Earlier this year in “Business Insights,” I reviewed “Key Success Factors for Nutraceutical Products.” These criteria—including sensory, efficacy, safety—are the critical factors to be considered in the innovation process to help assure success of new product launches. This month, I’ll reflect on how market dynamics over the past decade have changed the relative importance and characteristics of the success factors.
Growth of Mainstream Consumers
Notably, in the evolution of the dietary supplement market, the growth of mainstream consumers has significantly affected product development. Significant growth has been seen in the food/drug/mass/club (FDMC) distribution channel where consumers’ needs and desires are often quite different from the traditional “health food” consumer—in this case, “health food” broadly encompassing the natural products, multi-level marketing and catalogue channels. For starter,s let’s consider the importance of taste and other sensory factors.
The success factor of sensory and organoleptic characteristics encompasses taste as well as texture, color and smell. Not too long ago, there was a widely held notion that if a dietary supplement or “health food” DIDN’T taste bad, it probably WOULDN’T work. Given the passionate belief of health food consumers in their products and the fact that processing technologies had not been focused on this industry, many products lived up to the reputation.
For instance, omega 3s from fish sources were not as refined and encapsulation technologies were not widely utilized, thus a strong fishy taste and aftertaste was often the norm. Botanicals, amino acids, peptides and proteins and even fibers presented substantive product development challenges in terms of improving sensory and organoleptic characteristics.
Over the years, however, food scientists have been quite successful at remedying many of these issues. And that’s great news, especially considering that today’s mainstream consumers are not willing to sacrifice taste for health benefits. This is particularly true of products providing preventative health benefits, i.e., those that may be realized in the future. Therefore, to succeed in today’s dietary supplement and functional food market, products must deliver on consumers’ high sensory expectations.
Clear & Compelling Benefits—And Therefore Efficacy
Driven by educated consumers with specific lifestyle and life stage needs, products must provide clear and compelling benefits that address unmet needs. These needs have evolved over time driven by, for instance, the aging of the U.S. population.
Health issues faced by Baby Boomers are quite specific, ranging from joint pain, mental acuity, heart health and vision, to more general categories such as health, energy and wellness. Further, Baby Boomers are not accepting aging as an inevitable decline in activity and performance, as their parents may have.
The proliferation of quality medical information on the Internet, more knowledgeable healthcare professionals and consumer expectation for clinical substantiation highlights the increasing need for demonstrated efficacy. Historically, “the story” behind a new dietary supplement was often relied on to drive consumer purchase decision or belief. That story could be based on anything from significance in clinical research to cultural beliefs and practices from a faraway land.
Interestingly, the need for a good story is still effective in generating consumer interest, however, today’s consumer has also grown to expect solid clinical substantiation as a “reason to believe.” Products targeting mainstream distribution will always be held to a higher standard. As an executive from a major club store chain stated at the recent NBJ Summit, “Our products must be on trend but will never be trendy.”
Safety is #1
The safety of dietary supplements has always been important to consumers; however, several recent surveys have shown it is now the #1 product attribute affecting consumer purchase decision. Negative media coverage of products not delivering on label claim, poor quality of some imported ingredients or even deaths associated with adulterated products have elevated safety to a new level.
Another change in consumers’ expectation of safety is increased awareness of potential interactions between supplements and Rx or OTC medications. Continued education of healthcare professionals, especially pharmacists and primary care physicians, will help to alleviate this concern. Unquestionable safety in consumers’ minds has become an ante for new products entering the market.
Lifestyle fit includes a fairly broad group of characteristics, including, for example, convenience, eating and purchasing patterns, pill consumption, product forms and applications, sustainability and other environmental issues, as well as preference for organic, natural and vegetarian/vegan products.
Convenience. The demand for convenience has changed quite dramatically over the years. No longer are customers willing to seek out products from out-of-the-way health food stores; they expect to purchase where they shop, including convenience stores and the Internet. For today’s busy consumer, one-stop-shopping has become the norm.
Format. In years past the vast majority of dietary supplements were delivered in pill or capsule form or in powdered beverage mixes. While today most supplement users still prefer capsules, we have seen a rather dramatic increase in functional food sales. Though food applications present challenges for product developers and regulators, one just has to look at the probiotic and omega 3 (specifically EPA & DHA) markets to gauge consumer interest in alternative forms. Emerging product applications include gummies for adults and ready-to-drink (RTD) beverages, as well as fortification of a variety of more traditional food forms.
Value. The economic downturn over the past few years has increased demand for good value in health and wellness products. Though it appears the typical supplement consumer is using fewer supplements, we have seen a fairly significant influx of new users in the category.
New users are less brand loyal than supplement users were in the past. While traditional brands still dominate in the health food channel, mainstream consumers are more open to private label, store-branded products. Additionally, consumers who have switched to private label supplements during tough economic times do not exhibit a strong interest in moving back to their branded products once their economic situation stabilizes.
Insurance. One area where we have not seen much change over the years is third-party payment for supplements. It has been widely believed that once insurance companies realize the long-term benefits of preventative healthcare use, they will add select supplements to their formulary of covered products. This has not been the case. As a side note, during a “preventative health” sales call to an insurance company a few years ago, I was turned down—even with solid data supporting the long-term savings afforded by our product. The insurance company’s perspective was that on the whole consumers change insurance carriers every few years, “so why should we pay for benefits that another company will benefit from?”
Historically, Rx medications have often been less expensive than supplements due to a minimal co-pay for prescription drugs. With increases in patient contributions to medications and increasing awareness of side-effects, consumers are more often considering the alternative of efficacious dietary supplements. This is a trend we will see affecting more people as the government works to reel in healthcare spending.
For the Future
With greater access to the Internet, today’s consumers are far more enlightened about alternative and complementary therapies. And in the last decade especially, consumer behavior regarding supplements and functional foods has changed quite dramatically. Today’s enlightened consumer expects superior sensory attributes for products in preferred forms, unquestionable safety and efficacy, convenience and environmentally friendly products.
From the supply side, sourcing and development of bioactive ingredients, clinical substantiation and technologies supporting applications development have often exceeded consumer expectations. This has led to increased support of supplements by allopathically trained healthcare professionals and an emerging market of mainstream consumers who are realizing the benefits of high-quality dietary supplements and functional foods.
By studying the major changes in the nutraceuticals market and the ensuing impact on key success factors, product developers and marketers can better position their companies to succeed in an increasingly competitive environment.