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    Features

    Nutraceuticals State Of The Industry

    Executives talk about current and future challenges.

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    11.01.01
    As we close out 2001 and head into 2002, some say the nutraceuticals industry faces an uphill battle in the face of a struggling economy, the aftermath of September 11 and dwindling consumer confidence. That said, many segments of the business continue to do well and many executives are positive about the future of specific product categories. Increased emphasis on science and credibility appears to be the focus on the supplement side of the business, while in the functional food and beverage area, new product introductions continue and consumer interest remains high. What follows is a look-from executives throughout the industry-at the year gone by and the year to come.

    "Once again the industry has experienced a difficult year and we can look forward to more of the same in '02. Although glucosamine and calcium continue to power along, there have been few big new products. The disappointments in the functional food arena continue. We can expect to see more M&A activity as big companies look to ease their way into the space. The recent deals between Danone and Stonyfield Farm and Johnson & Johnson acquiring Viactiv from Mead Johnson are two different examples of companies placing bets in nutraceuticals.

    "In the regulatory arena, we will see weakening support in Congress for DSHEA although the new focus on bioterrorism and its connection to food safety may preclude any significant changes. As long as the industry fails to seize the initiative, we can look forward to more negative press. Nature abhors a vacuum."

    Steve Allen, vice president,
    new business development,
    Nutrition Division, Nestle USA


    "Consumers are paralyzed with confusion about the multitude of product offerings (so they buy none). The solution, I believe, lies in getting consumers to understand (and believe us when we tell them) what differentiates one product from another. This is where network marketing, with its development of one-to-one relationships, will shine. By being able to communicate the intricacies of today's complex evidence-based products, network marketers are in a unique position to help educate their customers in ways that are not possible with traditional retailing. The educational aspect of the relationship helps to empower customers to select supplements that they can understand, trust and believe in."

    Shawn Talbott, senior scientist,
    pharmacology & clinical affairs, Pharmanex


    "Over the next year we will see a dramatic focus on nutrients with clinically proven efficacy and safety. The thousands of scientific studies that have proven the health benefits and safety of DHA omega 3 fatty acid coupled with FDA's issuance of a qualified cardiovascular health claim for DHA (and EPA) and the recent allowance of DHA for use in infant formula are raising consumer awareness. The recent RDI in France of 250 mg per day of DHA for pregnant and lactating women and the expected AI (adequate intake level) in the U.S. will significantly increase demand for DHA-enriched products."

    Mark Braman, president and CEO, OmegaTech, Inc.

    "Again in 2001 we saw an increase in the use of long chain omega 3 fatty acids, EPA and DHA, in the U.S.; we have now seen steady growth in the use of EPA and DHA for six years in a row. We who work in this particular area see all the science that is done with EPA and DHA and I think there are not many products with this kind of science in the nutritional area.

    "The main objections from the consumer against EPA and DHA (or fish oil ) has been the tendency to a fishy burp and a possible concern about environmental contamination. More then 20 companies within the industry are now-in connection with the Council for Responsible Nutrition (CRN)-in the process of working out a voluntary quality standard for EPA and DHA, which should take care of these problems. It is our hope that we can have as many marketers of fish oil as possible follow the standard and, by this, give consumers a product they can trust and let the category grow further.

    "We also see in a tendency in the U.S., as in Europe, to switch to a more highly concentrated product, which requires less capsules and more convenience."

    Bjorn Rene, sales and marketing
    director, Pronova


    "The state of the industry today continues to evolve. The need for products based upon sound, substantiated science has never been more vital to the health and wellbeing of those who participate in our businesses. We never could have realized the growth our industry has had without the passage of DSHEA and we must not only support it, we must insist upon its full implementation not just by governmental agencies, but by all involved, whether they be suppliers, manufacturers, researchers or direct to consumer contacts. Every time a product is misrepresented or found to not be what it is claimed to be, the whole industry ultimately carries the burden of this guilt in the view of media and consumers. The message should be quite clear. If a product poses any risk of being confusing for the consumer or is not safe, let's not take the chance.

    "As a company, Kemin Foods continues to make a significant investment in not only internal research and development but also in third-party and contract research to help ensure product representations are accurate and supported by science. We believe the actions of leading companies directly reflect the commitment needed to develop and bring to market high quality products that were mandated under DSHEA and that should be everyone's objective.

    "True, we have seen some difficult situations in recent times but the industry is alive and well and continuing to grow. In spite of what some would like to see believed about the supplement industry, we are concerned, we do listen and we are going to overcome the negative actions of those few companies who choose to live on the edges of credibility."

    Chuck Brice, senior vice president of sales and business development, Kemin Foods

    "Probiotic supplements have grown out of the niche market of a few years ago to one of today's hottest supplements. With growing interest and awareness about them, it is not surprising that over 80 North American companies bring probiotic supplements to consumers, totalling about $100 million in 2001. The main reason halting stronger growth, compared to other supplements, is still the public's limited knowledge about the benefits of documented probiotics and their efficacy. Today's new technologies (enteric-coating and microencapsulation) will increase their efficacy, stability and viability and will expand their application into functional foods. These new delivery systems along with increased consumer education will potentially increase revenues to $150 million in 2004. So, we are on the right track! "

    Jean Leclerc, director of sales-
    The Americas, Institut Rosell-Lallemand


    "Turbulent times never really go away. Whether you are dealing with one crisis after another or just everyday challenges, uncertainty associated with doing business will always be present. Our industry is just like any other-it began with a high growth stage that eventually leveled off and now it has begun its slow descent into maturity, with hypercompetition squeezing margins and forcing consolidation. Luckily for us on the ingredient end of the value chain, there are a growing number of uses for natural ingredients, especially botanicals. It is no longer only about nutritional supplements, but growth is now being realized in functional foods, cosmeceuticals and a variety of niche markets. Effective penetration into these areas requires focusing expertise toward researching and developing products that cater to these areas. Only the most versatile and innovative companies that rely on scientific data and focus on quality will survive in the years to come."

    Darrin Duber-Smith, director of
    marketing and business development,
    Draco Natural Products, Inc.


    "The market for nutraceuticals was already languishing in 2001 and when the September 11 attacks occurred, business fell more sharply. In last year's comment, I stated that this industry is closely tied to the economy and availability of disposable income and as our economy has entered a recession, so has the industry. The consumer's incessant deluge by negative media, poor quality products and the economy has placed the industry past the apogee of the life cycle. This, however, should be an opportunity for the industry to look inwardly-as we all have had to do recently, assess its strengths, analyze its inadequacies and form an industry founded on quality products, based on science and guided by the need to credibly serve our constituencies."

    Don Stanek, director of sales, Linnea, Inc.

    "Natural Inc. has experienced its best year yet as a result of building a solid scientific foundation for our product, Tonalin CLA. As any reputable manufacturer will attest, published clinical data is what ultimately sets quality products apart from an influx of inferior products. We attribute our success and our customers' success to our dedication to research and building the Tonalin CLA brand. This ultimately helps our industry overall by sending the media a positive message about the natural products segment.

    "The natural products industry, like other industries across the board, was not entirely immune to the economic downturn this past year and especially the aftereffects of the September 11th tragedy. However, I remain optimistic about our industry since healthcare will always be an area of promise and potential. A good indication that as an industry we are moving forward collectively is the continuation of scheduled new product launches, trade shows and marketing programs. DSEA's formation is another positive step for propelling our industry forward.

    "In 2002, Natural Inc. looks forward to continuing its positive trend begun in 2001 through maintaining the course of credible research and extensive sales and marketing efforts. The more consumers learn of well-researched and efficacious supplements in the marketplace, the better for the industry as a whole."

    Nina A. Likins, director of marketing, Natural Inc.


    "Soy nutrition took another big step in 2001. Following the National Academy of Sciences previous recognition of choline as an essential nutrient, the FDA now allows a nutrient content claim for choline. This permits consumers to select foods, including supplements, that are a "good source" or "excellent source" of this nutrient. Soy lecithin, especially in its deoiled and fractionated forms, is a choline-rich food with excellent bioavailability. Choline and lecithin have a newly prized ability to positively affect brain development-including memory throughout life-cardiovascular health, liver health and reproductive development. Food applications will follow soon."

    Charles Worrall, director, health & nutrition, Eridania Beghin-Say America


    "No challenge may be greater than the need to convince consumers that supplements are necessary and effective. InterHealth Nutraceuticals meets this challenge with proprietary, science-based nutraceutical ingredients. CitriMax, ChromeMate, L-OptiZinc, Protykin and UC-II are examples of value-added ingredients many dietary supplement manufacturers rely upon to pass regulatory scrutiny and build consumer confidence. These types of ingredients also represent the future of the functional food and beverage markets, which will certainly generate even closer scrutiny. By demanding proprietary ingredients that are unique, efficacious and scientifically proven, our industry is better equipped to meet the problems of our rapidly changing business environment."

    William Seroy, president & CEO,
    InterHealth Nutraceuticals


    "This was a year of companies getting settled after several major acquisitions, FDA interceding with label claims and companies digging in to improve their existing products rather than launching new ones.

    "Product development efforts were centered around vitamin (antioxidant type) and mineral (calcium fortification) additions to new and existing products, with a few companies engaging in 'me too' taurine energy beverages. Healthy continues to mean indulgent with a 'good for you' additive, although many suppliers are being asked to supply GRAS status for any unconventional materials.

    "Soy interest continues to grow as companies test the water for consumer acceptance. We expanded our family of masking flavors and soy compatible flavors to meet this demand for better tasting products. Many new soy products will launch in 2002 primarily in the form of nutritional bars and beverages, not just soymilks.

    "In 2002, I expect to see an increased focus on health issues such as macular degeneration and overweight children. New products will need to taste good, offer timely results and be cost effective. These new market entries will follow the same trend of 'adding' a health benefit rather than 'removing' unhealthy components.

    "Consumer education is still the element for success that is missing from this industry. The organic industry is preparing such educational documents and if done well, they could pull the health focused consumers into their market."

    Maureen Draganchuk, vice president-
    business development, Virginia Dare


    "As a natural vegetable and marine oil supplier, Arista Industries has seen the economic slowdown impact the nutritional industry especially with respect to quality. We have had concerns that raw materials have been compromised to achieve lower prices, but as we have seen over the years, this policy does not work as the consumer ultimately suffers. Arista will continue to sell only the highest quality products. We believe that well informed buyers realize that the key to future growth is to maintain high quality standards. With this policy, we anticipate success for all our customers in 2002."

    Mary Ann Siciliano,
    national sales manager, Arista Industries


    "The industry has gone through numerous challenges over the last 20 years. It used to be that we battled FDA and endured its regular plant inspections. Back then, FDA really had trouble even classifying our business as an industry; it was either 'food' or 'drugs.' When there was a major threat against our products, we went to the people and won the passage of DSHEA and, for the first time, gained recognition as an industry. However, that recognition came at a cost that we are currently paying. To say the least, the media has been unkind and challenges to product claims have become a daily event. As an industry, we must clean up our act. One bad apple makes it tough on all the rest. Public perception has turned against us because of poor quality standards and the lack of scientific support for claims. Quality is essential for a strong industry and it is our firm belief that the nutraceuticals industry has a great future and that those companies that innovate using the latest technologies will be the real winners."

    Walter Rick, national sales manager,
    GCI Nutrients USA


    "We are struck by the increasing realization, by both consumers and industry players, that science is required to deliver health solutions to the consumer. To gain market share, nutrition companies are switching from reliance on undocumented claims to reliance on endorsement by physicians and other credible sources. We are also struck by the differences in the seriousness with which food companies ensure that their products are healthful. Some companies actively apply science to improve nutrition, while others view the role of R&D not as to provide health benefit but as simply to provide the illusion of health benefit to reassure unsophisticated consumers."

    Guy Miller, M.D., Ph.D., chairman & CEO, Galileo Laboratories, Inc.


    "As we close out 2001, I am pleased by recent meetings with major players in this industry who, despite initial reservations or misgivings, have realized that ConsumerLab.com's activities are necessary for the growth of both the industry and their own businesses. The burst of industry growth in the 1990's was fueled largely by consumer excitement about the potential for nutraceuticals; the subsequent decline was the result of consumer's expectations not having been fully met. By applying stringent quality standards and effectively broadcasting the names of products that meet these standards, ConsumerLab.com is guiding millions of consumers toward nutraceutical products most likely to work for them-greatly increasing the likelihood that they will have a positive experience, repurchase and recommend such products. Along the way, manufacturers are learning to make even better products. Now, and in the future, I expect the activities of ConsumerLab.com to play an important role in fueling sustainable growth in the nutraceutical industry."

    Tod Cooperman, M.D., president,
    ConsumerLab.com


    "The nutritional supplement business has experienced years of continuous growth founded on the principle that there were better natural health solutions than those allopathic medicines offered by the drug industry. With the recognition of the nutraceutical industry by the passage of DHSEA and the increased popularity of natural supplement products, the industry has been placed under the microscope and some of our products have failed the quality testing.

    "The entrance fee for joining the industry has been raised. Many of the products in the past were put together with one idea in mind: 'to increase sales.' Future products need to be built with the customer in mind. They need to work and produce concrete results over the long haul. The customer needs to feel that they are getting value for the investment. For the industry, that means investment in quality control, GMP, new equipment and better ways of doing business.

    "Improved quality control and solid scientific support for product claims are the cornerstones to building consumer confidence. Finding free reliable scientific advice on nutraceuticals is difficult. There is no single authoritative source of nutraceutical information and, in fact, there is no nutritional library in the U.S. With the latest Internet technology, it is possible to build an Internet nutritional library open for participation from qualified industry professionals and free for all users including the public. Such a library would not only be an authoritative depository for research within the industry, but a critical tool to expand the sales of nutraceuticals worldwide. Currently, BioStar Nutriceuticals is in the process of building such an e-commercial hub on the Internet to open up nutraceutical research, clinical trials and products in the world market."

    Richard Merriam, president,
    BioStar Nutriceuticals

    "Although the overall Japanese economy remains in serious trouble, the consumer interest in Japan in functional foods and nutraceuticals is continuing to increase. The FOSHU (Foods for Specified Health Use) category is growing in terms of the number of products approved, new 'functional components' allowed and new on-label health claims negotiated. Non-FOSHU functional food categories are growing as well, although with more restrictions on the allowed claims. It is expected that these trends will continue well into the future as the aging Japanese search for new ways of personally taking more responsibility for their own health."

    Ron Bailey, president,
    California Functional Foods


    "While quality remains a major issue we see signs of improvement. It's not from self-appointed testers, organizations certifying products or others cashing in on this industry problem. It's economics. During boom times marginal players can function but when times get tough it's the serious that survive. Those who take pride in their products and fulfill their responsibilities to the consumer endure. Those who do not should take heed. This evolutionary process applies to analytical labs too. Those that let quality and customer service take a back seat are now taking one themselves. While painful for some, this shakeout should benefit the industry over time."

    Robert Green, president,
    Integrated Biomolecule Corporation


    "While the Western European nutraceuticals markets are stable, we see a decrease in the U.S. market, but double digit growth in South America, e.g. Brazil, and Eastern Europe, e.g. Hungary. All growing markets have rather stringent regulations on the quality of the products and often the medical community is involved in the marketing process. These points are weak in the U.S. A Traditional Medicine Category in the U.S. could regain lost confidence in the consumers and build a solid relation with physicians as basis for a new growth area."

    Dr. Joerg Gruenwald, president,
    PhytoPharm Consulting, Institute for Phytopharmaceuticals


    "The nutraceuticals industry is in the process of mitosis and we should help it along. This 'industry' is really a collection of distinct groups tethered together by a common law (DSHEA) and an increasingly vague sense of purpose and direction. It is time to snip these cords and allow companies to find their 'team.'

    "The very term 'nutraceuticals' reveals the true bipolar nature of our industry. The functional food and nutrition 'team' needs NLEA reform and clarity on food-related issues such as GRAS status, health claims, functional beverage rules, etc. The herbal and non-nutrient 'team' needs to sort out herb/drug interactions, create a new regulatory framework to allow stronger claims (Rx, OTC and traditional medicines would be a good start), resolve analytical method differences and get serious about bringing closure to ephedra and pro-hormone related concerns. Both teams need meaningful new incentives to invest in research and development and to restore the importance of brand strength and loyalty in the consumer's mind.

    "The stagnation and discontent that underlies the nutraceuticals industry is really a result of our unwillingness to deal with the real issues at hand. As soon as we recognize and allow this dividing process to happen, the sooner things will improve. We don't have much time. Let's get started."

    Loren Israelsen, president, LDI Group


    "The nutraceuticals industry will see an accelerated shift from dietary supplements towards functional foods and beverages. The desire for science-based consumer products that deliver a functional health benefit is growing, but manufacturers must realize that consumers are not ready for 'therapeutic foods,' but rather they are hungry for convenient, good tasting foods that offer a lifestyle solution. Those companies that can provide a science-based functional benefit in a familiar and desired food form will see greater levels of success. It will be several years before consumers will be willing to 'eat their medicine,' so be wary of therapeutic claims and over-dependence on clinical food products."

    Peter Leighton, founding partner,
    Copernican Associates


    "While the Canadian health food and supplement industry has been experiencing growth over the last few years, the Canadian manufacturing industry still lags behind the U.S. in terms of development and marketing of natural health products (NHP), nutraceuticals and functional foods. In part this has been attributed to an unfavorable regulatory environment, which many believe has led to reduced consumer access and the stifling of innovation, competition and investment. In fact, one report concluded that Canada had the most restrictive regulatory climate in comparison to the U.S., Japan, and Europe for the development and marketing of functional foods, taking into account federal law, regulation guidelines and evaluation and licensing procedures governing production, manufacturing, packaging, labeling and advertising (Smith, B.L., Marcotte, M., and Harrison, G. 1996. "A Comparative Analysis of the Regulatory Framework Affecting Functional Food Development and Commercialization in Canada, Japan, the European Union and the United States of America" Commissioned by Agriculture and Agri-Food Canada to Intersect Alliance. Ottawa, Ontario). Health Canada did in fact recognize that our regulatory framework did not support labeling and advertising of the potential health benefits of these products to consumers and began efforts to rectify the situation in 1996. In my opinion, progress is being made in the area of NHP regulation but much more effort and expediency is required by government officials to allow health claims on, and increased consumer access to, many functional foods. From the standpoint of an industry association involved in assisting with the development of a strong and economically viable functional foods industry in Canada, I hope that the year 2002 will bring more progress in the regulatory environment for these products."

    Kelley Fitzpatrick, president, Saskatchewan Nutraceutical Industry


    "I believe we are beginning to see a true realization of the absolute necessity for solid science throughout the industry. This will bode well for a long term future rather than a short faddish few years."

    Fergus Clydesdale, Ph.D.,
    professor and head, Department of
    Food Science, University of Massachusetts


    The future of functional foods continues to hold promise for enhancing our health and wellbeing. Concerns about heart disease, eye health, bone and joint disorders and prostate health will continue to plague our aging population. The recent nutrient content claim for choline under FDAMAwill open the door for a plethora of new products in the cognitive function arena.

    Further, the cloning of the human genome in February of this year will enable personalized nutrition based on our genetic profile to someday become a reality. However, functional foods and their associated health benefit claims must be based on sound and accurate scientific criteria, including rigorous safety and efficacy studies. Interactions with other dietary components and potential adverse interactions need to be adequately addressed. Only when these issues are carefully considered can functional foods become an effective strategy to maximize health and reduce disease risk."

    Clare M. Hasler, Ph.D., founding director, Functional Foods for Health Program, University of Illinois
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    • Breaking News | Consumer Trends | Industry & Market News | Quality & Safety | Testing
      Alkemist Labs Announces Alkemist Assured Seal and Next Generation Transparency Reports

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      Digital Marketing Manager

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    • Breaking News | Consumer Trends | Healthcare Trends | Industry & Market News | World Markets
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    • Dietary Supplements | Regulations
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      Nutraceuticals World

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