Editorial: Industry's Eight Fears This Halloween

By Len Monheit
[email protected]
Comment on this Editorial

While in general I remain quite confident that companies who take the proper steps and measures will be successful in the future, I cannot deny that there are many vulnerable issues for the dietary supplements industry. Whether you’re operating in the US, Canada, Australia or even the European market regulatory uncertainty is going to have an impact. And of course, we’re not an isolated industry. We’re impacted by economic and trade factors, and our customers and legislators (as we know all too well) are heavily influenced by media and their own fundamental beliefs and perceptions.

With this (and Halloween) as background, I’d like to take this opportunity to list some of the scary issues we face. This is my list, and I’d certainly like to encourage others to share theirs with us:

  1. Education

    I fear that the gap between product development and the science to support products is increasingly being filled by marketing alone. This means that customers baseline understanding is not growing. In this instance, I define customers as anyone along the value chain who plays a role in the buying and selling process and take care to include legislators, practitioners, consumers and media. Critically, there is a lack of ownership of fundamental responsibility that needs to be addressed. Who is going to do the education?

  2. Short term mentality all too often prevails

    In uncertain economic times, companies need to ensure the bottom line remains stable. This often leads to a cycle of thinking only through the next few quarters with more strategic projects forgotten. These typically include product development and enhancement, category development (as opposed to product development) and strategic project positioning (a part of which is clinical research and value chain education). This way of thinking also means that price becomes the most important selling tool, and product and company differentiation ceases to be important.

  3. We have an image problem

    As a sector, the image we project influences the way we are treated. If we determine, as an industry, that working with practitioners and the scientific community is critical to future success and more widespread adoption of our products and our science, then we must project an image that is credible, stable, in control of itself and all of its members and their actions. Until we have consensus on this issue, it will be difficult for the industry to reach the expanded consumer base it must interact with in order to reach all potential markets.

  4. Lack of clear, empowered decisive leadership

    Notwithstanding the efforts of industry trade associations in all geographic regions (US, Canada, Australia etc.), recognized business leaders are few and far between. In many of these regions, industry could immensely benefit by having available, as spokespersons and resources, recognizable individuals with a solid business background, charismatic leaders capable of interacting with media, dealing with economic analysts, motivating employees and industry stakeholders, and thinking clearly and operating capably on both strategic and operational levels.

  5. No barriers to entry fundamentally exist

    This issue is really one of the industry’s double edged swords. Built primarily by entrepreneurs, the sector has succeeded due to the passion, commitment and creativity of these pioneers and more recently, by those who have used this commitment, and traditional and natural products, as the source of their innovation. Many observe the relative lack of barriers in this sector, especially when they consider other sectors. Sure, there are requirements, regulations and guidelines which must be met, including GMP’s, advertising and labeling rules and regulatory notifications. But if you have enough money or reach, you can introduce and market a product, for a time anyway, that will justify your investment and pay a high rate of return, even if you know you’re going to face fines or legal action on the other end. (Case in point – Coral calcium)

  6. Time and cost effect of new regulatory environment

    Earlier this week, the Australian Department of Health published a review of the complementary medicines sector and regulation, triggered by the Pan Pharmaceutical quality practice investigation earlier this year. The recommendations, even if implemented in part, will impact suppliers and manufacturers, undoubtedly adding a cost burden to operations.

    Similarly, changes in Canada and the US either being discussed or in various stages of implementation will change industry economics, likely adding to the price of finished products to consumers, also creating an administrative burden for the companies themselves. Whether it’s the product licensing process in Canada or testing requirements in Canada, the US or Australia, or even changes in label requirements anywhere in the world, understanding, implementing and paying for these ‘rule’ changes will be a burden. If there’s a cost involved and all the squeezing has been done out of the value chain (that’s a separate issue), then the consumer must pay. Without an additional value proposition, some won’t and growth will be severely restricted.

  7. You can’t get ahead if you’re on defense all the time

    The industry repeatedly attempts to defend itself against attacks coming from many directions including media, the medical community, and legislators. While tying up precious resources, it also, predictably, prevents any offensive thrust or strategy for the industry as a whole. Companies, operating singly or even in small groups, have been successful and proactive, with omega-3 products and suppliers being the most recent example of the successful expansion of a category, and more of this type of effort is required.

  8. Uncertain economic model for investment in science

    Just how valuable is the science? Often, useless for the company investing in it, while valuable to competitors and knock-offs and marketers who take data and mold it into a compelling marketing message often bearing little resemblance to the original data and parameters. Fundamentally and long term – the science is quite valuable, but in the short term, it ties up scarce resources and has uncertain returns so the risk benefit assessment may not justify the investigation. Many have spoken about the liberal borrowing of science, and a few months ago, the seriousness of this issue was struck home at an American Herbal Products Association presentation with FTC where the FTC representative was asked by an AHPA member how they were going to enforce advertising where a proprietary product (standardized herbal with proprietary process) had specifically been studied with health benefits to support health claims the company planned to make available to users of this specific ingredient. The question to FTC was, ‘Are they (FTC) going to take enforcement action against other companies making the same claim and how are they going to evaluate the product differences?’ FTC apparently didn’t understand the issue.

The industry has character, a grass roots appeal, an emerging spectrum of science (or the funding resources to generate such science) and most importantly, a potential significant benefit to health. Realizing and overcoming one’s fears is the surest way to succeed.

Happy Halloween.

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