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November 2014 Issue
Last Updated Friday, November 21 2014
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Word From Wall Street: Reviving Supplement Sales



Evaluating the importance of marketing spend.



By Adam Ismail



Published July 1, 2002
Related Searches: Business & Healthcare

Reviving Supplement Sales



Evaluating the importance of marketing spend.



By Adam Ismail



When supplement sales growth began to fall a few years ago, not a lot of effort focused on trying to determine the drivers behind the decline. In fact, the most common response was to blame it on the media and its overly negative coverage of supplements. However, one trend that went largely unnoticed was a steady decline in marketing dollars invested in the space, a trend which continues even to this day.

By examining public supplement manufacturers like Natrol, Twinlab, Weider and Nutraceutical International, the close relationship between de­creased investment and its effect on revenues can be seen.

In traditional consumer products industries, which have been studied much more extensively than the supplement industry, conventional wisdom indicates that not increasing marketing investment, keeping all other factors the same, will result in a decrease in sales between 7-10%. In our industry the case remains more or less the same. In a sampling of three quarters where these leading manufacturers did not increase their marketing expenditures, sales dropped an average of 10%.

This is not to say that marketing spend is the only reason supplement companies experienced sales decreases, as they certainly faced an uphill battle against other factors like the media. In the three quarters where they recorded their largest increases in marketing spend, an average 16% increase, companies only mustered an average 1.4% increase in sales.

Does this mean marketing in our industry is hopeless if we can only hope to muster 1-2% increases in sales with significant increases in marketing expenditures? Probably not, in fact, it has probably helped companies in the industry try to focus on finding ways to operate more efficiently in order to avoid letting their sales decreases turn into net losses. What it does mean is that the industry may need to find a more effective way to market its products.

Most people have seen the brand building statistics showing that most consumers cannot name a supplement brand. And the closest thing to a recognizable brand for the industry is Centrum®, which has probably done the best job of marketing. However, for most supplement manufacturers, which have many more SKUs than the Centrum line, marketing is a much more difficult task.

In the past two years companies have resorted to branding their individual formulas and products rather than focusing on their entire portfolio. While this approach certainly allows more flexibility in taking advantage of hot trends and ingredients at the consumer level, it really is a short term strategy. While none of these manufacturers completely abandon their own brand, the product name holds much larger significance on most packages. In the long term, it takes money away from building companies’ brands, which is a very lengthy but vital process. While Centrum is the most recognizable supplement brand, none of the product formulas resonate significantly with consumers. Yet, the lesson we learned from St. John’s Wort and other herbal products is that fad products will not maintain their growth. So, why invest in building a product brand that may decline in the near future when you can invest in your company’s brand, which should last significantly longer?

Private label brands quickly took share from established supplements in both the mass market and natural foods channels because there was little consumer loyalty to supplement brands. With some private label supplements being priced up to 40% less than branded products, supplement manufacturers have their work cut out for them. This is why maintaining marketing spend is vital, but even more so why it is important that manufacturers devote necessary resources to building brands to survive in the long term.NW


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