Direct-To-Consumer 2016 TABLE of CONTENTS

Direct-to-Consumer 2016 TABLE OF CONTENTS

Table Of Contents

1.0 Executive Overview...... 8 $14 Billion Direct to Consumer Supplement Sales by Channel in 2015...... 9

1.1 Executive Summary: Directly connected ...... 9 $14 Billion Direct to Consumer Supplement Sales by Product in 2015...... 11 Direct Channel Supplement Sales Growth by Product, 2008-2015 ...... 12

1.2 Directly personal ...... 12 Supplement Sales Growth by Product, 2016e-2020e...... 13 Direct Channel Supplement Sales by Product, 2008-2015...... 13

1.3 A direct line to direct-to-consumer ...... 14 Direct Channel Supplement Sales by Product, 2016e-2020e ...... 15 Direct Channel vs. Retail Channel Supplement Sales and Growth, 2008-2015...... 17 Direct Channel vs. Retail Channel Supplement Sales and Growth, 2016e-2020e...... 17

1.4 Soylent 2.0 ...... 18 Direct Channel Supplement Sales and Growth, 2008-2020 ...... 19 Supplement Sales Growth by Channel, 2008-2015 ...... 20 Supplement Growth by Channel, 2016e-2020e ...... 20 Supplement Sales by Channel, 2008-2015 ...... 21 Supplement Sales by Channel, 2016e-2020e ...... 21 Top Direct-to-Consumer Nutrition Industry Company List, 2015 ...... 23 2.0 Multi-Level Marketing...... 24 2.1 Direct marketing with a digital edge ...... 25 Herbs and Botanicals MLM Channel Supplement Sales and Growth, 2008-2015 ...... 25 Herbs and Botanicals MLM Channel Supplement Sales and Growth, 2016e-2020e ...... 25

2.2 Still lurching, still lucrative ...... 26 $16.2 Billion MLM Channel Supplement Market by Product Category, 2015...... 26 Meal Replacement MLM Channel Sales and Growth, 2008-2015 ...... 27 Meal Replacement MLM Channel Sales and Growth, 2016e-2020e...... 27 Mineral MLM Channel Supplement Sales and Growth, 2008-2015 ...... 28 Mineral MLM Channel Supplement Sales and Growth, 2016e-2020e...... 28 MLM Channel Supplement Sales and Growth, 2008-2015...... 29 MLM Channel Supplement Sales and Growth, 2016e-2020e ...... 29

Specialty MLM Channel Supplement Sales and Growth, 2008-2015 ...... 30 Specialty MLM Channel Supplement Sales and Growth, 2016e-2020e ...... 30 Sports Nutrition MLM Channel Supplement Sales and Growth, 2008-2015...... 31 Sports Nutrition MLM Channel Supplement Sales and Growth, 2016e-2020e...... 31

2.3 Leveraging the face to face ...... 32 MLM Channel Herbs and Botanicals Supplement Sales and Growth, 2008-2020e ...... 32 MLM Channel Meal Replacement Supplement Sales and Growth, 2008-2020e ...... 33

2.4 Big scam on campus? ...... 34 MLM Channel Mineral Supplement Sales and Growth, 2008-2020e...... 35 MLM Channel Specialty Supplement Sales and Growth, 2008-2020e ...... 36 MLM Channel Sports Nutrition Supplement Sales and Growth, 2008-2020e...... 38

2.5 Essential oils ﬁnd their way ...... 39 MLM Channel Supplement Sales by Product, 2008-2020e...... 39 MLM Channel Vitamin Supplement Sales and Growth, 2008-2020e...... 40 Vitamin MLM Channel Supplement Sales and Growth, 2008-2015...... 41 Vitamin MLM Supplement Sales and Growth, 2016e-2020e...... 41 3.0 The Internet...... 43 3.1 Online and engaged, but not always connected ...... 44 3.2 “Wild West” to “Whack-a-Mole” ...... 45 $2.5 Billion Internet Channel by Product Category in 2015...... 45 Herbs and Botanicals Internet Channel Supplement Sales and Growth, 2016-2020e ...... 46 Herbs and Botanicals Internet Channel Supplement Sales and Growth, 2008-2015 ...... 46 Internet Channel Supplement Sales and Growth, 2008-2015...... 47 Internet Channel Supplement Sales and Growth, 2016e-2020e ...... 47 Meal Replacement Internet Channel Supplement Sales and Growth, 2008-2015 ...... 48 Meal Replacement Internet Channel Supplement Sales and Growth, 2016e-2020e...... 48

3.3 iNutrition ...... 49 Mineral Internet Channel Supplement Sales and Growth, 2008-2015 ...... 50 Mineral Internet Channel Supplement Sales and Growth, 2016e-2020e...... 50

3.4 A ﬁne mess in the ﬁne print ...... 52 Specialty Internet Channel Supplement Sales and Growth, 2008-2015 ...... 52 Specialty Internet Channel Supplement Sales and Growth, 2016e-2020e ...... 52 Sports Nutrition Internet Channel Supplement Sales and Growth, 2008-2015...... 53 Sports Nutrition Internet Channel Supplement Sales and Growth, 2016e-2020e...... 53

Internet Channel Herbs and Botanicals Supplement Sales and Growth, 2008-2020e ...... 54 Internet Channel Meal Replacement Supplement Sales and Growth, 2008-2020e ...... 55

3.5 Beyond brick and mortar ...... 56 Internet Channel Mineral Supplement Sales and Growth, 2008-2020e...... 57 Internet Channel Specialty Supplement Sales and Growth, ...... 58

3.6 RealDose does digital direct right ...... 60 Internet Channel Sports Nutrition Supplement Sales and Growth, 2008-2020e ...... 61 Internet Channel Supplement Sales and Growth by Product, 2008-2020e...... 62 Vitamin Internet Channel Supplement Sales and Growth, 2008-2015...... 63 Vitamin Internet Channel Supplement Sales and Growth, 2016e-2020e...... 63 Internet Channel Vitamin Supplement Sales and Growth, 2008-2020e...... 64 4.0 Mail, Radio and TV...... 65 4.1 Connecting with distracted demographics ...... 66 Herbs and Botanicals Mail Order, DRTV/Radio Channel Sales and Growth, 2008-2015 ...... 66 Herbs and Botanicals Mail Order, DRTV/Radio Channel Sales and Growth, 2016e-2020e ...66

4.2 On thin air ...... 67 $1.9 Billion Mail Order DRTV/Radio, Channel by Product Category in 2015 ...... 67 Mail Order, DRTV/Radio Channel Meal Replacement Supplement Sales and Growth, 2008-2020e ...... 68 Mail Order, DRTV/Radio Channel Herbs and Botanicals Supplement Sales and Growth, 2008-2020e ...... 69 Mail Order, DRTV/Radio Channel Sports Nutrition Supplement Sales and Growth, 2008-2020e ...... 70 Mail Order DRTV/Radio Channel Supplement Sales and Growth, 2008-2015 ...... 71 Mail Order DRTV/Radio Channel Supplement Sales and Growth, 2016-2020e ...... 71 Mail Order, DRTV/Radio Channel Supplement Sales by Product, 2008-2020e...... 72 Mail Order, DRTV/Radio Channel Supplement Sales and Growth, 2008-2020e...... 72

4.3 Courting the Cord Cutters ...... 73 Meal Replacement Mail Order, Radio, TV Sales Growth, 2016e-2020e...... 73 Meal Replacement Mail Order, DRTV/Radio Channel Sales and Growth, 2008-2015 ...... 73 Mineral Mail Order, DRTV/Radio Channel Supplement Sales and Growth, 2008-2015 ...... 74 Mineral Mail Order, DRTV/Radio Channel Supplement Sales and Growth, 2016e-2020e....74 Specialty Mail Order, DRTV/Radio Channel Supplement Sales and Growth, 2008-2015 ...... 75 Specialty Mail Order, DRTV/Radio Channel Supplement Sales and Growth, 2016e-2020e ..75 Specialty Nutrition Mail Order, DRTV/Radio Channel Sales and Growth, 2008-2015 ...... 76

Specialty Nutrition Mail Order, DRTV/Radio Channel Sales and Growth, 2016e-2020e ...... 76 Mail Order, DRTV/Radio Channel Supplement Mineral Sales, 2008-2020e...... 77 Mail Order, DRTV/Radio Channel Supplement Sales and Growth, 2008-2015...... 77 Mail Order, DRTV/Radio Channel Herbs and Botanicals Supplement Sales and Growth, 2008-2020e ...... 78 Mail Order, DRTV/Radio Channel Supplement Sales and Growth, 2016e-2020e ...... 78 5.0 Practitioner ...... 79 5.1 Ofﬁce hours...... 80 Herbs and Botanicals Practioner Channel Sales and Growth, 2008-2015...... 80 Herbs and Botanicals Practioner Channel Sales and Growth, 2016e-2020e ...... 80

5.2 Practitioners, Get Ready ...... 81 Practitioner Channel Sales by Product...... 81 Meal Replacement Practitioner Channel Sales and Growth, 2008-2015...... 82 Meal Replacement Practitioner Channel Sales and Growth, 2016e-2020e...... 82 Mineral Practitioner Channel Supplement Sales and Growth, 2008-2015...... 82 Mineral Practitioner Channel Supplement Sales and Growth, 2016e-2020e ...... 82 Practitioner Channel Herbs and Botanicals Supplement Sales and Growth, 2008-2020e ....83 Practioner Channel Meal Replacement Supplement Sales and Growth, 2008-2020e ...... 84 Practitioner Channel Mineral Supplement Sales and Growth, 2008-2020e...... 85 Practitioner Channel Specialty Supplement Sales and Growth, 2008-2020e ...... 86 Practitioner Channel Sports Nutrition Supplement Sales and Growth, 2008-2020e...... 87

5.3 In the ofﬁce ...... 88 Practitioner Channel Supplement Sales and Growth, 2008-2015 ...... 88 Practitioner Channel Supplement Sales and Growth, 2016e-2020e ...... 88 Practitioner Channel Vitamin Supplement Sales and Growth, 2008-2020e...... 89 Practitioner Channel Supplement Growth, and Sales by Product, 2008-2020e...... 90 Practitioner Channel Specialty Supplement Sales and Growth, 2008-2015 ...... 91 Practitioner Channel Specialty Supplement Sales and Growth, 2016e-2020e...... 91 Sports Nutrition Practitioner Channel Supplement Sales and Growth, 2008-2015...... 92 Sports Nutrition Practitioner Channel Supplement Sales and Growth, 2016e-2020e...... 92 Practitioner Channel Vitamin Sales and Growth, 2016e-2020e...... 93 Practitioner Channel Vitamin Sales and Growth, 2008-2015...... 93 6.0 Grocery...... 95 6.1 Your shopping cart knows where you live...... 96 Direct Channel Nutrition Industry Sales by Product, 2016e-2020e...... 96

Direct Channel Nutrition Industry Sales by Product, 2008-2015...... 96

6.2 Thinking outside the (sample) box ...... 97 $14.7 Billion Direct Channel Nutrition Industry Sales by Product in 2015...... 97 Direct and Retail Channel Nutrition Industry Sales and Growth, 2008-2020e...... 99 Direct Channel Nutrition Industry Sales and Growth, 2008-2020e ...... 99

6.3 Virtual natural market Thrive is an ‘online marriage of Costco and Whole Foods’ ...... 100 Direct Channel Nutrition Industry Sales Growth by Product, 2009-20015 ...... 101 Direct Channel Nutrition Industry Sales Growth by Product, 2016e-2020e ...... 101 Direct Channel Nutrition Industry Sales by Product, 2008-2015...... 101

6.4 Marketing and infrastructure innovation drives Door to Door Organics ...... 102 Direct Channel vs Retail Channel Nutrition Industry Sales and Growth, 2008-2015...... 103 Direct Channel vs Retail Channel Nutrition Industry Sales and Growth, 2016e-2020e...... 103 Nutrition Industry Sales by Channel, 2008-2015 ...... 104 Nutrition Industry Sales by Channel, 2016e-2020e ...... 104

6.5 Delivery partnerships help PCC Natural Markets grow ...... 105 6.6 Prime changes in online retailing ...... 106 Nutrition Industry Sales Growth by Channel, 2016e-2020e...... 106 Nutrition Industry Sales Growth by Channel, 2009-2015 ...... 106 7.0 Direct Company Proﬁles ...... 108 7.1 AdvoCare International ...... 109 7.2 Alticor (Amway, Nutrilite)...... 112 7.3 Arbonne International ...... 116 7.4 Atrium Innovations (Douglas Labs, Pure Encapsulations, Sedona Labs Pro, Seroyal) ...... 118 7.5 Carlyle Group - Nbty (Puritan’s Pride) ...... 122 7.6 Forever Living...... 126 7.7 Healthy Directions (Helen of Troy) ...... 129 7.8 Herbalife International ...... 132 7.9 Liberty Interactive (bodybuilding.com) ...... 136 7.10 Market America Science (Isotonix)...... 139

7.11 Medifast...... 141 7.12 Melaleuca ...... 145 7.13 Metagenics ...... 148 7.14 Nature’s Sunshine Products Global...... 151 7.15 NSA (Juice Plus+)...... 154 7.16 NuSkin Enterprises (Pharmanex) ...... 157

7.17 Procaps Laboratories (Andrew Lessman) ...... 160 7.18 Shaklee (Activated/Ripplewood)...... 163 7.19 Standard Process...... 166 7.20 Swanson Health Products...... 170 7.21 Vitacost.com - Kroger Corporation...... 174 8.0 Acknowledgements and Deﬁnitions...... 177 8.1 Acknowledgements ...... 178 8.2 Research Methodology ...... 178 8.3 Disclaimer ...... 179 8.4 Copyright ...... 179 8.5 Deﬁnitions ...... 179 8.6 Product Categories ...... 179 8.7 Dietary Supplements ...... 180 8.8 Food and Beverage ...... 180 8.9 Natural & Organic Personal Care ...... 181 8.10 Other Household Products ...... 181 8.11 Sales Channels ...... 182

1.1 Executive Summary: Directly connected

Nutrition would seem the most personal of purchases. Whether it goes in a tablet or it’s served on your table, the food and supplements consumers ingest become the “what” in “you are what you eat.” And yet, the amazing growth of farmers markets notwithstanding, the layers and barriers between farm and fork continue to stack up.

The way those layers are stacked, and the way they’re shuffled, impacts options and benefits for consumers that range from affordability to basic health.

Against all that change in that intricacy of distribution, come the direct to consumer markets. Oddly enough, for the shop- per stopped on the street, the words “Direct to Consumer” impart the least direct of relationships. After all, the “operators standing by” aren’t exactly neighborhood apothecaries.

But like so many things, initial impressions wilt quickly in the bright light of experience. virtual or otherwise.

Direct to Consumer has never been so direct before.

$14 Billion Direct to Consumer Supplement Sales by Channel in 2015

Mail, DRTV,Radio Internet 14% 18%

PracƟƟoner 24%

MulƟ- Level/Network MarkeƟng 44%

Source: Nutrition Business Journal ($mil., consumer sales) While the network marketing channel continues to be the biggest contributor to direct channel supplement sales, this segment has been consistently losing share over the last decade. Back in 2005, MLM sales accounted for 55% of all direct channel sales.

And making the right decisions to create that connection has never been more important for companies to realize growth. The 2016 NBJ Direct to Consumer Report draws the connections between what’s selling and how to make the connection with consumers more possible and dependable.

Smart internet companies are focusing on personalization, using captured insights into customers’ interests, needs, and purchasing habits.

New grocery delivery companies not only save consumers time but give them very direct control of what they get and how fresh it is when it gets there. The days of the too-many-fava-beans CSA box could be coming to an end.

Multi-level marketing companies that were already educating their distributors on the science and supply chain integrity can now give them mobile tools to not only explain those benefits, but also help the consumer monitor how their purchase choices become observable changes in their health (see Leveraging the face-to-face page 32.

With rising interest in personalized nutrition set against a possible drop in public trust in supplements, practitioners have an ability to deliver that personalized and tailored approach to nutrition while also standing as a knowledgeable curator and gatekeeper for the highest quality products.

Only in the mail-order/radio/TV category has the personal connection remained difficult to build. Those operators are still standing by, maybe, but they aren’t doling out nutritional advice. A catalog lacks the sophisticated tools available to an internet site or mobile tool, which is why some traditional mail order companies are transitioning to digital as fast as they can, if they are not there already.

The direct effects All the elements of connection can be seen in the sales numbers. Last year was the latest in a series of years where supplements took a beating in the press, yet all the markets grew. How much they grew may be related to their ability to connect with consumers.

Mail-order/radio/TV, easily viewed as the least connected of the direct channels, is the slowest growing segment in NBJ’s estimates at 3.8 percent in 2015.

MLM is unchanged at 5.3 percent, despite activist hedge fund investor Bill Ackman’s well-publicized crusade against Herbalife and headline-grabbing scandals like the Vemma meltdown (See “Big scam on campus,” page 34).

No industry escapes the impact of the internet. In nutrition, the growth rate for online sales may only be slowing because the scale is so large. NBJ estimates 11.1 percent growth, down a blip from the 11.7 percent in 2014.

In the practitioner channel, where trust and personalization are primary commodities, growth also slowed but again by a small amount, falling from 7.6 percent in 2014 to 7.2 percent in 2015. Connecting the dots and data Growth numbers only paint the relationship between connection and consumption in the broadest strokes. What the NBJ Direct to Consumer Report does is draw out the details in smaller slices. In the 2015 report, executives can see which companies are selling well in a particular channel and also what sells well for them. NBJ data reveal which ingredients sell best in a particular channel and when the appeal of a particular ingredient plays profitably across every point of sale.

Find out how organic delivery is changing the way consumers make their choices and also how they prepare their meals.

Learn which channels, and which ingredients, might do best as personalized nutrition evolves from “What if?” to “What can my smart phone tell me?”

See which companies are finding traction and where they are finding it in detailed profiles of the strongest brands in Direct to Consumer.