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    Features

    Herbs & Botanicals Update

    Uncovering the latest developments in the herbs and botanicals market.

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    Tim Wright07.01.05

    Still crawling out from under the shadow cast by bad publicity surrounding controversial ingredients over the past several years, particularly ephedra, the herbs and botanicals market has been struggling to regain just a fraction of the glory it once knew. But with FDA's final cGMPs around the corner, the ceaseless innovation resulting in high quality proprietary extracts, the opportunities presented by the brave new world of functional foods and a stronger desire from consumers interested in using herbs as an alternative means of preventing serious health conditions, could things possibly be looking up? Just maybe.

    According to Nutrition Business Journal (NBJ), San Diego, CA, herbal and botanical supplements grew 2% to nearly $4.3 billion in 2004 from just under $4.2 billion in 2003. While herbal and botanical supplements were down 4% to $740 million in the mass market channel in 2004, they were up 3% in the natural health food channel, which accounted for almost $1.38 billion of 2004 sales. The direct-to-consumer sales channel and other outlets were responsible for over $2 billion of 2004 sales. Unfortunately, 2004 did not bode well for single herbal and botanical supplement sales, including echinacea, garlic, ginseng, ginkgo biloba, goldenseal, saw palmetto and St. John's Wort, which were all down 6-14% last year.

    What is Driving Today's Herbs & Botanicals Market?

    Today's herbs and botanicals market is being propelled forward by a variety of factors, the most obvious being the needs of baby boomers. "The baby boomer segment of the population is aging and trying to maintain a good quality of life, which entails seeking out alternatives to pharmaceutical drugs for specific ailments and for general health improvement," said Larry Martinez, president, Amax NutraSource, Inc., City of Industry, CA. "At the moment, the market is in single-digit growth mode but at least it is still growing. As the category evolves into a more mature state, it is in a better position to stave off negative publicity."

    Jocelyn Mathern, technical specialist, Acatris, Minneapolis, MN, also believes baby boomers are the major influential force determining new product trends in the herbs and botanicals market. "If you look at many of the popular products, such as natural hormone replacement products, prostate health, joint and brain health products, they're really geared for this market," she said.

    But there are negative growth factors as well. Industry research indicates that the retail value of herbal supplements has been experiencing a negative growth rate for the past three to four years, according to P K Dave, president, Nature's Formulary, LLC, Albany, NY. "This can be attributed to negative publicity and a down economy. However, we feel the market has long-term strength despite the fact that we are currently at the bottom of the 'down' portion of the cycle," he said. "We believe the market is shifting from being driven by one or two 'big products' to being health category driven. Evidence of this shift can be seen in consumers who are looking at buying groups of products for therapeutic benefits. Many consumers are increasingly taking several different supplements for one condition."

    One of the most popular health categories being pursued these days is inflammation. Annie Eng, president, HP Ingredients, Bradenton, FL, said this is because researchers recognize inflammation as a key component of many of the major diseases affecting human health. "Inflammation contributes to disease by damaging the very tissues it has evolved to protect. Seemingly unrelated disorders such as asthma, Alzheimer, multiple sclerosis, inflammatory bowel diseases and rheumatoid arthritis all have common inflammatory elements that underlie the disease process," she explained. "Right now the most common applications for anti-inflammatory ingredients are skin and joint care products. But eventually the anti-inflammatory category will include pain management, as well as alternatives to non-steroidal anti-inflammatory drugs (NSAIDs), such as Tylenol or Aleve, and COX-2 inhibitors."

    Qun Yi Zheng, president, PureWorld Botanicals, Inc., South Hackensack, NJ, believes the most recent trends are forcing companies to step up science and quality standards. "Today customers are more aware of products supported with human studies than ever before," he said. "They demand products with high quality standards, especially in the areas of pesticide and heavy metal contamination, solvent residues and sterilization without irradiation."

    Another trend, according to Ellen Schutt, vice president of marketing and brand strategy, RFI Ingredients, Blauvelt, NY, has been the overall shift away from single ingredient, stand alone herbal products toward multiple ingredient formulations for specific conditions. "For the most part formulas are more popular," she said. "Manufacturers may be interested in building a product around one specific ingredient, but they like to have additional synergistic raw materials that may have a different mechanism of action or fill a need the main ingredient doesn't. Having more than one ingredient also helps strengthen the marketing 'story' for the product."

    Notwithstanding the fluctuating global fortunes of the herbs and botanicals market, Gus Le Breton, CEO, PhytoTrade Africa, Harare, Zimbabwe, has seen a steadily growing interest over the past few years in African herbs. "Hoodia has, of course, led the way in awakening market interest in the huge untapped potential that is Africa, but there have been several others following close behind."

    Offering his opinion on the state of the herbs and botanicals market was Kenn Israel, director of marketing, Soft Gel Technologies, Inc./OptiPure Chemco Industries, Inc., Los Angeles, CA. "While the category as a whole has been soft, many of the most important new ingredients are coming from this segment. But the single most important trend is the move to patented, branded ingredients that have been clinically evaluated," he said. "It appears that the category is evolving into a field of price and scarcity driven commodities and high value proprietary ingredients."

    Issues Facing the Market

    Some of the biggest problems facing the herbs and botanicals market revolve around the safety, quality and science of ingredients. Industry veterans like PureWorld's Mr. Zheng are eagerly awaiting FDA's final ruling on cGMPs as one of the ways in which to remedy some of these issues. "Most quality conscious companies are anticipating FDA's announcement of the cGMPs because they believe these will change the industry for the better by requiring more stringent measures to ensure quality products are brought to our customers," he said. "Until these are released, we will continue to deal with problems such as low-quality products."

    Opting for a regulatory system encompassing the global market, Steve Siegel, vice president, Ecuadorian Rainforest LLC, West Paterson, NJ, said that as long as each country has its own set of standards the industry is going to remain wild. "Ideally a global regulatory body should be in place that would not so much impose but set standards for which suppliers, manufacturers and labelers could follow," he said. "That is not to say that current standards are not being enforced, however, there is just too much fragmentation within the industry. Clearer and more concise standards need to be established from start to finish, from cultivation to end product."

    Addressing the issue of commoditization was HP Ingredients' Ms. Eng, who said it continues to be a problem for the industry. "In today's botanical field, many companies borrow science to make claims about their own plant-derived products. While initially this practice may seem reasonable or appropriate, it is most often scientifically baseless and can result in the development and marketing of ineffective botanical products," she said. "Manufacturers that want cheap raw material end up putting out ineffective products, which results in loss of consumer confidence and ultimately future sales." Things are beginning to change, however, according to Ms. Eng. She said savvy consumers are becoming more demanding and ingredient suppliers are stepping up to the plate with more science-based products to support claims and product use in order to maintain a competitive advantage.

    OptiPure's Mr. Israel said the move to low cost commodity material is done in order to gain supply advantage. "Shortages in certain herbs or control of large segments of the market allow certain vendors to create markets in what would normally be a low profit environment," he said. "It is likely that boom and bust cycles will dominate large scale commodity herbs resulting in unstable pricing." For the future, however, he believes long-term growth will reside in high value added proprietary ingredients. "This move toward propriety," he explained, "is driven by the high cost of research and marketing and it is the only model that will allow for recovery of the investment required to prove the safety and efficacy of an ingredient."

    In a seemingly commodity market, Scott Rosenbush, business manager, Botanicals, PL Thomas, Morristown, NJ, believes the only effective way to differentiate products and gain competitive advantage is through branding. "The herbal market is being driven by branded and clinically supported ingredients in a variety of categories. This entails substantially more than just creating a trade name. Rather it involves all of the traditional aspects of branding, which includes clinical and scientific support, business-to-business advertising/marketing and consumer advertising/marketing," he said. "With increasing scrutiny by the FTC marketers want to have supportable claims at the very beginning of their new product formulation process. The market for these ingredients is usually relative to the level of scientific support for the product/ingredient."

    Alex Moffett, founder and president, Renaissance Herbs, Chatsworth, CA, concurred. "The proliferation of branded extracts on the supply side shows the industry's intense desire to stand out and avoid commoditization," he said. "Often these branded ingredients don't make the leap to the finished consumer products but they are useful in establishing a market presence with ingredient buyers."

    Functional Food Trends

    The use of herbs and botanicals in functional foods is growing dramatically. In fact, Amax's Mr. Martinez says fortification of functional foods and beverages with herbs and botanicals is the single largest trend right now. "This is clearly the single largest opportunity for growth for the industry as a whole," he said. "Green teas, phytosterols, natural sweeteners and antioxidant herbal extracts are just a few that have successfully crossed over into functional foods."

    Also offering insight into this evolution was PL Thomas' Rodger Jonas, national business development manager, who highlighted ingredients making the cross over into functional foods, including cranberry extracts, omega oils, rosemary extract and grape seed extract for heart health, fenugreek for glucose control, bromelain for joint health and lycopene for prostate health. "The list will grow as FDA claims grow," he said, adding, "Clinical studies are essential to proving the efficacy of the ingredient employed, followed by approval by the FDA."

    Mr. Jonas also said there are several hurdles that must be overcome in order for an ingredient to successfully cross over from supplements to functional foods. "Striving to get an ingredient approved as 'generally recognized as safe' (GRAS) is a big hurdle for many functional ingredients. Before that, the functional ingredients must be in a usable form, possessing good solubility and taste characteristics," he said. "The final hurdle for crossover into foods is an ingredient's cost. 'Good-for-you' cannot cost more than the total product and packaging cost of an existing non-fortified product."

    RFI's Ms. Schutt feels that many of the energy botanicals, including guarana, yerba mat and ginseng, are already well established as crossover ingredients. "Yerba mat in particular seems to be an up-and-coming ingredient. It has a very interesting chemical profile and seems to react differently in the body than other caffeine sources, allowing caffeine-sensitive individuals to use it without adverse effects, and since it's known as the 'Brazilian green tea,' it has a long history of use," she said. "Another key ingredient that is showing tremendous potential at the moment is aai, which is a high-antioxidant fruit from the Amazon. There are several aai-based beverages on the market and we've had interest from supplement manufacturers in aai-based pill products." According to Ms. Schutt, aai is well known and extremely popular in Brazil, and it is often paired with guarana, so it has received the reputation as an energy product. In actuality, it's a very high antioxidant fruit, rich in essential fatty acids and a host of vitamins and minerals, so it's a nice all-around ingredient if you're looking for a 'Rainforest' type of herbal formulation."

    While the inclusion of botanical extracts into functional foods is starting to take on increasing importance as a growth strategy for marketers, OptiPure's Mr. Israel said he is concerned. "This strategy may ultimately weaken dietary supplement sales as consumers begin to expect supplement like activity from their foods," he said. "It is still important for consumers to supplement their diets accordingly to what they are getting from their foods."

    Ayurvedics: Growing 'Niche' and Easy

    An Ayurvedic product is defined by the Association of Ayurvedic Products Suppliers as one that is comprised with an ayurvedic herb being the principal ingredient(s) AND is labeled as an ayurvedic supplement. "In this way, a product with several ingredients and an incidental ayurvedic herb amongst them would not be considered an ayurvedic product," said Nature's Formulary's Mr. Dave. "This definition in effect also separates ayurvedic products from the larger herbal/botanical category."

    There is nothing that makes an herb ayurvedic other than the fact that it was native to the area where ayurvedic medicine developed in India, according to Alex Moffett, founder and president, Renaissance Herbs, Chatsworth, CA. "Like all herbs, botanicals typical of ayurveda contain phytochemicals that can have an effect on human health and well-being," he said. "There has been an increasing awareness and demand for ayurvedic herbs but even more important is the trend of these herbs becoming part of the mainstream, rather than being segregated into a separate category."

    While the herbs from India have a traditional use within ayurvedic medicine, the ayurvedic market so far has been a selective one, mostly concentrating itself within India, according to Shailinder Sodhi, president, Ayush Herbs, Bellevue, WA. "These herbs have been used for various ailments and have proven their use over time," he said. "The efficacy and safety of these herbs cannot be matched. While ayurveda has been gaining recognition in the West, education is key to bringing it further along."

    Ayurvedic Market Trends

    The ayruvedic category's niche position has insulated it from the overall industry downturn to a degree, as the category has continued to experience positive growth rates. According to NBJ, ayurvedic herb sales grew 40% to $30 million in 2004.

    Ayurvedic herbs and botanicals are being used for all types of ailments, such as heart disease, joint health, hypertension, liver conditions, parasitic infections, high cholesterol, skin care and stress relief. In particular high demand are ingredients for weight loss and sexual function, according to Mr. Sodhi. "Currently the market is evolving and single ingredients are picking up in the finished product sector," he said, adding, "Products such as basil, karela, ashwagandha and boswellia are in demand. Another product that is in demand, but is low in supply, is curcumin. The tsunamis that hit Southern India in December affected the curcumin crop, making it a rare product this season. As a result, the prices for curcumin have gone up."

    While there is always a need for single herbs, particularly in the practitioner market, according to Mr. Moffett, he said the real growth in consumer products is in multi-herb formulas that address specific healthcare concerns. "Some of the 'hot' herbs at the moment include HCA/garcinia, green tea, gymnema, banaba, mangosteen, ashwagandha and boswellia," he said. "These herbs address healthy issues like weight loss, blood sugar management, inflammation and stress. Consumers have also become interested in antioxidant benefits and are using ORAC values as a way to evaluate the relative potency of various extracts."

    Ayurvedic Optimism

    Ayurveda has been simmering on the back burner of the supplement industry for 20 years, according to Mr. Moffett. "While it has not yet taken off with the public as 'the next big thing,' familiarity, interest and growth are steadily increasing, primarily fueled by the interest in yoga over the past several years," he said. "We expect to see more of the same steady incremental growth with consumers gradually becoming more familiar with ayurveda."

    As people are becoming more aware about the importance of preventative medicine and are taking actions to better their health, consumer confidence has improved over the years when it comes to ayurvedic medicine, says Mr. Sodhi. "Even though ayurveda has been on the receiving end of a lot of backlash from the media, it has still proven itself as one of the best forms of natural medicine out there," he said. "In the future, as education increases, we may see more companies entering the market providing competitive prices. The consumers on the other end will have to be very conscious about the herbs they are purchasing and try not to compromise quality for price."

    Educating customers about ayurveda is key for the market's future growth, which, according to Mr. Dave, entails selling not just products, but a lifestyle. "Our view is that consumers are getting tired of sensational weight loss and sexual function product claims. There will always be consumers looking for a quick fix, but we see more consumers recognizing that these areas, in addition to maintaining overall good health, are a matter of lifestyle. They are increasingly aware that it is an effort that integrates herbal therapy with issues such as eating habits, exercise and lifestyle changes," he said. "We see the ayurvedic category experiencing healthy growth over the next five years because many believe it is the last great frontier in natural medicine."

    Fostering Sustainability

    As the herbs and botanicals market continues to grow and evolve, the issue of sustainability has become a hot topic of discussion. "Sustainability is important for obvious ecological reasons. One cannot simply use up natural resources without much thought of the future," said Ecuadorian Forests' Mr. Siegel. "It is important to work with nature conservation boards in making sure that raw materials are ethically harvested. This places an enormous amount of ethical and moral responsibility on manufacturers." Mr. Siegel claims that manufacturers often turn a blind eye to where their supply is coming from, so long as their current needs are met at a low cost. "This not only compromises the future," he said, "but we must ask ourselves, what is going to happen when that supply is finished?"

    Echoing these sentiments was HP Ingredients' Ms. Eng. "Sustainability is extremely important to our industry. Two-thirds of the world's raw materials are still wild crafted. That's why we are constantly working with organizations like the Malaysia Agriculture Department to convey the importance of cultivation," she said. "Last year, the Malaysian government started an initiative to encourage farmers to cultivate a list of 10 medicinal herbs, which included providing the farmers with sidling, education and even guaranteed a buy back program. We are also working with the Chilean government to start experimentation with a plantation plot for Andrographis Paniculata."

    Sustainability is a rather complex issue for PhytoTrade Africa's Mr. Le Breton. "The current yardstick is organic certification, but it really isn't appropriate to the African context. Organic standards were developed by and for Western farmers, whereas our products are wild-harvested from the African bush," he said. "A monocultural plantation of mango trees can be organic, but it certainly isn't ecologically sustainable. A perfectly good, locally evolved ecosystem was cleared to make way for that plantation, and nobody can tell us that's good for biodiversity. Truly sustainable products are harvested in the traditional manner from naturally-occurring environments, exactly as nature intended it."

    RFI's Ms. Schutt said that its customers are becoming increasingly aware of the sustainability issue. "We have been receiving several calls asking us to document where our South American botanicals come from because they want to make sure that we are involved in sustainable growing and harvesting practices," she said. "This is great news for us-as sustainability is one of our core platforms-and for the industry as a whole. Higher quality, sustainably grown plant-based products are a win-win situation for everyone."

    What Does the Future Hold?

    Looking ahead, RFI's Ms. Schutt predicts that traceability and sustainability will become more important and more common. "With the increasing popularity of organics, manufacturers want to know where their products are coming from and how they're grown. This attitude is also spilling over into the conventional industry and ties into the desire for higher quality standards," she said. "We as suppliers need to know everything we can about where a product is grown, as well as how it's harvested and processed, creating a truly 'field to finished product' approach."

    PhytoTrade Africa's Mr. Le Breton sees a solid future for wild-harvested, natural nutraceutical ingredients. "Inevitably the market will become more highly differentiated, and the pressure to innovate is already relentless," he said. "There is no substitute for solid R&D, and the ability to back up claims through hard science is key to the long-term success of this category."

    In the end, PureWorld's Mr. Zheng said herbs/botanicals will continue to play a significant role in supplements. Furthermore, he said, "This movement will be supported as the food and beverage sectors become more attuned to the benefits of herbs and botanicals. Consumer confidence is on the rise. With more research demonstrating the efficacy and safety of herb products, and more companies caring about quality, we are seeing less negative reports about this industry."

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