Direct-To-Consumer Selling in the Nutrition Industry Report

Direct-to- Consumer Selling in the Nutrition 2010 Industry Report

An analysis of non-retail markets, trends, competition and strategy in the U.S. Nutrition Industry. NBJ’s Direct Selling Report 2010

2.1. ACKNOWLEDGEMENTS ...... 13 2.2. RESEARCH METHODOLOGY ...... 13 2.2.1. Disclaimer ...... 14 2.2.2. Copyright ...... 14 2.3. DEFINITIONS ...... 14 2.3.1. Product Categories ...... 14 2.3.2. Sales Channels ...... 15

3.1. NUTRITION INDUSTRY OVERVIEW ...... 19 3.2. U.S. NUTRITION INDUSTRY RETAIL VS. DIRECT ...... 21 3.3. NUTRITION INDUSTRY DIRECT-TO-CONSUMER SALES ...... 24 3.3.1. Nutrition: Direct Channel Overview ...... 25 3.3.2. Nutrition: Product Category Sales ...... 28 3.3.3. Nutrition: Growth & Forecast ...... 30 3.4. DIRECT-TO-CONSUMER SUPPLEMENT SALES ...... 32 3.4.1. Supplements: Direct Channel Overview ...... 35 3.4.2. Supplements: Product Category Sales ...... 38 3.4.3. Supplements: Growth & Forecast ...... 41 3.5. SUPPLEMENTS: TOP DIRECT-SELLING COMPANIES ...... 43 3.6. TOP DIRECT-SELLING SUPPLEMENTS ...... 44 3.7. NBJ DIRECT-SELLING MANUFACTURER SURVEY ...... 45 3.8. DIRECT-SELLING TRENDS ...... 48 3.8.1. Continuity Programs Trigger an Onslaught of Complaints from Supplement Companies ...... 48 3.8.2. FTC Regulations Change the Marketing Landscape for Nutrition Direct Sellers ...... 52 3.8.3. How Dirty Fingernails Lead to Sales...... 55 3.8.4. Amazon.com Opens Door to E-commerce Success for U.S. Nutrition Companies ...... 56 3.8.5. Direct Marketing Accelerating as Retailers See Branding Benefits ...... 57 3.8.6. U.S. Animal Nutrition in the Direct Channels ...... 58

4.1. NUTRITION INDUSTRY INTERNET SALES ...... 61 4.1.1. Nutrition: Channel Comparison ...... 62 4.1.2. Nutrition: Product Sales ...... 65 4.2. SUPPLEMENT INTERNET SALES ...... 67 4.2.1. Supplements: Channel Comparison ...... 68 4.2.2. Supplements: Product Sales ...... 70 4.2.3. Supplements: Growth and Forecast ...... 72 4.2.4. Top Internet Supplement Companies ...... 74 4.3. INTERNET/E-COMMERCE TRENDS ...... 74 4.3.1. The Dark Side of Direct Selling ...... 74 4.3.2. Internet Proves Useful Tool for Aiding Supplement Sales via Healthcare Practitioners ...... 75 4.3.3. MyProtein.co.uk Poised to Tackle Germany’s Online Sports Supplement Market ...... 77 4.3.4. Element Bars CEO Brings Customized Nutrition to the TV Masses ...... 79 4.3.5. NBJ Summit Extension Illuminates Best Internet Marketing and Sales Practices ...... 81

NBJ’s Direct Selling Report 2010

4.3.6. Direct-Selling Supplement Marketer Vows to Stop Using Deceptive Claims and Practices ...... 82 4.3.7. Natural & Organic Personal Care Products Continue to Emerge Online...... 82 4.3.8. Using the Internet to Outpace Retail Competition ...... 84 4.3.9. Search Engine Marketing Can Be Crucial Component of Successful Online Sales...... 88 4.3.10. E-marketing in a Recession ...... 90 4.3.11. Is Your Search Engine Marketing DSHEA Compliant? ...... 94 4.3.12. One-Third of Online Americans Use Social Media for Health ...... 95

5.1. NUTRITION INDUSTRY MAIL ORDER/DRTV,RADIO SALES ...... 100 5.1.1. Nutrition: Channel Comparison ...... 101 5.1.2. Nutrition: Product Sales ...... 104 5.2. SUPPLEMENT MAIL ORDER/DRTV, RADIO SALES ...... 106 5.2.1. Supplements: Channel Comparison ...... 107 5.2.2. Supplements: Product Sales ...... 109 5.2.3. Supplements: Growth and Forecast ...... 111 5.2.4. Top DRTV/Radio Supplement Companies ...... 113 5.2.5. Top Mail Order Supplement Companies ...... 113 5.3. MAIL ORDER/DRTV,RADIO TRENDS ...... 114 5.3.1. Direct Mail Still Best for Many Nutrition Products ...... 114 5.3.2. Understanding Infomercials: The Science of Direct-Response Ad Campaigns in the Nutrition Industry ...... 116 5.3.3. Deciding Between Television and Radio Advertising ...... 120 5.3.4. Supplement Infomercial Marketers Ordered to Pay Nearly $70 Million in Fines ...... 121

6.1. NUTRITION INDUSTRY NETWORK MARKETING SALES ...... 124 6.1.1. Nutrition: Channel Comparison ...... 125 6.1.2. Nutrition: Product Sales ...... 128 6.2. SUPPLEMENT NETWORK MARKETING SALES ...... 129 6.2.1. Supplements: Channel Comparison ...... 130 6.2.2. Supplements: Product Sales ...... 132 6.2.3. Supplements: Growth and Forecast ...... 134 6.2.4. Top Network Marketing Supplement Companies ...... 136 6.3. NETWORK MARKETING TRENDS ...... 137 6.3.1. Medifast’s Multi-Channel Sales Approach Generates Double-Digit Revenue Growth ...... 137 6.3.2. Juice Plus+ Squeezes Sales Success From Children’s Market ...... 140 6.3.3. Herbalife Stresses Affordability ...... 142 6.3.4. Isagenix Sets Record for Distributor Enrollment ...... 143 6.3.5. XanGo Looks Beyond Mangosteen ...... 144 6.3.6. MonaVie Going Global ...... 145 6.3.7. Nu Skin’s Game Changer ...... 146 6.3.8. Mixed Bag for Two MLMs in a 2010 First-Quarter Earnings Roundup ...... 149 6.3.9. USANA Staying the Course ...... 150 6.3.10. Despite a High Failure Rate, a New Generation of MLMs is Entering Nutrition Market ...... 150 6.3.11. Yoli Explodes onto Nutrition Market with New Blast Cap Technology ...... 153 6.3.12. Qivana Capitalizes on Management’s MLM Experience ...... 154 6.3.13. Rain Nutrition Goes for Fresh, Youthful Image ...... 154 6.3.14. Lifemax Brings ‘Miracle Seed’ to the MLM Masses ...... 155 6.3.15. Alticor Buys Substantial Ownership in Metagenics ...... 156 6.3.16. Metagenics CEO: We Need Alticor’s Backing to Make a Dent in Chronic Illness Epidemic ...... 156 6.3.17. MLMs: Long-Term Success for MLMs Requires Science to Trump Marketing ...... 159 6.3.18. Understanding the MLM Supply Chain ...... 160 6.3.19. MLM Ingredient Trends ...... 164

6.3.20. Personal Products in the MLM Channel ...... 165 6.3.21. Q&A With Liz Harvey, vice president of marketing at Isagenix ...... 166

7.1. NUTRITION INDUSTRY PRACTITIONER SALES ...... 173 7.1.1. Nutrition: Channel Comparison ...... 174 7.1.2. Nutrition: Product Sales ...... 177 7.2. SUPPLEMENT PRACTITIONER SALES ...... 178 7.2.1. Supplements: Channel Comparison ...... 179 7.2.2. Supplements: Product Sales ...... 181 7.2.3. Supplements: Growth and Forecast ...... 183 7.2.4. Top Supplement Companies in the Practitioner Channel ...... 185 7.3. PRACTITIONER SURVEY ...... 186 7.4. PRACTITIONER TRENDS ...... 193 7.4.1. Emerson Ecologics Works to Break Down Barriers Separating Practitioners and Dietary Supplements ...... 193 7.4.2. Founders Launched Xymogen to Fix Problems in Practitioner Sales Channel ...... 196 7.4.3. How to Achieve Practitioner Channel Success ...... 198 7.4.4. Whither Goes the Wise Woman ...... 200 7.4.5. Diversified Natural Products Adds Thorne Research to Growth Mix ...... 200 7.4.6. Case Study: Using Practitioner Endorsement to Increase Online Sales...... 201 7.4.7. Q&A With Jeffrey Bland, PhD, Chief Science Officer of Metagenics ...... 204 7.4.8. Schools Helping Physicians and Consumers Learn About Integrative Medicine ...... 207

8.1. ADVOCARE INTERNATIONAL, LP ...... 211 8.2. ALLERGY RESEARCH GROUP (KIKKOMAN) ...... 213 8.3. ALTICOR INC. (AMWAY, NUTRILITE) ...... 215 8.4. ATRIUM INNOVATIONS (DOUGLAS LABS, PURE ENCAPSULATIONS) ...... 217 8.5. BASIC RESEARCH/ZOLLER LABS ...... 219 8.6. BODYBUILDING.COM (LIBERTY MEDIA) ...... 220 8.7. DESIGNS FOR HEALTH ...... 222 8.8. EMERSON ECOLOGICS, INC...... 224 8.9. FACTOR NUTRITION LABS, LLC (FOCUS FACTOR) ...... 225 8.10. FOREVER LIVING PRODUCTS ...... 226 8.11. FREELIFE INTERNATIONAL, INC...... 227 8.12. HEALTHY DIRECTIONS, LLC (DOCTOR'S PREFERRED) ...... 228 8.13. HERBALIFE ...... 229 8.14. ISAGENIX INTERNATIONAL, LLC ...... 231 8.15. LIFE EXTENSION FOUNDATION ...... 233 8.16. MANNATECH, INC...... 234 8.17. MARKET AMERICA SCIENCE (ISOTONIX) ...... 236 8.18. MELALEUCA, THE WELLNESS COMPANY ...... 237 8.19. METAGENICS, INC...... 238 8.20. MONARCH HEALTH PRODUCTS (MONAVIE) ...... 240 8.21. NATURE'S SUNSHINE PRODUCTS, INC...... 241 8.22. NBTY, INC. (PURITAN'S PRIDE) ...... 243 8.23. NU SKIN ENTERPRISES ...... 245 8.24. NUTRISYSTEM, INC...... 246 8.25. PROCAPS LABORATORIES (ANDREW LESSMANN) ...... 247 8.26. PROGRESSIVE LABORATORIES, INC...... 248 8.27. PURITY PRODUCTS ...... 250 8.28. RELIV INTERNATIONAL, INC...... 251

NBJ’s Direct Selling Report 2010

8.29. SCHWABE NORTH AMERICA (INTEGRATIVE THERAPEUTICS) ...... 253 8.30. SEROYAL INTERNATIONAL INC...... 255 8.31. SHAKLEE CORPORATION ...... 257 8.32. STANDARD PROCESS ...... 258 8.33. SUNRIDER INTERNATIONAL ...... 259 8.34. SWANSON HEALTH PRODUCTS ...... 260 8.35. TAHITIAN NONI INTERNATIONAL (MORINDA HOLDINGS INC.) ...... 261 8.36. THORNE RESEARCH ...... 262 8.37. UNICITY INTERNATIONAL, INC...... 264 8.38. USANA HEALTH SCIENCES, INC...... 265 8.39. VITACOST.COM (NUTRACEUTICAL SCIENCES INSTITUTE) ...... 267 8.40. VITAMIN SHOPPE, INC...... 268 8.41. XANGO ...... 269 8.42. XYMOGEN ...... 270

Figure 1-1 U.S. Nutrition Industry Direct-to-Consumer Sales in 2009 ...... 11 Figure 3-1 U.S. Nutrition Industry Total Sales by Product Category in 2009 ...... 19 Figure 3-2 U.S. Nutrition Industry Sales & Growth, 1997-2009 ...... 20 Figure 3-3 U.S. Nutrition Industry Sales Growth by Channel in 2009 ...... 21 Figure 3-4 U.S. Nutrition Industry Sales by Channel in 2009 ...... 22 Figure 3-5 U.S. Nutrition Industry Retail vs. Direct Sales and Growth, 1999-2009 ...... 22 Figure 3-6 U.S. Nutrition Industry Retail vs. Direct Sales and Growth, 2010e-2017e ...... 23 Figure 3-7 U.S. Nutrition Industry Retail vs. Direct Sales Growth, 1998-2009 ...... 23 Figure 3-8 U.S. Nutrition Industry Direct Sales & Growth, 1997-2009 ...... 24 Figure 3-9 U.S. Nutrition Industry Direct Sales by Channel in 2009 ...... 25 Figure 3-10 U.S. Nutrition Industry Direct Sales by Channel, 1997-2009...... 26 Figure 3-11 U.S. Nutrition Direct Sales by Channel, 1999-2009 ...... 26 Figure 3-12 U.S. Nutrition Direct Sales Growth by Channel, 1999-2009 ...... 27 Figure 3-13 U.S. Nutrition Direct Sales by Channel as % of Total, 1999-2009 ...... 27 Figure 3-14 U.S. Nutrition Industry Direct Sales by Product Category in 2009 ...... 28 Figure 3-15 U.S. Nutrition Industry Direct Sales by Product, 1999-2009 ...... 29 Figure 3-16 U.S. Nutrition Industry Direct Sales & Growth, 2000-2017e ...... 30 Figure 3-17 U.S. Nutrition Direct Sales by Channel, 2010e-2017e ...... 30 Figure 3-18 U.S. Nutrition Direct Sales Growth by Channel, 2010e-2017e ...... 31 Figure 3-19 U.S. Nutrition Direct Sales by Channel as % of Total, 2010e-2017e ...... 31 Figure 3-20 U.S. Supplement Direct Sales & Growth, 1999-2009 ...... 32 Figure 3-21 U.S. Supplement Retail vs. Direct Sales, 1999-2009 ...... 33 Figure 3-22 U.S. Supplement Retail vs. Direct Sales and Growth, 1999-2009 ...... 33 Figure 3-23 U.S. Supplement Retail vs. Direct Sales and Growth, 2010e-2017e ...... 34 Figure 3-24 U.S. Supplement Direct Sales by Channel in 2009 ...... 35 Figure 3-25 U.S. Supplement Direct Sales by Channel, 1999-2009 ...... 36 Figure 3-26 U.S. Supplement Direct Sales by Channel, 1999-2009 ...... 36 Figure 3-27 U.S. Supplement Direct Sales Growth by Channel, 2000-2009 ...... 37 Figure 3-28 U.S. Supplement Direct Sales by Channel as % of Total, 1999-2009 ...... 37 Figure 3-29 U.S. Direct Supplement Sales by Product Category in 2009 ...... 38 Figure 3-30 U.S. Supplement Direct Sales by Product, 1999-2009 ...... 39 Figure 3-31 U.S. Supplement Direct Sales by Product, 1999-2009 ...... 39 Figure 3-32 U.S. Supplement Direct Sales Growth by Product, 2000-2009 ...... 40 Figure 3-33 U.S. Supplement Direct Sales by Product as % of Total, 1999-2009 ...... 40 Figure 3-34 U.S. Supplement Direct Sales & Growth, 2000-2017e ...... 41 Figure 3-35 U.S. Supplement Direct Sales by Channel, 2010e-2017e ...... 41 Figure 3-36 U.S. Supplement Direct Sales Growth by Channel, 2010e-2017e ...... 42 Figure 3-37 U.S. Supplement Direct Sales by Channel as % of Total, 2010e-2017e...... 42 Figure 3-38 Top 30 Companies for U.S. Direct Sales of Supplements in 2009 ...... 43 Figure 3-39 Top 30 U.S. Direct-Selling Supplements, 2008-2009 ...... 44 Figure 3-40 NBJ Survey: Market Drivers in 2009 Direct Selling Market ...... 45 Figure 3-41 NBJ Survey: Economic Impact on Product Development in 2009 ...... 46 Figure 3-42 NBJ Survey: Planned Product Development in 2010 vs. 2009 ...... 46 Figure 3-43 NBJ Survey: Marketing Budget in 2010 vs. 2009 ...... 47

NBJ’s Direct Selling Report 2010

Figure 3-44 NBJ Survey: Tools to Increase Product Sales ...... 47 Figure 3-45 NBJ Survey: Impact of Auto-Ship Programs on 2009 Sales ...... 48 Figure 3-46 NBJ Survey: Auto-Ship Programs’ Effects on Repeat Purchases ...... 49 Figure 3-47 NBJ Survey: Changes in FTC Claims Enforcement Role ...... 52 Figure 3-48 NBJ Survey: Claims Alternations Due to FTC Enforcement ...... 54 Figure 4-1 U.S. Nutrition Industry Internet S.W.O.T. Analysis...... 59 Figure 4-2 U.S. Nutrition Industry Internet Sales & Growth, 1997-2009 ...... 61 Figure 4-3 U.S. Nutrition Industry Internet Sales as a % of Total Nutrition Industry Sales in 2009 ...... 62 Figure 4-4 U.S. Internet Nutrition Sales as a % of Direct Nutrition Sales in 2009 ...... 62 Figure 4-5 U.S. Nutrition Industry Internet vs. Total Direct Sales and Growth, 1999-2009 ...... 63 Figure 4-6 U.S. Nutrition Industry Internet vs. Total Direct Sales and Growth, 2010e-2017e ...... 63 Figure 4-7 U.S. Nutrition Industry Internet Sales & Growth, 2000-2017e ...... 64 Figure 4-8 U.S. Nutrition Industry Internet Sales by Product, 1999 vs. 2009 ...... 65 Figure 4-9 U.S. Nutrition Internet Sales by Product, 1999-2009 ...... 66 Figure 4-10 U.S. Internet Supplement Sales & Growth, 1999-2009 ...... 67 Figure 4-11 U.S. Internet Supplement Sales as a % of Total Supplement Sales in 2009 ...... 68 Figure 4-12 U.S. Internet Supplement Sales as a % of Direct Supplement Sales in 2009 ...... 68 Figure 4-13 U.S. Supplement Internet vs. Total Direct Sales and Growth, 1999-2009 ...... 69 Figure 4-14 U.S. Supplement Internet vs. Total Direct Sales and Growth, 2010e-2017e ...... 69 Figure 4-15 U.S. Internet Supplement Sales by Product, 1999 vs. 2009 ...... 70 Figure 4-16 U.S. Internet Supplement Sales by Product, 1999-2009 ...... 70 Figure 4-17 U.S. Internet Supplement Sales Growth by Product, 2000-2009 ...... 71 Figure 4-18 U.S. Internet Supplement Sales by Product as % of Total, 1999-2009 ...... 71 Figure 4-19 U.S. Internet Supplement Sales & Growth, 2000-2017e ...... 72 Figure 4-20 U.S. Internet Supplement Sales by Product, 2010e-2017e ...... 72 Figure 4-21 U.S. Internet Supplement Sales Growth by Product, 2010e-2017e ...... 73 Figure 4-22 U.S. Internet Supplement Sales by Product as % of Total, 2010e-2017e ...... 73 Figure 4-23 Top Companies – U.S. Supplement Sales in the Internet Channel in 2009 ...... 74 Figure 4-24 NBJ Survey: Technologies Practitioners Use to Increase Supplement Sales ...... 76 Figure 5-1 U.S. Nutrition Industry Mail Order/Catalog S.W.O.T. Analysis ...... 97 Figure 5-2 U.S. Nutrition Industry Direct-Response TV S.W.O.T. Analysis ...... 98 Figure 5-3 U.S. Nutrition Industry Direct-Response Radio S.W.O.T. Analysis ...... 99 Figure 5-4 U.S. Nutrition Industry Mail Order/DRTV,Radio Sales & Growth, 1997-2009 ...... 100 Figure 5-5 U.S. Mail Order/DRTV,Radio Nutrition Sales as a % of Total Nutrition Sales in 2009 ...... 101 Figure 5-6 U.S. Mail Order/DRTV,Radio Nutrition Sales as a % of Direct Nutrition Sales in 2009 ...... 102 Figure 5-7 U.S. Nutrition Industry Mail Order/DRTV,Radio vs. Total Direct Sales and Growth, 1999-2009 ...... 102 Figure 5-8 U.S. Nutrition Industry Mail Order/DRTV,Radio vs. Total Direct Sales and Growth, 2010e-2017e ..... 103 Figure 5-9 U.S. Nutrition Industry Mail Order/DRTV,Radio Sales & Growth, 2000-2017e ...... 103 Figure 5-10 U.S. Nutrition Industry Mail Order/DRTV,Radio Sales by Product, 1999 vs. 2009 ...... 104 Figure 5-11 U.S. Nutrition Mail Order/DRTV,Radio Sales by Product, 1999-2009 ...... 105 Figure 5-12 U.S. Mail Order/DRTV,Radio SupplementSales & Growth, 1999-2009 ...... 106 Figure 5-13 U.S. Mail Order/DRTV,Radio Supplement Sales as a % of Total Supplement Sales in 2009 ...... 107 Figure 5-14 U.S. Mail Order/DRTV,Radio Supplement Sales as a % of Direct Supplement Sales in 2009...... 108 Figure 5-15 U.S. Supplement Mail Order/DRTV,Radio vs. Total Direct Sales and Growth, 1999-2009 ...... 108 Figure 5-16 U.S. Supplement Mail Order/DRTV,Radio vs. Total Direct Sales and Growth, 2010e-2017e ...... 109 Figure 5-17 U.S Mail Order/DRTV,Radio Supplement Sales by Product, 1999 vs. 2009 ...... 109 Figure 5-18 U.S. Mail Order/DRTV,Radio Supplement Sales by Product, 1999-2009 ...... 110 Figure 5-19 U.S. Mail Order/DRTV,Radio Supplement Sales Growth by Product, 2000-2009 ...... 110

Figure 5-20 U.S. Mail Order/DRTV,Radio Supplement Sales by Product as % of Total, 1999-2009 ...... 110 Figure 5-21 U.S. Mail Order/DRTV,Radio Supplement Sales & Growth, 2000-2017e ...... 111 Figure 5-22 U.S. Mail Order/DRTV,Radio Supplement Sales by Product, 2010e-2017e ...... 111 Figure 5-23 U.S. Mail Order/DRTV,Radio Supplement Sales Growth by Product, 2010e-2017e ...... 112 Figure 5-24 U.S. Mail Order/DRTV,Radio Supplement Sales by Product as % of Total, 2010e-2017e ...... 112 Figure 5-25 Top Companies – U.S. Supplement Sales in the DRTV/Radio Sales Channel in 2009 ...... 113 Figure 5-26 Top Companies – U.S. Supplement Sales in the Mail Order Channel in 2009 ...... 113 Figure 6-1 U.S. Nutrition Industry Network Marketing Channel S.W.O.T. Analysis ...... 123 Figure 6-2 U.S. Nutrition Industry Network Marketing Sales & Growth, 1997-2009 ...... 124 Figure 6-3 U.S. Nutrition Industry Network Marketing Sales as a % of Total Nutrition Industry Sales in 2009 .... 125 Figure 6-4 U.S. Network Marketing Nutrition Sales as a % of Direct Nutrition Sales in 2009 ...... 126 Figure 6-5 U.S. Nutrition Industry Network Marketing vs. Total Direct Sales and Growth, 1999-2009 ...... 126 Figure 6-6 U.S. Nutrition Industry Network Marketing vs. Total Direct Sales and Growth, 2010e-2017e ...... 127 Figure 6-7 U.S. Nutrition Industry Network Marketing Sales & Growth, 2000-2017e ...... 127 Figure 6-8 U.S. Nutrition Industry Network Marketing Sales by Product, 1999 vs. 2009 ...... 128 Figure 6-9 U.S. Nutrition Network Marketing Sales by Product, 1999-2009 ...... 128 Figure 6-10 U.S. Network Marketing Supplement Sales & Growth, 1999-2009 ...... 129 Figure 6-11 U.S. Network Marketing Supplement Sales as a % of Total Supplement Sales in 2009 ...... 130 Figure 6-12 U.S. Network Marketing Supplement Sales as a % of Direct Supplement Sales in 2009 ...... 131 Figure 6-13 U.S. Supplement Network Marketing vs. Total Direct Sales and Growth, 1999-2009 ...... 131 Figure 6-14 U.S. Supplement Network Marketing vs. Total Direct Sales and Growth, 2010e-2017e ...... 132 Figure 6-15 U.S Network Marketing Supplement Sales by Product, 1999 vs. 2009...... 132 Figure 6-16 U.S. Network Marketing Supplement Sales by Product, 1999-2009 ...... 133 Figure 6-17 U.S. Network Marketing Supplement Sales Growth by Product, 2000-2009 ...... 133 Figure 6-18 U.S. Network Marketing Supplement Sales by Product as % of Total, 1999-2009 ...... 134 Figure 6-19 U.S. Network Marketing Supplement Sales & Growth, 2000-2017e ...... 134 Figure 6-20 U.S. Network Marketing Supplement Sales by Product, 2010e-2017e ...... 135 Figure 6-21 U.S. Network Marketing Supplement Sales Growth by Product, 2010e-2017e ...... 135 Figure 6-22 U.S. Network Marketing Supplement Sales by Product as % of Total, 2010e-2017e ...... 135 Figure 6-23 Top Companies – U.S. Supplement Sales in the Network Markeing Channel in 2009 ...... 136 Figure 6-24 Medifast Revenue and Growth: 2000-2009 ...... 137 Figure 6-25 Herbalife Annual Sales: 2003-2009 ...... 143 Figure 6-26 Nu Skin Enterprises Inc. Annual Sales: 2003-2009 ...... 146 Figure 7-1 U.S. Nutrition Industry Practitioner Channel S.W.O.T. Analysis...... 171 Figure 7-2 U.S. Nutrition Industry Practitioner Sales & Growth, 1997-2009 ...... 173 Figure 7-3 U.S. Nutrition Industry Practitioner Sales as a % of Total Nutrition Industry Sales in 2009 ...... 174 Figure 7-4 U.S. Practitioner Nutrition Sales as a % of Direct Nutrition Sales in 2009 ...... 174 Figure 7-5 U.S. Nutrition Industry Practitioner vs. Total Direct Sales and Growth, 1999-2009 ...... 175 Figure 7-6 U.S. Nutrition Industry Practitioner vs. Total Direct Sales and Growth, 2010e-2017e ...... 175 Figure 7-7 U.S. Nutrition Industry Practitioner Sales & Growth, 2000-2017e ...... 176 Figure 7-8 U.S. Nutrition Industry Practitioner Sales by Product, 1999 vs. 2009 ...... 177 Figure 7-9 U.S. Nutrition Practitioner Sales by Product, 1999-2009 ...... 178 Figure 7-10 U.S. Practitioner Supplement Sales & Growth, 1999-2009 ...... 178 Figure 7-11 U.S. Practitioner Supplement Sales as a % of Total Supplement Sales in 2009 ...... 179 Figure 7-12 U.S. Practitioner Supplement Sales as a % of Direct Supplement Sales in 2009 ...... 180 Figure 7-13 U.S. Supplement Practitioner vs. Total Direct Sales and Growth, 1999-2009 ...... 180 Figure 7-14 U.S. Supplement Practitioner vs. Total Direct Sales and Growth, 2010e-2017e ...... 181

NBJ’s Direct Selling Report 2010

Figure 7-15 U.S Pracitioner Supplement Sales by Product, 1999 vs. 2009 ...... 181 Figure 7-16 U.S. Practitioner Supplement Sales by Product, 1999-2009 ...... 182 Figure 7-17 U.S. Practitioner Supplement Sales Growth by Product, 2000-2009 ...... 182 Figure 7-18 U.S. Practitioner Supplement Sales by Product as % of Total, 1999-2009 ...... 183 Figure 7-19 U.S. Practitioner Supplement Sales & Growth, 2000-2017e ...... 183 Figure 7-20 U.S. Practitioner Supplement Sales by Product, 2010e-2017e ...... 184 Figure 7-21 U.S. Practitioner Supplement Sales Growth by Product, 2010e-2017e ...... 184 Figure 7-22 U.S. Practitioner Supplement Sales by Product as % of Total, 2010e-2017e ...... 184 Figure 7-23 Top Companies – U.S. Supplement Sales in the MLM/Face-to-Face Sales Channel in 2009 ...... 185 Figure 7-24 How Knowledgeable Are You About Supplements? ...... 186 Figure 7-25 Dou You Sell Supplements in Your Office? ...... 187 Figure 7-26 Where Practitioners Not Selling Supplements Recommend Patients Go to Buy Supplements ...... 188 Figure 7-27 NBJ Practitioner Survey: Percentage of Patients Buying Supplements in Practitioner Office ...... 189 Figure 7-28 NBJ Practitioner Survey: Where Do You Buy the Supplements You Sell Patients? ...... 189 Figure 7-29 NBJ Practitioner Survey: Breakdown of Supplement Sales by Product Category ...... 190 Figure 7-30 NBJ Practitioner Survey: Factors Affecting Which Supplement Brands are Stocked ...... 190 Figure 7-31 NBJ Practitioner Survey: Dollar Amount of Average Supplement Sale ...... 191 Figure 7-32 NBJ Practitioner Survey: Supplement Sales in 2009 vs. 2008 ...... 192

In 2009, more than $15 billion in U.S. nutrition industry sales were generated from non-retail channels, including the Internet, network or multi-level marketers (MLMs), healthcare practitioners, direct response TV (DRTV), direct response radio (DR radio), and mail-order catalogs/direct mail. As Nutrition Business Journal explores in this report, each direct sales channel faces its own set of opportunities and challenges—and each has been impacted by the economic downturn in different ways and to varying degrees. In fact, listen to dietary supplement companies selling via the healthcare practitioner and MLM channels talk about how their businesses fared in 2009, and you hear two very different stories. On the one hand, both practitioner and network-marketing supplement firms benefited last year from the same consumer forces that lifted the overall sale of dietary supplements. As Americans lost their jobs and watched their savings evaporate, many turned to vitamins and other nutrition products to protect the one aspect of their lives they felt they could still control: their health. On the other hand, growing competition from online and brick-and- mortar retailers—which both engaged in deep discounting last year—and consumers’ general lack of disposable income conspired to eat away at U.S. supplement sales growth in the MLM channel in 2009.

Figure 1-1 U.S. Nutrition Industry Direct-to-Consumer Sales in 2009

Practitioner N&OPC & 18% Household 19% Internet Functional 16% Foods 4%

Natural & Mail/ DRTV, Organic Food Radio Network 16% Supplements 17% 61% Marketing 49%

Source: Nutrition Business Journal estimates. ($mil., consumer sales)

Although the network-marketing channel was affected the most, overall nutrition product sales growth within the U.S. direct-to-consumer channels was suppressed last year. According to NBJ estimates, U.S. consumer sales of nutrition products via direct channels grew only 4% in 2009. This was down from the 7% compound annual growth rate (CAGR) posted by the direct channels from 1997-2009. The majority of U.S. nutrition industry sales continue to be rung up at brick-and-mortar retail locations, but the direct-to-consumer sales channels remain crucial to the industry’s growth and continue to play an important role in building brand awareness and driving sales for nutrition products. This is why forward-thinking companies are developing multi-channel strategies that leverage the best aspects of each channel to move their sales to the next level.

NBJ’s 2010 Direct-to-Consumer Selling in the Nutrition Industry Report was created to help companies understand the market trends and major players in the direct-to-consumer markets so that they can allocate future investment dollars in the most effective and efficient ways possible.

NBJ’s Direct Selling Report 2010

In this 270‐page report, you will find:

 A breakdown and analysis of historical, current and forecasted U.S. direct-to-consumer sales in the nutrition industry for the four major direct sales channels—MLM, practitioner, Internet, and DRTV, DR radio and catalog  Detailed company profiles on the top 42 direct-selling companies in the industry and characteristics of successful firms  A list of the Top 30 supplements sold via the direct channels in 2009  A list of the Top 30 direct supplement sellers in the U.S. nutrition industry  U.S. direct product sales for dietary supplements, functional foods and beverages, natural foods and beverages, organic foods and beverages, and natural & organic personal care and household products. This analysis includes an overview of U.S consumer sales by direct channel for each product category and highlights key market drivers in for each channel and product category  A discussion of direct-selling strengths, weaknesses, opportunities and threats for each of the major sales channels  Tips and strategies for successful direct-to-consumer marketing in the nutrition industry  and much more…