GROWTH SPURT; HERBS ABLE TO RACK UP BIG SALES.

Byline: Ben Sullivan Daily News Staff Writer

There's a revolution under way in the U.S. vitamin industry with implications as broad for the unassuming supplements business as the Internet has been for computers.

Herbal extracts, which barely registered among vitamin and over-the-counter drug makers five years ago, have become the category's fastest-growing segment. Fueled by the enthusiastic and largely unexpected public embrace of products such as echinacea, St. Johnswort and ginseng, the herbal segment has experienced double-digit expansion each of the last four years and is expected to reach sales of nearly $2 billion annually by the end of the century.

Helping supply much of that root, berry and oil extract is Mission Hills-based Pharmavite Corp., whose Nature Made brand is the country's top-selling line of nutritional supplements.

Headquartered on San Fernando Mission Boulevard near Sepulveda Boulevard, with a manufacturing plant a few miles away in the city of San Fernando, Pharmavite has in three years gone from a company that depended almost entirely on sales of vitamin and mineral supplements to one that now derives one-quarter of its roughly $400 million in annual sales from herbs.

And the privately held company, which was bought in 1989 by Japanese drug giant Otsuka Pharmaceutical Co. Ltd., expects that portion to grow to 40 percent or more in the coming years.

``It's the fastest-growing part of our business,'' said Thomas Fourt, Pharmavite's director of marketing for branded products and new business development. To capitalize on the growth, the company in 1995 launched the Nature's Resource line of herbs, which has since grown to 40 products and last year was the top-selling brand of herbal supplements in the United States.

Checkered past

The medicinal use of herbs far predates the discovery and commercial manufacture of vitamins, and in much of the world herbs are a far more common part of a physician's armory. But until recently, they were viewed with skepticism in the United States by physicians, retailers and consumers alike.

``We'd carried items like ginseng, garlic, alfalfa and bee pollen for years,'' but they had been relatively slow growers as a category, Fourt said.

A public health scare in the 1980s over an apparent link between a fatal blood disease and tablets of L-tryptophan, a naturally occurring amino acid, only depressed the segment's already-limited sales.

Then in 1994, the Food and Drug Administration issued the first comprehensive labeling guidelines for food supplements, including herbal extracts. Before that, manufacturers had been strictly limited in what they could say about their products, and it was left to consumers to educate themselves on what if anything to take.

Under the clearer and more liberal labeling rules, companies like Pharmavite can explain in general terms what body parts or systems an extract affects and can claim, for example, that melatonin promotes sleep and that echinacea aids the immune system.

Thanks to the greater marketing freedom and intense media coverage of a few key products, herbs have entered the collective consciousness of American consumers, said Paul Bolar, Pharmavite's head of regulatory and legal affairs.

Case in point: Northridge Pharmacy. For most of its 65 years, the pharmacy operated more or less herb-free, concentrating on traditional cough and cold medicines, pain relievers and prescription drugs.

Last month, owner Barry Pascal hired the pharmacy's first herbalist to manage a store-within-a-store that he opened to promote the holistic health philosophy known as wellness.

``Our country is changing,'' Pascal said. ``In the past, medical practitioners, including myself, only took care of patients from the time they got sick until the time they're dead. Our Wellness Store concept is trying to treat people when they're healthy so they can stay that way, and that's where herbs come in.''

Pascal carries the full Nature's Resource line plus select products from other manufacturers. The pharmacy sells several thousand dollars' worth of herbs a month, but based on their growing market he expects them to account for between 25 percent and 50 percent of the pharmacy's over-the-counter sales within a decade.

Hearts, minds and gullets

Because Pharmavite was already in the vitamin business and had much of the manufacturing and distribution infrastructure in place - its supplements are sold at more than 70,000 U.S. outlets - it was able to hit the ground running with herbs. Other companies have taken longer to get into the game, but are now pursuing the segment aggressively.

Boulder, Colo.-based Celestial Seasonings, best known for its herbal teas, this year launched a line of herbal supplements with a multimillion-dollar public relations blitz aimed at grabbing market share and building wider public acceptance.

``There are still a lot of fence-sitters out there,'' said Celestial Seasonings Chief Executive Steve Hughes.

The company found that 60 percent of people who said they would buy Celestial Seasonings supplements were new to the herbal market.

CAPTION(S):

2 Photos, 2 Charts

Photo: (1--Color) Graciela Guzman, a packaging line operator for Pharmavite Corp., prepares bottles of herbal extracts for sale at the company's San Fernando manufacturing plant.

(2--Color) Soft-gel operator Miguel Peralta spreads vitamin E gelatin capsules on a tray for drying.

Gus Ruelas/Daily News

Chart: (1--Color) PIECES OF THE PIE

Herbal supplements as a percentage of the natural medicines, vitamins and supplements markets are expected to grow through the turn of the century.

(2) UP AND AWAY

SOURCE: Frost & Sullivan; Packaged Facts Inc.

Daily News