Editorial: Performance Under Pressure

By Len Monheit
[email protected]

We fret about a challenging industry environment with little patent protection, changing regulatory issues, negative media and in a few sub-sectors, declining sales. Yet industry pundits remain optimistic, citing sports nutrition, natural and personal care and other sub-sectors and product categories such as specialty supplements that remain strong growth opportunities.

The recent FDA qualified health claim for foods containing omega-3's will almost certainly lift consumer awareness of the health benefits of omega-3 products including dietary supplements and the US activity will likely stream over the border to boost Canadian awareness and sales despite a lack of action thus far on the part of Health Canada. And the entire range of products and categories targeted at general heart health , diabetes management and anti-aging are keeping supplement manufacturers optimistic as numerous countries wrestle with aging populations and rising health costs.

At several industry events in the past few years, I've listened to potential investors and venture capitalists describe the target industry economic environment to justify further investment, and although recent such activity has visibly been rather slow, behind the scenes, deals are being made and new money is entering the sector. It appears as though the appetite is increasing both from an investment standpoint, but also from the point of view of partnerships and strategic alliances to bring new, innovative products and technologies to market or to create ingredient synergies in new formulations.

We've recently seen acquisitions and supply chain integration that bears watching as new industry 'players' are created. Current examples include Bio-One Corporation (www.bioonecorp.com), Sunopta Inc. (www.sunopta.com), both with recent series of strategic acquisitions, and Canada's Planet Organic Health Corp. (www.planetorganic.ca) seemingly intent on building a national chain of natural supermarkets as well as vertical integration of brand manufacturing and distribution.

On the ingredient side, rumbling persists of acquisitions, licensing deals and other alliances to bring new branded ingredients to market or apply interesting technologies to existing ingredients to improve stability, bioavailability and even taste and smell. On the 'new money' side, judging from inquiries and general interest level (the rumor mill), private and institutional investors are watching the sector carefully, looking for that unique value proposition. Our current global marketplace means too that international markets also remain company growth opportunities.

As industry heads into a series of tradeshows and symposiums, it'll be interesting to take a pulse check of two key participant levels: 1)investors and 2)international participation to bring products to international markets. For participants, this means those seeking alliances, investment and foreign distribution could do well. It also means that those providing services such as industry analysis, networking, market research and brand development will be quite active.

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