Ellen Schutt11.01.98
An article in Forbes magazine (9/28/98) talks about the new nutraceuticals market. ABC's 20/20 (9/18/98) covers Michael Milken's remission from prostate cancer due to a soy-based diet. USA Today (10/14/98) dedicates the front page of its Life section to an article on pharmaceutical companies entering the botanicals business. And nutraceuticals have hit the mainstream.
Everywhere you turn today, it seems someone is talking about the latest answer to the health problem of the moment. Today's baby boomers are more concerned than ever about preserving their health and living healthier-not just longer-lives. In the U.S., a person turns 50 every seven seconds. Japan's population is even older. This population is taking charge of its own life and taking responsibility for its own well-being. Add to that the growing awareness of herbal remedies or functional and fortified foods and their impact on health and you have a market ripe for expansion.
In terms of the industry-or industries-involved, trends are also emerging that will impact the growth of nutraceuticals. Large food companies, always on the lookout for ways to diversify their product line and still turn a profit, have set up functional food or nutraceutical divisions. Pharmaceutical companies, a sworn enemy of dietary supplements for years, are now adopting the "if you can't beat 'em, join 'em" mentality and jumping on the nutraceuticals bandwagon. At any given meeting or trade show, you'll see a number of traditional pharmaceutical types checking out the action. These companies are already set up to implement the extensive research necessary for drug discovery; the move into the less expensive and time-consuming nutraceuticals research process is a logical progression.
Some companies are doing more than research, if the recent spate of mergers and acquisitions is any indication. The purchase of Solgar Vitamins by American Home Products in particular made news, as did more recently the acquisition of Pharmanex by Nu Skin. Acquisitions also continue among smaller manufacturers, as well as at the retail level, and from all accounts, this trend appears likely to continue. Strategies behind these mergers and acquisitions vary, from vertical integration to market dominance in a particular segment or region to gaining complementary technologies or products.
Another trend that will continue to evolve is the push for standardization, both in terms of "fingerprinting" as well as standardizing for consistency. A concern primarily in the botanical extract segment (see Hot Herbs, page 44), the nutraceuticals business as a whole could benefit from a standardized industry that is recognized as such. The consumer media plays a very powerful role in directing the public's ideas about the safety and efficacy of such products; a well-publicized standardization campaign would be a major step towards further legitimizing the business.
Tied into research and standardization is the patentability of products. The dilemma of how to patent a natural product has held this industry back in terms of strong clinical (patentable) research for years and the answers may not be easily forthcoming. One possibility is the proposed Nutraceutical Research and Education Act, which is modeled after the Orphan Drug Act and could potentially provide this business with the patent protection it needs. Opinions are divided on this, however, and the act is still in its infancy (see page 74 in our print publication for more information).
Finally, while standardization is important, so too is brand differentiation. How do you build brand loyalty? Many consumers today know about St. John's Wort, but they don't know which brand of St. John's Wort is better. Even in terms of the product itself, confusion reigns. Should you buy the root or the leaf? Is a standardized extract better than a whole herb? Consumer education also needs to play a role in the nutraceuticals industry of the future.
Nutraceuticals by any other name are still as sweet and-under the guise of many other names-have had a long history of use in diverse global regions. The challenge now is convincing an American public that these products are efficacious and are actually capable of bettering one's lifestyle over the long term.
One area where the industry must overcome adversity is in the medical arena, where most doctors are resistant to prescribing a functional food or dietary supplement rather than a drug. Likewise, consumers are familiar with and comfortable with taking medication, to some degree, and are not necessarily willing to change that mentality when treating a particular illness or condition. In our favor, however, is the fact that consumers-especially older consumers-are now more open to taking dietary supplements or eating certain foods to maintain their health. Patients are also pushing doctors to learn more about natural remedies and as HMO's become more open to covering complementary medicine (see related article on page 56 of the print publication), the industry should gain on the learning curve.
The debate continues to rage between philosophy and economics, however. As the industry registers double digit growth, manufacturers are jumping into the nutraceuticals market simply because of the money to be made. Companies that have a longer history in these businesses were involved originally because of the philosophy behind the foods and supplements. These two opposing views need to be reconciled and as the industry matures, the answer will fall somewhere in the middle.
Obviously, there is much to say about Washington's impact on this business, a fact many Washington lawyers can attest to. Here again, the industry will evolve as it grows and-although it will be a long road-eventually regulations, or the lack thereof, will benefit the majority of those in the business.
For an industry in its infancy in terms of mainstream acceptance, the nutraceuticals business has come a long way and it will continue to take giant steps forward to becoming a respectable industry in its own right.
Everywhere you turn today, it seems someone is talking about the latest answer to the health problem of the moment. Today's baby boomers are more concerned than ever about preserving their health and living healthier-not just longer-lives. In the U.S., a person turns 50 every seven seconds. Japan's population is even older. This population is taking charge of its own life and taking responsibility for its own well-being. Add to that the growing awareness of herbal remedies or functional and fortified foods and their impact on health and you have a market ripe for expansion.
From The Industry Standpoint
In terms of the industry-or industries-involved, trends are also emerging that will impact the growth of nutraceuticals. Large food companies, always on the lookout for ways to diversify their product line and still turn a profit, have set up functional food or nutraceutical divisions. Pharmaceutical companies, a sworn enemy of dietary supplements for years, are now adopting the "if you can't beat 'em, join 'em" mentality and jumping on the nutraceuticals bandwagon. At any given meeting or trade show, you'll see a number of traditional pharmaceutical types checking out the action. These companies are already set up to implement the extensive research necessary for drug discovery; the move into the less expensive and time-consuming nutraceuticals research process is a logical progression.
Some companies are doing more than research, if the recent spate of mergers and acquisitions is any indication. The purchase of Solgar Vitamins by American Home Products in particular made news, as did more recently the acquisition of Pharmanex by Nu Skin. Acquisitions also continue among smaller manufacturers, as well as at the retail level, and from all accounts, this trend appears likely to continue. Strategies behind these mergers and acquisitions vary, from vertical integration to market dominance in a particular segment or region to gaining complementary technologies or products.
Another trend that will continue to evolve is the push for standardization, both in terms of "fingerprinting" as well as standardizing for consistency. A concern primarily in the botanical extract segment (see Hot Herbs, page 44), the nutraceuticals business as a whole could benefit from a standardized industry that is recognized as such. The consumer media plays a very powerful role in directing the public's ideas about the safety and efficacy of such products; a well-publicized standardization campaign would be a major step towards further legitimizing the business.
Finally, while standardization is important, so too is brand differentiation. How do you build brand loyalty? Many consumers today know about St. John's Wort, but they don't know which brand of St. John's Wort is better. Even in terms of the product itself, confusion reigns. Should you buy the root or the leaf? Is a standardized extract better than a whole herb? Consumer education also needs to play a role in the nutraceuticals industry of the future.
Outside Factors Influence Business
Nutraceuticals by any other name are still as sweet and-under the guise of many other names-have had a long history of use in diverse global regions. The challenge now is convincing an American public that these products are efficacious and are actually capable of bettering one's lifestyle over the long term.
One area where the industry must overcome adversity is in the medical arena, where most doctors are resistant to prescribing a functional food or dietary supplement rather than a drug. Likewise, consumers are familiar with and comfortable with taking medication, to some degree, and are not necessarily willing to change that mentality when treating a particular illness or condition. In our favor, however, is the fact that consumers-especially older consumers-are now more open to taking dietary supplements or eating certain foods to maintain their health. Patients are also pushing doctors to learn more about natural remedies and as HMO's become more open to covering complementary medicine (see related article on page 56 of the print publication), the industry should gain on the learning curve.
The debate continues to rage between philosophy and economics, however. As the industry registers double digit growth, manufacturers are jumping into the nutraceuticals market simply because of the money to be made. Companies that have a longer history in these businesses were involved originally because of the philosophy behind the foods and supplements. These two opposing views need to be reconciled and as the industry matures, the answer will fall somewhere in the middle.
Obviously, there is much to say about Washington's impact on this business, a fact many Washington lawyers can attest to. Here again, the industry will evolve as it grows and-although it will be a long road-eventually regulations, or the lack thereof, will benefit the majority of those in the business.
For an industry in its infancy in terms of mainstream acceptance, the nutraceuticals business has come a long way and it will continue to take giant steps forward to becoming a respectable industry in its own right.