Nutritional Supplements Are Under the Weather

25 June 2001 00:00  [Source: ICB Americas]

Dietary supplements, a boom market in the 1990s, are facing slower growth. Particularly hard hit are herbal supplements, which show year-over-sales declines, although non-herbal supplements show stronger growth.

While the nutritional supplement industry as a whole has enjoyed a modest increase in sales, herbal product sales have plummeted. Sales totaled $16.8 billion in 2000, up 4.7 percent over 1999, according to Nutrition Business Journal, and they are projected to grow at between 3.5 and 5 percent through 2005. Supplement sales in supermarkets, drug stores and other mass merchandisers fell 2.4 percent last year, according to Information Resources Inc. Herbal supplement sales posted a 15.1 percent drop to $590.95 million, although non-herbal sales declined 13.1 percent to $646.05 million.

Among herbal supplements posting the largest US sales decline in mass merchandise outlets was St. John's wort, which posted a 45.4 percent sales decrease to $55.98 million, according to IRI. Echinacea fell 20.4 percent to $58.42 million, and garlic declined 20 percent to $61.21 million. Sales of ginseng fell 25.2 percent to $62.5 million, and kava kava fell 16.2 percent to $14.68 million. Saw palmetto declined 2.5 percent to $43.85 million, and cats claw dropped 46.9 percent to $963,081. The only gainers with sales over $1 million were soy (+115.6 percent to $41.04 million), valerian (+70.5 percent to $16.82 million), yohimbe (+12.5 percent to $2.14 million), milk thistle (+14.6 percent to $8.91 million), green tea (+39.4 percent to $3.15 million) and black cohosh (+2.0 percent to $6.15 million), according to IRI.

Industry insiders offer various reasons for the declines, with some saying that although consumer demand for self-care solutions remains strong, consumers have become leary of certain products. "At issue are increasing concerns about drug interactions, poor manufacturing standards, inconsistent quality, misleading product information and unsubstantiated claims, and a poor level of scientific research," says Peter Leighton, partner at Copernicus Associates, a strategy and ideation consultancy to food, biotech and nutrition companies.

Pharmaceutical company participation will both hurt and help dietary supplement sales. Changes may include marketing in a manner more akin to prescription and over-the-counter (OTC) therapies and the use of a professional detailing sales force. As a result of endorsement by healthcare providers, the media will be more comfortable communicating favorable stories about dietary supplements. However, Mr. Leighton projects that growth of dietary supplements will be hampered by more innovative, convenient, and experimental products, citing "Viactiv" soft calcium chew as an example. This Mead Johnson product achieved first year sales in excess of $30 million and captured 10 percent of calcium supplement sales.

The aging of the US population and a shift toward preventative health will continue to increase demand for nutritional supplements, and sales will increase despite recent setbacks, says Joseph Kirikian of Hankin Investment Banking, Los Angeles, Calif. He projects that pharmaceutical companies, such as American Home Products and Bayer, will be in the market to buy nutritional products companies, and larger food manufacturers, such as Kraft and NestlÄ, will also enter the market. The entrance of these larger players will reinforce a trend toward higher quality, science-based nutritional products as well as drive existing manufacturers to put more emphasis on research and quality.

Although herbal supplements sale are down, non-herbal supplements are posting much better growth. Overall, US sales of non-herbal supplements in mass merchandise outlets grew by 13.1 percent to $646.09 million last year, according to IRI. Gainers were acidophilus (+14.5 percent to $12.15 million), glucosamines and chondroitins (+25.6 percent to $368.55 million), co-enzymes and Q-10 co-enzymes (14.2 percent to $48.31 million), fish oil/fatty acids (+25 percent to $17.38 million), flax seed (+92.2 percent to $9.67 million) and glucose (+18 percent to $7.93 million), according to IRI.

On a specific product basis, bright spots in the nutraceutical market include "natural" weight loss ingredients, such as hydroxycitric acid (HCA), and combinations with stimulants, such as ephedra and other naturally occuring compounds, says Mr. Leighton. Peptides show promise because they confer a host of functional benefits, he says. Probiotics and prebiotics will continue to gain momentum in the US despite a reluctance to discuss "gut health," he says. Stimulants, such as guarana and taurine, will do well as energy products, and flavonoids will become better understood and characterized for the many health benefits they encompass. Mr. Leighton expects the greatest movement to come in "designer" food products that offer a functional or "wellness" benefit.

The osteoporosis market will remain competitive, with phytoestrogens playing a key role, says an official at Millennium Biotech, Bernardsville, N.J. For example, he notes, significant scientific data on ipriflavone presents convincing evidence for its use in the overall treatment of osteoporosis. Alternatives to synthetic estrogen replacement will also gain significant momentum in the next few years. Nutraceuticals, such as soy isoflavones and black cohosh, for the relief of menopausal symptom have tremendous market potential, the official notes. In the joint health category, glucosamine and chondroitin will continue to be strong, and omega-fatty acids will reemerge. Virility products, both familiar products, such as yohimbe as well as new contenders, will gain, he says.

New products will target the eye health, joint health, and gender-specific markets of special concern to an aging population, according to Lynda Doyle, director of marketing, new ingredients and business development for Roche Vitamins Inc. For example, a multitude of new supplements targeted to eye health containing lutein and/or vitamins E and C hit the market last year. Studies have associated lutein and another carotenoid, zeaxanthin, with reduced risk of age-related eye diseases such as macular degeneration and cataracts. Lycopene, another important carotenoid, has made substantial inroads into men's dietary supplement formulations. Ms. Doyle notes that a large body of epidemiological data associates higher serum levels and diets rich in lycopene with a reduced risk of prostate cancer. There is also mounting epidemiological data showing an association between lycopene and a reduced risk of cardiovascular disease.

Taking a more conservative position, Anthony Almada, president of ImagiNutrition Inc. and MetaResponse Sciences, a nutritional consultancy, says that there is nothing hot and new in the market. "New product introductions have slowed due to the economic downturn and the near total absence of true R&D within the dietary supplement category. Most of the products that have emerged as blockbusters were introduced to marketers by ingredient suppliers and manufacturers, who bear the majority of the onus of R&D." However, says Mr. Almada, BioActiva, a division of ImagiNutrition Inc., has identified bioingredients to watch. He projects that phytosterols, primarily beta-sitosterol, will be re-introduced to the market. The most well know of these cholesterol-lowering phytosterols has been Raisio's Benecol. Yerba mate, Ilex paraguariensis, a popular beverage in South America, will gain attention in the weight loss segment. Black cohosh (Cimicifuga racemosa), a traditional Native American herb used for the symptoms of menopause will be strong. GlaxoSmithKline's Remifeminhas recently entered the market. Mr. Almada also put the carotenoids zeaxanthin and astaxanthin, grape bioactives, long-chain saturated alcohols, and milk fraction bioactives on his up-and-coming list.

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