DIET SUPPLEMENT INDUSTRY AWAITING NEXT HOT PRODUCT.

Byline: Phil Galewitz Associated Press

After years watching sales of its natural pills soar, the dietary supplement industry might need its own dose of Melatonin.

For the first time in years, vitamin and herbal manufacturers are working without a singular hot-selling new product to spur consumer buying.

And without this year's version of Melatonin or Ginko Biloba, the industry has seen annual retail sales growth slow this fall from a robust 30 percent to 40 percent to about 15 percent, according to Information Resources Inc. That's still healthy for most consumer products, but not exactly what Wall Street was hoping for.

Industry officials meeting at a financial conference in New York said Wednesday that they expect sales growth to pick up again next year, although at rates still below recent levels.

``The industry is taking a breather,'' said Thomas Aarts, executive editor of Nutrition Business Journal, a trade publication. ``It's hard to keep compounding the same growth rates, especially when there is no new hot product.''

The stocks of most major dietary supplement companies are down more than 25 percent since summer, and analysts say it could take many months for them to rebound.

Rexall Sundown Inc., the Boca Raton, Fla.-based vitamin and herbal manufacturer, paid a steep price last week for slowing sales when it failed to meet Wall Street earning's forecasts. Rexall stock closed at $15.13 Wednesday after having traded at $22 earlier this month.

Other supplement companies have seen their stock prices fall, including Twinlab Corp., Herbalife International Inc. and NBTY Inc.

Rexall, which in the past three years has become the market leader by shifting sales from health food stores into mass retailers such as Wal-Mart, had 83 percent sales growth in its latest fiscal year, which ended Aug. 31. But the company expects only a single-digit growth rate for the industry the rest of the year and midteens next year, President Damon DeSantis told conference attendees.

Rexall, like others in the field, has doubled its research and development spending to find the next hot supplement.

Predictions vary on what will be the next product to attain stardom. The most frequently mentioned include calcium, which can reduce the risk of osteoporosis; folic acid to reduce birth defects and heart disease; and colostrum, the premilk fluid produced by women hours after giving birth that could aid the immune system.

Sales are slowing just as the industry is reaching new heights in terms of generally positive public exposure. Indeed, these are heady days for vitamin and herbal manufacturers, which once were seen as anything but mainstream.

This week, herbals graced the cover of Time magazine. Earlier this month, an entire issue of the Journal of the American Medical Association was dedicated to the science of supplements. And three major pharmaceutical manufacturers - Warner Lambert, American Home Products and Bayer have started their own herbal lines - a move that undoubtedly will bring more legitimacy to the supplement business.

Despite such advances, the industry has faced new challenges this year that again raise questions about future success. And the first scientific studies into two popular herbals - shark cartilage and echinacea - said they did nothing for cancer or colds, respectively.

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