Nutrition Business Journal®

them to envision a post-DSHEA world and every month by EFSA in Europe, NHPD Considering a humor specic changes in the law as open in Canada and ANVISA in Brazil. To put it windows toward a speculative future with plainly, that lack of clarity is the gray zone Post-DSHEA less acrimony between industry and regu- between food and medicine set into mo- lator and much more faith and goodwill tion on November 12, 1994, when President World between manufacturer and consumer. Clinton signed DSHEA into law. ese speculations matter because Are supplements regulated? the future is bright for supplements. e Is DSHEA working? Of course. Are they regulated industry grew 7% in 2011 to reach $30 bil- Al Powers is the CEO of NOW Foods, a lion in sales. ere is much more data to supplement manufacturer based in Bloom- in the right way? follow in the charts that populate the pages ingdale, Illinois. Powers won the 2010 NBJ of this issue, but let’s pause for a moment Lifetime Achievement Award for his 40 up front on those 30 billion reasons to get years of service to the nutrition industry. his is a thought piece. is is a story this right. ere is no bigger obstacle for Says Powers: “DSHEA was a work in prog- that asks some basic questions about the supplements industry, in our opinion, ress over many, many years. is was the T the regulatory environment facing that the lack of clarity on the regulatory culmination of best practices and best dietary supplements. It wants to stick its neck front. at lack of clarity extends well be- thinking over decades. I think it’s still rel- out a bit and respectfully wonder if there’s yond the NDI guidance document. at evant today. You wouldn’t want to open it a better alternative to be had. Is DSHEA a lack of clarity extends well beyond the up as an industry. All that would do is end strong or weak piece of legislation? Is it still borders of the U.S. market to precedent set CONTINUED ON PAGE 3 appropriate, given the scale and impact of the supplements industry on public health? Is pre-market approval really the end of the U.S. SUPPLEMENT SALES & GROWTH, 2000-2013E world, or could supplement stakeholders learn something from the controlled environ- ments of pharma? Or should those stakeholders stop pursuing research outright? ese are not yes/no, either/or questions, of course, but there is mental progress to be made in asking them as such. Or so we hope. NBJ posed these questions to some of the smartest minds around, and you will hear from them at length, in their own words, in just a moment. We approached a wide spectrum of thought leaders from within and without the industry—trade as- sociations, lawyers (boy, did we talk to lawyers), manufacturers both large and small, activists and government ocials alike. We asked them to help us gure out what’s Source: Nutrition Business Journal estimates ($mil., consumer sales) working in 2012 and what’s not. We asked nbj 2012 AnnualU.S. Market Nutrition Overview Industry INSIDE Overview INSIDE

1-09 21 34-36 Publisher & Editorial Director Patrick Rea Considering a Herbs & botanicals Homeopathy in perspective Editor in Chief Marc Brush post-DSHEA world roundtable 37-38 Associate Editor Connor Link 10-11 22-23 Market Intelligence Carla Ooyen Q&A with Mike Satow Research Analyst James Johnson Tom Aarts on Big Pharma Connor Link goes to Israel of Nutrition 21 Managing Editor Nora Simmons 12-14 24-26 39-40 Design Beth Ricciardi Is the future of supplements Q&A with John Venardos Omega-3 consumer survey Contributing Writers Laurie Budgar in whole foods? of Herbalife Rachel Cernansky, Richard Clarke 41-42 Melaina Juntti, Lisa Marshall 15-16 27-29 Q&A with Made Movement Jessica Rubino, Hank Schultz Dry labbing dragged Meal replacements rebound Brand Manager Blake McWilliams into the open 43-45 Subscriber Services Johanna Shirman 30-31 Transparency & mobile apps 17-18 Smooth sailing for Vita-Mix Bent Creek Institute 46-47 32-33 nbj Editorial Advisory Board 19-20 Q&A with Brian Czech Tom Aarts Q&A with Episencial & CircleUp of CASSE NBJ Co-Founder & EAB Chairman Traditional Medicinals Steve Allen Retired Nestlé Executive COMPANY & BRAND INDEX BY MARKET CHANNELS Anthony Almada SUPPLEMENTS DIRECT-TO-CONSUMER NATURAL & ORGANIC FOODS President & CEO, GENr8 AHPA...... 21, 34 Amway (Nutrilite)...... 24, 28, 45 Earth's Best...... 20 Mark Bartlett Alkemist Labs...... 15 Herbalife...... 24, 28, 45 Fair Trade International...... 20 VP of Global R&D, Pharmanex American Botanical Council...... 18 Nu Skin...... 29 Fooducate...... 43 Mark Blumenthal Founder, American Botanical Council American Herbal Pharmacopoeia 17 Standard Process...... 12, 45 GoodGuide...... 43 Josef Brinckmann Atlas Biosciences...... 15 ViSalus Sciences...... 28 Guayaki...... 20 VP of Sustainability, Traditional Medicinals Bayer...... 4 Dorot Farms...... 22 Lundberg Farms...... 20 Bob Burke Bent Creek Institute...... 17 EAS Consultancy...... 24 Made Movement...... 41 Founder, Natural Products Consulting British Columbia Inst. of Tech...... 15 EFSA...... 1, 24 Non-GMO Project...... 20 Greg Horn ChromaDex...... 15 FUNCTIONAL INGREDIENTS Odwalla...... 29 President, Specialty Nutrition Group Country Life...... 12 Bolthouse Farms...... 29 One Degree...... 45 Loren Israelsen CRN...... 4, 24, 36 Coca-Cola...... 41 Organic Valley...... 20 Executive Director, UNPA FDA...... 34 HerbaMed...... 22 Revelry Brands...... 45 Larry Kolb President, TSI Health Sciences FTC...... 32 GLOBAL NUTRITION ShopWell...... 43 Gaia Herbs...... 17, 45 ABAID...... 24 Traditional Medicinals...... 19 Michael McGun President, AHPA Garden of Life...... 12 ALANUR...... 24 USDA...... 19, 29 Randi Neiner GNC...... 4, 12, 28 Algatechnologies...... 23 Vita-Mix...... 30 Director of Marketing Research, Shaklee GOED...... 39 Anlit...... 23 Whole Foods Market...... 20 Ian Newton Hero (Yummi Bears)...... 12 ANVISA...... 1 NUTRIBEAUTY Managing Director, Ceres Consulting Hyman, Phelps & McNamara...... 34 CASSE...... 46 CircleUp...... 32 Kantha Shelke MegaFood...... 12, 45 Codex Alimentarius...... 25 Episencial...... 32 Founder, Corvus Blue Mintel...... 27 Commission E...... 3 RAW MATERIALS Scott Steinford Natural Vitality...... 14 Dorot Farms...... 22 Aker BioMarine...... 40 President, ZMC-USA Nature's Way...... 12 EAS Consultancy...... 24 BASF...... 4, 40 NBTY...... 4 EFSA...... 1, 24 BI Nutraceuticals...... 21 Nutrition Business Journal® (ISSN 1548-6168) Nestlé...... 28 Galam...... 23 DSM...... 4, 24, 40 is published 12 times a year in 10 editions (8 single and 2 double issues) by New Hope New Chapter...... 12 Gan Shmuel Group...... 23 Fortitech...... 31 Natural Media, a division of Penton Media Inc., Pzer (Centrum)...... 4, 12, 31 GreenLite...... 23 Glanbia Nutritionals...... 27 1401 Pearl Street, Suite 200, Boulder, Colorado, Polsinelli Shughart...... 3 Health Canada...... 3 Indena...... 21 USA 80302. © 2012 Penton Media Inc. All Procter & Gamble...... 12 IADSA...... 24 Nutrition 21...... 37 rights reserved. is publication may not be Rainbow Light...... 12 Inno-Bev (WakeUp)...... 22 Ocean Nutrition Canada...... 40 duplicated or reproduced without written permission. To order, call (303) 998-9263 or Schi Nutrition...... 31 LycoRed...... 23 Trygg Pharma (EPAX)...... 40 fax (303) 385-0046. Annual subscription rate Ullman, Shapiro & Ullman...... 3, 35 Mycolivia...... 23 Wright Group...... 31 is $1,295 in the United States and $1,345 University of North Carolina...... 18 NPHD...... 1 SPORTS NUTRITION & WEIGHT LOSS internationally. Venable LLP...... 3 Omnilife...... 24 Abbott Nutrition...... 28 www.newhope360.com/nbj Vitamin Shoppe...... 4 Sabra...... 23 Orgain...... 29 [email protected] Walgreens...... 13 erapeutic Goods Admn...... 26 Unilever (Slim-Fast)...... 27

2 | / 2012 Strategic Information for the Nutrition Industry nbj

Letter from the editor COVER STORY CONTINUED And I quote: “When systems promote excess, they become unsus- up weakening the consumer protections tainable. When systems become unsustainable, they break down. granted under the current law.” ey then have to revert to nd safer ground, a process known Marc Ullman is a partner at Ullman, Sha- in nature as the ‘renewal cycle.’ is is how the ecological world piro & Ullman in New York City. He focuses and its species adapt and evolve. Welcome to the renewal cycle his practice on compliance matters related for American business, now disrupting your best laid plans with to FDA and FTC , as well as NDI submis- nary a concern. We are evolving as consumers into a new food sions and GRAS notications. Says Ullman: “I had a client going back to 1996 who came world, one with much of the shape and color of a world just three a really long way on quality and ecacy generations removed, before the advent of modern food science.” and responsibility. ey spent millions and e quotation comes from NEXT—a seminal report launched millions of dollars on their facility and per- this summer from the minds of NBJ and Sterling-Rice Group— sonnel and GMP compliance. Within the but there’s more to nish the thought: Our food future looks a lot past six months they gave up. ey couldn’t make money. ey were losing orders to the like our past. Listen to Michael Pollan on Good Morning America: guys down the block who made no e ort to "e conversation of culture—which is to say the wisdom of your comply, who hired people they had red, mother and your grandmother and your great-grandmother—has who just didn’t care.” more to teach us about how to eat well than all the scientic studies in the world so far." No matter where you look, you can see Todd Harrison is a partner at Venable LLP in Washington, DC, where he leads the this undoing of food science to varying degrees across nutrition, rm’s food and drug division. Says Harrison: even in the trend toward whole foods in dietary supplements. “From a safety perspective, DSHEA works NBJ began to explore the ramications of food science under a great. From a claims perspective, it’s just bright consumer spotlight in last year’s overview, but we can’t let go okay. We could improve it with a natural of the charge. Change is everywhere now. It’s, well, ramifying. e monograph system like Germany’s Com- natural products industry has a front-row street in the great unrav- mission E or the Health Canada model where people can actually make legitimate eling of the socio-economic systems fraying across the industrial- claims for their products.” ized world, but it’s not the only seat to be had. ere are seats on Capitol Hill and Wall Street, seats in climate reform and healthcare Daniel Fabricant is the director of FDA’s Di- reform, seats occupied by Occupiers and moms fearful of poisoning vision of Dietary Supplement Programs. their children with GMOs. Neither FDA nor Fabricant chose to specu- late on matters outside DSHEA and the is is dramatic, rapid and meaningful change. It’s secular. present regulatory framework for this story. As we selectively re-examine the advances proferred by modern Says Fabricant: “We’re seeing poor compli- food science, pillars of the established industry will come under ance with GMPs. We’re seeing evidence of serious and sudden attack—hello and goodbye, pink slime. At noncompliance with AERs. We continue sucient scale, this change might also prove directly competitive, to see very low numbers of NDIs, so that makes us question compliance again. We’re if not antithetical, to mainstay categories of nutrition with decades seeing a rise in disease claims on products. of proven success—industries like functional foods and dietary We see rms that still don’t register with supplements—that now need to refashion their proposition or the agency for bioterrorism. We’re not even run the risk of falling tragically o -trend. Try not to be alarmed scratching the surface on safety here. ese by this, but certainly don’t try to ght it. are the basic regulatory compliance obliga- tions that all rms have to follow. Register- e renewing system in search of adaptive ing for bioterrorism takes you about six evolution is much bigger than any single seconds. I can walk you through it.” trend, industry or company. Jason Sapsin is an attorney at Polsinelli Marc Brush Shughart in Denver, where he leads the Editor in Chief rm’s FDA practice. Sapsin was formerly CONTINUED ON PAGE 4

newhope360.com/nbj | 3 nbj 2012 Considering a Post-DSHEA World

and you knew that 70% of the time something $30 BILLION U.S. SUPPLEMENT MARKET BY PRODUCT IN 2011 was going to be wrong with the boat—maybe the engine doesn’t work, maybe it’s something as severe as that, or maybe the windshield’s just out—are you going to continue to get on the boat?”

In search of enforcement Ivan Wasserman is a partner at Manatt, Phelps & Phillips in Washington, DC. He focuses his practice on matters involving the marketing of foods, dietary supplements, cosmetics, drugs and medical devices. Says Wasserman: “Like FSMA, DSHEA, and even the FTC Act, you have well-crafted laws out there and then you have the issue of the government funding available to police and enforce the law. When DSHEA was passed Source: Nutrition Business Journal estimates (consumer sales) in 1994, the dietary supplement market was much smaller, not only in terms of the num- of counsel in FDA’s Oce of Chief Counsel, research are very good scientists, so they ber of products and customers, but remem- where he advised the agency in its pursuance sponsored the research and it’s consistently ber back to 1994. e internet was a baby. of seizures, injunctions and product recalls. shown no benet from supplements.” In 2012, the internet has become part of our Says Sapsin: “DSHEA had and has a lot of po- life—it often is our life, for better or worse— tential. ere are some habits and institutions Steve Mister is president & CEO of the so you now have the ability for companies to that have grown up around it that are less Council for Responsible Nutrition (CRN) easily market and advertise dietary supple- helpful and less promising. e basic idea, it based in Washington, DC. CRN’s member ments and other products to a national, nay seems to me, is that you take food-type sub- companies include such names as Abbott, international, market. Without, and even stances that are known, that people use, that BASF, Bayer, DSM, GNC, Herbalife, NBTY, with, adequate funding, it’s become a di- are well-characterized and well-understood, Pzer and Vitamin Shoppe. Says Mister: cult task to police that enormous market.” and you create a system under which they “DSHEA is still the appropriate model for can be maximally available to people as part this industry. Many of our consumers don’t Ullman: “e problem is on the industry. of the diet. Many businesses have seen an op- really care about FDA blessing the ecacy of ere’s no place else to point the nger. e portunity to very aggressively market these our products or not. In fact, they’re distrust- industry’s sensitivity to quality and ecacy products as, I won’t say cure-alls, but as phar- ful of FDA assessing the ecacy of a prod- is woefully inadequate to its sensitivity to maceutical substitutes. at’s not the role of uct. e consumer wants to know this—‘If price. I’m painting with a terribly broad the dietary supplement.” I take Echinacea, is it being made in a safe brush here, but as long as the industry’s pre- way, in a consistent way? Am I getting what vailing motivation is economic, quality will Marion Nestle is the Paulette Goddard Pro- the label says I’m getting?’ GMPs, if they’re be a challenge. ere’s self-regulation on any fessor of Nutrition, Food Studies and Public robustly enforced, will give consumers reas- number of levels—turning people in to the Health at New York University. Nestle has surances on the safety side.” Better Business Bureau, working through written several award-winning books on the the Natural Products Foundation—we politics of the food industry and how it af- Fabricant: “I think GMP noncompliance can make all the right noise about doing fects consumer nutrition. Says Nestle: “e sends a message. Roughly 35% of inspec- that, but what we don’t see is the big retail- industry made an enormous mistake in tions come in from the districts classied as ers and big economic powers in the industry, working so hard to pass DSHEA. For awhile, ‘ocial action indicated,’ which means that saying, ‘I’m not going to buy that crap. I will it worked really well to stimulate sales, but we’re going to move toward a warning letter not allow that into my store. I will not allow there were some unfortunate provisions in or a stronger action, maybe pursue something it to be sold in association with my name.’ DSHEA that I think the industry has lived with the Department of Justice that has an to regret. e structure-function claim re- injunction or seizure attached to it. Another Scott Steil is the president of Nutra Bridge, duces credibility. It’s just not a credible way 35% is roughly classied as ‘voluntary action an outsourced sales & marketing rm in to market things, although lots of people indicated,’ which means that the rm could Minnesota representing branded, patent- fall for it. e idea that the industry wanted self-correct or the investigator didn’t gather ed, scientically proven ingredients. Nutra research done—I thought that was a big all the evidence needed to pro er a warning Bridge won the 2010 NBJ Award for small- mistake. e people who run the oces letter. at’s 70%, the majority of rms we’ve company growth. Says Steil: “With 7-Keto, of dietary supplements and alternative visited. If you were going to get into a boat we’ve done two lings with the FDA at

4 | / 2012 SUPPLEMENTS GLOBAL NUTRITION RAW MATERIALS Strategic Information for the Nutrition Industry nbj di erent doses and that continues to be a re- limited resources. One out of every four Sapsin: “When I was at the agency, it was ally nice feather in our cap. If someone says, dollars spent in this country is spent on an shocking to see what some businesses ‘I only use clinically validated, FDA-compliant FDA-regulated good.” considered to be acceptable manufactur- products in our line,’ then great. at’s music ing practices in their facilities. Maybe this to our ears. I’m competing with a ton of guys Nestle: “What the industry confronts now is part of the regulator’s dilemma—you’re who should be required to le an NDI. You’ve is a lack of credibility. It’s divided between exposed to so many horror stories that got to all play by the same rules.” very responsible companies that put into everyone becomes suspect. It’s everything the product exactly what they say on the from pests, to failure to clean equipment, to Ullman: “ere are companies that regu- label, that use high levels of quality control, failure to provide adequate sanitation facili- larly submit NDI notications, who do and that don’t oversell their products. And ties, to cross contamination between lines, things the way they are supposed to do it, then there are companies that do whatever peeling paint, dripping ceilings, you name it. who take the time and spend the money, they feel like doing, and don’t pay attention Industry will tell you—and not incorrectly, only to watch a wave of competitors magi- to whatever rules do exist. Because there’s I say this to my clients as well—that the cally appear on the market six months after nobody chasing them down, they push the agency can and will nd something wrong. the NDI goes public. A lot of these come in envelope as far as it can be pushed. e e issue is whether or not the industry from China. How about a carrot from FDA FDA isn’t going to do it because they’ll lose and the public are prepared to trust that, by in addition to the stick that they’re wield- in court. People at the FDA have told me and large, the agency is trying to make fair ing? How about they ensure that the me- that they’re not pushing against supple- calls and do the right thing.” too companies who don’t le the NDI don’t ment health claims because the courts will make it into the U.S market?” go against them and they’re tired of ghting Ullman: “I think that when FDA shuts the those battles.” doors on a couple of these companies for Mister: “FDA does not have to prosecute GMP violations, and brings strict criminal every violator of the law in order to make Fabricant: “In the past 18 months, we’ve tak- liability cases against executives for ignor- DSHEA work. If they do a good job of showing en a much more active role in enforcement. ing repeated warnings about GMP decien- that they will ex their muscle, most of the in- You’ve seen the rst injunction tied to supple- cies or not taking appropriate steps to avoid dustry will fall into line. ere will still be out- ment GMPs. You’ve seen the rst seizure tied adulteration with APIs, then you might see liers, but if the industry believes that there’s a to supplement GMPs. You’ve seen an awful lot an attitude change.” sound and rational enforcement from some- of warning letters. You’ve seen us use the NDI body watching, they’ll fall into line.” provision on failing to le DMAA. We know Learning from pharma our toolbox, and we’re going to use every tool Wasserman: “ere are benets and draw- Fabricant: “is agency has always been in there to our fullest ability to build what we backs to a pharma model. If it’s a resource challenged with competing priorities and need to build.” CONTINUED ON PAGE 6

Data Corner Recovery was the name of the game for the nutrition industry in 2011 with total sales growing 8.5%. at’s the highest growth the industry has posted since 2007. Carla Ooyen, Director of Market Intelligence

U.S. NUTRITION INDUSTRY REVENUES BY CHANNEL IN 2011

Natural & Specialty Mass Market Mail Order/DRTV, Category Retail Retail Radio MLM Practitioner Internet Total Supplements $10,970 $8,640 $1,630 $4,810 $2,450 $1,530 $30,030 Natural & Organic Food $16,600 $23,420 $920 $900 $220 $1,080 $43,130 Functional food $4,130 $35,970 $80 $370 $220 $310 $41,070 N&OPC and Household $4,860 $3,770 $420 $1,840 $520 $410 $11,820 Total $36,560 $71,790 $3,050 $7,920 $3,400 $3,320 $126,050

Source: Nutrition Business Journal ($mil., consumer sales). Primary research includes NBJ surveys of natural food, supplement and N&OPC manufacturers, distributors, MLM rms, mail order, Internet and raw material companies, as well as numerous interviews with major retailers, manufacturers, suppliers and industry experts. Secondary sources include SymphonyIRI Group, e Natural Foods Merchandiser, OTC Update, SPINS, e Nielsen Co., company data and others. Note: To avoid double counting, NBJ classies soymilk and nutrition bars as functional rather than natural & organic foods and beverages, although both are included in natural & organic totals cited in NBJ elsewhere. Natural & Specialty represents natural, health food, supplement and specialty retail outlets, including Whole Foods Market, GNC, sports nutrition stores, etc. Mass Market represents FDMCC or food/grocery, drug, mass merchandise, club and convenience stores, including Walmart, Costco, etc. Mail order represents catalogs, direct mail and direct response TV and direct response radio. Practitioners represent conventional and alternative health practitioners, athletic trainers, beauticians, etc., selling to their patients/clients.

newhope360.com/nbj | 5 nbj 2012 Considering a Post-DSHEA World burden, as the drug approval process certainly the evidence for harm. We’re talking about supplements. Every $150-200K study that you is, there will be far fewer companies with the very expensive placebos.” look at, it’s like pulling somebody’s ngernails ability to bring supplements to the market, out. ere are plenty of companies who could which would decrease the availability of im- Steil: “is is a $30 billion industry, but the invest in gold-standard, clinical data that gets portant, safe supplements to consumers. On milestone in pharmaceuticals for one block- published in a decent journal. If it’s a con- the other hand, I was at a dinner party the oth- buster globally is roughly $2 billion. For one scious decision to invest in products and put er night and one of the guests was complain- product. Pharmaceutical companies will see resources into clinical studies, we’re just not ing about her post-menopausal hot ashes. I something they like, and they’ll commit $800 doing it as an industry.” suggested a particular herbal ingredient, and million. ey might then get to a pivotal point she looked at me like I was crazy. All of her in development where they say it’s not work- Harrison: “Would pre-market approval be family are doctors, she told me, and she would ing, pull the plug and walk away from $800 the death of the industry? Yes, because FDA never try an herbal product because it hasn’t million. en they’ll sell it to a supplement doesn’t have the time or the ability to do the been approved by the FDA. So, from a market- company who markets it anyway.” safety reviews.” ing perspective, some form of pre-market system could attract new customers. Look at the Jeers: “A few years ago, I thought FDA Mister: “Pre-market approval of supple- medical device market. Over-the-counter de- would modify the regulatory environment ments? If it’s not the death of the industry, vices like anti-acne lights and muscle-toning and make it more pharma-like. It seems it’s the life support. If you look at the cur- belts, that have gone through FDA’s premar- like that’s happening, and our company is rent view of what FDA requires for approv- ket notication process boldly proclaim: 'FDA staged to take advantage of this changing al, those levels of safety and ecacy would Cleared!' in all of their marketing materials.” landscape. We have the clinicals and the cripple the industry. Look at what happened safety and toxicity studies to back what we with NDIs. FDA is supposed to simply tell Michael Jeers is president and CEO of think will become stronger structure-func- you they don’t object to marketing some- Helios, an ingredient developer in Santa Fe, tion claims within the category. e lan- thing, and what they came back with was New Mexico, with human clinical studies guage for us with our bone-density product a food-additive requirement with millions underway on several products. Helios won is this—NC-518 provides next-generation of dollars of rat studies through second and the 2011 IFT Innovation Award for NC-518, bone health. We can’t make a disease claim, third generation. ey try to force us into its novel calcium ingredient targeting im- but if we did, it would then be up to pharma two RCT trials whenever they can. Boy … provements to bone density. Says Je ers: to embrace our technology and take it to that would be disastrous.” “Our investment in NC-518 and in EstroG- the next level. at gets you into a Phase 3 100 is extensive. Extensive. We hope to re- clinical that could run you three-plus years. Nestle: “e supplements industry doesn’t coup that investment based on what we Keep in mind that Pzer’s research budget want a pharma model because they won’t think is superior science.” peaked at more than $10 billion a few years be able to prove ecacy. Look at what POM back. We're slowly seeing the spending Wonderful is doing. It’s not a supplement Nestle: “Research will do damage to the in- translate to Nutra. We're following an arc— company, but they’re acting like one. ey dustry. If I remember correctly, there have science met pharma in the 40s, and now spent $35 million to prove that pomegran- been articles in NBJ that documented the nutra will meet both science and pharma in ates have antioxidant activity. If you feed fall in sales of certain supplements after the next decade.” them to animals, their antioxidant activity negative research came out, and the nega- goes up. I’m not kidding. at’s what they’ve tive research is astonishing. It’s so compre- Steil: “I’ve been personally challenged by the shown. If you read the court transcripts, it’s hensive—single nutrients, one a days. My resistance to perform more science in this in- hilarious. All you can do is laugh.” interpretation is that none of this is going to dustry. It’s really hard for CEOs of companies make healthy people healthier, and since it’s to sell the idea to investors of dropping $1 mil- Improving the law healthy people who take supplements, the lion into an R&D portfolio. For an ingredient Mister: “If we were doing this all over again, probability of doing any good is very small. I supplier, if you can do $5 million in business we might ask ourselves, could we stomach don’t think the probability of doing harm is on that, you’ve got a pretty good product. a little more regulation in certain areas as a very great either. I’m not very impressed by You’re not talking about a billion dollars in tradeo to prevent unreasonable action in “The industry made an enormous mistake in working so hard to pass DSHEA. For awhile, it worked really well to stimulate sales, but there were some unfortunate provisions in DSHEA that I think

the industry has lived to regret.” —Marion Nestle, New York University

6 | / 2012 SUPPLEMENTS GLOBAL NUTRITION RAW MATERIALS Strategic Information for the Nutrition Industry nbj

UNIVERSE OF U.S. SUPPLEMENT COMPANIES IN 2011 NBJ’S TOP U.S. SUPPLEMENT COMPANIES IN 2011 ($MIL.) Market No. of Cos. Supplement Sales % of Market Company Wholesale Supplement Sales Greater than $100M 34 $7,270 40% Carlyle Group - NBTY...... 1,820 $20M - $100M 94 $3,430 19% Pharmavite*...... 1,230 Less than $20M 727 $2,060 11% Abbott Labs/Ross Products (Ensure, EAS)...... 560 Perrigo*...... 540 Supplement Man./Marketers 855 $12,750 71% GNC (contract manufacturing)*...... 440 Multi-Level Wholesale Value $2,720 15% Pzer (Centrum, Caltrate)...... 440 Private/Store Label Wholesale Value $2,480 14% Glanbia (Optimum Nutrition, BSN)...... 380 Total Wholesale Supplement Value $17,950 100% Bayer (One A Day, Flintstones)...... 350 Consumer Sales ($mil) $30,030 Schwabe NA(Nature’s Way, Enzymatic)...... 320 Iovate (Hydroxycut, MuscleTech)...... 270 *Companies with a substantial portion of revenues from contract manufacturing of supplements. Source: Nutrition Business Journal [$mil., net sales (gross sales minus any returns, discounts or allowances)]. In the Atrium Innovations (G of L, Pure Encap)...... 250 top company list, company revenues listed are wholesale for supplements only (including contract manufacturing) CytoSport (Muscle Milk, Cytomax)...... 210 rounded to the nearest $10 million, not entire company revenue. Company brands listed are representative but not comprehensive. List does not include raw material companies or rms selling primarily through the multi-level mar- Nestle (Boost, Carnation, Optifast)...... 190 keting channel. Some revenues are estimates that have been compiled through information provided by company Schi Nutrition International ...... 190 executives, industry analysts and reputable published material. NBJ makes every eort to be accurate, but revenue gures are not the result of audits and are not guaranteed to be accurate. Errors and omissions are unintentional. NOW Foods...... 190 In the company universe table depicting wholesale sales, revenues for non-retailer contract manufacturing were sub- Healthy Directions (Doctor’s Preferred)...... 180 tracted to avoid double counting. International Vitamin Corporation...... 180 Alacer...... 170 others? Maybe having a product reg- ey’re pill exhausted, but you know what, VitaQuest Intl (Windmill)*...... 160 istration in the statue would be a good I’m exhausted by going to the dentist. I’ll Nutraceutical Intl. (Solaray, Cal, Zand)...... 160 thing. CRN does not have a position on bet other people are too, and I could in- Basic Research/ Zoller Labs...... 150 that, but there are people in the industry vite them over to my house and pull their ProCaps Laboratories (Andrew Lessman)...... 150 who raise the point. Every time we hear teeth out on the kitchen table. ere are Metagenics...... 140 Natural Factors Nutritional Products ...... 130 FDA talk, they say—35,000 products in lots of market opportunities, but that Life Extension...... 120 the market, 50,000 products in the mar- doesn’t mean we don’t rst engage in a New Chapter...... 120 ket, 60,000 products in the market. It’s reasoned consideration of whether there Standard Process ...... 120 pretty clear to us that FDA has no idea are limitations on how we ought to pursue Unilever (SlimFast)...... 110 how many products are in the market. them. We could require dietary supple- Cornerstone Research and Development*...... 110 Registration is very di erent than say- ment manufacturers to prove safety. Not Kikkoman (Country Life, Allergy Research)...... 110 ing we would give them any kind of pre- to prove ecacy, but to prove safety pre- DSM/Martek (Amerit)...... 100 market approval. It would have to be the market. We could also have a clearer and Delavau*...... 100 kind of thing where you register and they stricter rule around claims. e agency Jarrow Formulas...... 90 can’t say no. It’s the di erence between a spends a lot of time regulating substances Nordic Naturals...... 90 driver’s license and a birth certicate.” as drugs, not because of what they are but Natural Organics (Nature’s Plus)...... 90 because of what they say they can do.” Arizona Nutritional Supplements* ...... 90 Harrison: “What would make a dif- USP Labs...... 90 ference is a rational system in place for Harrison: “If you’re willing to do a well- Bausch & Lomb (Ocuvite, PreserVision)...... 80 making disease claims. We need over- done, clinical study on your Echinacea Factor Nutrition...... 80 the-counter disease claims for non-life product and you show that it limits the ISI Brands (TwinLab, Metabolife)...... 80 threatening, supplement-appropriate duration of your cold, maybe you get ex- Airborne Consumer Health...... 80 conditions. You can be a dietary supple- clusivity on that claim for two-to-three Gaspari Nutrition...... 80 ment or you can be an herbal medicinal years. If you do the clinical trial and it Nature’s Products, Inc. (Rainbow Light)...... 70 product. Your choice. If you want to make shows positive results, you get to make Nature’s Best (Isopure) ...... 70 structure-function claims, be a supple- the claim and nobody else does. Let’s ReNew Life Formulas...... 70 ment. If you want to make those disease call a spade a spade. If we could make S.A.N. Corp. (Bolt, V-12, Tight)...... 70 claims, submit your dossier to FDA and the disease claim, I know people would Bluebonnet Nutrition Corp...... 70 that’s it, you’re done.” pay for the studies. e study would Natural Alternatives*...... 70 have market value. is is how the law P&G (Metamucil, Align Minerals)...... 60 Sapsin: “Some work could be done to gets in the way right now.” Atkins Nutritionals...... 60 clarify provisions of the law, but fun- reshold Enterprises Ltd...... 60 damentally, companies are seeing these Sapsin: “I would require a pre-mar- Reliance Private Label Supplements*...... 60 market opportunities and they want to ket inspection of dietary supplement e FRS Company...... 60 Barlean's Organic Oils...... 50 respond. Consumers want alternatives. CONTINUED ON PAGE 8

newhope360.com/nbj | 7 nbj 2012 Considering a Post-DSHEA World

companies, without any kind of FDA stamp, U.S. NUTRITION AND SUPPLEMENT SALES BY RETAIL CHANNEL IN 2011 are much more vulnerable to class actions.”

Independents/ # of Total Retail Nutrition Supplement Sapsin: “Patent protections in natural prod- Small Chains Stores Sales($mil) Sales($mil) Sales($mil) ucts are weaker, yes. But you’re not stuck if Natural Food Store <2000 sq ft 1,220 $600 $600 $150 you’re on the side of dietary supplements NFS: 2001-6000 sq. ft. 1,900 $4,690 $4,690 $520 as an important component of a healthy NFS: >6000 sq. ft. 1,000 $9,720 $9,720 $1,000 and balanced lifestyle, of dietary supple- Health Food Store: <1000 sf 1,340 $350 $350 $260 ments using ingredients well-studied in HFS: 1001-2000 sq. ft. 1,730 $890 $890 $580 the food supply over a long period of time. HFS: >2000 sq. ft. 1,620 $4,060 $4,060 $1,980 If that’s your view, then why do you need to VMS Store: <=1000 sq. ft. 1,640 $790 $790 $740 do a safety or ecacy study? Don’t recreate VMS Store: >1000 sq ft 1,340 $1,200 $1,200 $1,090 the wheel. Where you get into trouble and Subtotal 11,780 $22,300 $22,300 $6,310 where you begin to need the science is when Large Chains you decide to make specic statements Whole Foods 300 $10,180 $10,180 $1,500 about what the product is going to do for GNC 5,930 $1,400 $1,400 $1,110 you—and I’m going to exaggerate now—to- Vitamin World 440 $220 $220 $200 morrow. Or you get into trouble with the hot Vitamin Shoppe 530 $770 $770 $710 new dried beetle extract from Peru, some- Other* 16,550 $1,680 $1,680 $1,130 thing people haven’t seen before. e things Total Natural & Specialty 35,530 $36,560 $36,560 $10,970 that I would call the circumstantial guaran- Mass Market tees of trustworthiness—the history of use, Food 98,910 $571,200 $45,850 $1,310 the understanding of the substance—those Drug 38,530 $229,330 $5,760 $2,010 aren’t there anymore. If that’s where you are, Mass Merchandiser 6,940 $294,520 $12,870 $3,050 in my mind you’re not really talking about a Club 1,220 $133,690 $5,900 $1,800 food anymore. Peruvian beetle extract is not Convenience/Other 148,130 $158,790 $1,430 $460 food in the United States, and the burden of Total Mass Market Retail 293,720 $1,387,530 $71,790 $8,640 proof and the responsibility that should be Total Retail Nutrition 329,250 $1,424,090 $108,350 $19,600 incumbent upon the manufacturer of that Non-Retail Nutrition n/a n/a $17,700 $10,420 extract increases proportionally.” Total Nutrition Industry $126,050 $30,030 Fabricant: “Just a few weeks ago, we found

Source: Nutrition Business Journal and e Natural Foods Merchandiser market overview survey, SPINS, e Nielsen Co., a product from Mexico with two pretty SymphonyIRI Group, U.S. Department of Commerce, FMI, NACDS, public company lings and others. *Other includes specialty/gour- potent NSAIDs—diclofenac sodium and met, personal care, cosmetic, gyms, herb shops, mall stands, delis, bakeries, salons, gift/boutique stores, etc. Nutrition sales include natural & organic and functional foods, supplements and other (N&OPC, books, household goods, etc.). methocarbamol. ey both have a really dif- cult safety prole. ey’re used for pain but can be really tough on the liver. We’re see- facilities. It’s GMP pre-market, and you don’t food companies over claims. It’s just been an ing this shift. If you look at weight loss and go on the market unless you can pass that explosion, in California especially. So consider bodybuilding, those are lifestyle products. safety inspection.” this: If FDA approves a drug and someone We expect to see more and more problems tries to sue the drug company over the truth- with drug adulteration in lifestyle products, In the long, long term fulness of their claims or the inadequacy of including the pain area.” Wasserman: “e big paradigm shift in en- their warnings against potential side e ects, forcement has been the incredible rise in con- the drug company points to the FDA approval Jeers: “Worst-case scenario, if the in- sumer class actions against supplement and process as a preemptive defense. Supplement dustry evolves to strictly pharmaceutical “I would require a pre-market inspection of dietary supplement facilities. It’s GMP pre-market, and you don’t go on the market unless you can pass that safety inspection.” —Jason Sapsin, Polsinelli Shughart

8 | / 2012 SUPPLEMENTS GLOBAL NUTRITION RAW MATERIALS Strategic Information for the Nutrition Industry nbj

NBJ SURVEY: OUTLOOK ON INDUSTRY REGULATORY ISSUES News from

NEW DIRECTIONS IN FOOD PRODUCT INNOVATION Interesting tensions are afoot in the consumer packaged goods world, especially for those looking to hop on the health and wellness bandwagon. I see three main directions in the food world today:

Fortified so as to be functional. This is Source: Nutrition Business Journal survey of 116 supplement manufacturers, marketers and distributors conducted 5/21/12 - 6/18/12. the M.O. of the “nutri- Question: "Please rate the following issues based on the scale below." tion by addition” crowd. standards, we’re stepping up by providing served by a retreat from primary research Naturally functional: pharma-like clinical studies. ey’re not and health claims to adopt a benign stat- nutrient-dense, clean-label specically pharmaceutical standards, but ure as a small thing you can do to improve foods that do not induce inflam- they’re pharma-like. at's our niche. We nutrition. Market forces, however, seem mation. Among the naturally want to bring ingredients to market that downright determined to pull supplements functional superfoods that con- demonstrate Phase 1 and Phase 2 human toward drugs by targeting more and more sumers seem to be gravitating clinical studies conducted in a certied, reg- specic functions, by making stronger and istered research facility. As we move farther stronger claims, and by digging in with in- towards are these: orange juice, through this maze of FDA and FTC’s evo- dustry’s sharpest heels at nigh every turn cranberry juice, pomegranate lution of their market view, we believe that when threats to these freedoms surface juice, green tea, Greek yogurt, not only are Phase 1 and Phase 2 clinicals from Washington, DC. coconut water and chia. going to be important, but the research- It’s fair to ask the question: If the free Food/supp/pharma ers who did the studies (in an unbiased market wants supplements to be drugs and convergence. This is stu like environment) will also be important.” to serve as medicine—to, in essence, o er extending shelf life for years. a less expensive, less risky alternative to Or extracting stem cells from Powers: “Look at Canada. I’ve seen Canadi- pharmaceuticals—then what is the regula- tissue taken from a cow’s ans come to the U.S. with an extra suitcase tory framework that will allow the science muscle, growing muscle cells and they ll it with supplements. ey’ve to blossom and begin to really prove eca- bought them in our stores. So now we have cy for consumers? DSHEA was designed to under tension to bulk them people smuggling vitamins. Before the shifts concern itself much more with safety than up in a petri dish, and the new toward pre-market approval, I’d only heard ecacy. Is it the right law for a maturing in- muscle fibers are minced and of drug smuggling, not vitamin smuggling.” dustry looking to capitalize on the very real turned into burgers. I’m still trends toward natural alternatives to drugs? waiting for truly progressive nbj: At the end of the day, the law is the Are the free-market forces so adamantly food product designers to de- law. Baked into the very DNA of DSHEA defending DSHEA doing themselves a dis- velop foods and aect life—how is this tension between supplements po- service by protecting the grayness, which about modulating brain chemis- sitioned as food and supplements posi- leads ineluctably to consumer mispercep- try for optimum oce perfor- tioned as medicine. e very nature of the tions and distrust? Is DSHEA truly serving mance? What about sleep? law attempts to create a third category the long-term health of the industry? How about libido? You know, and legitimize a gray space between these Maybe not. Maybe the industry would the stu we really care about! two camps, and this nature expresses itself be better served to stay put inside the gray in constant, competing tensions to pull area much more closely aligned to the supplements into one or the other. Some food camp than the drug camp. Either Todd Runestad voices see little cause to champion dietary that, or open up Pandora's box and amend Editor-in-Chief, supplements as much more than placebo, the law to truly promote ecacy through Functional Ingredients and that the industry’s future would be best better science.

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