2010 Ingredients Market Overview: Recession, regulations, recovery

The regulatory pot is on full boil, with a new NDI guidance expected from FDA and FTC holding marketers' feet to the fire. Sales are holding strong for many ingredients, even with the potential double-dip recession. Fi editor-in-chief Todd Runestad gives you the scoop on where we've been and where we're heading.

Henry Waxman hates supplements more than any other American congressman, and his former employee — Joshua Sharfstein — is now running the FDA apparatus taking aim at us. Quality requirements, from GMPs to lab equipment and personnel, are taxing companies, many to the breaking point. Economically motivated adulteration is a vexing, possibly intractable problem, especially in the areas of erectile dysfunction, weight loss and muscle building products (FDA is taking particular aim at these three categories). For their part, the FTC has raised the bar on what claims can be made — just ask the folks at Pom, or Iovate, or Nestle. Wonderful. Across the pond, European regulators want to put the round supplements peg into the square pharmaceutical hole with proposed rules that make any claim about the healthiness of a product verboten. Over in the Far East, the Western world's manufacturing base has been off-shored, but — short-sightedly — not necessarily to Western standards. The cherry on this cow pie is the macroeconomic headwinds blowing strong.

And yet, and yet — what, we worry?

That's because our knight in shining armor is, as ever, the almighty consumer. "As insurance deductibles go up, as unemployment rises and bonuses fall, consumers will increasingly try to take matters into their own hands by buying supplements," consumer trends advisor and author Christine Dumas told us at the CRN conference in October. "Whole Foods Market just reported their first quarter of negative growth in their history — but supplements performed better than the rest of the store."

As long as regulators don't "dumb down" freedoms, as one CEO put it — of dosage levels to the point where therapeutic levels cannot be formulated, and of marketing copy so that you can't say the truth even if you have the science on your side — then the quality requirements are not insurmountable and the sun will rise tomorrow.

Of course, that's a big if. But FDA deputy commissioner Sharfstein seems capable of striking a reasonable balance between safety and access, and he is full of happy talk about open communication, collaboration even, when it comes to New Dietary Ingredient regulation. Which is hopeful because many in the industry say a conservative NDI interpretation could spell doom for as many as 60 percent of ingredients on the market. You read right — NDIs are the elephant in the room that could make a DSHEA repeal look like a relative boost to bottom lines.

Remarkably, the wellness world continues to grow — and did, even in the depths of the Great Recession — demonstrating, once and for all, the recession-resiliency of our industry. So we've got that going for us. Which is nice.

Want to know what makes us happy?

  • Sodium reduction will play out as a cap-and-trade style regulation, with a 25% reduction recommended over five years. Kraft Foods is on board, and will have an overall 10% reduction by the end of 2011. To some extent, consumers will have to learn to love sodium less. On the other hand, the time is ripe for innovation in the flavors world.
  • Gluten-free is latching onto the "free-from" movement, so even though bona fide celiac disease sufferers are a minuscule part of the population, hip shoppers are gravitating to gluten-free offerings. Good news: taste, texture and mouthfeel are finally coming around to match with what the market expects.
  • Botanicals grew at a 4.8% clip — faster growth than any other year in the last decade, according to analysis by our sister publication, Nutrition Business Journal. Tip o' the cap to H1N1 there. Cranberries held the top spot with nearly 24% growth. Other boomers included ginger and valerian, also up 24%, while soy maintained the No. 2 spot in spite of its fortunes falling 12% through 2009.
  • We're bullish on soy's long-term prospects. The bloom has certainly fallen off of the rose that is soy. The conventional wisdom is that its heart-health benefits are really about its comparative healthiness versus red meat, but other than that there's nothing inherently healthy about soy. That may well change because in 2010 the Missouri Plant Science Center broke ground, an ambitious, 25,000-square-foot R&D facility that could verify soy's heart-health and anti-cancer benefits derive from the soy peptide, lunasin.
  • Multisyllabic nutrient mainstreaming: Resveratrol, polyphenols, pterostilbene. Red wine is their sex appeal and label-copy cover. Inside, whether from Japanese knotweed, or synthetic, or its nouveau cousin pterostilbene — got procyanidins? — this could be the biggest boom this side of açai and vitamin D.
  • Immunity, energy, brain boosters (Martek and its life'sDHA is the No. 1 supplier in North America) and on-the-go offerings. Get busy, people!


Want to know what bums us out?

  • Combo products were said to be the next great frontier. Remember the initial hope when Bayer launched a product with aspirin and sterols? The FDA saw it otherwise, and put the kibosh on the concept. Along these lines, Merck for years has had a patent on a statin/coQ10 combo. It should be a no-brainer because research shows patients on the combination live an average of 8 years vs only 5 for statins alone. Of course the statins-only folks die younger — statins deplete the body of coQ10, so people die of heart attacks with fine cholesterol numbers. Three more years of selling statins — what's not to like? Well, lawyers note that to launch such a product would be a tacit acknowledgement that statins alone do indeed cause earlier deaths, and the class-action suits would fly. File under: cynical bastards.
  • Weight-loss is really taking a hit, with diet formulas off 21 percent in the natural channel and down 14 percent in Food/Drug/Mass markets, according to SPINS research. In particular, the satiety properties of protein are a very mixed story. Experts say they can't predict behavior response to protein and load.


Happiness quotient to be named later:

  • Big Pharma says hello. The next two years ought to see much greater involvement and influence of Rx companies into the DS industry because margins are down and pharma companies need to diversity their portfolios. With Lovaza as a template — the prescription fish oil sells more omega-3s, north of $1 billion, than the entire omega-3 supplements world combined — look to see other Big Pharma outfits acquiring major supplements brands and gaining influence. The positive spin on this is increased research into nutritional ingredients, hence greater safety and efficacy studies and, ultimately, greater regulatory and consumer acceptance.
  • Private equity advances. All that money on the sidelines has to go somewhere. The values-driven mission that is the essential core of this industry could be upended by the bean counters. How's your karma?
  • Natural grew faster than organic in 2009, not surprising because consumers were trading down from organic to natural. Consumers, confoundingly, on the whole don't know the difference between natural and organic. For a video conversation on this, visit "New Hope Supply Network" on YouTube.
  • GMPs are part of DSHEA that everyone signed off on. They are also useful in helping to dispel the whole "unregulated supplements industry" meme. On the other hand, official pronouncements are that GMPs will knock out 20% of companies whose pockets are not deep enough to comply — but "nobody in the industry believes it will be that low," said Scott Steinford, president of ZMC-USA.


What keeps execs up at night

  • Supply chain consistency, quality and adulteration
  • GMP enforcement and quality control
  • Publication of NDI regulation requirements
  • Restrictions on international markets due to EFSA and Codex
  • FTC requirements on scientific substantiation
  • Continued "unregulated industry" blather — Tom Aarts


Where we're headed

  • Natural > organic > organic and sustainable > organic, sustainable and raw
  • Greens > acai > superfoods > better tasting
  • Fish oil capsules > liquid fish oil (lemon flavored!) > functional foods with fish oil
  • Flax > hemp > chia
  • Jack LaLane > Phil Donahue > Oprah > Dr. Oz


Chart: Food/drug/mass market sales chart 2008-2010

FDM sales

Chart: Natural channel sales, 2008-2010

Natural channel sales

Chart: Sales by condition, natural and mass market channels

Sales by top 5 conditions

Market Overview Index

Regulatory Roundup
Canada regulations make for a "challenging" market
Regulations reshape the business landscape

Top Ingredients
Pervasive Internet scams take a toll on açai
Calcium sales on the rise—but will bad press crash the party?
Bacteria buddies: Americans love their probiotics
Elderberry: Flu-fighters' secret weapon
Fish oil's lesson: Not all platforms created equal
Resveratrol's rapid rise still leaves room for opportunity
Stevia suppliers, retailers are still wearing their sweet smiles
Vitamin D sales soar 91%, but it's not all smooth sailing

Top Categories
Vision category: Present looks cloudy, future looks clear
Steady demand keeps gut health market churning along
Despite economy, energy sector still energized
Male libido category keeps it up
Weight management ingredient suppliers remain upbeat

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