By Len Monheit
As we move into 2007, there is bound to be the usual analysis of the highs and lows of 2006 including more ephedra dialogue, continued frustration with no final GMP rule, AERs of course, a few new product introductions and personnel (dis)placements, but when all is said and done, how will 2006 really measure up? And perhaps more importantly, what kind of stage has been set for 2007?
Depending on where you are in the value chain, where in the world your market is, and what your channel strategy is to be, your response will most certainly differ. And of course, as you consider your strategic marketing plan and business approach for 2007 and beyond, the entire SWOT picture might have changed.
As we at NPIcenter look back on the year that was, in the US environment, regulatory/legislative progress and the lack typically take center stage.
The passage of AER legislation was a milestone that diffused or delayed one angle of an inevitable attack on DSHEA. (UNPA AER seminar, January 11 –http://www.npicenter.com/anm/templates/newsATemp.aspx?articleid=17199&zoneid=37) Of course numerous other angles of attack do exist, and with what is anticipated to be at the very least a non-supportive house, further Capitol Hill crises are on the horizon for the industry. One of the outcomes of this inevitability is consideration of support for industry groups active in the lobbying process, as is, possibly more importantly, getting involved at the local level to ensure representatives know who you and your company are.
On the flip side, the lack of progress on GMPs continues and might in fact go on through 2007. One would presume that in the meantime, industry continues to shore up all practices so that no matter the form of GMPs, compliance is essentially assured. Many leading companies have established standards well above any bar FDA is likely to set and so are not really worried, but numerous others continue to take a wait and see approach without any ongoing investment in quality assurance and control. More worrying perhaps, is the lack of progress being made in raising the bar on supplier expectations. It still is unfortunately evident that many manufacturers will accept any piece of paper supporting the quality of a raw material. That practice doesn’t bode well for the industry’s future. Although some progress is being made in the development of validated analytical methods, the progress is still too slow, the need largely ignored by companies that need to be more active in driving the process.
In Canada, 2006 was a year where Health Canada’s Natural Health Products Directorate appeared to get better organized and committed to backlog reduction, but the bulk of the submissions eliminated were incomplete, combination products (and non-monograph submissions) remain a conundrum, and there were few if any ‘policy-indicating’ NPN product licenses awarded. Companies remain frustrated at the lack of progress, the market is relatively stifled, international companies remain in the dark at the status of submissions from years ago, and the potential of the regulatory framework is not nearly realized. Maybe 2007 is the year of potential, as the only way NHPD can further reduce backlog and streamline the process is to either issue or refuse NPN submissions – clearly policy indicating.
On the products side, in many geographies with so much uncertainty, 2006 might best be characterized as the ‘year of wait and see’. I would suspect that in many finished product categories, new product introduction rates were lower than in previous years, and gaining successful product traction was a slower, more deliberate process. Much of this is to the benefit of a patient forward-thinking industry. New windfall products with spectacular profit encourages the short term mentality of easy in and quick out that has been all too typical of the past. If it take a commitment to introduce a new product successfully, that’s not bad – is it?
Industry consolidation, specifically on the ingredient side, has been a factor of not only 2006, but recent years. It appears as though the belief is that a rounded offering and some integration is required, in order to successfully compete and add enough value. 2006 saw the introduction of new lutein and CoQ10 products as supply rose above demand, and new ingredient introductions were largely centered around personal care, joint and immune support. More on new products will emerge as Nutracon gets closer this March. Competition for the Nutraward this year, like any other, will be fierce. New Hope ahs extended the deadline for submission so companies still have another week or so to submit.
When one analyzes channel results for the past several years, it becomes quite clear that the direct marketing channel continues its unabated growth, and Internet sales also continue to grow, but from a much smaller base obviously. There are no signs of either of these stopping, as the power of personal communication helps to drive the former, while increasing acceptance and ease contributes to the latter.
Global issues continue to get even more complex. Companies with an eye to other geographies must choose good partners, service providers, representatives and clients in order to participate long term. Event decisions (who and where) have become less obvious (and more numerous). Intelligence gathering has become in ways both easier and harder – easier because the volume of information and its availability has increased significantly. Conversely, good information is frequently elusive, and the ability to discern good from bad an acquired skill.
So what else is in the crystal ball for 2007?
More product introductions than 2006
Companies can’t do ‘wait and see’ for two or more years. And patience has bounds.
More patent litigation
As companies continue to cut the corners on product introduction and scramble for market share and quick sales, more erosion of IP will occur. Some companies are expected to get even more aggressive than ever in protecting their IP.
More calling out / culling out based on quality
Expect to see more information on the use of adulterated products and how to determine when products are adulterated or lacking quality. Expect a bit more transparency as companies try to condition suppliers and consumers to ask better questions. While some in the industry might protest the tactics, messaging and other practices of Consumerlab.com, the sheer volume of their results does at least two key things – it shows everyone that sub-standard products are on the marketplace and gets people talking about product quality.
Market force meets regulatory pressure
In Canada, pent-up frustration over a relatively stagnant marketplace should trigger heated dialogue with regulators and re-evaluation of policies and interpretations. In the United States, the comment period regarding the regulation of conventional foods marketed as functional foods has been extended. Policies regarding New Dietary Ingredients and future activities of the FDA in this area remain unclear. Battle imminent?
For this and more stay tuned. We look forward to your thoughts, predictions, experiences as we move though 2007 together.