2003 state of the industry overview: review and forecasts from nutraceuticals executives.
Here's a look at what various industry executives had to say about the state of the nutraceuticals industry and what's in store for 2004.
"Our industry is forced to create more scientifically based products and more food/supplement delivery solutions with less human and capital draining resources. This change has created opportunities for ingredient manufacturers, contract manufacturers, formulation labs and consultants.
"It is clear that these third party companies are beginning to step up to the challenge. I also believe that there is great opportunity for innovative ingredient suppliers to take their core knowledge and strengths and collaborate more in their customers' product development cycles. In my opinion, it is the responsibility of the manufacturer to understand its value proposition to the consumer. In addition, it should also be the responsibility of the manufacturer to be able to create great tasting products that have a benefit founded in rational science. In addition, companies need to provide the proper regulatory information to support product claims. I do not see ingredient suppliers forwardly integrating into finished goods marketing, but I do see the roles changing in the development cycle.
"Pressure to create healthy products is equally weighted for both marketers of finished goods and ingredient manufacturers. I see the risk and the reward proposition changing in our industry. In the future, I see more collaborative relationships forming between finished goods manufacturers/marketers and the innovative health ingredient companies. This will be a recipe for long-term sustained growth for the companies that participate."
Director of Marketing
Cargill Health & Food Technologies
"Qualified health claims, representing a new regulatory philosophy toward the consumer's exposure to nutrition claims, herald a new era for nutrition marketing. There will be access to information in a timelier manner and educated consumers will have the ability to select products based on label information not previously permitted. Obesity will become the tail wagging the nutrition dog--it will drive consumer attention to weight management as the primary nutrition pursuit of health. Expansion of claim use and emphasis on weight management has a double impact, which will increase consumer awareness of nutrition value. Expect extensive activity focused on the food label in the years ahead."
Professor of Food Marketing
Erivan K. Haub School of Business
Saint Joseph's University
"The fiber story continues to evolve and deliver benefits demanded by consumers. In the late 1980's, insoluble fiber had a pivotal role in creating the functional foods industry. During the 1990% the emphasis shifted to soluble fiber and heart disease. In 2003, the addition of fiber to 'carbohydrate conscious' baked goods delivered new benefits to consumers as the reduced impact on blood glucose levels (glycemic response) and energy management became a more important part of the Atkins diet, the South Beach diet and other weight control programs. This differentiation between types of carbohydrates will continue to grow as the scientific substantiation confirms which benefits specific fibers deliver. There will be great opportunities in carbohydrates during 2004."
Business Development Manager--Nutrition National Starch
"While the functional food and food ingredients business continues to develop well, the supplement and specifically the herbal business need a great push. Consumer confidence must be won back through better quality products and new research, so as to create positive stories for public relations. The medical community has to be better integrated, and research into possible side effects and interactions is needed in order to gain a complete understanding of the safety and efficacy of botanical products."
(a unit of analyze & realize ag)
"Few of us doubt that the theme for the coming year will be regulatory challenges and opportunities facing our industry. We have a new FDA commissioner, a looming healthcare crisis with diabetes and obesity already making headlines and the continuing legal and market woes of the supplement industry highlighted by the problem of ephedra.
"The new proposals for health claims will be closely examined and are unlikely to offer most companies big advantages in the short term. The result is likely to be a greater drive to undertake clinical trials supporting claims and enabling the broad consensus of scientific opinion to warrant the most differentiated claim, but this is unlikely to happen quickly.
"Another development will be the re-shaping of product portfolios to emphasize the health and wellness products. Already, we have seen one of the large beverage companies running national ads displaying its entire portfolio and not just the soda for which they are best known. This will lead to acquisitions as well as some reformulating of existing products in order to defend against lawsuits that seem inevitable."
Vice President--New Business Development
"I see the prospects for nutraceutical pharmaceuticals and botanicals and herbal-based ingredients that have prescription-strength efficacy against various diseases.
"I feel the FDA-imposed GMP requirements will help shake out some of the pretenders in the nutraceutical category. The GMPs will also be an added cost burden for the legitimate companies who will need to find creative ways to comply without incurring a lot of additional cost that will ultimately be passed onto the consumer.
"I feel the functional food and nutraceutical industry is ripe to explore novel taste modification technology emerging from startup biotechnology companies such as Linguagen Corp. This type of technology can be effectively used to discover novel bitter taste blockers that can prevent the perception of bitter taste often found in functional botanical and herbal ingredients. Successful application of this technology could result in increased levels of functional ingredients, such as polyphenols in functional foods, leading to healthier consumer products. This represents a change from traditional flavor masking techniques employed by the flavor industry."
Highland Park, NJ
"The Japanese economy may finally be recovering from years of negative results, although it is likely that a full recovery will first require that the U.S. economy rebounds fully from the problems here. In spite of the economic problems in Japan, however, the growth of the functional foods and nutraceuticals markets, and in the FOSHU (Foods for Specified Health Uses) category specifically, has been dramatic. There are now nearly 400 approved FOSHU products, with retail sales at around $4 billion. The credibility and image of the FOSHU category continues to grow in Japan. One of the challenges, perhaps not next year but some time in the near future, will be to prove that the introduction of FOSHU products with proven clinical efficacies has in fact had positive impacts on the overall health of the rapidly aging Japanese population. After all, that was the ultimate objective of the FOSHU regulations when they were issued several years ago."
California Functional Foods
"It was another good year for product quality, with the increasing market competitiveness, closer scrutiny by governmental agencies and the forthcoming GMPs, serious players have realized that product quality is key, and the only way to insure that is to test raw materials and finished products. Serious players have also realized that you need a quality laboratory, which produces quality results. In earlier times when the industry was low on the quality learning curve any certificate of analysis would do (and the cheaper the better). But now too many are watching and testing, and getting caught with a deficient product is costly. Scrutiny of analytical labs (whether in-house or outside) will increase during the New Year, and that's a good thing. Quality is a chain running from the creation of the raw materials to the consumer's use of products; success demands no broken links."
"Some of the primary activities of the American Herbal Products Association (AHPA) in 2003 were responses to rulemaking processes initiated by the Federal government during the year. These included FDA's proposed rule for dietary supplement cGMP; new rules for conforming to the bioterrorism law and reopening of the comment period for ephedra regulation.
"AHPA also took the initiative to address other relevant regulatory areas. In March we submitted a petition to advocate mandatory submission by dietary supplement marketers of reports of serious adverse events and in May we provided the Federal Trade Commission (FTC) with draft guidance for advertising weight loss products.
"If industry's efforts in 2003 to address the regulation of supplements are successful, we will have laid the groundwork for a reasonable regulatory framework in the future."
American Herbal Products Association
Silver Spring, MD
"2003 has been a challenging year with numerous acquisitions, consolidations, regulatory changes, concerns with certain supplements and unsatisfactory margins. BASF is optimistic the industry will turnaround and stabilize in 2004. Certainly the FDA issuance of GMPs for dietary supplements is a positive indication.
"BASF remains committed to the nutritional industry, which is why we invested in new plants in Germany and Korea to supply customers with reliable, high-quality ingredients. We also continue to support trade associations that mandate responsible nutrition, and invest in clinical trials to confirm the positive health science of our ingredients and our customers' products."
Business Director--Human Nutrition
Mount Olive, NJ
"Federal legislation and the negative attitude about dietary supplements in Congress are on the verge of changing the industry as we know it. If current legislation passes, manufacturers of dietary supplements could lose up to 50% of the value of their businesses, the FDA would gain unprecedented regulatory power over these products and introducing new ingredients would be next to impossible. Even if DSHEA can survive 2003 without being amended, look for 2004 to pose even greater challenges."
Executive Director & CEO
National Nutritional Foods Association (NNFA)
"The past year has been characterized by ongoing challenges throughout the industry. As suppliers to the food, functional food and supplement industry, we have definitely noticed our strongest interest in the functional food area, which continues to be a bright spot. The growing emphasis on healthier diets has companies from the mainstream food and dietary supplement segments converging on the functional food area with new product concepts and formulation ideas.
"Additionally, with the current national emphasis on 'five-a-day,' our position in GRAS fruit and vegetable-based antioxidants has served us well as marketers--and consumers--learn more about alternative ways to meet their daily intake requirements."
RFI Ingredients, Blauvelt, NY
"Fortification is not just about incorporating single vitamins and minerals into a product anymore. Now foods and beverages are being developed with multiple ingredients to provide overall health solutions and to serve specific demographic audiences. This trend has stretched into virtually every product category within the last year. I believe that this momentum will spur ingredient combinations that we never imagined before and continued record growth for the human nutrition premix industry. But the bottom line remains the same--taste. No matter how many nutrients a product has, it has to taste great or the product won't sell."
"The state of the industry moving forward is rather one of treading water while waiting for the other shoe to drop. The continued lack of enforcement by the governmental agencies contributes to this but the renewed growth of the industry blinds us to the realities of what is to come. The day of reckoning is approaching as additional layers of regulation are built. Meanwhile, we move up our climbing sales charts toward a precipice. The industry needs to act as well as sell in order to protect the future prospects. Hopefully we will find a means to act for ourselves rather than allow action to overwhelm us."
Director of Consulting & Regulatory Affairs
Santa Ana, CA
"At National Enzyme Company, we are bullish on the future of our opportunities as well as the industry's. With science leading the way, the legitimacy and effectiveness of dietary supplements will continue to grow. The standards of excellence are constantly being raised, which forces good suppliers to improve and non-compliant suppliers to close. We are confident that our 70-plus years in the industry will provide us the foundations to build upon in this dynamic industry."
Vice President--Sales & Marketing
National Enzyme Company
"Of paramount concern for the coming year is the ability of the nutraceuticals industry to deal effectively with wave after wave of negative publicity in the media. By magnifying the outrageous actions of the few, ratings starved news organizations send our consumers a distorted, unbalanced yet entertaining image of abuse. Politicians react by introducing potentially pernicious legislation. This is why supporting the dissemination of positive and truthful information through alliances such as DSEA may be the singularly most constructive step we can take as an industry acting in concert to counter the most serious threat of the last 30 years."
"The nutrition industry is maturing rapidly and new strategies are evolving at all levels to deal with the changes. Dietary supplement products continue to struggle with profitability yet functional foods and beverages are more than compensating for the losses incurred by supplements. Two issues, however, threaten both the long-term success and the very existence of the nutrition industry: 1) Fraud-based business models; and 2) The failure to deliver expected health benefits. The basis of the industry is a very loyal consumer that shares our understanding that natural products and better nutrition improve health. We may lose this consumer support if the industry allows these issues to continue.
"We are seeing a major shift in the role of the supplier in the nutrition industry. The driving force behind the loss of profitability in the dietary supplement industry is competition and few successful new products. The inevitable result is greater competition and price pressure on proven supplements. In response to the pressures on profitability, the burdens of scientific proof and marketing strategy are increasingly being shifted to suppliers."
President & CEO
Proliant Health Ingredients
"Our industry is at a crucial crossroads and we see tremendous opportunities for growth for sustainable products given these parameters. First, we need to remain focused on science. As a leading supplier of natural ingredients, we continue to believe that credible science will drive our success. But we can't do it alone. We must have the support of our colleagues along the value chain as well as increased research support from government agencies to add to the totality of evidence backing our products. Second, we must overcome fragmentation within the industry and work together on raising the bar on quality standards."
Global Market Segment Manager--Dietary Supplements Cognis Nutrition & Health
La Grange, IL
"Consumer use of nutritional supplements has continued to rise yet the marketplace has witnessed tremendous consolidation and a collapse over the past three years. And while there are many reasons for this, it is in fact a natural progression of any high-growth segment to hit points of consolidation before renewed growth.
"Through extensive analysis of our forward looking data, we believe the consumer need for nutritional solutions will only grow stronger, however, the types of solutions will expand beyond 'commodity' dietary supplements. The explosion of 'functional foods' is one example of this, and we can expect to see similar growth through new delivery systems and new technologies in both food and supplements. Some of the segments where we expect huge growth include essential fatty acids (EFA's), probiotics, cognitive health, immune health and women's health.
"Ninety percent of consumers already believe in the connection between diet and health, and with advances in nutrition research we believe the nutrition industry is going to see phenomenal growth, but it all boils down to validation. Every product must successfully be validated for success to occur. There are three types of validation: First Person validation occurs when a consumer buys the product and it meets their satisfaction; Second Person validation is when a valued second party (such as a friend, celebrity or the media) endorses a product and Third Person validation happens when a credible third party (academic, regulatory or consumer) successfully vets the product. Any form of validation is essential but when the potential for harm increases, so too does the need for third party validation.
Vice President--Marketing Natrol, Inc.
"The trend of incorporating unique ingredients into function-specific formulations is speeding up as health-conscious consumers begin to identify the importance of synchronizing their health, living style and life stage with supplements. The functionality of 'antioxidant cocktails' is well substantiated by recent positive research findings as well as a better understanding of their mechanisms of action at both cellular and genetic levels.
"As a well recognized branded ingredient that adds value to functional formulas, Ester-C(R) is uniquely positioned to continue to increase its market share of an exciting segment of the industry."
Dr. Phil Brown
Corporate Communications Manager
Zila Nutraceuticals Inc.
"2003 has given the industry a major wake up call. The central message being--act more responsibly because it is no longer business as usual. Significant regulatory issues are facing us; action taken against unsupported and improbable product claims continue to make headlines; product quality is on open display for all to see by various independent laboratories; profits and return on investment have diminished and the list goes on. Why? Because the barriers to entry have been too low for too long in this industry. Our house has become cluttered with 'treasures' that are nothing more than fools gold.
"Sabinsa welcomes the fact that efforts geared toward raising the awareness, understanding, compliance and enforcement of existing laws, principles and practices can, and will, collectively lead to a better environment in which to do business. Sometimes it takes a rigorous housecleaning to determine which treasures are worth keeping and which are not. We all best roll up our sleeves because the housecleaning has begun."
President and COO
"Health continues to be a spark for growth in the food industry. More than ever consumers search for new ways to address health issues, packaged goods companies drive for high margin innovation and nutraceutical ingredients are enabling the way. Yes, 'taste rules,' still. How much new health claims will boost sales, no one knows for sure, but big brands appear more convinced than ever that the right ingredients are keys to success. There is little doubt that the ultimate winners will continue to be those who deliver proven health benefits in products that clear the consumer preference hurdle."
Vice President--Sales & Marketing
Cargill Health & Food Technologies
"The new regulations bringing bioterrorism and GMPs to the forefront, coupled with the continued attacks on DSHEA, have focused the industry's attention on quality. Supplement manufacturers and the industry as a whole needs to aggressively address product quality and safety issues to protect integrity, as well as to foster its recovery and future growth. Raw material suppliers are expected to take more responsibility, and rightly so. The burden of investing ha credible scientific safety and efficacy research, environmentally and socially responsible manufacturing facilities and product liability insurance underwritten by legitimate global insurance companies is on the shoulders of raw material suppliers. The future of the industry is highly dependent on the willingness of supplement manufacturers to work exclusively with suppliers that can and do meet these challenges and responsibilities, regardless of short-term price differences that may exist with suppliers that cannot and do not meet these standards."
President & CEO
Daiichi Fine Chemicals, Inc.
Vernon Hills, IL
"The most important new functionalities for nutraceuticals will focus on improving the physical appearance of the consumer and transforming users into perfect paragons of pulchritude. We may be entering the astrological Age of Aquarius, but America is firmly entrenched in its own age of Narcissus. American consumers are consumed with physical appearance, and with 'making over.' Personal transformations are chronicled in television shows such as 'Extreme Makeover' and 'Queer Eye For The Straight Guy.' Cosmetic surgery is now so commonplace that fake breasts, liposuctioned thighs and Botox-frozen faces dominate the sidelines of every youth soccer game. Given the epidemic of obesity, diabetes and other weight-related conditions, the most highly desired functional products will burn fat, block carbs, speed metabolism and suppress appetite."
The Natural Marketing Institute (NMI)
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|Title Annotation:||State of the Industry|
|Article Type:||Industry Overview|
|Date:||Dec 1, 2003|
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