Natural Foods Merchandiser

Research pays in science and sales

Though the lightning-fast growth of the late 1990s is a distant memory, the herb and supplements category continues to hold steady. Best-selling products and ingredients generally remain consistent in both when comparing the natural and conventional channels. And though the industry?s growth and consolidation over the last decade make it harder for small players to launch products, hot new items continue to debut on store shelves.

Supplements sales remain solid in both natural and conventional channels, though herbs are performing better in their core market, the natural channel. Numbers provided by natural products consulting business SPINS, based in San Francisco, show the top 10 ingredients in the natural channel had small to moderate increases in total dollar sales. In the conventional channel, which sells eight to 10 times more product than the natural channel in total volume, several of the top-selling ingredients showed moderate declines.

One product that has taken off in both channels is fish oil, owing to a seemingly insatiable consumer demand for omega-3 fatty acids. Fish oil concentrate shows a 54.3 percent increase in the natural channel and a 31.5 percent increase in the conventional channel. It is now the sixth-leading supplement ingredient in the natural channel, 10th in conventional.

That?s no surprise to manufacturers. ?We?re seeing a tremendous amount of growth in existing product categories that provide a substantial amount of omega-3 fatty acids,? said Mark Fox, president of Hauppauge, N.Y.-based Twinlab, an Ideasphere company. ?We recently launched an innovative source for omega-3—krill, a crustacean harvested from Antarctic waters, which provides greater concentration of omega-3 EPA and DHA, as well as more potent antioxidants than fish oil. The launch of these new products has had a great amount of interest with retailers.?

Although natural and conventional channels show overlap in terms of top sellers, manufacturers make clear that the shoppers in each channel are not interchangeable. ?A true natural-channel shopper is much different than a conventional shopper when it comes to supplements,? Fox said. ?In the natural foods channel, quality ingredients and scientific support play a major part of the buying decision. In the conventional channel, buying decisions largely depend on brand name recognition and price.?

According to SPINS data, in the conventional channel, multivitamins, calcium, soy foods, glucosamine/chondroitin, milk protein, vitamin C and vitamin E all showed small to moderate sales declines, ranging from 4 percent to 20 percent. Sales were slightly stronger in the natural channel. Only soy foods supplements showed a decline—of 19.3 percent—while other products and ingredients were up slightly. Other than fish oil, the strongest gains came for probiotic supplements, at 16.7 percent growth, and multivitamins for women at 16.6 percent.

?Historically, the trend has been for products to move from the health food channel into the mass market,? said Michael McGuffin, president of the American Herbal Products Association, based in Bethesda, Md. Probiotics seem a clear example of this trend. In spite of increasing consumer knowledge of the benefits of probiotics in yogurt, probiotic supplements have not yet cracked the top 10 products list in mainstream markets, where liquid and refrigerated supplements are uncommon. In the natural channel, however, they are the third-best selling product.

Data from Information Resources Inc., based in Chicago, shows total herb sales in the mass channel down almost 10 percent from a year ago. According to data from IRI, which tracks supermarkets and mass merchandisers excluding Wal-Mart, the biggest increases came for well-established herbs with significant scientific support. Cranberry, green tea and multiherb combinations showed the greatest gains in the mainstream market. Familiar herbs—including echinacea, garlic, ginkgo biloba and ginseng—remained the overall top sellers in the channel, in spite of small decreases in total unit sales.

The biggest drops came for herbs that never had much market penetration in conventional channels to begin with. For example, guarana, yucca, gotu kola, eleuthero, devil?s claw and dong quai all fell more than 50 percent from a year ago. ?This doesn?t indicate a tremendous falloff, because most of these herbs went from almost nothing to almost nothing,? said McGuffin. ?I?m surprised that herbs like gotu kola are even offered in the mass market in 2004. It?s a fine herb, but the wrong demographic.?

Some of the hottest new products on the market have reversed the trend of starting strong in natural and then moving to mainstream, McGuffin said. One example he cites is the homeopathic cold remedy Airborne. ?It?s a fizzy, effervescent vitamin-herb combo, and it?s taking off in the mass market,? McGuffin said. ?Another example is Pom [pomegranate juice], which came out with a brilliant new packaging of an old food. They?re selling their antioxidant health claim now on billboards in Los Angeles. If we haven?t seen it yet, we will soon start to see pomegranate supplements.?

Brokers and marketing experts also see hot new products emerging. ?Liquid supplements are an area that retailers are beginning to look at as a separate category,? said Kim Driggs, president and chief executive officer of Avatar Marketing, based in Kailua-Kona, Hawaii. ?Supplements like this offer a window of opportunity for supplements sales to go in a better direction.?

What does the future hold for herbs and supplements? ?I think we?re a steady industry, and there?s every reason to think that American consumers will keep using herbs for a long time,? said McGuffin. ?There?s room to grow in terms of product and marketing sophistication, and great opportunities for companies to carve out a unique niche.?

Driggs sees a more conservative trend on the part of supplements buyers. ?Overall sales are very flat, and it?s harder to get retailers to give new people a chance,? she said. ?This industry was built on new business, and without new business it stops being exciting and creative.?

With sales for many products showing, at best, small gains, the retailers and manufacturers poised to do best in the coming year are those who can identify coming trends and get new products in the hands of consumers.

Mitchell Clute is a freelance writer in Crestone, Colo.

Natural Foods Merchandiser volume XXVI/number 6/p. 52, 54, 56

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