Erik Goldman05.01.07
Selling Popcorn at a Train Wreck
It is high time for the natural products industry to step up to the plate in the face of a rapidly growing healthcare crisis.
ByErik Goldman
A few months ago, I gave a talk at Natural Products Expo West for a delegation of Japanese executives interested in bringing new natural products and ingredients into the healthcare practitioner channel. The talk was hosted by Nobuo Iwasawa of Health Business magazine, and the idea was to give delegates an overview of U.S. healthcare, with a focus on practitioner attitudes and behaviors toward dietary supplements and natural products.
As such things often do, it turned into a rather extensive research project, one that turned up some pretty eye-opening figures. Again, as these things often do, it provided equal measures of good news and bad news.
First, the Good Stuff
If you’ve ever wondered whether you’re vainly banging your head against the wall in trying to sell natural healthcare to the medical community, you can rest assured that at least all that banging is causing some cracks! According to Nutrition Business Journal, supplement sales by healthcare practitioners grew nearly 100-fold from 1997 to 2004 (the last year for which we’ve got data). Practitioner channel sales rose from $720 million to $1.4 billion in that time, growing at an average of over 10% per year.
The most growth came from two of the least obvious practitioner groups: medical doctors and nurses, and massage therapists. Supplement sales by MDs and nurses increased by 874%, from $15.5 million in 1997 to $151 million in 2004. That isn’t bad given how challenging it can be to convince the tough-minded medical crowd. And we’re still on the early part of that curve when you consider that only a small percentage of the nation’s doctors and nurses are selling supplements in their practices.
The most significant growth, however, came from massage therapists, who sold over $72 million of supplements in 2004, up from just $6 million in 1997. Massage professionals tend to be far less visible than more politically and economically powerful practitioner groups like MDs or chiropractors, but the sales figures suggest that they’re looking for new revenue streams in their practices, and supplement industry players would be wise to pay attention to them.
Supplement sales by chiropractors and naturopathic doctors, two mainstay constituents for most brands in the health practitioner channel, have been flat for most of the last 10 years. In 1997 chiropractors represented 32% of the total practitioner market, a percentage that didn’t really change by 2004. NDs comprised 7% of the total in 1997, and this went down to 6% in 2004. In contrast, MDs went from 2% to 11% of the total channel, while massage therapists went from 1% to 5% of the total.
Companies that built their businesses around the chiropractic and naturopathic markets are re-defining their strategies these days. Some are revving up their efforts to attract MDs, while others are starting separate consumer-oriented lines and leaping into the retail fray, hoping that they will not alienate their practitioner base by doing so.
What’s clear is that exclusive reliance on the DC and ND segments won’t likely yield much growth going forward—there simply are not enough NDs to expand the market, and the chiropractic segment is pretty well maxed-out as far as supplement marketing goes.
Some very promising findings, however, recently surfaced from a national market research survey commissioned by a major pharmaceutical company considering entry into the practitioner nutrition game. The survey involved well over 1000 busy primary care doctors, and assessed their attitudes toward nutrition-based medicine and use of supplements.
Roughly one-fifth of these doctors still hold “old school” mainstream views that are decidedly negative or indifferent toward nutrition and supplements. But the good news is that an equal number were using nutrition-based strategies—including supplements—as first line approaches.
Another 23% were generally in favor of lifestyle and diet changes, but seldom pushed their patients toward supplements; 14% took a skeptical, “show me the science” stance, suggesting that they would incorporate supplements and nutrition-based therapies into their practices if the data were convincing. Overall, the survey suggests that there are a lot of physicians out there who are willing to be won over if you can show them the value, safety and efficacy of your products.
Physician attitudes have definitely shifted favorably in the last decade. And this is translating into real-world sales growth as indicated by some fresh consumer survey data from the Natural Marketing Institute (NMI), Harleysville, PA. NMI reports that 19% of consumers surveyed said they purchased natural products from a healthcare practitioner in the past three months. That number certainly raises one’s eyebrows! Moreover, there was a clear age differential in likelihood of purchasing from practitioners—26% of those over 65 said they purchased products at a practitioner’s office, versus only 11% of consumers aged 18-29.
This finding may reflect a predilection for convenience among older individuals or perhaps a vestige of the traditional “whatever the doctor says,” attitude. Either way, it’s an interesting bit of data pointing to a trend worthy of one’s attention.
So, the good news is that the healthcare practitioner channel is growing steadily, showing no signs of slowing down in the coming years, especially as more conventionally trained physicians start to see the holistic light and the natural healthcare professions continue to mature.
Now, the Bad News
The bad news is that healthcare as a whole is a shrieking, fiery train-wreck. And it ought give you plenty of cause to think long and hard about what your business is doing, and the real value of your products.
It’s certainly giving our nation’s political and corporate leaders something more to worry about. Consider this: between now and 2030, the number of new young workers entering the U.S. workforce is expected to grow by about 18%. In that same time period, the number of Medicare beneficiaries is expected to grow by about 98%, according to the Organisation for Economic Cooperation and Development. This translates into a lot more healthcare expenditure supported by far fewer taxpayers.
U.S. healthcare spending is expected to reach $4 trillion by 2015, according to the Centers for Medi-care & Medicaid Services’ 2006 annual report. As a nation the U.S. spends two to three times more per capita on healthcare compared to other industrialized nations like Japan, Canada, France and Germany. Yet there are few indicators to show that on a population basis, we are any healthier. In fact, according to the World Health Organization, the U.S. ranked 33rd in overall healthcare system performance.
Not surprisingly, this is causing big-time CEO agony. According to Hewitt’s “2006 Health Care Expectations” report, healthcare costs to employers have increased 76% over last five years. And corporate leaders expect healthcare cost increases of 10% this year, well in excess of the 7% most say they can afford.
General Motors spent $5.2 billion on healthcare for its 1.1 million employees, dependents and retirees in 2005, with $1.9 billion (37%) spent on prescription drugs. GM chairman G. Richard Wagoner, Jr., estimated that healthcare costs add $1,500 to the price of every car that GM produces. Mr. Wagoner has gone on record stating that healthcare costs are jeopardizing the competitiveness of U.S. businesses in the international market.
You know things are bad when Wal-Mart CEO Lee Scott sees eye to eye with labor union leader Andrew Stern and together they call on the Federal government to create a national healthcare system!
And there are at least 46 million American citizens without any sort of health insurance, up from 37 million when the Clinton’s proposed their healthcare reform plan in 1993.
What does this mean for our industry? It means that we’d better start thinking seriously about how the products, services and values that represent the natural healthcare movement can address the healthcare crisis. We need to demonstrate those values—both social and economic—in terms that the bean counters of the world understand, and we need to push for policy at the federal and state level that supports natural medicine.
This is not about next quarter, or next year. This is about the next century. This is not about how many bottles of pills or boxes of powder you’re selling but about how your products can contribute meaningfully to the future of American healthcare.
You can be sure that healthcare will be a major issue in the next presidential election. Whoever ends up in the White House will have to deal with it, one way or another. Are we, as an industry, going to speak up and have an influence on the overall direction of healthcare in this country, or are we going to let the future be determined by other industries with other agendas, and then bitch self-righteously about it later?NW