2011 Sample Issue | To subscribe or learn more, go to nutritionbusinessjournal.com

Sales Growth Sputters $108 Billion U.S. Nutrition Industry Consumer Sales in 2009 in Every Nutrition Category Network N&OPC and Marketing Functional Natural & Household Mail 7% Foods Order/DRTV, Specialty as Economy Takes its Toll 10% 34% Radio Retail Supplements outperform food and 2% 30% personal care, but companies across the board still struggle to expand

Practitioner ttempting to encapsulate in sev- 3% eral thousand words how a $108 Internet Abillion industry fared over the 2% course of a year is never easy, but the Supplements task is made that much more diffi cult 25% Natural & Mass Market when you’re talking about a year like Organic Retail 2009 and a market as diverse as the U.S. Foods 56% nutrition industry. Like much of the rest 31% of the U.S. economy, many nutrition Source: Nutrition Business Journal estimates (consumer sales) companies struggled to grow last year in the face of soaring unemployment, plummeting consumer confi dence and product categories and sales channels. An Industry Under Attack According to NBJ estimates, U.S. con- a near-frozen lending environment. It wasn’t just the economy that attempt- sumer sales of nutrition products— ed to rough up the U.S. nutrition indus- which we defi ne as dietary supplements, “The year past was the fi rst time we try in 2009, though. Numerous other natural & organic foods and beverages, ever experienced a drop in sales,” Na- forces—including emboldened regula- functional foods and beverages, and nat- ture’s Path Foods Founder and CEO tors, resolute critics and litigious con- ural & organic personal care (N&OPC) Arran Stephens told Nutrition Busi- sumer advocacy groups—took swipes and household products—moved up ness Journal. “While 2008 was a great at nutrition companies. Some of these 4.4% to $108.3 billion in 2009. year, 2009 was a tough year for us and attacks were legitimate, others less so. for the industry,” echoed Tony Harnack Their attempts to single out whom they While any level of growth during the II, president of Wellington Foods, a believe to be the industry’s “bad actors” worst economic downturn since the contract manufacturer of liquid and are viewed by many as welcome clean- Great Depression should be viewed as powder supplements. Others, however, up measures. Still, others fear that the a positive, the industry’s expansion rate were able to keep their growth engines resulting bad press, regulatory scrutiny last year was the lowest it’s been since running at a healthy pace—despite the and lawsuit onslaught will turn respon- NBJ began tracking nutrition product dour economy. “Standard Process sible companies into collateral damage. fared very well in 2009, breaking a com- sales in 1996. Growth was even signifi - cantly down from 2008, when industry pany sales record by hitting more than On the regulatory front, the U.S. nutri- sales expanded 8.8%—despite the near $100 million in sales,” said National Di- tion industry withstood numerous chal- collapse of the mortgage and banking rector of Sales Mike Scamarcia. lenges over the last 12 months, including industries and retailer inventory clamp- an uptick in U.S. Food and Drug Ad- downs experienced in the fourth quar- Overall, the U.S. nutrition industry kept ministration (FDA) warning letters, ter of that year. on growing last year—at least in most an FDA crackdown on steroid products

continued on page 4 NBJ 2011 Sample Issue

Nutrition Business Journal (ISSN 1548- Inside NBJ 6168) is published 12 times a year in 10 editions (8 single and 2 double issues) 2010 Nutrition Industry Overview: Growth rates decline across the industry as total nutrition by New Hope Natural Media, a division sales reach $108 billion. Regulatory scrutiny is on the rise for supplements, but product develop- of Penton Media Inc., 1401 Pearl St., ment is fi nally picking up some steam. We review sales and growth estimates, trends and impor- Suite 200, Boulder, CO 80302. ©2010 tant news events for each major industry category...... 1-12 Penton Media Inc. All rights reserved. U.S. sales top $750 million as Lovaza launches ambitious advertising campaign and points This publication may not be duplicated toward more pharmaceutical creep into supplements...... 13-14 or reproduced without written permis- Recent consent decrees from FTC raise the bar for claims substantiation and raise the sion. To order, call (303) 998-9263 or fax threat of two human clinical studies as a new standard...... 15-16 (303) 385-0046. Annual subscription rate EU’s health claims legislation sets the global functional food and beverage industry on is $1,195 in the United States and the edge, as companies attempt to pass EFSA’s rigorous approval bar...... 17-18 Americas, $1,245 in Europe and Asia. Network marketers were hampered by currency exchange and soft consumer spending www.nutritionbusinessjournal.com in 2009, causing a drop in U.S. sales. Global opportunities emerged, however, and industry [email protected] leaders Nu Skin and Herbalife posted record revenues...... 19-21 Publisher Patrick Rea Gaia Herbs and Ascenta Health set the standard for ingredient traceability with online Editor Marc Brush transparency tools...... 22-23 Associate Editor Connor Link Contributing Writers Lisa Marshall Company Index Laurie Budgar Karen Raterman Amarin ...... 14 InterHealth Nutraceuticals ...... 12 Pronova Biopharma ...... 13 Rachel Cernansky Ascenta Health...... 22 Iovate Health Sciences ...... 15 Provexis ...... 17 Isocell North America ...... 8 Pure Encapsulations ...... 14 Research Director Carla Ooyen BI Nutraceuticals ...... 4 Biothera ...... 20 Jarrow Formulas ...... 4 Racconto...... 5 Marketing Manager Chris Lasonde Brigham & Women’s Hospital ...... 14 Jigsaw Health ...... 8 Rainbow Light ...... 8, 11 Subscriber Services Maggie Skille Capsugel ...... 11 Johnson Nutrition Solutions ...... 5, 18 Reliant Pharmaceuticals ...... 13 Ceres Consulting ...... 14 Kellog ...... 18 Resolvyx Pharmaceuticals ...... 14 NBJ Editorial Advisory Board Council for Responsible Nutrition .....23 LaneLabs ...... 16 Rite Aid ...... 10 Tom Aarts CSPI ...... 18 Los Angeles Galaxy ...... 20 Sabinsa ...... 8 NBJ Co-Founder and EAB Chairman CVS ...... 10, 13 MonaVie...... 20 Schwabe North America ...... 7 Steve Allen Dean Foods ...... 6 Multiple Marketing ...... 18 Scientifi c Food Solutions ...... 8 Retired Nestlé Executive Dole ...... 5 National Enzyme ...... 11 Shelton Group ...... 6 Anthony Almada EFSA ...... 17 National Starch Food Innovations ...... 5 Solgar ...... 10, 13 President & CEO, GENR8 Inc. Emerson Ecologics ...... 14 Natural Products Association...... 5 Standard Process ...... 1 Mark Bartlett FDA ...... 1, 13, 15, 21 Nature’s Path Foods ...... 1 TwinLab ...... 10, 13 FTC ...... 15 Nestle ...... 15 Ullman, Shapiro & Ullman ...... 4 V.P. Global R&D, Pharmanex Gaia Herbs ...... 9, 22 New Chapter ...... 11 University of Texas ...... 7 Mark Blumenthal GAO ...... 4, 22 Next Pharmaceuticals ...... 12 UNPA ...... 16 Exec. Dir., American Botanical Council General Mills ...... 18 Nordic Naturals...... 11, 13 USANA ...... 21 Josef Brinckmann GlaxoSmithKline ...... 12, 13 Now Health Group ...... 10 Wellington Foods ...... 1, 11 V.P. R & D, Traditional Medicinals GNC ...... 10, 13 Nu Skin ...... 20 WhiteWave Foods ...... 6, 23 Bob Burke GOED ...... 12, 13 Ochsner Heart & Vascular Institute .14 Whole Foods Market ...... 7 Founder, Natural Products Consulting Harvard Medical School ...... 14 Omega Protein ...... 10 Wise Woman Herbals ...... 7 Greg Horn Herbalife ...... 19 Organic Consumers Association ...... 6 World Health Organization ...... 23 Herbalist & Alchemist ...... 11 Pharmavite ...... 10 Xigo Health ...... 7 President, Specialty Nutrition Group IMS Health...... 13 POM Wonderful ...... 15 Yoli ...... 21 Loren Israelsen Exec. Dir., UNPA Larry Kolb Subscribers Speak Out President, U.S., TSI Health Sciences Michael McGuffi n ”I read the 2010 Nutrition Industry Overview from cover to cover. The information is so valu- President, AHPA able and useful for someone selling in the industry. I have to say I didn’t want to put it down, Randi Neiner which is rare for me. Congratulations on a tremendous issue! Thank you.” —Xsto Solutions Dir. of Marketing Research, Shaklee Corp. “I have been a reader of Nutrition Business Journal for nearly a decade and have always been Ian Newton impressed with the insightful data and articles that are found there.” —Qivana Managing Dir., Ceres Consulting Kantha Shelke “NBJ continues to be a leader in providing clear, concise and complete information. The most Founder, Corvus Blue recent review of the animal segment is excellent! What a great overview of a complex and Scott Steinford often confusing issue.” —National Animal Supplement Council President, ZMC-USA

2 | Nutrition Business Journal | nutritionbusinessjournal.com Strategic Information for the Nutrition Industry

All About NBJ ince 1996, Nutrition Business Journal has led the Who We Are nutrition industry in providing strategic market re- Patrick Rea is NBJ’s publisher and editorial director. He search and market quantifi cation for supplements, S also co-chairs the NBJ Summit (nbjsummit.com), an an- natural & organic foods, functional and lesser-evil foods, and nual retreat and conference for CEOs in the nutrition natural & organic personal care and household items. With a industry. Patrick formerly served as NBJ’s director of dedicated research and editorial staff focused on gathering research from 2000 to 2005. Prior to joining NBJ, Patrick was information and producing strategic business intelligence a fi nancial analyst with Health Business Partners. Patrick on the supplement and nutrition industry, NBJ occupies a speaks regularly at industry tradeshows, conferences and unique space in the research world. seminars about the strategic business issues facing the nutri- tion industry. To contact Patrick, please call 303.998.9229 or Ten times a year, NBJ publishes a 24- to 48-page execu- e-mail [email protected]. tive journal that provides an in-depth analysis and market quantifi cation of one specifi c area of the nutrition industry, Marc Brush is the editor of NBJ and helps guide the edi- ranging from direct-to-consumer sales channels to natural & torial direction for all NBJ products. Marc has written for organic product sales to raw material & ingredient supply. many industry publications, and brings more than 10 years of professional experience in editing and business analyt- How We Do What We Do ics to NBJ. Contact Marc at 303.998.9249 or via email at NBJ’s basic methodology for nutrition industry quantifi ca- [email protected]. tion involves a complete compilation and assessment of existing data on the industry, augmented by NBJ surveys Connor Link is NBJ’s associate editor. A graduate of the and interviews. We compile and analyze data at each level of University of Colorado, Connor writes our weekly e-newslet- the value chain, including consumer spending data (which ter, and provides content for each issue and NBJ market re- we receive from The Hartman Group, Natural Market- search report. To reach Connor, call 303.998.9338 or e-mail ing Institute and ACNielsen, among others), retail sales [email protected]. fi gures (which are provided by Information Resources Inc. and ACNielsen for the mass market and by SPINS, Carla Ooyen is NBJ’s research director. In addition to pro- Natural Foods Merchandiser and Whole Foods Magazine ducing market research reports, Carla is also responsible for natural food stores), sales data for alternative channels for NBJ’s quantitative research, company databases and (including multi-level marketing, catalog, practitioner and surveys. Carla earned her MBA from the Leeds School of Internet), and manufacturer and raw material supplier sales Business at the University of Colorado. If you have a data data (which is obtained via NBJ surveys). Individual com- or research question, call Carla at 303.998.9228 or e-mail pany data is also collected through surveys or secondary [email protected]. sources. For each issue, NBJ conducts a minimum of 40 to 50 interviews with executives to capture both qualitative Chris Lasonde is the marketing and subscription ser- and quantitative information. vices manager at NBJ. A graduate of Plymouth State Col- lege, Chris can answer questions about becoming an NBJ NBJ’s business segment survey methodology starts with an subscriber; registering for a Web seminar or other NBJ understanding of the total universe of companies in a par- event; or purchasing NBJ research reports, data charts and ticular segment and an in-depth knowledge of the top 20 to back issues. Contact Chris at 303.998.9221 or via e-mail at 100 companies accounting for a majority of sales in that seg- [email protected]. ment. NBJ then makes every effort to ascertain annual sales of the top fi rms and get an adequate response from survey- Maggie Skille, a graduate of the University of Wiscon- ing the remaining populace to build a statistically valid mod- sin, is NBJ’s marketing and subscriber services coor- el for each segment. NBJ will typically capture 60% to 80% dinator. Maggie can answer any questions about NBJ’s of the revenues in a defi ned segment using this method. In subscriptions and related research products. For more addition, sales data received from companies is aggregated information about NBJ or to become a subscriber, call into segment models to obtain industry or segment break- Maggie at 303.998.9263 or send her an e-mail at downs by product, sales channel or other characteristic. [email protected]

While NBJ makes every effort to be accurate in its data col- Probably the best way to understand what NBJ does is to lection and presentation, it is impossible to be perfect and read one of our issues and see the depth of information we any inaccuracies that appear in NBJ are unintentional. In publish on the nutrition industry. To subscribe to NBJ or addition, NBJ’s data is constantly updated given best avail- download a free sample issue, please visit our website at able data so that in some cases previously published data www.nutritionbusinessjournal.com. may be inconsistent with the most current estimates.

nutritionbusinessjournal.com | Nutrition Business Journal | 3 NBJ 2011 Sample Issue

2009 U.S. Nutrition Industry Revenues by Channel

Natural & Specialty Mass Market Mail Order/DRTV, Category Retail Retail Radio MLM Practitioner Internet Total Supplements $9,860 $7,820 $1,490 $4,450 $2,100 $1,180 $26,900 Natural & Organic Food $15,100 $16,130 $640 $830 $180 $800 $33,680 Functional Food $3,670 $33,140 $40 $260 $40 $200 $37,350 N&OPC and Household $4,340 $3,140 $360 $1,750 $440 $330 $10,370 Total $32,970 $60,240 $2,530 $7,300 $2,760 $2,510 $108,300

Source: Nutrition Business Journal ($mil., consumer sales). Primary research includes NBJ surveys of natural food, supplement and N&OPC manufacturers, distributors, MLM firms, 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, The Natural Foods Merchandiser, OTC Update, SPINS, The Nielsen Co., company data and others. Note: To avoid double counting, NBJ classifies 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, in- cluding 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. fraudulently marketed as supplements, the entire industry, even responsible panies, noted industry regulatory expert and the continued rollout of supplement companies that have nothing to do with Marc Ullman, a partner at Ullman, Sha- good manufacturing practices (GMPs). the problem. The industry could also piro & Ullman. Ben Khowong, CEO The pace of regulatory activity picked up face continued fallout from the recent and CFO of the supplement manufac- even more steam earlier this year when Government Accountability Office turer Jarrow Formulas, said the cur- Senator John McCain (R-Arizona) intro- (GAO) reports that questioned how re- rent political environment for dietary duced—and then backed away from—a tailers market supplements, brought up supplements makes it that much more tough supplement regulations bill called concerns over the toxicity levels found important for the industry’s voice to be the Dietary Supplement Safety Act of in herbal supplement products, and heard on Capitol Hill. “We do our part to 2010 (DSSA). called for fundamental changes in the protect our industry through lobbying,” way FDA oversees the introduction of Khowong said. “Everybody needs to get Working with industry, Senators Orrin new food ingredients. In addition, food involved politically.” Hatch (R-Utah) and Tom Harkin (D- safety legislation, which is expected to Iowa) helped to diminish the threat asso- pass this year, could impact all food and George Pontiakos, president and CEO ciated with the DSSA. Then in May, the beverage companies, as well as dietary of the supply company BI Nutraceuti- senators unveiled new proposed legisla- supplement manufacturers. cals, told NBJ that he believes industry tion that would give the FDA more mus- should also be reaching out to FDA to cle to effectively enforce long-standing When taken together, all of these issues help the agency enforce current supple- provisions of the Dietary Supplement are creating a “challenging atmosphere ment laws. “The FDA has a very tough Health and Education Act (DSHEA) and in Washington” for U.S. nutrition com- situation—they are very underfunded finally weed out many of the companies acting illegally or irresponsibly to the detriment of the entire industry. NBJ Manufacturer Survey: Most Critical Regulatory Challenges AERs Despite these positive events, many reg- 1% Food Safety ulatory-related challenges remain. First, GMPs Legislation some in the industry question whether 27% 9% the Hatch-Harkin bill will see the light of day given the current political environ- ment in Washington, D.C. Also, as has been communicated by Joshua Sharf- Changes to DSHEA stein, MD, the principal deputy commis- Other 24% sioner of food and drugs at the FDA, the 3% agency views the adulteration of supple- ments with prescription drugs or banned Increased Enforcement by the substances as its primary concern re- Expansion of FTC FDA and FTC lated to the dietary supplement indus- Authority 33% try. In working to clean up this problem, 3% the FDA and Congress could introduce tougher regulatory rules and enforce- Source: Nutrition Business Journal survey of 119 supplement manufacturers, marketers and distributors ment procedures that negatively affect conducted 5/4/2010 - 6/21/2010. Question: "What is the most critical regulatory challenge facing the U.S. dietary supplement industry over the next 12 months?"

4 | Nutrition Business Journal | nutritionbusinessjournal.com Strategic Information for the Nutrition Industry and have far bigger issues to deal with in large part, to the costs associated foods and beverages account for 31% of than dietary supplements,” Pontiakos with compliance. industry sales, supplements contribute said. “Where is the industry’s effort to 25% of sales, and the small N&OPC and help take the load off of FDA?” Still, as BI Nutraceuticals’ Pontiakos household products category makes up sees it, the supplement industry already only 10% of sales. GMPs Now Reality for All has been quite successful in complying Supplement Companies with GMPs. “No other industry that I can U.S. consumer sales of functional foods think of would have been able to accom- and beverages increased 2.7% to $37.3 For many nutrition industry companies, modate and embrace such a sea change billion in 2009. This was down from 7% the final rollout of supplement GMPs— in legislation and be fully compliant in growth in 2008. Despite last year’s slug- which occurred in June of this year— 36 months,” Pontiakos told NBJ. “We gish growth, the functional category will pose the greatest regulatory-related should be declaring victory as an indus- added nearly $1 billion in new sales. As challenges for the U.S. nutrition indus- try, but no one talks about how well the NBJ reported in our 2010 Functional try, at least in the near term. supplement industry prepared for or Food and Beverage issue (which pub- managed its way through this change.” lished in February 2010), sales of func- “I think GMPs will drive everything for the tional products outpaced the 1.6% sales next one to two years and understanding Economy Pummels Functional, expansion achieved in 2009 by the total the full force of the regulation will drive Natural and Organic the Hardest $628 billion U.S. food and beverage in- everyone’s quality programs,” said Wel- dustry. Still, the functional category was lington Foods’ Harnack. “FDA is now As noted, the recessionary pain expe- pinched by slower consumer spending, a auditing, and everybody is using those rienced by nutrition companies in 2009 slight slowdown in new functional prod- recent warning letters as learning expe- wasn’t uniformly spread across the en- uct launches (which spiked in 2008), riences.” Harnack said his contract man- tire industry. All of the nutrition cat- and the discontinuation of numerous ufacturing company, which came under egories tracked by NBJ saw declines in lackluster functional offerings. GMP compliance last year, is doing the growth in 2009, but the dietary supple- same thing and also invested in receiv- ment category was the least affected, Although the United States has seen ing GMP certification through an inde- with growth declining less than 1% from growth in the number of products being pendent audit from the Natural Prod- the 6.3% expansion the supplement marketed for their inherently functional ucts Association (NPA). “We didn’t category posted in 2008. In compari- benefits (such as whole grain bread or want to wait for the FDA’s report card son, growth was down 4% for functional Dole’s Wildly Nutritious Immunity to know that we were ready for GMPs,” foods, 6% for natural & organic foods Blend of frozen fruits), NBJ research Harnack said. and beverages, and 10% for N&OPC and shows that up to 75% of U.S. functional household products. food and beverage sales in 2009 were de- Of course, some supplement companies Functional foods and beverages make rived from products that have been for- and suppliers worry that the smallest up the largest nutrition industry cat- tified with a functional ingredient (such manufacturers will not be able to com- egory, accounting for 35% of U.S. nutri- as Racconto’s Essentials Glycemic ply with all of the new GMP rules—due, tion industry sales. Natural & organic Health Rigatoni, which is enhanced with National Starch Food Innova- U.S. Nutrition Industry Sales & Growth: 2000-2013 tion’s Hi-maize resistant starch). $160,000 14% According to Mintel’s Global New Prod- $140,000 ucts Database, 770 foods and beverages 12% with functional claims were launched $120,000 in the United States in 2009. Of course, 10% the harsh reality, especially in the cur- $100,000 8% rent economy, is that 80% of these new $80,000 products will fail within 18 months, ac- 6% cording to global functional food expert $60,000 Julian Mellentin. Given the increased 4% regulatory scrutiny being paid world- $40,000 wide to functional product claims, now $20,000 2% more than ever ingredient and function- al product companies should be focused $0 0% on investing in research to support their 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e2011e2012e2013e products, said Guy Johnson, PhD, prin- cipal of Johnson Nutrition Solutions. Sales Growth “It’s the [functional] products that have Source: Nutrition Business Journal estimates ($mil., consumer sales) sound science behind them and actually

nutritionbusinessjournal.com | Nutrition Business Journal | 5 NBJ 2011 Sample Issue have a measurable benefit demonstrated $26.9 Billion U.S. Supplement Sales by Product in 2009 by clinical trial that are going to survive in the marketplace.”

Sports Nutrition Organic Battles Natural Herbs & Botanicals 11% As NBJ discussed in detail in our 2010 19% Organic Foods, Beverages and Per- Minerals 8% sonal Care issue (which published in March 2010), sales of natural & organic products also took a bit of a beating last Meal year. According to NBJ estimates, U.S. Replacements consumer sales of natural & organic 10% foods and beverages grew 5.5% to $33.7 billion in 2009, adding $1.8 billion in new Vitamins 34% sales. Last year’s sales growth was down Specialty significantly from the compound annual 18% growth rate (CAGR) of 13% the natural & organic food category experienced from 2000-2008. Source: Nutrition Business Journal estimates (consumer sales)

When comparing sales of natural vs. or- 2009. The moves into natural for these Even when the economy fully recovers, ganic products, the former clearly came previous organic-only brands triggered the battle between natural and organic out as the winner in 2009. U.S. consum- an onslaught of criticism from other is likely to continue—at least until the er sales of natural foods and beverages organic companies, as well as at least FDA better defines what “natural” really grew 6% to $13.6 billion last year, while one lawsuit from consumer advocacy means from an ingredient and produc- organic food and beverage sales in- groups. tion standpoint (which isn’t expected creased 5% to $22.3 billion. The differ- to happen any time soon). Therefore, ence was most pronounced in the mass During a March 2010 meeting with New organic companies and advocates must market channel, where natural expand- Hope Natural Media (NBJ’s parent do everything they can to convince con- ed 6% to $6.9 billion and organic moved company), WhiteWave’s new president, sumers of the benefits of organic, noted up 3% to $10.3 billion. However, in the Blaine McPeak, emphasized that the Suzanne Shelton, CEO of the industry natural & specialty channel, where more new products were just a test—one public relations and advertising firm loyal organic consumers tend to do their that the company embarked on in an ef- The Shelton Group. “There is a real shopping, organic sales did much bet- fort to provide more affordable, healthy opportunity for the makers of organic ter—expanding 7% on sales of $10.2 bil- products to those consumers who can- foods right now,” Shelton said, “but they lion, according to NBJ estimates. Natu- not afford the price premium that often have got to get out there and start edu- ral sales increased 5% to $5.9 billion in accompanies certified organic products. cating consumers about the difference the natural & specialty channel last year. As McPeak also noted, 99% of Hori- between natural and organic.” [Editor’s note: For more on how sales zon’s revenues were generated from fared in both the natural & specialty the sale of certified organic products in As NBJ has extensively reported for and mass market channels, see the 2009. Furthermore, WhiteWave remains the last two years, the natural & organic Retail Overview, starting on page 42.] committed to organic certification, Mc- personal care and household products Peak said, and will continue to devote market is currently locked in the debate The disparities between natural and marketing resources to helping educate over what defines both “organic” and organic products took on new mean- consumers about the value of organic “natural” for non-ingestible products, ing last year, as several organic compa- agriculture. such as skin creams and laundry deter- nies introduced their first non-organic, gents. On the organic front, the industry natural products or dropped organic Although the news was not enough to remains caught in an impasse over rules certification altogether. The most no- appease the Organic Consumers As- governing the use of the word “organic” table example of this, of course, was the sociation—which called for a boycott on personal care products. At issue is decision made by WhiteWave Foods of the Silk brand over the way the natu- whether a public regulation or private to launch two non-organic products ral product versions were introduced standard is most appropriate for regu- within its Horizon Dairy line: a natu- last year—WhiteWave announced in lating and enforcing the many issues ral yogurt branded Little Blends and a June 2010 that it was switching back to surrounding approved ingredients and single-serving milk product called Milk an organic-only version for its unsweet- formulation of organic personal care Breakers. WhiteWave, which is owned ened Silk product. The company’s other products. by , also rolled out its first Dean Foods products remain natural. non-organic Silk soymilk products in

6 | Nutrition Business Journal | nutritionbusinessjournal.com Strategic Information for the Nutrition Industry

U.S. Vitamin Sales & Growth: 2000-2013 recruiting for a $150,000 clinical trial that will be conducted this year. $14,000 12% 2009 Ends on a High Note $12,000 10% H1N1 and other trends helped keep $10,000 overall U.S. supplement sales growth 8% in 2009 slightly ahead of the 5% CAGR $8,000 the category achieved from 2000-2009. 6% But as we will discuss in more detail $6,000 later on, when you dig into the sales data, it becomes clear that some sup- 4% $4,000 plement product categories (such as vitamins and herbs & botanicals) held $2,000 2% strong in 2009, while others (including sports and meal-replacement supple- $0 0% ments) fared considerably less well. In 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e2011e2012e2013e addition, supplement sales fluctuated rather significantly throughout the year Sales Growth for many companies. “2009 played out Source: Nutrition Business Journal estimates ($mil., consumer sales) like two different tales over the course of the year,” Schueller said. The first six Today, nearly a dozen private certifica- The idea that taking supplements is less months, he explained, were relatively tion programs and supporting factions expensive than visiting the doctor or pay- slow, as companies attempted to shake representing various viewpoints exist. ing for pharmaceutical drugs helped to off the dust caused by the drastic stock Most recently, Whole Foods Market keep supplement sales growth relatively market fall and retailer pull back in late announced in June 2010 that it would strong in 2009. The H1N1 pandemic, 2008. The second half of the year, how- stock only organic personal care and which surfaced in April 2009, also add- ever, was much more favorable, as the beauty products that meet the same ed fuel to consumer interest in immune- economy slowly began to recover and certification standards as the organic support supplements—including vita- the H1N1 scare gained momentum in food and beverages the company sells. min C, echinacea and herbal immunity the United States. Whole Foods has asked its suppliers blends—and this helped to boost the making any sort of organic claim to sub- entire category. “The swine flu last year Despite being “an unusual year” that mit compliance plans by August 1, 2010, really brought a lot more people looking saw the integration of two of the largest and achieve full compliance by June 1, for health products into the stores,” said U.S. supplement brands—Nature’s Way 2011. Matt Schueller, chief customer officer at and Enzymatic Therapy/Integrative Schwabe North America (which owns Therapeutics Inc.—under the Schwabe According to NBJ estimates, the U.S. the Nature’s Way, Enzymatic Thera- North America umbrella, Schueller told N&OPC and household products mar- py and Integrative Therapeutics Inc. NBJ that Schwabe experienced “high ket grew 2.7% to $10.4 billion in 2009. brands). “We saw a very strong second single-digit” expansion of its U.S. sales Only $270 million in new N&OPC and half of 2009, and that was in line with last year. “We are proud of what we were household product sales were added the general market.” able to accomplish in 2009,” Schueller last year. said. “Even in the face of the recession Surging consumer interest in the im- and our integration, 2009 was a growth H1N1 Helps Supplement Sales munity market motivated serial entre- year.” preneur Rudy Beeck to give up his work Turning our attention to dietary supple- in the pharmaceutical industry in 2009 Wise Woman Herbals, a Creswell, ments, the story becomes a bit more to launch XIGO Health. This year, the Oregon-based manufacturer of herbal upbeat—and complicated. According to company is rolling out a line of immune- supplements, “pulled through 2009 NBJ estimates, U.S. consumer sales of support supplements targeted to moms surprisingly well,” said President Ken dietary supplements grew 6% to $26.9 and their families. The products—called Koenig, DC. “It was a very soft year billion in 2009. Again, sales growth was Maximum Immune Defense, Daily but ended strong and slightly ahead down only slightly from the 6.3% growth Immune Defense and Daily Immune of the prior year due to the influenza the category achieved in 2008, when Defense for Children—contain a pat- scare in November and December of supplement sales experienced a notice- ented combination of lactoferrin, beta 2009. People were scrambling for natu- able boost from consumers who viewed glucans and L-glutamine. XIGO hired a ral immune support in an effort to stay multivitamins and other products as in- top researcher from the University of healthy and avoid the vaccine.” Rising expensive “insurance policies” against Texas at San Antonio to head up its consumer interest in Standard Process’s getting sick. research department and is currently omega-3 products and adrenal support

nutritionbusinessjournal.com | Nutrition Business Journal | 7 NBJ 2011 Sample Issue supplement Drenamin helped to fuel to $970 million last year. This stalwart Trading Down in Multivitamins the company’s “high single-digit” expan- vitamin was also treated to some prod- Multivitamins remain the largest prod- sion last year, Scamarcia said. “Despite uct innovation in 2009. In November, uct within the vitamin category and add- the recent economic struggles, we were Scientific Food Solutions unveiled ed $110 million in new sales dollars in encouraged to see that people main- a new patent-pending vitamin C ingre- 2009. Total U.S. consumer sales of mul- tained their daily supplement regimens dient called Fast-C. A winner of NBJ’s tivitamins inched up only 2.4% to $4.8 because preserving their health and well 2009 Scientific Achievement Award, billion last year. This was down from being was a top priority.” Fast-C combines Scientific Food Solu- 4.3% growth in 2008. The drop in sales tions’ buffered, acid-neutralized Com- expansion was due partly to consumers For Isocell North America, however, fort-C (which is easier on the stomach trading down to lower-priced multivita- 2009 was “a year to forget,” said Paula than standard vitamin C) with Sabinsa mins, including private-label products. Simpson, co-founder and executive di- Corp.’s Bioperine, a black-pepper-de- “Basic vitamins are being commoditized rector of the company, which manufac- rived compound shown to increase the by the mass market,” said Jarrow For- turers a new line of nutricosmetics called absorption of other nutrients. mula’s Khowong. “Successful brands like GliSODin Skin Nutrients. “We didn’t Jarrow have to focus on effective and hit the projections we expected because Jigsaw Health launched a new high- unique formulas and delivery [forms] to of the economic downturn. Fortunately, dose, slow-release vitamin C finished compete.” 2010 is proving to be much better.” product. “That right away shot up to be one of our top five best-selling products,” Multivitamins remain a pillar of Rainbow *** said Patrick Sullivan Jr., co-founder and Light’s product strategy. The company’s president of the direct-selling supple- Women’s One and Men’s One multivi- Diving deeper into NBJ’s sales and ment company. tamins outsell all other multivitamins in growth data, the following section pro- the women’s and men’s categories, said vides snapshots of how the six dietary Vitamin E continued its decline in sales Sandra Klein, vice president of business supplement categories tracked by last year, dropping 7% to $340 million. development. “These multivitamins are NBJ—vitamins, minerals, herbs & bo- A barrage of negative research studies growing at two times the rate of the next tanicals, specialty, sports nutrition and and confusing consumer information best-selling brand.” meal replacement—performed in 2009. has driven vitamin E sales down since 1999, when sales reached $870 million Vitamins: D is 2009 Sales Star in the United States. The small “other” Magnesium Aids Mineral Sales vitamins category, which includes vita- U.S. consumer sales of minerals grew U.S. vitamin supplement sales to con- min K, combination vitamins and other 5% in 2009 to $2.2 billion. Once again, sumers grew nearly 7% to $9.1 billion in vitamins, posted the second-largest growth was strongest for magnesium 2009. This was down from 10% growth growth rate of 20%, increasing sales to supplements, which spiked 10% to in 2008. Between 2004 and 2007, growth $1.1 billion in 2009. $340 million. From 2000-2009, magne- in sales of vitamin products had been sium supplement sales posted a CAGR steady, expanding 3%-5% annually. The of 14%, while the CAGR for all mineral higher growth seen in 2008 and 2009 was due primarily to the phenomenal U.S. Vitamin D Sales & Growth: 2001-2009 success of vitamin D and D-combination products. Vitamin D experienced the $450 140% strongest growth of any supplement $400 product in 2009, with sales rising 82% 120% to $430 million. The segment contrib- $350 100% uted $190 million in new sales dollars $300 last year and is expected to continue its 80% robust growth, as more healthcare prac- $250 titioners and consumers understand the $200 60% need for vitamin D supplementation and $150 the science supporting its health ben- 40% efits grows. $100 B vitamin sales also continued to be 20% strong in 2009, growing 7% to $1.2 bil- $50 lion in U.S. consumer sales. B vitamins $0 0% are currently the second-largest single 2001 2002 2003 2004 2005 2006 2007 2008 2009 vitamin category after multivitamins. Sales Growth H1N1 worries helped to boost sales of Source: Nutrition Business Journal estimates ($mil., consumer sales) vitamin C, which increased nearly 8%

8 | Nutrition Business Journal | nutritionbusinessjournal.com Strategic Information for the Nutrition Industry

$4.9 Billion U.S. Specialty Supplement Sales by Product in 2009 ture herb & botanical sales. In 2009, the company introduced three products— Passionflower Solid Extract, Sweet Plant Oils Others Dreams and Mood Enhancer—that it 5% 21% believes will help Wise Woman Herbals CoQ10 capitalize on these trends. “These prod- 9% ucts are all calmatives and support nor- mal nervous system function and restful sleep,” said Koenig. “Such products are Probiotics in demand as a result of our fast-pace, 11% Fish/Animal Oils high-anxiety society.” Gaia Herbs told 20% NBJ that it is also seeing an increase in consumer demand for products related to adrenal support and adaptogenic re- sponses to stress. “People are exhaust- Glucosamine/ ed, overworked and overwhelmed,” said Chondroitin Marshall, who noted that Gaia’s No. 1 16% Homeopathics product is its Adrenal Health. 18% Source: Nutrition Business Journal estimates (consumer sales) Beyond consumer trends, the herb & botanical market is also being impact- supplements during this time period time. Sales then leveled off after the ed by worries over product quality. “If was just 5%. cold and flu season ended.” I have a concern that broadens out to the herbal industry, it’s economically Magnesium’s sales success should come Acai continued to be the fastest-growing motivated adulteration in botanicals,” as no surprise to Jigsaw Health. The product in the herbal subcategory, post- said Greg Cumberford, vice president of company’s best-selling product is its ing a staggering 230% growth rate in strategic initiatives at Gaia Herbs. “We Magnesium with SRT, which features a 2009. With sales just under $300 million, see evidence of it in materials that we premium, highly absorbable form of che- acai is now the biggest selling botanical sample. We have this robust framework lated magnesium. Despite the growth product, jumping from the 10th ranked for eliminating it, but it’s mindboggling in sales, however, Sullivan said many position it held in 2008. Rounding out to me the extent to which primarily consumers still do not know about the the list of top five herbal supplements foreign-supplied botanical raw materials importance of magnesium supplementa- based on consumer sales in 2009 were: are adulterated, specifically for financial tion. “Consumers keep taking more and noni juice, with sales remaining flat at reasons. I think in terms of the sustain- more calcium, but the country’s rate of $270 million; mangosteen juice, which ability of our industry and garnering the osteoporosis continues to go up—and dropped 1% to $200 million; green tea, trust of consumers, eliminating so-called the reason is because you cannot absorb up 16% to $160 million; and goji juice, EMAs is important.” calcium without magnesium,” Sullivan down 14% to $145 million. said. “We see a big opportunity in edu- Specialty Sales Soften cating the market about magnesium.” Sales of herbal supplements in the mass Despite Bloom in Probiotics market retail channel were very strong Botanicals Buoyed by Immunity in 2009, with sales growing 15% to $880 In 2009, U.S. specialty supplement million. Herb & botanical sales were sales grew 7.5% to $5.0 billion, adding Growth for the overall U.S. herb & bo- also strong on the Internet, with sales $350 million in new sales. Although bet- tanical supplement market was much increasing $10 million, or 12%, to $95 ter than overall supplement category stronger in 2009 than in 2008. While the million last year. Natural & specialty growth, this expansion rate was down subcategory grew a sluggish 1% in 2008, retailers remain the largest sales chan- significantly from the 10% CAGR the U.S. consumer sales increased 5% to nel for herbal products; however, their specialty subcategory achieved from $5.0 billion in 2009. Interest in immune- sales weakened in 2009. Sales of herbal 2000-2009. Despite a slowing for the support products, driven by fear of the supplements in the natural & specialty subcategory, however, specialty sup- H1N1 virus, was a key driver of botani- channel grew only 4.5% to $1.6 billion. plements once again represented the cal sales growth last year. For example, fastest-growing segment of the overall sales of the immune-support herb Echi- According to Wise Woman Herbals, which supplement product category. nacea grew 7% to $130 million in 2009. sells its 325 botanical products primar- “There was a big shift to immune prod- ily through healthcare practitioners, im- Specialty subcategory growth was led ucts last fall with the flu scare,” noted mune support, glandular support, sleep by probiotics, which spiked 24% to $530 Keri Marshall, ND, medical director for aids, weight-control and anti-aging million in 2009. “The probiotic category . “We saw a huge increase Gaia Herbs products are the most likely to drive fu- has been growing by leaps and bounds,” in sales for black elderberry during that said Schwabe North America’s Schuel-

nutritionbusinessjournal.com | Nutrition Business Journal | 9 NBJ 2011 Sample Issue ler. Through Enzymatic Therapy, $980 million last year. Fish/animal oil NBJ’s Top U.S. Supplement Companies Schwabe markets line of probiot- became the largest specialty supple- ics that continue to sell “very well,” ment segment in 2009—surpassing in 2009 ($mil.) Schueller added. Sold under the glucosamine/chondroitin, sales of Company 2009 Wholesale Supplement Sales brand Pearls, the line was bolstered which declined 4% to $800 million. NBTY (Natures Bounty, Sundown)...... 1,790 with several new products last year, In 2009, fish/animal oils accounted Pharmavite*...... 790 including Pearls Kids Probiotic for 20% of all specialty supplement Abbott Labs/Ross Products (Ensure, EAS)..530 Blend and Pearls Elite, which deliv- sales. Pfizer (Centrum, Caltrate)...... 470 ers 5 billion CFUs (colony forming Perrigo*...... 420 units) per dose (compared with the Despite its continued sales growth, Schwabe NA (Nature’s Way, Enzy)...... 300 1 billion CFUs found in the original the fish/animal oil segment has dealt Metagenics...... 230 Pearls product). with its share of challenges over the Iovate (Hydroxycut, MuscleTech)...... 210 last 12 months. Perhaps the biggest Bayer (One A Day, Flintstones)...... 200 In Europe, probiotic companies have blow came from the California law- Schiff Nutrition International...... 190 been feeling the heat as a result of suit filed in March of this year against Unilever (SlimFast)...... 190 the regulatory atmosphere surround- six fish oil supplement manufactur- GNC (contract manufacturing)*...... 190 ing claims substantiation. Schueller ers and two retailers: CVS Pharma- Healthy Directions (Doctor’s Preferred)...... 180 said he anticipates seeing changes cy Inc., General Nutrition Corp. Glanbia (Optimum Nutrition)...... 170 to the way probiotics are regulated (GNC), Now Health Group Inc., Alacer...... 170 in the United States as well. “We ex- Omega Protein Inc., Pharmavite VitaQuest Intl. (Windmill)*...... 170 pect regulations on probiotics to get LLC, Rite Aid Corp., Solgar Inc., CytoSport (Muscle Milk)...... 160 tighter rather than looser,” he said. and TwinLab Corp. The lawsuit al- Atrium Innovations (Garden of Life)...... 160 “We welcome that because, as the leged that the companies sold fish NOW Foods...... 150 regulatory bar is raised, consumers oil, shark oil, fish liver oil and shark Nestle (Boost, Carnation, Optifast)...... 150 will get more effective products and, liver oil supplements that had PCB Nutraceutical Intl. (Solaray, Cal, Zand)...... 140 as a result, more people will come to contamination above the so-called Basic Research/ Zoller Labs (Zantrex)...... 140 the category.” “safe harbor” limits set for human Life Extension...... 130 PCB consumption under Califor- BSN (NO-XPLODE, CellMass, Nitrix)...... 120 A Tale of Woe for Fish Oil? nia’s Proposition 65, which requires Kikkoman (Country Life)...... 110 companies to warn consumers about Although probiotics experienced Natural Factors Nutritional Products...... 110 contaminant exposures. the greatest growth rate of all spe- Standard Process...... 110 cialty supplement products, the fish/ Arizona Nutritional Supplements*...... 110 Many in the industry view the law- animal oil segment added the most Cornerstone Research and Development*...100 suit as frivolous and unwarranted. new sales dollars to the specialty New Chapter...... 100 “We have complete confidence in subcategory in 2009. According to Inverness Medical Nutritionals (now IVC).. 100 the safety of the fish oil supplement NBJ estimates, U.S. consumer sales Natural Organics (Nature’s Plus)...... 90 market, which has been validated of fish/animal oil products increased Delavau*...... 90 through multiple third-party reviews by $140 million, or 17%, to reach Matrixx Initiatives (Zicam)...... 90 ISI Brands (TwinLab, Metabolife)...... 90 Universe of U.S. Supplement Companies in 2009 Airborne Consumer Health...... 80 Martek (Amerifit)...... 80 Market No. of Cos. Supplement Sales % of Market Jarrow Formulas...... 80 Nordic Naturals...... 80 Greater than $100M 32 $6,6200 41% $20M - $100M 75 $2,800 17% Bausch & Lomb (Ocuvite, PreserVision)...... 70 Less than $20M 639 $1,900 12% Natural Alternatives*...... 70 Nutritional Laboratories International*...... 60 Supplement Man./Marketers 768 $11,320 70% Multi-Level Wholesale Value $2,520 16% Nature’s Products (Rainbow Lt, Champion).. 60 Private/Store Label Wholesale Value $2,230 14% Plethico (Natrol)...... 60 Threshold Enterprises Ltd...... 50 Total Wholesale Supplement Value $16,070 100% Consumer Sales ($mil) $26,900 Atkins Nutritionals...... 50 Bluebonnet Nutrition Corp...... 50 *Companies with a substantial portion of revenues from contract manufacturing of supplements. Source: Nutrition Business Journal [$mil., net sales (gross sales minus any returns, discounts or allow- Proctor & Gamble (Metamucil)...... 50 ances)]. In the top company list, company revenues listed are wholesale for supplements only (including Thorne Research...... 50 contract manufacturing) rounded to the nearest $10 million, not entire company revenue. List does not include raw material companies or firms selling primarily through the multi-level marketing channel. Nature’s Best (Isopure)...... 50 Some revenues are estimates that have been compiled through information provided by company execu- Barlean’s Organic Oils...... 50 tives, industry analysts and reputable published material. NBJ makes every effort to be accurate, but revenue figures are not the result of audits and are not guaranteed to be accurate. Errors and omissions VPX Sports...... 50 are unintentional. In the company universe table depicting wholesale sales, revenues for non-retailer NEXT Proteins Inc...... 50 contract manufacturing were subtracted to avoid double counting. Similasan USA...... 40

10 | Nutrition Business Journal | nutritionbusinessjournal.com Strategic Information for the Nutrition Industry

Is New Product Development Finally Picking Up Steam?

lthough the economic downturn pummeled new for 2010 is a line of certifi ed organic women’s, men’s and product development in the U.S. nutrition indus- prenatal multivitamins. “[These products] were just intro- Atry last year, the tide may be turning. Wellington duced this year, but their sales are already very strong with Foods, a long-time contract manufacturer of liquid and ‘sales per point’ for an average-sized store turning at close powder nutritional supplements, recently reported to Nu- to the rate of New Chapter [organic multivitamins],” Klein trition Business Journal that the company is seeing a re- said. “This indicates that these new products will join the surgence in new product investment in 2010. “We are opti- ranks of our top-selling multivitamins.” Rainbow Light also mistic that we will be able to recover from the sales dip we launched in 2009 its GreenDog Naturals brand to “deliver took in 2009 and be back to 2008 levels by the end of the potent, food-based nutrition” for dogs. “The brand contin- year,” said Tony Harnack II, president of Wellington Foods. ues to grow in both the natural and independent pet chan- nels,” Klein said. But business isn’t totally back to normal. The recession weeded out those companies that were willing to make risk- Herbalist & Alchemist, an herbal extract manufacturer ier investments in faddish products, Harnack noted. As a in Washington, New Jersey, is one supplement company fo- result, the product categories generating the most interest cused on using clinical research to guide its new product from supplement marketers are those that will provide the development, said the company’s CEO, Beth Lambert. “We most proven benefi ts to consumers. “The categories that don’t follow trends, but rather introduce products devel- have the greatest science behind them—such as calcium oped and proven safe and effective in a clinical setting.” and vitamin D—are most in demand,” Harnack said. As the Herbalist & Alchemist did introduce a small number of new economy slowly improves, companies are also once again products in 2009, including Kid’s Tummy Re-Leaf and willing to develop new products that may have been viewed Restorative Cleansing Protocol. This year, however, new as more discretionary during the recession—such as liquid product development will take a backseat to preparations energy or nutricosmetic products, Harnack said. Growing for a potential good manufacturing practice (GMP) audit, consumer interest in liquid and powder form supplements Lambert said. is adding to the growth of Wellington Foods, which is in the process of moving into a new state-of-the-art manufactur- Capsugel told NBJ that it is seeing growing manufacturer ing facility in Corona, California. interest in combination products, such as those using the company’s capsule-in-a-capsule and beads-in-a-capsule de- Findings from NBJ’s survey of supplement manufacturers livery forms. In 2010, Capsugel is developing capsules that and marketers shows that most companies continue to take delay the release of ingredients during the digestive process a cautious approach to new product development, with the so that the contents open up in the intestines rather than majority of respondents reporting that their plan is to only the stomach. “We anticipate that these digestive-resistant slightly increase or keep their product development activity capsules will be well received in the probiotic market, which the same in 2010 as it was in 2009 (as the chart on page 11 traditionally targets the intestines for product release,” said shows). Mark Vieceli, Capsugel’s director of sales, marketing & busi- ness development for the Americas region. For fi sh oil supplement manufacturer Nordic Naturals, 2009 was a much slower year than 2008 on the product de- Innovation is also occurring on the product packaging front. velopment front, according to Tiffany Diehl, the company’s “The most important change we put into motion in 2009 strategic project manager. Things appear to be picking up was the conversion of our entire bottled supplement line this year, however. In June, the company unveiled its Ome- to sustainable EcoGuard bottles,” said Rainbow Light’s ga Probiotic product, which contains a blend of fi sh oil and Klein. “Rainbow Light is the fi rst in the industry to switch live probiotic spores that doesn’t require refrigeration. Call- to bottles made from 100 percent post-consumer recycled ing both 2008 and 2009 “very stagnant” years for product plastic. EcoGuard bottles reduce the carbon footprint of development, National Enzyme Co. did manage to rollout the bottle by 78%, are BPA-free, FDA approved for safety one innovative new offering last year, called BioCore AR. and 100 percent recyclable. We estimate that this initiative According to Harold Fox, the company’s director of sales, will keep 6 million plastic bottles out of the waste stream.” “BioCore AR harnesses the success of a common antacid, while addressing the problem of stalled digestion through One area where many nutrition industry executives would the use of powerful digestive enzymes.” like to see more innovation is in developing new ingredients. “There are fewer companies doing research on dietary sup- “We continued to develop a rich pipeline for review and many plement ingredients because the payback is much higher in of these products will be launched in 2010,” said Sandra the pharmaceutical environment,” said Peter Zambetti, se- Klein, vice president of business development at Rainbow nior manager of global business development at Capsugel. Light. “If anything, our innovation and product develop- “[Companies] can be creative with combinations for only so ment has increased.” Among Rainbow Light’s new products long before the industry stagnates.”

nutritionbusinessjournal.com | Nutrition Business Journal | 11 NBJ 2011 Sample Issue by industry watchdogs on thousands of NBJ Manufacturer Survey: Product Development in 2010 vs. 2009 products,” said Adam Ismail, executive director of the Global Organization Greatly Increased for EPA and DHA Omega-3s (GOED). 5% “In fact, this industry is among the high- Somewhat Increased Greatly Reduced est quality and most transparent of all 38% consumer product [industries].” 4%

The over-the-counter (OTC) fi sh oil Somewhat Reduced market also faces growing competition 12% from the pharmaceutical industry. As NBJ explores in the story starting on page 14, sales of the fi sh oil prescrip- tion drug Lovaza have already hit more than $750 million in the United States About the Same and could be driven up even more by 41% GlaxoSmithKline’s multimillion dollar ad campaign for the product. Source: Nutrition Business Journal survey of 109 supplement manufacturers, marketers and distributors According to Ismail, however, perhaps conducted 5/4/2010 - 6/21/2010. Question: "How does your current 2010 product development plan the biggest issue that could affect the compare to your actual product development in 2009?" fi sh oil market going forward is its abil- herbs. Michele McRae, director of for- functional food category is expected to ity to manage growth. “The market has mulation and quality at Rainbow Light, improve over 2009 rates but still remain grown rapidly because the body of sci- said the product was developed to ad- sluggish, with sales growing on average ence supporting omega-3s has grown dress the needs of multi-tasking women about 5% per year over the next four rapidly,” Ismail said. “The challenge trying to balance careers, families and years. This will result in a predicted is that when science grows quickly, it social activities. “We formulated Busy sales level of $45.1 billion in 2013. takes some time for regulations to catch Brain Release with proven ingredients up. This means that issues such as rec- shown to support a calm, focused mind With the overall economic recovery ap- ommended intakes and health claims and better sleep,” added McRae. pearing to stall a bit, some companies are taking time to catch up to where the are already seeing a slowing of growth market is already going; but in order for this year. “The fi rst quarter was strong, the market to reach its full potential, we Cautious Optimism in 2010’ but the second quarter has softened sig- will have to wait for these issues to be Looking toward the future, NBJ fore- nifi cantly,” said Wise Women Herbals’ resolved.” casts that total U.S. consumer nutrition Koenig. “I think that the third quarter industry sales will reach nearly $140 bil- will continue to be soft and business lion by 2013. The industry is predicted In Times of Stress will pick up again in the fourth quarter. to post a compound annual growth rate Specialty supplements targeted to stress Unfortunately, I think a lot of compa- of 7% over the next four years. or sleep issues are also growing in popu- nies will be struggling to get through larity. Sales of the sleep aid melatonin, the summer months.” According to Growth of the supplement industry is for instance, were up 20% to $130 mil- Paul Dijkstra, CEO of the branded in- forecast to remain fairly steady, averag- lion in 2009. This made melatonin the gredient supply company InterHealth ing 6% per year and reaching $34 billion second fastest-growing segment within Nutraceuticals, sales in 2010 could in sales by 2013. The natural & organic the specialty subcategory. Other prod- also be affected by broader changes in food and natural & organic personal care ucts designed to address the needs of consumer purchasing habits. “Consum- and household products markets are these stressful times are also well po- ers who saw dietary supplements and both expected to rebound signifi cantly sitioned. The best-selling products at functional food and beverages as ways from their dips in 2009. NBJ forecasts , for example, to stay healthy and keep costly doctor NEXT Pharmaceuticals that the natural & organic food market are its stress reliever and visits and medications at bay may fi nally Relora Sedi- will average 9% growth through 2013, sleep aid, according to the company’s be cutting back on the number of sup- tol though this is still well below the 13% vice president, Deanne Dolnick. plements they take or functional food CAGR posted from 2000-2008. Sales of and beverages they consume,” Dijkstra emerging products, such as organic fi ber, In June, Rainbow Light rolled out a noted. natural household cleaners and organic product called , Busy Brain Release feminine hygiene products, are expect- which is said to be the fi rst supplement To subscribe to NBJ, please visit ed to allow the N&OPC and household to deliver therapeutic levels of GABA nutritionbusinessjournal.com or call products category to average 9% growth and L-theanine in combination with 303.998.9263. over the next four years. Growth in the co-enzymated B vitamins and calming

12 | Nutrition Business Journal | nutritionbusinessjournal.com Strategic Information for the Nutrition Industry

U.S. Fish & Animal Oil Sales & Growth: 2000-2009 $1,200 50% Lovaza Battles Supplements 45% $1,000 for Slice of Omega-3 Market 40% 35% With U.S. sales topping $750 million, $800 GSK launches ambitious campaign 30% touting benefi ts of its fi sh oil drug $600 25% 20% $400 t’s been a banner year for the mak- 15% ers of Lovaza. The world’s fi rst 10% Iprescription omega-3 fatty acid— $200 manufactured by Norway-based Pro- 5% nova Biopharma and marketed in the $0 0%

United States by GlaxoSmithKline 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 (GSK)—reached “blockbuster” status in 2009, with global sales topping $1 Sales Growth billion and U.S. sales reaching $758 mil- Source: Nutrition Business Journal estimates ($mil., consumer sales) lion, according to market research fi rm IMS Health. Thus far this year, inter- On the fl ip side, some disgruntled con- The ad, and its print counterparts, stress national sales are up another 9%. And sumers and skeptical healthcare profes- that Lovaza has not been shown to pre- thanks to an ambitious multimillion-dol- sionals suspect Lovaza may be the be- vent heart attack or stroke (at least not lar TV and print campaign that not-so- ginning of a disturbing trend, in which yet). A GSK spokesperson declined to subtly emphasizes “you can’t get it in a pharmaceutical companies with deep comment on how much the company health food store,” sales are expected to pockets turn relatively cheap OTC sup- has spent on its Lovaza advertising, but continue climbing in 2010. plements into pricey prescription drugs the campaign has been effective enough covered by insurance. The big-picture to prompt questions from consumers Meanwhile, makers of over-the-counter result, they say: higher healthcare costs and practitioners, who are wondering (OTC) fi sh-oil supplements—sales of for all of us. “People should do their part just what’s in this “new” drug and how it which totaled $976 million in 2009, ac- to reduce healthcare costs and reject the matches up to non-prescription fi sh oil cording to Nutrition Business Journal idea that products like fi sh oil, niacin and varieties for promoting overall health. estimates—have been on the defensive vitamin D should be costly prescription “We get inquiries daily from practitio- since March, when a California environ- agents,” advised Milwaukee cardiologist ners, especially conventional physi- mental group fi led suit against six man- Bill Davis, MD, author of The Heartscan cians, asking, ‘How do you compare to ufacturers and two retailers (including Blog. “This small effort alone will save Lovaza?’ ” said Monique Wellise, sales Solgar Inc., TwinLab Corp., CVS hundreds of millions of dollars.” manager for Nordic Naturals’ profes- Pharmacy Inc. and General Nutri- sional sales division. tion Corp.) alleging that their omega-3 products contained excessive amounts What’s New About It? As Wellise and others note, Lovaza of polychlorinated biphenyl compounds Since March, channel surfers every- is nothing new: The drug gained U.S. (PCBs). where have been treated to a slick, 60- Food and Drug Administration second TV ad in which a doctor clad in (FDA) approval in 2004; and in 2005, a Between the omnipresent Lovaza ads a long white lab coat welcomes them to relatively obscure, privately held com- and the scary headlines questioning the “the world of Lovaza—where nature pany called Reliant Pharmaceuticals safety of OTC fi sh oil pills, one might meets science.” As he passes through an brought it to the U.S. market under the assume omega-3 supplement makers underwater lab where fi sh swim outside name Omacor. Two years later, GSK would be running scared. Not so, said the windows and researchers pour mys- purchased Reliant for $1.65 billion and Adam Ismail, executive director of the terious liquids from one beaker to the quietly went to work on the massive Global Organization for EPA and next, he introduces the “prescription ad campaign that has recently brought DHA Omega-3 (GOED). “There is no that starts in the sea” and goes on to ex- Lovaza into the spotlight. evidence that Lovaza is taking away sales plain that “if you have high cholesterol, from the omega-3 supplement market,” high blood pressure or diabetes, you In terms of content, even doctors who Ismail said. “These ads have been good may also have high triglycerides (too prescribe Lovaza concede that it dif- for business [by] bringing awareness to much fat in your blood). Lovaza lowers fers little from the high-quality, highly the whole category.” very high triglycerides.” concentrated OTC omega-3 fatty acid supplements on the market. The trouble

nutritionbusinessjournal.com | Nutrition Business Journal | 13 NBJ 2011 Sample Issue is, those products are hard to fi nd, and to take 3,000 mg daily of EPA/DHA and for dry eyes, asthma, irritable bowel dis- Lovaza’s FDA approval is comforting you have a choice: You can go to a health ease, rheumatoid arthritis and cardio- to skeptical cardiologists or consumers food store and spend $30 out of pocket vascular diseases. worried about toxins, said Chip Lavie, on a high-quality supplement, or I can MD, a cardiologist with the Ochsner write a prescription for Lovaza that will Will we soon see even more high-priced Heart and Vascular Institute in New cost your insurance company $240,’ he prescription versions of dietary supple- Orleans (and occasional Lovaza con- will choose the prescription,” explained ments heading our way? Probably a few, sultant). “It’s more about what’s not in Davis. “We will all bear the cost of this said Ian Newton, managing director of Lovaza than what’s in it,” Lavie said, re- extravagant rip-off drug because they Toronto-based Ceres Consulting and a ferring to Lovaza’s fi ve-step refi nement have found a way to get it covered by global omega-3 expert. “It’s all about re- process, said to eliminate environmental insurance. It’s just stinkin’ fi sh oil.” imbursement,” Newton said. “If you can toxins and squeeze crude fi sh oil down get your product reimbursed on medi- to a super-concentrated product that is Bigger Fish to Fry cal plans and drug plans, then even if 90% EPA/DHA in ethyl-ester form (the patients can buy similar products at the As of now, Lovaza/Omacor is only ap- same form most concentrated fi sh oils drug store, they will go for the prescrip- proved in the United States for very come in). “It is possible to fi nd an over- tion because their doctor recommends high triglycerides (more than 500 mg/ the-counter product that is very pure it.” But, Newton added: “The only time dl), and in certain European and Asian and right about the same concentration you see this is when you have actives markets for the prevention of repeat as Lovaza. The problem is that the con- with good safety profi les and a very, very heart attacks after an initial one. As of sumer has to be really educated to be high degree of science to show how ef- 2009, about 1.3 million patients world- able to do that. If they just go to the typ- fi cacious they are. Very few compounds wide were on it, according to Pronovo ical drugstore, there are so many differ- could do this.” Biopharma. ent brands that they get overwhelmed.” Already, pharmaceutical companies But the company undoubtedly has bigger Each capsule of Lovaza includes 465 have rolled out prescription versions of plans. This year, Brigham and Wom- mg of EPA and 375 mg of DHA, and the niacin (Niaspan has been around since and recommended dose for lowering high en’s Hospital Harvard Medical 1997) and vitamin D2 (which many will recruit 20,000 people with- triglycerides is four capsules daily. Its School contend is inferior to over-the-counter out known prior cardiovascular disease cost, depending on where you are in D3). Newton predicts that future likely or cancer and randomize them to take the country, ranges from $1.30 to $2 per candidates for supplement-based drugs one gram per day of Lovaza or placebo capsule, which—if you are following a might include: plant sterols, coenzyme to see if Lovaza helps prevent heart dis- prescription for lowering high triglycer- Q10, and glucosamine/chondroitin. ease or cancer over the next fi ve years. ides—can add up to $160 to $240 per Other trials are in the works to investi- month. In comparison, Nordic Natu- gate the effi cacy of aspirin plus Lovaza All News Is Good News rals’ ProOmega concentrated soft gels in reducing cardiovascular events, and For now, fi sh oil supplement manufac- contain 325 mg EPA and 225 mg of DHA to see how well the drug works with turers don’t seem to be too worried per capsule and cost roughly 50 cents statins to lower cholesterol. According about their new competition. “Certain- per softgel. (You’d have to take roughly to Pronova Biopharma’s annual report, ly we could go toe-to-toe with Lovaza six capsules to match what is in four it aims to someday see it used for atrial on their quality controls,” says Nordic capsules of Lovaza.) Member’s Mark fi brillation, heart failure and prevention Naturals’ Wellise, noting that her com- brand, widely available at discount of heart disease related to type-2 dia- pany’s products are -certifi ed and stores, contains 300 mg of DHA/EPA NSF betes. It’s also working on developing a considered “gold standard” under combined and costs $16 for 350 softgels. Em- vegetarian capsule that better dissolves ’ quality-control pro- (You’d have to take roughly 11 capsules erson Ecologics and reduces side effects, such as burps gram. “Overall, I think it’s very positive,” to match Lovaza’s four.) and bad taste in the mouth—two side- Wellise said. “It validates the use of ome- effects that are awkwardly spelled out in ga 3s in a clinical application. ” Bottom line: If you are willing to swal- the Lovaza TV ad. low a lot of pills and do some research Kyle Bliffert, president of to fi nd a superior OTC product, you can Pure Encap- In addition, numerous other companies (which has 11 fi sh oil prod- save money, said Lavie. “If it weren’t for sulations are working to create prescription ome- ucts), concurred. “If a patient’s doctor the cost, Lovaza would be the best one ga-3 drugs. Connecticut-based puts them on Lovaza and they have a for everyone to use, but certainly the Amarin has developed AMR101, a “semi- high monthly co-pay or don’t have pre- over-the-counter ones are much less Corp. synthetic, ultra pure (96%) ethyl-ester scription drug insurance, they’ll just buy expensive,” he added. But what if your EPA” now in phase 3 clinical trials for their omega-3 over the counter,” Bliffert insurance company covered it? Herein the treatment of high triglycerides and said. “If GlaxosmithKline wants to spend lies the big problem, said Davis. “If I high cholesterol. Massachusetts-based millions of dollars advertising the health say to John Smith the policeman with is working benefi ts of fi sh oil on TV, it can do noth- the Cadillac insurance plan: ‘You need Resolvyx Pharmaceuticals on a line of EPA and DHA-based drugs ing but benefi t all of us. I’m in.”

14 | Nutrition Business Journal | nutritionbusinessjournal.com Strategic Information for the Nutrition Industry

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NBJ Survey: Impact of High Cost of Clinical Research to Support Product Claims FTC Raises the Bar for Highly significant impact Claims Substantiation in 24% Recent Consent Decrees Actions against Iovate, Nestlé and POM open the door for new clinical standard Significant impact No impact of two human studies 25% 14%

he Federal Trade Commission (FTC), which regulates advertis- Ting in the United States, ruffl ed Slight impact nutrition industry feathers in July 2010 13% Moderate impact with the publication of two settlements 24% that appear to indicate a signifi cant Source: Nutrition Business Journal survey of 92 raw material & ingredient supply companies conducted change in the way the agency deals with 8/13/10 - 10/4/10. Question: "How has the high cost of conducting clinical research to support product misleading claims for functional foods claims impacted your company in the last 12 months?" and dietary supplements. cy ordered that neither could repeat FTC: Not a Blanket Approach At least one company, POM Wonder- certain claims in their advertising unless The question on everyone’s lips is: Do ful, is going after the agency in a legal they can cite at least two high-quality these consent orders indicate a new battle that one industry expert referred human clinical studies in substantiation standard that applies to the whole indus- to as “the biggest fi ght since Ali vs. Fra- of those claims. zier.” Although opinions differ on the ex- try? The answer is yes and no. In terms of the non-disease claims referenced in act outcome this recent spate of activity In the case of Nestlé, this stipulation re- the settlements, FTC insists it is not au- could have on the U.S. dietary supple- lated to claims made on TV and in print tomatically the case that all such claims ment and functional food and beverage advertising that the company’s BOOST will need to be substantiated by at least industries, everyone agrees that compa- Kid Essentials probiotic drink for chil- two human studies in the future. nies have entered a new age of regula- dren could cut the number of school sick tory enforcement. days and reduce the duration of acute “The orders are specifi c to the compa- diarrhea. Iovate, meanwhile, was found nies under order, and we’re not changing to have falsely claimed in TV, print and Nestlé and Iovate the standards that we use to determine online advertisements that its Acce- Although many believe the FTC began whether a claim is substantiated,” said lis and nanoSLIM supplements were changing its approach to health claims Mary Engle, director of the FTC’s adver- linked to weight loss. enforcement shortly after the Obama tising practices division, which handled administration came into offi ce, the the Nestlé and Iovate cases. In both settlements, Nestlé and Iovate agency sent shock waves through the were told that they must not make cer- U.S. nutrition industry on July 14, 2010, The choice of two clinical studies as an tain disease treatment claims in their when it simultaneously published con- appropriate level of substantiation was advertising unless they had been pre- sent decree orders involving the food not arbitrary, she added, but nor is it approved by the Food and Drug Ad- giant Nestlé and the supplement com- now a blanket benchmark. “That’s what ministration (FDA). For Nestlé, this pany Iovate Health Sciences. our experts believed was needed to be related to a claim that BOOST Kid Es- confi dent the claims were properly sub- sentials would strengthen the immune Both decrees demonstrated a depar- stantiated,” Engle said. “But we have system and reduce the risk of upper re- ture from the FTC’s usual practice of a case under investigation right now, spiratory tract infections such as colds prohibiting a company from making any where I think we’re going to end up with and fl u. Similarly, in the case of Iovate, it similar claims in the future unless it has one clinical study needed, and not two, related to the claim that two of the com- “competent and reliable evidence” to so it’s not always going to be two. I think pany’s supplement brands, Cold MD and substantiate them. Instead, in both the it might often be, just because of the de- Germ MD, prevented colds and fl u. Nestlé and Iovate settlements, the agen- sire to see the result replicated.”

nutritionbusinessjournal.com | Nutrition Business Journal | 15 NBJ 2011 Sample Issue

LaneLabs vs. FTC Muffl ing Free Speech? FTC’s Engle declined to discuss the case, and POM refused to be interviewed, To understand why the FTC has sud- It’s not just the requirement for two but in the wake of the FTC’s fi ling, the denly become so specifi c in its substan- human clinical studies that makes the company issued a press release stating: tiation requirements, it is necessary to Iovate and Nestlé settlements so sig- “POM believes very strongly in its First go back to a settlement reached be- nifi cant. They also mark a complete sea Amendment rights to communicate the tween the FTC and supplement manu- change in the way the FTC views dis- promising results of our extensive sci- facturer LaneLabs in 2000. As was the ease treatment and reduction claims. entifi c research program on pomegran- norm back then, the FTC instructed Both consent orders state that Nestlé ates. We believe the commission is act- LaneLabs not to make any health claims and Iovate must not repeat their respec- ing beyond its jurisdiction, exceeding its in advertising in the future unless they tive disease-related claims unless they authority, and creating a new regulatory were backed by competent and reliable are pre-approved by the FDA via its scheme that attempts to treat our juice scientifi c evidence. stringent drug evaluation process. as a drug, which it is not. The FTC is violating POM’s constitutional rights to Following the settlement, LaneLabs FTC’s Engle said this is simply a case of share useful and important information went on to make further health claims the commission bringing its approach with the public, and therefore we have and, in 2007, the FTC took enforcement into line with that of the FDA, which initiated a separate lawsuit to preserve action against the company, claiming regulates claims made on labels. “These these rights.” it had violated the original order from disease claims are ones that, if made seven years earlier. The case went to on the label, would require FDA pre- Will this lawsuit succeed? Villafranco court where LaneLabs put up an ex- approval,” she said. “We’ve had many, thinks not. “POM contends that the FTC pert witness to explain the science be- many cases over the years where disease is creating a new standard that’s going hind its claims. In August 2009, to the treatment or prevention claims have to apply throughout the entire industry, FTC’s horror, the judge found in favor been made—for supplements mostly— that it’s essentially de facto rule-making. of LaneLabs, forcing the commission to and companies take care to avoid claims The FTC’s response is: No, that’s not the rethink the language it used in consent on the label but then go ahead and make case; this only applies to the respon- orders. “Prior to that case, all the con- them in advertising.” dents. And I suspect that ultimately will sent orders were in ‘vanilla language,’ ” prevail, because as a matter of law that’s explained MacKay. “It was just the same: Enter POM absolutely true.” The company is required to have com- The FTC’s new stipulations are fueling petent and reliable scientifi c evidence.” the legal battle between the agency and The legal battle is far from over, howev- After that case, the FTC announced POM Wonderful, the manufacturer of er, and is something all dietary supple- plans to revise their standard order lan- pomegranate juice drinks. On Septem- ment and functional food fi rms need to guage to make it more specifi c.” ber 13, 2010, the company fi led a law- watch closely, said Loren Israelsen, ex- suit in Washington, DC, calling for the ecutive director of the United Natural The FTC said it was not LaneLabs alone district court to declare invalid what it Products Alliance, “It is the biggest that sparked the recent change in its described as the FTC’s “new standard fi ght since Ali vs. Frazier,” Israelsen told approach to consent decrees. “We have and set of requirements that it is univer- NewHope360.com, a sister web publica- seen in a number of cases, in which our sally applying against food and dietary tion to Nutrition Business Journal. “I orders have required companies under supplement companies to determine don’t see either side caving in.” order to have competent and reliable whether an individual or company is scientifi c evidence to substantiate cer- engaged in deceptive advertising.” POM tain claims going forward, that there’s argued that these new standards con- been some uncertainty about what that NBJ Bottom Line stituted a violation of the First Amend- standard means and how it applies in re- ment, and that by demanding FDA pre- spect of particular products and claims,” approval for disease claims, the FTC was As the FTC gets more specifi c with its lan- Engle said. “And so we thought, when over-reaching the limits to its powers guage and more nuanced with its require- it’s possible to say what level of science laid down by the FTC Act, which con- ments in claims stipulations, the number is needed to substantiate the claim go- tains no such provision. of human clinical trials may be less of an ing forward, then we may as well go issue than industry might think. Whether ahead and be specifi c in the order.” Two weeks later, on September 27, the one study or two or even three, the trend Engle did concede, however, that the source of POM’s dissatisfaction with the toward more targeted science on humans is LaneLabs decision was very troubling. FTC became clear when the commission clear enough, and RMIS companies should “Even though this was something we’d published details of charges it was laying take note. POM Wonderful’s aggressive re- been thinking about because of other against POM, claiming that the company sponse to FTC will also be an interesting cases, that decision was really infl uen- had falsely advertised that its products (and public) test of the agency’s mettle as tial in making clear the need for us to could treat heart disease, prostrate can- it continues to ramp up enforcement. be more specifi c about the level of evi- cer and erectile dysfunction. dence required,” Engle said.

16 | Nutrition Business Journal | nutritionbusinessjournal.com Strategic Information for the Nutrition Industry

ousted because of EFSA’s hard-line in- sistence that health claims dossiers for NBJ in 2011 EU’s Health Claims ingredients prove cause and effect be- yond all reasonable doubt. If you were not a Nutrition Busi- Legislation Sets ness Journal subscriber in 2010, Industry on Edge Halting Outlandish Claims you missed our coverage of the most pressing issues facing the ‘Severe’ new rules make it that much So how did it come to this? In the mid- global nutrition industry today—not more diffi cult for fi rms to sell in Europe noughties, with Europe’s functional food to mention our analysis of current and may shape future U.S. policy and beverage industry booming, the Eu- and future market opportunities for ropean Commission decided a tougher supplements, functional foods and legal instrument was required to curb beverages, natural & organic foods arketing functional foods and the industry’s excesses and ensure con- and beverages, and natural & or- drinks in Europe will never be sumers across the EU were not misled ganic personal care and household Mthe same again. A tough new by outlandish claims based on little or products. The following are just a law—the Nutrition & Health Claims no evidence. National laws, which var- few of the stories NBJ will bring to Regulation—means companies wishing ied from country to country in their se- subscribers in 2011. to sell food and beverage products or verity, were abolished to make way for a dietary supplements with a health claim single piece of legislation to harmonize • NBJ’s new proprietary market re- in the European Union must now prove and control the use of health claims to search on supplements and other beyond doubt that the claim is true. The market and advertise food, drink and di- nutrition industry categories rule sounds straightforward on paper, etary supplements. but the regulation has evolved into per- • An entire issue dedicated to dis- haps the most severe piece of food legis- Most people, it’s fair to say, had been cussion of the market intersections lation ever to be implemented anywhere expecting a law that was designed to happening between cosmetics, nu- in the world. For the many U.S. compa- stop snake-oil merchants from ripping traceuticals and beauty products nies that sell their products globally, the off gullible consumers. Instead, the Eu- new law has made it harder to market a ropean Commission created a regula- • Continued monitoring and analy- nutrition product with a health claim in tion that makes it extremely diffi cult, if sis of the economy and consumer the EU than in any other region of the not almost impossible, for a company to spending levels and how they are world. make a health claim. affecting industry sales

Over the last 18 months, the European How bad has it been? The fi gures speak • A deep dive into the regulatory Food Safety Authority (EFSA)—the for themselves. EFSA is assessing more environment for dietary supple- independent scientifi c body whose job than 4,000 general claims that will be ments and what possible changes it is to assess claims applications under added to a “community list” of permit- might mean for specifi c companies the regulation—has adopted such an ted health claims in the EU. These will and the industry as a whole unyielding approach to the task that it be available to any company that satis- will only be swayed by the kind of “gold- fi es the relevant conditions of use for a • A steady focus on the “new” FDA standard” clinical trials that are usu- specifi c health claim. At the time of this and FTC, including analysis of ally associated with pharmaceuticals. writing, EFSA had issued opinions on where these agencies might look Further, EFSA has also demanded that 523 of these, with two thirds of those next to better regulate industry these trials be conducted in healthy, opinions negative. Even those claims rather than diseased, populations, that were given the thumbs-up were, • Ongoing analysis of the industry which is making compliance that much on the whole, bland, everyday claims opportunities created by govern- more onerous and expensive for nutri- for vitamins and minerals, such as this ment healthcare reform and new tion companies. for vitamin C: “Contributes to a normal corporate wellness initiatives function of the immune system.” No If an industry could shed tears, it would claims for probiotics or botanicals were • A look at the animal nutrition in- be weeping buckets. Unaccustomed to approved by EFSA. dustry, including supplement sales having its claims challenged so thor- and major trends shaping a rapidly oughly, functional food and beverage A Ray of Hope growing market companies have watched in disbelief as Fortunately, buried within the claims EFSA has thrown out claim after claim wreckage are nuggets of hope. The best • Our end-of-year double issue on for failing to come up to scratch. While known of these is the story of Provexis, the global nutrition industry, with many have fallen short on basic techni- a small U.K.-based company that has de- updated statistics and data trends calities—such as neglecting to charac- veloped a tomato extract called Fruit- for major product categories in terise an ingredient—others have been fl ow, which helps blood circulation by overseas markets

nutritionbusinessjournal.com | Nutrition Business Journal | 17 NBJ 2011 Sample Issue reducing platelet aggregation. Fruitfl ow Importance of Scientifi c Research Supporting Functional Effi cacy Claims is particularly special because, again at the time of writing, it is the only ingredi- Not at all ent that has gained approval from EFSA Important 1% under Article 13.5. Somewhat Crucial Important 43% EFSA’s positive opinion has made a huge 4% difference to Provexis, said CEO Ste- phen Moon. “We got our approval on the Important 17th of December and we have since re- 12% ceived a very high level of interest from global food and beverage players,” Moon said. “The change has been instant. It’s almost like we have got through the des- ert and fi nally arrived at the oasis. It has raised the profi le of the company.” As Very Important Moon explained, the benefi ts have gone 40% far beyond his company’s ability to com- Source: Nutrition Business Journal survey of 83 functional food manufacturers, marketers and retailers mercialize Fruitfl ow. “The fi nancial and conducted 1/6/09-1/29/10. Question: "How would you rate the importance of scientific research in investment community has now seen the supporting the health or efficacy claims for the active functional ingredients in your products?" potential of Provexis, and it’s enabled us to raise substantial capital, which is many complain such investments typi- of the most egregious examples of false going to help us drive forward our total cally aren’t feasible for smaller compa- claims, ingredient obfuscations and oth- pipeline.” Most recently, in December nies, although the Provexis story rather er labelling shenanigans.” 2009, Provexis announced it had raised undermines this argument. £2.1 million ($3.4 million) via an open Many nutrition industry insiders say offer to its shareholders. Gruenwald said those businesses with- claims enforcement has grown tougher out access to funds to spend on R&D since the election of Barack Obama. Provexis succeeded because it took might have to divert money from other “You don’t have to look too far to see care to satisfy the specifi c demands of parts of the business—marketing and evidence that the U.S. FDA is more lit- the health claims process, said Moon. advertising perhaps—if they want to eral about interpreting regulations, and “We followed the guidelines on prepar- be able to use claims for their products. there are examples of claims that had ing the dossier to the letter,” he said. “The marketing guys will want to spend been out there for a while that are now “And the clinical trials we’d done over it in the usual way, but companies need being questioned,” noted Guy Johnson, the years were very consistent and well to invest more into research and claims principal of Johnson Nutritional So- designed.” substantiation,” he said. “We are run- lutions. “I don’t think that there is any ning clinical trials [for clients] which question that enforcement here is being Fruitfl ow is currently incorporated into cost 100,000 to 200,000 euros, which is stepped up.” just one consumer product—a fruit juice certainly a lot of money to invest, but called Sirco, which sells in the U.K. Eric if you end up with a proprietary health One recent example is FDA’s May 2009 Bates, sales and marketing manager at claim it’s absolutely worth it.” warning to General Mills regarding its Multiple Marketing, which owns Sir- Cheerios label claims. The agency said co, said the publicity following the ap- Tougher U.S. Enforcement that claiming Cheerios can lower cho- proval provided a boost to Sirco sales. lesterol 4% in six weeks represented With the European functional food and “There has certainly been an increase “serious violations” of federal law and beverage industry now on a tight leash, in the orders coming through from the demanded the company halt the use of many are wondering whether the U.S. trade,” Bates said. “EFSA approval pro- this claim. Hoping to avoid engaging in market might be next to feel the force vides a great credibility to the health its own claims scrap with the FDA, Kel- of claims regulation. There is certainly a claim used for the brand.” logg’s in November 2009 voluntarily re- hunger for more claims scrutiny in some moved the controversial ... quarters. The Center for Science in Ultimately, the lesson from the Provexis the Public Interest (CSPI), for ex- case is that where the right kind of evi- The full version of this story pub- ample, has campaigned tirelessly for dence exists, EFSA will be persuaded lished in NBJ’s 2010 Functional Food & steps to be taken against what it claims to approve a claim. The diffi culty is ob- Beverage issue in February. To order are spurious claims by major manufac- taining that evidence, and companies a copy of the issue, view the full ver- turers. In December 2009, CSPI submit- must be willing to invest the signifi cant sion or subscribe to NBJ, please visit ted a 158-page report to the U.S Food research dollars necessary to prove the nutritionbusinessjournal.com or call & Drug Administration (FDA) detailing claims for their products. Of course, 303.998.9263. what it colourfully described as: “some

18 | Nutrition Business Journal | nutritionbusinessjournal.com Strategic Information for the Nutrition Industry

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Top U.S. Network-Marketing Supplement Companies: 2009 MLMs Use New Markets, Fresh Products to Offset Company Sales ($mil.) Alticor (Amway, Nutrilite) $670 Slowing Domestic Sales Monarch Health Products (MonaVie) $450 Total U.S. supplement sales via Shaklee $330 network marketers fell 3% in 2009, Herbalife International $240 XanGo $180 but fi rms fared better overseas Market America Science(Isotonix) $180 Melaleuca $150 Sales growth was a fl eeting concept for Forever Living $140 many U.S.-based multi-level market- USANA Health Sciences $140 ing (MLM) companies in 2009, with the Nature’s Sunshine Products $130 mantra “fl at is the new up” providing Mannatech $130 solace for those who were lucky enough Tahitian Noni International $110 to maintain a foothold in their respec- Unicity International $100 tive markets. Many nutrition-related Nu Skin (Pharmanex) $100 network-marketing fi rms, however, Advocare International $90 were able to overcome the dour domes- Sum of Top 15 MLM Channel Manufacturer Sales $3,150 tic economy by selling products geared toward health and wellness, launching Source: Nutrition Business Journal ($mil., net). Estimates derived from surveys, company execu- tives and industry analysts. Although NBJ has made every reasonable effort to be accurate, fi g- into new global markets, and bringing ures are not guaranteed to be accurate. Errors and omissions are unintentional. more opportunity-seeking distributors into the mix. ing an already massive global footprint. clubs, where customers go to a distribu- Nutrition Business Journal spoke with Paraguay was one of the few remaining tor’s home or offi ce location and, in re- a number of the leading MLM companies Central and South American countries turn for a daily membership fee, have in the nutrition industry for an update that Herbalife had yet to infi ltrate, mak- access to a shake, aloe and a tea—three on what transpired in 2009 and an out- ing the rollout an easy decision. Vietnam of our core products,” said Walsh. This look for the year ahead. was a slightly more unorthodox choice, represents a departure from the classic something Herbalife President Des model where consumers pay for more Herbalife Stresses Aff ordability Walsh attributed to a growing population expensive monthly hauls of supple- Herbalife utilized its 30 years of in- of young people, an emerging economy, ments, oftentimes resulting in unused dustry experience, 2-million-plus dis- and a rise in disposable incomes. or excess product. The change in phi- tributors and 73-country reach to chew losophies, which has been gradual over the economic recession up, spit it out Walsh attributed Herbalife’s 2009 growth the last several years, has allowed Herb- and come back for seconds. The global to the the fi rm’s ongoing transition to a alife to remain competitive on price and MLM goliath achieved sales of $2.3 bil- “daily consumption” business model, value in less-developed markets. “The lion on growth of 5.1% in 2009, based which emphasizes its products’ afford- transition has dramatically expanded on a local currency comparison. The ability as replacements for less nutri- the number of customers who could weak U.S. dollar caused that number to tious daily meal choices. The idea for readily access our products,” Walsh told dip to -1.5% after currency exchanges the model was born out of a suggestion NBJ. “Frankly, in recent years, we’ve were taken into account, but the nega- from a Mexican distributor who found been promoting products as a very cost- tive growth fi gure is a misnomer as all that the average income in Mexico was effective meal alternative, and we were but one of Herbalife’s regions—China— relatively low and the number of people successful in marketing products as a expanded in 2009. Having posted more who could afford an entire month’s sup- more intelligent consumer choice, based than $2 billion in annual sales for the last ply of Herbalife products was limited. on a price-value relationship. Trading up three years, the company is recognized The distributor sought a way to expand nutritionally and down from a cost per- as the one of the global leaders in the the number of customers who could af- spective has really resonated.” nutrition industry MLM space. ford the products—which primarily con- sist of meal-replacement beverages and In 2010 Herbalife plans to increase its Herbalife launched two new markets in weight-loss supplements. “Our distribu- marketing and branding activities— 2009—Vietnam and Paraguay—expand- tors developed the concept of nutrition ranging from its longtime sponsorship

nutritionbusinessjournal.com | Nutrition Business Journal | 19 NBJ 2011 Sample Issue of the Major League Soccer club Los An- point out that he anticipates continued were implementing big global rollouts geles Galaxy to a three-day billboard growth in the United States. to help sustain sales, Nu Skin launched takeover of Times Square and the spon- two small markets—Turkey and Colom- sorship of two race-car drivers in the In- MonaVie’s new introductions in 2009 in- bia—that hardly classify as needle mov- dianapolis 500. The company forecasted cluded an energy drink launch at the be- ers. Rather, growth in existing markets double-digit growth for the first quarter ginning of the year. The hope is that the is where Nu Skin’s real story lies. and expects positive growth in virtually new product, branded as MonaVie-E, all of its global markets in 2010. will bring the massive growth MonaVie The company’s financial growth, led has seen in its super-fruit supplement by its proprietary anti-aging product MonaVie Going Global sales to the energy drink category. The line branded as ageLOC, accelerated company also capitalized on the hot throughout the year, according to Nu After riding the acai wave of success immune-health category—which was Skin Chief Financial Officer Ritch Wood. all the way to the cumulative $1 billion strengthened by consumer fears over the Nu Skin saw growth of 4% in Q1, and sales mark within its first three years of H1N1 virus in 2009—with its immunity that expanded to 12% by year’s end. Al- existence, MonaVie is faced with the blend branded as (M)mun. The prod- most every region grew for Nu Skin in same dilemma as XanGo and many oth- uct contains Wellmune, a proprietary 2009; the only country that experienced er super-fruit specialists: How will the immune system-supporting functional challenges was Japan, and that is show- company provide new growth opportu- ingredient developed by Biothera. Ac- ing signs of improvement. Southeast nities for distributors while staying true cording to Thorpe, Biothera raised $250 Asia and Europe both increased sales by to its core identity? Thus far, MonaVie’s million to produce Wellmune, and Mo- almost 25% in 2009; Korea grew 15%; answer has been to expand into un- naVie obtained the exclusive license for China was up between 5% and 10%; tapped markets and rollout a select few its use in acai beverages. “Both prod- and North America was up between 8% strategic new products to complement ucts provided new energy around an old and 10%. “We’ve experienced some very its otherwise narrow acai offering. product line,” Thorpe said. “We will con- nice growth, and it’s been driven by sev- tinue to innovate in juices, but we also eral things, but primarily an innovative MonaVie entered five new countries in expect to introduce some other product product launch—and that’s the healthi- 2009: Israel, Mexico, Malaysia, the Unit- lines in the coming years.” est type of growth,” Wood told NBJ. ed Kingdom and Poland. The company also held its Japanese grand opening in When NBJ spoke with Nu Skin at the 2009, though it had sold products there Nu Skin’s Game Changer beginning of 2009, the company was prior to last year. The new markets If there was a nutrition industry MLM excited about the launch of ageLOC, helped MonaVie offset slowing sales in flying higher than touting it as a “game-changing” prod- many of its more mature regions, includ- Nu Skin Enterpris- in 2009, NBJ has yet to find it. The uct line that would reposition the com- ing the United States and Canada. “We’ve es global leader in the direct-selling per- pany as a leader in the global anti-aging seen softness is some of our markets sonal care market posted an impressive market. One year later, the company and strength in others—it’s really been a $1.3 billion in sales on almost 7% growth has not backed off that stance. “One of tale of two cities in some respects,” said last year. While many of its competitors the reasons we’re so excited is because Devin Thorpe, MonaVie’s chief financial officer. “Our focus is now on completing an international rollout.” Nu Skin Enterprises Inc. Annual Sales: 2003-2009 $1,400 20% Currently, the United States accounts for approximately 70% of MonaVie’s $1,200 15% business, though the company sees it- self soon generating more international $1,000 sales. “MonaVie is truly a global busi- 10% ness,” said Thorpe, noting that the com- $800 pany now has more than 1 million dis- 5% tributors worldwide. “The U.S. accounts $600 for about 20% of the world’s business, 0% and someday our business will reflect $400 that in our sales.” Thorpe anticipates MonaVie garnering 50% of its sales from $200 -5% international markets in 2011 as more distributors get involved. The company $0 -10% also predicts that its new markets will 2003 2004 2005 2006 2007 2008 2009 outpace the United States in terms of Sales Growth annual sales growth for the foreseeable future. That said, Thorpe was quick to Source: SEC filings ($mil., global net sales)

20 | Nutrition Business Journal | nutritionbusinessjournal.com Strategic Information for the Nutrition Industry ageLOC is a long-term product platform direct-sales sector, it pays to keep the thinks those standards have helped the that spans nutrition and skincare in a product line compact so that the aver- company maintain its quality edge, es- meaningful way,” said Kevin Fuller, Nu age associate can easily describe the pecially when it came to the rollout of Skin vice president of product market- products.” Still, USANA launched a few the U.S. Food and Drug Administra- ing. “That’s what’s driving innovation new products in 2009, including a pro- tion’s Good Manufacturing Practices into multiple delivery forms.” biotic supplement and higher doses for (GMPs). “We’ve been ahead of the curve some existing products. Those higher for 10 years or more, and we’re still Nu Skin formally launched ageLOC in doses sometimes limit where USANA ahead of the curve,” said Wood. “USA- October 2009 at its convention in Wash- products can be sold. “Many European NA’s quality standards go beyond those ington D.C., though it made certain countries cap their dosages in line with mandated by the FDA and are more in products available throughout the year recommended daily intake, so we’ve told line with those mandated by Australia— leading up to the launch. The company ourselves that we’re not real excited like drugs,” Wood said. “We think it’s the is encouraged by the product’s early re- about those markets,” Wood said. right thing to do. Supplements are every turns. “Generally, we’ll sell between $3 bit as important for your health as OTC million and $4 million at a convention, USANA’s point of differentiation has long and prescription drugs, so they need to but this year was around $17 million,” been its quality, adhering to near-phar- be manufactured with quality. And no Wood said. “We believe this will be the maceutical-grade standards with most doubt our quality standards are a point largest product launch in our history, of its manufacturing operations. Wood of differentiation for us.” well over $100 million, so the numbers are backing up the hope that we thought this could be a game-changing prod- Yoli Explodes onto Nutrition Market with New Blast Cap Technology uct.” The founders of Yoli had all built network-marketing organizations of their own, so they had one main objective in starting their latest nutrition MLM: They USANA Staying the Course didn’t want to offer a copy-cat pill, lotion or juice. If they were going to launch Multi-level marketers often sink or swim a new business, Yoli’s founders were determined to fi nd a new revolutionary on their ability to differentiate from the technology that would deliver nutritional ingredients and do it at a price point competition. Not only was USANA able consumers could afford. That technology turned out to be Yoli’s Blast Cap. to sustain positive sales growth in 2009, which was a rare feat last year, but it The cap is a plastic device that fi ts onto the neck of a plastic beverage bottle also stayed committed to its existing and contains a nutrient-rich powder that is frozen and protected until it’s re- markets with no real plans for expan- leased into water. The Blast Cap can fi t on any water bottle or on Yoli’s brand- sion—another departure from the com- ed, sustainable, BPA-free bottle. The company’s fi rst Blast Cap formulation is petition. “We are not a company that called Truth and is loaded with antioxidants, enzymes, probiotics, and other grows its business exclusively through vitamins and minerals. What is unique about Yoli’s products is that they are international launches,” said Tim Wood, fl ash-frozen in powder form and preserved in theBlast Cap without the use of PhD, USANA’s executive vice president sugar, chemicals or the pasteurization necessary with other beverages. of research & development. “We’re not a new-country-per-year type of company. Yoli’s Blast Cap offers the same amount of nutrition as an entire bottle of juice, Launching new countries can dilute our Falter said. At $2.50 a cap, which supplies powder for an 18-20 ounce bottle, effort, and we’re big believers in tak- the product is quite affordable compared to other juices that retail at $30-$40 ing a balanced approach at USANA.” for 25 ounces. “It comes down to cost and value,” said Daren Falter, a Yoli The last new country that the company founder and executive vice president. launched was the Philippines in 2008, which brought USANA’s total number of When asked what other Yoli products are on the horizon, Falter said that “the global markets to 14. possibilities are endless.” Although the company does not have an in-house scientifi c team, it employs a team of scientifi c consultants who are working on USANA turned in global sales of $437 the next Yoli formulations. “We are looking at the largest up-and-coming health million on growth of 2% in 2009. The trends and products that deal with mood, stress, depression and joint health,” company employs approximately Falter said. Because the products are sweetened with stevia reb-A, they are 200,000 customers worldwide, with the also low in calories and being used as weight-management aids. “That was just majority of its sales being derived from an added benefi t,” Falter noted. the United States. Canada and Hong Kong represent its next largest markets. Along with its Blast Cap technology, Yoli is focused on making its distributors Similar to its conservative international profi table—fast. The company provides a break-even bonus to incent loyalty expansion philosophy, USANA typically and recruitment: If distributors refer between two and six people to the com- exercises restraint when rolling out new pany, they get a check that covers their monthly product expenditures. “You offerings. “We don’t grow by launch- get your fi rst six people signed up, and your business is in the black,” Falter ing new products,” Wood said. “In the explained. “Nobody quits free product.” Yoli launched in January 2010.

nutritionbusinessjournal.com | Nutrition Business Journal | 21 NBJ 2011 Sample Issue

and ingredient purity, a position that product can be traced back to its master sets the company right where it needs batch using Gaia’s Meet Your Herbs web to be as regulations and media scrutiny interface. Meeting Your Herbs, begin to challenge less diligent manu- facturers to match its high standards. Meet Your Herbs’ purity information in- and Your Fish Oil Too cludes specifi cs about sourcing—where As supply quality issues grow, Gaia is currently in the midst of a re- the botanical originated and certifi ca- branding campaign, much of it built tions it might carry—and horticultural Gaia Herbs and Ascenta Health bring around the new traceability tool at the practices related to the source bioregion. sophisticated traceability tools online heart of Meet Your Herbs. With Meet The integrity module of the program to assuage consumer, retailer concerns Your Herbs, a Gaia customer can enter conveys information about extraction an ID number found on the packaging methods and the processes by which n testimony before the U.S. Sen- of every product the company sells and Gaia transforms the raw herbal material ate this May, the Government Ac- learn detailed information about the into a component extract. The potency Icountability Offi ce (GAO) pub- sourcing of ingredients and quality con- section provides detailed validation of lished the results of its investigation into trols in the manufacturing process for the strength representations made on herbal dietary supplements. By focusing that particular product. the label, including pertinent biomark- on products often targeted to elderly ers and testing methods. To wrap it all consumers—ginseng, garlic and ginkgo up, Gaia presents a certifi cate of compli- ance, signed by laboratory personnel, to biloba—the GAO hoped to expose some “We want to force a divide of the deceptive sales tactics at play in provide customers with even more faith between the companies that retail aisles across the country, as well in the effi cacy and safety of the prod- as test the effi cacy and safety of the sup- want to operate this way, and ucts they bought. According to Keri Marshall, Gaia’s medical director and a plements in question. Through its inves- those that don’t. I hope that tigation, the GAO found trace levels of naturopathic doctor, “Meet Your Herbs we can bring more people to heavy metal toxins, including lead and allows the consumer to experience the mercury, in 37 of the 40 supplements our side.” process that we go through—how we verify genus and species, how we verify tested, though no single product tested —Rene LeClerc, by the GAO reached levels signifi cant there’s no contamination or adultera- Ascenta Health enough to pose an immediate health tion, how we assure there’s no heavy hazard. metal toxicity or pesticide residues.”

Regardless of those fi ndings and the “We launched Meet Your Herbs because Ascenta: ‘Let Us Show You’ actual scientifi c value of demonstrating it became very clear to us, as we were Of course, traceability is not just impor- soil-level toxicities in soil-grown prod- assessing the marketplace, that consum- tant for garlic and schisandra. Fish oil ucts, the GAO report—and subsequent ers and healthcare practitioners were all supplements—which generated $976 media and Congressional attention paid being confronted with questions about million in sales in 2009, according to to it—once again raises important ingre- the origins and safety of dietary supple- NBJ research—carry their own quality dient quality and traceability questions ments,” said Greg Cumberford, vice concerns for consumers, who are being for the dietary supplement industry. president of strategic initiatives at Gaia. bombarded with messages about the po- With a commitment to organic agricul- tential toxicity and oxidation associated Gaia: ‘We Have Nothing to Hide’ ture, wildcrafting and ethically sound with fi sh oil. Ascenta Health—based business practices, Gaia knew it was Gaia Herbs is one herbal supplement in Nova Scotia and maker of NutraSea, capable of answering those questions in Canada’s leading fi sh oil brand—has de- company attempting to address those meaningful ways, Cumberford added. questions head on with a new consum- veloped its own web-based traceability er-focused ingredient-tracing initiative tool called Pure Check to assuage those With Meet Your Herbs, Gaia classifi es its concerns. called Meet Your Herbs. The program, manufacturing practices into three infor- which is being heavily promoted by mation categories: purity, integrity and With Pure Check, Ascenta provides Gaia, represents a long-time commit- potency. Say a consumer buys Adrenal ment to ingredient quality and integrity real-time access to independent, third- Health, Gaia’s most popular product and party testing for every batch of product for the company. Gaia Herbs maintains a an adaptogenic response to stress man- 250-acre organic farm in North Carolina it makes, something Rene LeClerc, vice agement that contains rhodiola root and president of sales, believes is unique to where it cultivates more than 50 medici- ashwagandha as its core ingredients. nal herbs. Stroll across the grounds and the category. “People can’t believe that That consumer, with just a few clicks we are this transparent, putting every- you might fi nd echinacea purpurea in on the Gaia website, can dig into a de- blossom or fi elds of verdant wormwood thing out there for our competitors to tailed chain of custody documenting the see and for our consumers to see,” said and skullcap. Since 1986, Gaia has led entire lifecycle of the ingredients in that the industry in sustainability practices LeClerc. “Pure Check is simply a philo- product. In fact, every botanical in the sophical belief that we make a high-

22 | Nutrition Business Journal | nutritionbusinessjournal.com Strategic Information for the Nutrition Industry quality product, and we believe it’s the best product on the market. We’re going U.S. Herbs & Botanicals Sales & Growth: 2000-2013 to show you that it is what we say it is.” $7,000 8%

The company organizes its quality con- $6,000 6% trol data into three buckets: label claim, oxidation and purity. With label claim, $5,000 Ascenta provides strength represen- 4% tations of EPA and DHA, and the data $4,000 often exceed dosages marketed on the 2% bottle. Oxidation tests measure the $3,000 freshness of the product and the care 0% with which it was manufactured, report- $2,000 ing compound levels of peroxides, and -2% value levels of p-anisidine and totox. $1,000 The company measures these results against the Council for Responible $0 -4% Nutrition’s (CRN’s) maximum lim- 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010e2011e2012e2013e its, as set by its Voluntary Monograph Sales Growth on Long Chain Omega-3s. Purity tests speak to toxicity and contamination by Source: Nutrition Business Journal estimates ($mil., consumer sales) measuring dioxins and furans, PCBs and dioxin-like PCBs (such has lead, U.S.,” noted LeClerc, who described the where and how the soybeans in their cadmium, mercury and arsenic). Again, company’s growth prospects as “sipping Silk soymilk were grown. Sara Loveday, these values should compare favorably from a fi rehose of opportunity.” When marketing manager at WhiteWave, sees to maximum limits set by CRN or the he speaks to buyers inundated with me- it as a way to tell Silk’s “crop-to-cup World Health Organization. too fi sh oil products, LeClerc said that story.” he hears a uniformly positive response The Pure Check platform launched in to his company’s clear and impactful Just how valuable might such traceability June 2007 and is now front-and-center approach to quality. “Pure Check is a be? In compiling the research that led to on Ascenta’s website. It features heavily breath of fresh air,” he said. “Buyers tell Meet Your Herbs, Gaia’s branding group in all of the company’s packaging, mar- me, ‘You’re driving the category. You’re surveyed 2,100 retailers and consumers. keting materials and advertising. Tests building the category. You’re bringing in “One of the most amazing numbers that results are conveyed online in a consum- new consumers.’ ” came out of that survey,” according to er-friendly format, with succinct expla- Marshall, “was that 83% said they would nations of the more arcane terminology When Traceability Goes Viral prefer a brand or a company that offered involved and bar graphs to visually dem- traceability. They wanted proof. They According to Alexandra Orozco, Ascen- onstrate the company’s commitment to wanted absolute proof and certainty in ta’s marketing director, more than 10% ingredient quality. Ascenta is able to what they were getting.” of NutraSea customers now use Pure present this data because the compa- Check to validate the quality compo- ny makes its own product—something To subscribe to NBJ, please visit nents of their purchase. Gaia’s traceabil- many large retail brands cannot match nutritionbusinessjournal.com or call ity tool is too new to provide meaningful because they co-pack ingredients from 303.998.9263. statistics as yet; but given the market- different suppliers. ing campaign surrounding the platform, clicking customers are very likely to NBJ Bottom Line LeClerc sees Pure Check as the primary come. In looking at web-based trace- way for Ascenta to distinguish itself in ability as a marketing trend gaining trac- Gaia Herbs’ Meet Your Herbs and Ascenta the crowded and competitive U.S. mar- tion across the nutrition industry, Gaia’s Health’s Pure Check programs put both ket for fi sh oil supplements. “I don’t Greg Cumberford offered the following: companies in good standing for the po- have one batch of product in the mar- “You are going to continue to see this tential fallout to come from heightened ketplace anywhere where you cannot as a trend among companies that have scrutiny of supplement manufacturers. get the third-party report for that batch nothing to hide. You are beginning to Those companies that make safety and on our website. That is by far the most see it more broadly already in organic quality priorities will have to adapt less, if powerful point of difference for our dairy and organic beef.” In fact, White- at all, to a stricter regulatory environment line,” said LeClerc. With 45% of the Ca- Wave Foods plans to introduce its own and should be rewarded for their good be- nadian health food channel already in its traceability tool in September, allowing havior, as transparency and disclosure in- pocket, cracking the U.S. market is a top consumers to enter a UPC code on the creasingly lead to market differentiation. priority. “It’s a special time for us in the company website to learn more about

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