Supplement sales are strong despite the economy. Capitol Hill is not a friend of DSHEA and consumers are seeking new products and useful education from the dietary supplement industry. The take away messages from Nutrition Business Journal's annual summit in Dana Point held late July were symptomatic of what is on consumer's minds these days—health care and the economy. For the natural products industry, ditto on economic concerns, but adding to the uncertainty is the regulatory climate.
All three points identify both opportunities and adversities, as Dr. Paul Stoltz, CEO of Peak Learning Inc., talked about in his NBJ presentation. Attendee Len Monheit, director of the New Hope Natural Media's Supply Portfolio (sister division to NBJ) summed it up, "How you deal with adversity is an important factor in your own and your business' success. As this industry faces increasing challenge and yes, adversity, individuals and companies will respond in different ways. Not all responses will have equal impact on our future."
If you missed the event, here is a recap of the highlights (to find out more for next year, click here):
Strong supplement sales are a silver lining of the bad economy. One message delivered time and time again by NBJ Summit presenters and attendees was that dietary supplement sales are benefiting from the recession and people's increased focus on self-care and sickness prevention. "Instead of massive obstacles, the economy is offering up a huge platter of opportunity," Vitamin Shoppe CEO Tom Tolworthy told NBJ Summit attendees. Vitamin Shoppe, Tolworthy explained, recently experienced its 14th consecutive quarter of comp store sales growth and has seen a 20% rise in new customers. As NBJ Publisher and Editorial Director Patrick Rea noted during his state of the industry presentation, dietary supplement sales growth was stronger in 2008 than it has been since the late 1990s. NBJ expects supplement sales to continue growing in 2009 but at a slightly slower pace than in 2008.
DSHEA is under threat. During a video address to Summit attendees, Orrin Hatch, the Republican senator from Utah who is one of the most vocal and active supporters of the Dietary Supplement Health and Education Act (DSHEA) in Congress, pulled no punches when explaining what currently faces the dietary supplement industry in Washington, D.C. "Your industry has a very difficult road ahead on Capitol Hill," he said. "DSHEA is a war still being waged in Congress." One change that could potentially be coming to dietary supplements legislation is the addition of a pre-market approval requirement for all supplement products—which, as Sen. Hatch noted, could spell the end for even some responsible supplement companies.
Industry involvement is crucial to preserving DSHEA. "Your industry must take a more active role in preventing the rollback of DSHEA," said Sen. Hatch, who noted that he plans to continue fighting for the industry and for DSHEA. "But," he added, "I need your unwavering support and strongly encourage your involvement in the legislative process." He advised supplement executives to visit their congress members, educate them about the important role supplements play in health and wellness, and invite them to tour their GMP-compliant facilities to see what responsible companies are doing to safeguard product quality and safety. GNC CEO Joseph Fortunato urged companies to join and support the Coalition to Preserve DSHEA, the non-profit industry group created in 2004. "Everyone should be concerned about the sea change we are seeing in Washington," Fortunato told NBJ Summit attendees.
Preserving individual access to health should be industry's message. As United Natural Products Alliance Executive Director Loren Israelsen pointed out during his dinner speech (which was aptly titled, "Industry Turbulence—Buckle Up"), at the same time DSHEA is coming "under assault," a growing number of Americans are going bankrupt because they simply can't pay for their healthcare expenses. People can't afford to get sick, and this is why many are turning to dietary supplements and other less-expensive health products. So, Israelsen explained, rather than position its defense of DSHEA around the notion of "saving our vitamins," the industry should beat the drum of preserving "the fundamental access of individuals to the kind of healthcare they want." After all, natural self-care is not just about being able to ward off illness with a handful of supplements, it's about "living as well as you can for as long as you can"—and this is what the industry should stand for, Israelsen said.
Healthcare reform is coming. While it might not get done this year, healthcare reform will happen—and the dietary supplement industry must act quickly if it wants to have its voice heard and become a stakeholder in the process. The good news is that with the Obama administration and the public increasingly focused on disease prevention, the perceived importance of dietary supplements by consumers and legislators could greatly improve.
Supplement AERs tell a positive story—one that the industry should be promoting. As Tolworthy pointed out, the supplement industry experienced 596 Serious Adverse Event Reports (SAERs) between December 2007 and October 2008—this compares to the tens of thousands of SAERs that come in annually for pharmaceutical drugs. "Our industry has a clean record on safety," Tolworthy said. "We need to tell this story." But as Israelsen told Summit attendees, the industry also needs to learn how to do AERs well or potentially suffer the fate of Hydroxycut and Zicam, which were both pulled off the market after AER reporting pointed to potential safety problems.
How well is the supplement industry delivering on the "product promise"? This question, posed to Summit attendees by NBJ's Rea, points to the many challenges the industry as a whole continues to face in the areas of product quality and substantiation. As Rea asked attendees, is what's on your product label actually in the pill at the point of purchase, is it absorbed efficiently and effectively into the body, and is the product safe? If your answer is, 'No, not always'—or even, 'I'm not sure,'—your company has important work to do.
Retailers and consumers are hungry for product innovation. "We need a new emphasis on product innovation," said Vitamin Shoppe's Tolworthy, who noted that 18% of his company's revenues are generated by the sale of new products. New products are essential to an industry that has very few big, consumer-driven brands, he added. GNC President and Chief Marketing/Merchandising Officer Beth Kaplan said product innovation is helping to fuel her company's continued growth. "We thrive on new products," said Kaplan, who went on to talk about some of the company's latest GNC-branded offerings, including its new line of nitric oxide-based sports nutrition products for endurance athletes called Pro Performance AMP. "These are the kind of things that fuel growth for specialty retailers," she added.
Consumer education is lacking. Doug Degn, Wal-Mart's retired executive vice president of merchandising, shared some interesting survey results with NBJ Summit attendees that highlighted the need for more consumer education about the many benefits of supplements. According to Degn, when asked why they chose not to make a supplement purchase, 40% of consumers surveyed said it was because they didn't see a need, while 20% said they already eat a balanced diet so didn't require supplements and 27% said it was because supplements were too expensive.
Optimism is growing on the investment front. During his presentation on the first day of the NBJ Summit, Canaccord Adams Managing Director David Thibodeau dished out some much-needed positive market news: Investors, he said, are starting are starting to pay attention to growth markets again and valuations are slowing improving. Public markets are rebounding as well, Thibodeau explained, and many of the public companies in the nutrition industry are performing particularly well. As a case in point, Thibodeau noted that Canaccord Adams' Healthy Living Index—which includes such companies as NBTY, Herbalife and Green Mountain Coffee—has outperformed the major indices and grown 19.1% over the last six months.
Adversity can be transformed into opportunity. Many threats and challenges await the nutrition industry, but rather than stick its collective head in the sand, the industry should approach these challenges proactively and with the collective goal of weeding out the rotten apples before they spoil the entire crop. "Rather than look at the glass as being half empty, let's look at our opportunities to refill the glass with fresh water," said Mark LeDoux, chairman and CEO of Natural Alternatives International Inc. and elected chairman of the Council for Responsible Nutrition.
"Excellence is not cheap." This message from LeDoux was perhaps the most important statement uttered during the three-day NBJ Summit. As LeDoux noted, ensuring product efficacy, quality and safety requires a hefty investment in proper research, ingredient supply and testing. Product innovation and consumer education also requires substantial time and resources. Cutting corners might save money today, but it will almost certainly short change your company's—and the industry's—prospects tomorrow.
The future could be bright. A key message of Metagenics Chief Scientific Officer Jeffrey Bland's keynote presentation was one every supplement industry executive should take to heart: The dietary supplement industry is "alive and well," Bland said, and its "golden years" are coming—provided that the goals and values of responsible, evidence-based supplement companies prevail.