Commodity prices for vitamin and botanical ingredients continue to tumble, leaving supplements manufacturers to mull passing the savings on to retailers.
Karl Riedel, chief operating officer of Nature's Life in Garden Grove, Calif., said three factors have combined to drive the cost of ingredients down: flat supplement sales; increased production capacity in Europe and Asia; and a decade-old European price-fixing case settled last November.
This summer, vitamin C was selling for about $1.27 per pound, down from about $2.18 in 2000.
Nature's Life recently dropped the price of its vitamin C and E lines, saw palmetto-based men's prostate and black cohosh-based women's menopause formulas, glucosamine sulfate, Co-Q10 and SAMe supplements an average of 10 percent.
"When business was good, everyone was increasing prices 20 percent a year and nobody thought a thing about it, they just paid what was asked," Riedel said. "But when sales flattened, retailers started sharpening their pencils."
Nature's Life margins increased, but the company worried retailers were losing their customers to discount retailers and Internet and catalog sales. "We wanted to help them combat that," Riedel said.
For the best-selling supplements, the mass market is flooded with low-cost products that may lure away naturals customers. "There is a lot of competition for the consumer dollar .... We can't sit still and let the market continue to hemorrhage," Riedel said.
But Heather Isley, vice president of the 17-store Vitamin Cottage chain based in Lakewood, Colo., is skeptical that a dollar saved on a bottle of vitamin C will lure lost customers back. "There are two issues there," she said. "First is the perception in the public's mind that supplements always cost more in a typical health food store than in the big box—and I don't necessarily think that's true. And second, statistics show that most people who take supplements buy from the mass-market stores."
Isley said consumers are more influenced by what they read in the newspaper than what they see on a shelf tag. "I think the main reason for decreases in supplement sales is negative media," she said. "We are slammed, week after week, by the misrepresentation of studies."
Vitamin Cottage already passes on manufacturers' discounts to consumers. The company logged a chain-wide 8 percent increase in sales in the first eight months of 2002.
Riedel admitted naturals customers may not be as price sensitive as mass-market shoppers. "But they still want to feel that they are getting value for what they are paying."
Natural Foods Merchandiser volume XXIII/number 10/p. 7