The Nutraceuticals Market Is Booming. Will It Last?
The dietary supplement market has seen explosive growth this year, due, in large part, to the pandemic. But even before COVID-19, nutraceuticals were growing at about 6% to 7% year over year. Is this trend likely to continue? And will the nutraceuticals market need to adapt to evolving consumer demands to maintain this demand?
GLG spoke with Garnet Pigden, former President at Kappa Biosciences, for insights into these questions at an October 6 Remote Roundtable. Below are a few select excerpts from the event.
Why is the dietary supplement industry growing so rapidly, and will it continue to do so after a COVID-19 vaccine is widely distributed?
This year the dietary supplement industry is forecast to grow as much as 20%. Why? Because the pandemic is encouraging people to consume more and more multivitamins to try to boost their immunity, so they don’t contract COVID-19. So what we’ve seen is tremendous increases in vitamin C, vitamin D, E3 and probiotics. It’s a great time to be in the supplement market.
People who have now increased their usage of multivitamins will continue to do so. It’s reinforcing. They didn’t get sick during the pandemic when they took more supplements, so they’ll continue to take more supplements after a vaccine is found. We’re very encouraged that the growth we’re experiencing this year in multivitamins and in vitamins overall will continue in the foreseeable future.
What are you seeing in the U.S. market in terms of the growth of different channels and different business models? Is this growth an omni-channel growth across online, offline, and retail grocery brands?
Immunity is one area that is growing in leaps and bounds. Prior to this year, products that positioned themselves as immunity boosters were growing at rates of 1% to 2% year over year. This year, however, the immunity products are growing at double- if not triple-digit rates. I saw a number the other day that said vitamin D3 was up 80% year over year. And vitamin C is up something like 40% year over year. Beyond immunity, we see continued growth in areas such as digestive health, cognition, sleep, and stress reduction.
As for channels, internet consumption continues to grow at a rate of about 30% year over year. Amazon and others continue to steal a share from the brick-and-mortar players, such as GNC and Vitamin Shop. Those brick-and-mortar players are somewhat akin to the last dinosaurs licking the leaves off the trees. There’s not really a great reason for someone to rush out to a GNC store or a Vitamin Shop store to buy what they can easily buy online, and have delivered the next day.
Will new consumer behaviors and demand for personalized products impact the business models and cost points for these nutraceutical businesses?
The notion that you can somehow tailor a supplement to someone’s individual needs is hard to execute. I’m not sure I’ve seen a model that is easily or profitably scalable. It’s hard to get a product that’s going to address all your concerns because that can lead to a large tablet or capsule, and can also be very expensive.
Four things must be correct before a supplement can be successful: science to make the claims, the demand for the specific benefit, the dosage, and the cost per dose. And if any one of those four is not perfect, you will fail. With personalized nutrition, the demand is significant, but the more difficult part is, what’s the dosage? Is it one small pill per day, which is the ideal, or do you have to take six? And is the cost per dose going to be three or four dollars, versus 30 cents? Those are the things that will trip you up and kill a proposition.
We’ve seen examples of companies that follow a route to market that’s very similar to pharmaceuticals in that they actually take this to doctors. Is this an effective route to market?
We call that channel the practitioner channel, and it comprises doctors, personal trainers, fitness instructors, etc. That channel, while small, can be very profitable, and there are a few companies that operate in that space. They tend to tailor their products for those doctors and trainers. They have a direct path to market, so they don’t have to give away margin that they would otherwise give to the CBSs, Walgreens, and Walmarts of the world.
How strong is the food supplement market for vitamin K2-7?
The food supplement market is a virgin territory because really K2 is being exploited right now only in dietary supplements. There’s some K2 that’s being used in dairy products over in Asia, and the combination of K2 and D3 in a milk product is ideal, because K2 is essential to help calcium be absorbed into your bones.
There are opportunities for K2 to be included in beverages in the future, such as vitamin water, maybe products like Propel. It would be a natural for cereal, as well as for energy bars. And the beauty of K2 is the daily dose is 90 micrograms, so it’s easy to be included in many different food forms. That’s an area of opportunity that is waiting to be exploited. We see K2 grow year over year by as much as 25% to 30% in a dietary supplement arena, and the awareness of K2 is growing continually in the market given that there are 20 published studies that it supports both bone and heart health.
What kind of regulatory expectations can we expect to see on nutraceuticals, especially in the U.S. and Europe markets?
The FDA will continue to police marketers for the gold standard of two double-blind placebo-controlled studies to support their claims. But the U.S. will remain a claim-friendly environment compared with the rest of the world. It will be an ideal place for marketers to bring their ingredients and finished products to the consumers.
How has consumer behavior changed over the past five to seven years, and how will it change in the next five?
The supplement industry traditionally grows anywhere from 5% to 7% year over year, and it has done that remarkably well for about 20 years. In times of recession, the industry tends to do better. Back in 2008-9, the industry grew at something like 9%. In recessionary periods, the consumer behavior has been such that consumers buy more supplements because they don’t want to get sick, have to go to the doctor, or miss work.
The desire for an improved immune system will continue. Condition-specific categories such as bone health, heart health, and digestive health will continue. And the growth that has been seen in digestive health over the last dozen to 15 years will continue, because consumers can absolutely find comfort in a well-designed probiotic — they can experience greater digestive comfort in anywhere from two to three hours, and that’s not true for all supplements.
The outlook is very promising. I would anticipate over the next five years you’ll see continued stable growth of 5% to 7%, if not better. So stay invested in supplements.
About Garnet Pigden
Garnet Pigden is an independent consultant with expertise in nutritional and functional ingredients for the human, personal care, and animal additive industries. Currently, Garnet acts as President of Kappa Bioscience’s North America Operations. Prior to this, Garnet was the interim President of Sales & Marketing at Natrol LLC — a $150 million manufacturer of branded dietary supplements. (Natrol LLC is a wholly owned subsidiary of Aurobindo Pharma Inc.) Prior to that he was Senior Vice President of Global Marketing at DSM Nutritional Products, one of the world’s leading suppliers of vitamins, carotenoids, and other fine chemicals to the feed, food, pharmaceutical, and personal care industries. He also was the Global VP of Strategic Marketing, Consumer Solutions Group for MeadWestvaco in Richmond, Virginia. MeadWestvaco provides packaging solutions, products, research, design, manufacturing, and distribution capabilities to global leaders in the food and beverage, media and entertainment, personal care, home and garden, cosmetics, and health care industries.
This nutrition industry article is adapted from the October 6, 2020, GLG Remote Roundtable “Global Nutraceuticals Market.” If you would like access to this teleconference or would like to speak with personal care expert Garnet Pigden, or any of our more than 700,000 industry experts, contact us.