Editorial: Musings from SupplySide West 2006

By Len Monheit

And so another SupplySide West is in the books. By all accounts, the event was a success, with hosts Virgo Publishing reporting over 7000 attendees, some 800 booths on an expanded and differently laid-out show floor, 50 or so VendorWorks presentations and a whole lot of other things going on including receptions and other special events. As usual, when I reflect on a busy few days, several observations and themes come to mind. I noted a few in my last column; I’ve now had a few more days for things to percolate.

Although show activity was exceptionally high day one, it also stayed pretty good throughout day two as well, better, in fact, than in previous years. Even though those in the back of the hall (around the ‘L’, as I referred to it), didn’t fare quite as well as those up front, even the back booths got some traffic all the way through the show.

Having some of the VendorWorks presentations right in the show hall was helpful. During a busy two day event, traveling in and out of the hall takes a lot of time, so being right there for the presentations was a benefit. Having said that, attendance for these presentations ranged from 10 to 60, and while the ‘breakeven analysis’ will vary company to company, those on the low end of the attendance range were certainly not happy, and can’t have considered the money well spent. And with 50 or so presentations, on top of the educational program, there certainly was a lot going on, when for many people, show floor activity and dialogue was a primary objective - in very limited time. For a few of those with booths bordering on the walled off show floor area where the ‘in-hall’ VendorWorks presentations were occurring, the traffic disruption meant they were facing a wall, or potentially even lost visitors who never made it around the obstruction.

As far as the exhibitors themselves were concerned, most of the key players were represented with adequate space, and there was certainly a large contingent of Asian-based exhibitors, as is usually the case. It is interesting to note that the quality of booths from these companies appears to be getting significantly better, where in previous years, many had table-top presentations and very limited marketing materials. This evolution lends itself to significant market confusion, as essentially any organization with a neat brochure can make it to the show floor. And in these days where many purchasers persist in buying based on price alone, a back half of hall largely filled with relatively unknown ingredient suppliers illustrates one of the industry’s problems.

Several companies participated in arranged meetings with potential buyers in Virgo’s ‘Connections’ sessions, and here again, from the people we spoke with, there were mixed reviews. Obviously smaller and more intimate and arranged meetings make sense, and can add exceptional value. There were a few cases though, where the ingredient supplier made the commitment to these sessions, only to have a few of the prospective buying partners not show up for the arranged meetings.

In summary and to reiterate, this was a good event, with an active show floor, and some high-powered decision makers actively seeking new ingredients. I myself would have appreciated more time on the floor itself, and perhaps a chance to attend a few more sessions. To me personally it is unclear whether intended diversifying of this show into both a supplements and food ingredients show is moving significantly forward. It appeared as though the overwhelming dominance of the supplements side continues, despite show floor participation from several food ingredient companies.

I did have the opportunity to meet with several key contacts over the three days, and these meetings triggered numerous observations. Kemin Health has returned to the new ingredient launchpad with its Splendesta potato-based satiety ingredient. The company, for the past several years, had been trying to present and brand this product to consumers as Satise, and has now returned to the business to business environment and channel it knows well from past experience with its FloraGlo lutein. With the scientific dossier it has compiled and ongoing interest in weight management strategies in general, Kemin has a good chance of achieving a strong position in this ingredient category. As a side note to this development, it is interesting to observe that success in business-to-business marketing and communications does not automatically translate to the ability to market and communicate effectively to consumers.

Health condition category dominance was also evident in the actions of several other companies. For instance, Spain-based Bioiberica made some noise with the company’s proprietary hyaluronic acid product, Hyal-Joint®, produced by a proprietary natural process and shown in the company’s studies to trigger endogenous synthesis of hyaluronic acid and thus directly act on synovial fluid. The company is seeking dominance in the joint care ingredient category. Another key growth category, immune support and health was also heavily targeted by branded ingredient companies. Cognis Nutrition & Health, whose focus most recently had been in either heart and eye health, has made it know that they intend to be active in at least two other high profile health categories, immune health and cognitive function, and Embria, with its Epicor® ingredient, also obviously intends to be a major player in the immune health category.

There were at least two concrete examples I observed of one of the key ingredient challenges in our marketplace – that of building the category itself and at the same time, differentiating one’s company within the category. Integrity Nutraceuticals International has invested heavily in research on cinnamon and its proprietary extract Cinnulin PF®, and in branding efforts. More than ever, it is the ingredient company’s responsibility to build the category by providing information and education, and of course, differentiation within the built category is always a challenge. Network-marketing company XanGo LLC was also present on the show floor. This marks at least four ‘out of channel’ events this company has participated in over recent months as it seeks to build the mangosteen category, and its dominance within it. Relative newcomer, at least to industry events, NutraCea also must build category awareness both in trade as well as to a consumer audience. The company is currently involved in heavy production scale-up as well as active messaging with its stabilized rice bran and rice bran products.

These twin challenges of awareness and differentiation are being felt across all ingredient categories. Herbal extract suppliers too are feeling the pressure and need, with some of the European-based suppliers introducing new quality standards and parameters, and others, such as BI Nutraceuticals, talking about particle engineering technology and the company’s ability to apply its processing technology to produce higher quality powders.

At some point, much of the exercise becomes getting value-chain partners and consumers to ask better questions in a more transparent and aware marketplace. Generating both the questions and enabling the answers is squarely the responsibility of the ingredient company.

Switching gears for a second, over the past several years, I’ve spoken numerous times about the enlarging role and expectations surrounding ingredient companies now expected to provide almost turnkey solutions to facilitate new product development and introduction to the marketplace. The relatively new relationship between Cognis and Wild Flavors is a testimony to this expectation as the companies partner to provide ingredient knowledge, with formulation, flavor and behavior expertise. The combination of Frutarom with its newly acquired nutraceutical ingredient arm Acatris might be expected to perform similarly.

To conclude, SupplySide West was certainly thought provoking and represents the latest convergence of companies and minds in a highly evolving marketplace. It was apparent to me that with so much uncertainty (market, regulatory etc) companies had, for much of 2006, taken a ‘wait and see’ approach. It is evident that the gloves have come off in recent weeks with companies all along the value chain getting more aggressive, observations that bode very well for 2007. For many on the ingredient side, the next big exposure opportunity is SupplyExpo at Natural Products Expo West, and even for some, the Nutracon ingredient award competition.

We’re in for some very interesting months.

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