2007 Proved Lucrative for Ingredient Suppliers. Will 2008 and 2009 Offer More of the Same?



The faltering economy is likely first and foremost on the minds of business executives these days, and conversations with suppliers of dietary supplement and functional ingredients paint two sides to the story of how the downturn is affecting the U.S. nutrition industry and what is possibly in store for 2009. On one side, suppliers say they are feeling the pinch associated with bad debt and tighter access to capital and credit, while still dealing with the blows that rising fuel prices and currency fluctuations delivered in 2007 and the first half of 2008. Others point to a slowdown in finished product development that is believed will grow even more sluggish in the coming year. “Food and supplement manufacturers tend to launch significantly fewer new products when the economy is down,” said Sharrann Simmons, senior marketing manager at Cognis Nutrition & Health. “If your business is dependent on new product launches, as ours is, this can become problematic.”

But, on a more positive note, many suppliers interviewed by Nutrition Business Journal over the last month said they have felt few ramifications of the U.S. economic downturn and financial system meltdown. “We continued to have strong months through the fourth quarter of 2008,” noted Larry Kolb, president of U.S. operations at TSI Health Sciences. Said Fortitech CFO and COO Brian Wilcox, “This seems to be a segment of the marketplace that, while not immune to the effects of the economy, [is benefitting] from consumers, who are still looking for products that deliver added health benefits, and from manufacturers, who are increasingly looking for new ways to differentiate their products from the competition.”

Such good news is reflected in NBJ’s 2007 sales estimates for the raw material & ingredient supply (RMIS) segment of the nutrition industry. Last year, increases in raw material prices—coupled with continued strong consumer and, hence, manufacturer demand—helped to drive relatively solid growth of supplement ingredient sales, which moved up 6.4% to $2.7 billion in 2007. This represented a much more robust growth rate for supplement ingredient sales, which were up 4% in 2006 and 2.7% in 2005 and were essentially flat in 2004. In comparison, U.S. consumer sales of dietary supplements were up 5.9% to $23.7 billion in 2007.

NBJ’s Raw Material & Ingredient Supply issue, which publishes later this month, provides an in-depth look at our 2007 RMIS sales numbers and preliminary estimates for 2008, as well as findings from our annual supplier survey and interviews with more than 25 executives in the RMIS industry. To order your copy of the issue or to subscribe to NBJ, go to www.nutritionbusinessjournal.com.

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