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    Columns

    Revisiting Key Success Factors for Nutraceuticals

    Companies that translate industry trends into effective business strategies stand to capitalize on growing demand for health and wellness products.

    Revisiting Key Success Factors for Nutraceuticals
    It is important to evaluate new or repositioned products against 'Key Success Factors.'
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    Gregory Stephens, RD, Windrose Partners04.01.15
    In previous Business Insights columns (January 2007, April 2011) I addressed “Key Success Factors for Nutraceutical Products.” Criteria for new products have stood the test of time; however, in our rapidly changing market, adjustments are inevitable. This month I have revisited several factors, highlighting some distinctions.

    Consumers’ Unmet Needs
    Many of today’s rapidly growing markets were in their infancy several years ago. For example, consider the gluten-free market. Though the incidence of diagnosed Celiac disease has not increased significantly, the number of people in the U.S. who are either self- or practitioner-diagnosed as gluten-sensitive has increased dramatically. At the recent Natural Products Expo West conference, there were 465 exhibitors marketing gluten-free products and a total of 957 addressing gluten in some way. Gluten-free is more than just a market trend, as it has been gaining attention among many healthcare practitioners as well.

    Another important development has been the “clean label” movement. In years past, consumers were most concerned with what was in their product. However, their focus has shifted, as they seem more concerned with what is not in their products—specifically, artificial ingredients and perceived allergens. Looking at the fastest growing consumer segment, Baby Boomers, the percentage that indicated they are looking for a short list of ingredients on product labels has increased from 34% to 51% over the pasts 7 years, according to the Natural Marketing Institute (2014). In consumer focus groups I’ve often heard the comment, “If I can’t pronounce an ingredient, I don’t want it in the product.”

    Potential side effects of prescription medications and nutrient/drug interactions, has become another growing concern. Part of this trend has been driven by specific classes of medications being prescribed to broader patient populations. A few years ago, statin drugs were recommended for patients with total cholesterol above 240 mg/dl (“high risk”). With the encouragement of pharmaceutical companies (and clinical substantiation), that number has been lowered to 200 mg/dl (“borderline high risk”), increasing the target population by millions. Looking for alternatives to medications in an effort to avoid associated side effects, many consumers in this borderline category are seeking effective lifestyle modifications and nutritional interventions.

    The most significant population trend affecting consumers’ unmet needs is the aging U.S. population, which includes the exploding Baby Boomer cohort that is approaching 80 million in the U.S. It has been reported that two years from now 50% of the U.S. adult population will be over 50 years old and will control 70% of the nation’s disposable income. The top nutritional ingredients Boomers want more of in their diets include omega-3s, protein, vitamin D, calcium and heart healthy ingredients (NMI, 2014).

    Addressing an unmet consumer need is just the first step—one that is almost meaningless if the consumer is not aware of the benefits afforded by nutritional products.

    Communicating Benefits (Claims)
    There are many ways consumers become aware of the link between products/ingredients and their associated health benefits. This may include media coverage, word-of-mouth from friends, colleagues and relatives, recommendations from healthcare practitioners and product advertising and labels. Communicating product claims through traditional marketing is becoming more of a challenge.

    FDA is clear that since dietary supplements are intended to keep healthy people healthy, as opposed to preventing, improving or treating a medical condition, any claims supported by clinical research with “disease” endpoints are inappropriate. Thus, for example, a study showing a product reduces cholesterol in subjects with elevated cholesterol supports a drug claim—not a structure-function claim—and is not acceptable for a dietary supplement. FDA may suggest filing an investigational new drug (IND) application and proceeding with drug development.

    Alternatively, a study demonstrating significance in supporting normal cholesterol levels in subjects with cholesterol already in the “normal” range would likely require a large study population and a lengthy investigation period. It is unlikely that a dietary supplement company would embark on this path since the ensuing claim would be structure-function and the potential for significant protection of findings (intellectual property) is unlikely.

    Safety & Efficacy
    It has been said that assuring product safety is not a measurable success factor but rather an “ante” to get into the game—a given. Recent actions by the New York Attorney General (NY AG) against botanical supplements has opened the door to further questions on not only efficacy of supplements but also safety.

    As consumers have high trust in their healthcare professionals, it’s reasonable to consider recent events as an opportunity to market products through the practitioner channel. Patients trust their practitioner’s recommendations and physicians expect products with unquestionable safety.

    Another factor affecting marketing of supplements is the challenge of obtaining FDA “approval,” or acceptance of New Dietary Ingredient (NDI) notifications. We are expecting new NDI guidance from FDA by the first quarter of 2016, but until then the challenges continue. Some companies are taking the Generally Recognized As Safe (GRAS) route to substantiate safety of NDIs, specifically self-affirmation. In 2015 we may, however, see FDA revise guidance to require more transparency of GRAS self-determinations, especially addressing any conflict of interest among expert panelists.

    Do supplements deliver the benefits claimed? No doubt everyone reading this article is well aware of the recent actions of the NY AG and the likely direction this inquiry will follow. Needless to say, product safety and efficacy are under a microscope. Regardless of the appropriateness of the DNA testing methodologies, this investigation could open the door for additional class-action lawsuits from citizen groups and interventions by other regulatory agencies.

    Fortunately, key industry groups are addressing the issue head-on. For instance, the United Natural Products Alliance (UNPA) has launched its own investigation to test the products through third-party labs, utilizing appropriate methodologies. The association will share results publicly, which could either validate NY AG’s findings, contradict them, or produce mixed findings that are unlikely to placate authorities or an industry that is still reeling from the investigation. This will be the #1 issue affecting our industry in 2015.

    Applications Development/Sensory
    Taste is increasingly important in all forms of nutraceuticals. Other organoleptic attributes continue to develop as well, especially as more “mainstream” consumers enter the market. According to NMI research, the number of consumers who prefer to get their supplements in forms other than pills increased over the 5-year period 2006-2013 from 29% to 44%.

    For example, gummy supplement forms for adult consumers have been growing. Fortified foods seem to be a mixed bag, in that consumers want functionality in their foods and beverages yet are not always willing to pay a premium for them. Fortification of milk with omega-3 DHA may differentiate the product but typically does not achieve a higher price point.

    Sourcing & Distribution
    Transparency in sourcing is more important than ever. Well over half of dietary supplement users now indicate that knowing the source of the supplement ingredients is important to them. This is followed by the desire to have products from natural, organic and vegetarian sources. Sourcing also correlates strongly with the previously mentioned “clean label” movement and product safety. Consumers increasingly expect full disclosure via product labels and company websites.

    Expansion in product distribution should be viewed according to specific channels. The Internet, mainstream retail and the health practitioner channel have been leading growth. Internet sales drivers include use of affiliate marketing lists, strong customer support, social media and savvy marketing. The 9-year CAGR of supplement sales through the Internet is 20%.

    Growth in the traditional retail sector (food/drug/mass/club) has been catapulted by widespread access to supplements in the club store setting (e.g., Costco, BJs).  Value packs and lower cost, quality store brands (e.g., Kirkland Signature) not only appeal to current users but are also attracting new consumers to the market.

    The health practitioner channel is also realizing significant growth, albeit from a smaller base. The 9-year CAGR of 8% is only outpaced by growth via the Internet. Key drivers include clinical substantiation and the perception of high-quality products. This channel also taps into the value factor, where consumers are more willing to pay a premium price for products recommended by their healthcare practitioners.

    These changes have affected the development of new nutraceutical products, impacting the industry at large. It is important to evaluate new or repositioned products against the Key Success Factors, keeping in mind that fulfilling most but not all won’t be good enough to assure market success. For those marketers capable of translating these trends into effective business strategies, there will be ample opportunity to capitalize on growing demand for nutritional health and wellness products.


    Gregory Stephens, RD
    Windrose Partners

    Greg Stephens, RD, is president of Windrose Partners, a company serving clients in the the dietary supplement, functional food and natural product industries. Formerly vice president of strategic consulting with The Natural Marketing Institute (NMI) and vice president of sales and marketing for Nurture, Inc (OatVantage), he has 25 years of specialized expertise in the nutritional and pharmaceutical industries. His prior experience includes a progressive series of senior management positions with Abbott Nutrition (Ross Products Division of Abbott Laboratories), including development of global nutrition strategies for disease-specific growth platforms and business development for Abbott’s medical foods portfolio. He can be reached at 215-860-5186; E-mail: gregstephens@windrosepartners.com.
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