11.01.02
As the nutraceuticals industry closes the door on another rough year and looks ahead, most executives are of the opinion that we have our work cut out for us. However, there are some bright spots in some cases and many executives are positive about the future of their business as well as the industry itself. What follows is commentary from executives throughout the industry on the year that has passed and the year ahead.
"Regarding the state of the industry in Japan, the overview comments made one year ago are unfortunately still valid, with the continuing depressed economy the dominant problem. Nevertheless, the nutraceuticals and functional foods markets are growing in spite of the economic problems, and in spite of recent food safety incidents (more 'mad cows', adulterated weight loss products from China, intentionally misbranded foods, etc.), which are causing serious consumer concerns. It is possible, however, that the credibility of the FOSHU (Foods for Specified Health Uses) category of functional foods with health claims will actually be enhanced by these crises, improving the already positive image of the category and resulting in additional growth in the future."
Ron Bailey, President
California Functional Foods
Ashland, OR
&
Japan Insider Columnist
"In our sphere of activity-product quality-we think 2002 was another good year for the industry. We look back when we started supplement testing over eight years ago when few had an inkling about testing and fewer still did any. Flash forward a few years and just about everyone knew the need for testing and a greater number (albeit still a minority) did some. Today not only is everyone familiar with testing, but many are conversant in the specifics. They know the difference between 'results' and 'legitimate results.' We dare say a significant organization ignoring product quality through testing is now the exception. Our industry is maturing, and that's a good thing."
Robert Green, President
Integrated Biomolecule Corporation
Tucson, AZ
&
Quality Focus Columnist
"The dietary supplement/nutraceutical industry is at a crossroad of great significance. The post 1994 (DSHEA) big bang has been followed by a sustained contraction in sales, shelf space, consumer confidence and political good will. The reasons for this are many, but the consequent market erosion is unmistakable. The year 2003 will usher in a new Congress and a new FDA commissioner. Change is in the wind. We may witness the end of ephedra, publication of a major GMP rule (tougher than we expect), new food safety rules (response to bioterrorism) and the very real prospect of Congressional efforts to amend or repeal DSHEA.
"All of these 'threats' represent great risk but can and should be treated as great opportunities. It is time for the industry to accept responsibility for its mistakes and use the prospect of new law, regulation and market conditions as a chance for meaningful and productive change. Leaders and executives throughout the industry are well aware of the nature of the problems and what it will take to fix them. If this doesn't sound appealing, consider the prospect of the last five years looking like the good old times compared to what the next five years could be."
Loren Israelsen, President
LDI Group
Salt Lake City, UT
&
Nutraceuticals World Editorial
Advisory Board Member
"There is a new herbal trend in Europe. Since the strong growth in the herbal supplement market in the late 1990s, plant-based ingredients in functional foods have become the new growth sector. Mainly beverages but also bars, breads and yogurts contain healthy herbal material. Research is starting to show the effectiveness in clinical trials. Claims are still difficult but consumers know about the medical benefits and have a willingness to try the new functional foods. Harmonization of the European regulations and claim requirements are under development and will further boost the growth."
Dr. Joerg Gruenwald, President
Phytopharm Research & Phytopharm Consulting
Berlin, Germany
&
Eurotrends Columnist
"Over the past few years we have seen our industry go through major changes. There have been winners and losers. We have seen and heard claims that just sound too good to be true. Products that have overstated their benefits have had their day in the consumer's court and many have paid a difficult price.
"On the other hand, the companies that have done their homework have been rewarded with the consumer's trust. These companies have taken the time to listen and learn, they have asked their consumer what they wanted and have responded with customized solutions. The winners are delivering solutions built on solid science. The recent downturn of our industry maybe just a message from our consumer to make sure we are listening to them and a warning to all of us to make sure we don't overstate our promises."
Paul Paslaski, Director of Marketing
Cargill Health and Food Technologies
Libertyville, IL
&
Nutraceuticals World Editorial
Advisory Board Member
"The business sectors that make up the nutraceuticals market have come under increasing pressure. The U.S. economy has withstood one of the longest periods of a 'bear' stock market, while competitive pressure has increased. That states the obvious. Yet what some do not see is the necessity to think of business as an integral part of an international triad. There continues to be tremendous business integration between the U.S., Europe and Japan. Each of these regions have their own nutraceuticals industries. Any firm that does not consider the actions within this triad may awaken to find their competition has been bought by a European or Japanese firm. Any firm that does not look for opportunities within the triad may miss great potential."
Greg Kitzmiller
Marketing Faculty and Co-Director,
Global Business Information Network
Kelly School of Business, Indiana University
Bloomington, IN
&
Strategy Sketchbook Columnist
"Consumers are better educated as to the benefits of nutritional supplements and fast becoming more selective in choosing products. Manufacturers must develop products that are standardized, safe and supported by science. Marketers must insure that messages are truthful and easy to understand. Branded ingredients, such as Ester-C, will complement both marketers and manufacturers in their drive to give consumers value and renewed vitality of life.
"As nutritional supplements become more mainstream and appear in drug, discount and grocery shelves, natural product retailers must more accurately understand their customers and match their needs to products that will benefit their health."
Dr. Phil Brown, Corporate
Communications Manager
Inter-Cal Nutraceuticals
Prescott, AZ
"The industry is reaching an inflection point where it is getting smarter-smarter with a more substantial and substantive scientific knowledgebase for justifying products and smarter in terms of market segmentation for such products. Products will be less an outcome of naive and over-enthusiastic pursuit of novel products as once represented by melatonin. Tomorrow's products will have more scientific credibility and value-added benefit through dosage, quality control and documented absorption as occurs in the calcium supplementation market, either by dietary supplement or beverage consumption. This is the new model."
Nancy Childs, Ph.D, Professor of Food Marketing-Nutraceuticals Institute
Saint Joseph's University
Philadelphia, PA
&
Nutraceuticals World Editorial
Advisory Board Member
"Over the last year we have witnessed the continued maturation of the dietary supplement industry. In the past, product managers operated more opportunistically, launching a plethora of new products, knowing few of these shooting stars would survive. Now, marketers are focusing on developing products with more sustainable lives, often mining these from existing underdeveloped portfolios.
"How do we differentiate 'sustainable' products? Successful marketers leverage the equity in their brands, capitalizing on the existing trust of consumers and healthcare professionals for their product. Ingredient suppliers provide branded products with a high level of technical support. Ingredient developers and marketers invest in clinical research on the health benefits of single and new combination products. Companies that have invested in research pursue new claims.
"How do we identify growth opportunities? For a good example, look to the recently released National Academy of Sciences' Institute of Medicine (IOM) recommendations, which established dietary reference intakes for fiber consumption for the first time. For men under age 50, this is a whopping 38 grams of fiber per day. As the average American consumes no more than 12 grams daily, achieving this goal will be difficult without supplementation. Additionally, a new category of functional fibers is proposed in the IOM recommendations. To be classified as such, an ingredient must have demonstrated physiological benefit through well-designed clinical research. Ingredients having this clinical research support, including oat beta-glucan, psyllium and others, will be better able to capitalize on the new market opportunities created through the well-publicized IOM recommendations. Sustainable products such as these provide a healthy foundation for a vibrant dietary supplement industry."
Gregory Stephens, RD, Vice President, Sales and Marketing
Nurture, Inc.
Devon, PA
&
Nutraceuticals World Editorial
Advisory Board Member
"In 2002, we saw the need for nutritional ingredient companies like ours to be even more consumer focused regarding the positioning of product benefits and how they could be used to differentiate consumer products. There were noticeably few major functional food introductions by the powerhouse consumer brands despite continued growth in the category. Continued scientific support, clear regulatory positions and breakthrough innovations are needed to drive mass market blockbuster products. Increased consumer awareness, changes in our healthcare paradigm and technology advances such as nutragenomics will make major impacts on the future of this industry."
Steve Snyder, Director, Sales &
Marketing-Nutraceuticals
Cargill Health & Food Technologies
Minneapolis, MN
"The present state of the industry can be summed up by the phrase 'Poised and Posing.' There is a poised stance that could well make the market rise meteorically through technical and scientific applications in the functional foods area. The posed perspective reflects the last few year's worth of effort (or lack thereof) to address the continuous media attacks, the requirement that someone (either ourselves or the government) will clean up or clean out the industry as a whole and the interminable waiting for all things to resolve. Both of these positions can be overcome with effort. Yes, that's going to mean spending money, but it means a commitment to making things better rather than waiting for things to get better. The industry is filled with imaginative and dynamic individuals who could, if brought together behind any one or several initiatives, build the springboard to a highly successful future. Yet, we remain, posed and poised anticipating that we will have to react but unsure as to how."
Jim Lassiter, President
The Lassiter Group
Laguna Beach, CA
"Consumers are continuing their journey into the wellness category in an attempt to take control of their personal health as well as the health of their family. In the dietary supplement category, an arena where consumers are seeking simplification, many manufacturers have responded by developing new products, brands and line extensions. Instead, manufacturers should concentrate on building a strong brand through knowledge and the creation of a consumer community.
"Similarly, many companies continue to sell and market products by emphasizing function claims and neglecting the lifestyle connection. Consumers are seeking emotional relationships with brands and are looking for retail experience rather than simply utility of products. Consumers will gravitate toward manufacturers and retailers that provide them with lifestyle brands and experience, in particular those that act as trusted wellness advocates."
Laurie Demeritt, President
The Hartman Group
Bellevue, WA
"Continued consolidation in the nutrition industry will create new opportunities as the consumer need for wellness and 'nutritional enhancements' will proliferate. While therapeutic-oriented dietary supplements will see negative growth, those designed to provide a lifestyle enhancement will show strong growth. But consumers are continuing to seek food and beverage options that can deliver an advantage over 'traditional' choices. As well, new delivery systems and technological advances will drive incremental growth in functional foods and beverages. The real winners will be those companies that can connect with the consumer and deliver a functional benefit without marketing the product based upon that."
Peter Leighton, Vice President,
Marketing & Product Development
Natrol, Inc.
Chatsworth, CA
"In France, regulation constraints make it very hard to develop new nutraceutical ingredients. Ingredients must be provided from alimentary raw materials, and then a positive list is established. This means that outside the list, no raw material can be accepted. Provided from raw materials means that purified extracts are excluded because those extracts do not reflect the composition of original raw materials.
"To register new ingredients is a very long and expensive process because it must be shown that the new ingredient, not coming from the positive list, is no different than the composition of the original alimentary raw material, is not toxic, is completely safe for humans, is efficient for health and finally that metabolism is not toxic and is safe.
"This is why there are few new developments on French nutraceutical markets. As the regulation in other European countries is quite different, the regulation of France should be changed but it will take time."
Jean-Yves Berthon, CEO
Greentech S.A.
Saint-Beauzire, France
"The nutraceutical and functional food markets continue to evolve. The decline in the supplements and new food and beverage introductions continued to be evident in 2002 versus the industry peak we experienced in the late 1990s. I do not view this as a negative, but rather a strengthening of the industry, which will give rise to healthier products based on more sound data.
"The soy milk, sport nutrition and supplement industries continue to reformat the way they service the needs of their changing customer base. These companies are challenged to offer better tasting products to attract new mass market consumers without losing their established consumer base. As a flavor manufacturer, this is our forte. We work very closely with each of these markets to mask the unpleasant off notes and provide new flavors for their market success.
"In 2003, I expect to see more consumer friendly products that address disease prevention, such as macular degeneration, coronary heart disease (CHD), obesity and bone and joint health. Additionally, I expect to see a dramatic growth in organic foods, which offer a sense of 'safety' and 'security' to the consumer."
Maureen Draganchuk, Vice President Business Development
Virginia Dare
Brooklyn, NY
"A compelling issue is the misrepresentation of herb quality, safety and efficacy by the media. Clearly, there are problems in these areas and negative publicity is sometimes warranted. However, the media often distorts the perception of the regulatory situation by repeating ad nauseum the 'unregulated industry' mantra, eroding consumer and health professional confidence. Media also oversimplifies news about negative clinical studies, often misrepresenting the results and confusing the public, as happened recently with ginkgo and St. John's Wort. Just as there is a problem with quality control with some herb products, there is also a quality control problem in the way the media reports about herbs!"
Mark Blumenthal, Founder &
Executive Director
American Botanical Council
&
Editor, HerbalGram
Austin, TX
"Industry fragmentation and communication are critical, and the window for developing a self-imposed industry governing framework is closing. The industry needs to prove to itself and others that it can operate cohesively, collaboratively and responsibly. If it proves this in the next several months, it will limit the ammunition provided to its detractors and it will bring onside several of its most vocal critics. If it is unable to develop and sustain momentum, pieces of 'opportunity' will be developed, but the infrastructure of the industry will not grow. Another issue to watch is that as more food and consumer product companies with brand strength become involved in the sector, ingredient branding strategies could change. Those ingredients supported by science and research will likely survive."
Len Monheit, President & CEO
NPI Center
Toronto, Ontario, Canada
"The Canadian natural health products (NHP) and functional food industry is dynamic and is making a transition from niche market status to the mainstream. In 2001, Nutrition Business Journal estimated that Canadians purchased approximately $4.2 billion worth of dietary supplements, nutraceuticals and functional food products in comparison to $3.9 billion in 2000. It appears that, as in the U.S., the fastest growing market segments in Canada are sports, meal, homeopathic and specialty supplements, functional foods, natural and organic foods and natural personal care products. Other jurisdictions are watching with interest as Canada moves forward with new regulations for NHPs through Health Canada's Natural Health Product Directorate (NHPD). Proposed regulations for NHPs were published in Canada Gazette Part I on December 21, 2001. The main components of the regulations include definitions, product licensing, adverse reactions reporting, site licensing, good manufacturing practices (GMPs), clinical trials and labeling and packaging.
"One area of debate continues to be the definition of NHPs. Even though the proposal does not include conventional foods and is not intended to capture a product in a food medium, the rule is unclear as to whether foods bearing health claims or structure/function claims relating to a nutrient (e.g., a beverage with the statement 'contains calcium to help build strong bones') are outside the scope of the NHP regulation. Public consultations have occurred across Canada regarding NHPD's proposals for GMPs. Later this year, the Directorate will hold public consultations related to proposed standards of evidence for the evaluation of safety and health claims. In comparing the Canadian NHP regulations to that of the Dietary Supplement Health and Education Act (DSHEA) of 1994, there remains the possibility that NHPs available in Canada may be able to legally carry a much wider range of health claims than its U.S. counterparts. Unlike dietary supplements regulated under DSHEA, there will be requirements for product and site licenses for NHPs sold in Canada. Regarding regulations related to functional foods, Health Canada is moving at a much slower pace despite aggressive lobbying efforts on the part of the industry. It is hoped that the year 2003 will bring more progress in the regulatory environment for these products."
Kelley Fitzpatrick, President
Saskatchewan Nutraceutical Network
Saskatoon, Saskatchewan, Canada
"The nutraceuticals industry has had its share of ups and downs this year, but as 2002 draws to a close, we see a resurgence of interest in value-added ingredients for both supplement and functional food applications. The industry seems to have matured in the last several years and now understands the importance of quality in its product lines. We are also seeing expanded interest in our ability to provide custom formulations and blends to potential customers; manufacturers are looking for complete turnkey solutions from suppliers.
"For the future, we see the industry remaining tight but with pockets of opportunity. Specifically, we foresee growth in the functional food segment of the business and, as consumers head 'back to basics,' we have noted particular interest in our fruit and vegetable-based antioxidant products."
Jeffrey Wuagneux, President & CEO
RFI Ingredients
Blauvelt, NY
"While generally there was modest growth in supplement sales in 2002 compared with the previous year, our CLA sales continued to grow above and beyond the industry's growth rate. We attribute this increase to the steady nature of the diet and sports fitness categories, collaborating with our manufacturing partners to develop mutually beneficial publicity and co-op programs, and to our aggressive support of clinical research, and consumer and retail promotional programs to differentiate our brand. It is increasingly essential to reach consumers as much as possible to strengthen brand awareness. The future of this industry continues to stem from credible research on our ingredients, aggressive promotion of our unique points of differentiation and collaboration with manufacturing partners to develop comprehensive sales and marketing programs to make sure end-users hear our message. Specifically, Tonalin CLA sales growth has been more than 250% since 1999. This sales growth is the result of a targeted advertising and public relations campaign, publicity explaining new research and the production of VNR's to get media coverage."
Nina Likins, Director of Marketing
Natural Inc.
Vernon Hills, IL
"While some segments of the dietary supplement industry are under pressure due to quality and safety issues , the high protein/low carb diet of the sports nutrition community is being embraced as a mainstream lifestyle diet. Whey protein continues to maintain its position as the premium protein source and now dairy calcium is also emerging as a new nutraceutical due to its lipolytic and bone building properties."
Jerry O'Dea, Vice President &
General Manager
Glanbia Ingredients, Inc.
Monroe, WI
"From my vantage point, the nutraceuticals industry appears to be rapidly approaching the crossroads that will determine whether it will survive and thrive or fragment and dissipate like splattered paint. Okay, that's a bit dramatic, but clearly the time has come for this industry to stand up and declare to the public that its products are beneficial and capable of withstanding scrutiny by health organizations. The new laws dictating stringent requirements for the labeling of organic foods portend deeper involvement by the federal government into the claims of nutraceutical products and companies. The time has come to be proactive and that, to me, means embracing-no, even stronger than that-demanding federal oversight and standards. Until this happens, the marketplace will continue to treat much of the industry with suspicion and disdain, which in the long run will prove to be a far greater threat than any governmental involvement."
Elisha Tropper, President
Prestige Label
Brooklyn, NY
"Against a backdrop of international tension and tumbling stock markets, our industry meandered along. Almost all categories showed anemic growth and though the nutraceuticals to cure the condition might be available, the business requires more than a novel ingredient. Let's hope 2003 is the year when consumer insight links with science and technology to come up with the products that people will make part of their daily lives. Strong science is key to creating sustainable value in nutraceuticals but science alone cannot drive the industry back to consistent double digit growth rates."
Steve Allen, Vice President,
New Business Development
Nestle USA, Nutrition Division
Glendale, CA
"Today's nutraceutical executives must look well beyond their preferred 'comfort zones,' or the markets within which they are used to operating. For both suppliers and manufacturers, opportunities abound in natural personal care, functional foods, specialty and traditional supplements, OTC/pharma and in a variety of niche markets. Keeping abreast of news, trends and other non-intuitive developments necessitates that the executive spend a great deal of time and energy engaging in market scanning. As such, primary quantitative and qualitative market research must be conducted to assess end user behavior and attitudes and then integrated within the strategic planning process. This data is as important for the supplier as it is for the branded product manufacturer or retailer."
Darrin Duber-Smith, Strategic
Marketing Director
Natural Marketing Institute
Harleysville, PA
"We are at an inflection point for the industry, with developments this year pointing to a brighter future. We see stronger support for nutrition and health in the food industry and investment community, as well as government and the scientific community. Food companies are adding health benefits to their products as a proven, low-cost way to grow a brand. Investors are selectively continuing to fund development of nutraceutical ingredients and products, even while cutting back on other technologies. The National Academy of Sciences set DRI's for several macronutrients this year, including fiber. The medical community published noteworthy papers supporting the health benefits of omega 3's and other nutritional ingredients. The government focused on nutritional steps for consumers to take in fighting the obesity 'epidemic.' Concurrently, pharmaceuticals such as hormone replacement drugs lost support, while non-drug compounds like SAMe, were cited in a government report to be as effective as prescription drugs. All of the above will result in greater numbers of consumers seeking the benefits of functional foods and nutritional supplements."
Griff Parker, President
Natural Bridge
Devon, PA
"The nutraceutical products industry is facing a credibility crisis. Questions concerning product safety and efficacy have increased regulatory scrutiny, fueled media attacks, reduced consumer confidence and softened sales. The problem is compounded by the failure of many companies to support their products with adequate product research and consumer education. While some companies invest heavily in research and product education, consumers are also plagued with cheap, unproven, ineffective and even unsafe products that reflect on the industry as a whole. With few exceptions, the industry has failed to walk the talk and is now paying for its lack of foresight and investment in product quality, substantiation and communication."
William "Skip" Seroy, President & CEO
InterHealth Nutraceuticals Inc.
Benicia, CA
"The dietary supplement industry has certainly had its highs and lows in recent years, with the boom of the St. Johns Wort era having 20% CAGR, to the lows in recent years of flat to negative growth in many areas.
"With the recent poor financial performance, poor consumer confidence and media coverage still tending to be somewhat negative, the dietary supplement industry is clearly showing signs of maturing. This, in turn, has put significant pressure on the value chain supporting the industry, which in turn has lead some to exit the industry as well as consolidation.
"The good news through all of this is that there are now very emergent leaders in the industry and we have the opportunity to re-invent ourselves as such. I would propose that these leaders need to focus in the following areas in order to drive the industry's direction: (1) Product safety-products must be safe and free from adulterants, economic or otherwise, (2) Science sells-products with demonstrated efficacy, targeted in the right therapeutic areas will create excitement, (3) Insurance and liability-clearly top of mind with most industry executives. Hence, the need to get points 1 and 2 (above) right, (4) Media coverage-changing the ratio of positive to negative media is the goal, this will occur as points 1 and 2 (above) are addressed and consumer confidence is re-established. This focus will once again allow us to regain consumers, drive growth and increase value for all stake holders in the industry."
Peter Hafermann, Vice President,
Marketing & Sales
BI Nutraceuticals
Longmont, CO
"The new business development of Boehringer Ingelheim in the organic mineral salt area developed better than expected. New customers as well as numerous new projects and contacts were acquired in the first 11 months of 2002.
"Calcium citrate, an extremely versatile calcium source, turned out to be the most interesting mineral salt in 2002, followed by magnesium and zinc citrate. An increase of market share could be generated in the U.S. market as well as in Europe. Special grades for the food and supplement industry such as powder and fine powder-micronized and granulate-are produced in a pharmaceutical company's environment at Boehringer Ingelheim. The highest quality standards of our corporate quality management system apply to our products, which is advantageous in light of food ingredients and dietetic supplements being controlled more stringently in the future.
"In addition to the existing product portfolio, new product development was focused on calcium aspartate, magnesium glutamate and zinc citrate as well as calcium and magnesium salts of L-pyroglutamic acid."
Ernst Gnther, Product Manger,
Organic Mineral Salts
Boehringer Ingelheim GmbH
Ingelheim/Rhein, Germany
"Regarding the state of the industry in Japan, the overview comments made one year ago are unfortunately still valid, with the continuing depressed economy the dominant problem. Nevertheless, the nutraceuticals and functional foods markets are growing in spite of the economic problems, and in spite of recent food safety incidents (more 'mad cows', adulterated weight loss products from China, intentionally misbranded foods, etc.), which are causing serious consumer concerns. It is possible, however, that the credibility of the FOSHU (Foods for Specified Health Uses) category of functional foods with health claims will actually be enhanced by these crises, improving the already positive image of the category and resulting in additional growth in the future."
Ron Bailey, President
California Functional Foods
Ashland, OR
&
Japan Insider Columnist
"In our sphere of activity-product quality-we think 2002 was another good year for the industry. We look back when we started supplement testing over eight years ago when few had an inkling about testing and fewer still did any. Flash forward a few years and just about everyone knew the need for testing and a greater number (albeit still a minority) did some. Today not only is everyone familiar with testing, but many are conversant in the specifics. They know the difference between 'results' and 'legitimate results.' We dare say a significant organization ignoring product quality through testing is now the exception. Our industry is maturing, and that's a good thing."
Robert Green, President
Integrated Biomolecule Corporation
Tucson, AZ
&
Quality Focus Columnist
"The dietary supplement/nutraceutical industry is at a crossroad of great significance. The post 1994 (DSHEA) big bang has been followed by a sustained contraction in sales, shelf space, consumer confidence and political good will. The reasons for this are many, but the consequent market erosion is unmistakable. The year 2003 will usher in a new Congress and a new FDA commissioner. Change is in the wind. We may witness the end of ephedra, publication of a major GMP rule (tougher than we expect), new food safety rules (response to bioterrorism) and the very real prospect of Congressional efforts to amend or repeal DSHEA.
"All of these 'threats' represent great risk but can and should be treated as great opportunities. It is time for the industry to accept responsibility for its mistakes and use the prospect of new law, regulation and market conditions as a chance for meaningful and productive change. Leaders and executives throughout the industry are well aware of the nature of the problems and what it will take to fix them. If this doesn't sound appealing, consider the prospect of the last five years looking like the good old times compared to what the next five years could be."
Loren Israelsen, President
LDI Group
Salt Lake City, UT
&
Nutraceuticals World Editorial
Advisory Board Member
"There is a new herbal trend in Europe. Since the strong growth in the herbal supplement market in the late 1990s, plant-based ingredients in functional foods have become the new growth sector. Mainly beverages but also bars, breads and yogurts contain healthy herbal material. Research is starting to show the effectiveness in clinical trials. Claims are still difficult but consumers know about the medical benefits and have a willingness to try the new functional foods. Harmonization of the European regulations and claim requirements are under development and will further boost the growth."
Dr. Joerg Gruenwald, President
Phytopharm Research & Phytopharm Consulting
Berlin, Germany
&
Eurotrends Columnist
"Over the past few years we have seen our industry go through major changes. There have been winners and losers. We have seen and heard claims that just sound too good to be true. Products that have overstated their benefits have had their day in the consumer's court and many have paid a difficult price.
"On the other hand, the companies that have done their homework have been rewarded with the consumer's trust. These companies have taken the time to listen and learn, they have asked their consumer what they wanted and have responded with customized solutions. The winners are delivering solutions built on solid science. The recent downturn of our industry maybe just a message from our consumer to make sure we are listening to them and a warning to all of us to make sure we don't overstate our promises."
Paul Paslaski, Director of Marketing
Cargill Health and Food Technologies
Libertyville, IL
&
Nutraceuticals World Editorial
Advisory Board Member
"The business sectors that make up the nutraceuticals market have come under increasing pressure. The U.S. economy has withstood one of the longest periods of a 'bear' stock market, while competitive pressure has increased. That states the obvious. Yet what some do not see is the necessity to think of business as an integral part of an international triad. There continues to be tremendous business integration between the U.S., Europe and Japan. Each of these regions have their own nutraceuticals industries. Any firm that does not consider the actions within this triad may awaken to find their competition has been bought by a European or Japanese firm. Any firm that does not look for opportunities within the triad may miss great potential."
Greg Kitzmiller
Marketing Faculty and Co-Director,
Global Business Information Network
Kelly School of Business, Indiana University
Bloomington, IN
&
Strategy Sketchbook Columnist
"Consumers are better educated as to the benefits of nutritional supplements and fast becoming more selective in choosing products. Manufacturers must develop products that are standardized, safe and supported by science. Marketers must insure that messages are truthful and easy to understand. Branded ingredients, such as Ester-C, will complement both marketers and manufacturers in their drive to give consumers value and renewed vitality of life.
"As nutritional supplements become more mainstream and appear in drug, discount and grocery shelves, natural product retailers must more accurately understand their customers and match their needs to products that will benefit their health."
Dr. Phil Brown, Corporate
Communications Manager
Inter-Cal Nutraceuticals
Prescott, AZ
"The industry is reaching an inflection point where it is getting smarter-smarter with a more substantial and substantive scientific knowledgebase for justifying products and smarter in terms of market segmentation for such products. Products will be less an outcome of naive and over-enthusiastic pursuit of novel products as once represented by melatonin. Tomorrow's products will have more scientific credibility and value-added benefit through dosage, quality control and documented absorption as occurs in the calcium supplementation market, either by dietary supplement or beverage consumption. This is the new model."
Nancy Childs, Ph.D, Professor of Food Marketing-Nutraceuticals Institute
Saint Joseph's University
Philadelphia, PA
&
Nutraceuticals World Editorial
Advisory Board Member
"Over the last year we have witnessed the continued maturation of the dietary supplement industry. In the past, product managers operated more opportunistically, launching a plethora of new products, knowing few of these shooting stars would survive. Now, marketers are focusing on developing products with more sustainable lives, often mining these from existing underdeveloped portfolios.
"How do we differentiate 'sustainable' products? Successful marketers leverage the equity in their brands, capitalizing on the existing trust of consumers and healthcare professionals for their product. Ingredient suppliers provide branded products with a high level of technical support. Ingredient developers and marketers invest in clinical research on the health benefits of single and new combination products. Companies that have invested in research pursue new claims.
"How do we identify growth opportunities? For a good example, look to the recently released National Academy of Sciences' Institute of Medicine (IOM) recommendations, which established dietary reference intakes for fiber consumption for the first time. For men under age 50, this is a whopping 38 grams of fiber per day. As the average American consumes no more than 12 grams daily, achieving this goal will be difficult without supplementation. Additionally, a new category of functional fibers is proposed in the IOM recommendations. To be classified as such, an ingredient must have demonstrated physiological benefit through well-designed clinical research. Ingredients having this clinical research support, including oat beta-glucan, psyllium and others, will be better able to capitalize on the new market opportunities created through the well-publicized IOM recommendations. Sustainable products such as these provide a healthy foundation for a vibrant dietary supplement industry."
Gregory Stephens, RD, Vice President, Sales and Marketing
Nurture, Inc.
Devon, PA
&
Nutraceuticals World Editorial
Advisory Board Member
"In 2002, we saw the need for nutritional ingredient companies like ours to be even more consumer focused regarding the positioning of product benefits and how they could be used to differentiate consumer products. There were noticeably few major functional food introductions by the powerhouse consumer brands despite continued growth in the category. Continued scientific support, clear regulatory positions and breakthrough innovations are needed to drive mass market blockbuster products. Increased consumer awareness, changes in our healthcare paradigm and technology advances such as nutragenomics will make major impacts on the future of this industry."
Steve Snyder, Director, Sales &
Marketing-Nutraceuticals
Cargill Health & Food Technologies
Minneapolis, MN
"The present state of the industry can be summed up by the phrase 'Poised and Posing.' There is a poised stance that could well make the market rise meteorically through technical and scientific applications in the functional foods area. The posed perspective reflects the last few year's worth of effort (or lack thereof) to address the continuous media attacks, the requirement that someone (either ourselves or the government) will clean up or clean out the industry as a whole and the interminable waiting for all things to resolve. Both of these positions can be overcome with effort. Yes, that's going to mean spending money, but it means a commitment to making things better rather than waiting for things to get better. The industry is filled with imaginative and dynamic individuals who could, if brought together behind any one or several initiatives, build the springboard to a highly successful future. Yet, we remain, posed and poised anticipating that we will have to react but unsure as to how."
Jim Lassiter, President
The Lassiter Group
Laguna Beach, CA
"Consumers are continuing their journey into the wellness category in an attempt to take control of their personal health as well as the health of their family. In the dietary supplement category, an arena where consumers are seeking simplification, many manufacturers have responded by developing new products, brands and line extensions. Instead, manufacturers should concentrate on building a strong brand through knowledge and the creation of a consumer community.
"Similarly, many companies continue to sell and market products by emphasizing function claims and neglecting the lifestyle connection. Consumers are seeking emotional relationships with brands and are looking for retail experience rather than simply utility of products. Consumers will gravitate toward manufacturers and retailers that provide them with lifestyle brands and experience, in particular those that act as trusted wellness advocates."
Laurie Demeritt, President
The Hartman Group
Bellevue, WA
"Continued consolidation in the nutrition industry will create new opportunities as the consumer need for wellness and 'nutritional enhancements' will proliferate. While therapeutic-oriented dietary supplements will see negative growth, those designed to provide a lifestyle enhancement will show strong growth. But consumers are continuing to seek food and beverage options that can deliver an advantage over 'traditional' choices. As well, new delivery systems and technological advances will drive incremental growth in functional foods and beverages. The real winners will be those companies that can connect with the consumer and deliver a functional benefit without marketing the product based upon that."
Peter Leighton, Vice President,
Marketing & Product Development
Natrol, Inc.
Chatsworth, CA
"In France, regulation constraints make it very hard to develop new nutraceutical ingredients. Ingredients must be provided from alimentary raw materials, and then a positive list is established. This means that outside the list, no raw material can be accepted. Provided from raw materials means that purified extracts are excluded because those extracts do not reflect the composition of original raw materials.
"To register new ingredients is a very long and expensive process because it must be shown that the new ingredient, not coming from the positive list, is no different than the composition of the original alimentary raw material, is not toxic, is completely safe for humans, is efficient for health and finally that metabolism is not toxic and is safe.
"This is why there are few new developments on French nutraceutical markets. As the regulation in other European countries is quite different, the regulation of France should be changed but it will take time."
Jean-Yves Berthon, CEO
Greentech S.A.
Saint-Beauzire, France
"The nutraceutical and functional food markets continue to evolve. The decline in the supplements and new food and beverage introductions continued to be evident in 2002 versus the industry peak we experienced in the late 1990s. I do not view this as a negative, but rather a strengthening of the industry, which will give rise to healthier products based on more sound data.
"The soy milk, sport nutrition and supplement industries continue to reformat the way they service the needs of their changing customer base. These companies are challenged to offer better tasting products to attract new mass market consumers without losing their established consumer base. As a flavor manufacturer, this is our forte. We work very closely with each of these markets to mask the unpleasant off notes and provide new flavors for their market success.
"In 2003, I expect to see more consumer friendly products that address disease prevention, such as macular degeneration, coronary heart disease (CHD), obesity and bone and joint health. Additionally, I expect to see a dramatic growth in organic foods, which offer a sense of 'safety' and 'security' to the consumer."
Maureen Draganchuk, Vice President Business Development
Virginia Dare
Brooklyn, NY
"A compelling issue is the misrepresentation of herb quality, safety and efficacy by the media. Clearly, there are problems in these areas and negative publicity is sometimes warranted. However, the media often distorts the perception of the regulatory situation by repeating ad nauseum the 'unregulated industry' mantra, eroding consumer and health professional confidence. Media also oversimplifies news about negative clinical studies, often misrepresenting the results and confusing the public, as happened recently with ginkgo and St. John's Wort. Just as there is a problem with quality control with some herb products, there is also a quality control problem in the way the media reports about herbs!"
Mark Blumenthal, Founder &
Executive Director
American Botanical Council
&
Editor, HerbalGram
Austin, TX
"Industry fragmentation and communication are critical, and the window for developing a self-imposed industry governing framework is closing. The industry needs to prove to itself and others that it can operate cohesively, collaboratively and responsibly. If it proves this in the next several months, it will limit the ammunition provided to its detractors and it will bring onside several of its most vocal critics. If it is unable to develop and sustain momentum, pieces of 'opportunity' will be developed, but the infrastructure of the industry will not grow. Another issue to watch is that as more food and consumer product companies with brand strength become involved in the sector, ingredient branding strategies could change. Those ingredients supported by science and research will likely survive."
Len Monheit, President & CEO
NPI Center
Toronto, Ontario, Canada
"The Canadian natural health products (NHP) and functional food industry is dynamic and is making a transition from niche market status to the mainstream. In 2001, Nutrition Business Journal estimated that Canadians purchased approximately $4.2 billion worth of dietary supplements, nutraceuticals and functional food products in comparison to $3.9 billion in 2000. It appears that, as in the U.S., the fastest growing market segments in Canada are sports, meal, homeopathic and specialty supplements, functional foods, natural and organic foods and natural personal care products. Other jurisdictions are watching with interest as Canada moves forward with new regulations for NHPs through Health Canada's Natural Health Product Directorate (NHPD). Proposed regulations for NHPs were published in Canada Gazette Part I on December 21, 2001. The main components of the regulations include definitions, product licensing, adverse reactions reporting, site licensing, good manufacturing practices (GMPs), clinical trials and labeling and packaging.
"One area of debate continues to be the definition of NHPs. Even though the proposal does not include conventional foods and is not intended to capture a product in a food medium, the rule is unclear as to whether foods bearing health claims or structure/function claims relating to a nutrient (e.g., a beverage with the statement 'contains calcium to help build strong bones') are outside the scope of the NHP regulation. Public consultations have occurred across Canada regarding NHPD's proposals for GMPs. Later this year, the Directorate will hold public consultations related to proposed standards of evidence for the evaluation of safety and health claims. In comparing the Canadian NHP regulations to that of the Dietary Supplement Health and Education Act (DSHEA) of 1994, there remains the possibility that NHPs available in Canada may be able to legally carry a much wider range of health claims than its U.S. counterparts. Unlike dietary supplements regulated under DSHEA, there will be requirements for product and site licenses for NHPs sold in Canada. Regarding regulations related to functional foods, Health Canada is moving at a much slower pace despite aggressive lobbying efforts on the part of the industry. It is hoped that the year 2003 will bring more progress in the regulatory environment for these products."
Kelley Fitzpatrick, President
Saskatchewan Nutraceutical Network
Saskatoon, Saskatchewan, Canada
"The nutraceuticals industry has had its share of ups and downs this year, but as 2002 draws to a close, we see a resurgence of interest in value-added ingredients for both supplement and functional food applications. The industry seems to have matured in the last several years and now understands the importance of quality in its product lines. We are also seeing expanded interest in our ability to provide custom formulations and blends to potential customers; manufacturers are looking for complete turnkey solutions from suppliers.
"For the future, we see the industry remaining tight but with pockets of opportunity. Specifically, we foresee growth in the functional food segment of the business and, as consumers head 'back to basics,' we have noted particular interest in our fruit and vegetable-based antioxidant products."
Jeffrey Wuagneux, President & CEO
RFI Ingredients
Blauvelt, NY
"While generally there was modest growth in supplement sales in 2002 compared with the previous year, our CLA sales continued to grow above and beyond the industry's growth rate. We attribute this increase to the steady nature of the diet and sports fitness categories, collaborating with our manufacturing partners to develop mutually beneficial publicity and co-op programs, and to our aggressive support of clinical research, and consumer and retail promotional programs to differentiate our brand. It is increasingly essential to reach consumers as much as possible to strengthen brand awareness. The future of this industry continues to stem from credible research on our ingredients, aggressive promotion of our unique points of differentiation and collaboration with manufacturing partners to develop comprehensive sales and marketing programs to make sure end-users hear our message. Specifically, Tonalin CLA sales growth has been more than 250% since 1999. This sales growth is the result of a targeted advertising and public relations campaign, publicity explaining new research and the production of VNR's to get media coverage."
Nina Likins, Director of Marketing
Natural Inc.
Vernon Hills, IL
"While some segments of the dietary supplement industry are under pressure due to quality and safety issues , the high protein/low carb diet of the sports nutrition community is being embraced as a mainstream lifestyle diet. Whey protein continues to maintain its position as the premium protein source and now dairy calcium is also emerging as a new nutraceutical due to its lipolytic and bone building properties."
Jerry O'Dea, Vice President &
General Manager
Glanbia Ingredients, Inc.
Monroe, WI
"From my vantage point, the nutraceuticals industry appears to be rapidly approaching the crossroads that will determine whether it will survive and thrive or fragment and dissipate like splattered paint. Okay, that's a bit dramatic, but clearly the time has come for this industry to stand up and declare to the public that its products are beneficial and capable of withstanding scrutiny by health organizations. The new laws dictating stringent requirements for the labeling of organic foods portend deeper involvement by the federal government into the claims of nutraceutical products and companies. The time has come to be proactive and that, to me, means embracing-no, even stronger than that-demanding federal oversight and standards. Until this happens, the marketplace will continue to treat much of the industry with suspicion and disdain, which in the long run will prove to be a far greater threat than any governmental involvement."
Elisha Tropper, President
Prestige Label
Brooklyn, NY
"Against a backdrop of international tension and tumbling stock markets, our industry meandered along. Almost all categories showed anemic growth and though the nutraceuticals to cure the condition might be available, the business requires more than a novel ingredient. Let's hope 2003 is the year when consumer insight links with science and technology to come up with the products that people will make part of their daily lives. Strong science is key to creating sustainable value in nutraceuticals but science alone cannot drive the industry back to consistent double digit growth rates."
Steve Allen, Vice President,
New Business Development
Nestle USA, Nutrition Division
Glendale, CA
"Today's nutraceutical executives must look well beyond their preferred 'comfort zones,' or the markets within which they are used to operating. For both suppliers and manufacturers, opportunities abound in natural personal care, functional foods, specialty and traditional supplements, OTC/pharma and in a variety of niche markets. Keeping abreast of news, trends and other non-intuitive developments necessitates that the executive spend a great deal of time and energy engaging in market scanning. As such, primary quantitative and qualitative market research must be conducted to assess end user behavior and attitudes and then integrated within the strategic planning process. This data is as important for the supplier as it is for the branded product manufacturer or retailer."
Darrin Duber-Smith, Strategic
Marketing Director
Natural Marketing Institute
Harleysville, PA
"We are at an inflection point for the industry, with developments this year pointing to a brighter future. We see stronger support for nutrition and health in the food industry and investment community, as well as government and the scientific community. Food companies are adding health benefits to their products as a proven, low-cost way to grow a brand. Investors are selectively continuing to fund development of nutraceutical ingredients and products, even while cutting back on other technologies. The National Academy of Sciences set DRI's for several macronutrients this year, including fiber. The medical community published noteworthy papers supporting the health benefits of omega 3's and other nutritional ingredients. The government focused on nutritional steps for consumers to take in fighting the obesity 'epidemic.' Concurrently, pharmaceuticals such as hormone replacement drugs lost support, while non-drug compounds like SAMe, were cited in a government report to be as effective as prescription drugs. All of the above will result in greater numbers of consumers seeking the benefits of functional foods and nutritional supplements."
Griff Parker, President
Natural Bridge
Devon, PA
"The nutraceutical products industry is facing a credibility crisis. Questions concerning product safety and efficacy have increased regulatory scrutiny, fueled media attacks, reduced consumer confidence and softened sales. The problem is compounded by the failure of many companies to support their products with adequate product research and consumer education. While some companies invest heavily in research and product education, consumers are also plagued with cheap, unproven, ineffective and even unsafe products that reflect on the industry as a whole. With few exceptions, the industry has failed to walk the talk and is now paying for its lack of foresight and investment in product quality, substantiation and communication."
William "Skip" Seroy, President & CEO
InterHealth Nutraceuticals Inc.
Benicia, CA
"The dietary supplement industry has certainly had its highs and lows in recent years, with the boom of the St. Johns Wort era having 20% CAGR, to the lows in recent years of flat to negative growth in many areas.
"With the recent poor financial performance, poor consumer confidence and media coverage still tending to be somewhat negative, the dietary supplement industry is clearly showing signs of maturing. This, in turn, has put significant pressure on the value chain supporting the industry, which in turn has lead some to exit the industry as well as consolidation.
"The good news through all of this is that there are now very emergent leaders in the industry and we have the opportunity to re-invent ourselves as such. I would propose that these leaders need to focus in the following areas in order to drive the industry's direction: (1) Product safety-products must be safe and free from adulterants, economic or otherwise, (2) Science sells-products with demonstrated efficacy, targeted in the right therapeutic areas will create excitement, (3) Insurance and liability-clearly top of mind with most industry executives. Hence, the need to get points 1 and 2 (above) right, (4) Media coverage-changing the ratio of positive to negative media is the goal, this will occur as points 1 and 2 (above) are addressed and consumer confidence is re-established. This focus will once again allow us to regain consumers, drive growth and increase value for all stake holders in the industry."
Peter Hafermann, Vice President,
Marketing & Sales
BI Nutraceuticals
Longmont, CO
"The new business development of Boehringer Ingelheim in the organic mineral salt area developed better than expected. New customers as well as numerous new projects and contacts were acquired in the first 11 months of 2002.
"Calcium citrate, an extremely versatile calcium source, turned out to be the most interesting mineral salt in 2002, followed by magnesium and zinc citrate. An increase of market share could be generated in the U.S. market as well as in Europe. Special grades for the food and supplement industry such as powder and fine powder-micronized and granulate-are produced in a pharmaceutical company's environment at Boehringer Ingelheim. The highest quality standards of our corporate quality management system apply to our products, which is advantageous in light of food ingredients and dietetic supplements being controlled more stringently in the future.
"In addition to the existing product portfolio, new product development was focused on calcium aspartate, magnesium glutamate and zinc citrate as well as calcium and magnesium salts of L-pyroglutamic acid."
Ernst Gnther, Product Manger,
Organic Mineral Salts
Boehringer Ingelheim GmbH
Ingelheim/Rhein, Germany