredient in Australia can take 18 months to two years and cost perhaps $100,000. (Tellingly, under the still-pending New Dietary Ingredient rule in the US,
the cost of successfully filing an NDI—even a lesser GRAS dossier—can cost in the high five figures and take several months. And most
NDIs are rejected by the FDA.)
“That Australian kind of model is a substantial burden on the legitimate industry,” says Marc Ullman of the New York law firm
Ullman, Shapiro & Ullman, “especially for small companies that want to comply and are trying to comply. Before we create a significant
change in the model and impose significant layers of new regulation, I’d like to see some real enforcement of the law as written. The
problem we’re confronting is grounded more in the presence of scofflaws in the industry. These people are not in the dietary supplements business, they’re in the fraud business.”
For all the work companies do to abide by GMP regulations, the scuttlebutt is that FDA agents are pikers when compared to professional career regulators Down Under. Ullman says this is because supplements get little respect—and littler funding—within the FDA.
Ullman says it would make a difference merely to elevate the Division of Dietary Supplements to an Office of Dietary Supplements. “That makes them a line item in the budget, and with that comes real accountability. Improvements in the quality of inspections
and enforcement go hand in hand with holding the FDA accountable for what they do with supplements. And that is tied in to elevating
the Division of Dietary Supplements to an Office of Dietary Supplements.”
That might sound like semantics, but the FDA’s division employs 25 people. They are both stretched thin and not given a great
deal of respect within the federal government. For example, Ullman says, division investigators do not specialize in supplements, and the
Department of Justice shows little enthusiasm for going after dietary supplement cheats.
“I don’t think the scofflaws are going to start paying attention as long as the consequence is a letter,” Ullman says. “Companies
that get 483s or warning letters play it out. Kabco was in business three years from the first warning letter to an injunction. That’s three
years of non-compliance. There’s no real risk for those people.”
So, more money for the FDA, and more aggressive prosecution of scofflaws. Raise your hand if you think either of these are likely to come to pass. That leaves the industry in the uncomfortable position of passively accepting cheaters and thieves who are shaking
the foundation of the larger responsible industry, or having to swallow inelegant sledgehammer legislation that gives up and calls for
pre-market approval. Surely there’s a sensible middle ground, but good luck finding sensible people in Congress anymore.
LeDoux thinks attitudes in Congress are shifting, as they are in the culture. Millennials are demanding transparent business
practices and quality goods. There’s enough quality supplement makers that would actually benefit if substandard players were shown
the door, even if an increased suite of regulations make the cost of doing business go up and slow down.
“Pharma is a big player in this space. Frankly, they would not have any heartburn with any of these concepts,” says LeDoux. “The
good guys stay, the bad guys find a new line of work, and consumers win.”
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Comparing regs: Australia vs America
Australia
America
Positive list of ingredients (ingredients are evaluated for safety
and quality before they’re permitted to be included in goods)
Negative list of ingredients
Included on a register, with a market authorization number
No register of available goods
Therapeutic claims
Structure/function claims
Regulators can and do conduct their own tests on finished
products, typically in response to specific issues to evaluate.
Private, for-profit third-party testing companies conduct
finished-product tests, either to inform the public or shame
manuafacturers.
When brand holders (aka, “sponsors”) launch a product, they
have to certify that they hold evidence to support therapeutic
claims.
Structure/function claims must be truthful and not misleading. Companies should have scientific dossiers, per GMPs, but
many do not.
13.3 Industry Prepares for FSMA
Remember the Food Safety Modernization Act (FSMA)? If not, it’s time to get reacquainted.
Four years after passage of the most sweeping change to the nation’s food protection system in a century, the protracted negotiations between regulators and stakeholders about its details are drawing to a close, and a tidal wave of new rules is poised to hit. Hurried
by consumer groups that sued the agency for taking too long, the Food and Drug Administration in April dubbed 2015 “the Year of
FSMA” and promised to publish the bulk of the law’s final rules this fall. Large companies will be expected to abide by these rules within
about a year. Mom-and-pop food companies and independent farms will have three to five years to comply.
Advocates say, the law will ultimately mean fewer cases of deadly foodborne illnesses, which currently sicken about 48 million
people annually, hospitalize 128,000, and kill 3,000. That—all agree—is a good thing. But for those in the farming, food manufacturing,
importing, or (to a lesser extent) supplement ingredient industries, FSMA could also mean big operational changes and potentially
crippling new expenses.
US FDA Recalls of Supplement Products, 2012-2015
35
30
25
20
15
10
5
0
2012
2013
2014
2015
Safety Alerts
Source: FDA
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“Larger companies are already worried about it because they have the resources to worry about it,” says Benjamin England, a former
FDA attorney and CEO of the international consulting firm FDAImports.com. “Smaller companies aren’t even thinking about it yet. I
think that’s a big mistake. You are talking about completely revamping the way the food industry documents risk. That is going to be
challenging.”
FSMA 101
When president Obama signed the 88-page act into law in January 2011, the country was still reeling from a series of high-profile
outbreaks of food contamination. In 2006, Dole brand baby spinach contaminated with E.coli resulted in 205 confirmed illnesses and
three deaths. In 2007, consumers nationwide fell ill after eating botulism-tainted canned chili from Castleberry’s Food Company. In 2009,
nine people died and an estimated 22,000 got sick after eating salmonella-tainted peanut products from Peanut Corporation of America.
“The food industry had a come-to-Jesus moment,” says David Plunkett, senior staff attorney for the Center for Science in the Public
Interest, which has pushed for years for more stringent food safety laws. Many food companies, he says, had already begun to put measures into place to better identify points in their supply chain or manufacturing system where things could go wrong, and prevent them.
But with few industry-wide mandates in place, the good guys often got pulled down by the bad guys.
“When an outbreak occurred, even if you were a good guy doing everything right and not part of the outbreak, you were hurt just as
much as the guy causing the problem,” Plunkett says.
KEY FSMA DATES
Here’s a look at when some key pieces of the law will be finalized and when companies need to com-
PREVENTIVE CONTROLS FOR
HUMAN FOOD
PRODUCE SAFETY RULE
FOREIGN SUPPLIER
VERIFICATION PROGRAMS
Final rule expected:
August 30, 2015
October 31, 2015
October 31, 2015
Compliance timeline:
one year for large businesses;
two for small (fewer than
500 employees); three for
very small (less than
$1 million annual sales)
two years for larger farms;
three years for small ($250,000
to $500,000 annual sales);
four years for very small
($25,000 to $250,000).
Farms with less than $25,000
in annual sales are exempt.
six to 18 months
FSMA, which came about largely at the request of food industry trade groups, requires food producers to focus on prevention. And
for the first time, it emboldens the FDA to punish them swiftly if they don’t. “Prior to FSMA, a problem had to occur, and then the FDA
could go out and try to figure out what happened,” Plunkett says. “This moves it from a reactionary to a proactive system. That’s a huge
change.”
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The seven pending rules ( five will be finalized this fall; two more next spring) are complicated and cover hundreds of pages. But
they break down into four main requirements:
•
•
•
•
Biannual registration: Food manufacturing facilities must register with the government every two years, updating the FDA on
what kind of food they are producing. They must also implement written “preventive controls,” plans determining where problems
(in the form of pesticides, parasites, unapproved food additives, or microbial contaminants) may be introduced, how to prevent
them, and how to halt them swiftly if they occur.
Farm standards: Farmers must comply with new standards for the safe growing, harvesting, packing, and holding of produce.
Import standards: For the first time, importers will be explicitly responsible for verifying that their suppliers “have adequate
preventive controls in place to ensure that the food they produce is safe.”
Repeat inspections: The FDA must inspect all “high-risk” facilities within five years, and every three years thereafter. And the
agency now has authority to issue a mandatory recall when a company fails to do so; hold products that are potentially in violation; and even suspend a food facility’s registration, shutting it down for six months.
Most of the law has yet to take affect. But the FDA has already exercised its new recall authority twice. In 2013, it warned Colorado-based Kasel Associates that it had two days to recall its pet treats, some of which had been found to contain salmonella, or FDA
would. (Kasel swiftly obliged.) That same year, after dozens of people suffered acute liver failure after taking OxyElite Pro dietary supplements, FDA warned USPlabs that if it did not stop distributing the products on its own, the agency would force it to do so. USPlabs
recalled the products and destroyed $22 million worth of stock.
At least initially, the FDA has vowed to stress education over enforcement, and the agency will give smaller companies generous
leeway before they have to comply. (See timeline.) They’ll need it, says Ricardo Carvajal, a Washington, D.C. attorney who advises food
and supplement companies. “I think the small and medium-sized businesses will have the most work to do to catch up,” he says. “Some
of them might be in for a rude awakening.”
England estimates that even a small food manufacturing facility with a handful of SKUs will have to spend $15,000 to $30,000 to get
a preventive control system in place. That’s not counting the steps they’ll have to take to maintain and review records over the years and
assure quality control. Some won’t be able to afford it.
“I see a lot more consolidation happening,” England says. “Small businesses are not going to be able to afford to do it, and they will
be bought up by large companies who can.”
An uncertain impact on industry
When the FDA first unveiled its proposed rules for “produce safety” in January 2013, the agency included new requirements which
would have strictly regulated the number of days a farmer had to wait after applying compost (45 days) or manure (nine months) before
harvesting crops. Other proposed rules would have heightened the requirements governing what kind of water a farmer could use and
mandated costly water testing. Farmers complained that it would force them to totally change the way they farmed and, in some cases,
kill their businesses. Mother Jones reported that organic carrots and spinach from small farms could go away as a result, and outraged
consumers flooded FDA with thousands of letters. In response, the FDA issued a second set of rules that appear to have backed off on
the composting, manure, and water requirements.
“It is very rare for an agency to do that,” says Sophia Kruszewski, a policy specialist with the National Sustainable Agriculture Coalition. “We have been pretty pleased with the degree of FDA’s outreach to our stakeholders.”
There is, however, still a lot of confusion and concern among farmers, especially those who do some minimal processing of their
produce—like peeling squash—on site. Would that classify them as “facilities” and subject them to a whole other set of fees and preventive controls? What if they collaborate with other farmers via a co-op or food hub? Would that open them up to new rules and fees?
“On the one hand we are finally getting a bump in the buy-local movement, which is creating opportunities for small farmers to
scale up,” says Roger Noonan, owner of Middle Branch Farm, an organic operation in New Hampshire. “On the other hand, we have a
regulation that could potentially undermine that. For someone like me, it will be very costly. There is no doubt.”
Because dietary supplement manufacturers are already subject to many of the same requirements via GMPs, they are, for the most
part, exempt from FSMA. “To subject them to GMPs and FSMA would have been redundant,” says Steve Mister, of the Council for Responsible Nutrition. “If you are an ingredient supplier, this is a big deal.”
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Ingredient suppliers will now have to put their own preventive-control systems in place. And if they import from overseas, which
most do, they’ll have to make certain that their suppliers do the same. The law even mandates the FDA to boost its inspections of foreign
facilities exponentially over the coming years.
“It pushes the liability upstream and requires that ingredient suppliers verify that what they think they are selling is indeed what
they are selling,” says Mister.
Hope Hanley, VP of Quality Assurance and Regulatory Affairs for Deerland Enzymes, says her company is already following many
of the guidelines spelled out by FSMA. But they have added a few new things. They recently implemented a new “Food Defense Training” system for all employees and are installing video cameras in all production areas. It’s all worth it, says Hanley. “If implemented and
enforced correctly and sustainably, it is certainly the right thing to do and will be good for the industry.”
Will it work?
The key question now: Will the FDA have the resources to enforce the law?
Jaydee Hansen, senior policy analyst for the Center for Food Safety (CFS), isn’t so sure. In 2012, CFS sued the FDA for failing to
roll out FSMA fast enough. (The FDA is now under a court order to meet certain deadlines.) But Hansen and others fear it won’t have
enough money to carry it out promptly.
The Congressional Budget Office estimated it would cost $580 million for the federal government to carry out FSMA from 2011 to
2015. But according to a recent article in the New York Times, Congress has allocated only half that amount. When it comes to inspecting
foreign facilities, a recent report by the Government Accounting Office already concluded that “FDA is not currently keeping pace with
the FSMA mandate.” It should have inspected 4,800 facilities in 2014 but inspected only 1,323, the report said.
According to an FDA spokesperson, the agency currently has 1,700 investigators in charge of 186,000 registered food facilities and
more than 11,000 supplement facilities. It intends to begin training 1,100 more, plus 2,300 state inspectors soon.
“FSMA needed more money and tougher timelines to begin with. As is, it will be years before even the most hazardous parts of the
food industry get inspected under this plan,” Hansen says. “That said, it is far better than what we had before.”
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KEY FSMA DATES
Here’s a look at when some key pieces of the law will be finalized and when companies need to comply.
Preventive Controls For Human Food
Final rule expected: August 30, 2015
Compliance timeline: one year for large businesses; two for small (fewer than 500 employees); three for very small (less than $1 million
annual sales).
Produce Safety Rule
Final rule expected: October 31, 2015
Compliance timeline: two years for larger farms; three years for small ($250,000 to $500,000 annual sales); four years for very small
($25,000 to $250,000). Farms with less than $25,000 in annual sales are exempt.
Foreign Supplier Verification Programs
Final rule expected: October 31, 2015
Compliance timeline: six to 18 months.
13.4 Comparing the Third-Party Certifiers
Despite the oft-cited need for a third-party label with the trust and brand recognition of a Good Housekeeping Seal of Approval,
we’re still left with an alphabet soup of certifications and seals known primarily to industry insiders. Still, any certification is better than
none, and the four certifiers listed below go way beyond the bare minimum. NSF has expanded into China and India; USP literally set the
standards for ingredient strength, quality, and purity and is still the gold standard there; and the Banned Substances Control Group grew
out of Olympic anti-doping efforts and helps to drive worldwide understanding of—and testing for—products adulterated with banned
substances. Of the four, Underwriters Laboratories probably has the most recognition with consumers, but it also has the shortest history in supplements. UL’s ClearView program launched just this spring, but it has the benefit of having been developed in conjunction with
the Natural Products Association. The chart below dives into the standards, processes, and expenses behind the various seals.
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USP
VERIFIED
PROGRAM
1) GMP FACILITY REGISTRATION
2) DIETARY SUPPLEMENT
PRODUCT CERTIFICATION
3) CERTIFIED FOR SPORT
CERTIFIED
DRUG
FREE
UL
CLEARVIEW
Company
founded
1840
1944
1894
2004
Testing program
established
2001
1) 2002
2) 2001
3) 2006
Supplement testing “in the ’70s”;
GMP since 2005
2004
Number of
GMP-approved brands
92
400
150 (joint UL/NPA program)
No standalone
GMP certification
Number of
products approved
with seal
92
2) 700+
3) 425
Program began last month.
No products approved yet.
200+
Yes
Yes
Yes
GMP
compliance review
Frequency
Annual
Semi-annual
Annual
Ongoing via
annual label verification,
contaminant testing, and
finished-product testing.
Supply-chain
Reviews supplier
qualification during
GMP audits.
Reviews ingredient
quality and source for each
verified product.
Reviews cert. of analysis
and test data for
incoming raw material.
Does full supply chain audit and
all other requirements in 21 CFR 111.
Initial certificate shall specify
thscope audited at facility.
Facility audits for applicable
contract manufacturers.
Compiles list of
manufacturers and
ingredient suppliers.
GMP audits for
manufacturers,
and COA reviews
for ingredients.
ID testing of
ingredients
Yes
Yes
Yes
Yes
One to three batches of
product per manufacturer,
per manufacturing site.
2) Tests one lot of certified
product annually
and whenever changes
are made to
formulation or manufacturing.
3) 100 percent of certified
lots are tested.
(Certification granted lot by lot.)
One to six lots per year.
Annual label verification
and/or ID testing.
Scale of
ID testing
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USP
VERIFIED
PROGRAM
Tests for undeclared
pharmaceuticals
N/A
Batch testing
1) GMP FACILITY REGISTRATION
2) DIETARY SUPPLEMENT
PRODUCT CERTIFICATION
3. CERTIFIED FOR SPORT
CERTIFIED
DRUG
FREE
UL
CLEARVIEW
2) No
3) Yes, for pharmaceuticals and OTC
drugs on the banned lists of the
World Anti-Doping Agency, Canadian
Centre for Ethics in Sport, MLB, and NFL.
No
Yes
Yes
No
Yes
Number of
batches tested
N/A
3) 100 percent
N/A
100 percent
Number of drugs
covered
N/A
Up to 81, along with ability to
develop tests for additional
pharmaceuticals as requested.
Depends on product
392
Testing for substances
banned in sport
N/A
3) Yes
Yes
Yes
Batch testing
N/A
3) 100 percent
Number of
batches tested
N/A
3) 100 percent
All for sports supplements; others
dependent on service level
100 percent
Number of banned
substances
covered
N/A
3) Tests for nearly 300 substances
banned by World Anti-Doping Agency, Canadian Centre for Ethics
in Sport, MLB, and NFL.
160; more on request
207
(in addition to
392 pharmaceuticals)
Yes
Yes
Yes
Yes
Batch testing
Yes
Yes
Yes
No
Number of
batches tested
Up to three batches per
manufacturer, per site.
2) One lot tested annually or when
changes are made to formulation or
manufacturing process.
3) 100 percent
One to six annually, depending
on production volume and
customer requests
Annual random selection
Random testing of
finished product for
verified ingredients
Yes
2) Yes
3) All certified lots already tested
Yes
Yes
Random testing of
drugs/banned substances
No
2) Yes
Yes
Yes
Random testing of
contaminants
Yes
2) Yes
Yes
Yes
How is finished
product obtained?
Randomly,
from multiple locations
Collected by NSF auditors;
purchased in the marketplace;
shipped directly from customer.
Random off shelf when possible
Off shelf and from
manufacturer
Certified products list
Yes
Yes
Yes
Yes
Batch numbers
No
2) No
3) Yes
No
Yes
Certificates of analysis
No
2, 3) Yes. Posted and provided
to the company
No
Available upon request
How is information made
available?
www.uspverified.org
Manufacturers -Secured Web Portal
Consumers info.nsf.org/Cerfied/dietary
Consumer website optimized for
mobile, (ClearView information for
retailer/supplier)
Website
Primary audience
Consumer
Consumer
Consumer (UL Verified); manufacturer and retailer (ClearView)
Athlete/consumer
Cost per certified product
From $5,000
From $2,500
Cost per facility audit
From $10,000
From $11,000 to $14,000
Testing for heavy metals,
pesticides, and microbe
contaminants?
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13.5 Our O-ring Opportunity
By Loren Israelsen, president, UNPA
The recent furor over the New York Attorney General (NYAG) investigation of herbal dietary supplements has ignited a public (and
private) debate over the regulation of supplements. On time, and as expected, the critics called for changes to DSHEA. The DS industry
protested that the test used by the NYAG was bogus. The bully pulpit power of the establishment press, i.e., the New York Times, was on
display, as was the farcical and lobotomized regurgitation of the original NYT story via social media.
Amidst this, many asked, “Where is the FDA?” Nowhere, it seems. The NYAG did not consult FDA in advance of its investigation,
and it appears that the agency was content to let all of this play out. This changed with the publication of Dr. Pieter Cohen’s article on
BMPEA, which quickly resulted in the issuance of 14 warning letters to companies selling BMPEA. This, in turn, led to the filing of a
$200 million defamation lawsuit against the study’s authors by one seller of BMPEA. Along the way, 14 other state’s AGs joined the New
York AG in a letter to Congress urging a re-think of DSHEA and recommended other policy changes that even Senator Durbin has not
suggested. Meanwhile, yet other Attorneys General decided to look into this BMPEA matter and confronted major retailers who, in turn,
took steps to remove BMPEA from their shelves.
The ever-lurking Plaintiff ’s Bar (aka wolf pack) has filed over 75 class action lawsuits based on the false findings of the New York AG
investigation. Not to be outdone, public interest groups joined the fray and are actively soliciting money and “victims” who have been
duped or harmed by using dietary supplements. Their pitch suggests that federal regulators are not doing their job, and so the nonprofit
public-interest community will fill in for the time being.
Editorials from important papers and thought leaders lament the state of dietary supplement regulation and are calling for a
pre-market approval system for supplements based presumably on the prescription drug approval process. So far, no one can explain
who would pay for such a system, who would manage it, or how this would rectify problems such as spiking or illicit internet claims.
For the first time in recent memory, practitioners who often recommend or sell supplements to their patients are beginning to
worry how all of this will affect their professional reputations. Regulators in other countries are taking notice of the dustup here, and
whether that leads to anything important remains to be seen.
Underlying all of this remains the fact that the NY AG’s testing was conceived, executed and published starting from a faulty premise (that DNA barcoding is suitable for plant extract ID testing as a stand-alone test), and virtually none of these critics have returned to
this basic point and suggested that we start with a review of the known facts and a broader history of the issues that have now blown up
in such spectacular fashion. This is what makes this story different from all others in the past. This entire debate is predicated on a false
factual premise and yet with guilt assumed. So, let’s go back and set the record straight and then consider how to proceed.
While distant in time and subject, the 1986 Challenger space shuttle disaster offers an interesting analogy worth thinking about. On
January 28, 1986, the NASA space shuttle Challenger exploded 73 seconds after launch. I, like millions, saw this on live TV. It took several
minutes to realize what happened and weeks and months to comprehend the loss. As a nation mourned, a presidential commission
was created to investigate the disaster and submit a report to then President Ronald Reagan. The findings were submitted in June, 1986,
with many recommendations to improve space shuttle flight safety. The cause of the explosion was a failure in the solid rocket booster
O-rings. How that discovery was made and revealed is the reason to include this story here. One of the commission members was a Nobel Laureate and Cal Tech professor, Richard Feynman who, in addition to being one of the great scientific minds of modern times, was
a colorful and eccentric personality famous for practical jokes, bongo drum playing and working from a local topless bar as his second
office (to get away from it all). During a televised commission hearing, Feynman demonstrated how the O-rings became rigid and inflexible if put in a glass of ice water, thus compromising the seal to prevent hot rocket gases from escaping. Under intense pressure to meet
schedule, the Challenger was launched on an icy cold morning (31 degrees Farenheit), but data on O-ring seal integrity only went to 53°
F (on the view that South Florida weather would never go to 31 degrees Farenheit). This was the fatal design flaw and decision.
This simple demonstration helped millions of people understand a basic idea that explained the unimaginable. The point is this.
Seemingly complicated problems often have a simple “O-ring” root cause. In NASA’s case, this O-ring problem was well known but was
rationalized or lost in translation between the engineers and management. The result was years in the making but shocking when it
actually happened.
We all have our O-rings in life and in business. The current New York AG episode provides an invitation to do an O-ring check. I
suspect we will conclude the root cause is a problem around how we define regulation. We insist, correctly, that we are regulated and
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subject to a host of federal laws. Yet, we are portrayed as unregulated, which is seen as an invitation by various parties to step in as pseudo regulators who claim their actions are in the public interest. Here is the problem. Their definition of “regulation” means pre-market
approval. Ours does not. This gap in definitions explains much of the current controversy.
The O-ring analysis would suggest a review of the basic design (DSHEA), the operating procedures (GMPs, NDIs, AER, etc.) and mission objectives and assumptions (broad access, reasonable prices, inherent baseline safety of most products). If our 2015 mission is to
preserve the basic design, then procedures must be strictly followed. If that is compromised by breach of discipline within the industry
or inability of external regulators, public confidence will erode (as in O-rings).
Current conditions suggest we should be assessing design, procedures and mission objectives while course corrections are possible
and before another incident occurs. The first step is to agree that all three subjects are on the table.
13.6 Power User
Everyone in the nutrition industry knows Anahad O’Connor’s name. He has led the recent New York Times coverage of supplements
and has become a target for criticism from many in the industry. So it’s surprising to learn that O’Connor—who will be speaking at the
NBJ Summit in July—is a longtime and current supplement user. And among the four books he has written is the diet guide Lose It! The
Personalized Weight Loss Revolution. So NBJ reached out to O’Connor to find out more about his personal and professional relationships
with the supplement industry.
nbj: What’s your history as a supplement user?
Anahad O’Connor: I’ve always been interested in supplements. My parents raised me as a vegetarian. They were very much into
health and nutrition. They were vegans before it was cool or fashionable and trendy. They raised me on echinacea when I had a
cold and would give me things like wheat germ oil and all kinds of supplements as a child. When I became a health reporter at
the Times, this was just one of the areas that I wanted to cover and write about and look at the research on different things that
people were taking and that I was taking.
nbj: As you left your parents house and went out on your own, did you maintain that lifestyle or did you rebel against your parents and
start eating junk?
O’Connor: It’s funny. I have six siblings. Some of them definitely rebelled. But I stayed on that path and was always very passionate
about health. I continued taking supplements. I still do. I work out at least five or six times a week. I’m very conscious of what I
eat and what I put in my body.
nbj: What supplements are you taking now or have you taken?
O’Connor: One supplement that I have always taken pretty regularly is fish oil. I also use whey protein with my breakfast to make
a protein shake. My wife was a vegetarian for a while, so we had a lot of B-12 around. Vitamin D is something that I’ve used a lot,
and I’m currently taking workout supplements. I have a cabinet of various things. You name it, I’ve probably tried it.
nbj: What have you stopped using, and why?
O’Connor: I still buy fish oil. But that’s one thing where as much as I like omega-3 fatty acids—I think they’re good for health—I
think research is kind of mixed. I’m also wary of which omega-3 supplements I buy, because I’ve come to discover that omega-3
fatty acids are very fragile and they can become rancid easily. What I would like to be able to do is to find the best quality fish oil
supplement. I’m not sure which is the best one, and, unfortunately, there’s really no way to tell what’s the best quality.
nbj: There’s reliable information out there, but also a lot of misinformation. It’s hard to tell which is which.
O’Connor: Exactly. That’s something that’s informed in my reporting. I feel like there are a lot of people like myself who think that
there are supplements that are worthwhile and certainly worth taking—particularly those that don’t have a lot of side effects that
we know of, such as fish oil. But how do I find the best quality one, and what does the research really say about it? How much of it
do I need? Or how much of it should I be taking?
One thing I’ve tried to do in the meantime is just to eat a lot of wild salmon or wild fish.
nbj: It’s safe to say that there’s an assumption out there that you don’t use supplements and that you hate the industry and want to take it
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down. Have you felt that?
O’Connor: There’s definitely a perception that I’m anti-supplement, which I’m not. I not only take them myself but I have long
recommended supplements to friends of mine and people who ask for health advice. I’ve had many what people would characterize as pro-supplement articles in the Times. I would say that the reporters that I know who are anti-supplements are people who
choose not to write about supplements. They’re just not interested in the topic.
I’m interested in it because I’ve always been a supplement user, and I want to know what the best supplements are and which ones
are superior in terms of quality. I think that everyone should have access to supplements. My reporting is kind of focused on trying
to improve quality-control issues in the industry, because I think that what it says on the label should be what is in the bottle. I think
that, far too often, that doesn’t happen.
I think there’s a perception that The New York Times, is anti-supplement. People say, “Oh, well this is just the Times in the pocket
of the pharmaceutical industry.” But that’s not the case at all. Nothing could be further from the truth—we’re certainly not in the
pocket of the pharmaceutical industry. We have many reporters, including myself, who have written very critical articles about the
pharmaceutical industry and about prescription drugs and the problems there. It kind of baffles me.
nbj: On the botanicals, was that one that you were looking into or was your coverage more of a response to the New York AG investigation?
O’Connor: The first story I did on that was the 2013, Steven Neumaster’s study—which we found really fascinating. The coverage
that followed earlier this year was really a response to the AG’s investigation, which was launched after they read my 2013 story. They reached out to us here at The New York Times and said, “We’ve got this research we’ve done and this investigation. We’re
going to put something out on it. Would you like to do a story on it?”
nbj: There is a very big perception inside the industry that the DNA test, especially as it was applied by the New York AG, was right-fightwrong-tool. Have you looked into that part at all?
O’Connor: Yeah. I had dug into that. I was actually planning to write a follow-up story, which I was working on when the AG’s office and GNC contacted me and said, “Hey. We’ve got a deal we’re about to announce to put this thing to bed and hopefully move
on.” That nixed my plans to do a follow-up story digging into the science. In my reporting for the follow-up piece I had spoken to
the Council for Responsible Nutrition and some others in the industry. Of course, when I wrote those stories, the one in 2013 and
then the more recent on on the AG’s deal—for both of those stories the American Botanical Council and others said to me, this is
the wrong test for extracts. It shouldn’t find any DNA in the extracts.
The Council for Responsible Nutrition was very insistent on that. Of course, in my story I interviewed Pieter Cohen. I said, “Okay, he’s an
objective guy. Let me hear what he has to say.” He said, “Look, these results, if they’re true, are extremely devastating.” I think that was the
quote that I had from him. Then he said, “But, you know, I’m not sure about this test for these extracts. I think it might be the wrong test
and that the results might be inaccurate.” That’s what I put in the story.
nbj: The industry is really focused on that.
O’Connor: To continue fighting, I think, is not going to win over consumers. I mean, people know that, obviously, it’s not an unregulated industry. That’s wrong. But most understand that the regulations are certainly not as strong or as strict as they could be.
And this is because the industry played a role in crafting them.
There are definitely a lot of companies that are doing the right thing. But there are also a lot of bad apples, you know? I feel like what
the industry should do is try to lift up the companies that are doing the right thing and then do things to address all the bad apples.
Someone like Pieter Cohen, for example, would advocate for regulations that would specifically target all the companies making
the weight-loss products, the sexual-enhancement products, and the bodybuilding products that are spiked with steroids. Try to
get a handle on all those bad actors to at least give consumers the perception that the industry is really concerned about getting
all the bad stuff off the market. I feel like consumers are starting to think—or have been thinking—that the industry is not really
serious about self-regulation and getting the bad actors out of the way.
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Table of Contents
14. Acknowledgements
and Definitions
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Acknowledgements and Definitions
14.1 Acknowledgements
The principal editors of Nutrition Business Journal’s 2015 Supplement Business Report were NBJ editor-in-chief John Bradley, senior
market analyst James Johnson, and senior editor Rick Polito. Authors of various sections and market profiles include Philip Armour,
Katherine Harmon Courage, Grant Davis, Fred Dreier, Connor Link, Lisa Marshall, Jessica Rubino, Todd Runestad, Joysa Winter, and
Larissa Zimberoff.
We would also like to acknowledge a number of secondary sources of information, which are cited in this report, especially SPINS
(spins.com), AC Nielsen, ArcView Market Research, IRI Group, Natural Foods Merchandiser magazine, Functional Ingredients magazine,
Delicious Living magazine, New Hope Natural Media, NEXT, and many others.
Most importantly, we thank all of the companies NBJ has interviewed since we published our first issue of NBJ in 1996 and the
companies that have participated in our annual quantitative surveys over the years. Our ability to collect, analyze, and present data and
information is a function of the cooperation of the companies in the industry, and we are grateful for their participation.
14.2 Research Methodology
NBJ’s basic methodology for nutrition industry quantification has been a complete compilation and assessment of existing data
on the industry, augmented by NBJ surveys and interviews. Data is compiled and analyzed at each level of the value chain: consumer
spending data (Hartman and Nielsen, for instance), retail sales figures (IRI and ACNielsen for mass market and SPINS, Natural Foods
Merchandiser and Whole Foods magazine for natural food store data), alternative channels (NBJ surveys on multilevel marketing,
catalog, practitioner, and internet sales), distributor data and interviews, manufacturer sales (NBJ surveys), and raw material supplier
data (NBJ surveys). Individual company data is also collected through surveys or secondary sources. NBJ also conducts a minimum of
40-50 interviews with executives every month to capture both qualitative and quantitative information. NBJ’s 2015 Supplement Business
Report includes 2013/2014 data based on analysis conducted in June through September 2014.
NBJ’s business segment survey methodology starts with an understanding of the total universe of companies in that segment and an
in-depth knowledge of the top 20–100 companies in that segment. NBJ then makes every effort to ascertain annual sales of the top firms
and get an adequate response from surveying the remaining populace to build a statistically valid model for that segment. Segments NBJ
surveys in this detailed manner include supplement manufacturers in each category, raw material suppliers in vitamins and herbs and
botanicals, MLM firms, internet sellers, catalog sellers, etc. NBJ will typically capture 60–80 percent of the revenues in a defined segment
using this method. Subsequently breakdowns received from companies are aggregated into segment models to obtain industry or segment breakdowns by product, sales channel, or other characteristic.
Sales data determined from each level of the nutrition industry value chain (see chart at beginning of the raw material section) is
reconciled against the other levels so consumer sales, retail sales, wholesale sales, distributor sales and material supply sales ratios are
accurate for each product area.
Although NBJ has made every effort to be accurate in its data collection and presentation, it is impossible to be perfect and the authors beg your understanding of any inaccuracies that appear in this report. In addition, since NBJ’s data is constantly updated based on
best available figures, some cases previously published numbers may be inconsistent with the data in this report. Conversely, data in NBJ
issues after September 2015 or in subsequent reports will represent best available data as of that time. For questions regarding sources
and/or methodology, contact James Johnson at [email protected].
14.2.1 Disclaimer
NBJ understands that some of the categorizations or analysis in this report may not agree with that of our readers. NBJ conducts
a variety of surveys and interviews with companies and accesses data in many forms to help provide sales figures for as many companies as possible. These figures are used in market estimation models, but are also listed in the profile section of this report. Sales figures
printed for each company are not always the result of a direct contact or response with that company, and in some cases estimates are
derived from secondary sources or estimates.
NBJ has made every reasonable effort to ensure the accuracy of this report. However, information in this report is not guaranteed to
be accurate and should not be construed as investment advice. Any errors and omissions are unintentional.
© 2015 Penton
196
Article
Name
Acknowledgements and
Definitions
14.2.2 Copyright
© 2015 Penton Media Inc. New Hope Natural Media, Nutrition Business Journal, nutritionbusinessjournal.com. All rights reserved.
This report, or any part, may not be duplicated or reproduced in any form without the written permission of the publisher. Likewise, no
part of this report may be given, lent, resold or disclosed without written permission.
For more information on duplicate copies, reproduction rights and proprietary research services, please visit www.nutritionbusinessjournal.com.
14.3 Definitions
Nutrition Industry: NBJ defines the Nutrition Industry by its four main product categories: Dietary Supplements, Natural & Organic Foods, Functional Foods, and Natural & Organic Personal Care and Household Products.
14.3.1 Product Categories
Dietary Supplements: NBJ defines Dietary Supplements by its six main product categories: vitamins, minerals, herbs & botanicals,
meal supplements, sports nutrition, specialty supplements.
Natural & Organic Foods: Natural foods focus on the health benefits of foods derived from natural sources and that are, to varying degrees, free of pesticides, additives, preservatives, and refined ingredients. Organic foods, sometimes “certified organic,” are not only
free of chemicals, pesticides, hormones, and antibiotics but go beyond the human health consequences of conventional farming and
food manufacturing to embrace principles of sustainable farm management, humane treatment of animals and the social impacts of
food production.
Functional Foods : Because “functional foods” and “nutraceuticals” are essentially marketers’ terms and not recognized in law or
defined in any dictionary, market researchers tend to use them inconsistently. Nutrition Business Journal defines functional food as food
fortified with added or concentrated ingredients to a functional level, which improves health and/or performance or products marketed
for their ‘inherent’ functional qualities. They include some enriched cereals, breads, sports drinks, bars, fortified snack foods, baby foods,
prepared meals and more. If a food could be considered both organic and functional, NBJ categorizes it as an organic food.
Natural & Organic Personal Care (N&OPC): NBJ’s broad, inclusive accounting of the natural and organic personal care industry
defines N&OPC as health and beauty products derived from natural & organic sources and that are, to varying degrees, free of pesticides,
additives, preservatives and refined ingredients. Natural & Organic Personal Care products include shampoos, soaps, lotions, cosmetics
and other natural toiletries.
Other Natural Household Products: This category includes all natural and organic household cleaners, natural and organic pet
food, organic flowers, and organic fibers (linens & clothing).
14.3.1.1 Dietary Supplements
Vitamins: Single and multivitamin supplements made of natural or synthesized vitamins. Vitamins are any of various organic or
synthesized substances that are essential in minute quantities to the nutrition of most animals and some plants, act especially as coenzymes and precursors of coenzymes in the regulation of metabolic processes but do not provide energy or serve as building units, and
are present in natural foodstuffs or sometimes produced within the body. Products in the vitamin category include: vitamin C, vitamin E,
B vitamins, vitamin A/beta carotene, niacin, folic acid, multivitamin formulas, and other single vitamins.
Minerals: Single and multi-mineral supplements made of natural or synthesized minerals. Minerals are solid homogeneous crystalline chemical elements or compounds. Products in the mineral category include calcium, magnesium, chromium, zinc, selenium, potassium, iron, silica, manganese, boron, choline, iodine, phosphorous, copper, dolomite, multi-minerals formulas and other single minerals.
Herbs & Botanicals: Single herb or multi-herb supplements made primarily from plants or plant components. Products in this
category include: echinacea, garlic, ginseng, ginkgo biloba, super fruits, and many more.
Specialty Supplements: Supplements that do not fit into the other supplement subcategories, including glucosamine, melatonin,
DHEA, fish oils/shark cartilage, bee products, CoQ10, 5HTP, amino acids, homeopathic remedies, SAMe, chondroitin, probiotics, prebiotics, colostrum, other oils, other enzymes, other hormones, etc.
© 2015 Penton
197
Article
Name
Definitions
Meal Supplements: Shelf stable liquid nutritional formulas created primarily to substitute, but sometimes supplement, a meal.
Some are enteral feeding formulas and some are weight loss formulas. Occasionally some are sold for medical purposes to frail or intestinally challenged people. Meal supplement products sold at retail include Slim Fast, Ensure, Nestle Sweet Success, Boost, EAS AdvantEdge, Pedia Sure and Sustacal.
Sports Nutrition: Sports Nutrition products include all pills, powders/formulas and drinks (excluding Gatorade, Powerade, etc.)
formulated to enhance physical activity whether it be endurance, strength, speed, or other athletic states. Sports nutrition products
include: creatine, amino acids, protein formulas, fat burners, ribose, HMB, androstenedione and many others.
14.3.1.2 Food and Beverage
Dairy: Milk, cheese, eggs, butter, yogurt, sour cream, cottage cheese, ice cream, and other fresh, canned, or frozen dairy products.
Fruit & Vegetables: Fresh, frozen, canned, and dried fruits and vegetables.
Breads & Grains: Fresh, refrigerated, and frozen bread, baked goods, baking needs, dry breakfast foods (cereal), pasta, rice, and
other dried grains.
Meat, Fish, Poultry: Fresh, frozen, and canned meat, fish, and poultry.
Beverages: Fresh, frozen, and RTD juice, soft drinks, alcoholic beverages, tea, coffee, and dairy alternatives.
Snack Foods: Candy, gum, nuts, salty snacks such as chips, and nutrition bars.
Packaged/Prepared Foods: Frozen, refrigerated, canned, and dried prepared foods, service deli, jams and jellies, meat alternatives, baby food and formula, canned and dry soup, pasta sauce, and desserts.
Condiments: Dressings, spreads, sauces, spices, fats and shortenings, and sweeteners.
14.3.1.3 Natural & Organic Personal Care
Health & Beauty Care (HBC): All conventional personal care products, including those made with natural, organic, and functional
ingredients. Products in the HBC category include cosmetics, feminine hygiene, hair products, baby care, nail care, oral hygiene, bath
items, deodorants, shaving, skin care, bath/toilet soap and fragrances.
Skin care: Natural or organic facial care products, including lotions, cleansers, toners, exfoliants, and masks; lip balm; hand anf
body lotions; foot care; sunscreen; tanning products; and insect repellants.
Hair care: Natural or organic shampoo, conditioner, styling products, hair spray, hair colorants, and hair accessories such as brushes, barrettes, and clips.
Soap: Natural or organic liquid and bar soap, shower gel, and body wash.
Oral Hygiene: Natural or organic toothpaste, mouthwash, whiteners, dental floss, and other dental accessories.
Cosmetics: Natural or organic cosmetic products such as foundation, eyeliner, mascara, concealers, lipstick, and blush.
Fragrances & Aromatherapy: Natural or organic perfumes, essential oils, and massage oils.
Deodorants: Natural or organic solid, roll-on, gel, powder, spray, and crystal deodorants.
Baby Care: Natural & Organic baby shampoos, lotions, diapers, diaper rash creams, and diaper wipes.
Bath Products: Natural or organic bath gels, bath salts, bubble bath, loofah, bath puffs, and bath brushes.
Shaving: Natural or organic shaving cream, aftershave, and razors.
Feminine Hygiene: Natural or organic menstrual pads, tampons, and washes.
Nail Care: Natural or organic nail polish, polish remover, nail files, and cuticle creams.
14.3.1.4 Other Household Products
Household Cleaners: Natural, organic, eco-friendly or green liquid laundry products; dishwashing products; bath, kitchen and
other cleaners; powder laundry products; cleaning supplies; and air fresheners.
Pet Food: Natural or organic pet food, treats, chews, and rawhide.
Fiber: Organic clothing and linen, such as bedding, towels, and table linen.
Flowers: Flowers grown according to organic standards.
© 2015 Penton
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Article
Name
Definitions
14.3.2 Sales Channels
Natural & Specialty Retail: This channel represents natural and health food stores, supplement stores, and specialty retail outlets,
such as Whole Foods and GNC.
Department Store/Boutique/Other: High-end department store/boutique brands and salon/spa or “practitioner” sales (Aveda,
Dr. Perricone). Practitioners include chiropractors, traditional Chinese medicine specialists, acupuncturists, homeopathists, massage therapists, naturopaths, osteopaths, aromatherapy specialists, faith healers, biofeedback specialists, meditation/telaxation therapists, Hypnotherapists, hydrotherapists, Ayurvedic specialists, and mainstream/conventional medical practitioners (MDs, GPs, etc.).
Specialty Personal Care Stores: Specialty personal care stores (the Body Shop, Sephora, Bath & Body Works) that sell primarily
personal care products,
Multilevel Marketing: Covers multilevel and network marketing companies (Neways, NuSkin, Avon, Herbalife, etc.). Also known
as direct selling, the Multi-level Marketing channel consists of products or services marketed person to person by independent salespeople. Salespeople are commonly referred to as distributors, representatives and consultants. Products are sold primarily through in-home
product demonstrations, parties and one-on-one selling.
Other Direct: Other direct sales are defined as consumer purchases directly from the seller and include mail order, Internet, direct-response television and radio. Brands sold in this channel include Jurlique and Bare Escentuals.
Mass Market: The mass-market channel represents conventional grocery, drug, mass merchandise, club, and convenience stores.
Examples include Wal-Mart, Target, 7-Eleven, and Costco.
Mass Market & Beauty Supply: Mass market (supermarkets, drug, mass merchandiser, club, and convenience stores), and beauty
supply discounters.
Mail Order: Mail Order sales are defined as consumer purchases of nutrition products from direct-to-consumer sellers that utilize
catalogs, direct mail or infomercials to reach their customers and facilitate sales.
Multi-Level/Network: Also known as direct selling, the multilevel-marketing channel consists of products or services marketed
person to person by independent salespeople. These salespeople are commonly referred to as distributors, representatives, and consultants. Products are sold primarily through in-home product demonstrations, parties, and one-on-one selling.
Practitioner (also includes: athletic and fitness trainers): Practitioner sales consist of products to consumers by practitioners.
These include chiropractors, traditional Chinese medicine specialists, acupuncturists, homeopathists, massage therapists, naturopaths,
osteopaths, aromatherapy specialists, faith healers, biofeedback specialists, meditation/telaxation therapists, Hypnotherapists, hydrotherapists, Ayurvedic specialists, and mainstream/conventional medical practitioners (MDs, GPs, etc.).
Internet: Internet sales, otherwise known as E-commerce sales, are defined as consumer purchases of nutrition products from
direct-to-consumer sellers that utilize Internet websites to reach their customers and facilitate sales.
Direct Channels: Include mail order (catalog, DRTV/radio, direct mail, telemarketing), multilevel network, practitioner sales, and
Internet.
© 2015 Penton
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Table of Contents
15. Company
Profiles
© 2015 Penton
200
Company Profiles
Abbott Laboratories (Ensure, EAS)
2012
2013
2014
522
541
567
Estimated U.S. Supplement Wholesale Sales ($mil.)
2014 U.S. Supplement Wholesale Sales Profile:
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
0
0%
Vitamins
0
0%
Mass Market Retail
453
80%
Minerals
0
0%
Direct/Other
Channels
113
20%
Herbs &
Botanicals
0
0%
0
0%
470
83%
Sports
Nutrition
96
17%
Specialty
0
100%
566
100%
Private Label/
Contract Manuf.
TOTAL
566
100%
Meal
Replacement
TOTAL
Company Overview
Abbott Labs, best known for its Similac brand of baby formula, is engaged in the discovery,
development, manufacture and sale of healthcare products and services. In 2014, the
company marketed more than 10,000 products in more than 150 countrires and had net
revenue of $20.2 billion. The company has four reporting segments: Nutrition, Diagnostics,
Established Pharmaceutical, and Medical Devices. Nutrition products accounted for 34%
of the company’s portfolio mix and the division launched 64 new products in 2014. Net sales for the Nutritionals division were $7.0
billion in 2014, growing 3.2%. Abbott Nutrition brands include EAS, Similac, Ensure, PediaSure, ZonePerfect and Juven. (Note: Abbott’s
supplement products marketed under the Ensure brand name are classified by NBJ as meal replacement supplements.)
Abbott spun off its pharmaceutical division into AbbVie in 2013 in order to provide better focus for diverent business segments and
investor focus.
Ensure was first introduced in 1973 and is a top doctor-recommended liquid nutrition brand. The product line includes its staple
RTD products with a few newer condition specific-options such as Ensure Active Heart Health. There is also the Original Nutrition Powder as well as Ensure Active High Protein Powder.
The EAS Sports Nutrition brand offers powder, bar, and drink products. It is a typical sports nutrition brand aimed at bodybuilders, performance athletes and everyday fitness needs.
© 2015 Penton
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Company Profiles
Abbott Laboratories S.W.O.T. Analysis
Strengths
Weaknesses
• EAS is marketed to men and Ensure is marketed to women
so Abbott captures different market demographics using
dissimilar brands
• EAS has diverse product offering, many forms
• EAS develops strong marketing initiatives
• Abbott Spin-off of US pharmaceuticals has allowed the
company to focus more on its nutrition products
• Abbott featured in Forbes in 2015 as a top 10 company for
female employees
• Ensure line remains a consumer favorite and newer condition
specific and high protein offerings keep the brand relevant
• Brands that resonate more with an older population
• Product recalls on medical side can hurt overall corporate
image
• Product innovation is minimal and definitely not cutting
edge
• EAS branding is very typical of sports nutrition products and
doesn’t differentiate itself from the competition
Opportunities
• Make whole food, natural nutrition options
• Growth in international sales strongest in developing countries with expanding middle class.
Threats
• Competition from other meal replacement manufacturers
such as SlimFast
• Consumer movement toward whole foods could
NBJ Bottom Line:
Over the years, Abbott Nutrition has been an active acquirer of leading nutrition industry brands, with a strategy of leveraging their
production capabilities, innovation expertise and broad distribution to achieve profitable growth. Two American demographic trends
could provide opportunities: Improving U.S. economy suggests rising birth rate after years of decline and could increase infant fomula
sales; aging population opens opportunities for adult nutrition alternatives. The company has also been adept at marketing to emerging
markets.
Website:
www.ensure.com
www.eas.com
www.abbottnutrition.com
www.abbott.com
© 2015 Penton
202
Company Profiles
Atkins Nutritionals
2012
2013
2014
67
70
64
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
3
5%
Vitamins
0
0%
Mass Market Retail
51
80%
Minerals
0
0%
Direct/Other
Channels
10
15%
Herbs &
Botanicals
0
0%
0
0%
64
100%
0
0%
Private Label/
Contract Manuf.
Meal
Replacement
Sports
Nutrition
Specialty
TOTAL
64
100%
TOTAL
0
0%
64
100%
Company Overview
Founded in 1989, Atkins Nutritionals, Inc. first made waves thanks to founder Robert Atkins’ popular diet and the boon of
the low-carb diet movement. Atkins manufacturers, markets and sells consumer packaged foods ( frozen meals, nutrition
bars, ready-to-drink shakes, and better-for-you confectionary products) as weight loss and lifestyle tools with its products
currently being sold through mass, supermarket and club channels throughout the United States.
The company has been struggling over the last several years, but the recent popularity of the low-carb Paleo diet has brought renewed attention to this brand.
At Atkins.com, consumer can learn about how the diet works, find program-friendly recipes and purchase Atkins foods. The company offers several apps to help make the diet process easier to manage, including a food and exercise tracker, a carb counter, and a meal
plan and shipping list. The website also offers a forum and chat group where dieters can interact. The Atkins Carb Tracker was ranked a
Top 10 diet app on iOS by HealthTap AppRx in 2014.
While the website is still built around the Atkins diet ideals (not mentioning other diets like Paleo), it does now offer followers two
plans: Atkins 20 includes 20 grams of carbohydrates per day while Atkins 40 allows 40g and a much wider array of food options.
The Wall Street Journal reported in February 2015 that Atkins’ backer, private-equity firm Roark Capital, was seeking a buyer for the
company. Roark purchased Atkins in 2010 from North Castle Partners.
© 2015 Penton
203
Company Profiles
Atkins Nutritionals S.W.O.T. Analysis
Strengths
Weaknesses
• Growing obesity rates in the United States and around the
world will continue to drive consumer demand for weightloss products that work.
• Atkins Nutritionals has found new popularity with Paleo diet
trend and reports showing weight-loss benefits of low-carb
diets
• Company has managed to outlast “fad diet” status despite
continued skepticism in the medical community
• Strong website and apps to assist dieters
• Atkins products contain artificial colors, flavors and sweeteners, making them a poor fit for a growing number of
healthy food consumers who prefer more natural offerings
(such as Paleo dieters)
• Beleaguered dieters increasingly drawn to simple whole
foods/healthy diet lifestyle instead of a specific diet or program.
• Roark reportedly looking to sell the company
• Food and supplement products are very tightly associated
with a very specific and limiting low-carb diet that may not
translate to new low-carb diet movements
Opportunities
Threats
• Obesity rates in the United States and globally continue to
grow and the Atkins approach could be positioned to a larger
mass market and more global audience
• Continued focus on providing high fiber, high protein, low
sugar products to diabetics
• Low-carb mantra could be matched to concerns in surging
diabetes population
• Focus on rolling out a clean ingredients line under a different brand name that would be less strongly tied to just the
Atkins diet
• Expanding products to attract Paleo dieters
• Growing competition in the weight-management nutrition
bar category from brands such as thinkThin.
• The ascension of another novel weight-management program and product set.
• Loss of financial backing to support brand continuation
© 2015 Penton
204
Company Profiles
NBJ Bottom Line:
Not surprisingly, Atkins Nutritionals, the company founded by the doctor who gave birth to the low-carb movement, has ridden the
waves created by the initial success and then crash of the low-carb diet. During its heyday, Atkins was on a low-carb-product-launching
spree, releasing hundreds of new offerings each year, including muffin mixes, breads, ice cream and even chocolate. Then, as consumers
began to eschew the idea of following carb-restricted meal plans and as the diet came under fire from nutritionists and doctors, the
company tried to distance itself from the Atkins plan as its product sales took a nosedive.
Now, bolstered by a growing body of science showing the effectiveness of carb-restricted eating on weight loss, the company is once
again touting the benefits of the Atkins diet through its consumer outreach and product offerings. However, with reports that Roark is
looking to sell the company, it appears that Atkins continues to suffer a bumpy ride and may not be able to grab a new wave of consumers in an exciting, authentic way.
Website:
www.atkins.com
© 2015 Penton
205
Company Profiles
Atrium Innovations (Garden of Life, Pure
Encapsulations, Douglas Labs, Seroyal)
2012
2013
2014
277
317
354
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
92
26%
Vitamins
71
20%
Mass Market Retail
0
0%
Minerals
74
21%
202
57%
Herbs &
Botanicals
60
17%
60
17%
Meal
Replacement
67
19%
0
0%
Direct/Other
Channels
Private Label/
Contract Manuf.
Sports
Nutrition
Specialty
TOTAL
354
100%
TOTAL
81
23%
354
100%
Company Overview
Atrium Innovations, headquartered in Quebec City, Montreal, Canada, develops, manufactures and
markets vitamins, minerals, specialized nutrition and health products. The company has historically
distributed its extensive portfolio of products mainly in the healthcare practitioner and health food and
specialized store channels, with a primary focus in North America and Europe. However, with the leading
natural retail brand Garden of Life in its portfolio since 2009, it also has a strong retail presence. The company has been moving toward
a vertically integrated portfolio and now includes seven manufacturing facilities in the U.S., Canada, Europe and Argentina. Atrium
operates in 35 countries and employs 1,300 people worldwide.
In January 2014, Atrium completed being acquired by a group of investors led by Permira who will have a 75% share in the company
with Fonds and CDPQ taking a 12.5% share respectively. Observers called the $24 share price a fair price tag. A management change
followed six months later with the appointment of Peter Luther as president and CEO. Luther comes with experience as president of
Johnson & Johnson’s Consumer Healthcare division.
© 2015 Penton
206
Company Profiles
The company has a history of acquiring brands and companies including the 2013 acquisition of a controlling interest in Muscos
Pharma CZ, the exclusive distributor of Wobenzym in Central and Eastern Europe. In 2011, the company purchased Enzimas S.A. and
Robert & Fils, following 2010’s acquisition of Seroyal and Trophic Canada. Atrium’s health and nutrition product companies include
Douglas Laboratories, Pure Encapsulations and Garden of Life in the United States; Wobenzym in Germany and now the United States
(under the GoL umbrella); Orthica and AOV in the Netherlands; and Minami Nutrition in Belgium. Their Trophic Canada product line
is available in Canada along with Douglas Laboratories Canada (which sells Pure Encasulations, Douglas Laboratories, and Wobenzym
products). The Unda, Genestra, Pharmax, and Wobenzym brands now operate under the Seroyal umbrella. The Klean Athlete brand is
operated under Douglas Labs and is focused on providing 100% clean sports nutrition products.
In October 2014, Nature’s Products announced that it had purchased the Nutri-Health Supplements and Sedona Labs lines from Atrium.
In 2015, new product introductions across the Atrium portfolio included Genetra’s Cor Defense, a baker’s yeast formula containing
antioxidants and EpiCor® for immune support, and Douglas Labs’ new line of vision health supplements. Garden of Life rebranded its
top-selling multivitamin line to mykind Organics.
Atrium Innovations S.W.O.T. Analysis
Strengths
Weaknesses
• Atrium Innovations is a leader in the U.S. practitioner supplement market with its Pure Encapsulations, Douglas Laboratories, and Seroyal brands leading the charge
• Company is known for its investments in research and product quality
• Through Garden of Life, Atrium has a solid foothold in the
natural retail channel, and a leading stance in the Non-GMO
movement
• Atrium has global distribution and is known for its global
expertise
• Company is increasing its education initiatives targeting
both consumers and healthcare professionals.
• Vertical reach, including raw material production and distribution were key to the success of the finished good portion
of the business
• Portfolio cohesiveness has strengthened as the pace of
acquisitions has slowed
• Current supplement regulations limit the claims practitioner
supplement companies can make for supplement products
• Company in transition phase as it settles into new owners
and leadership team
Opportunities
Threats
• Atrium Innovations has an opportunity to leverage the Garden of Life, Trophic, and Seroyal brands; make a strong push
into natural & specialty in the U.S. and Canada
• Solid growth in health care practitioner channel as consumers look to doctors for health solutions
• Embrace e-commerce tools to drive sales, especially repeat
orders for its practitioner supplement brands
• Atrium Innovations is dedicated to research and producing
quality products, but it is still vulnerable to the threats created by those companies tarnishing the industry’s reputation
with adulterated products and illegal marketing
• Like all companies with practitioner supplement brands,
Atrium faces growing competition from Internet discounters
© 2015 Penton
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Company Profiles
NBJ Bottom Line:
Companies as big as Atrium can be slow to react to trends but the large number of niche brands and labels keep Atrium agile
enough to explore new opportunities and react to threats. The company did some streamlining in the past year with the sale of Nutri-Health and Sedona Labs and appears to be well poised for the next phase of its existence under the new management team.
Website:
www.atrium-innov.com
www.douglaslabs.com
www.purecaps.com
www.gardenoflife.com
www.wobenzym-usa.com
www.seroyal.com
www.trophicproducts.com
www.wildroseproducts.com
www.kleanathlete.com
© 2015 Penton
208
Company Profiles
Basic Research/ Zoller Labs (Zantrex, Relacore,
Leptopril, etc.)
2012
2013
2014
150
167
212
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
0
0%
Vitamins
0
0%
Mass Market Retail
34
16%
Minerals
0
0%
178
84%
Herbs &
Botanicals
212
100%
0
0%
Meal
Replacement
0
0%
Sports
Nutrition
0
0%
Specialty
0
0%
212
100%
Direct/Other
Channels
Private Label/
Contract Manuf.
TOTAL
212
100%
TOTAL
Company Overview
Basic Research is a privately held company based in Salt Lake City, UT with an industry reputation for
innovative, but generally controversial, product development and research. The company holds and/or
licenses patents related to more than 20 formulations, including patents for lip augmentation, stretch
marks/wrinkles/anti-aging, non-ephedra stimulant and non-stimulant weight-loss compounds,
nocturnal post-absorptive muscle anabolism, and granulated protein-rich nutritional supplements.
Basic Research’s brands include the “anti-aging” formula SeroVital®, what they call the “stress-reducing “feel-good” pill” Relacore® Extra, skin-care products such as the stretch-mark/anti-wrinkle cream StriVectin®-SD, Hylexin® and Dark Spot Eraser, weight-loss products
like Zantrex®-3 and Vysera™-CLS, the SmartShake shaker bottle and more. The company distributes products in 61,000 individual retail
outlets around the globe.
Several products distributed by Basic Research, such as Relacore, have come under scrutiny by the FDA for making claims that cannot be substantiated or that would place the product under FDA regulation as a drug. The company’s connections with their products
manufacturers, Zoller and Carter-Reed Company, are very involved and almost impossible to decipher.
© 2015 Penton
209
Company Profiles
Basic Research/Zoller Labs S.W.O.T. Analysis
Strengths
•
•
•
•
Weaknesses
Strong marketing and distribution
Weight-loss category expertise
Opportunistic business and product approach
New Zantrex SkinnyStix playing on recent success of water
additive products
• Dodgy reputation in industry and with regulators
• High risk tolerance
• Dense corporate wall and static website
Opportunities
Threats
• Leverage marketing & distribution team
• Launch back into personal care products
• Capitalize on branding with new product extensions (drinks,
weight-loss program)
• Sell off brands and develop new ones
• Improve corporate transparency and create a corporate
masthead that can be trusted
• Expand into cleaner, simpler weight loss/sports line to meet
changing consumer desires
• FDA and FTC
• Marginalized by changes in future regulations
• Litigation through class-action lawsuits initiated by consumers
• Consumer trend toward lifestyle solutions
Jenny McCarthy is currently endorsing their new Zantrex SkinnyStix,
which is a weight loss supplement to be added to water, building on the current craze for drink additives.
NBJ Bottom Line:
As a weight-loss supplement company, Basic Research is already saddled with skepticism from consumers who remember the
ephedra implosion and additional controversies. The company continues to add new brands and products to its portfolio that cater to
the latest consumer diet interests. While it may not top the list of responsible industry players, Basic Research has picked a niche that
continues to play successfully on American health and vanity concerns.
Website:
www.basicresearch.org
www.zantrex3.com
www.relacore.com
www.vyseracls.com
www.serovital.com
© 2015 Penton
210
Company Profiles
Valeant/Bausch & Lomb (Ocuvite, PreserVision)
2012
2013
2014
151
172
184
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
0
0%
Vitamins
184
100%
Mass Market Retail
175
95%
Minerals
0
0%
Direct/Other
Channels
9
5%
Herbs &
Botanicals
0
0%
Private Label/
Contract Manuf.
0
0%
Meal
Replacement
0
0%
Sports
Nutrition
0
0%
Specialty
TOTAL
184
100%
TOTAL
0
0%
184
100%
Company Overview
Bausch & Lomb is an eye health company dedicated to perfecting vision and enhancing life for consumers around the world. Founded in 1853, the company is headquartered in Rochester, New York. Its core businesses include soft and rigid gas permeable
contact lenses and lens care products, and ophthalmic surgical and pharmaceutical products.
In the latter half of 2013 Bausch & Lomb was acquired by Valeant Pharmaceuticals which has a track record of improving profits of
companies that it acquires. Initially, Valiant focused on improving efficiency at Bausch & Lomb, including some layoffs and the changing
of the corporate office. Valeant’s existing ophthalmology business was integrated into the Bausch & Lomb division. Valient’s CY2014
earnings were $8.3 billion compared to $5.8 billion in 2013, with 54% of the business being generated in the U.S.
Bausch & Lomb’s product segments now include Contact Lenses and Lens Care, Allergy/Redness relief, Rx Pharmaceutical, Eye
Wash, Eye Vitamins, Surgical Products, Vision Accessories, Safety and Industrial Cleaning Products, and Diagnostics.
Bausch & Lomb’s dietary supplement line include four products under the PreserVision brand and three Ocuvite products.
© 2015 Penton
211
Company Profiles
Basic Research/Zoller Labs S.W.O.T. Analysis
Strengths
• Leader in the eye health segment making supplements a
natural product extension
• Proprietary manufacturing
• Strong presence in mass
• PreserVision brand is simple and understandable, without
overstepping any claims boundaries
• Consumer awareness of eye health supplements is rising,
especially as the Baby Boomers reach retirement age
Opportunities
•
•
•
•
Rapidly aging population; opportunity to drive repeat sales
Practitioner channel sales
Exploring new formats could appeal to pill-weary seniors
Promote eye-health supplements as part of a complete eye
care routine
Weaknesses
• Eye health mostly a faith-based market; products intended
more to “prevent degeneration” than “improve vision”
• Use of artificial dyes in PreserVision make it a tough sell for
the natural retail channel
• Parent company might cause long-term change in priorities
Threats
• Market for eye health ingredients often suffers huge price
swings
• New entrants with the predicted double-digit growth of the
ocular vitamin category
• Vitamins in eye health formulations typically included in
most multivitamins
• Lower quality substitute products
NBJ Bottom Line:
Bausch & Lomb has been very successfully in translating its trusted name in eye care products into the dietary supplement realm.
The company is sticking to its core competencies and maintaining a limited, but well-focused product line. Bausch & Lomb has strong
strategic forsight and agile market deployment. Thus far it appears that Valeant is managing the company well and this can be seen in
the organic growth Bausch & Lomb is enjoying currently.
Website:
www.bausch.com
© 2015 Penton
212
Company Profiles
2012
2013
2014
502
490
473
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
0
0%
Vitamins
383
81%
Mass Market Retail
473
100%
Minerals
38
8%
0%
Herbs &
Botanicals
24
5%
0%
Meal
Replacement
0
0%
Sports
Nutrition
0
0%
Specialty
28
6%
473
100%
Direct/Other
Channels
0
Private Label/
Contract Manuf.
0
TOTAL
473
100%
TOTAL
Company Overview
Bayer Corp. is a research-based, growth-oriented global enterprise with core competencies in the fields of healthcare,
agriculture and high-tech polymer materials. The cornerstones of its business activities are in Europe, North America
and the Far East. The headquarters of the Bayer Group is in Leverkusen, Germany. Bayer’s HealthCare division
includes its Pharmaceutical products as well as its Consumer Health group, which in turn includes Consumer Care
(where its supplement products fall), Medical Care, and Animal Health products. In fiscal year 2014, Bayer employed
118,900 people and had sales of €42.2 billion.
Net sales for the Consumer Care division were €4.2 billion in 2014. The division operates in more than 100 countries and maintains
18 manufacturing sites and four product research and development centers. More than 170 brands around the world and 17 OTC brands
generating annual sales of more than € 100 million each fall under the division’s pervue. Brands in the Consumer Care portfolio include
Aleve, Aspirin, Bepanthen/Bepanthol, Berocca, Canesten, Claritin, Coppertone, Dr. Scholl’s, Elevit, Iberogast, MiraLAX, One a Day and
Supradyn. In 2014, Merck Consumer Care and Dihon Pharmaceutical Group Co. were acquired and rolled into the division. The division
continues to seek M&A opportunities to expand its pipeline and diversity of product offerings.
Bayer’s One-A-Day line now includes several special formulations for men and women in various life stages, as well as the Vitacraves
line of chewable supplements. In 2012, Bayer launched Trubiotics, a once daily probiotic supplement, as a One-A-Day sub-brand. The
product offers innovative cannisters in capsule and chew delivery format.
The company has faced some controversy related to health claims on its Phillips’ products. This brand is a mix of both OTC products along with dietary supplements including fiber gummies and probiotics.
© 2015 Penton
213
Company Profiles
Bayer Group S.W.O.T. Analysis
Strengths
Weaknesses
• The One-A-Day brand is one of the best-selling multivitamin
brands in the world.
• The Flintstones brand (which turned 50 in 2010) remains the
top-selling children’s multivitamin brand in the world
• Bayer is well financed and enjoys a reputation for quality
among consumers
• Corporate profit motives limit a company’s ability to foster
an entrepreneurial and innovative culture
• Clashes with FTC/DOJ over claims on Phillips’ Colon Health
product
• Failure to acquire new supplement brands
Opportunities
Threats
• With its strong R&D background, Bayer has the resources to
innovate—as it did with its Bayer Aspirin with Heart Advantage product. It must continue to work to find the fine
marketing line that will keep FTC/FDA happy
• Bayer has the marketing muscle necessary to educate consumers on the benefit and quality of its multivitamin and
other supplement products
• Consumers in other countries such as China and Russia
continue to value American supplement brands, and Bayer is
in a good position to continue capitalizing on such consumer
preferences
• With large R&D resources, Bayer is well positioned to capitalize on growing consumer interest in alternative vitamin
formats including fizzes, gels and gummies.
• Bayer has faced numerous lawsuits, including class action
suits tied to the FDA warning letters over the company’s
supplement-OTC combo products.
• Although it has a strong foothold in the mass market, the
maturing One-A-Day brand faces growing competition from
other, more science-focused condition-specific supplement
brands. The children’s supplement market is also becoming
increasingly competitive and new products could take sales
away from Flintstones.
• Growing media reports on why multivitamins are unnecessary could impact mass-market multivitamin users most—
many of whom may purchase mass market brands such as
One-A-Day.
• Consumers are increasingly turning to private-label multivitamins, such as Costco’s Kirkland Signature brand
© 2015 Penton
214
Company Profiles
NBJ Bottom Line:
A major player in the U.S. vitamin market, Bayer has found success with condition-specific multivitamin formulas. Bayer continues
to refine and innovate its product offerings sold through the mass market and the launch of new products, such as Trubiotics. With the
mainstream appeal of the One-a-Day brand, it will be interesting to watch the growth of the probiotics category.
The company continues to be interested in acquiring more offerings in the supplement category, but after the widely publisized loss
of its bid to buy Schiff, has not found a new acquisition target.
Website:
www.flintstonesvitamins.com
www.oneaday.com
www.trubiotics.com
www.bayer.com
www.phillipsrelief.com
© 2015 Penton
215
Company Profiles
Bluebonnet Nutrition Corp.
2012
2013
2014
73
75
71
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
71
100%
Vitamins
16
22%
Mass Market Retail
0
0%
Minerals
12
17%
Direct/Other
Channels
0
0%
Herbs &
Botanicals
15
21%
Private Label/
Contract Manuf.
0
0%
Meal
Replacement
0
0%
Sports
Nutrition
6
8%
Specialty
23
32%
TOTAL
71
100%
TOTAL
71
100%
Company Overview
Bluebonnet Nutrition was founded in 1991 in Sugar Land, Texas and is wholly owned by the Barrows family.
The company was founded on the basic principle that it will offer the cleanest, purest, most natural nutritional
supplements exclusively to the independent natural food retailer. The company’s tag line is “Nutrition to the
Fifth Power” which encompasses “Nature, Science, Quality, Truth, and Knowledge”. The company’s manufacturing facility is Kosher Certified and is where 85% of its products are manufacturered.
Bluebonnet offers vitamins, minerals, amino acids, proteins, herbal extracts and specialty supplements, such as antioxidants,
CoQ10, glucosamine, essential fatty acids, fiber/digestive aids, probiotics and food supplements. It also offers several of its products in
a vegetarian format. New product introductions include EarthSweet Chewables Cellular Active and Super Earth Organic VeggieProtein
Powder..
© 2015 Penton
216
Company Profiles
Bluebonnet Nutrition S.W.O.T. Analysis
Strengths
Weaknesses
• Focused on developing clean supplements that don’t have
added colors or bindings
• Offer a variety of delivery systems and vegetarian products
• Committed to using high quality ingredients
• Whole food supplements
• Focused solely on the natural channel
• Lack of internet presence
• Cluttered website does not clearly market product and highlights awards that are no newer than 2012
• Sports nutrition line has traditional hardcore appearance
that doesn’t mesh with natural supplement image
Opportunities
Threats
• Expand international effort to increase consumer base
• Obtaining Non-GMO project verification or offering a large
organic line would be a natural extension for this naturalchannel focused company and would allow them to stay
current with the latest consumer trends
• Develop online educational tools to offer unique value to
consumers to increase brand awareness and grow customer
loyalty
• Playing up its commitment to the natural channel as other
leading players are purchased by big CPG companies
• Update sports nutrition line to the clean labeling & ingredients combination that is gaining popularity
• Brand lacking in unique offerings to set it apart from other
natural channel focused brands like New Chapter or NOW
Foods
• M&A activity is consolidating the industry and may make it
harder for smaller players to remain competitive with players
like New Chapter that now have large corporate backing
NBJ Bottom Line:
Bluebonnet Nutrition offers a broad line of products and is a well-known and recognized brand. It is well positioned to take advantage of the movement toward whole food and simpler supplement ingredient panels. However, the company needs to take a more active
digital and media role in order to remain relevant
Website:
www.bluebonnetnutition.com
© 2015 Penton
217
Company Profiles
2012
2013
2014
1,888
1,966
2,002
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
362
18%
Vitamins
467
23%
Mass Market Retail
1,204
60%
Minerals
487
24%
22%
Herbs &
Botanicals
276
14%
Direct/Other
Channels
436
Private Label/
Contract Manuf.
0
TOTAL
2,002
0%
100%
Meal
Replacement
61
3%
Sports
Nutrition
203
10%
Specialty
508
25%
2,002
100%
TOTAL
Company Overview
NBTY, Inc. is a global vertically integrated manufacturer, marketer and retailer of a broad line of
nutritional supplements in the United States and throughout the world. The company was
initially incorporated in 1979 under the name Nature’s Bounty, however, the name was changed
to NBTY Inc. in 1995. The Carlyle Group, a private-equity firm based in Washington, D.C.,
purchased NBTY in 2010.
NBTY’s corporate offices are located in Ronkonkoma, New York. The company markets approximately 25,000 products under
numerous brands, including Nature’s Bounty, Vitamin World, Puritan’s Pride, Holland & Barrett, Rexall, Sundown, MET-Rx, American
Health, DeTuinen, SISU, Solgar, Home Health, Ester-C and Natural Wealth. NBTY’s net sales reached $3.2 billion for FY2014, ending September 30, with sales growing just 1.3%. For the first half of FY2015, sales are essential flat year-over-year.
NBTY offers, through mail order and e-commerce, a full line of vitamins and other nutritional supplement products as well as selected personal care items, under its Puritan’s Pride and other brand names, at prices that are generally at a discount to those of similar
products sold in retail stores. The company has more than 2.9 million customers on its direct-response customer list, with response rates
that it believes are above the industry average.
Puritan’s Pride had its beginnings over 40 years ago, when Arthur Rudolph, a pioneer in the vitamin business, decided to offer quality products at a great value by selling the products that he manufactured direct to the health-conscious public through the mail with the
Puritan catalog. Puritan’s Pride is headquartered in Long Island, NY, and manufactures over 1,000 vitamins, minerals, herbs and other
nutritional supplements in its own state-of-the-art facilities.
NBTY started a new Non-GMO verified product line in 2014 called Nature’s Origin.The line will also be certified gluten-free and free
from irradiation.
© 2015 Penton
218
Company Profiles
Carlyle Group - NBTY S.W.O.T. Analysis
Strengths
Weaknesses
• Largest supplement company
• Diverse array of brands
• Diverse channel strategy with specialty retail stores, directing selling arm, and many mass market brands
• Discounters like Puritan’s Pride benefit from immediacy of
price comparisons made online
• Because of its size, NBTY is able to exert a great deal of
purchasing power over its ingredient suppliers
• NBTY maintains a large direct-to-consumer customer base
• Making efforts to update branding and stay relevant in rapidly changing market
• Commitment to online sales and consumer interaction evident from redesign of many brand websites
• NBTY’s products are considered to reside on the lower end of
the quality spectrum
• NBTY’s primary direct mail customers are aging
• Private label margins remain low.
• Questionable labeling accuracy (DHA & Vit D for instance)
Opportunities
Threats
• Continued global expansion
• Continue to leverage social media platforms to inform consumers of sales and discounts
• Consumer feedback gathered quickly through direct distribution; information passed on to NBTY’s retail brands
• Continued expansion of Nature’s Origin into )rganic or “Beyond Organic” certifications
• Rising consumer awareness of product quality
• Online supplement companies that do a better job of connecting with and educating NBTY’s customer base while still
offering competitive prices
• FDA and other government bodies and press casting poor
light on supplement industry
NBJ Bottom Line:
NBTY’s huge brand catalog offers multiple growth channels and diversified demographic targeting. The sports supplement market
has been strong but continuing controversies could stall growth. Overall growth has been strong but company’s private label market
operations have not been highly profitable.
© 2015 Penton
219
Company Profiles
Website:
www.metrx.com
www.naturesbounty.com
www.solgar.com
www.puritanspride.com
www.vitaminworld.com
www.naturesorigin.com
www.nbty.com
© 2015 Penton
220
Company Profiles
Church & Dwight (Northwest Natural Products,
Nutrition Now)
2012
2013
2014
177
189
198
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
34
17%
Vitamins
145
73%
Mass Market Retail
157
79%
Minerals
30
15%
Direct/Other
Channels
8
4%
Herbs &
Botanicals
16
8%
Private Label/
Contract Manuf.
0
0%
Meal
Replacement
0
0%
Sports
Nutrition
0
0%
Specialty
TOTAL
198
100%
TOTAL
8
4%
198
100%
Company Overview
Church & Dwight Co. Inc. is a $2.6 billion consumer products company, known for such household brands as
ARM & HAMMER and Trojan, that was founded in 1846 and is headquartered in Ewing, New Jersey. The
company’s business is divided into three primary segments, Consumer Domestic, Consumer International
and Specialty Products.In recent years it has taken an increased interest in the dietary supplement market.
Church & Dwight purchased Avid Health, the parent company of both Nutrition Now and Northwest Natural
Products, in August, 2012. Church & Dwight Co. was attracted to Avid Health because of the gummy
supplements’ tremendous growth potential.
Church & Dwight’s supplement lines include the former Northwest Natural products brand: L’il Critters,
Vitafusion and Accurflora. Based on a “coming soon” label on the websites, there is more to come for the Nutrition Now branded PB8
digestive aid products, while other former Nutrition Now gummy products have been merged into the Vitafusion line.
In early 2015, Vitafusion introduced an “Extra Strength” line of products that include D3, Biotin, Melatonin, and B-12 products. The L’ll
Critters brands introduced three new “Vites Plus” for Immune support, bone support and omega-3 DHA support.
© 2015 Penton
221
Company Profiles
Nutrition Now S.W.O.T. Analysis
Strengths
• Owns and operates facility designed specifically for gummy-based supplements
• Made with natural flavors, gummy products consistently
rated best in industry for taste
• Strong presence in probiotics space
Weaknesses
• Limited number of product offerings
• Premium priced brands
• Getting lost in the large Church & Dwight portfolio
Opportunities
Threats
• Specialized facility gives company capacity to expand innovative gummy product line
• Leverage condition-specific marketing approach to increase
market penetration
• Move beyond gummies into additional formats including
melts and fizzes
• Large mass market players with gummy formulations, such
as Flintstones
• Gummy vitamin category has become very competitive with
lots of private label competition
• Highly-publicized and growing skepticism on the efficacy of
vitamin supplements could cloud the market
NBJ Bottom Line:
As the gummy vitamin category has become increasingly competitive, these brands may be falling behind. They will need to continue to exploit their early-in advantage and use condition-specific products to stand out among larger players. They should be looking past
gummies into additional formats. Church & Dwight Co.’s acquisition appears to have slowed the product development cycle.
Website:
www.gummyvites.com
www.churchdwight.com
www.nutritionnow.com
© 2015 Penton
222
Company Profiles
Capstone (Cornerstone Research and Development,
Integrity Nutraceuticals)
2012
2013
2014
128
146
149
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
0
0%
Vitamins
30
20%
Mass Market Retail
0
0%
Minerals
22
15%
0
0%
Herbs &
Botanicals
60
40%
149
100%
7
5%
Sports
Nutrition
12
8%
Specialty
18
12%
149
100%
Direct/Other
Channels
Private Label/
Contract Manuf.
TOTAL
149
100%
Meal
Replacement
TOTAL
Company Overview
Capstone Nutrition is a large pure-play developer and manufacturer in the nutrition industry, with facilities in Ogden, UT and Spring Hill, TN and the combined resources of Cornerstone Research and Development and Integrity Nutraceuticals. Since 1992, the company has
been developing, producing, and packaging capsule, tablet, and powder products for a
variety of customers in the United States and internationally. The company’s goal is to provide a one stop product development and
manufacturing service.
Capstone’s product portfolio is comprised of vitamins, minerals, botanicals, probiotics, sports nutrition, anti-aging, and general
wellness products for branded customers selling through internet, multilevel marketing (MLM), mail order, healthcare practitioners,
mass market retail, as well as health food and specialty retail.
Sun Capital Partners, a private investment firm, sold Cornerstone Research & Development to Integrity Nutraceuticals in April,
2014 for an undisclosed amount
Headquartered in Ogden, Utah, the Cornerstone arm of the company develops, produces, and packages over 600 capsule, tablet, and
powder products for a variety of leading, blue-chip branded VMS customers. Cornerstone operates out of its state-of-the-art 300,000 sq
ft. facility that offers its customers a variety of turnkey manufacturing solutions. The company has been a leading innovator in the VMS
category, and in a given year, Cornerstone’s research and development team typically develops 30-35 new or enhanced products, reengineers more than 100 existing products, and pilots another 150 products according to customer demands.
© 2015 Penton
223
Company Profiles
Founded in 1999, Integrity Nutraceuticals is a raw material supplier of bulk nutraceuticals and nutraceutical product manufacturer.
The company’s capabilities range from providing ingredients to fully integrated services such as custom formulations, manufacturing
and packaging.
Nutrition Now S.W.O.T. Analysis
Strengths
• Cornerstone known as high-quality contract manufacturer
• Numerous certifications including NSF GMP, Certified for
Sport, Kosher, Halal, TGA
• Member of the United Natural Products Alliance—a trade
organization with a very small membership list
Opportunities
• Powdered drink premixes
• International—TGA certification has global clout
• Additional capabilities of Cornerstone and Integrity combined
Weaknesses
• So many decisions in the supplement industry come down
to price, an area where most high-quality manufacturers
cannot compete
• Private label margins remain low
• Merging of companies and rebranding to Capstone masthead may cause customer confusion
Threats
• Since GMP compliance is mandatory, certifications hold less
sway as selling points
• Highly competitive contract manufacturing market
• Quickly evolving delivery system trends require investment
in emerging technologies
NBJ Bottom Line:
Cornerstone is a high-quality, Utah-based manufacturer with a sterling reputation. Under the new Capstone umbrella, the company
should continue to be successful, with the benefit of Integrity’s additional capabilities.
Website:
www.capstonenutrition.com
www.integritynutraceuticals.com
© 2015 Penton
224
Company Profiles
Hormel Foods (CytoSport)
2012
2013
2014
216
317
342
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
273
80%
Vitamins
0
0%
Mass Market Retail
34
10%
Minerals
0
0%
Direct/Other
Channels
34
10%
Herbs &
Botanicals
0
0%
0
0%
42
12%
299
88%
Private Label/
Contract Manuf.
Meal
Replacement
Sports
Nutrition
Specialty
TOTAL
341
100%
TOTAL
0
0%
341
100%
Company Overview
CytoSport, Inc. was formed in 1998 by Greg Pickett and his son Mike Pickett and is based in
Benicia, CA.. CytoSport manufacturers and markets sports nutritional supplements under the
Cytosport, Muscle Milk, Cystosport Monster Series, and Cytomax brands. The company’s first
product was the Cytomax brand followed in 2000 by Muscle Milk, though this brand didn’t morph
into its popular RTD form until 2004. The US-based brand began international distribution in
Canada in 2011, the United Kingdom in 2012, and Germany and Australia in 2013.
Cytosport is partnered with several sports and health organizations, as well as with universities and pro athletes.
When the once hardcore Muscle Milk brand entered the mainstream grocery aisle, Cytosport created the Monster Milk sub-brand
to continue to target serious athletes. These products have now morphed into the Cytosport Monster brand and are targeted at the
bodybuilding/cross fit type athlete. The Cytomax brand continues to be targeted at endurance athletes such as cyclists and runners,
while the Cytosport brand is the more general sports nutrition products such as whey protein. Few sports nutrition products have
transitioned from specialty stores into the mass market and been successful in both channels. Muscle Milk — a popular line of protein
powders and drinks— bucked that trend.
CytoSport was purhased by the Hormel Foods Corporation in August 2014 for approximately $450 million. Hormel indicated in a press
release that the acquisition would “serve as a growth catalyst for the company’s Specialty Foods segment, and also expands its offerings
of portable, immediate, protein-rich foods.” Hormel has since named a new management team including Greg Longstreet as CEO, Tom
Miskowski as COO, Steve Orcutt as CFO, and Andy Benson as senior vice president of sales.
© 2015 Penton
225
Company Profiles
CytoSport S.W.O.T. Analysis
Strengths
Weaknesses
• Muscle Milk can now be found in a wide range of retail outlets, including sporting goods stores, bike stores and conventional grocery stores.
• CytoSport’s many celebrity athlete endorsements have
helped to propel the company’s product brands.
• The company has invested in quality assurance certifications, such as NSF International’s Certified for Sport designation. Such certifications are increasingly important in the
sports supplement arena.
• CytoSport maintains rigorous manufacturing control of its
RTD and powder products at its 150,000 square-foot production facility.
• CytoSport has developed marketing agreements with
numerous universities for the “collegiate version” of Muscle
Milk.
• Acquisition by Hormel Foods
• Bad press around claimed false advertising around the Muscle Milk brand
• Walking a tough marketing tightrope where very similar
brands target both casual consumers and hardcore athletes.
• Clashes with FDA over the lack of milk in Muscle Milk
Opportunities
Threats
• CytoSport products are sold in a growing number of countries. Mainland China, with its burgeoning middle class, could
be a key expansion focus for the company
• Continued investing in quality and science will further set
CytoSport apart from other sports nutrition companies and
strengthen its reputation among athletes and the general
public
• Continued development of sales in the mass market channel
• CytoSport could target women with new brand.
• New creative delivery formats in a market that is innovating
around delivery
• Realign brands to create clear and separate marketing for
each target audience
• Build on trend toward clean sport products with line extension (or perhaps preferably new brands) in the vein of Muscle
Milk Organic
• Concerns over heavy metals in protein products
• Negative press associated with the sports supplement market
• FDA and USADA efforts to clean up the sports supplement
market
• Wrestling with Gatorade for exclusive collegiate sponsoring
positions
• Highly publicized sports supplement controversies including
“DMAA” recalls could make customers more suspicious of
category
© 2015 Penton
226
Company Profiles
NBJ Bottom Line:
Cytosport has experienced tremendous cross channel sales successes but has also been in the center of some sports nutrition controversies. With the recent acquisition by Hormel, the company will likely be treading much more carefully as big companies don’t like
lawyers. They will need to work hard to remain an innovative brand in a market niche that changes rapidly.
Website:
www.cytosport.com
www.musclemilk.com
www.cytosportmonster.com
www.cytomax.com
© 2015 Penton
227
Company Profiles
Delavau
2012
2013
2014
99
104
105
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
0
0%
Vitamins
32
30%
Mass Market Retail
0
0%
Minerals
63
60%
Direct/Other
Channels
0
0%
Herbs &
Botanicals
10
10%
105
100%
Meal
Replacement
0
0%
Sports
Nutrition
0
0%
Private Label/
Contract Manuf.
Specialty
TOTAL
105
100%
TOTAL
0
0%
105
100%
Company Overview
Founded in 1847, Delavau is a private label firm that manufactures a wide range of consumer products for the
nutritional and pharmaceutical industries. These include vitamins, minerals, herbals, and other nutritional
supplements, along with over-the-counter pharmaceuticals and food products. The company’s stated expertise
is in calcium sourcing and manufacturing, custom formulations and new product development.
Products are offered in the following formulations: bulk powder, granulation, and bulk tablets. In addition to Delavau’s manufacturing capabilities, they assist customers with formulation development and optimization, marketing efforts, and innovative product
solutions. The combination of these specialties allows Delavau to minimize time-to-market, resulting in more timely and successful
product launches.
HBM Holdings acquired Delavau in 2012. HBM’s other investments include Mississippi Lime and Tru-Flex Flexible Exhaust Products.
© 2015 Penton
228
Company Profiles
Delavau S.W.O.T. Analysis
Strengths
Weaknesses
• Wide-ranging manufacturing capabilities
• Can provide turnkey services for clients with marketing,
innovation, and development capabilities
• Largest manufacturer/innovator of calcium-based products
• Vertically integrated structure
• Long operating history and track record
• Strong list of market leading customers
• Wide array of delivery system capabilities including chocolates
• Website is underdeveloped
• Playing in highly competitive contract manufacturing arena
Opportunities
Threats
• While the firm has no need to market directly to consumers, their trade marketing could be enhanced to build name
recognition
• Target new customers and sell capabilities to smaller companies than their traditionally large clients
• Continue innovation and integrated offerings to be a “onestop shop” for customers
• Calcium products ideally poised for aging baby boomers
concerned about bone health
• Build prototype brands to highlight innovative thinking and
future market potential
• Companies choosing to bring manufacturing in house
• Fluctuating delivery system demands require capital investment
• Potential of customers choosing not to utilize their integrated offerings and instead seeking out manufacturing only
facilities
• Highly competitive contract manufacturing industry
NBJ Bottom Line:
A highly private firm, Delavau services many marketers of dietary supplements providing a full range of integrated services for new
company and product launches in the U.S. supplement industry, making them an easy choice for manufacturers who want one-stop
shopping. The 2012 purchase of Delavue by HBM provides access to the calcium products of sister company Mississippi Lime and the
backing of a bigger financial entity.
Website:
www.delavau.com
© 2015 Penton
229
Company Profiles
DSM (i-Health)
2012
2013
2014
99
135
143
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
4
3%
Vitamins
0
0%
Mass Market Retail
139
97%
Minerals
0
0%
Direct/Other
Channels
0
0%
Herbs &
Botanicals
69
48%
Private Label/
Contract Manuf.
0
0%
Meal
Replacement
0
0%
Sports
Nutrition
0
0%
Specialty
74
52%
143
100%
TOTAL
143
100%
TOTAL
Company Overview
Royal DSM is a global science-based company active in health,
nutrition and materials. DSM delivers innovative solutions that
nourish, protect and improve performance in global markets
such as food and dietary supplements, personal care, feed,
medical devices, automotive, paints, electrical and electronics, life protection, alternative energy and bio-based materials. DSM and its
associated companies delivered annual net sales of €9.3 billion in 2014 with 62% of its sales generated by its Nutrition division. The company has approximately 25,000 employees and is listed on Euronext Amsterdam.
DSM’s Nutrition division posted sales of €4.3 billion in 2014. The Human Nutrition & Health segment accounted for 38% of that
revenue, while the Animal Nutrition & Health division produced 48%. The Foods Specialties and Personal Care divisions remain a small
portion of the business, at 3% and 11% respectively. The Americas acounted for 41% of DSM Nutritional sales in 2014. DSM Nutritional
Products comprises all but the Food Specialties segment of DSM’s Nutrition division.
In February 2011, Royal DSM announced that it had successfully completed the acquisition of Martek Biosciences Corporation. The
acquisition, for a total consideration of approximately US $1.1 billion, was fully in line with DSM’s strategy for its nutrition cluster and
added a new growth platform for health and natural food ingredients for infant formula and other food and beverage applications. As a
result of the acquisition, DSM gained extensive new opportunities in the infant nutrition segment as well as food, beverages and dietary
supplements. In September 2011, DSM announced a reorganization and rebranding of Martek into Nutritional Lipids, a new division
that houses life’sDHA, life’sARA and DSM’s polyunsaturated fatty acid (PUFA) portfolio.
© 2015 Penton
230
Company Profiles
The company’s retail brands, traditionally housed under the Amerifit brand name, have been rebranded under the i-Health name
since the 2011 post-Martek acquisition reorganization. The i-Health division includes the Estroven, AZO, Culturelle, DHEA, i-cool, i-flex,
Ovega-3 and BrainStrong brands.Miskowski as COO, Steve Orcutt as CFO, and Andy Benson as senior vice president of sales.
DSM (i-Health) S.W.O.T. Analysis
Strengths
• 99% + market penetration with core ingredients
• Built the DHA infant formula category
• Good traction with food & beverage applications for
life’sDHA, including major organic players and major CPGs
• I-Health division carries strong portfolio of supplement
brands that make use of Life’sDHA
Weaknesses
• Hexane extraction still necessary in infant formula applications and of growing concern from consumer advocates
• Saturated core market for the company’s core ingredients
• Very niche market leaves company open to consumer’s
changing interests in Omega-3s
Opportunities
Threats
• New products that better mimic nutritional payload of fish,
without the baggage of sustainability and toxin contamination
• Increasing interest from major food & beverage companies
globally
• Full backing and resources of DSM, a dominant global player,
now at the brands’ disposal
• Continue to diversity portfolio with acquisitions like 2015
purchase of vitamin C producer Aland
• Next wave of scrutiny imminent over solvents, including hexane
• Omega-3 fish oil prostate cancer link headlines could cut
demand, with infant formula category at particular risk
NBJ Bottom Line:
In DSM’s purchase of Martek, the conglomerate locked up the vegetarian-sourced DHA market, making it increasingly hard for
smaller companies to enter this segment. Additionally, the company’s food & beverage business is broadening with new categories such
as cheese, cooking oils, bread, frozen foods, tortillas, smoothies, and meat alternatives. A study linking omega-3 to prostate cancer likely
caused DSM a lot of heartache over the past year, sales woes that hit in Q4 appear to have normalized and DSM reports that the I-Health
division is experiencing strong growth for the first quarter of 2015.
© 2015 Penton
231
Company Profiles
Website:
www.i-healthinc.com
www.estroven.com
www.culturelle.com
www.azoproducts.com
www.brainstro ngdha.com
www.brainstrongmemory.com
www.ovega.com
www.i-coolformenopause.com
www.lifesdha.com
www.dsm.com
© 2015 Penton
232
Company Profiles
Glanbia (Optimum Nutrition, BSN, Isopure)
2012
2013
2014
403
464
505
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
298
59%
Vitamins
5
1%
Mass Market Retail
25
5%
Minerals
0
0%
Herbs &
Botanicals
Direct/Other
Channels
182
Private Label/
Contract Manuf.
0
TOTAL
505
36%
0%
100%
0
0%
Meal
Replacement
116
23%
Sports
Nutrition
373
74%
Specialty
10
2%
505
100%
TOTAL
Company Overview
Glanbia plc is a leading international cheese and nutritional ingredients
group, headquartered in Ireland. The Group has 4,300 employees and has
operations in 34 countries through its Global Ingredients, Global Performance Nutrition, and Dairy Ireland segments as well as Joint Ventures and
Associates. The company employs 5,800 people and its products are sold or
distributed in more than 130 companies. Corporate revenue reached €2.5
billion in 2014 on 6.6% growth (not including Joint Ventures and Associates
which contributed another billion euro).
Glanbia’s Global Performance Nutrition division posted revenue of
€746.2 million in 2014 on 7.4% growth.
Headquartered in Fitchburg, WI, Glanbia Nutritionals offers a full range of nutrition dairy and flax ingredients. Its state-of-the-art
production facilities in the United States, Canada and Europe produce advanced ingredients such as Solmiko milk proteins, TruCal milk
minerals, Bioferrin lactoferrin, Provon whey protein isolate and MeadowPure UltraGrad flax.
Optimum Nutrition was acquired by Glanbia in August 2008 for $315 million. It is one of the leading manufacturers of dietary
supplements and sports nutrition products. The brand’s mission is “to produce distinctive, affordable, premium-quality products while
making every effort to anticipate ever-changing customer needs and meet the demands of a dynamic market with innovative products,
effective support materials, and unsurpassed service.”
In 2011, Glanbia aquired Bio-Engineered Supplements and Nutrition, Inc. (BSN) for $144 million.
© 2015 Penton
233
Company Profiles
In 2012, Glanbia Nutritionals increased its manufacturing capabilites by aquiring Aseptic Solutions USA, a manufacturer of shelf
-stable high-acid beverages made with aseptic technology. Today, Aseptic Solutions offers full service contract manufacturing, from
concept through packaging, processing, and branding, all focused on the beverages (or RTD formatted products). This is a great addition
to the supply-to-shelf Glanbia portfolio.
In September 2014, Glanbia acquired another sports nutrition brand, Isopure, for $153 million. Isopure is a US based provider of
premium branded sports nutrition products. Isopure focuses on powders and ready-to-drink, primarily through the specialty, internet
and direct distribution channels. According to a press release at the time of the acquisition, Isopure generated net revenues of US$74.6
million for the twelve month period to the end of July, 2014, representing a CAGR of 20% for the period from end December 2011 to end
July 2014.
Glanbia also owns the smaller sports nutrition brands Nutramino and ABB Performance. Nutramino was another 2014 acquisition
and in Glanbia’s 2014 annual report they indicated that it “provides access to the Scandinavian market and offers the potential to distribute its Ready-To-Drink (RTD) and bar offering to other European markets.”
Glanbia (Optimum Nutrition) S.W.O.T. Analysis
Strengths
• Dairy is a key component in many sports nutrition, weight
loss and meal replacement products
• Major global player in dairy based food and nutritional ingredients
• Vertical integration of Glanbia Nutrition
• BSN, Optimum Nutrition, Isopure well-known sports nutrition brands that use Glanbia raw materials
• Aseptic Solutions provides product development and RTD
manufacturing and packaging expertise
• Glanbia’s Sports Nutrition School to educate staff and customers (hosted events in 9 countries with 5,000+ participants in 2014)
Weaknesses
• Slow ingredient innovation
• Lacking a wide range of ingredients backed by proprietary
science
• Whey dependency in a diversifying industry
Opportunities
Threats
• Technology in Aseptic Solutions acquisition provides new
formats and access to additional markets for whey and dairy
materials
• Continued acquisitions to fill in holes in values chain. Delivery
system innovation could be a key area.
• Emphasize sustainability plan, including Carbon Trust accreditation and Origin Green project — a feature largely absent
from protein market.
• Product development around cleaner sports nutrition and
ingredients beyond whey.
• Increased involvement in meal replacement
• Health claims environment causing uncertainty and reducing
value of differentiated ingredients
• Whey availability
• Global interest in non-whey ingredients
• Sustainability concerns around animal-based ingredients
© 2015 Penton
234
Company Profiles
NBJ Bottom Line:
One of the biggest whey protein suppliers in the world, Glanbia has set itself up for success by continuing to buy companies that
create synergies in its supply chain. While the company might be well advised to diversity its ingredient portfolio as consumers become
more interested in alternative protein sources, it is unlikely that whey protein is going to lose popularity anytime soon.
Website:
www.optimumnutrition.com
www.bsnonline.net
www.asepticusa.com
www.theisopurecompany.com
www.glanbianutritionals.com
www.glanbia.com
© 2015 Penton
235
Company Profiles
GNC (contract manufacturing)
2012
2013
2014
500
551
531
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
0
0%
Vitamins
156
29%
Mass Market Retail
0
0%
Minerals
52
10%
Direct/Other
Channels
0
0%
Herbs &
Botanicals
58
11%
534
100%
Meal
Replacement
54
10%
Sports
Nutrition
107
20%
Specialty
107
20%
TOTAL
534
100%
Private Label/
Contract Manuf.
TOTAL
534
100%
Company Overview
Headquartered in Pittsburgh, PA, GNC Holdings is one of the leading retailers of dietary supplements in the US. Corporate revenue
reached $2.6 billion in 2014 and the company boasts more than 8,000 locations and 16,000 employees. Total revenue remained essentially flat in 2014 with the company’s Retail segment being the only division that experienced a very slight gain in sales. The Manufacturing/
Wholesale division, the smallest of the company’s three segments, posted sales of $241.2 million, which represented an 8.3% decline. This
segment decline was reportedly due to decreased purchases from large wholesale customers. Additionally, the company recorded $244.3
million in intersegment revenues in this division for sales of its GNC branded products to its retail operations.
GNC continues to offer contract manufacturing services to outside companies, but it continues to keep itself busy with a wide array
of house brands, including Puredge, Total Lean, Pro Performance Amp, Beyond Raw, and GenetixHD. In total, they now have 23 GNC
sub-brands.
Beyond its retail stores, GNC-branded products are available in Rite Aid, Sam’s Club, Petsmart and online at drugstore.com.
© 2015 Penton
236
Company Profiles
GNC (contract manufacturing) S.W.O.T. Analysis
Strengths
Weaknesses
• GNC’s Gold Card loyalty program drives repeat sales and
revenues and enables the supplement retailer to remain in
contact with customers and understand purchase profiles
• With GNC franchise stores in 50+ countries, this dietary supplement retailer is in a good position to capitalize on growing
global demand for nutrition products and expand sales of its
private-label brand.
• Diversity of products protects sales from sudden consumer
swings on latest health headlines
• Diverse GNC brand offerings allow them to control the value
chain and easily react to market opportunities
• History of carrying controversial brands like Jack3D
• Some believe that GNC’s restrictive cost structure has degraded the quality of the supplements the company sells.
• GNC’s size makes it difficult for the company to successfully
work with small, innovative sports supplement companies.
• Heavy dependency on Gold Card customers
• Lack of natural/wellness as consumers increasingly shop at
natural-branded retail
• Hardcore branding of Beyond RAW sends a mixed message
that seems unlikely to resonate
• Continued focus on quick fix products is likely to lead to
further regulatory skirmishes
Opportunities
Threats
• Global partnerships
• Sales of GNC branded products in more store-within-a-store
concepts such as Rite Aid
• Invest in more non-sports private label products to grow
consumer base and compete with mass
• Expand GNC Natural brand into a sports nutrition brand that
can be trusted by natural/health minded consumers (rather
than physique athletes)
• Continue current (2015) initiative to reset stores with the following in mind: plant and natural proteins, women’s beauty,
and functional foods
• Bad press associated around sports nutrition supplements
and controversial ingredients
• FDA warning letters around DMAA, DMBA and other products
• Increased retailer liability for the safety of the products on
their shelves
• Protein’s explosive growth in mainstream stores causes price
pressures within brick and mortar competitors.
• Negative scientific studies and bad press around supplement
efficacy
• Bad press related to NY AG’s office despite no evidence that
GNC deviated from federal cGMP standards
NBJ Bottom Line:
GNC continues to be a leading national sports nutrition retailer and private label supplement provider. The company is likely to
continue to run into controversy with some of its sports nutrition products, but with young males as an important consumer segment,
the payoff is likely worth the risk. The company’s initiatives to help broaden its product lines to draw women and consumers looking for
cleaner products will help to diversify its portfolio and ensure future success.
Website:
www.gnc.com
© 2015 Penton
237
Company Profiles
Helen of Troy/Healthy Directions (Doctor’s Preferred)
2012
2013
2014
135
146
152
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
0
0%
Vitamins
33
22%
Mass Market Retail
0
0%
Minerals
23
15%
152
100%
Herbs &
Botanicals
30
20%
0
0%
3
2%
Direct/Other
Channels
Private Label/
Contract Manuf.
TOTAL
152
100%
Meal
Replacement
Sports
Nutrition
6
4%
Specialty
56
37%
152
100%
TOTAL
Company Overview
Healthy Directions, LLC is a publisher of alternative and
complementary health newsletters and a direct-to-consumer retailer of doctor-formulated nutritional supplements and skin care products. The company offers professional guidance through its blog, website, newletters, and webinars, and
supplements and personal care products branded under its group of integrative and alternative health doctors: Julian Whitaker, MD, Dr.
David Williams, Stephen Sinatra, MD, Susan Lark, MD, Aaron Tabor, MD, Richard Wurtman, MD, and Joseph Pergolizzi, Jr., MD. Dr Yan
Pin Xu joined the health expert team in early 2015.
Healthy Directions was originally launched in 1974 by Thomas L. Phillips as Phillips Publishing, pioneering the newsletter concept.
In 1991, the company launched Julian Whitaker’s Health & Healing newsletter, which quickly became one of the largest circulation
health publications in the country. The company launched its first branded website, www.drwhitaker.com in 2000.
ACI Capital Co. Inc and American Securities Capital Partners LLC, both New York-based private equity investment firms, acquired a
majority of the assets of the company in 2004, in partnership with the company’s existing management, and the company was officially
renamed Healthy Directions, LLC in 2005. Healthy Directions is headquartered in Potomac, Maryland.
Helen of Troy Limited acquired Healthy Direction in mid-2014 for approximately $195 million.
© 2015 Penton
238
Company Profiles
Glanbia (Optimum Nutrition) S.W.O.T. Analysis
Strengths
Weaknesses
• Healthy Directions is one of the most experienced players in
the nutrition industry direct mail channel
• TV ads for products such as OxyRub cross marketed on website
• The company maintains a large Healthy Directions infrastructure and strong product development capabilities.
• Healthy Directions maintains an in-house regulatory team
that is able to help the company navigate the changing supplement regulations
• Extensive health-related blog and online content
• Eight doctors that serve as the basis for product lines
• Revamped website and addition of online ordering have
brought the company back into the modern competitive
world
• Healthy Directions’ customer demographic is quickly aging.
• Company’s group of celebrity physicians are getting stale
and may no longer be considered cutting edge
• Has been slow to market new products
Opportunities
Threats
• Sign on next generation of celebrity physicians who bring
connections to new demographic groups.
• Continue to cultivate a younger generation of consumers and
new direct purchase channel preferences
• Take advantage of Helen of Troy larger infrastructure to
increase distribution
• Aged customer demographic group will eventually be gone
• Healthy Directions faces growing competition from more
sophisticated direct-to-consumer marketers
• Media attacks on specialty supplements
• Bottom line pressures from new parent company
NBJ Bottom Line:
A major player in direct with a broad base of customers, Healthy Directions has finally stepped up its game and revitalized the company to appeal to more modern consumers and allow ordering beyond its traditional mail order format. Actions such as a new, highly
functional website and the introduction of new talent to its professional portfolio have allowed a brand that many felt was faltering to
gain new life. In fact, in 2014 NBJ awarded Healthy Directions an Industry Achievement Award for its double digit growth in 2013 and the
addition of two new doctor brands.
Website:
www.healthydirections.com
© 2015 Penton
239
Company Profiles
2012
2013
2014
196
215
211
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
0
0%
Vitamins
95
45%
Mass Market Retail
32
15%
Minerals
34
16%
0
0%
Herbs &
Botanicals
25
12%
179
85%
Meal
Replacement
0
0%
Sports
Nutrition
2
1%
Specialty
55
26%
211
100%
Direct/Other
Channels
Private Label/
Contract Manuf.
TOTAL
211
100%
TOTAL
Company Overview
International Vitamin Corporation (IVC), formerly Inverness Medical Nutritionals Group, develops, manufactures
and markets branded over-the-counter healthcare products as well as providing private label and contract
manufacturing services. Among its branded products, IVC markets Stresstabs, a B-complex vitamin with added
antioxidants; Ferro-Sequels, a time-release iron supplement; Protegra, an antioxidant vitamin and mineral supplement; Posture-D, a calcium supplement; SoyCare, a soy supplement for menopause; ALLBEE, a line of B-complex
vitamins; and Z-BEC, a zinc supplement with B-complex vitamins and added antioxidants. The company also
market SpongeBob SquarePants gummies.
International Vitamin Corporation is also a supplier in the US of private label vitamins and nutritional products for major drug and
food chains, as well as bulk vitamins, minerals and nutritional supplements for unaffiliated brand name distributors. The company has a
tableting and capsule facility in Freehold, NJ and a softgel facility in Irvington, NJ. They also manufacture powdered products, thanks to a
2013 acquisition.
In June 2013, IVC acquired Adam Nutrition Inc., a contract manufacturer of nutraceutical supplements. In a press release, the company stated that the purchase was “intended to better serve the needs of IVC’s and Adam Nutrition’s current customers and provide a
platform for future channel and product expansion.”
IVC President and CEO Steven Dai commented, “I am very excited to bring Adam Nutrition into the IVC family. We look forward to
helping Adam’s current customer base grow their businesses while leveraging the powder capabilities to expand into new markets. This
transaction also fits with our strategy to offer US-made products to the global marketplace.”
© 2015 Penton
240
Company Profiles
International Vitamin Corporation S.W.O.T. Analysis
Strengths
Weaknesses
• Offers a wide variety of private label and contract manufacturing capabilities
• Softgel, tablet and powder manufacturing capabilities
• Addressing consumer desire for smaller, more convenient
delivery systems
• Licensed manufacturer of Rx and OTC drugs
• Solid financial backing
• Branded products in niche categories to avoid competition
with contract manufacturing clients
• SpongeBob SquarePants!
• Limited branded product line
• Highly competitive contract manufacturing industry makes it
hard to leave a unique footprint
Opportunities
Threats
• Continued development of products that focus on condition
specific uses
• Consider developing cutting edge branded products that
could serve as a product introduction for private label customers
• Drug manufacturing capabilities allows the company to be
on leading edge of trends toward higher grade/more pharmaceutical-like supplements
• Expand gummies beyond children’s line
• Many supplement brands in the mass market space are competing with much more cutting edge products to steal IVC’s
branded product share
• Reliance on raw material supplier research leaves IVC dependent on outside sources for innovation
• Contract manufacturing’s notoriously low margins
NBJ Bottom Line:
IVC’s global supply and manufacturing network provide efficiencies that could help the company compete in the low-margin
contract manufacturing space. It will need to continue to update its manufacturing and packaging abilities to stay current with hot new
delivery system trends. The 2013 acquisition of Adam Nutrition is a step in the right direction.
Website:
www.ivcinc.com
© 2015 Penton
241
Company Profiles
2012
2013
2014
170
210
262
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
82
35%
Vitamins
0
0%
Mass Market Retail
136
52%
Minerals
0
0%
34
13%
Herbs &
Botanicals
157
60%
0
0%
Direct/Other
Channels
Private Label/
Contract Manuf.
TOTAL
262
100%
Meal
Replacement
0
0%
Sports
Nutrition
105
40%
Specialty
0
0%
262
100%
TOTAL
Company Overview
Iovate is headquartered in Oakville, Ontario, Canada and produces some of the most well known brand names in
the weight loss and bodybuilding segments of the supplement industry. In 2014, the company was awarded
Bodybuilding.com’s “Most Innovative Brand of the Year” award.
Iovate’s stated mission is to “help people around the world reach their goals with the highest quality active
nutrition and weight management products.” The company’s brands include Hydroxycut, MuscleTech, Six Star Pro Nutrition, EPIQ,
Xenadrine, and Purely Inspired. Purely Inspired is Iovate’s newest weight loss brand and is aimed at a higher end, more natural focused
consumer.
The company invests in science to support its products and holds more than 80 worldwide patents, with 40 more pending patents.
Iovate boasts numerous university and private research partnerships, including many renowned institutions and laboratories throughout the world, including the University of Toronto, the University of Nottingham, and the University of Texas Medical Branch.
© 2015 Penton
242
Company Profiles
Iovate S.W.O.T. Analysi
Strengths
Weaknesses
• Strong name recognition in weight-loss supplements
• Strong presence nationally in mass and convenience
• Staying current with industry trends with products like Hydroxycut Drops, Instant Drink Mix and Gummies
• Playing in the market segment that resonates with consumers’ image and health concerns
• New Purely Inspired brand has the clean, simple, natural
image that is currently hot in the market.
• BetaATP, marketed under the Muscletech brand, awarded
2015 NutraIngredients’ Sport and Energy Finished Product of
the Year
• Iovate became a member of NPA in 2014, signaling its commitment to the industry
• A leading player in the weight loss/muscle building supplement category is unlikely to avoid future controversy
• MuscleTech brand has outdated, generic hard-core bodybuilding brand image
• Continued links to class action lawsuits such as the 2015 suit
accusing Iovate of “protein spiking” MuscleTech, Six Star and
EPIQ products
Opportunities
Threats
• Direct marketing—direct channels continue to present the
best growth prospects in the category
• Complement thermogenic weight loss products with other
categories like nutricosmetics or even anti-aging supplements to build out line and consumer base
• Online nutrition and lifestyle information and wellness regimens to help build legitimacy
• Continued product delivery innovation to stay relevant in a
rapidly changing market segment
• Build upon the Purely Inspired brand to appeal more to consumers looking for long-term healthy solutions rather than
the quick fix
• Iovate is one of the biggest companies in the weight-loss pill
market, and considering its previous run-ins with regulators,
is a likely target for future tangles with the FDA
• Continued bad press and FDA scrutiny/recalls around suspect weight-loss ingredients and tainted products
© 2015 Penton
243
Company Profiles
NBJ Bottom Line:
Iovate has definitely experienced the rollercoaster ride that is generally associated with being a company focused on the weight
loss and bodybuilding segments of the supplement industry. While its portfolio includes well-known brands in the segment, constant
lawsuits appear to be the cost of doing business.
Website:
www.iovate.com
www.hydroxycut.com
www.xenadrine.com
www.muscletech.com
www.epiqresults.com
www.sixstarpro.com
www.purelyinspired.com
© 2015 Penton
244
Company Profiles
Twinlab Consolidated Corporation (TwinLab,
Metabolife)
2012
2013
2014
108
113
99
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
60
61%
Vitamins
15
15%
Mass Market Retail
32
32%
Minerals
4
4%
Direct/Other
Channels
7
7%
Herbs &
Botanicals
28
28%
Private Label/
Contract Manuf.
0
0%
Meal
Replacement
0
0%
Sports
Nutrition
38
38%
Specialty
15
15%
TOTAL
99
100%
TOTAL
99
100%
Company Overview
Twinlab is a well-know name in the dietary supplement
industry that underwent corporate restructure in late 2014.
As part of some corporate juggling and emergence into a
public company via a reverse merger, Twinlab Corporation was acquired by Twinlab Consolidation Cororation (TCC), a subsidiary of
Twinlab Consolidated Holdings Inc (Symbol TLCC).
Twinlab Consolidation Corporation (TCC) is an industry-focused health and wellness company. In addition to its namesake brand,
Twinlab®, established in 1968, TCC also manufactures and sells other well-known category players including the Metabolife® line of diet
and energy products; Fuel line of sports supplement products; Alvita® teas, established in 1922 as a single-herb tea line; Trigosamine®
joint support products as well other health and wellness brands. Twinlab’s manufacturing facility is located in American Fork, UT.
Twinlab produces over 600 nutrition products including tablets, capsules, powder drink mixes, nutritional snacks and bars. The
company’s headquarters is currently in New York City but will be moving to St. Peterburg, FL late in 2015. Its R&D facility is in Grand
Rapids, MI. The company distributes its products in more than 55 countries.
Twinlab’s website includes a recipe finder, body mass index calculator and waist-hip ratio calculator to assist customers with gaining or maintaining a healthy body.
In February 2015, TLCC acquired Nutricap Labs’ contract manufacturing business NutraScience Labs Inc.
© 2015 Penton
245
Company Profiles
“For the past decade, Nutricap has been a fast-growing leader among standalone contract manufacturing businesses,” said TLCC
CEO Tom Tolworthy. “We believe that the integration of Nutricap’s robust book of contract manufacturing business into the broader
branded and contract manufacturing infrastructure owned by the Company will not only bring significant accretive value to the Company and its shareholders, but of equal importance will provide an increased level of product options and services to Nutricap’s and TLCC’s
customers.”
“For some time, I have recognized that in order to meet their ever-expanding demands for unique high-quality products, our
customers needed immediate access to the type of development, quality platforms and resources that are found only in a company of a
certain size like TLCC and which owns its own manufacturing facility,” explained Nutricap CEO Jonathan Greenhut. “When this opportunity presented itself, we recognized that this was a perfect fit and the right home for the continued success of our customers.”
The contract manufacturing business of NutraScience Labs will be headed up by Steve Rolfes, president of the Contract Manufacturing Division of TLCC’s subsidiary, Twinlab Consolidation Corp. “Through NutraScience Labs, we intend to leverage our significant
product development and manufacturing infrastructure to provide customers with the highest levels of product choice, product quality
and service across a broad range of products and dose forms,” said Rolfes.
Added Tolworthy, “As we continue to execute upon our strategy of accretive growth through acquisition, we believe the value created by Jonathan Greenhut and Nutricap in the assets acquired by NutraScience Labs will serve as a strong foundation for immediate
acceleration of the Company’s position in the contract manufacturing channel. Not only do we intend to dedicate ourselves to continued
best-in-class service for Nutricap’s customers, but to establish ourselves as the best-in-class option for the broad market of nutritional
supplement customers with contract manufacturing needs.”
© 2015 Penton
246
Company Profiles
Iovate S.W.O.T. Analysis
Strengths
Weaknesses
• Well known and established brands in the SNWL industry
• Strong relationships with large online retailers like Amazon
and Vitamin Shoppe
• Wide SNWL and supplement lines draws consumers from
many segments
• Updated package branding and online presence for Metabolife line
• Has stayed nimble in recent years, adapting to natural protein trends and general health options
• Sports & fitness Clean Series emphasizes legitimacy and
differentiates company from consumers’ suspicious perceptions of sports supplement industry.
• Non-GMO products place company at front of curve in supplement industry.
• Alvita tea line provides product diversification and entry into
a hot food/supplement crossover category
• Increased manufacturing capabilities through acquisition of
NutraScience Labs
• Mixed targeting of wholesome brands and hardcore athlete
can confuse consumers
• Lack of innovation and proven efficacy to support products
• Low consumer perception of quality, too mainstream
Opportunities
Threats
• Better segmentation of family products versus core SNWL
products could allow each product line to be more successfully marketed to target audience
• Increase customer base by extending distribution into club
space
• Update Twinlab packaging to represent modern aesthetics –
similar to Metabolife branding – to draw in consumers
• Emphasize non-GMO offerings
• Expand on Clean Series concept
• Participating in a cluttered market where customer loyalty
can be hard to maintain as new, flashy brands enter the
market
• Competition from cheap products selling in the mass market
where price often matters more than quality
• FDA/FTC run ins for sports nutrition brands
NBJ Bottom Line:
The 2014 management buyout sets up the company to get the full benefit of CEO Tom Tolworthy’s management expertise and
market sense. The 2015 acquisition of NutraScience adds to the company’s vertically integrated capabilities. It may take time, and a few
bumps in the road, for Tolworthy’s long-term outlook to play out. In the meantime, commitments to traceability and transparency could
help the company in era of supplement skepticism.
© 2015 Penton
247
Company Profiles
Twinlab has been on a financial rollercoaster over the last several years--it’s seen a bankruptcy, a buyout, several mergers, and now a
taste of the public market. But now the company can settle back into the groove of rebuilding its natural retail dominances and leveraging its manufacturing and brand assets to build out its portfolio.
Now’s the time for Twinlab to put its newfound capital where its mouth is in order to make a meaningful impact on the dietary
supplement industry.
Website:
www.twinlab.com
www.metabolife.com
www.alvita.com
www.cleanseries.twinlab.com
© 2015 Penton
248
Company Profiles
Jarrow Formulas
2012
2013
2014
117
119
117
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
99
84%
Vitamins
29
25%
Mass Market Retail
0
0%
Minerals
28
24%
12
10%
5%
Direct/Other
Channels
18
Private Label/
Contract Manuf.
0
TOTAL
117
16%
0%
100%
Herbs &
Botanicals
Meal
Replacement
2
2%
Sports
Nutrition
13
11%
Specialty
33
28%
117
100%
TOTAL
Company Overview
Jarrow Formulas, which is based in Los Angeles, CA, is a formulator and supplier of nutritional supplements. The company was founded in 1976 and incorporated in 1988. Jarrow
Formulas offers a wide selection of supplement products categorized under 14 different
condition specific segments. The company’s products are marketed throughout the United
States and internationally in more than 20 countries in Europe, Asia, Israel and Latin
America. Unlike many supplement manufacturers, Jarrow is avoiding a “mass market” online focus with its products being sold on its
own site plus less known outlets such as Vitamin Express, Tunies.com, and Provitaminas. The company uses unique marketing initiatives that help to build meaningful retail relationships.
Jarrow launched its new Yum-Yum PS100 Gummies made with Sharp-PS® Green, a unique ingredient from Enzymotec, in late 2014.
Jarrow Formulas’ Yum-Yum PS100 Gummies deliver 100 mg of phosphatidylserine (PS) sourced from Non-GMO sunflower lecithin,”
says Rory Lipsky, senior director of business strategy. “PS is an essential nutritional component of the cell membranes in our brains. We
think kids and adults alike will enjoy this delicious, strawberry flavored PS gummy that helps promote brain function.”
2015 new product innovation included Greek Yogurtein and grass fed whey protein products. “Greek Yogurtein is a great tasting
blend of concentrated Greek Yogurt, Fiber, and Whey and Micellar Casein proteins,” says Clay Dubose, vice president of Sales.
© 2015 Penton
249
Company Profiles
Jarrow Formulas S.W.O.T. Analysis
Strengths
Weaknesses
• Big player in probiotics and prebiotics, a category presenting
increasingly strong growth prospects, with continued innovations
• Powerful brand recognition and charismatic leadership
• Strong advocacy for the entire industry
• Extensive product line, including non-GMO offerings
• Aggressive posturing from founder alienates many
• Depth of information on website is impressive but design of
interface is cluttered
• Majority of packaging is busy and dated
Opportunities
Threats
• Offensive, aggressive defense of industry could build favorable brand recognition
• Expansion of already strong global presence
• Increase number of non-GMO free products to put company
in good position if controversy impacts supplement industry
• Focus research on emerging science in gut health
• Packaging overhaul. The new Greek Yogurtein is a step in the
right direction
• Escalating demands from global regulators requires increased time and effort for full compliance
• Continuing noise about heavy metals in rice proteins
NBJ Bottom Line:
A large part of Jarrow’s sales come from probiotics, a fast growing category. Jarrow also remains dedicated to the natural retail
channel, achieving impressive sales and growth year over year. Probiotics and prebiotics are destined to garner more interest and press
as buzz on microbiome grows but all companies will need to be careful with claims and marketing. Jarrow Rogovin himself often causes
industry stirs with his outspoken stance on the industry, such as his negative statement regarding NPA’s hiring of Daniel Fabricant in
2014, but industry members appreciate the company’s long-term support.
Twinlab has been on a financial roller coaster over the last several years--it’s seen a bankruptcy, a buyout, several mergers, and now
a taste of the public market. But now the company can settle back into the groove of rebuilding its natural retail dominances and leveraging its manufacturing and brand assets to build out its portfolio.
Now’s the time for Twinlab to put its newfound capital where its mouth is in order to make a meaningful impact on the dietary
supplement industry.
Website:
www.jarrow.com
© 2015 Penton
250
Company Profiles
Kikkoman (Country Life, Allergy Research Group)
2012
2013
2014
112
117
122
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
85
70%
Vitamins
32
26%
Mass Market Retail
6
5%
Minerals
31
25%
31
25%
Herbs &
Botanicals
17
14%
0
0%
5
4%
Sports
Nutrition
18
15%
Specialty
19
16%
122
100%
Direct/Other
Channels
Private Label/
Contract Manuf.
TOTAL
122
100%
Meal
Replacement
TOTAL
Company Overview
Kikkoman Corporation, based out of Noda,
Japan, is a leading global food and pharmaceutical company, with US operations headquartered in San Francisco,. Kikkoman, through its wholly-owned subsidiary KI NutriCare, owns both Country Life and Allergy Research
Group/NutriCology Inc., two leading supplement manufacturers and marketers.
Country Life, located in Hauppauge, NY, has been a developer of nutritional supplements, vitamins, foods and beverages since 1971.
Country Life’s family of companies includes Country Life Vitamins, Biochem fitness brand, Desert Essence personal care line, and IronTek sports nutrition products. Country Life is a major player in natural retail with some distribution in mass market outlets and online.
Allergy Research Group, along with its subsidiary NutriCology, Inc., offers a targeted nutritional supplement line consisting of more
than 250 products. Under the direction of company founder Dr. Stephen A. Levine, NutriCology/Allergy Research Group is considered a
leader in the field of nutritional biochemistry and is focused on providing patients with hypoallergenic products. Dr. Levine founded the
company in 1979 and remains the head of the company’s Scientific Advisory Board. Six other doctors also sit on the Board, guiding both
the company’s product development as well as legislative issues affecting the global supplement market.
The Allergy Research Group product line is available only to doctors and other healthcare practitioners, whereas NutriCology products can be found in health food stores, as well as at nutricology.com. Allergy Research operates out of Alameda, CA.
© 2015 Penton
251
Company Profiles
Kikkoman (Country Life, Allergy Research Group) S.W.O.T. Analysis
Strengths
Weaknesses
• Allergy Research Group is a respected participant in the practitioner channel
• Country Life, along with its Biochem and Iron-Tek brands,
offer a wide array of supplement offerings
• Financial backing and global expertise of multinational Kikkoman soy sauce conglomerate.
• Wide variety of condition specific solutions targeting audience prone to multiple conditions
• GMP, NSF certification
• Country Life manufacturing facility is USDA Organic Certified
• Country life offers wide array of gluten-free, vegetarian, and
vegan supplements
• Allergen focus of ARG is well positioned in a market that is
increasingly focused on known and perceived allergens
• Product branding needs to be updated and consumer brands
benefit from being distinctly marketed on different web
sites - especially sports nutrition brands which are usually
marketed much differently than general health supplements
• Country Life is not perceived as a quality brand
• Not known for its customer service
• Large backing of Kikkoman seems to be slowing innovation
in this small segment
• Websites don’t have a current feel, with little news or trending nutrition topics
Opportunities
Threats
• Strongly promote Country Life’s gluten-free value proposition to engage customers and draw them to the brand
• Use knowledge gained through Allergy Research Group and
practitioner channel to strengthen retail brands
• Use Kikkoman financial backing to freshen brand and create
a leading edge practitioner brand
• Offer better web design to better showcase impressive content
• Emphasize and enlarge gluten-free offerings
• Add to GMO-free product list, a natural for allergy-oriented
consumers
• Include more news, including product introductions and
research, on all websites to show that brands are active
market participants
• ARG needs to become active in the personalized medicine
trend.
• Vast selection of supplements companies that are presenting a clearer value proposition to consumers
• Failure to update online/social media strategy could result in
loss of potential customers
• Many natural brands that are offering much more cutting
edge products, new branding, and better service
© 2015 Penton
252
Company Profiles
NBJ Bottom Line:
Country Life is a longtime player in natural retail, giving it a strong distribution base, but the company needs to enliven its strategy
in order to be a brand that people seek rather than just find. The Allergy Research Group has also been a quiet player in recent years and
needs to become an active player relative to market trends toward personalized medicine.
Website:
www.country-life.com
www.biochem-fitness.com
www.nutricology.com
www.kikkoman.com
www.allergyresearchgroup.com
© 2015 Penton
253
Company Profiles
Liberty Interactive (Bodybuilding.com)
2012
2013
2014
210
235
259
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
0
0%
Vitamins
26
10%
Mass Market Retail
0
0%
Minerals
0
0%
259
100%
Herbs &
Botanicals
0
0%
0
0%
Direct/Other
Channels
Private Label/
Contract Manuf.
TOTAL
259
100%
Meal
Replacement
26
10%
Sports
Nutrition
207
80%
Specialty
0
0%
259
100%
TOTAL
Company Overview
Liberty Interactive Corporation operates and owns interests in a
broad range of digital commerce businesses, primarily focused on
video and eCommerce operating businesses. The company consists
of two tracking stock groups: the QVC Group and the Liberty
Ventures Group. The Liberty Ventures Group includes Backcountry.com, Bodybuilding.com, CommerceHubs, Evite, and Right Start,
along with interests in several other companies. For 2014, Liberty Interactive’s corporate revenue was $10.5 billion
Headquartered in Boise, ID, Bodybuilding.com is an Internet retailer of sports, fitness and nutritional supplements. The company
boasts more than 1.7 million site visitors per day, was ranked #9 in the 2014 Inc. 5000 listing of Top Idaho Companies, and in 2014 ranked
#10 in the Idaho Private 75.
The company’s website offers a range of content, with work-out programs, overall health, nutritional and product information. Besides selling a wide array of sports nutrition brands and products, the company also offers five of its own private label brands: Platinum
Series (patented ingredients at full, clinical strength), Foundation Series (quality at low pricepoint), B-Elite Fuel (meal delivery plans),
clothing, and accessories.
© 2015 Penton
254
Company Profiles
Liberty Media (Bodybuilding.com) S.W.O.T. Analysis
Strengths
• Most visited sports nutrition website in the world with 1.7
million-plus unique visitors daily
• Intricate and well-serviced website
• Large online fitness community with customizable fitness
and nutrition plans for individual customers
• Five US distribution centers plus Costa Rica and London
offices and EU distribution
• Two private label supplement lines with good traction and
unbeatable price point
• B-Elite meals diversify its private label product offerings
Weaknesses
• History of run-ins with FDA
• Carrying the hottest products in sports and weight-loss is
likely to keep the company in the center of controversy
Opportunities
Threats
• Due diligence operations, like in-house testing of outside
products, could add more credibility
• Increased international expansion
• In-house legal counsel should help the company insulate
itself from regulatory intrusions
• Take a more proactive role in ensuring the quality and safety
of the products the company sells on its website
• Loose scrutiny over claims made by customers on online
forums may put Bodybuilding.com at risk for FTC action
• With a broad range of products and pressure to lead the
industry, the company faces a constant curve or regulatory
challenge
• Regulators putting more pressure on retailers concerning the
products that they sell
NBJ Bottom Line:
Bodybuilding.com has had its ups and downs in the sports nutrition industry, including clashes with FDA. While it hasn’t been a
part of recent warning, its active forum is often a place for talking about the latest ingredient fads. The company will need to be careful
to maintain a product line (beyond its private label) that allows it to remain a trusted online retailer.
Website:
www.bodybuilding.com
www.libertyinteractive.com
© 2015 Penton
255
Company Profiles
Life Extension
2012
2013
2014
123
131
139
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
7
5%
Vitamins
48
35%
Mass Market Retail
0
0%
Minerals
19
14%
Herbs &
Botanicals
28
20%
Meal
Replacement
0
0%
Sports
Nutrition
4
3%
Specialty
39
28%
139
100%
Direct/Other
Channels
Private Label/
Contract Manuf.
TOTAL
132
95%
0
0%
139
100%
TOTAL
Company Overview
Founded in 1980, Life Extension Foundation (LEF) is a nonprofit organization dedicated to
finding new scientific methods to enhance and expand the healthy human life span. It funds
research programs aimed at developing new anti-aging therapies and combating such
age-related killers as heart disease, stroke, cancer, and Alzheimer’s. The Life Extension Foundation has donated nearly $100 million to
anti-aging and disease prevention studies. The company was founded by William Faloon and Saul. In the beginning, the Foundation
published findings on CoQ10, DHEA, and other promising supplements in a newsletter.
In 1983, Life Extension Foundation Buyers Club formed as a separate corporation to promote, sell and distribute dietary supplements. The company grew primarily through member referrals and sold products mainly through newsletters, catalogs and direct mail.
The company currently offers over 350 supplements. Its best selling products include CoQ10, Fish Oil, Anti-Aging formulation and Super
Bio-Curcumin.
Today, the internet is also an important source of sales. Customers don’t have to be members, but members receive a 25% or more
discount over the standard retail pricing for supplements. Annual membership costs $75 but comes with a product credit as well as
several other benefits.
Life Extension Magazine® is a monthly publication of the Life Extension Foundation Buyers Club. With a readership of over 350,000,
it provides coverage of new discoveries involving anti-aging supplements. In addition, the Life Extension Foundation Buyers Club supports such services as a toll-free Health Advisor hotline and a mail-order blood lab. Club members also receive discounts on blood tests.
© 2015 Penton
256
Company Profiles
To round out its offering of health services, Life Extension Pharmacy, Inc., established in 2006, offers its customers access to quality
pharmaceuticals at competitive prices, particularly on generic drugs that are priced often below insurance co-pays.
Life Extension is a large global organization consisting of thousands of members and subscribers, and over two hundred employees,
with headquarters in Fort Lauderdale, FL.
Figure 1 22 Liberty Media (Bodybuilding.com) S.W.O.T. Analysis
Strengths
Weaknesses
• Strong print-based magazine espousing lifestyle trends to
drive consumers toward products
• Full line of supplements with more than 350 products
• Florida-based retail and information center offering public
seminars and nutrition education
• Social media presence across all major platforms
• Through its established membership model, Life Extension
maintains a solid (but not long) list of continuity customers
• Perceived cutting-edge product development, with 15-25
new products launched each year
• Semi-proprietary ingredients
• Life Extension’s owner is considered eccentric and has been
known to antagonize the FDA/government
• The company is more operational than strategically focused
• The company has a relatively shallow management team
• The company has a lot of customer churn
• Customer base is aging
Opportunities
Threats
• Continue multichannel strategy: grow out affiliate program,
retail presence and online sales
• Invest more in in-house clinical trials to promote efficacy and
consumer trust
• Continue investing in science-backed ingredients and products
• Focus marketing on larger healthcare issues, emphasizing
prevention
• Better communicate the value of the premium priced brand
• Use its e-mail marketing and social media to drive online
sales and expand customer base
• Already offering blood tests, the company could put itself at
the forefront of big personalized medicine trend
• Strong and credible retail competition
• Company’s strident crusade against the FDA makes it a
target not just for the agency but for politicians looking to
further regulate the supplement industry
• Consumers becoming wary of network marketing operations
NBJ Bottom Line:
Life Extension has become a force to be reckoned with in the direct sales of dietary supplements via its newsletter and website in
the last 10 years. Long rumored to be for sale, LEF has remained independent and well protected through its high-value marketing and
well managed direct distribution. The company has a very large range of products which could insulate it from headlines like the fish oil
omega-3 prostate cancer link (the company has dozens of fish oil products). That a company with a name like the Life Extension Foundation can survive for 33 years through successive waves of fad and crash, is a testament that the company has found a business formula
that wor
Website:
www.lef.org
© 2015 Penton
257
Company Profiles
Matrixx Initiatives
2012
2013
2014
57
60
62
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
0
0%
Vitamins
0
0%
Mass Market Retail
62
100%
Minerals
0
0%
Direct/Other
Channels
0
0%
Herbs &
Botanicals
0
0%
Private Label/
Contract Manuf.
0
0%
Meal
Replacement
0
0%
Sports
Nutrition
0
0%
Specialty
62
100%
TOTAL
62
100%
TOTAL
62
100%
Company Overview
Headquartered in Bridgewater, NJ, Matrixx Initiatives, Inc. is a consumer
healthcare company engaged in the development and marketing of products
which utilize unique delivery systems to provide consumers with “better ways to
feel better.” Zicam, LLC, its wholly-owned subsidiary, produces, markets, and sells a full line of Zicam® branded products. In early 2011,
Matrixx was acquired by an investor group led by HIG Capital.
Zicam Cold Remedy assortment of cold shortening products is the heart of the Zicam line of respiratory products. The first Zicam
Cold Remedy was introduced in 1999. The product line today includes four categories: Cold Shortening, Nasal Congestion/Sinus Relief,
Allergy Relief, and Kids Cold Relief.
a, CA.
© 2015 Penton
258
Company Profiles
Matrixx Initiatives S.W.O.T. Analysis
Strengths
•
•
•
•
•
Zicam very popular in the immune category
Strong mass distribution
Recognizable, condition-specific branding
Strong moves into new formats
Facebook following, 112,000, impressive for such a narrow
product line
• Allergy Relief line provides summer products
Weaknesses
• Immune category subject to seasonal swings
• Over reliance on narrow, seasonal product portfolio
• Minimal product innovation
Opportunities
Threats
• Launching a new homeopathic brand will help Matrixx diversify and reduce its reliance on the Zicam brand
• Direct sales
• Develop products better aligned with natural foods consumers
• Diversity portfolio to be less dependent on seasonal illnesses
• Loss in the Supreme Court case gives confidence to lawyers
filing additional lawsuits
• More reliable remedies could steal retailers away from product with such a checkered history
NBJ Bottom Line:
While it hasn’t always been smooth sailing for the Zicam brand, it has been more than 5 years since its run-in with the FDA. The
company continues to chug along and slowly introduce new products. In an industry that is rapidly introducing new products, Zicam
will need to amp up its product development in order to remain relevent in the market.
Website:
www.matrixxinc.com
www.zicam.com
© 2015 Penton
259
Company Profiles
Metagenics
2012
2013
2014
136
140
148
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
0
0%
Vitamins
21
14%
Mass Market Retail
0
0%
Minerals
15
10%
148
100%
Herbs &
Botanicals
21
14%
0
0%
Meal
Replacement
0
0%
Sports
Nutrition
0
0%
Specialty
92
62%
148
100%
Direct/Other
Channels
Private Label/
Contract Manuf.
TOTAL
148
100%
TOTAL
Company Overview
Founded in 1983, Metagenics is a life sciences company that uses nutritional
genomics to create nutrition programs and products for the prevention and
management of chronic diseases such as diabetes and heart disease. The
privately owned company offers more than 200 nutrigenomic-based natural
health products in 15 health support categories, such as blood sugar balance, stress management, and cardiometabolic health. Company
headquarters are in Aliso Viejo, CA and manufacturing facilities are in Gig Harbor, WA. The company also has international locations in
Australia, Canada, New Zealand, Belgium, and the Netherlands. Metagenics holds 43 patents, with more than 230 more pending.
Through its educational programs, Metagenics will be holding its fourth Lifestyle medicine Summit in September 2015. The event is
aimed at bringing together industry experts in lifestyle medicine to address critical health issues and discuss the latest advancements in
prevention and treatment of common health issues. The 2015 Summit is focused on healthy aging.
Metagenics also offers several lifestyle medicine programs, including Clear Change for metabolic detoxification, Healthy Transformation
weight loss program, and the Metabolic Syndrome Program.
© 2015 Penton
260
Company Profiles
Metagenics S.W.O.T. Analysis
Strengths
Weaknesses
• Legacy company with longevity in the market
• A leader in the increasingly important practitioner channel
• Financial backing of Alticor while maintaining independent
operation of the company
• Successful marketer of supplements to conventional medical
practitioners
• Invests in research to support product efficacy
• International strength, with an enviable position in the
fast-growing (and tough-to-enter) Australian supplement
market
• Association with Personalized Medicine Institute and strong
play in personalized medicine
• Branding on bottle is a little outdated
• Limited acceptance of supplements by mainstream medical
establishment
• Largest company in practitioner supplement space—takes all
the arrows
Opportunities
Threats
• Continued education of MDs to increase acceptance of supplement recommendations
• Continued promotion and expansion of Lifestyle Medicine
Programs
• Leverage expertise in personalized medicine movement
• Internet discounters
• Retail competition offering cheap, convenient products
• Limited number of practitioners with notable expertise in
the intersection of genomics and supplements
• Increasing competition in bariatric arena
• Continuing media and scientific scrutiny questioning value of
supplements
NBJ Bottom Line:
Many believe personalized medicine with products keyed to a patient’s genetic propensity to respond to specific nutrients is the
future of nutritional supplements. Many supplement companies focused in the practitioner channel are moving in this direction, but
Metagenics has been at the forefront of supplement research with former Chief Science Officer Jeffrey Bland moving on to head the
Personalized Lifestyle Medicine Institute. In order for the whole movement and Metagenics to succeed, the idea has to be adopted by a
large numbers of practitioners. Metagenics has done well to create those relationships but training practitioners in the details of personalized medicine and genomic-based supplementation is no small task.
Website:
www.metagenics.com
www.bariatricadvantage.com
© 2015 Penton
261
Company Profiles
Natural Alternatives International
2012
2013
2014
66
73
77
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
0
0%
Vitamins
62
80%
Mass Market Retail
0
0%
Minerals
4
5%
Direct/Other
Channels
2
3%
Herbs &
Botanicals
4
5%
75
97%
Meal
Replacement
0
0%
Sports
Nutrition
4
5%
Specialty
4
5%
77
100%
Private Label/
Contract Manuf.
TOTAL
77
100%
TOTAL
Company Overview
Natural Alternatives International, Inc. (NAI), founded in 1980, engages in the formulation and manufacture of
nutritional supplements, as well as in the provision of strategic partnering services to its customers. The
company’s products and services include scientific research, clinical studies, proprietary ingredients, condition-specific product formulation, product testing and evaluation, marketing and sales support, packaging and
delivery system design, regulatory review and international product registration assistance. The company is
incorporated in Delaware, has headquarters in San Marcos, California, and has manufacturing facilities in San
Marcos and Lugano, Switzerland, as well as a sales presence in Yokohama, Japan.
NAI’s business approach is aimed at achieving long-term growth through sales channel diversity. The company’s program to expand its business is spearheaded by a direct-to-consumer marketing program for its own
products. NAI also has manufacturing contracts with companies in areas including: direct selling organizations, weight-loss centers,
health and fitness facilities, e-commerce and various media channels.
NAI is a public company with FY2014 earning osf $73.9 million, with 91% of that revenue coming from private-label contract manufacturing. For the first nine months of FY2015, ending March 31, 2015, sales were $56.9 million, an 8% increase over the previous period.
NAI also has a worldwide manufacturing agreement with NSA International, Inc. of Memphis, Tennessee, the maker of Juice Plus+
products. NAI and NSA are both focused on whole food nutrition and original clinical research on products manufactured by NAI and
marketed by NSA under the brand name JuicePlus+®.
NAI has traditionally manufactured and marketed its own branded products under the Pathway to Healing (and Dr. Cherry) product
line; however, the company decided to discontinue the brand in 2014 due to a steady decline in sales.
© 2015 Penton
262
Company Profiles
Natural Alternatives S.W.O.T. Analysis
•
•
•
•
•
Strengths
Weaknesses
Leading contract manufacturer for the supplement market
Fairly stable and growing amount of working capital
Therapeutic Goods Administration (TGA) approval
Long term relationship with Juice Plus+
Commitment to whole food supplements market
• Majority of sales come from three large customers: NSA
(38%), Mannatech (17%) and Shaklee (16%) of PL business
Opportunities
Threats
• International private label
• Continued research into patentable formulations and ingredients
• Highlight Mark LeDoux’s industry leadership activity
• Continue to be a leader in whole food supplements and simple supplement formulations
• Rising supply costs, especially for letter vitamins, will make
it tougher for NAI to compete for contract bids
• Consolidation and attrition in finished products
• Plaintiffs in law suits in Jack3d DMAA scandal but dismissed
claims against NAI but it’s not helpful to be associated with
the scandal even tangentially
• Large customers choosing new manufacturers
NBJ Bottom Line:
A major player and active influencer in the supplement industry, Natural Alternatives CEO Mark LeDoux’s personality has built
NAI to what it is today. The company is seeing strong growth and has a good partnership with Juice Plus+. It is well positioned for future
success thanks to its commitment to the whole food supplement movement.
Website:
www.nai-online.com
www.thepathwaytohealing.com
© 2015 Penton
263
Company Profiles
2012
2013
2014
150
161
175
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
167
96%
Vitamins
63
36%
Mass Market Retail
4
2%
Minerals
32
18%
Direct/Other
Channels
4
2%
Herbs &
Botanicals
32
18%
Private Label/
Contract Manuf.
0
0%
Meal
Replacement
4
2%
TOTAL
175
100%
Sports
Nutrition
0
0%
Specialty
46
26%
175
100%
TOTAL
Company Overview
Natural Factors is a family-owned supplement business with its headquarters and production facility located
in Coquitlam, British Columbia, Canada. The company also has an Eastern office in Mississauga, Ontario and
a U.S. Sales & Distribution Center in Everett, Washington. Other facilities include extensive farms in the
Okanagan region of British Columbia, where it also has a production facility and liquid extraction plant.
The company grows its own Echinacea for its ECHINAMIDE products on its Factor Farms in the Okanagan region of British Columbia. The Farms also grow herbs for its unique formulations, allowing the company to quickly process after
harvesting.
Natural Factors offers a wide array of supplements including bee products, CoQ10 products, EFAs & PS, enzymes, herbs, minerals,
probiotics, joint products, men’s formulas, women’s formulas, weight loss and several vitamin categories. It offers a supplement line under the Doctor Michael Murray brand. Murray is a naturopathic doctor who has published more than 30 books on the natural approach
to health.
Natural Factors conducts laboratory and clinical research to ensure the efficacy of its products. Its stated goal is for its research to
ensure “that we can guarantee the safety, purity and potency of all raw materials used in their creation.” Over 50 scientists work in the
company’s R&D, Quality Control and other departments.
© 2015 Penton
264
Company Profiles
Natural Factors S.W.O.T. Analysis
Strengths
Weaknesses
• Leading brand in the natural channel
• Vertically integrated model, with proprietary farming operations, production and extraction facilities and distribution
centers
• Strong sales with Dr. Michael Murray recommended brand of
supplements
• Full supplement portfolio, with standard vitamins and minerals, as well as proprietary and condition specific lines
• Farm ownership offers some insulation from herb and botanical commodity price swings
• Weak online and direct response market presence
• Energy spent on navigating compliance issues between
Canadian and U.S. divisions
• Botanicals can be subject to fads and fickle consumer interest
Opportunities
Threats
• Broad PGX weight-loss line – now is the time for success
with clean sports and weight loss products
• Sponsorship of “Botanical Adulterants Monitor” e-newsletter provides some bulwark against growing public skepticism
on ingredient purity
• Use social media to connect with Millennials
• Expand upon 2015 launch of Whole Earth & Sea® Pure Food
Super Mushroom to play on consumer interest in whole and
pure supplement offerings
• Continued commitment to Non-GMO products
• Nature Made, Schiff or other mainstream brands looking to
make a play in the natural channel
• Aging consumer audience for herbs
NBJ Bottom Line:
Natural Factors is a Canadian company that has carved a nice niche in the natural and specialty channel in the U.S. It has a marketing focus on retailer education and support from “celebrity” practitioners like Dr. Michael Murray (represented in its Dr. Murray–labeled
products). A well-rounded catalog with whole foods-oriented products ranging from tablets to protein energy mixes provide versatility
while a selection of organic and vegetarian offerings appeal to specific segments. Vertical integration is an increasingly important advantage as supply chain issues get more attention.
Website:
www.naturalfactors.com
www.doctormurray.com
© 2015 Penton
265
Company Profiles
2012
2013
2014
88
91
77
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
74
97%
Vitamins
29
38%
Mass Market Retail
2
2%
Minerals
2
5%
Direct/Other
Channels
1
1%
Herbs &
Botanicals
36
43%
Private Label/
Contract Manuf.
0
0%
Meal
Replacement
0
0%
Sports
Nutrition
9
11%
Specialty
2
3%
77
100%
TOTAL
77
100%
TOTAL
Company Overview
Natural Organics Inc. / Nature’s
Plus is a manufacturer of
nutritional supplements. The
company has been in operation since 1972, with founder Gerald Kessler passing away in 2015. It is based in Melville, NY and offers more
than 1200 products, which it manufactures itself.
Nature’s Plus’ brands include SPIRU-TEIN, Animal Parade, Source of Life, Herbal Actives, ageLOSS, DreamQuest, Thursday Plantation, and Rx-Formulations (which are still supplements). Nature’s Plus products are sold in natural & specialty retail stores worldwide.
© 2015 Penton
266
Company Profiles
Natural Organics/Nature’s Plus S.W.O.T. Analysis
Strengths
• Entire process from development to distribution done inhouse
• Variety of convenient dosage forms: gummies, chewables,
liquids, etc.
• Remains under leadership of dynamic founder who is well
known in the supplement industry
• Robust global presence
• Online Health Library
• Nature’s Plus University nutrition science correspondence
course
Weaknesses
• Focused primarily on natural and specialty channel
• Relies heavily on independent health/natural store staff to
educate consumers on product/brand benefits
• Lack of e-commerce on company website
• Rx-line that isn’t Rx seems to be asking for regulatory interference
Opportunities
Threats
• Extend product reach into new markets
• Updated branding and marketing efforts could help enliven
brand
• Allow product purchase through website
• Expand whole food supplement offerings
• More innovative companies grabbing consumers with new,
trendy products
• Crowded space; brands struggle to carve out niches
NBJ Bottom Line:
Natural Organics/Nature’s Plus is a mainstay in the natural and specialty channel. Both the SPIRU-TEIN and Source of Life product
lines recently achieved 25 years in production. Its herbal and whole foods products position it well with the natural wellness market, but
the contract manufacturing division is bound to be impacted by growing skepticism on the efficacy of vitamin supplements.
Website:
www.naturesplus.com
© 2015 Penton
267
Company Profiles
Nature’s Products, Inc.
2012
2013
2014
75
79
73
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
61
83%
Vitamins
21
29%
Mass Market Retail
10
14%
Minerals
4
5%
Direct/Other
Channels
2
3%
Herbs &
Botanicals
1
2%
Private Label/
Contract Manuf.
0
0%
Meal
Replacement
TOTAL
73
100%
4
5%
Sports
Nutrition
37
50%
Specialty
7
9%
73
100%
TOTAL
Company Overview
Founded in 1986, Nature’s Products, Inc. (NPI) is a vertically integrated producer,
manufacturer and marketer of private label and branded supplement products.
NPI makes virtually all popular forms of dietary and healthcare supplements in its
130,000 sq. ft. manufacturing complex located in Sunrise, Florida. Nature’s Products’ brands include Rainbow Light®, Champion Nutrition®, Iceland Health®, Blessed Herbs® and VitalStyle®.
The Company currently employs over 360 employees and offers a wide range of formulations, dosage forms, and manufacturing and
packaging capabilities. Nature’s Products also has several global business affiliates that expand the breadth of its capabilities and dosage
forms beyond the nutritional supplement area.
In 2002, NPI purchased Rainbow Light to grow into the natural supplements space, and the 2008 acquisition of Champion Nutrition
expanded NPI’s sports nutrition portfolio.
Rainbow Light Nutritional Systems, founded in 1981, is a manufacturer of a wide array of nutritional supplements. Products lines
includes the whole food based Certified Organics, condition-specific Integrative Health Therapies, Protein Energizer nutritional shakes,
and MinAsure breath supplements, along with the standard selection of supplements included in most wide-range supplement line. The
Santa Cruz-based company was the first to produce food-based multivitamins. In February 2009, Rainbow Light expanded into the pet
nutrition category with its new line of all-natural, organic whole food pet supplements, GreenDog Naturals.
Champion Nutrition manufactures and markets a line of nutrition sports nutrition products to professional athletes, bodybuilders,
and fitness enthusiasts worldwide. Established in 1983, Champion manufactures its products on-site at its 135,000 square-foot GMP-certified manufacturing facility in Sunrise, FL. The company has 37 international distributors. Champion’s supplement line includes Daily
© 2015 Penton
268
Company Profiles
Protein Blends, Workout Support, and Mind & Body Boosters. Many of Champions products are vegetarian, vegan, gluten-free, dairyfree, and/or allergen free. Members of the free Champion Advantage Program receive a 10% discount on all product orders as part of an
auto-ship program.
In October 2014, Nature’s Products announced that it hasd acquired Nutri-Health Supplements, including the Sedona Labs brands,
from Atrium Innovations. Nutri-Health adds to Nature’s Products direct-to-consumer brand offerings, which already included Iceland
Health and Blessed Herbs. Sedona Labs products are sold in natural health stores, while the Sedona Labs Pro is a healthcare practitioner
brand.
“This is a bold step into the future for Nature’s Products, and represents the next phase of growth and transformation for our company,” commented Jose Minski, president and CEO of Nature’s Products, in a press release about the acquisition. “We are very excited
about this new venture, and the synergies and opportunities that this acquisition will bring our way.”
As part of the purchase of Nutri-Health® and Sedona Labs®, Nature’s Products acquired Flora Source®, Nutri-Health Supplement’s
flagship Multi-Probiotic® product. Also added to Nature’s Products portfolio are the Sedona Pro™, iFlora® Multi-Probiotic®, ArthroZyme®,
Flora Sinus®, Memoril, and GlucoProtect 6X® products, among others. Synergies between the companies are expected to be leveraged to
accelerate growth in Nature’s Product’s high-performing direct-to-consumer business across multiple natural products categories.
Nature’s Products S.W.O.T. Analysis
Strengths
Weaknesses
• Leading brand in natural & specialty with expanding direct-to-consumer channel presence
• Vertically integrated model, with proprietary farming operations, production and extraction facilities and distribution
centers
• Farm ownership offers some insulation from herb and botanical commodity price swings
• Broad product line, including some certified organics
• Clean branding for Rainbow Light and Champion products
• Modern positioning of Champion Daily Protein line
• Participation in the whole food supplement movement
• Very diverse channel and contract manufacturing strategy
makes the company less susceptible to market fads and
fluctuations
• Many new brands to work into a large portfolio
• Focusing on acquisitions rather than new product development in existing lines may leave them behind on cutting edge
trends
Opportunities
Threats
• Contract manufacturing
• Plant-based proteins
• Continuing to market Champion to athletes looking for
cleaner products
• Ability to track consumer profiles for future product development through Champion Advantage Program
• Continue to strengthen cross-channel portfolio thanks to
new acquisition of Sedona Labs & Nutri-Health
• Expand organic and non-GMO offerings to meet growing
• Rising prices for raw whey could lead to higher retail prices;
will have to find a point of differentiation besides price
• Sports nutrition brands better targeted at specific consumer
groups
© 2015 Penton
269
Company Profiles
NBJ Bottom Line:
Nature’s Products has greatly expanded its product portfolio in the last decade and now holds a wide range of respected brands
across retail and direct channels. The company has also recently rebranded Rainbow Light and Champion brands with modern packaging. With all of the additions and improvements, the company seems to be very well positioned for future growth.
Website:
www.championnutrition.com
www.rainbowlight.com
www.sedonalabs.com
www.sedonalabspro.com
www.nutri-health.com
© 2015 Penton
270
Company Profiles
Nestlé
2012
2013
2014
223
218
249
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
10
4%
Vitamins
0
0%
Mass Market Retail
239
96%
Minerals
0
0%
Direct/Other
Channels
0
0%
Herbs &
Botanicals
0
0%
Private Label/
Contract Manuf.
0
0%
Meal
Replacement
239
96%
Sports
Nutrition
10
4%
Specialty
0
0%
249
100%
TOTAL
249
100%
TOTAL
Company Overview
Nestlé, with headquarters in Vevey, Switzerland, was
founded in 1866 by Henri Nestlé and today is a
leading nutrition, health and wellness company. The
company’s 2014 sales reached CHF 91.6 billion on organic growth of 4.5%. Organic growth was 5.4% in the Americas. In 2014, the
company created a Skin Health division.
The Nestlé Nutrition segment provided CHF 91.6 billion on organic growth of 7.7%. By product, the nutrition and health sciences
segment experienced CHF13.0 billion, up 8.7%.
Nestlé Health Science (and its HealthCare Nutrition business) is a key part of the Nestlé Group’s nutrition, health and wellness
strategy. The subsidiary is focused on aging care, critical care & surgery, gastrointestinal function, and pediatrics. Its Vitaflo subsidiary,
acquired in August 2010, provides specially formulated nutritional products for patients with rare metabolic disorders most often diagnosed in infancy. In the area of Gastrointestinal Health, its capabilities have been strengthened by the acquisitions of Prometheus Laboratories (May
2011) and CM&D Pharma (February 2011), as well as an investment in Vital Foods (July 2011). In July 2012, Nestlé Health Science acquired a stake in Accera, a privately held US company specializing in the research, development and commercialization of medical foods
for the dietary management of patients with neurodegenerative disorders such as Alzheimer’s disease.
The HealthCare Nutrition division is headquartered in Florham Park, NJ. Some of Nestle’s notable nutrition brands for adults and infants include BOOST, Carnation, Nutren, Optifast and Peptamen. Nestlé sold the PowerBar brand to Post Holdings in early 2014, a follow-up
to its 2013 sales of its Jenny Craig brand to North Castle Partners Many of the company’s other brands fall into the medical food range.
© 2015 Penton
271
Company Profiles
Nestlé S.W.O.T. Analysis
Strengths
Weaknesses
• Strong international presence with a diversified revenue
base
• Very profitable public company
• Large portfolio of meal replacement and medical food brands
• Continually introducing new products to stay ahead of market trends
• Nestle HealthCare Nutrition business has great resources to
access key research to fuel innovation
• Deep pockets allow company to buy attractive nutritional
startups with little risk to the overall finances
• Divested less core brands such as PowerBar to focus on core
nutrition competencies
• Slow growth compared to natural ingredient competitors
• No presence in natural & specialty with meal replacement
supplements
• On wrong side of GMO debate if company wishes to expand in
growing natural/wellness market
Opportunities
• Expand condition specific categories, especially low-glycemic/diabetes support or gut health
• Continue to expand product lines that can extend from medical food into everyday consumer use
• Green foods and super foods to help attract natural products
consumers
• Use company’s resource to find a leading position in personalized medicine trend
• Consider organic or non-GMO offerings
© 2015 Penton
Threats
• Recent FTC suit for unsubstantiated claims on BOOST Kid
Essentials product
• Herbalife, Amway, and natural channel brands providing
more meal replacement competition
• Growing interest in more natural products where company
lacks innovation and leadership
272
Company Profiles
NBJ Bottom Line:
Nestlé’s true focus is on products that serve as medical foods to those with acute needs. Examples include Arginaid, for patients
recovering from burns, and Glutasolve, for those with GI injury. It’s a fine line crossover into meal replacements, and most of their products are freely available for purchase at mass market retailers such as Wal-mart and online at Amazon. Nestle is definitely a well respected mass market brand in this market segment and will continue to grow in the future.
Website:
www.nestle.com
www.powerbar.com
www.nestlehealthscience.us
www.carnationinstantbreakfast.com
www.boost.com
© 2015 Penton
273
Company Profiles
Nordic Naturals
2012
2013
2014
112
120
126
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
69
55%
Vitamins
4
3%
Mass Market Retail
4
3%
Minerals
0
0%
53
42%
Herbs &
Botanicals
0
0%
0
0%
Meal
Replacement
0
0%
Sports
Nutrition
0
0%
Specialty
123
97%
TOTAL
127
100%
Direct/Other
Channels
Private Label/
Contract Manuf.
TOTAL
126
100%
Company Overview
Founded by husband-and-wife team Joar and Michele Opheim in 1995, Nordic Naturals is a
leading manufacturer and provider of high-end essential fatty acids in the dietary supplement and medical industries. The company offers a complete line of Omega-3s from fish in
combination with Omega-6s from borage oil and evening primrose oil. Nordic Naturals oils
are produced through a patented manufacturing process and are molecularly distilled for purity and freshness, utilizing an enzymatic
distillation process that delivers oils in their natural triglyceride form for improved shelf life and absorption. Nordic Naturals manufactures all of its products in Norway. Involved in research and education, Nordic Naturals is a chosen brand for various clinical trials at
accredited universities and research institutions.
The company now distributes in 35 countries with the mission of “bringing forward a new definition of fish oil quality as it relates
to purity, freshness, taste, dosage, and sustainability.” The company has been at the forefront of industry standards for omega-3 oils and
sustainability efforts. The company offers more than 150 products in a variety of flavors and formulations. All of its products are nonGMO verified.
Nordic Naturals offers many finished supplement products for humans and pets. The company sells Children’s Omegas, vitamins,
and gummy supplements, as well as cod liver oil, Omega-3 concentrates, Omega-3 non-concentrates, Omega-3.6.9 combinations, Omega-3+Nutrients, Vitamin D3 formulas, Daily Omegas, Specialty Products, and the pet line. The company has been continuing to broaden
its finished product line and new product introductions in 2015 have included a Baby’s Vitamin D3 and Omega Boost Junior.
“We’ve always been focused, as a company, on correcting the global omega-3 deficiency. But addressing vitamin D deficiency is also
a priority for us,” notes Joar Opheim, Nordic Naturals CEO and founder. “Up to 91 percent of pregnant women in the United States are
estimated to be deficient in vitamin D, and globally, vitamin D deficiency is widespread in infants. Baby’s Vitamin D3 is a great solution
for parents and an important addition to our line of vitamin D products.”
© 2015 Penton
274
Company Profiles
The company also offers a professional line of supplements under the ProOmega and Ultimate Omega brand names.
Nordic Natural’s products are sold through the natural retail/health food channel, specialty pet food stores, health practitioners and
veterinarians.
Nordic Naturals S.W.O.T. Analysis
Strengths
• Product innovation. Nordic Naturals has launched numerous
condition-specific fish oil products and specialty fish-oil
products
• Quality—Nordic Naturals is often cited as one of the highest
quality fish oil brands
• Nordic Naturals is working to grow its relationships with
healthcare practitioners through its professional line of products
• A leader in product quality standards and sustainability
• Nordic Naturals is considered a high-quality brand within the
children’s DHA market
• Taking advantage of consumer interest in new delivery systems with new products such as effervescent stick packs
• Pet line takes advantage of growing consumer interest in
pet health
Weaknesses
• Presence in the practitioner channel and the natural retail
channel causing conflicts
• Some consumer preference for non-fish based Omega 3s
• Practitioner sales channel very competitive requiring persistent sales contact
Opportunities
Threats
• Global expansion. Nordic now operates in more than 35
countries
• Vegetarian and “fishless” products to bring omegas to a
wider audience
• Focus education on children’s market and reported benefits
for behavior issues
• Create “functional treat” in pet line as pet supplements
move away from pills and powders
• More condition specific products that help diversify product
portfolio away from total omega-3 dependence
• Fish oil companies that offer superior ingredient traceability,
such as Ascenta Health in Canada
• Lovaza and other future pharmaceutical products offering
similar or better health benefits
• Growing krill market
• Negative headlines in 2013 casting doubt on efficacy of
Omega 3s as well as linking fish oil to prostate cancer hurt
entire category
• Veterinarian visits are falling precipitously and practitioner
focus leaves company vulnerable
• No “functional treat” in pet line.
• All fish products are vulnerable to sustainability attacks despite all efforts by company to promote sustainable profile
© 2015 Penton
275
Company Profiles
NBJ Bottom Line:
Nordic Naturals has continued to diversity its finished product portfolio. While still very dependent on Omega-3’s, extending product lines to areas such as Vitamin D and CoQ10 will provide the company with more stability should the effectiveness of Omega-3’s be
questioned again in the future.
Website:
www.nordicnaturals.com
© 2015 Penton
276
Company Profiles
NOW Foods
2012
2013
2014
219
234
250
Sales
($mil.)
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
192
77%
Vitamins
68
27%
Mass Market Retail
0
0%
Minerals
10
4%
58
23%
Herbs &
Botanicals
26
11%
0
0%
Meal
Replacement
10
4%
Sports
Nutrition
45
18%
Specialty
90
36%
250
100%
Direct/Other
Channels
Private Label/
Contract Manuf.
TOTAL
250
100%
TOTAL
Company Overview
Founded in 1968, NOW Foods remains a family owned business which operates in the
natural food and supplement industry with an inventory of over 1,500 products, including
nutritional supplements, sports nutrition, natural foods, and personal care. The company
manufactures its own brand names as well as private label products.
NOW Foods has made the survival of independent health food stores central to its
mission. It views these stores as a vital information source, without which consumers would be doomed to shop for nutrition products
in local supermarkets or chain drugstores. The company moved into a new 130,000 square foot distribution and manufacturing facility
in Sparks, NV in 2012. Its headquarters and main manufacturing facility remain in Bloomington, IL.
Long dogged for its startling and generic packaging NOW has been working to update its brand image. In 2012, company launched
its completely redesigned packaging for the company’s natural foods line: NOW® Real Food. It has also created a very non-NOW like
white label based branding for its personal care line. In 2015, the company announced the long awaited rebranding of its supplement
lines, keeping to the traditional orange and blue but with a modern, less-generic feel.
As part of its family owned company image, NOW Foods is known for its employee program. In 2014, for the second year in a row,
the company was named by the National Association of Business Resources (NABR) as one of the Best & Brightest Companies to Work
For® in the country.
“It’s inspiring, everyday, to be part of this team at NOW Foods and experience their collective commitment to making our products
the best they can be,” said NOW Health Group CEO Jim Emme. “NOW is made up of a team of dedicated employees who are committed
to our mission: to make great products that help people lead healthier lives. We are honored to be recognized for how special that is.”
© 2015 Penton
277
Company Profiles
NOW Foods S.W.O.T. Analysis
Strengths
Weaknesses
• Value-based supplement brand that serves as the storebrand equivalent for many stores
• NOW Foods now has a brand presence in more than 50 countries and is working to grow its international footprint
• Strong management team, lead by president and CEO Jim
Emme
• NOW has won numerous quality and innovation awards
• NOW Foods has been recognized for its progressive and
unique employee programs
• NOW University education for retailers and consumers
• Brand Identifying orange maintained during rebrand to ensure brand continuity while gaining a modern feel
• International distribution through NOW International
• Viewed as branded generic, which hurts perception of its product quality
• Corporate efficiency could be affected by proliferation of similar product SKUs
Opportunities
Threats
• NOW’s facility expansion will help facilitate the company’s
global growth and research and development efforts
• Leverage long-term quality reputation and educational offerings to raise the brand beyond its current “generic” status
• Expand sports nutrition offerings, taking advantage of a
position of trust in a product category that has a long history
of quality and ingredient problems
• Win customers and retail partners by advocating for GMO
• Competition for GMO-free ingredients could drive up prices
and weaken NOW’s ability to provide competitively priced
high-quality supplements
• As more retailers find it easier to develop their own store
brand they may have less need for a value brand like NOW
© 2015 Penton
278
Company Profiles
NBJ Bottom Line:
A fully integrated supplement company, NOW Foods continues to find success because the family-owned company’s message of
authenticity resonates with natural & specialty retailers and their customers. The company has been active in the Non-GMO movement
and continues to strive to remove GMOs from its products. With its new branding, it appears well targeted for success in an ever-changing market.
Website:
www.nowfoods.com
© 2015 Penton
279
Company Profiles
Nutraceutical International Corporation
2012
2013
2014
176
182
178
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
163
92%
Vitamins
48
27%
Mass Market Retail
2
1%
Minerals
37
21%
Direct/Other
Channels
9
5%
Herbs &
Botanicals
45
25%
Private Label/
Contract Manuf.
4
2%
Meal
Replacement
0
0%
Sports
Nutrition
14
8%
Specialty
34
19%
178
100%
TOTAL
178
100%
TOTAL
Company Overview
Nutraceutical International Corporation, formed in 1993, is a manufacturer and marketer of branded nutritional supplements sold primarily
through health and natural food stores. Nutraceutical sells branded
products under a wide array of brand names which they segment into the following categories: Healthy (5 brands including Solaray and
KAL), Innovative (8 brands including Nature’s Life and LifeTime), Nature’s Cure’s (13 brands including Zand, Herbs for Kids, bioAllers,
and NaturalCare), Active (3 brands including Natural Balance), Healthy Market (10 brands including FunFresh Foods and Spring Drops),
Beautiful (22 brands including Heritage Store, Life-flo, and Living Flower Essense), Beehive (Three brands including Honey Gardens),
Books, and Pets (ActiPet and The Pet Crystal).
In 2014, NI acquired VitaLogic (a Georgia-based clinically-formulated dietary supplement brand), Nutra Biogenesis (a Washington
state practitioner channel exclusive line), and Perfect 7 (a California-based intestinal/colon cleanser).
The company also owns neighborhood natural and health food markets which operate under the trade names The Real Food Company, Thom’s Natural Foods, Cornucopia Community Market, Fresh Vitamins, Granola’s, and Peachtree natual Foods.
Headquartered in Park City, UT, Nutraceutical International manufactures and/or distributes over 8,000 individual SKUs, including
over 800 SKUs sold internationally, and employs more than 800 full-time employees. For fiscal year 2014, which ended September 30th,
the company’s sales were $214 million, an increase of 2.9% over the previous year’s sales. For the first half of fiscal year 2015, sales were
up 1.9%. Acquisition and integration of branded supplement companies in growing market segments is a core tenet of the company’s
operations and will continue to play a key role.
© 2015 Penton
280
Company Profiles
Nutraceutical International Corporation S.W.O.T. Analysis
Strengths
Weaknesses
• Large portfolio of respected supplement brands
• New acquisitions strengthen presence in practitioner channel
• Alan James Group used as new product development portal
through acquisition
• Large corporation cannot respond as quickly to changing market dynamics as small startups
• Very fast-paced acquisition schedule could put strain on
finances and integration ability
• Little internet presence
Opportunities
Threats
• Targeted entry into mass market retail to increase customer
base and avoid losing out on a channel that is gaining dominance
• Entry into the emerging Canadian market
• Build contract manufacturing/bulk business as means of
gaining share of the mass market channel
• Build Nutraceutical International brand so that consumers
recognize the connection between a portfolio of brands
• Acquire companies on the supply end to build vertical integration capabilities and maintain strong control over product
quality
• Competitive brands such as NBTY have a strong and established presence in the mass market retail channel
• Customers increasingly looking to find these brands at mass
market retail stores
NBJ Bottom Line:
While Nutraceutical International’s portfolio contains a wide array of respected brands, it is not one of the growth stars of the
supplement industry. Growth remains slow and steady. Acquisitions in the professional channel and condition speific brands will help it
remain relevant in an industry that has quickly moved toward the solution based approach.
Website:
www.zand.com
www.nutraceutical.com
© 2015 Penton
281
Company Profiles
Perrigo
2012
2013
2014
578
647
673
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
0
0%
Vitamins
403
60%
Mass Market Retail
0
0%
Minerals
71
11%
Direct/Other
Channels
0
0%
Herbs &
Botanicals
35
5%
673
100%
Meal
Replacement
34
5%
Sports
Nutrition
0
0%
Specialty
130
19%
TOTAL
673
100%
Private Label/
Contract Manuf.
TOTAL
673
100%
Company Overview
With world headquarters in Ireland, Perrigo Company is a leading global healthcare supplier
and one of the world’s largest manufacturers of over-the-counter (OTC) and generic prescription
pharmaceuticals, infant formulas, nutritional products, animal health, dietary supplements, active
pharmaceutical ingredients and medical diagnosis products. As of FY2015 ( following the Omega Pharma acquisition), the company
divides its products into six operating segments. Dietary supplements and infant formula did comprise the Nutirtionals segment, but are
now part of the larger Consumer Healthcare division. For FY2014, ended June 28, 2014, total corporate revenues reached $4.1 billion on
15% growth. For the first 9 months of FY2015, net sales are up 5.3%
The Nutritionals division posted sales of $552 million for FY2014 on 9% growth. Segment sales were down for the first three quarters
of FY2015. Perrigo’s store brand dietary supplements compare to leading national brands such as Centrum, One A Day, Flintstones, as
well as Ensure, Garlique, Ginsana and Osteo Bi-Flex.
Perrigo entered the gummy supplement market in 2015 when it announced an agreement with Ferrara candy Co. to manufacture
store brands for them.
Perrigo’s Chairman and CEO Joseph C. Papa stated, “We are excited to announce the addition of a full assortment of children’s and
adult multivitamins, calcium, fiber, heart health and letter vitamins to our store brand portfolio. This strategic supplier relationship extends our company’s reach into a financially attractive and expansive gummy market. We look forward to working with Ferrara and are
excited to launch new products into this growing nutritional category.”
© 2015 Penton
282
Company Profiles
NBJ Bottom Line:
Perrigo manufactures the largest portfolio of private-label products and continues to make acquisitions and build partnerships in
order to extend its capabilities. Private-label products, Perrigo’s speciality, offer consumers a cost advantage that is not going to go away
in an improving enconomy. And it appears that almost everyone wants a private label option these days. The future looks bright for
Perrigo.
Website:
www.perrigo.com
www.storebrandformula.com
© 2015 Penton
283
Company Profiles
Pfizer (Centrum, Alacer)
2012
2013
2014
454
445
418
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
77
16%
Vitamins
313
75%
Mass Market Retail
326
78%
Minerals
104
25%
21
5%
Herbs &
Botanicals
0
0%
0
0%
Meal
Replacement
0
0%
Sports
Nutrition
0
0%
Direct/Other
Channels
Private Label/
Contract Manuf.
Specialty
TOTAL
418
100%
TOTAL
0
0%
418
100%
Company Overview
Based in New York,, Pfizer is a global biopharmaceutical company with a leading portfolio of products and medicines that support wellness and prevention, as well as treatment and cures for diseases across a broad range of
therapeutic areas. Pfizer’s 2014 revenues were $49.6 billion, a decrease of 3.8% compared to 2013. Revenue for the
Pfizer Global Vaccines, Oncology and Consumer Healthcare division, which includes its supplement brands Centrum, Caltrate, and Emergen-C, posted revenues of $10.1 billion with $5.4 billion of those sales occurring in the US. Total revenues for
just the Consumer Healthcare segment increased 3% to $3.4 billion. Supplements are a small part of Pfizer’s Consumer Healthcare
division, which also includes brands such as Advil, Nexium, Robitussin, Chapstick, and Preparation H.
A couple of years ago (around 2012), Pfizer launched a new supplement line called ProNutrients that included Omega-3, Probiotic,
and Fruit & Veggie. The Omega-3 product continues to carry the ProNutrients brand name under the Centrum umbrella, but the other
two products have disappeared. The Centrum Specialist™ line of enhanced multivitamins that debuted at about the same time continues to include Prenatal, Energy and Heart products. The Specialist line initially also had a vision product, but now the vision offering is
Centrum Silver Plus Vision. It appears that the company is playing with products and branding to determine how best to resonate with
its customer base.
Alternative delivery system formats are hot right now, and Pfizer is well placed with its Caltrate and Emergen-C, and even some Centrum, offerings.
© 2015 Penton
284
Company Profiles
Pfizer S.W.O.T. Analysis
Strengths
Weaknesses
• Pfizer owns two popular mass market brands, Centrum &
Caltrate
• Broad mass market distribution
• Top brands with senior citizens
• Strong global presence
• Focus on R&D
• Emergen-C provides reach into natural & specialty channels
and widespread consumer recognition
• Company hasn’t been able to capitalize on success of Centrum
in truly innovative ways
• Supplement products getting lost in the pharmaceutical portfolio
Opportunities
• Launch products in digestive health, immune categories, and
other emerging categories – a process started with Centrum
Specialty line
• Leverage the company’s pharma research and perception
• Expansion of animal health division into supplement to take
advantage of growing consumer interest in pet products
• Take advantage of impending harmonization in the ASEAN
countries
• Continue to expand Emergen-C in nutrition products across
broader range as they are doing with sleep and other specialty formulas
• Continue to expand product lines to reach consumers of all
ages, such as the Centrum kids products. Focus on growing
Threats
•
•
•
•
Complacency
Innovative mass market competition
Competition from generics
Continued negative media on multivitamins as worthless
expense
• Stiff competition from emerging brands
NBJ Bottom Line:
Pfizer owns a few key brands with excellent recognition including Centrum and Caltrate, but this is a tiny portion of the gigantic
pharmaceutical company’s portfolio. Emergen-C continues to innovate to go beyond just an immunity product. Pfizer continues to
tweak the Centrum brand to remain relevent but hasn’t had any earth shattering new products.
Website:
www.caltrate.com
www.centrum.com
www.emergenc.com
www.pfizer.com
© 2015 Penton
285
Company Profiles
Pharmavite (Nature Made)
2012
2013
2014
1,370
1,413
1,388
Sales
($mil.
% of
Sales
Natural & Specialty
Retail
42
3%
Mass Market Retail
763
55%
Sales Channel
Direct/Other
Channels
28
Private Label/
Contract Manuf.
555
TOTAL
1,388
2%
40%
100%
Product
Category
Sales
($mil.)
% of
Sales
Vitamins
694
50%
Minerals
361
26%
Herbs &
Botanicals
111
8%
Meal
Replacement
0
0%
Sports
Nutrition
0
0%
Specialty
222
16%
1,388
100%
TOTAL
Company Overview
Founded in 1971, Pharmavite LLC, manufactures Nature Made dietary supplements, SOYJOY
nutrition bars, and provides contract manufacturing services. Pharmavite produces and
distributes more than 120 dietary supplement products in the U.S. and more than 100 internationally throughout Japan, Taiwan, Mexico,
South Korea and Iran.
Pharmavite’s production facilities include more than 600,000 square feet of manufacturing, packaging, distribution and research and
development space. The company produces 15 billion tablets, capsules and softgels annually. Pharmavite’s packaging facility produces
more than 120 million bottles and cartons per year and its distribution center ships more than 35,000 shipments per year to domestic
and international customers. The corporate headquarters is located in Mission Hills, California. Pharmavite has been owned by Japanese health company Otsuka Pharmaceutical Co., Ltd. since 1988.
Pharmavite acquired FoodState in late 2014, with the goal of providing Pharmavite with a play in additional sales channels. Per the
company’s press release regarding the acquisition, “FoodState will benefit from Pharmavite’s 40+ years of experience and scale in manufacturing, research and product development, by sharing best practices; and Pharmavite enters the natural and practitioner channels via
FoodState’s fast-growing brands, which align with Pharmavite’s values of high quality and integrity and are well positioned for continued
growth.”
“Joining Pharmavite allows us to continue to fulfill our mission of improving lives by creating high-quality supplements made with
farm fresh whole foods right in our New Hampshire facilities,” said Robert Craven, FoodState CEO. “FoodState will maintain its existing
executive and organization structure and will operate very much as it has been, reporting to Pharmavite through a newly formed Board
of Directors. We’re excited by the opportunity to grow with a company that shares our values.”
FoodState’s brands consist of Innate Response Formulas, which is focused on the practitioner sales channel, and MegaFood, which
is a popular whole food supplement brand sold in the natural retail channel.
© 2015 Penton
286
Company Profiles
Pharmavite S.W.O.T. Analysis
Strengths
Weaknesses
• Second-largest supplement company in the United States
• Nature Made is one of the best-recognized and well-established brands in the mass market
• Acquisition of FoodState gives Pharmavite a strong presence
in natural retail with the highly popular MegaFood brand and
the practitioner channel through Innate Response
• International operations
• Backing of Japanese parent company Otsuku
• Bigger than they are nimble; not seen as a product innovator
• Big manufacturers come under more scrutiny for safety, efficacy and purity
• Reliant on brand loyalty, consumer education strategy
Opportunities
Threats
• Capitalize on interest among Millennials for cleaner products
and alternative delivery systems
• Portfolio diversification and opportunity for operational
efficiencies due to FoodState acquisition
• Bring MegaFood whole food concept to Nature Made line to
attract cross-channel consumers at a mid-level price point
• Pharmavite’s continued partnership with probiotic ingredient
manufacturer Probi
• Private-label and contract manufacturing for major retail
players can be a cutthroat market
• NBTY and other mass market players with comprehensive
supplement lines
• Chorus of negative headlines on supplements could hit players in mass harder than brands in natural channel
• Natural channel consumer aversion to large market players
owning natural brands and concerns over quality
NBJ Bottom Line:
One of the largest supplement companies in the U.S, Pharmavite is known as a leader in the mass market and private label arenas.
With the acquisition of FoodState, it will have a much broader channel presence. There is great opportunity for each company to learn
from the other and create crossover product offerings.
Website:
www.pharmavite.com
www.naturemade.com
www.megafood.com
© 2015 Penton
287
Company Profiles
ProCaps Laboratories
2012
2013
2014
151
163
173
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
0
0%
Vitamins
55
32%
Mass Market Retail
0
0%
Minerals
26
15%
173
100%
9
5%
0
0%
14
8%
9
5%
Direct/Other
Channels
Private Label/
Contract Manuf.
Herbs &
Botanicals
Meal
Replacement
Sports
Nutrition
Specialty
TOTAL
173
100%
TOTAL
60
35%
173
100%
Company Overview
Headquartered in Henderson, Nevada, Andrew Lessman’s ProCaps Laboratories manufactures vitamin
and nutritional supplements. The company was founded by Lessman in 1979, when the biochemist and
law student began creating vitamin supplements that would make use of the latest scientific research.
The company was originally called The Winning Combination. In 1997 the name was changed to YourVitamins, before becoming ProCaps Laboratories. In the early years the company sold primarily to elite athletes, entertainment celebrities,
and professionals in the fields of fitness and medicine. In the mid-1980s, Lessman decided that direct response marketing was the best
way to spread the word about the hard science behind the products and increase the client base. In the late 1980s, Lessman started
selling his products on QVC, and then moved to HSN in 1996.
ProCaps Labs continues to be the flagship supplement brand on the Home Shopping Network, as well as selling the products
through the company website. The company offers a wide range of supplement products with its top sellers falling into the multivitamin, weight management, Omega-3, CoQ10, Beauty, and the Andrew’s Own Tea segments.
Lessman is still the owner of ProCaps Laboratories. The company’s 250,000-square-foot vitamin manufacturing facility is completely
powered by a solar energy array installed on the building roof and the adjacent parking structure. The company strongly touts its solar
commitment, with an “All Solar” logo on packaging that is as big as the brand logo.
© 2015 Penton
288
Company Profiles
ProCaps Laboratories (Andrew Lessman) S.W.O.T. Analysis
Strengths
Weaknesses
• Powerhouse brand on HSN with long-term consumer following
• Wide array of supplement products
• Ownership of manufacturing allows company to lead with
quality assurance
• Founder and brand ambassador still at helm of company
• Content-rich web site
• Green Foods Complex powder illustrates strong handle on
trends
• Updated branding
• Provides autoship and volume discounts for its online customers without forcing autoship
• Limiting customer base by only participating in the relatively
small home shopping consumer pool
• Distributes product almost exclusively through one distributor—HSN—over which it doesn’t have absolute control
• Children’s vitamin drink high in sugar
Opportunities
Threats
• With home shopping networks gaining acceptance with
the general population and expanding into mobile devices,
ProCaps has an excellent opportunity to expand its consumer
base
• Contract manufacturing
• Market founder Andrew Lessman as a more credible alternative to Dr. Oz
• Continue to promote that vitamins are 100% pure and additive-free, characteristics that are becoming more and more
important to consumers
• Lack of consumer confidence in supplements fed by negative
headlines
• More people dropping cable in favor of internetstreamed
programming
NBJ Bottom Line:
ProCaps Laboratories continues to be a well respected direct-response brand. The company has a long term environmental and
product quality message that is on target with current emerging consumer trends. With its rebranding and company website in place to
complement HSN exposure, it seems to have a promising future. However, the company may be wise to increase consumer exposure in
other channels so that it is less dependent on the HSN model.
Website:
www.ProCapsLabs.com
© 2015 Penton
289
Company Profiles
Procter & Gamble (Metamucil, New Chapter)
2012
2013
2014
185
188
196
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
97
49%
Vitamins
19
10%
Mass Market Retail
96
49%
Minerals
2
1%
119
61%
Direct/Other
Channels
3
2%
Herbs &
Botanicals
Private Label/
Contract Manuf.
0
0%
Meal
Replacement
0
0%
Sports
Nutrition
0
0%
Specialty
55
28%
196
100%
TOTAL
196
100%
TOTAL
Company Overview
Procter & Gamble is a multi-national consumer packaged goods company with products that are sold in more than
180 countries, primarily through mass market retail outlets. Some of the company’s best known brands include Tide,
Puffs, Tampax, and and Cover Girl. For the fiscal year ended June 30, 2014, P&G’s net sales were $83.1 billion, up less
than 1% over the 2013 fiscal year. Sales for the first 9 months of FY2015 were down 4%.
P&G’s Metamucil fiber supplement is a well known mass market OTC crossover brand. The brand has remained current with evolving consumer trends and now offers a wide array of products, from its traditional powder drink mix to health bars. The umbrella brand
(or is that meta brand?) is now known as “Meta” and includes Metamucil Meta Health Bars, and MetaBiotic probiotic supplement.
The company also markets the Align brand of probiotic supplement.
In 2012, P&G acquired Vermont-based New Chapter Inc., a leading supplement brand in the natural channel, for an estimated $120
million. While initial fears among natural channel retailers and consumers were that P&G would radically change New Chapter for the
worse, P&G has essentially left New Chapter alone to its own devices, with the exception of securing the supply chain in order to prevent
stock outs. Otherwise, P&G has learned from the mistakes previous CPG companies have made and has allowed New Chapter to continue the business that made it successful in the first place.
Since 1982, New Chapter produces a widely respected line of whole food supplements that are generally condition specific oriented.
Products include Every Man, Every Women and other multivitamin formulas, several herbal supplements including the Take Care line,
Zyflamend, Wholeomega fish oil supplements, and the LifeShield mushroom based line.
© 2015 Penton
290
Company Profiles
Procter & Gamble (Metamucil, New Chapter) S.W.O.T. Analysis
Strengths
•
•
•
•
•
•
•
•
•
Metamucil is the leading legacy brand in the fiber category
Large, loyal consumer base for Metamucil
Metamucil continuing to innovate with new delivery options
P&G provide New Chapter with needed research and marketing power to expand brand
New chapter known for its whole food, organic, science validated products and their commitment to sustainability
NC early adopter of Non-GMO Project verification
NC has a good reputation with retailers
NC packaging is engaging, informative and reflects the quality image
Conducts research to support products
Opportunities
• Continue to offer delivery form innovations and product
taste for Meta products
• National advertising campaign to raise awareness of New
Chapter and reasons for its superiority when compared to
traditional vitamins
• Continue to promote Non-GMO-Project verification as a
value add
• Continue to promote whole food/simplicity of products as
this is a growing trend
• Promote high quality/efficacy/value of NC products
Weaknesses
• Metamucil is often shelved in the OTC area of the store rather
than with competitive supplements (often dual labeled)
• Hard for large multinational company to react to market
changes as quickly as a startup company
• New Chapter is a high cost brand
• NC reputation damaged in natural channel and among core
consumers with P&G as parent
Threats
• Many upstart companies and direct sellers entering the
cleansing/detox market
• Bulk psyllium products from manufacturers like NOW
• Retailer backlash in natural channel due to New Chapter
acquisition
• Consumer perception that P&G will corrupt New Chapter’s
values
NBJ Bottom Line:
P&G’s Metamucil brand is a mainstay of the gastrointestinal health category, and with the company continuing to invest in product
innovation, its well poised to maintain a healthy share of the category in the future.
To date, P&G’s foray into the natural supplement world through New Chapter has gone well. The company weathered initial concerns, and New Chapter has remained a high quality, top seller. With New Chapter’s continued focus on the issues that drive the natural
channel, such as non-GMO certification, it is well positioned to continue to resonate with the consumers that are willing to pay for a
top-of-the-line product.
Website:
www.metamucil.com
© 2015 Penton
291
Company Profiles
Reckitt Benckiser (Schiff, Airborne)
2012
2013
2014
467
496
504
Sales
($mil.
% of
Sales
Natural & Specialty
Retail
40
8%
Mass Market Retail
302
60%
21
4%
141
28%
Sales Channel
Direct/Other
Channels
Private Label/
Contract Manuf.
TOTAL
504
100%
Product
Category
Sales
($mil.)
% of
Sales
Vitamins
76
15%
Minerals
30
6%
Herbs &
Botanicals
20
4%
Meal
Replacement
5
1%
Sports
Nutrition
71
14%
Specialty
303
60%
TOTAL
504
100%
Company Overview
Reckitt Benckiser surprised all of the industry when it outbid Bayer to acquire Schiff in 2012 for a total
stock price of $1.4 billion. While the company’s name isn’t known to most consumers, its brands are:
Lysol, Woolite, School, Calgon, Mucinex, French’s and many more. RB’s 2014 net revenue was £8.8 billion
on 4% like-for-like growth. Its health division accounts for 32% of sales and 8% growth. The company is
continuing to work to integrate Schiff into its portfolio, including traveling in 2014 as part of its annual
off-site strategy session to Salt Lake City in order to visit the Schiff factory.
Schiff Nutrition International develops, manufactures, markets, distributes and sells vitamins, nutritional supplements and sports
nutrition products. Schiff Nutrition’s core brands include Move Free (joint product), Schiff Vitamins, Tiger’s Milk, and MegaRed. Schiff
acquired the probiotics brands Sustenex and Digestive Advantage from Ganeden for $40 million in June 2011. Both brands include
Ganeden’s popular BC30 probiotics technology to promote stability and efficacy. The company has since consolidated all of its digestive
health brands into the Digestive Advantage brand. Schiff purchased the well-known Airborne brand in 2012. It appears to have quietly
discontinued its Fi-bar brand, while the Tiger’s Milk brand can be found on its website, but only with a little digging.
© 2015 Penton
292
Company Profiles
Schiff S.W.O.T. Analysis
Strengths
Weaknesses
Well-known mass market brands
Broad mass market distribution
Schiff continues to roll out new products
Purchase of Airborne in 2012 positioned Schiff to penetrate
mass-market channels with other products (i.e. Tiger’s Milk
bars)
• Airborne introduction of an Everyday and Dual Action products are giving the brand more use occasions
• Schiff is not perceived as innovative or edgy and the RK purchase doesn’t appear to be helping this problem
• New brands (MegaRed, Airborne) need to continue replacing
lost sales in more dated brands (Tiger’s Milk, Move Free)
• Main Schiff website does poor job of showcasing education
content
• Mega corporation ownership could slow innovation
• Tiger’s Milk bar looking dated in crowded bar category
•
•
•
•
Opportunities
•
•
•
•
Acquire new complimentary brands to drive growth
Continue to convert more consumers from fish oil to krill
Use Airborne’s multi-format technology in other brands
Focus education for digestive products on gut health and
hyped gut-brain axis
• Market positive sustainability findings for krill oil in
MegaRed
Threats
• Commoditization of core production and product markets.
• Lack of resolution on the sustainability front for krill oil products
• Widely reported link to prostate cancer hit fish oil and has
since spread to krill, likely impacting MegaRed sales
• Reckitt Benckiser paid premium price for Schiff and could
squeeze company for expected profits, weakening new products development
• Increasing competition in exploding probiotics market
NBJ Bottom Line:
As part of the Reckitt Benckiser portfolio, Schiff has enormous resources and international reach. In the past, it has done an admirable job of acquiring brands and supporting their mission while maintaing the innovative edge of the smaller company. The Reckitt
Benckiser acquisition makes that culture questionable. While it has been two years since the acquisition, RB seems to be slow in making
any major transformative moves regarding Schiff. The portfolio of supplement brands hasn’t made any big news lately and is in danger of
its now cutting edge brands going the way of Tiger’s Milk.
© 2015 Penton
293
Company Profiles
Website:
www.schiffvitamins.com
www.tigersmilk.com
www.fi-bar.com
www.digestiveadvantage.com
www.megared.com
www.airbornehealth.com
www.movefree.com
© 2015 Penton
294
Company Profiles
Reliance Private Label Supplements
2012
2013
2014
68
76
78
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
0
0%
Vitamins
8
10%
Mass Market Retail
0
0%
Minerals
19
25%
Direct/Other
Channels
0
0%
Herbs &
Botanicals
28
35%
78
100%
Meal
Replacement
0
0%
Sports
Nutrition
4
5%
Specialty
19
25%
TOTAL
78
100%
Private Label/
Contract Manuf.
TOTAL
78
100%
Company Overview
Reliance is a manufacturer of private label supplements that are to be sold directly to retailers,
plus it also provides complete contract manufacturing services for manufacturers. The company has been making it easy for businesses to offer their own private label since its inception in
1978 with practices such as low minimum orders, fast turnaround times, 500+ SKUs in stock, and in-house label design and printing. The
company is headquartered in Somerset, New Jersey.
The company is constantly introducing new products such as Flax Fusions (a flax oil emulsion), Plant Fusion (a multi-source plant
protein), Shelf-Stable Probiotics, and Whole Food Multi. In 2012, the company moved into a new facility, increasing its manufacturing
capacity and quality control capabilities.
Reliance added a Clean Sports Nutrition line to its portfolio in 2013. “Independent retailers are missing out on store brand sales in the
sports nutrition category, which is mainstreaming and growing very quickly,” said Kenny Flores, Reliance vice president of sales. “It’s not
just bodybuilders buying sports-specific supplements. There is a lot of crossover now, with 95 percent of the sports nutrition products in
the mainstream. Consumers want sports supplements that are ‘Clean and Safe,’ not the ones that make headlines when an athlete fails a
drug test.”
© 2015 Penton
295
Company Profiles
Reliance S.W.O.T. Analysis
Strengths
• Wide range of private-label and contract manufacturing
capabilities
• Recent website update
• More than 50 trademarked ingredients in its portfolio including Life’s DHA, FloraGLO, and OptMSM
• Keeping over 500+ SKU in stock allows for quick delivery on
private label offerings
• European sourced herbal extracts
• Supply chain transparency
Opportunities
• Continue to promote plant-based proteins experience to
build on current consumer interest in protein alternatives
• Promote probiotics industry knowledge
• Expand Clean Sports line
Weaknesses
• Private label margins remain low
Threats
• Crowded contract manufacturing industry
• Pricing pressure
NBJ Bottom Line:
Reliance is dedicated to innovation, quality, and premium ingredient sources such as the 50 patented and trademarked materials
offered in hundreds of SKUs. Production, packaging, printing and even label design create a one-stop-shopping experience that would be
attractive to many private label clients . The company’s new manufacturing facility places it at the pinnacle of quality and climate control
in the private label manufacturing industry. With negative press across the supplement spectrum, Reliance will have to rely on strong
relationships to keep customers from looking for cheaper alternatives in order to hold onto margins if demand falls. With quality focus
and industry leadership, the company has proven the commitment to hold onto those relationships.
Website:
www.reliancevitamin.com
© 2015 Penton
296
Company Profiles
2012
2013
2014
84
104
129
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
116
90%
Vitamins
0
0%
Mass Market Retail
0
0%
Minerals
0
0%
13
10%
32
25%
0
0%
Meal
Replacement
0
0%
Sports
Nutrition
0
0%
Specialty
96
75%
129
100%
Direct/Other
Channels
Private Label/
Contract Manuf.
TOTAL
129
100%
Herbs &
Botanicals
TOTAL
Company Overview
Founded in 1997, ReNew Life Formulas produces natural health supplements and functional foods
primarily for digestive health. Product categories include cleansing, fiber, probiotics, enzymes, oils, and
specialty products. The company’s brands include Ultimate Flora, Digest Smart, Renew Life Skinny Gut,
Norwegian Gold, FiberSMART, OmegaSmart and FitSMART. The company appears to have discontinued its pet supplement line. ReNew
Life is primarily focused on its US business, but also sells its products in Canada.
The company has a Recipes and Diet section on its website that offers support for consumers following its cleansing and detox
programs.
In December, 2014, ReNew life announced that its first Non-GMO Verified products had begun shipping, though it was only two products
to begin with.
© 2015 Penton
297
Company Profiles
Renew Life Formulas S.W.O.T. Analysis
Strengths
• ReNew Life is a leading brand in the increasingly important
digestive and immune health categories
• The company has a strong history of innovation
• ReNew Life is a legacy natural retail brand
• Passionate management team led by founder Brenda Watson
• Focused on consumer education
• Well positioned for trendy cleanse market
• Strong content on website
Weaknesses
• Disappearance of pet line
• Cluttered website has more of an online retailer feel than a
quality brand presence
Opportunities
Threats
• Focus education on gut-brain axis as product development
follows science
• Continue to expand children’s probiotic products as children’s
supplement sales are expected to grow
• New liver support product could resonate with cleanse customers
• Respectable start in social media could be grown
• Redesign website to better promote respected industry
brand over quick fix internet retailer image
• FTC and FDA are increasing their scrutiny of the immune and
digestive health categories
• Consumers focusing on probiotics as an ingredient in yogurt
and other foods rather than tablet formats
• “Fat burner” and appetite control claims risky with current
post-Oz FTC stance
• Getting too caught up in trendy products related to cleanses
or weight loss could weaken the strong brand reputation
NBJ Bottom Line:
A very popular brand in natural & specialty retail, ReNew Life has focused on fast growing products such as enzymes, probiotics,
and fish oils. Fish oils have hit a rough spot with bad press but probiotics is the brightest spot in supplements right now. Always innovating, the company recently launched higher potency, no refridgeration required probiotic formulas. Probiotics seem a solid trend whereas
cleanses could have fad-like flucations. Ultimate Flora Kids could find niche with parents responding to increasing number of reports
that probiotics can be a solution to attention deficit and behavior problems. That much-hyped gut-brain axis could be a good space in
which to stay ahead but company needs to be extremely careful about making claims.
Website:
www.renewlife.com
© 2015 Penton
298
Company Profiles
SAN Corporation
2012
2013
2014
74
80
85
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
75
88%
Vitamins
0
0%
Mass Market Retail
6
7%
Minerals
0
0%
Direct/Other
Channels
4
5%
Herbs &
Botanicals
18
21%
Private Label/
Contract Manuf.
0
0%
Meal
Replacement
0
0%
64
75%
Sports
Nutrition
Specialty
TOTAL
85
100%
TOTAL
3
4%
85
100%
Company Overview
SAN (Scientifically Advanced Nutrition) Corporation, founded in 1996, sells an extensive array of
protein powders, bodybuilding, weight-loss, and other supplements. SAN Nutrition’s headquarters
are located in Oxnard, CA, with another location in Medley, Fla.
San offers a wide array of sports nutrition products, with its best sellers including hardcore bodybuilding products like Metaforce 5.0 and Launch 4350 Reloaded, as well as healthy living/clean sport
products such as the Rawfusion line.
SAN runs an active blog concerning their products and sponsored events. It also continues to support a team of athletes who use
their products, including IFBB Pro fitness competitor Oksana Grishina, IFBB Pro figure competitor Candice Lewis, and MMA pro fighter
Khabib Nurmagomedov.
© 2015 Penton
299
Company Profiles
S.A.N Corporation S.W.O.T. Analysis
Strengths
Weaknesses
• Well-rounded line of sports nutrition supplements
• Represented across multiple e-commerce sites
• Creating crossover product line – black for hardcore, white for
simple and clean
• Web presence is no longer hardcore focused
• Want to be known as a quality brand with research behind
its products, but packaging appears almost schizophrenic
between science and fringe sports image
• Strong focus on stimulant products; lack of independent evidence of safety, efficacy on finished products
• Caught up in DMAA recall
• Company name makes it hard to find on the internet
Opportunities
Threats
• Continue to expand vegan and raw offerings to attract
consumers looking for clean sports nutrition, such as the
Rawfusion line
• Expand focus on average consumers
• Create stronger brands that drive customers to purchase and
differentiate from other sports nutrition
• Emerging and innovating companies grabbing consumers
with trendy products
• Products include numerous ingredients that may be defined
as NDI’s under new FDA guidance
• Facing DMAA lawsuit
• Bad press associated around sports nutrition supplements
and controversial ingredients
• FDA warning letters around DMAA, DMBA and other products
NBJ Bottom Line:
A mid-sized marketer of bodybuilding supplements with a full line of products that bear names like “Fierce Domination,” it is clear
the company is not worried about association with controversial ingredients, suggesting a casual regard for safety that could land in the
spotlight again.
Website:
www.sann.net
© 2015 Penton
300
Company Profiles
Schwabe NA (Nature’s Way, Enzymatic Therapy,
Integrative Therapeutics, Wellesse)
2012
2013
2014
357
395
436
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
283
65%
Vitamins
78
18%
Mass Market Retail
78
18%
Minerals
61
14%
Herbs &
Botanicals
131
30%
13
3%
Sports
Nutrition
9
2%
Specialty
144
33%
TOTAL
436
100%
Direct/Other
Channels
52
12%
Private Label/
Contract Manuf.
22
5%
TOTAL
436
100%
Meal
Replacement
Company Overview
Dr. Willmar Schwabe Pharmaceuticals, headquartered in Karlsruhe, Germany, was founded in 1866. The company is a manufacturer
of herbal medicines and comprises six companies in Germany and more than 20 subsidiaries and joint ventures around the world. As a
vertically integrated pharmaceutical company, Schwabe controls the manufacturing process from growing and harvesting the plants to
the production of the finished goods. Schwabe products are sold in over 60 countries world-wide. Schwabe North America, the company’s entity in North America, is based in Green Bay, Wisconsin.
Since 2008, Germany-based Dr. Willmar Schwabe Pharmaceuticals has owned Enzymatic Therapy (including Enzy’s Integrative
Therapeutics Inc. pracitioner supplement business) and Nature’s Way. The Enzymatic Therapy and Nature’s Way brands remain separate
but the manufacturing and operations for the businesses have been integrated. Independently family-owned Schwabe is a world leader
of clinically proven phytomedicines.
Nature’s Way offers a comprehensive supplement and homeopathic products line. Sub-brands include the popular Alive! Brand,
Boericke & Tafel (B&T) homeopathic products, as well as CalmAid, Ginkgold, Primadophilus, Sambucus, and Umcha ColdCare.
© 2015 Penton
301
Company Profiles
Enzymatic Therapy was founded in 1981 by health store proprietor Terry Lemerond, and the company merged with Tyler Encapsulations, Vitaline Formulas, and NF Formulas in 2000 to create an integrated natural medicine company. Integrative Therapeutics falls
under the Enzymatic Therapy corporate umbrella. The company manufacturers and distributes dietary supplements and natural medicines. Its products are sold throughout leading natural products retailers, medical clinics, and in 15 countries outside the United States.
Integrative Therapeutics, Inc. is a manufacturer and distributor of dietary supplements for medical professionals and their patients
and has been in business for more 35 years. The Green Bay, Wisconsin-based company’s top 50 products have been the subject of more
than 2,500 independent, peer reviewed and published clinical trials and studies. Fourteen doctors sit on Its medical advisory board.
Schwabe acquired Botanical Laboratories and its Wellesse brand of premium liquid supplements in 2013.
Nature’s Way offers a comprehensive supplement and homeopathic products line. Subbrands include the popular Alive! Brand, Boericke & Tafel (B&T) homeopathic products, as well as CalmAid, Ginkgold, Primadophilus, Sambucus, and Umcha ColdCare.
Schwabe S.W.O.T. Analysis
Strengths
Weaknesses
Strong portfolio of recognizable brands
Multi-channel strategy reaches a wide array of consumers
State-of-the-art manufacturing facility
Superior quality—Enzymatic Therapy/Integrative
Updated branding for Integrative Therapeutics
Addition of Wellesse to portfolio
Gluten-Free products
• Enzymes continue to stay on periphery of consumer consciousness
• Legacy brands need marketing spend to stay relevant to consumers and practitioners
• Regulation run-ins
• Stale Enzymatic Therapy website with lack of updated content
Opportunities
Threats
• Embracing E-commerce tools to drive sales, especially repeat
orders
• Pair enzymes with probiotics to grow out that segment of
the business
• Recent celebrity endorsement deals
• Market prebiotics to capture emerging interest in microbiome/gut health
• Personalized medicine trend is a perfect match for practitioner channel-based brands
• Continued delivery system innovation
• Strong competition from major competitor Atrium Innovations
• FDA investigations in supplements and DNA testing
• Noise of price-focused competitors in the mass market
space
•
•
•
•
•
•
•
© 2015 Penton
302
Company Profiles
NBJ Bottom Line:
With four strong brands in its portfolio, Schwabe has created a supplement business that is successfully playing in all of the sales
channels. The company has a few new innovative products, but could benefit from more innovation and revitalized branding to increase
its competitive position overall.
Website:
www.integrativepro.com
www.enzymatictherapy.com
www.naturesway.com
www.wellesse.com
© 2015 Penton
303
Company Profiles
Standard Process
2012
2013
2014
131
141
152
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
0
0%
Vitamins
70
46%
Mass Market Retail
0
0%
Minerals
27
18%
152
100%
Herbs &
Botanicals
30
20%
0
0%
Meal
Replacement
0
0%
Sports
Nutrition
8
5%
Direct/Other
Channels
Private Label/
Contract Manuf.
Specialty
TOTAL
152
100%
TOTAL
17
11%
152
100%
Company Overview
Standard Process provides health care professionals with high-quality, nutritional whole
food supplements. Founded in 1929 by Dr. Royal Lee, Standard Process grows crops on
company-owned, organically certified farmland, utilizes state-of-the-art manufacturing
processes, and employs the highest quality control standards. The company remains privately held and employs more than 320 people.
The company offers more than 300 products through three product lines: Standard Process whole food supplements, Standard Process Veterinary Formulas™, and MediHerb® herbal supplements. The company is headquartered in Palmyra, WI. Standard Process sells
exclusively through the healthcare practitioner channel – both human and veterinary.
In 2014, Standard Process was named for the seventh year in a row to Deloitte Touche’s Wisconsin 75 list which acknowledges
leadership by privately held companies.
In May 2015, Standard Process introduced NutriSync, a wellness accessment tool. According to Standard Process, “NutriSync is an
‘at home’ system that consists of: a laboratory analysis of specific gene variants in your genetic material (DNA) that have been found to
influence health. an online Lifestyle survey that provides valuable information about various lifestyle habits that relate to the gene variants being tested. The goal of the NutriSync Assessment, is to provide you with genetic information about yourself that may have lifelong
implications for your nutrition and fitness, to help you take more strategic control of your own wellness and guide your diet and lifestyle
choices in your quest for optimal health.”
© 2015 Penton
304
Company Profiles
The last six months have been busy with innovation for Standard Process. in April, it launched its first mobile app, meant to help
customers who are following the company’s 21-day cleanse program. In that same month, the company also launched a new online
supplement order service, called Patient Direct by Standard Process. The system allows practitioners to determine a nutritional protocol
and then provide a patient with portal access where they can order products. Patient Direct gives health care professionals the ability to
access, view, and change a patient’s online ordering account.
Standard Process S.W.O.T. Analysis
Strengths
•
•
•
•
•
•
•
•
•
Legacy company with longevity in the market
A leader in the increasingly important practitioner channel
Sales partnership with Chiropractors
Fully vertical supply chain
Well positioned in the growing whole food supplement arena
Research staff to support product line development
Pet product line
More than 100 gluten-free product offerings
Improved image and ordering thanks to redesign of long
suffering website
Weaknesses
• Low potency products
• Lack of product innovation
Opportunities
• Launch more innovative and progressive formulas – take the
whole food concept to the next level ahead of competition
• Move away from tablets to more consumer friendly dosage
formats
• Create “functional treats” for pets as owners move away
from tablet delivery
• Increase consumer awareness of brand-drive inquiries to
practitioners
• Organic supply chain could be advantage when GMO-free
concerns impact supplements
• Continued introduction of technology to help professionals
and patients use their products
• Expand on personalized medicine trend via the 2015 introduced NutriSync program
© 2015 Penton
Threats
•
•
•
•
•
Internet discounters
Retail competition offering cheap, convenient products
Growing competition in the whole food supplement space
Consumer skepticism over supplements
Growing movement toward healthier food as an alternative
to supplementation
305
Company Profiles
NBJ Bottom Line:
Standard Process has had a strong year of technological innovation that was long overdue and should help the company maintain a
top spot in the practitioner distribution channel. Its recent introduction of NutriSync leaves it well placed in an industry that is becoming increasingly focused on personalized medical and supplementation solutions.
Website:
www.standardprocess.com
© 2015 Penton
306
Company Profiles
2012
2013
2014
230
256
278
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
0
0%
Vitamins
56
20%
Mass Market Retail
0
0%
Minerals
69
25%
278
100%
Herbs &
Botanicals
28
10%
0
0%
Meal
Replacement
6
2%
Sports
Nutrition
8
3%
Specialty
111
40%
TOTAL
278
100%
Direct/Other
Channels
Private Label/
Contract Manuf.
TOTAL
256
100%
Company Overview
Swanson Health Products, an independently owned and operated company based in Fargo, North Dakota,
was founded by Leland Swanson in 1969 as a mail-order business dedicated to providing quality nutritional
supplements at affordable prices with a strong emphasis on customer service. The company has grown to
become one of America’s largest privately held, mail-order and internet marketers of dietary supplements
with global sales and distribution channels. The company carries more than 20,000 products including
vitamins, minerals, supplements, sports nutrition, and organic beauty, pet and cleaning products. The company has more than twenty of
its own brands including Swanson Ultra, Sanson FIT, Swanson Superior Herbs, nad Swanson Healthy Home.
The company was founded by Leland Swanson, an arthritis sufferer who decided to sell supplements through the mail as a way of
sharing the products that he had found for himself. The Swanson’s began offering a line of basic nutritional supplements in the 1970s and
by 1979 the company had 30,000 customers.
Swanson sells its products through mail-order catalogs, online, or via telephone orders. In 2011, the company stated that the
internet had become its primary sales channel. In February of 2012, the company was voted the #1 Catalog/Internet brand based on
a customer satisfaction survey by ConsumerLab.com. In 2015, Swanson was voted the #1 catalog/internet brand for overall consumer
satisfaction by ConsumerLab.com subscribers.
At the beginning of 2015, Swanson also announced plans to double its international business over the coming 18 months. Although
Swanson’s major international markets are Canada, China, Australia, Japan and Great Britain, the company currently sells direct to
consumers in 173 countries and has operating partners in 51 countries that distribute Swanson products to retail establishments and on
foreign language websites.
© 2015 Penton
307
Company Profiles
In Spring 2015, Swanson announced that it was expanding its organic grocery line to nearly double its offerings over the next six
months. Swanson is especially keen to grow its non-GMO and gluten-free lines.
“We offer 642 different organic teas, 92 brands of Stevia and 53 different honeys. You can’t find that at any grocery store,” said Swanson CEO Ken Harris. “We just completed a market basket analysis of Swanson versus Whole Foods and we came in 24% cheaper. We are
giving busy families more choices at lower costs, delivered to their door for free. What could be better?”
Swanson Health S.W.O.T. Analysis
Strengths
Weaknesses
Long, solid history
Large customer database
Good story and customer loyalty
Offers big guarantees (satisfaction, price, etc.)
Innovative private label products
Impressive Facebook following
Expanding online grocery business
Expanding international business
Effectively transferring business from mail order to online
Extensive private label lines
• Aging customer demographic
• Website branding has had some update but still feels crowded
and old-fashioned
• Price competitor = lower margins
Opportunities
Threats
• Increase sophistication of e-mailing marketing
• Increase educational offerings
• Vegetarian, vegan, organic and non-GMO products resonate
with whole foods wellness trends
• Take rebranding to the next level to create a truly modern
and innovative brand image
• Continued international expansion
• Immense competition from NBTY
• Growing competition from mainstream online retailers such
as Amazon
• Fading of direct mail channel
• Direct-sellers often quick targets for regulatory investigation
•
•
•
•
•
•
•
•
•
•
NBJ Bottom Line:
Swanson is a well respected retailer in the direct-selling channel that continues to offer its customers new leading brands as well
as introducing its own innovative product lines, such as Swanson Homeopathy. The company has a very strong Facebook following and
continues to innovate to stay relevant. It appears to be very savvy in its transition from a mail order to online retailer. Its branding could
still stand to be updated, but the company walks a fine line between an aging mail-order customer and often younger internet purchasers. Its expansion of online grocery is on trend and allows Swanson to take advantage of existing infrastructure to compete in a rapidly
expanding natural products segment.
Website:
www.swansonvitamins.com
© 2015 Penton
308
Company Profiles
Threshold Enterprises Ltd. (Source Naturals,
Planetary Herbals)
2012
2013
2014
64
66
64
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
60
93%
Vitamins
17
28%
Mass Market Retail
1
2%
Minerals
6
10%
Direct/Other
Channels
3
5%
Herbs &
Botanicals
30
47%
Private Label/
Contract Manuf.
0
0%
Meal
Replacement
0
0%
Sports
Nutrition
2
3%
Specialty
TOTAL
64
100%
TOTAL
8
12%
64
100%
Company Overview
Threshold Enterprises, Ltd., located in Scotts Valley, CA, was founded in 1978 by Ira Goldberg. The company is a
well known national nutritional supplements distributor and manufacturer of Source Naturals® and Planetary
Herbals™ brands. The company’s brands are sold through more than 7,000 health food stores as well as the
internet. The company has grown significantly through exceptional channel relationships, product innovation
and the reputation of its brands for potency, quality and value. Threshold Enterprises is one of Santa Cruz
County’s larger employers, with over 850 employees.
Two years after founding Threshold, Goldberg realized that he shouldn’t just be distributing supplements, he should also be selling
his own line, and thus in 1982 he founded Source Naturals. At the time, the idea of combining many nutrients, herbs and nutraceuticals
in one formulation was a fairly novel idea, and Source Naturals pioneered the concept with Wellness Formula, now a top immune support product. Other award winning products in Source’s line-up include Life Force Multiple™, Mega-Kid Multiple™, Inflama-Rest™, the Skin
Eternal™ line, Higher Mind™, Essential Enzymes™, and Male Response™. New products for the company include the Vegan True line.
Planetary Herbals was founded more than 30 years ago in response to Goldberg’s realization of the importance of herbal products.
Goldberg worked with Dr. Michael Tierra to take formulas that Teirra was using in his practice and commercially package them. Planetary Herbals products offer a combination of classic herbal traditions, integrating herbal formulas with the latest findings of clinical
pharmacological research. Additional product formulators include Lesley Tierra (NCCAOM), Alan Tillotson, PhD, Jill Stansbury, ND,
Tom Dadant (Herbal Storyteller), and Roy Upton, RH.
© 2015 Penton
309
Company Profiles
Threshold Enterprises S.W.O.T. Analysis
Strengths
Weaknesses
• Wide selection of supplements (especially herbal products)
under Planetary Herbals and Source Naturals brands
• Global distribution
• Innovative immune support and other on-trend condition
specific product lines
• Vegan offerings
• Branding is weak and does little to differentiate itself - packaging has a generic feel
• Bare bones Planetary Herbals website is not engaging and
makes company seems less professional – need to update as
they have Source Naturals site
Opportunities
Threats
• Product selection tools would assist customers in selecting
from a wide array of Planetary Herbals products and likely
increase sales levels and brand loyalty
• Redesign packaging to attract modern consumer
• Increase flow of new product development backed by clinical
research to enliven consumer base
• Use distribution contacts and new products and packaging
to move into whole foods wellness space
• Further engage consumers through website
• Low quality, low priced manufacturers – especially in the
herbal sector globally
• Many natural brands with stronger product stories, including
research and new products, are well positioned to continue
taking market share
NBJ Bottom Line:
Threshold is a large, private distributor of supplements in the natural channel, in addition to producing two successful wellness-focused supplement brands. Source Naturals Wellness Formula has long been a leader among immune support system products. The
company is making some strides with updating of the Source Naturals image and the new Vegan True line; however, it needs to devote
more time to product innovation and marketing to create real consumer draw.
Website:
www.sourcenaturals.com
www.planetaryherbals.com
www.thresholdenterprises.com
© 2015 Penton
310
Company Profiles
Kainos Capital (SlimFast)
2012
2013
2014
120
115
93
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
2
2%
Vitamins
0
0%
Mass Market Retail
82
88%
Minerals
0
0%
Direct/Other
Channels
9
10%
Herbs &
Botanicals
0
0%
Private Label/
Contract Manuf.
0
0%
93
100%
0
0%
Meal
Replacement
Sports
Nutrition
Specialty
TOTAL
93
100%
TOTAL
0
0%
93
100%
Company Overview
Based in Dallas, TX, Kainos Capital is a middle market private equity firm focused on the food and consumer sector.
The Kainos Team has extensive investment and operating experience in the industry, having invested more than $2
billion of equity in more than 40 transactions in the food and consumer sector with a total transaction value in excess
of $7 billion.
Last year was busy for Kainos, starting with the acquisition of InterHealth in January 2014. InterHealth produces a wide range of
dietary ingredients, such as Meratrim®, Super CitriMax®, UC-II®, Aller-7®, and Zychrome®. According to a press release at the time of the
acquisition, the InterHealth team hopes that Kainos Capital’s vast knowledge of the nutritional ingredients market can help spur the
company’s continued growth and bolster the success rate of its future endeavors.
InterHealth’s weight loss ingredients fit in well with Kainos’ July acquisition of the SlimFast brand from Unilever for an undisclosed
amount. Unilever maintains a minority stake in the business.
Andrew Rosen, Managing Partner of Kainos Capital, said: “We are tremendously excited to acquire the SlimFast business in partnership with Unilever. SlimFast is the most recognizable brand name in weight management and over the last twenty years has helped
millions of people lead healthier lives. Chris Tisi and his team have decades of experience in the diet and weight management category
and are ready to give Slim-Fast the resources and entrepreneurial focus that will drive the brand to new heights.”
The company’s acquisitions didn’t end with SlimFast. In March 2014, the InterHealth arm acquired Chick Cart, a nutritional ingredient manufacturer including the UC-II ingredient that had been exclusively licensed to InterHealth. In May 2015, InterHealth acquired
Next Pharmaceuticals, another raw material supplier known for brands such as Relora, which supports healthy stress and weight levels.
Kainos also owns complementary companies Milk Specialties Global, a whey protein manufacturer, Healthy Delights, an international branded marketer of supplement products including the line of nutritional confection chews and Nu-Life, a 50 year-old multivitamins brand.
© 2015 Penton
311
Company Profiles
SlimFast began when S. Daniel Abraham first produced his SlimFast meal replacement drinks in 1977. After the success of Dexatrim
and other over-the-counter drugs, he spun off SlimFast Foods in 1990 from his Thompson Medical Company to capitalize on the needs
of weight-conscious consumers. SlimFast sells ready-to-drink shakes, drink powders, and snack bars through retailers in North America,
the UK and Ireland.
SlimFast products are marketed directly to the consumer through TV ads and a comprehensive website. The company’s current
marketing centers on the family friendly “It’s Your Thing” slogan, and the weight loss program continues to be focused on two meals of
SlimFast products paired with one traditional 500-calorie meal, with suggested recipes on the website. Kainos is spending more than
$50 million, according to AdAge, on the new TV advertising campaign in the hopes of boosting sales that have been quickly declining in
recent years.
Kainos Capital (SlimFast) S.W.O.T. Analysis
Strengths
Weaknesses
• Online diet program model reduces overhead costs compared
to other diet programs
• Products sold at attractive price point
• New backer Kainos Capital providing new direction and advertising budget
• Recognized name and brand that has been in the market for
many years
• SlimFast doesn’t offer clients the full service attention competitors like Jenny Craig or Weight Watchers do
• SlimFast does not have an educational community and coaching component in its business model
• Viewed as a “crash diet” and not a lifestyle choice
• Has done little to attempt to capture the male market like
many of its competitors have
Opportunities
• Obesity rates are increasing internationally, expand overseas
with lifestyle messaging
• Offer full-service weight loss services
• Offer specialty options such as dairy-free or gluten-free
• Corporate wellness program integration
• Develop and sell healthy frozen meals and desserts under
the Slim-Fast brand
Threats
•
•
•
•
Lots of competition in slow growth segment
The weight loss sector is seasonal and volatile
Trend toward lifestyle diets
Diet programs that build client relationships
NBJ Bottom Line:
SlimFast is a legacy weight-loss brand that has been struggling for years. The brand’s purchase by Kainos Capital should provide
new focus and the new marketing campaign seems to be headed in the right direction. Kainos’ ingredient and manufacturing portfolio
should also bring operating synergies. However, the SlimFast brand feels tired compared to all of the new, healthy, lifestyle-based weight
loss supplement options, and brand will have to do more than just change its marketing in order to gain future success.
Website:
www.slimfast.com
www.kainoscapital.com
© 2015 Penton
312
Company Profiles
USP Labs
2012
2013
2014
92
98
90
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
0
0%
Vitamins
0
0%
Mass Market Retail
85
95%
Minerals
0
0%
Direct/Other
Channels
5
5%
Herbs &
Botanicals
0
0%
Private Label/
Contract Manuf.
0
0%
Meal
Replacement
0
0%
90
100%
Sports
Nutrition
Specialty
TOTAL
90
100%
TOTAL
0
0%
90
100%
Company Overview
USPlabs, based in Dallas, Texas, is a developer of hardcore bodybuilding supplements, including
pre-workouts, pro-hormones, thermogenics and anabolic formulas.
Its once flagship pre-workout product, Jack3d, enjoyed mainstream popularity and growth before
coming under fire for its use of DMAA. DMAA, also known as MHA or geranium extract, is an allegedly natural ingredient that has been
linked to liver damage and heart failure, and was banned by the FDA in 2013. USPlabs had more issues with the FDA in early 2015 when
the FDA warned that international shipments of OxyELITE Pro Super Thermogenic contained hidden amounts of fluoxetine, a potentially harmful antidepressant that has been shown to be associated with suicidal thinking, abnormal bleeding, and seizures.
© 2015 Penton
313
Company Profiles
USPlabs S.W.O.T. Analysis
Strengths
• Growing popularity of pre-workout category
• Strong, if not misguided, customer demand for bleeding-edge supplement products
• Jack3d legacy
• Strong branding
Weaknesses
• Cornerstone products: Jack3d and Oxyelite no longer contain
DMAA due to FDA actions
• Tainted company image
• Hard to set themselves apart (in a good way) from other hardcore sports nutrition brands
• Products that require a page of “warnings”
Opportunities
Threats
• Create a very transparent product portfolio to regain regulatory and consumer trust
• Translate past success in pre-workouts into more refined
marketing and solid science
• Complement glutamine, thermogenic and pre-workout products with more commodity-type products like whey protein
and multivitamins to help grow breadth of brand
• Identifying and using the next hot, but not unsafe, sports
nutrition ingredient
• Provide the company story on the website to give it a more
authentic feel
• Any DMAA-related adverse events could cast aspersions
across all SNWL marketers, making USP a common enemy
• Class action lawsuits galore over false marketing of DMAA
as natural
• Continued FDA scrutiny of sports nutrition products and hot
ingredients such as DMBA
• USPlabs and the DMAA problems continue to be covered in
the media when discussing the new DMBA controversy
• Senators urging FDA to go after USPlabs for fluoxetine contaminants
NBJ Bottom Line:
In May 2012, the company, along with nine other marketers and manufacturers, received an FDA warning letter compelling USPlabs
to cease sale of products containing DMAA, which FDA alleged is a synthetic stimulant and not a dietary ingredient. The controversy
has continued even after DMAA was banned and removed from USPlabs’ products. It’s never good when Senators ask the FDA to go
after you. And even though USPlabs hasn’t been hit in the latest DMBA warnings from the FDA, almost every article mentions the brand
and its DMAA problems when addressing the new DMBA issue. While USPlabs has obviously formulated products that resonate with
hardcore athletes, the company is going to have difficulty getting back to a growth model if it can’t step out of the controversial limelight.
USPlabs are obviously walking the tightrope between providing the type of products its customers want and not falling into trouble with
the FDA.
Website:
www.usplabsdirect.com
© 2015 Penton
314
Company Profiles
VitaQuest International
2012
2013
2014
208
193
203
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
20
10%
Vitamins
41
20%
Mass Market Retail
0
0%
Minerals
41
20%
2%
Herbs &
Botanicals
41
20%
Meal
Replacement
10
5%
Sports
Nutrition
51
25%
Specialty
20
10%
204
100%
Direct/Other
Channels
4
Private Label/
Contract Manuf.
179
TOTAL
203
88%
100%
TOTAL
Company Overview
VitaQuest International, LLC, located in West Caldwell, New Jersey, provides custom formulated
lifestyle nutritionals and multi-channel distribution of specialty nutritional and nutraceutical
products. As a contract manufacturer in the 21st century, the company is part of an increasing
industry trend where contract manufacturers no longer simply formulate to customer specificiations. VitaQuest offers complete solutions including product concepts, formulations, GMP manufacturing, lab services, packaging
design, regulatory compliance support and marketing support. In February, 2006, VitaQuest was purchased by CK Life Sciences International Holdings, Inc and operates as one of its subsidiaries.
Founded in 1977, VitaQuest’s has operated its subsidiaries under Windmill Health Products (its branded product line) along with
contract manufacturing arms Garden State Nutritionals, Inc. (GSN), and Celmark Hydroceuticals. As of mid-2015, the company is
operating its contract operations under the Vitaquest International name and the Garden State website now redirects to the primary
Vitaquest site.
The company contract manufactures a wide array of supplement delivery formats, such as time release, tablets, capsules and chewables and produces a wide array of supplement products. The Windmill brand includes a wide array of supplement products including
vitamins, weight loss products, herbal teas, supplements, sports nutrition and probiotics. Windmill also represents many high profile
brands such as QuickTrim, Go Kids Lazy Town, Sensa, Enzyte, Garden Greens, and Rejuvicare.
The Celmark division manufacturers both skin care and liquid supplement products for private-label and contract manufacturing clients.
© 2015 Penton
315
Company Profiles
VitaQuest International S.W.O.T. Analysis
Strengths
• Large GMP manufacturing facility offers flexibility to accommodate both small and large clients
• Unique formulation and packaging capabilities
• Sold in over 3,500 pharmacies across the country
• Celmark provides market diversification through beauty care
products
• Combination of contract manufacturing and branded products allow for comprehensive understanding of industry
trends
Opportunities
• Private label segment continues to increase
• Invest in new product development and innovation to facilitate long-term customer relationships
• Continue to develop strategic partnerships with highly visible
brands
• Smaller brands entering the market rely on contract manufacturers and strong partnerships
Weaknesses
• Websites have had some updates but are still behind the
times in look and feel
• Differentiation from other contract manufacturers could be
better communicated
Threats
• Custom manufacturing and private label contracts within
mass market are highly competitive
NBJ Bottom Line:
VitaQuest is a large, but second-tier full service contract manufacturer of dietary supplements offering turnkey solutions for a variety of supplement formulation, manufacturing, packaging, and marketing challenges. Its Celmark division allows it to tap into two of the
hottest natural products trends: liquid supplements and skin care products.
Website:
www.vitaquest.com
www.celmarkhydro.com
www.windmillvitamins.com
© 2015 Penton
316
Company Profiles
Xymogen
2012
2013
2014
50
64
68
Sales
($mil.
Sales Channel
% of
Sales
Product
Category
Sales
($mil.)
% of
Sales
Natural & Specialty
Retail
0
0%
Vitamins
38
55%
Mass Market Retail
0
0%
Minerals
14
20%
Herbs &
Botanicals
Direct/Other
Channels
68
Private Label/
Contract Manuf.
0
TOTAL
68
100%
0%
100%
10
15%
Meal
Replacement
0
0%
Sports
Nutrition
3
5%
Specialty
3
5%
68
100%
TOTAL
Company Overview
Xymogen is a provider of research-based, high-quality nutraceuticals and functional foods sold exclusively
to licensed healthcare professionals. The company is based in Orlando, Florida. Xymogen was founded in
2003 by current CEO Brian Blackburn, along with Will McCamy, and Medical Director, Robert Rountree,
M.D. McCamy and Rountree have since left the company. The company started with a US focus, expanded
to Canada in 2012, and now sells products in more than 16 countries.
The company has experienced strong growth since it started, reporting record breaking revenue of $7
million for January 2015. Xymogen’s annual sales have increased steadily from just over $5.2 million in 2004 to more than $68 million by
the end of 2014. The company was recognized as one of Inc. Magazines Inc. 5000 fastest growing companies in 2014, its 7th appearance
on the list.
Xymogen began manufacturing its own formulas when it opened its new, 136,000-square-foot manufacturing facility and headquarters in 2012. Since that time, the facility has been GMP (Good Manufacturing Practices) and GMP for Sport registered with NSF International. The company is also working to gain the Australia Therapeutic Goods Association certification in 2015.
New products in the last year include FIT Food Vegan Complete, part of its line of protein shakes, and ALAmax Protect to support cardio
metabolic health.
© 2015 Penton
317
Market
Company
Data Overview
Profiles
Xymogen S.W.O.T. Analysis
Strengths
• Sales team former Metagenics staff; experience with practitioner sales
• Quickly grown into a true competitor in the practitioner
channel
• Hypoallergenic supplements; quality profile
• Sell through internal sales force to maintain control, rather
than through distributors
• Practitioner controlled e-commerce site
Opportunities
•
•
•
•
New growth avenues in neuroscience and brain health
International expansion
Expansion of FitFood line to target healthy diet trend
Join the personalized medicine revolution
Weaknesses
• Me-too products; no truly unique offering
• Co-founders leaving the company
Threats
• Well established brands such as Pure Encapsulations and
Standard Process have better reputations in the practitioner
channel still provide a tough challenge for Xymogen
NBJ Bottom Line:
Over the last decade, Xymogen has transitioned from small startup to a major player in the practitioner channel. Continuing to
introduce new products that resonate with consumer trends, while also being high quality, will help it to maintain its momentum.
Website:
www.xymogen.com
© 2015 Penton
318

NBJ Supplement Business Report 2015

Transcription

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