Industry resilient, but takes its shots

These are extraordinary times. In 2008, the water line for this industry was about eight per cent. In 2009, some companies are lucky if they can stay afloat, while others are seeing so much overflow it seems like a 100-year flood — think vitamin D and stevia.

In this issue of Functional Ingredients, the editorial is dedicated to ingredient names and numbers that have fared well over the course of the past two years and, sadly, those that are faltering.

Historically, this industry has been recession-proof, but in this new era of regulation the assaults on the industry are more than just the economy. For the first time since its inception, the FDA is actually enforcing DSHEA. Some industry leaders are saying be careful what you wish for, while others welcome the scrutiny, citing that too many bad players snuck on the ark while no one was watching (see the 10 Commandments sidebar, below).

For the companies that entered this space with only money on their minds, the pending Good Manufacturing Practices (GMPs) will prove too tough an obstacle to overcome. As you will see on in an exclusive GMP survey from our readers, most companies will make it through the arduous process and come out ahead. In the opinion of Functional Ingredients editors, GMPs are a necessary and vital component to regaining consumer confidence.

During the recent NBJ Summit, 40 per cent of the CEOs and other executives in attendance said they believe the most critical challenge facing the dietary-supplements industry is potential changes to DSHEA, followed by food-safety legislation (28 per cent) and new GMP rules for supplements.

As the year closes, there is hope. In September 2009, two significant government pronouncements made an impression. One, Federal Reserve Chairman Ben Bernanke proclaimed the recession "very likely over." Granted, it may be akin to a truck that ran you over and it's only a few feet past you as you lie flattened on the pavement — but hey, the accident is over!

Two, the USDA proclaimed organics "mainstream." Its agricultural marketing service announced, "Organic products have shifted from being a lifestyle choice for a small share of consumers to being consumed at least occasionally by a majority of Americans."

Hand-in-hand with lifestyle choices such as organic is health care. Town-hall meetings are hot beds of anger and frustration as tomes of legislative paperwork are hoisted into the hallowed halls of Congress and the Senate. Admittedly, reading the actual proposals hasn't been a strong suit for our elected officials, but meanwhile, Americans are slowly getting it — good health can't be taken for granted.

Wellness depends not only on physicians, but also on self care. This industry is squarely placed to be the epicenter of self care and wellness, whether it's healthier schools or healthier cupboards.

Health care
Across the country, many schools have removed soda vending machines, saying they should not be plying children with sugary drinks. In the summer of 2009, the American Heart Association urged people to reduce their intake of sugary foods and beverages to lower the risk of conditions such as obesity and high blood pressure — singling out soft drinks as a prime culprit.

Riding those coattails is a proposal floating about of a penny an ounce tax on sugary beverages, which would raise $14.9 billion in its first year, to be spent on health-care initiatives. The tax would apply to soft drinks, energy drinks, sports beverages, and many juices and iced teas — but not sugar-free diet drinks. Even President Obama has voiced a cautious openness to the tax, though he allowed that the politics of it could submarine the idea.

At its core, the natural-products industry is about healthier living. Healthier than what, you say? Healthier than the chemical-intensive, cheap, subsidised, commodity carbohydrates food manufacturers foist upon unwitting consumers, who buy based on price without bothering to consider the link between diet and health.

In the Great Recession economy, while natural and organic are more expensive than conventional foods, they are, however, less expensive than a trip to the doctor, lab tests and a prescription for some exorbitant designer drug. Can you say "recession-proof?" Only this time, savvy retailers were quick to the trick and rolled out private-label offerings that have put the squeeze on manufacturers. Suppliers came out ahead with increased volume.

How they fared...













What recession?
Sales of foods manufactured and marketed as functional increased 46% since 2004 to a little more than $6.3 billion (27%, adjusted for inflation)

60% of adults claim to have purchased functional foods and drinks in the past three months, up from 48% in May 2008.

Source: Mintel

Food trends
In 2008, more than 1,000 new gluten-free foods and beverages were introduced; sales have grown by an average of 28 per cent during the last five years, reaching $1.56 billion in 2008, according to market research group Packaged Facts. General Mills this past year launched a gluten-free version of its Chex cereal; Betty Crocker is whipping up gluten-free cookies and cakes, and Coors Field in Denver has an entire gluten-free concession stand. Clearly, it's more than just one per cent of the US population estimated to have celiac disease — going gluten free is flat-out trendy. And not a moment too soon. Gritty and crumbly have (finally) given way to chewy and moist. National Starch takes starch from its gluten-free cabinet of ingredients including maize, tapioca and rice, and offers them to manufacturers for cookies, cakes and muffins. The Holy Grail — breads — is still a work in progress.

Also hopping on the gluten-free ingredients bandwagon is chia — an ancient whole grain that entered the spotlight in 2008 and is joining the gluten-free world. The bonus with chia is its nutritional properties — omega-3s, fibre, protein, calcium, vitamins and other minerals that add up to an antioxidant wunderkind. "It incorporates easily into a variety of foods, including baked goods, snacks, bars and drink mixes," says Dean Mosca, president of Proprietary Nutritionals. Chia's exotic history as a sacred food of the Aztecs only adds to its marketing heft.

In America, people voted for change in 2008. As 2010 looms, from the economic vantage of consumers, change would be a welcome thing. For consumer packaged-goods companies, seizing new opportunities means being nimble and keeping a finger on the pulse of the prevailing zeitgeist. This might mean providing value-added offerings to households with stagnant incomes.

Various industry surveys say companies are increasing new-product development efforts, more so than existing product improvements. As Nielsen senior vice president of global research and development Doug Anderson said in assessing the market for the next decade, "Those who keep doing what they're doing today will be left behind."

Click to enlarge


Click to enlarge

Fastest-Growing and Declining Supplements in 2009

Fastest Growing

Fastest Declining

Natural Channel

Natural Channel

1. Fish oil

1. Chinese herbs

2. Vitamin D

2. Psyllium

3. Probiotic supplements

3. Milk-based protein

4. Vitamin C

4. Guarana

5. Multi-source protein

5. Adult multivitamins



1. Açai

1. Adult multivitamins

2. Fish oil

2. Flaxseed

3. Vitamin D

3. Soy products

4. Multivitamins

4. Ester-C vitamin C

5. Calcium

5. Vitamin E

Source: SPINSscan Natural; Natural Supermarkets >$2M (excluding Whole Foods)
SPINSscan Conventional; Nielsen ScanTrack excluding Walmart
Total US; 52 weeks ending 5/19/09


The 10 commandments for the future of functional ingredients

  1. Thou shall not take the GMPs lightly.
  2. Honour thy FDA, for they are watching.
  3. Do not covet and poach others' scientific studies.
  4. Do not make false claims.
  5. Do not advertise fake endorsements by Oprah and Dr Oz — hello, açai?
  6. Strains, forms and dosage levels matter.
  7. What's on the label is in the pill ... really.
  8. What's on the label is in the pill, at the point of purchase.
  9. What's on the label is in the pill, at the point of purchase, and what's in the pill is absorbed efficiently and effectively into the body.
  10. What's on the label, is in the pill at the point of purchase, and is absorbed efficiently and effectively into the body and, most of all, the product is safe.


Who we are: Twitter version

We canvassed a coterie of industry thought leaders to quip about how they would describe the state of the industry today.

>> Maturing
>> Robust
>> At a crossroads
>> Under scrutiny
>> GMP realization
>> Resilient
>> Entrepreneurial energy is not dead!
>> Value-added ingredient growth
>> Selling ozs of prevention
>> Part solid ethics, part garbage
>> Highly credible, sometimes
>> Marketed claims : substantiated claims ratio ~1:1,000
>> Visionaries and hucksters
>> Challenged by ingredient adulteration
>> We want efficacious dosing … yeah, right!
>> We only work with quality ingredients … yeah, right!
>> Science over scams (SOS) >> Me, too, with borrowed science
>> Too low of an entry threshold
>> Lacking a game plan to reform the industry
>> Too many parasites
>> Should be part of health-care reform
>> Secretly providing health care
>> Surviving despite big pharma
>> >> Weathering the storm
>> Slashing budgets
>> Refining brands
>> What do you have for a penny a dose (with strong clinical data)?
>> Strong as ever
>> Supporting full Chinese employment
>> Superfruity!!!


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