Darrin Duber-Smith07.01.04
It is no small wonder to even those who casually follow the natural products industry that herbs and botanicals now appear in more products and have more applications than ever before. San Diego, CA-based Nutrition Business Journal (NBJ) has indicated that the U.S. nutritional products industry was worth approximately $58 billion in 2002, and it should be no surprise that herbs and botanicals are found in several of these products.
Herbs and botanical suppliers, like most other raw material players, must take care to avoid the commoditization of their products, even though there are thousands available serving a myriad of functional purposes. If botanical raw materials become commodities, like pork bellies or frozen concentrated orange juice, crucial marketing concepts such as differentiation and competitive advantage must be largely discarded in favor of price and volume considerations. This has indeed happened in the world of vitamins, where a few large multinational players dominate the marketplace, setting prices and volume levels for the industry. What then is happening with herbs and botanicals?
Smart suppliers pay great attention to intellectual property as a means of differentiating one product from another. This usually comes in the form of a brand name for a specific herb or botanical or, more commonly, a proprietary blend of herbs or botanicals. Top that off with a process patent and you have the makings for achieving a sustainable competitive advantage. Of course, branded retail product manufacturers have been used to this game of differentiation for many years, and they often source smart suppliers by examining their strategic marketing savvy.
The herbs and botanicals industry has its roots in the nutritional supplement market segment, an area that has experienced extremely slow growth over the past several years; NBJ reported that this mature market stood at $18 billion in 2002. Opportunities in supplements have been limited to non-botanical, specialty ingredients, but botanicals in the forms of single herbs, multi-herb-combinations, vitamin/herb blends are still in demand, although not at the levels seen in previous years. Some of the greatest opportunities in this area now lie in the heavily regulated and resource intensive OTC/pharmaceutical area, as researchers are basing increasing numbers of drugs on botanicals.
Yet, the functional foods segment, bringing in $20.5 billion in sales in the U.S. in 2002, and growing at between 7-10% annually, has taken the lead over supplements as the preferred medium for nutritional supplementation. It seems that more and more people simply prefer food to pills, powders and tinctures. Bars, beverages, and many traditional foods products contain herb and/or botanical ingredients that claim to enhance overall wellness or provide certain functional benefits, such as increased energy, enhanced relaxation, eye health, cardiovascular health, antioxidant benefits, and even increased sex drive. Consumers have demonstrated a need and the market has indeed responded, as will always be the case!
Perhaps the best opportunity for growth on both the supply side as well as with retail brands is in the smaller natural personal care market segment. At $4.5 billion in 2002 (NBJ), it is growing at a rate of between 15-25% annually and now comprises just under 15% of the total health and beauty market in the U.S., and botanicals are the main ingredient! Used for everything from emollients, surfactants and emulsifiers, to cosmeceutical active ingredients that provide certain semi-therapeutic benefits (e.g., anti-aging, collagen-enhancing, skin whitening, etc.), botanicals increasingly appear at center stage. Tied to the personal care market, and still very much in its infancy, is the rapidly growing natural household products segment, which posted $450 million in sales in 2002 (NBJ). Plant-based alternatives to the harsh synthetics found in most household cleaners are in very high demand by both mainstream and smaller natural players.
There are several factors driving the market for botanicals.
Consumers desire natural alternatives to drugs, so that they can enhance overall wellness and attain certain functional benefits involved in the prevention and/or treatment of medical conditions, or to ward off the effects of aging. Most important, the aging population will increase their need for treatment, while the younger population gravitates more toward prevention. This is probably why the Natural Marketing Institute (NMI), Harleysville, PA, recently reported that its psychographic research revealed a slight shift toward treatment and away from prevention.
Organizations at all levels of the supply chain continue to engage in clinical and pharmacological research to validate traditional use claims and find new uses for botanicals.
Sophisticated pharmaceutical testing techniques, coupled with well-implemented GMP programs, continue to validate product claims through HPLC, UV, mass spectrometry and other metrics.
Increased research has demonstrated that many botanicals, such as green tea, not only have multifunctional benefits, but also can be used in both internal and topical applications.
Players at all levels continue to seek a means of gaining sustainable competitive advantage and establishing meaningful differentiation from competitive and substitute offerings by acquiring some means of intellectual property, most effectively done through branding.
Suppliers have broadened their reach and are sourcing new botanicals from around the world and discovering new applications on a daily basis. Globalization continues to ease regulations and other barriers that have stunted growth in scale (global markets) and breadth (number of available herbs).
With regard to strategic marketing planning, smart suppliers have broadened their scope and now look at several market segments simultaneously to remain diversified and competitive.
Opportunity Knocks
Clearly, there is much to discuss in the world of herbs and botanicals, as they are found in a large number of natural products. One of the primary rules in marketing science is that the market dictates what products are to be developed and for what purposes. Companies must then ensure that research and development is market-driven. Simply put, products must be created in response to or anticipation (backed by lots of market data) of market need, as opposed to the old way of creating products and then finding a market for them. Industry is simply too competitive and consumers now have too many choices for that kind of myopic strategic thinking. The survivors understand this, or eventually learn it.
Opportunity is knocking in the world of herbs and botanicals, and organizations owe it to their shareholders to answer the door!NW
About the author: Darrin Duber-Smith, MS, MBA, is president of Green Marketing, Nederland, CO, which is a strategic planning firm offering marketing planning and marketing plan implementation to natural products companies in all stages of growth. He has 15 years of specialized expertise in the natural products industry and is currently an adjunct marketing professor at the Metropolitan State College School of Business in Denver, CO. He can be reached at success@greenmarketing.net.
State of Supply
Herbs and botanical suppliers, like most other raw material players, must take care to avoid the commoditization of their products, even though there are thousands available serving a myriad of functional purposes. If botanical raw materials become commodities, like pork bellies or frozen concentrated orange juice, crucial marketing concepts such as differentiation and competitive advantage must be largely discarded in favor of price and volume considerations. This has indeed happened in the world of vitamins, where a few large multinational players dominate the marketplace, setting prices and volume levels for the industry. What then is happening with herbs and botanicals?
Smart suppliers pay great attention to intellectual property as a means of differentiating one product from another. This usually comes in the form of a brand name for a specific herb or botanical or, more commonly, a proprietary blend of herbs or botanicals. Top that off with a process patent and you have the makings for achieving a sustainable competitive advantage. Of course, branded retail product manufacturers have been used to this game of differentiation for many years, and they often source smart suppliers by examining their strategic marketing savvy.
The Market Segments
The herbs and botanicals industry has its roots in the nutritional supplement market segment, an area that has experienced extremely slow growth over the past several years; NBJ reported that this mature market stood at $18 billion in 2002. Opportunities in supplements have been limited to non-botanical, specialty ingredients, but botanicals in the forms of single herbs, multi-herb-combinations, vitamin/herb blends are still in demand, although not at the levels seen in previous years. Some of the greatest opportunities in this area now lie in the heavily regulated and resource intensive OTC/pharmaceutical area, as researchers are basing increasing numbers of drugs on botanicals.
Yet, the functional foods segment, bringing in $20.5 billion in sales in the U.S. in 2002, and growing at between 7-10% annually, has taken the lead over supplements as the preferred medium for nutritional supplementation. It seems that more and more people simply prefer food to pills, powders and tinctures. Bars, beverages, and many traditional foods products contain herb and/or botanical ingredients that claim to enhance overall wellness or provide certain functional benefits, such as increased energy, enhanced relaxation, eye health, cardiovascular health, antioxidant benefits, and even increased sex drive. Consumers have demonstrated a need and the market has indeed responded, as will always be the case!
Perhaps the best opportunity for growth on both the supply side as well as with retail brands is in the smaller natural personal care market segment. At $4.5 billion in 2002 (NBJ), it is growing at a rate of between 15-25% annually and now comprises just under 15% of the total health and beauty market in the U.S., and botanicals are the main ingredient! Used for everything from emollients, surfactants and emulsifiers, to cosmeceutical active ingredients that provide certain semi-therapeutic benefits (e.g., anti-aging, collagen-enhancing, skin whitening, etc.), botanicals increasingly appear at center stage. Tied to the personal care market, and still very much in its infancy, is the rapidly growing natural household products segment, which posted $450 million in sales in 2002 (NBJ). Plant-based alternatives to the harsh synthetics found in most household cleaners are in very high demand by both mainstream and smaller natural players.
Market Drivers
There are several factors driving the market for botanicals.
Consumers desire natural alternatives to drugs, so that they can enhance overall wellness and attain certain functional benefits involved in the prevention and/or treatment of medical conditions, or to ward off the effects of aging. Most important, the aging population will increase their need for treatment, while the younger population gravitates more toward prevention. This is probably why the Natural Marketing Institute (NMI), Harleysville, PA, recently reported that its psychographic research revealed a slight shift toward treatment and away from prevention.
Organizations at all levels of the supply chain continue to engage in clinical and pharmacological research to validate traditional use claims and find new uses for botanicals.
Sophisticated pharmaceutical testing techniques, coupled with well-implemented GMP programs, continue to validate product claims through HPLC, UV, mass spectrometry and other metrics.
Increased research has demonstrated that many botanicals, such as green tea, not only have multifunctional benefits, but also can be used in both internal and topical applications.
Players at all levels continue to seek a means of gaining sustainable competitive advantage and establishing meaningful differentiation from competitive and substitute offerings by acquiring some means of intellectual property, most effectively done through branding.
Suppliers have broadened their reach and are sourcing new botanicals from around the world and discovering new applications on a daily basis. Globalization continues to ease regulations and other barriers that have stunted growth in scale (global markets) and breadth (number of available herbs).
With regard to strategic marketing planning, smart suppliers have broadened their scope and now look at several market segments simultaneously to remain diversified and competitive.
Opportunity Knocks
Clearly, there is much to discuss in the world of herbs and botanicals, as they are found in a large number of natural products. One of the primary rules in marketing science is that the market dictates what products are to be developed and for what purposes. Companies must then ensure that research and development is market-driven. Simply put, products must be created in response to or anticipation (backed by lots of market data) of market need, as opposed to the old way of creating products and then finding a market for them. Industry is simply too competitive and consumers now have too many choices for that kind of myopic strategic thinking. The survivors understand this, or eventually learn it.
Opportunity is knocking in the world of herbs and botanicals, and organizations owe it to their shareholders to answer the door!NW
About the author: Darrin Duber-Smith, MS, MBA, is president of Green Marketing, Nederland, CO, which is a strategic planning firm offering marketing planning and marketing plan implementation to natural products companies in all stages of growth. He has 15 years of specialized expertise in the natural products industry and is currently an adjunct marketing professor at the Metropolitan State College School of Business in Denver, CO. He can be reached at success@greenmarketing.net.