In the 20 years following the passage of the landmark Dietary Supplement Health and Education Act (DSHEA), the U.S. nutraceuticals industry has become an integral part of both public health and the economy. About two-thirds (68%) of U.S. consumers reported taking supplements, according to a 2014 survey commissioned by the Council for Responsible Nutrition, and a vast majority (83%) expressed overall confidence in the safety, quality and effectiveness of these products.
However, Good Manufacturing Practice (GMP) requirements continue to present challenges to many companies, as demonstrated by FDA warning letters that are made public on a weekly basis. Meanwhile, economically motivated adulteration has been a significant problem for decades. Keen understanding of what’s required under the law, along with appropriate testing methods and secure, transparent supply chains, will be critical to ensuring product safety. Empowered with new enforcement tools afforded by the Food Safety Modernization Act (FSMA), expect federal agencies to dedicate more time and resources to oversee the dietary supplement industry and enforce existing laws.
This past June, a U.S. Senate hearing on weight loss products, which featured popular TV personality Dr. Oz, shined a spotlight on questionable science that supported sales of otherwise unproven products. Expect further FTC action against companies that fail to support claims, which includes use of the undefined term “natural” on products that contain artificial or synthetic substances.
Additionally, expect debate to continue over labeling of genetically modified organisms (GMOs) and, more broadly, the role of science, technology and engineering in the food supply amid an expanding population and shrinking natural resources.
—Sean Moloughney, Editor, Nutraceuticals World
Delivery is a curious place to start in the nutrition value chain. Even Whole Foods, with a reputation for high prices, only ekes out a profit margin of about 4.5%. Simplifying the chore of shopping for supplements or food is not a new idea. Fifty years ago, a pint of milk appeared at the door six days a week in many places. But will this new crop of technology powered companies fare any better than the milkmen or the delivery models from the dot-com era of the 1990s?
The public capital markets will decline at some point. The severity of the downturn will impact private investors, who will need to keep plenty of cash in reserve while entrepreneurs will be hoping the cash is transferred to their balance sheets before everyone rushes for the door.
—Steve Allen, Co-Founder, Nutrition Capital Network
—Ellen Schutt, Communications Director, Global Organization for EPA & DHA Omega-3 (GOED)
Education of consumers now requires more than marketing messages. Validation of claims through scientific and/or third party verification is increasingly mandated. Social media has emerged as a double-edged sword in terms of accuracy and content. Total and complete control of consumer education content and accuracy relating to a product is important but exceedingly difficult. For this reason more attention to social media content monitoring will continue to rise in importance. Transparency has also taken a larger role in consumer expectations; questions across all levels of the supply chain are complex and detailed. The line between proprietary and requested information becomes increasingly narrow. Honesty, ethics and integrity are important guidelines to navigate the transparency issue. Companies cannot afford to stonewall questions from consumers anymore than they can afford to become an open book.
—Scott Steinford, CEO/Founder, QX-Partners
Regulatory uncertainty and compliance failure remain two important issues. The industry has been anxiously awaiting the FDA’s final rule for NDIs. Companies are continuing to fail cGMP inspections despite the fact that new cGMPs were put in place three years ago.
Consumers are checking out certification labels more than ever before buying foods and supplements. For the first time, natural claims have topped organic as a preference, in part because many people distrust the organic seal due to instances of fraud. The desire for “free from” clean labeling keeps on growing. These two words are key for families confused by labeled ingredients that cannot be pronounced or understood. Non-GMO certification has moved to the forefront. The proliferation of the Non-GMO Project seal has jumped onto the scene. More and more products are being certified every day. Capsugel continues to be the only hard capsule manufacturer to achieve this certification.
—Peter Zambetti, Director of Global Development, Capsugel
Previous industry guidance provided by the American Herbal Products Association continues to be a valuable resource and the U.S. Pharmacopeia has recently addressed herbal product nomenclature with a guideline for assigning monographs titles. Targeted for monographs in the Herbal Medicines Compendium, it’s easily applicable to supplement ingredients by simply adding common names.
It’s past time for agreed upon international standards for botanical extracts that clearly identify native extract yield and percent excipient in ingredient descriptions, but not to routinely include percent amounts and extract ratios in what these ingredients are called. Too often herbal ingredients are purchased without an understanding of the quality of the starting material, how it was processed, and what the final product represents. Scientifically valid methods of supplement ingredient analysis continue to be developed through AOAC International efforts currently funded by the NIH Office of Dietary Supplements.
—Steven Dentali, VP, Botanical Sciences, Global Product Science & Safety, Herbalife
—Nancy M. Childs, PhD, Professor of Food Marketing and Gerald E. Peck Fellow, Saint Joseph’s University, Erivan K. Haub School of Business
Type 2 diabetes is already a pandemic disease worldwide, with 79 million American adults estimated to have higher blood sugar levels than normal, but not high enough for a diagnosis of diabetes (called “prediabetes”). High insulin levels drive weight gain, prevent weight loss, and promote fat storage, making insulin sensitivity a major biomarker driving obesity as well as type 2 diabetes. While 2014 was a good year for resistant starch research, 2015 will be the year that resistant starch becomes a hot topic within the dietary supplement and functional food industries.
—Rhonda Witwer, Industry Consultant
We review contracts that require on-site compliance audits (often redundant with other retailers requiring the same thing), “social responsibility” clauses (e.g., guarantee of no child labor), and indemnification clauses that are all-encompassing in favor of the retailer and are without regard to fault. Specifically, with respect to liability insurance, we are seeing large retailers demanding ever-higher limits of coverage, even for the smallest of companies, which may be their suppliers. This is an expensive prospect that in some cases has become the tipping point for the supplier. Two in particular, Wal-Mart and Walgreens, currently have a requirement of $20 million for dietary supplements, although enforcement of these requirements seems to be spotty at this time.
—Greg Doherty, Managing Director Dietary Supplement Practice Group, Bolton & Company
—Daniel Fabricant, PhD, Executive Director & CEO, Natural Products Association (NPA)
CRN is still determined to distinguish the good guys from the bad, and we are dismayed each time we learn of illegal activity putting consumers at risk and tainting the reputation of our industry. We should be emboldened by the enforcement action that has taken place this past year, but FDA must increase the aggressiveness by which it enforces the law, moving criminals out of our marketplace once and for all. In the next year, we will continue to push for fuller implementation of the law by the agencies that regulate our industry, discouraging any notion that suggests rewriting the law is a solution—because it is not.
—Steve Mister, President & CEO, Council for Responsible Nutrition (CRN)
—John Blair, CRN Chairman, and Senior Vice President, The Juice Plus Company
—Harvey Kamil, CRN Vice Chairman, and Vice Chairman, NBTY
As a result, the borders were much tighter and not accessible for dietary supplements that were previously being imported as food under China food law. China FDA deems this practice illegal and requires that all dietary supplements follow China’s Health Food law, which requires registration. This registration process is known as the “blue hat” registration system and is quite the investment, taking over two years to complete and costing around $100,000 per SKU.
These changes are all part of China’s plan to reign in the health product industry and issue new regulations moving into 2015. On Nov. 5, 2014, the first part of this plan was finally revealed, calling for a new category of “nutritional supplements,” which refers to vitamins and minerals only. The draft regulations for nutritional supplements has been translated into English by the U.S. - China Health Products Association and its members are preparing a comment paper to submit to China’s FDA by the end of November 2014.
2015 will be a very interesting year for China’s dietary supplement industry. It is expected that implementation of regulations will come out early in the year and industry will begin to understand more clearly how the new system will operate.
The association applauds China’s move to reform the system and will continue to share information with Chinese FDA and other relevant organizations to encourage the further opening of China’s dietary supplement industry.
—Jeff Crowther, Executive Director, U.S. - China Health Products Association
Bone health represents another growing category. A developing science portfolio and new product combinations are making this an exciting category to be in. It’s encouraging to see new product launches and new line extensions across many categories. The pace is picking up and this is very positive news.
Internationally, the U.S. dollar is gaining strength. For ingredient imports, it’s a good thing and stimulates new opportunities. Many would argue a strong dollar does more good than harm. The U.S. economy seems to be doing better. It’s fragile but companies are expanding and hiring, so things are moving in the right direction. It would feel a little more positive if we all weren’t working overtime to get things done, but it’s far better than sitting around with nothing to do!
—Dan Murray, VP Business Development, Xsto Solutions, LLC
—Peter Leighton, Vice President of Product Strategy at Complete Nutrition and Founder of Abunda
The numbers and the general consensus are that 2014 is a dull year for dietary supplement revenues, led by declines in multivitamin and omega-3 sales. Strongly negative press on supplement science and industry integrity are reported to be important factors in the slower year. The ongoing core debate among industry leaders is what is necessary for the industry to recover, with public/relations lobbying, self-policing, and higher science standards each having strong advocates. We believe that the consumer movement toward proactive, as contrasted with reactive, approaches to healthy living favors informed use of dietary supplements.
We believe this is a stronger long-term trend than the trend of seeking our full health benefits from consuming wholesome foods. At PLT Health Solutions, we closely adhere to our strategy of developing and launching “best-in-class,” clinically supported, ready-to-go ingredients which address identified consumer priorities.
—Paul M. Flowerman, President & CEO, PLT Health Solutions, Inc.
In terms of krill specifically, we continue to believe strongly in the power of education, which is the main driver of our new “How to Speak Krill” campaign. Because omega-3s are crucial and complex, we’ve made it our mission to ensure retailers, health practitioners and consumers—everyone—have all the information they need at their disposal to make an educated decision when it comes to these fatty acids. This is why we have taken our retailer education program to the health practitioner segment. Just as retailers do with consumers, many practitioners recommend omega-3s to their patients. However, there seems to be a knowledge gap when it comes to knowing the different sources. We intend to fill that void by teaching them “How to Speak Krill.”
—Becky Wright, Marketing Director, Aker BioMarine Antarctic US
Over the past year we have seen a number of clinical studies conducted on both new and long-standing products, further proving their safety and effectiveness. So far this year, six studies have been published demonstrating the benefits of Pycnogenol—our standardized natural extract from French maritime pine bark. This research fostered online consumer conversation and purchase response and feeds into our flourishing research portfolio. More research is coming in 2015. This level of credibility and consumer education is a key motivating factor in why Horphag Research has attained a pioneer role in research and development and continues to push the envelope in science and innovation.
—Sebastien Bornet, Director of Global Marketing, Horphag Research (worldwide exclusive supplier of Pycnogenol)
Our industry needs to be more active in the advocacy, education and overall consumer dialogue with consistent, relevant and simple-to-understand messaging. Also, educating and working more closely with the media should be part of the industry’s strategic plans going forward.
The challenge regarding regulation will continue to be the search for the intersection of consumer protection and promoting an environment for the industry to make investments in, and get timely returns on, R&D and primary science.
—Will Black, VP Marketing, DSM Nutritional Products, NAA
We’ve been advocating a change to how companies test for chondroitin purity for two years, and are seeing encouraging signs that the message is getting through. The industry trade publications have been extremely helpful in getting the word out, and with the recent publication of an article on chondroitin testing in the peer reviewed Journal of AOAC International and subsequent recommendation from the United Natural Products Alliance that its members begin CAME testing immediately, we’re hopeful that consumers will have the benefit of higher quality chondroitin products.
The Supreme Court decision in the POM Wonderful case was encouraging, as industry trade associations and regulatory attorneys were very vocal in their recommendations that companies make sure the amounts in their products reflect not just the supplement facts boxes, but meet consumer expectations indicated by what is on the front of the package. In the end, when the consumer’s expectations are met, we all benefit.
—Weiguo Zhang, President, Synutra Pure
Populations that consume a lot of vitamin K2 in their diets—the Japanese and the Dutch, for example—clearly demonstrate stronger, healthier bones, as well as cardiovascular systems with less calcification.
The industry needs to recognize that this large-scale deficiency carries with it staggering implications. The good news is that NattoPharma’s data is the proving ground that this deficiency can be addressed, and with it, global health concerns.
—Eric Anderson, Senior Vice President of Global Sales and Marketing, NattoPharma
—Michael Bush, Senior Vice President, Ganeden Biotech
Consumer expectations of access to information that was formerly behind the scenes will continue to grow, and forward thinking companies will be ready. Manufacturers are getting more questions about ingredients: “Where are they from? How were they grown? Are they non-GMO? Are they allergen free? Are they pure?” The next question is going to be: “How do you know?”
With manufacturers mentioning product testing as part of their quality descriptions, the logical next questions will be “Where and how do you test? And for what?” While most consumers won’t be looking for an in-depth explanation of testing methods and equipment, they will expect more than vague assurances that products are tested, especially if “dry labbing” came up when they Googled “supplement testing.”
Given this landscape, I predict that when we look back at the end of 2015, which lab a company uses for its third-party testing won’t be kept a secret anymore. We’re ready for that.
—Elan Sudberg, CEO, Alkemist Labs
Ultimately, the dietary supplement industry continues to be driven by strong personal values.
By Greg Stephens
President, Windrose Partners
Most will agree that 2014 has been an exciting and challenging year in our industry. Consumer safety through cGMPs, other regulatory action and inaction by FDA, and a rapidly changing political scene are all hot topics. Certainly many colleagues will focus their comments on these and a range of other issues. I will focus my observations on another industry dynamic. As those who have roots in dietary supplements may have observed, there is a cyclical nature to the market. There are numerous examples, depending on one’s perspective.
I am approaching it from the perspective of the ongoing convergence of the dietary supplement and pharmaceutical industries. During my first visits to Natural Products ExpoWest in the late 1990s, two concerns were voiced in the annual State of the Industry address: state licensure requirements by dietitians and the entry of Big Pharma into the supplement market. Sitting in the audience, I recall feeling more than a little self-conscious—my name badge exposing “RD” after my name and just under that, my employer name, a major pharma company. And yes, I was there to assess acquisition opportunities. Shortly thereafter, AHP (American Home Products, subsequently Wyeth) acquired Solgar, which added fuel to a frenzy of M&A activity. Also during this period, Bayer, Warner-Lambert and SmithKline launched or were test-marketing their own brands of botanicals.
With their marketing and distribution expertise and seemingly unlimited resources, pharma companies were encroaching on a future growth area for supplements: the traditional food/drug/mass markets. This, combined with no real “heart” for the industry, caused them to be often viewed with a little disdain. Still, one industry executive observed, “Today I’m seeing the same guys wearing Birkenstocks and pony-tails—the only difference is they are now in Armani suits.”
Post-acquisition was not as glamorous as expected. During integration and implementation of growth strategies it seems the “low hanging fruit” was not as accessible as pharma marketers had imagined. Supplement companies had a seemingly unlimited number of SKUs, few of which reached the pharma threshold of viability. And they didn’t truly understand the culture of the market, particularly the natural foods channel. Also, formerly the sweetheart of the media, consumers began to read negative stories on supplements. This eventually led to a dive in the market. As quickly as they closed, the acquisitions became divestitures. Having bought Solgar for a reported $425 million, Wyeth divested the company seven years later for just more than $100 million. The list goes on.
Such acquisitions continued but with less emphasis on dietary supplements and more on branded “nutritional” products, like Abbott Labs acquisition of EAS. Today, pharma continues to flirt with supplements but with more targeted indications and limited SKUs.
Now we’re seeing the pendulum swing in the other direction. At an industry gathering not long ago, a pharmaceutical executive made the observation that supplement companies are now encroaching on space traditionally exclusive to pharma, specifically medical foods. During the growth phase of medical foods, the industry would usually see a handful of product launches annually. Over the past two years this number has escalated dramatically. Fueled by a category permitted to make nutritional disease management claims and no requirement for FDA premarket approval, it is estimated that there have been at least 10 times that many launches over the past year. Much to the chagrin of the nutra-pharma companies, most of these products come from companies with roots in the dietary supplement industry. (Certainly, many supplement companies are misguided as to the regulatory requirements for medical foods.)
Many dietitians entered the profession because of our passion for health and wellness through nutrition. Career opportunities now abound for dietitians with supplement companies. As far as heart goes, the dietary supplement industry continues to be driven by strong personal values. Regardless of your background and company, this industry is made up of passionate, caring people. Despite the cyclical nature of the industry, our common goal remains: providing safe and efficacious solutions to improve the health of patients and consumers.